SaaSX's podcast provides best practices for building, growing and exiting technology companies. Get three author-read articles per week.
Justin and Anna Talerico have complemented each other in successfully founding, operating, growing and exiting for over two decades. They understand how to grow recurring revenue businesses because they've done it. They know how to thrive with capital efficiency because they've had to. And they believe in creating and nurturing people-centered cultures because that served them so well in attracting and retaining top talent.
Justin and Anna love the business of SaaS. It’s different. It’s challenging. It’s stimulating and satisfying. It’s their passion and SaaSX is their way to share that with you. If you want insights from operators, you’re in the right place.
Justin and Anna Talerico are co-founders of martech SaaS ion interactive, which was acquired by a strategic buyer in 2017. They are currently the co-founders and principals behind Beacon9, a SaaS advisory based in Nashville, Tennessee that provides vision and execution for growing technology companies.
Please, No More Annual Performance Reviews!
Who hates annual employee performance reviews? Everyone, that’s who.
Employees hate them, managers hate them. HR probably hates them.
There are plenty of studies and articles and trends to back this up. Like this one. And this one. Publications like The New York Times and The New Yorker are spreading the word. And there’s even a book about how much performance reviews suck.
So, what’s the solution? Resigning ourselves to stick with something that doesn’t work? There has to be a better way.
I’ve experimented with many different ways to conduct performance reviews. Formal. Informal. Annual. Quarterly. Ad hoc. Paper. Online. 360 reviews. You name it, I’ve probably done it.
The problem with performance reviews has been written about extensively (as evident by the links above). The bottom line is that they are:
* Not agile and therefore not aligned with the rhythms or realities of the modern workplace. * Often not specifically relevant to the employee’s role or their actual contribution. * Too time-consuming & too cumbersome to administer, so managers and staff just go through the motions. * Potentially damaging to the employee/manager relationship unless the manager is highly skilled at giving the right feedback and coaching for improvements. * Not consistently effective at getting the outcomes you want from the employee. * Easily buried away in some folder and quickly forgotten about just a few days after the review (i.e. not relevant to the realities of work).
My solution: Just do away with the annual review. It’s a relic.
My biggest problem with annual performance reviews as the primary formal feedback mechanism with an employee is that workplace goals, strategies and tactics change too frequently for a yearly review to be relevant.
People also ebb and flow too frequently for an annual review to be relevant. Yes, employees have certain characteristics that don’t change much over time, but they also have so much that can impact their situational work performance—from the specific nature of their most recent projects and responsibilities, what is happening in their personal life, even what’s happening within the walls of the office or the company culture. I am not saying an A player drops to a C player. Individual performance is nuanced and never really static.
If you want to throw traditional performance reviews out the window and take a more agile approach, here is what I found worked best for me:
Frequent, regularly scheduled meetings
Meet with each of your team members regularly, without fail.
When you approach reviews as something that should be agile, the nature of the meetings will shift over time. Sometimes one-on-one meetings will be perfunctory. Sometimes you will dive deep into issues or trends you are seeing.
What’s a sales methodology and do you need one?
A sales methodology is just a standard approach to selling. It’s the how. Not to be confused with a sales process that describes the steps in the methodology. It’s the what.
Do you need a sales process? Yes. Do you need a sales methodology? Yes. They go hand in hand.
Without a sales methodology, your sales team will not know how to sell. And more importantly, they will not know how you want them to sell. Even if you have a team of very experienced salespeople, this is true.
It’s your responsibility, as the sales leader to prescribe the approach you want your team to take. You can’t leave this up to each individual. That’s not scalable, and it’s also not effective. Even the most experienced salesperson needs and wants a guide for how you want them to sell to your buyers.
“The sales methodology is like a set of rules for how you sell your products or services to customers.” Sales Hacker
How to implement a sales methodology
The first step, of course, is to select which sales methodology is right for your organization. I’ve listed some popular ones at the bottom of this article. Familiarize yourself with the options and determine which makes the most sense for your type of sale.
Once you have selected the sales methodology, you will need to:
* Create sales playbook materials in support of the methodology* Train existing team members on the new sales methodology* Incorporate training into your new hire onboarding materials* Conduct periodic refresher training via lunch & learns, workshops, etc, to ensure the methodology is adopted and used correctly on an ongoing basis* Lean on the sales methodology during pipeline reviews, coaching, opportunity huddles, and deal strategy sessions
Rolling out a sales methodology will fail if you don’t incorporate it into your sales culture and make it part of your everyday conversations. Only you, as the sales leader, can ensure the sales methodology is successful.
Avoid the “we don’t need one” trap
If you hire experienced salespeople, it’s easy to fall into the trap of “we don’t need a sales methodology”. You think they are experienced and they know how to sell so why get in their way.
I’ve made this mistake myself and it resulted in poor sales execution and salespeople approaching every deal differently, making deal management frustrating for everyone—the customers, the sales team and me.
Every salesperson needs a framework for how you want them to sell. And every team needs to use the same approach to selling. Without one, you are no more than a loosely held together band of lone wolves, each making things up on the fly, or randomly pulling in various approaches based on the situation.
You’ll find yourself being unable to coach and provide deal strategy, because each deal will be in a different state. Some sellers will use X as a qualification criteria, others will use Y. Some will handle objections this way, some that way. Some will have a late-stage deal with fundamental information still uncovered, others will have deals stuck in the first stage because they are digging too deep.
If you hire experienced salespeople, it never hurts to hear about what type of methodology they have used in the past, what’s worked and what hasn’t. A sales methodology can be adapted as you use it and find what’s working best.
Customer success IS product.
The bigger the addressable market and how much it is needed by the market indicates how much effort is needed for the customer success function.
Customer success is your product. Your product is customer success. Period, end of story.
It’s time to change the culture of expectation for customer success.
Having worked with products that had incredible product-market fit (PMF) and products that didn’t, I can tell you that perfectly executed customer success plays do not make or break a product. What makes or breaks a product is how good it is, and how the size of the total addressable market (TAM) is for that product.
Product/market fit means being in a good market with a product that can satisfy that market.Mark Andreesen
What customer success can’t do
No amount of customer success brute force can convince customers to adopt a product they don’t want, need and find valuable. No customer success intervention can get a customer to use a product they don’t find easy and useful. Customer success can’t be held accountable for:
* Getting a customer to adopt your product.* Getting a customer to use your product. * Getting a customer to renew their subscription if they haven’t been using your product and receiving value leading up to the renewal term.
What customer success can do
Assuming product-market fit exists, what can customer success influence?
* A customer’s relationship with, and affinity for, your company and brand.* A customer’s strategy for successfully using your product to meet their business needs.* A customer’s vision for how and where your product can be used, leading to deeper adoption and organic expansion.* Your customer’s willingness to renew their subscription, assuming the customer has been using the product and receiving value from it.
Customer success as a push or pull function
Customer success follows a fairly standard playbook, especially in SaaS. The motions are onboarding, adoption, engagement, expansion, and renewal. 80% of these apply to any SaaS company, with the 20% being specific to the company and product.
As you think about the strategy of your customer success, consider how push/pull it is (using the rudimentary chart included in this article). If you need a “push” customer success strategy, you will need more customer success staff and resources, because it’s more effort. You may even want to consider shifts in overall market and product strategy to help move it up and to the right on the chart. That’s not easy, but it is what’s required to reap the rewards of a more “pull” customer success strategy which is considerably less effort.
Don’t get me wrong—customer success motions are rarely effortless. But as you move up and to the right, they do become easier and the strain on customer success as a function is lifted.
SaaS Strategy: Balancing and Managing Short- and Long-Term Tradeoffs
Growing a SaaS company at >50% YOY (at scale) is hard. If it was easy, everyone would do it. One of the big reasons it’s so hard is that you’re constantly trading off between short-term results and long-term scalability. This is true in technology, where there’s constant angst around amassing tech debt in the name of feature pace. But it’s also true in sales, marketing, customer success, operations, support, and product. Short- and long-term tradeoffs complicate the best-laid plans.
Long-Term Slow Down
I fell into this trap for a few years back in the day. Leaning too far to the long-term side slows down short-term performance. And that can turn into slogging rather than flying. When you think long-term first, and focus on processes more than performance, you lose agility and urgency.
For me, urgency is a critical success factor in driving outsized growth. I seldom see one without the other.
The other trap is speed at all costs. The common misnomer here is that the debt you amass in short-term prioritization takes a long time to come back and bite you. Wrong. It comes back faster than you think. And it can bite very, very hard. The irony here is that when that debt does bite you it impedes short-term performance. And, if you’re sprinting like a bat out of hell, you may very well grow so fast that you attract premature liquidity interest. Guess what? When the wheels are flying off the car flying down the road at 180mph isn’t the best time to go through diligence.
The cost of only focusing on short-term growth is that you accrue debt everywhere — people, processes, systems, technology — you name it. Do that for longer than short bursts with recovery between them and you burn the company and its people out. That’s neither sustainable nor healthy.
Dividing & Conquering Short- and Long-Term Tradeoffs
My preferred solution to the short/long-term conundrum was to have people divided into two camps. The floor-it-at-all-costs camp just answered to urgency. And the long-term, process/systems camp wove a sustainable net in parallel. The important cultural thing here was that neither group could resent the other. Most of the time that worked out, as long as we maintained transparency to the why and cross-built appreciation between the divergent missions. The yin and yang of that relationship became a rallying cry for conquering short- and long-term tradeoffs.
The long-term groups end up taking great pride in stabilizing and creating sustainability. The short-term groups stay urgent and almost reckless but know they have a net to catch them. Both are driving growth. This is a critical understanding and appreciation. The short-termers are driving this month and this quarter. The long-termers are driving this year and next. Both are driving valuation.
So if you want to give the sales and marketing teams the freedom to get a little bit reckless, charge the ops team with making that possible. And if you want to give a skunkworks engineering group carte blanche to launch MVPs, create a group that tidies up behind them to ensure that everything still works and complies with standards. And if you need to experiment with divergent pricing and packaging, do it — fast — but then have some folks come behind and translate that into systemic reality. It’s the separation of church and state that makes the short- and long-term tradeoffs work.
You’re Charging on a Credit Card — When Do You Pay?
Is Your SaaS Charismatic Enough to Build a Tribe?
Nurturing the characteristics of a charismatic company to inspire devoted, loyal advocates to provide social proof.
Social proof is huge in SaaS marketing. What people think and say about your SaaS has a lot to do with its momentum and market fit. But how they feel about your solution has wider implications. Real advocacy comes from having a devoted tribe. That’s the difference between marketing coming from just you, or having thousands of authentic voices spreading the word on your behalf. The latter is incredibly powerful. And it comes from creating a charismatic brand.
Inspiring devotion from visitors, followers, and customers.
I saw this play out at ion interactive before we were acquired. Devotion wasn’t limited to customers. It started with people who were familiar with us. And then it extended to those who actively followed us. And yes, it culminated in passionate customers. The customer piece was great, but the wider social proof that came from people on the outskirts had massive value as well. Just last week I interviewed someone who was clearly a devoted, passionate, ion advocate. She was never a customer. And only used the platform for a short time. But she loved the company. More accurately, she loved what we stood for. Our point of view deeply resonated with her.
6 ways to nurture the characteristics of a charismatic SaaS company and inspire social proof.
My inspiration for this post came from a breakfast meeting I had yesterday with an old friend. One of the topics we discussed was what made some SaaS companies spread like wildfire while others have to work so hard for traction. There are a lot of factors in play there, but one of the ones that came up was fan-like devotion and social proof. That led to a discussion around the idea of charisma and how that dovetailed with SaaS culture. And that led to how founders can nurture the characteristics that make a company magnetic.
Today, as I was noodling this article, I Googled charisma and did some reading. It’s interesting to me to think about these characteristics outside the context of a person, in the broader context of an entire company.
Charisma is the ability to attract, charm, and influence the people around you.Psychology Today
Being attractive, charming and influential sounds like a pretty good road toward breeding passionate advocates.
Charisma — a personal magic of leadership arousing special popular loyalty or enthusiasm for a public figure (such as a political leader)Merriam-Webster
But, what makes a company charismatic? I’m going to draft off of six elements of personal charisma courtesy of Psychology Today and reframe them in the context of a company…
1. Emotional Expressiveness
As a company, do we express our point of view spontaneously and genuinely? This cuts to the core for me, which is authenticity. An authentic voice is a unique one, and a differentiated, real perspective on a space or problem is both valuable and useful — inspiring advocacy and social proof.
2. Emotional Sensitivity
To me, as a company, do we listen, have empathy, and express our brand with a high emotional IQ? Do we make everyone who interacts with us feel valued and heard? One of the most critical things a growing SaaS company does is listen, ingest and respond to feedback in the form of evolutionary changes. When those adjustments show emotional sensitivity...
Unprepared for SaaS Due Diligence?
Many SaaS companies go through due diligence in a less-than-ideal state. That’s a lot less stressful when you know what that means.
A while back I wrote about what to expect in SaaS due diligence and provided an interactive institutional readiness report card to help you prepare, but today I want to address the consequences of being unprepared for SaaS due diligence. Founders find themselves in diligence situations feeling unprepared all the time. Could be with a bank for a line of credit. Might be for venture debt. Could be for investment. Perhaps for an exit or partial liquidity event. Or could just be for an annual audit. Diligence is pretty common and universally painful. How painful? That depends on preparedness. Today, I want to look at what it means to you and your process if you go into diligence unprepared. Punchline: It’s not the end of the world. But it’s going to cost you time, resources, and money.
What is SaaS diligence?
It’s strangers going through your closets and hampers looking at your underwear. In SaaS, due diligence processes look at many things at a high level and certain things at a deep and specific level. For more on this look back at my articles on what to expect and how to prepare to be acquired. From a pragmatic perspective, SaaS due diligence is similar to an audit where they take samples of everything and drill into those things where the samples don’t true up. So let’s take the position that some important samples like churn, revenue or COGS don’t true up. That’s what we mean by being unprepared for SaaS due diligence. But what does that mean to the deal?
What is being unprepared for SaaS diligence?
Let’s start with the less painful stuff.
There are many ways you can be unprepared for SaaS due diligence. Contracts could be undocumented. There could be unknown liability or legal exposure. Employee records or policies could be incomplete. And so on. Many things like that do have consequences, but they’re contractual reps and warranties more than they are valuation killers. So in a way, they’re less painful. (Still stressful.)
Reps and warranties are essentially risk mitigators that get written into your contract with the buyer or investor. Anything they’re uncomfortable with, or unsure of, will likely end up in reps and warranties for you to sign off on as your responsibility, not theirs. There are many flavors of reps & warranties — some longer term, some shorter. Some with potentially harsh financial and legal consequences and some not so much.
The more buttoned up you are, the fewer anomalous reps and warranties will be in your contract, and the less stressed you will be to negotiate them out or sign off on them.
The top (or bottom) three ways to be unprepared for SaaS due diligence
There are real, painful consequences that impact the process and financial outcome. These consequences come to be when important SaaS due diligence items are unprepared. My top three ways to get yourself into this super-hot water are revenue, churn, and COGS. There are others, but the consequences are similar, so I’ll just focus on these three.
Consequences of being unprepared in SaaS revenue booking