preparing for a slump as a SaaS operator
Don’t know about you, but the hardest part of adjusting to work from home life for us has been managing the kids. Understandably, the decreased social interaction from containment has hit them the hardest. It inspired us to put together a quick list of online resources that will help keep your young ones entertained while they're stuck in the house, and hopefully enable you to focus on work as well.
Have a great weekend!
📉 If you were working in software during the 2009 recession, you know it was a trying time. We aren’t here to say that a new recession is here, or that the recent spread of COVID-19 will be what brings it, but one thing is for sure – another recession will come at some point, and there are ways you can prepare for the next inevitable slump as a SaaS operator. For those looking to raise capital, it’ll be hard to find founder-friendly valuations right now. Luckily, the SaaS debt market shouldn’t be widely affected other than slightly smaller loan totals, and should be a viable alternative unless you’re pre-revenue.
🖼️ When we measure company health, we typically use metrics like MRR and number of customers (see the graph below). Just looking at that graph would give you the impression that this company is growing slightly while decreasing in customer count. it looks like the reason for growth would be an increase in ARPA, as they’re growing MRR while losing customers. While this logic is technically sound, the shallow level of analysis can be misleading. Digging deeper into the types of customers they’re gaining or losing might present a different picture, like low paying (less desirable) users churning at a higher rate than a growing new segment of larger ones. Moral of this story—failing to segment data can understate your numbers and lead to poor business decisions.
🐜 B2B salespeople across the globe are seeing the effects of the sudden onset and fear surrounding COVID-19. Meetings are being cancelled, many clients have halted responses, and others pushed what would be a sale out a few weeks to see how the economy reacts. A recent survey of 134 B2B sales leaders showed that 87% believe their Q1 would be affected by coronavirus. Database management tool Cockroach Labs got creative by offering to donate money to charities in exchange for potential customers scheduling meetings. We thought it was a fun win/win scenario when we can all use one!
📞 Cold calling isn’t exactly a blast, and most sales reps will take the opportunity to avoid it if they can. One alternative you can push which actually has a much higher success rate is asking your customers for referrals. Reps might feel awkward asking for what they view as a favor, but remember, your business should be providing their referrals with value – you’re actually helping them out! We’ve never heard of a customer churning because someone asked for a referral, so what do you have to lose? Our advice would be to segment customers by usage and start with the most active users in your base, they’re most likely to help out.
❓ There’s no shortage of sales tools and CRMs on the market, which makes it difficult to pick which is best for you. Your evaluation will be somewhat unique to your business, but these are a few questions you can ask vendors which will point to important areas across all use cases. A question they’re probably not expecting is what their platform’s adoption rate is—only 13% of sales reps think they harness the full capacity of their sales tool, and you want to make sure you fall into that group. One to ask yourself is how many supporting tools your team will use with it. We’re all for simplicity and value “all in one” type solutions if they truly cover the scope of work.
🎰 In Forrest Gump, Thomas Hanks famously said that life is like a box of chocolates because you never know what you’re gonna get. Professional poker player Annie Dukes would probably alter the quote to “life is like a game of poker, because you’re making a series of bets on imperfect information.” In her national bestseller Thinking in Bets, she argues that all of our decisions come down to how probable we think the outcome is. Even the best decisions can result in the undesired outcome, so we must judge them based on the process we use to make them—not just the results. To become a great decision maker like Annie, you’ll also need to learn to recognize your biases and practice becoming more comfortable in uncertainty. Time to hit the slots.