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Driven newsletter archive

Issue 12. January 5, 2020

Tapeworms and consultants |  SaaS status and predictions | How much funding do you need? | Measure the sales productivity of any company | CS and Sales: Kissing cousings | What SMBs look for in SaaS solutions 

Good to be back with you after the holidays!

Hope you finished your year strong and had a great holiday season.

During the holiday break, I thought hard about you.

Help me deliver more value

I was brainstorming ways to add more value and interest to these emails.

My goal is to provide you with the most value I can for the least possible effort on your part.

I want to grow the readership to a few thousand this year. So it’s important to be sure you’re happy before I invite others to join.

Vote by clicking on links

So I’m tyring a few more experiments. Today, I ask you to vote by clicking on links that appear in articles throughout this email. That includes clicking on sources or resources in articles that interest you.

It’s the most effective way for me to learn how to improve this experience for you.

Your click takes only a second. Literally. One. Second.

No sneaky popup survey will appear. You’ll just see a confirmation that your click registered.

What are you thinking about?

What’s on your mind, and what would like like to read about in the next few weeks?

Here’s your first chance to vote. Click on any of these you like, and I’ll cover them in the next few issues.

Here are my guesses:

What to expect this week

As I promised in your most recent email, all the articles this week are shorter than in recent weeks.

I’m doing this to see if you prefer brevity over substance.

Here are this week’s topics, in order:

  • Status of the SaaS industry at the close of 2019
  • Predictions for SaaS in 2020
  • Put your CEO to work at your sales kickoff
  • How well does your sales team perform against your competitors’?
  • How much funding should your SaaS company raise?
  • Customer Success and Sales: kissing cousins?
  • The fast evolution of Customer Success as a revenue machine
  • 2 new resources on product-led growth
  • What SMBs look for in choosing tech solutions
  • The difference between tapeworms and business consultants

Reading time

Your estimated reading time is about 8 minutes.

SAAS | INDUSTRY | TRENDS

Fast and intense competition: SaaS at the close of 2019

Continued strong revenue growth. Gartner predicted that SaaS industry revenue would reach $85 billion by the end of 2019. That’s 17.8% percent year-over-year growth compared to 2018.

They estimate total industry revenue of $278 billion by the end of 2021.

So much growth in just two years doesn’t seem possible. Did someone make a mistake?

I haven’t been able to confirm that Gartner’s 2021 projection is accurate. I don’t subscribe to Gartner. Can you shed any light on this?

Market saturation. Competition is intense and getting more so. A many SaaS solutions are available to solve almost any business problem.

Examples:

  • More than 6,000 martech systems, and 3,000 sales tech systems, (including hundreds of CRM systems)
  • More than 220 systems for warehouse management

The industry appears ripe for consolidation. The big guys (Google, Microsoft, Oracle, Salesforce, Infor, and SAP) continue to acquire best-of-breen application providers at a healthy clip. And also at premium prices.

Hyperspecialization of products. Some SaaS companies have tried to provide “all-in-one solutions.” But most SaaS products do only a few things, and they do them very well.

Example: SaaS systems that do only calendar management and scheduling

Consider the owners of small and medium-sized businesses. If they want best-of-breed applications to manage several processes, they’ll probably need a separate SaaS product for each.

Ease of integration. With the hodgepodge of specialized SaaS products, business executives want their applications to be easy to integrate. They prefer ready-made integrations, and they expect open APIs.

Importance of data location. Under GDPR requirementsSaaS providers must pay attention to the countries where their servers store data for affected EU customers.

Data security. Security remains a top concern for companies buying SaaS applications. That’s unlikely to change. Are you sure you have state-of-the art security through your providers of cloud services? AWS and Microsoft lead the pack in data security.

Sources:

SAAS | INDUSTRY | PREDICTIONS

What to expect for SaaS in 2020

I’m generally skeptical of predictions. That’s because they’re often obvious, self-serving, or wrong.

In journalism school, we learned not to say “foreseeable future” because the future is never foreseeable.

Even so, some forecasts are considerably better than a coin toss.

I thought these are pretty good, as predictions go.

B2B marketers will use more B2C tactics. As traditional advertising approaches become less effective, B2B software companies will look to B2C tactics to survive.

End users will dominate the decision process. In many companies, the decision to acquire software is increasingly in the hands of end users.

Third-party influencers will be even more important. Leading B2B companies will seriously target business “influencers.” These are the people whose opinions influence others to buy one software product over another. They’re the ones who others look to for recommendations.

Enterprise SaaS companies must pay more attention to software-rating sites. B2B SaaS companies will also increase their presence on third-party software-rating sites. They include G2, Capterra, and a fast-growing list of other such sites.

Product managers will have revenue quotas. Product managers in PLG (product-led growth) companies will be responsible for a revenue-related growth metric. They will also carry a quota for percentage improvement.

CEOs and CFOs will pay more attention to cash flow and profit.SaaS companies will manage the metrics related to capital efficiency: cash flow, profitability.

As the current economic expansion enters its 12th year, it’s more likely to end soon. To attract outside investment, SaaS businesses will have to show they can eventually be profitable. They’ll have to show high growth, best-in-class efficiency, and positive cash flow… all at the same time.

Flexible work relationships. As long as the job market remains tight, employers most offer more. Employees want more flexibility at work. That means remote working, partial work-from-home, staggered work hours, and more.

Source:

The SaaS Trends You Need to Know for 2020.” OpenView Partners. OpenView Blog. December 17, 2019.

SHORT TAKES

Put your CEO to work at your sales kickoff

What kinds of late-hour adjustments can you make to help ensure the success of your sales kickoff meeting?

One good idea is to review the role your CEO will play.

Sales Benchmark Index (SBI) offers a list of 10 topics for your CEO to address during the sessions. SBI’s suggestions include this one:

 

 

 

 

 

 

 

 

 

 

 

What are the 3 to 5 metrics you will measure each quarter and year to track the interlock between Product, Marketing, and Sales?

Download SBI’s full list of 10 kickoff topics for CEOs here. [Downloadable Word file. 1 page. No charge. Registration required.]


How well does your sales team perform against your competitors’?

You can check this by evaluating the relative turnover of sales teams, and especially turnover of sales leaders.

High turnover in a sales team is a bad sign for almost any SaaS company. It suggests the company doesn’t have its sales operations under good control.

A few companies I’ve worked for had a “churn and burn” strategy in managing their sales team. They hired lots of reps and expected most of them not to last. Those companies didn’t invest a penny in sales development or sales enablement.

But that’s not such a good idea because the costs of high turnover in sales can be staggering. The direct costs of losing a sales leader are even higher.

That’s why smart investors, board members follow a metric called sales team churn (STC). They also watch a more specific indicator called “churned sales heads per year.”

How do you measure the turnover of sales reps and leaders? And what level of turnover is right for a company like yours?

Discover it here:

How to Calculate the Sales Performance of any Company in Two Minutes Flat.” Vic Singh. Get Latka blog. December 13, 2019.


How much funding should your SaaS company raise?

Money from venture capital and private equity firms is flowing freely these days to SaaS companies. It’s especially true for companies in Silicon Valley and New York City.

But the funding levels in the Valley and New York are highly inflated compared to the rest of the United States.

Those inflated funding levels could lead you to think you need much more funding than you do. Or even more funding than you should want.

Shareholders should be aware of the several disadvantages to getting too much investment.

So how much funding is right for your company?

As a general rule, always try to keep your funding raised way lower than your total revenues,” counsels Nathan Latka in a December 5 email to his subscribers. “That will help you keep your leverage with investors. Don’t get caught in the hype.”

Or maybe focus on improving sales execution instead of raising funding. You can use your revenue and improved cash flow to fuel your growth. If you want more on this in a future email, please click here.


Customer Success and Sales: kissing cousins?

The Customer Success role is only about a decade old in SaaS companies.

And in that short time, it has become critically important to the goals of achieving customer satisfaction and recurring revenue.

With this growing role, the boundary lines between Customer Success and Sales are blurring.

In the near future, enterprise SaaS sales teams are likely to include a higher percentage of CS people. And CS might be a better career path for some people who would otherwise be a good fit for sales.

Get more here:


The fast evolution of Customer Success as a revenue machine

Now that Customer Success (CS) is an important member of the revenue team, expectations for the CS function are changing.

In 2020 and beyond. CS teams will…

  1. Focus more on revenue generation over churn reduction.
  2. Emphasize more data-driven decision making.
  3. Develop and implement metrics to gauge customer health.
  4. Align more closely with Marketing.
  5. Do more customer journey mapping.
  6. Use predictive analytics to becomes more proactive, less reactive.
  7. Use more technology to scale customer success efforts.
  8. Adopt customer-success principles across the organization.
  9. Invest more in training.

The training is necessary because field is adapting so fast.

Sources

Dig deeper


Intrigued by product-led growth? Try 2 new resources to satisfy your hunger for info

Product-Led Growth (PLG) is a hot topic for VC firms and SaaS startups.

The main advantage of PLG from an investor’s perspective is simple. It eliminates the need for a sales team and all the related costs and headaches.

To be clear, it delivers those benefits initially if not over the long term.

As PLG companies grow, they must often hire an enterprise sales team to sell to very large accounts.

Increasingly, the PLG strategy also appeals to SaaS companies that already sell to enterprise accounts. If offers a way for them to revitalize revenue growth at higher margins.

If you’d like to understand more about PLG, two helpful new resources are now available.

The first is a new book just released by OpenView Partners. It’s called BUILD. Product-Led Growth: The End-User Era. [Downloadable PDF. 151 pages.]

BUILD is a compilation of posts that previously appeared on the OpenView blog.

The second is the online PLG Summit from the Product-Led Institute. Scheduled for January 20 to 31. It will include more than 100 sessions with leading practitioners of PLG. You can view it from your computer anywhere. And the price is right: Zip. Register here.


What small and medium-sized businesses look for in choosing tech solutions

If you sell to SMBs, your sales, marketing, and product teams need to know this.

Here are the top 5 things they consider when choosing software and other tech:

  • Ease of use (69%)
  • Trustworthy vendor (63%)
  • Price (63%)
  • Simplicity of maintenance (62%)
  • Speed and ease of setup (62%)

Source

Here’s What SMBs Consider When Evaluating New Technology.” Marketing Charts. December 20, 2019.


What’s the difference between tapeworms and business consultants?

Startups don’t risk depending on tapeworms.

Source

How to Avoid the Startup Trap of the Parasitic Consultant.” Danny Crichton. Tech Crunch Blog. December 9, 2019. [May require registration or subscription.]

WRAP UP

About links, commissions, and endorsements

When I provide links to articles from vendors, does it imply an endorsement?

Only of their content. Not of their products or services.

If I recommend a service or a book, it’s because I think it’s likely to help you. Period.

I get nothing from providing links to any commercial service, including the books for which I provide a link to Amazon.

As the circulation grows, I’ll start earning commissions. I’ll tell you when that starts.

Please share this email

If you find value in this week’s edition, please share it with friends and colleagues who may be interested. They can go here to get their own copy of future editions.

Tell me what you think

Please feel welcome to communicate your comments or feedback. Just email me. I respond fast, and I take every suggestion to heart.

Have a great week!

Get ’em, tiger. 

Best,

Dave Vranicar

ABOUT DRIVEN

Driven is a free weekly email for time-strapped revenue leaders in business-to-business SaaS companies.

Its goal is to keep you informed about a broad range of topics related to revenue growth.

We scan the horizon for insights and ideas from sources you may otherwise miss.

You can receive your own copy of Driven at no charge by sharing your email address here.

About links, endorsements, and recommendations

When I provide links to articles from vendors, it does not imply an endorsement of their products or services. I link to them because they offer good content.

I’ll make it clear when I’m recommending a product or service. 

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