If you look at the funding needs of your SaaS business – is it driven by desperation or from a source of strength?
Answering the question is an easy one. It’s a feeling that’s pretty black or white.
For many SaaS founders I see around me, sadly, the feeling is one of increased desperation. And more often than not, it’s a result of many things that are just not working as they hoped for.
Every month, the situation gets a little bit worse – driven by internal and external conditions resulting in compromised top-line revenue, sub-optimal margins, and non-predictable cash flow.
Here are some of the causes I often see:
- Low sales performance – indicated by indecisive prospects.
- Compromised margins – due to the too high cost of sale, excessive discounts, and high cost of implementation and customer support (in comparison to the SaaS fees)
- Poor product adoption (breath & speed) – often due to poor product market fit
- Higher than average customer churn – often due to poor customer fit or an inability to satisfy customers’ needs that, honestly, be better off with the competition.
This is just a tiny subset of the things you can control internally.
More often than not, however – this picture is challenged by what’s happening externally. The things we can’t control
- The shifting economic or political conditions as we’ve recently seen again. What was mission critical last quarter suddenly becomes the lowest priority on their agenda (and visa versa)
- The speed by which technological development changes the norms. So, what was state of the art last year isn’t anymore today. This also constantly reshapes the competitive landscape.
- The constantly evolving regulatory landscape doesn’t make doing business easier either.
- And last but not least: The influence of investors. No matter how aligned you are – their agenda is different—the result: Feeling squeezed between a wall and hard rock.
Put this together, and you got the perfect cocktail of complexity. The pressure to meet expectations often forces us to make decisions to fix the short term, that harm our long-term trajectory. And suddenly – what looked like a position of strength at the start- turned into desperation to fill the unsatisfiable need for more funding to keep the business alive …
How do you avoid this – that’s the big question.
Two questions to reflect upon today:
- If you look at the funding needs of your SaaS business – is it driven by desperation or from a source of strength? What do you believe is the cause?
- My request to you: What has worked well for you to not get caught in the vicious cycle of chasing funding?