These 6 takeaways, ranked from highly actionable to very philosophical:
- What Data On 600 Companies Revealed About Free Trials
- Build A Resilient SaaS Company With GRIT
- 5 Ways To Scale From $1m TO $500m ARR
- People Don’t Buy Features Or Value - They Buy Perceived Value
- Buyer Journeys Are Evolving
- Your Frontend Should Be Consumer-Grade, Your Backend Enterprise-Grade
What Data On 600 Companies Revealed About Free Trials
- Stick to annual contracts.
- Strive for 90% logo retention.
- Target 100-140% Net Dollar Retention (NDR).
- Prefer time- and usage-based trials.
- Shorten trial length.
- Hire sales people to call leads.
- Aim for 5% unassisted conversion.
- Shoot for 15% assisted conversion.
- Question activity scoring in Enterprise.
- Test requiring payment.
Build A Resilient SaaS Company With GRIT
Bessemer Venture Partners gave their annual State of the Cloud and delivered as usual an actionable presentation.
One especially interesting section structured a framework - GRIT - to better understand the key growth metrics of a SaaS business beyond simple revenue growth, and see where you rank compared to the likes of Slack and Twilio. If you’re anywhere close to them, you’re probably doing something right.
- Annual Recurring Revenue Growth: it takes about 7 years for the median SaaS business to grow from $1M to $100M ARR.
- Annual Net Retention: the bigger the account size, the higher your net retention should be - churn is always bad, but fickle SMBs typically churn faster than Enterprise accounts.
- Years Of Runway: 18-24 months of runway is a very healthy benchmark.
- Efficiency Score: a slightly more sophisticated formula (Net New ARR / Net Burn), it measures whether you’re overspending to fuel growth - great in the short term, not scalable very long.
5 Ways To Scale From $1m TO $500m ARR
Karen Peacock, COO at Intercom ran through five essential tactics they used to scale:
Some quotes in particular contained a wealth of insights:
- “When growing your product watch what your customers do, not what they say”.
- “Everyone has a strategy until they’re handed a big check”. Be careful not to end up following what your first big customer wants, instead of the big problem you’re solving.
- “Expand your product by going downstream if you’re an upmarket business, or upstream if you’re a downmarket business”. We reflected on our own experience of scaling with our scaling lessons from dealing with 1000 software companies keynote.
People Don’t Buy Features Or Value - They Buy Perceived Value
And as a consequence, your pricing should reflect that. Naomi Pilosof Ionita from Menlo Ventures ran a great session on pricing. Having written extensively on the topic of SaaS pricing before, these three takeaways really resonated with us:
- Know who you’re building for: segment users by needs and willingness-to-pay.
- Align pricing & packaging with building accretive value.
- Personalize monetization with predictive data.
Diving into pricing by value we’ve covered finding out what your customer truly values and practically implementing that value.
Buyer Journeys Are Evolving
There were many discussions about buyer journeys, especially during a panel on the trends in growth and marketing by Iterable, Segment, Madkudu and Intercom.
- More and more, buyer journeys happen far away from your website. Buyers discover you (in a community on Facebook), compare you (on G2Crowd) and make decisions (checking their network) before they even visit your website - leading in a high number of enigmatic “Direct > Signup” journeys in Google Analytics.
- Your marketing needs to adapt and can’t only be about your landing pages or on-site content - you must focus more than ever to be where your buyers are.
- When these buyers land on your website, they may only want to check a couple of specific questions, not a full demo. Use human chat, bots or ensure easy discoverability of the answers to these last questions.
- Attribution of these journeys, especially word of mouth, is very hard. Try to do it, but keep in mind that trying to get more word of mouth can be a better use of your time than perfect understanding.
We’ve covered the topic of word-of-mouth campaigns and how you can create hype around your launch practically.
Your Frontend Should Be Consumer-Grade, Your Backend Enterprise-Grade
Brian Halligan from HubSpot summarized it well during his talk. Our interpretation:
- Your Frontend should be consumer-grade: make it easy to use, with emotional connections, and consistently deliver perceived value.
- Your Backend should be enterprise-grade: make it robust and scalable, adaptable to varying customer situations and definitely deliver measurable value.
This ties interestingly with 2 strong trends in SaaS:
- SaaS businesses moving upstream need an enterprise grade backend to sell to larger and larger accounts.
- SaaS businesses moving downstream need a consumer grade frontend to attract the vast number of SMBs and prosumers, for whom clunky means probably not a good product.
See You Next Year
And in the meantime, I look forward to more learnings and chats with all of you at SaaStr Europa in June!