This post is by Jason Lemkin from SaaStr
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These are truly the best of times in SaaS. But why? Well … take a look at this chart from Gartner on the % of the $1 trillion in IT spend going to Cloud. It was 1% just a few years ago, going to 16%+ in 2021. That’s 16x growth in Cloud Services spend in 10 years. 1600%. That’s a lot. That doesn’t mean things are easy. Competition is wider and fiercer than ever. And the number of vendors has exploded far more than just 16x. Probably 1600x. That means the competitor for budget is even more intense than ever. Still one thing is true in SaaS today — if you truly have product-market fit, and a good team behind it, you can grow faster than ever. So if you are growing at a so-so rate … say 40%-80% after $1m ARR
what’s “wrong”? It’s not like you aren’t growing at all. You’ve done the impossible — you’ve convinced a bunch of customers that didn’t know they needed another product to buy $1m+ of yours. But you aren’t growing fast enough. I’m going to suggest if that’s the case, in 2019-2020, well … something is off. Figure out what that is, make an upgrade, and you will grow more quickly. Some root causes of slow-ish growth after $1m ARR:
- Not agile-enough dev team. As you being to scale, your customers will ask you for more and more functionality, more integrations, more security … more of everything. You don’t and can’t do it all. But the best engineering teams do more of it, more quickly. And they key is that compounds. After a few quarters, a top engineering team can ship 5x the features that matter over a course of a year. That sort of compounds to 25x over 2 years, 125x over 3 years, etc. Not literally but close. If you just can’t ship enough features, find a way to upgrade engineering. Hire a great CTO or head of engineering, or go find just 1 amazing developer.
- Wrong salespeople. It’s so easy to get sales hires wrong. Most important is hiring folks you’d truly buy from. Yes, a great VP of Sales might solve all your problems. But so just might adding 2 sales reps that the customers love, know your product cold, and can close at your price point. If your salesteam can’t sell at least 75% as well as you can, something is off. Make some changes.
- Not really doing demand gen. I see this time and time again. Something starts to work in the early days in marketing, be it content marketing or events or partnerships. But no one is really doing traditional demand gen. No one is managing the funnel. Owning a lead or opportunity commit. Owning delivering more raw ingredients to sales. Nurturing leads. Etc. etc. Everyone needs this. Sometimes you can get pretty far without a head of demand gen. But without it, we all hit a wall at some point.
- Low NPS. If your customers don’t love you, they don’t buy more from you, and they don’t recommend you. In Year 1 and even Year 2, the effects here aren’t clear. But they become much clearer over time, as renewals get hard, churn becomes an issue, and growing accounts is a struggle. Hire a real customer success lead and make her #1 KPI and goal driving NPS up. That almost always works in a quarter or two.
The post What To Do If You Are Growing, Just Not Quickly Enough appeared first on SaaStr.
Companies that grow at say 100%-150% a year are often running the exact same playbook as those growing 50%-80%Differences: Quality of sales team
Agility of dev team
Overdelivering in MQLs
Higher NPS So … The team — Jason SaaStrScale Lemkin (@jasonlk) June 25, 2019