Monday October 14 was SaaS.City day, a pre-conference day offering hands-on bootcamps and workshops dotted around Dublin. Harrison Rose’s workshop was part of the “Getting Ready to Scale your SaaS” bootcamp that was hosted by Platform.sh. During the day, attendees had the opportunity to participate in three interactive workshops from:
Kieron Sambrook-Smith, Platform.sh’s Chief Commercial Officer, on building operational models for SaaS businesses who want to scale.
Valerie Gombart, founder and CEO of Hi Inov, who gave insights into how entrepreneurs can approach and work with VCs at different stages of a SaaS company’s lifecycle.
Our very own Co-founder and Chief Commercial Officer, Harrison Rose, who worked with the delegates to create coherent and efficient go-to-market strategies for SaaS companies.
Our CEO Christian Owens presented his keynote on Wednesday October 16 in front of a packed audience at the Growth Stage. Focusing on the 5 ways start-ups turn into scale-ups, Christian presented the main findings of our 2020 SaaS Commerce Trends report alongside examples of how successful SaaS companies have applied them in order to grow and offering tips to SaaS entrepreneurs on how they can get on the unicorn path themselves.
Below we have summarized the main focus points from Harrison’s and Christian’s presentations, along with some practical tips and advice they shared with their audience.
What we talk about when we talk about growth for SaaS businesses
You might already be all caught-up on our most recent blog posts focusing on the 5 main growth stars we’ve seen SaaS start-ups using to grow (if you haven’t, here’s a link to one of them so you can find out more). These are the growth tracks we have identified based on analyzing years’ worth of data across thousands of software sellers worldwide. Without exception, we’ve seen these growth stars being used by successful SaaS companies across different industries over and over again, regardless of whether they're product- or sales-led.
We wanted to expand our research in order to map out key market trends for next year. This is why we conducted independent research to create our SaaS Commerce Trends report. The findings were eye-opening.
If you haven’t done so already, grab your copy of our SaaS Commerce Trends: 2020 Report here
The five growth stars in SaaS
Companies tend to build strategies around growth targets. Often, these strategies focus on functional growth, like how different disciplines within the business contribute to those targets. For example, how the product management or sales teams achieve their targets for product development or leads harvesting.
At Paddle, we look at growth a bit differently. We understand the value of functional growth, but we think this is only part of the big picture and doesn’t reflect how whole organizations grow, which is by moving into new markets.
We’ve been analyzing the ways in which the most successful SaaS companies go to market since day one. From data across over 1000 sellers worldwide, the likes of companies like Slack, Hubspot or Shopify, as well as the insights from our report, we’ve been able to identify 5 key growth levers that the biggest software companies have used and continue to do so in order to thrive.
Monetization Increasing revenue through continual testing and optimization of pricing plans.
Internationalization Expanding into new geographies through the use of local currencies, languages and native-speaking support and sales.
Moving upmarket Organizing users into team plans and entire companies into enterprise deals to grow your ACV.
Moving downmarket Boosting sign-ups via introducing and upselling through self-serve without any sales-assisted sales.
Product expansion Attracting new customers and growing ACV with your existing customers by offering more products or a complete platform solution.
Which growth strategy is right for my business?
Companies like Slack or Hubspot make use of all of the above growth levers.
Our research indicates that SaaS businesses that use more than three of these have a higher ARR growth rate compared to those that utilize only one or two.
Depending on whether you’re product- or sales-led, your path to growth might differ slightly:
Regardless of your go-to-market model, the common starting point for SaaS startups is monetization. However, perhaps the most surprising finding from our report was that many SaaS businesses have been getting this wrong. Although optimizing your monetization strategy would have the highest impact on revenue (16%), we uncovered that this is actually the least used track amongst SaaS businesses (only 18% plan to use it versus 47% who have chosen to expand their product suite).
So what can you do to ensure your company adopts the right growth track today?
Key takeaways from Christian’s keynote at SaaStock 2019
1. Decide on your go-to-market strategy: product-led or sales-led?
The examples of Slack or Shopify are great, but your business is different so you have to define your own path and unlock your route to growth.
If you’re sales-led (like Salesforce), stabilize your performance in your home market before launching any international sites. We’ve seen sales-led companies growing faster when they focus on their home markets first until they’ve solidified a consistent, repeatable model to scale for larger deals, then expanding into international markets.
The reason why this type of organization tends to sell globally at scale later on lies in the fact that the sales process depends on overlapping time zones and/or establishing local presence in different countries, both of which have a high operational overhead.
On the other side, if you’re product-led (like Slack) maximize your conversions on a global scale first before moving upmarket and targeting larger enterprise deals. Adopting a freemium pricing model, which is used widely across product-led businesses, means that anyone can sign up, which in turn means these companies can reach a global audience from day one and target traffic outside their home market. As their user base grows, product-led software companies tend to grow best by moving upmarket.
2. Focus on the right growth track
Once you’ve determined the above, make sure you pick the right growth track for you . By making even incremental improvements of 1% across each one of the five levers you can reap significant results:
(Source: Price Intelligently )
By constantly iterating on monetization you can optimize your monetizing strategy and ensure you always stay on top of market trends, needs and shifts.
3. Be prepared: E-V-E-R-Y-T-H-I-N-G will break when you move upmarket
Targeting larger businesses and enterprises is hard. We asked our panel what they see as the main blockers on this track and determining the right pricing, building a sales team and adapting the product to the needs of larger organizations came at the top (for 45%, 43% and 41% of the respondents respectively).
No wonder we call this track the “unicorn growth track”… but it is also the most costly one to establish as it entails adjusting your product to cater for the needs of larger businesses, hiring new people with advanced skills and upgrading your billing stack and payment infrastructure among others.
So moving upmarket can make or break you. Christian reminded the audience that what’s important at this stage is to not overcommit. Large deals on the table can get any one of us really excited, but it’s important to ensure you can resource and service larger deals before you actually sign up for them. Don’t sign any customers who can break your business. Moving upmarket is not just about the “yeses” you’ll hear - it’s also about the “nos” you’ll say.
4. Localize your strategy to each market
When launching new sites and hiring new teams around the globe, you’re leaving money on the table all over the world.
Don’t get us wrong. It’s worth it. We know it, our panel knows it: 4 out of 10 respondents in our survey said that expanding globally unlocked an immediate and scalable source of growth amongst other benefits, including better external perception as a more mature company.
But how do you do it strategically?
Localize your website, your product and your sales process. Each market has different needs, different codes of conduct and cultural norms so you don’t want to stand out for the wrong reasons.
Localize your pricing and add local languages in key touch points across the whole customer journey. From our own customers we see up to a 30% lift in conversion rates globally when they localize their pricing and checkout experience. And for certain key markets, like Germany for example, simply supporting Euros and local payment methods can lead to three times the volume of conversions compared to pre-launch of these features.
Workshop takeaways: Common pitfalls and the elements of an efficient go-to-market strategy
The goals Harrison set for his workshop were to help its 30 attendees identify the growth track that’s right for their business, the main challenges they are most likely to face and to build a coherent go-to-market strategy based on the above.
During the workshop, Harrison asked participants to split into two groups focussing on the two main growth tracks depending on their business focus. Delegates of product-led companies focused on discussions around common challenges of targeting larger enterprise deals and key learnings, while their peers from sales-led companies exchanged ideas around go-to-market strategies for the launch of a global presence.
Alongside Harrison, Account Managers Wahid Tashkandi and Chris Morrow and Head of Growth Ed Fry helped coordinate the discussions around the tables and later invited representatives of each group to present top conversation points and their conclusions.
For sales-led companies, the conversation focused heavily on how they can expand internationally after having covered the first two stars of their growth track. The below formed common ground among participants:
How do I optimize my sales processes for global expansion?
How do I qualify opportunities in new markets?
Do I need to hire local sales representatives or can my sales team operate from the current office?
How do I build relations in a different cultural environment? And how do I know what’s appropriate or accepted versus what’s not?
When going global, gaining a deep understanding of your core markets fast is key to your success. Don’t assume this means hiring a local sales team and all issues will be sorted. For example, there are markets where English is vastly accepted as the primary language used throughout the sales cycle (e.g. Israel or Finland). However, localizing your pricing, accommodating for popular local payment methods and offering an overall user experience that is local at heart is important.
At the other side of the room, the discussion steered heavily towards the topic of scaling in order to sell to larger businesses. Things that came up repeatedly included:
How do I plan for the cost of moving upmarket while keep running my business as usual?
How do I know it’s the right time to scale?
How do I capture the attention and build trust with larger organizations?
How do I plan internally for the impact of working with big companies?
We’ve already touched on the cost of expanding to larger companies; what’s important to keep in mind is that this isn’t just the operational burden of a sales team but it includes the high-resource/human-supported work that goes into providing those contracts. It’s also very hard to predict when these contracts will land, or how long the process will take, which makes it hard to hire the right people and resource for these contracts immediately.
Moving upmarket tends to be a long (and sometimes painful) learning curve with weak or long feedback loops being common since contracts are often year long and the buyers are not the end users (as opposed to product-led, freemium tools where user activity and churn is much quicker, more obvious and shown at scale).
Wrapping up the workshop, Harrison stressed the importance of deciding on your go-to-market strategy as product-led or sales-led as this leads to fundamentally different approaches and business priorities. The five growth stars are a means to accelerate your growth, but simply jumping on the growth star bandwagon without product/market fit or trying to adopt most or all of them too quickly can (and most likely will) result in failure.
The whole Paddle team loved the days we spent at SaaStock this year. We were able to have really valuable conversations with SaaS founders and executives around how SaaS companies grow in today’s landscape and hear all about the growth pains startups face.
If you would like a copy of Christian’s and Harrison’s SaaStock slide decks, please email them directly at firstname.lastname@example.org!