Jan Heybroek, the founder and CEO of MDoutlook, is the moderator of EO Atlanta’s Forum Confidential programme. Jan contributed this article with help from Rhonda Suttle, EO Atlanta executive director, and Thamara Ataide, EO Atlanta marketing manager.
The Entrepreneurs’ Organization (EO) exists to help entrepreneurs achieve their full potential. One way the organization does this is by facilitating deep, honest and respectful conversations that lead to growth and breakthroughs.
EO Atlanta’s new EO Forum Confidential sessions are a great example. Led by Jan Heybroek, the closed, coached conversations facilitate shared experiences around one presenter’s specific business challenge in a deep-dive presentation format.
Business challenge: Scaling a SaaS business
In a recent Forum Confidential session, EO Accelerator member “Dan” (not his real name) presented his business challenge to a group of experienced entrepreneurs in search of helpful, real-world tips and best practices.
Dan’s professional IT services consultancy developed a SaaS product and now wants to grow and scale the product—but has little experience in marketing or selling SaaS products. Dan’s ultimate goal is to scale the business for a lucrative exit in about five years.
During the Forum Confidential session, EO members with expertise in the SaaS space and other digital markets shared their experience to help Dan grow and scale.
Here are 11 tips EO members shared:
1. Know what investors want.
Never share your exit strategy with venture capitalists. VCs want to learn the total available market and see evidence that you can grow your startup into a US$1-10 million (or more) revenue business. Angel investors want to see that you’re thinking about long-term potential. So, if you anticipate a short-term exit, keep that information to yourself.
2. Leverage vertical SaaS benchmark and ratio studies.
Sites including OpenView and Saastr provide great comps for what you’re doing, so you can learn whether 80% retention for an S&B segment is good (it is!) and see how your company compares. Use these resources to understand how your company will look when you pitch a VC or angel.
3. Seek existing middleware tools.
It’s a best practice to identify the type of connectors you need and find middleware tools already on the market. For example, existing middleware can connect your software and payment process, so you don’t have to spend time and effort rewriting code that someone else has already written.
4. Value external input.
Don’t go with your gut. Customer insights are your guiding star. Research and absorb external input from people who know the space. Lean heavily on feedback from beta testing, current users and market research. Focus strongly on customer needs: Think deeply about why you are doing this—what are those customer needs and pain points? And then test thoroughly before you start application development. Do this repeatedly and early. This also applies to other business challenges: Talk to other entrepreneurs in a safe environment; be vulnerable; and listen and learn from their experiences. EO offers great opportunity, education and tools to facilitate this, and create Instimacy (=instant intimacy) in business conversations.
5. Senior leaders are sales superstars.
It’s no surprise that salespeople and CEOs have different conversations with customers, but recognizing this played a key role for one EO member: “In hindsight, it was a bad idea that our sales conversations weren’t handled by senior leadership. A salesperson trying to close a deal asks much different questions than a founder trying to improve their product. Once senior leadership took over our sales component, we discovered so many good nuggets about which features were most important to customers. Those conversations provided great insight on feature discovery.” In addition, ensure scalability by incorporating junior staff for tactical sales support and bringing on middle-to-high level sales leaders who can further and expand the customer relationship.
6. Raise onboarding fees.
If your Saas product requires a time-consuming onboarding process in order for the customer to see best results, raise your onboarding fee accordingly. In addition to recouping costs, you’ll rule out clients who aren’t serious about using your product.
7. Narrow your focus.
When building out the initial product, consider whether your offering is too broad. It’s often the case that customers only want a couple of core functions. Don’t be a mile wide and an inch deep if customers want you to be a mile deep and an inch wide.
8. Identify pain points.
Zero in on one or two standout pain points your product solves. Then, create branding and messaging around that. For example, how much time are you going to save customers? What does your product change for them? Make them feel that.
9. Listen and learn.
Listening to what your customers say exposes a real-life petri dish of things you didn’t realize were problems. For example, some customer segments don’t use email, so adding an SMS messaging function to communicate with them could be the feature that sets your product apart. Train your sales team to perform customer discovery, and conduct frequent debriefs to unearth nuggets of truth that could open up larger markets for your product. Again, this also holds true for challenges your business faces. Most entrepreneurs have faced exactly the same challenges, and have overcome these. Learn from their experiences.
10. Don’t wait too late to hire financial experts.
One EO member who is currently planning an exit shared that, though he has now hired a high-level VP of Finance, “I brought him in too late in our stage—I wish I had hired him earlier. Making sure we had the right financial people was a game-changer for our business.” Getting your business ready for an exit, organizing processes and reporting with purpose is critical; start a few years out.
11. Quantify your big three metrics.
Customer acquisition cost (CAC), gross margin and lifetime value are the big three metrics that buyers understand. While it can be challenging to calculate CAC and lifetime value in a SaaS environment, it’s critical to do so. That way, when you get ready to sell, buyers will understand the true value of your business.