“One thing that companies need to think about more is how to get leverage. But, unfortunately, most companies focus on throwing people at the problem and not getting more leverage.” 

It’s a quote from Auren Hoffman, CEO of SafeGraph – and it has stuck with me since I heard it.

Here’s the thing.

We often think about growing our SaaS business in terms of increasing ARR and MRR. But is doubling your ARR good if this also means doubling the number of people you need to deliver it? 

Auren elaborated on this: 

A simple metric we focus on is revenue per employee. Unfortunately, for many companies, that number stays the same over time. So often we talk about success, stating we have 1000 people in our company. To me, that’s a failure.
Every time you have to hire someone, it means that you don’t have the systems and that you have to have humans do it. Every time you hire somebody is going to be harder to communicate internally. 

Just think about it. You’re growing but actually slowing down your business. That’s not what your customers want, not what your employees want, and not what you want. As they say: it doesn’t scale.

So how to go about it? Here’s a valuable tip from Auren

When people join our company, we say you are Warren Buffett; you are a capital allocator. You have money to spend. Your goal is to get yourself leverage. If you can get yourself leverage in your productivity, do it. If you can get your team productivity up, do it. If you can increase the whole company’s productivity, do it. Your goal is to spend money to get leverage. This way, we’re able to move much, much faster.

Scaling a SaaS business is a mindset. It applies to everything.

Question for you to reflect upon

How has your SaaS business’s average revenue per employee evolved this year? What does it tell you?

 

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