“One thing that SaaS startups 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:
One of the key metrics 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. That’s not sustainable long term.
Just think about it. You’re growing but actually slowing down your business. That’s not what your target 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? How do you scale a B2B SaaS business?
That’s what I aim to answer in this blog. My first takeaway is (as Auren already illustrated): Scaling a SaaS business is a mindset; A leverage mindset.
And this quote from Auren is highly valuable in relation to that:
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.
Question for you to reflect upon
How has your SaaS business’s average revenue per employee evolved this year? What does it tell you?
In the next paragraphs of this blog, I’ll dig deeper into the seven steps to create a highly scalable SaaS business.
Step 1: Start with alignment.
Many SaaS companies find Product Market Fit – but never scale. They don’t get the motion in place.
The big question: Why?
- Sometimes it’s execution.
- Sometimes it’s delivery.
- Sometimes it’s timing.
But what I see as the biggest hurdle: Alignment.
And here’s why. Let’s first dig into the definition:
“Scaling a SaaS business means setting the stage to enable and support growth in your company. It means having the ability to grow without being hampered.”
In B2B SaaS, we’re often masters of scale on the technology side. We can build systems that can scale globally across millions of users. That’s not the problem.
The problem is creating momentum in finding the right businesses that leverage this technology precisely as it was meant to be.
It means finding those customers that are thrilled to:
- Contractually accept it as-is
- Implement it as-is
- Use it as-is
Achieving this is all about clearly defining how you segment and position your SaaS product – and deliberately aligning every aspect of your business around it. It’s not ‘just marketing,’ it’s about the way you make cross-silo collaboration happen.
When we’re optimally aligning the technology side with the business side, we can turn every 1$ investment into a +$10 return.
It’s where remarkable traction starts.
Every diversion from this harms your ability to scale.
Question for you to reflect upon:
On a scale of 1-10 – what’s your ability to grow your SaaS business without being hampered? What if you’d better align departments?
Step 2: Weed out the desire to grow at all cost
I see many SaaS entrepreneurs struggle with scaling their business. The product has found its fit in its target market, and it’s time to scale the business. But it doesn’t…
One mistake I see being made a lot is the urge to grow at all costs.
Just go back to one of the lessons Sunny Han, CEO of the Fulcrum manufacturing platform, shared last week in our podcast:
“In the beginning, we had all these idealistic comments about how these legacy systems are so bloated, and they have all these fields everywhere. Well, what causes that is this desire to grow at all costs. We often said, ‘Alright, let’s add this little feature to close this deal.’ I thought, ‘They’re not big features, but the million little features cause the blow, right? And the market is huge.’
Here’s the thing
Sunny learned this didn’t work. It gave him the understanding that scaling is not about growing your ability to sell something to everyone. It’s about making it an art to sell what you have to the right customers – again and again. It’s about optimizing your pipeline around repeatability. It’s about finding new ways to lower customer acquisition cost (CAC).
Make sure that you continually deliver your best value to a customer base that benefits most from it – across all cylinders of your business: Marketing, Sales, Services, and Customer success.
Sunny and his team took valuable lessons from this – and changed:
We’ve changed our sales process to be more exclusive. Our sales process takes many weeks because we’re making sure that everyone understands what the future state will look like for them. We fundamentally filter out the people that don’t fit. It helped us build this discipline of saying no more often than we’re saying yes – knowing the yeses are going to fit really well. It massively increases the credibility that we have with our customers.
It is where scaling starts. You’re putting a flywheel in motion that becomes unstoppable because every step strengthens your business.
Question for you to reflect upon:
If you’d say ‘no’ more often – what would that do to your ability to scale your SaaS business faster?
Step 3: Eliminate the trickle-down effect
Scoring a new customer makes us feel we’re winning with our SaaS business. But, unfortunately, the feeling of victory is often short-lived.
Closing the deal is one thing. Creating a fan is another thing. So although it might be that we can help them functionality-wise, still, only some customers turn into a fan. And that’s impacting our ability to scale.
Here’s the thing
Ill-qualified customers hurt the business more than we often want to acknowledge. I refer to this as the trickle-down effect.
- We want repeatability, but these customers will always remain exceptional cases
- Fans value our platform for what it was built for, but these customers resist seeing that as valuable
- Fans rave about the peak moments they experience, but these customers moan about all the gaps
As such, this is what happens next.
- Your R&D department is distracted trying to fill the unfillable hole of requirements from exceptional cases.
- Your Customer Success team burns valuable hours trying to please customers who will only be partially pleased.
- The slickness of your solution, loved by your fans, gradually blurs into a monster, dropping CSAT rates and compromising Customers’ lifetime value (CLTV).
I don’t have to tell you what happens next… slowdown in product adoption, increased churn, low NRR, profitability pressure, inconvenient conversations with investors, and ultimately unpopular measures.
It all starts by recognizing this – and that’s about visibility. The trickle-down effect is real – and it takes guts to address it. But doing so is a win-win for everyone: Your business, customers, and investors. The only ones that will hate it are your competitors.
Question for you to reflect upon:
On a range of 1-10: How’s your ability to scale impacted by customers that you shouldn’t have accepted in the first place? What could you change today to turn the tide?
Step 4: Develop an eye for repeatability.
A critical ingredient to scaling a SaaS business is: Repeatability.
But what is repeatable? The definition: To perform or accomplish something again and again with a predictable outcome.
To illustrate this with a quote from Robin van Lieshout, CEO of Insided in one of our CEO Masterminds:
“One of my learnings in hindsight is this: If you cannot repeatedly close X amount of deals in a certain period with almost the same type of funnel metrics (Lead>MQL>SQL>Opportunity) with a predictable set of resources (money and people), then don’t even think of hiring more senior executives to step in, take and scale.”
Here’s the thing:
Going to a repeatable GTM engine is one of the most important things for a SaaS company below 10 million AR. Not having a repeatable GTM engine results in uncontrolled burn, challenging conversion rates, unpredictable growth rates, and challenging conversations with your investors.
The essence of creating a remarkable SaaS business is to create leverage. Without repeatability, that fails. It’s simply too costly.
But once you see repeatability – how do you go about it? Shay David, CEO of Retrain AI, shared three of his principles:
- Normalize terminology – to align everyone
- Gather data – about everything
- Build processes – automate everything (with people in the loop)
Question for you to reflect upon:
On a scale of 1-10, what’s your ability to repeatedly (and profitably) close X amount of deals in a certain period with the same resources?
Step 5: Accelerate the process toward repeatability
Earlier this year, I wrote about repeatability as a critical ingredient to the successful scalability of a SaaS business. All good and understandable. But a big question instantly arises: “How can we accelerate the process toward repeatability?”
And the good thing is: Every department can contribute. It’s why alignment is so important. Here are some strategies from peer SaaS CEOs to illustrate this:
- Leadership: Don’t obsess over your TAM; obsess over your serviceable market where you can make a difference and build traction (Shay David, CEO of Retrain AI)
- R&D: Work from hypotheses around the biggest pain points you see. Find the cheapest way to answer that hypothesis and double down to deliver that in a differentiated way. (Dmitri Sirota, CEO of BigI)
- Marketing: Take position on why you do what you do and what you stand for. Be OK to communicate ‘If you don’t agree with what we do, or why we do no hard feelings, but then you shouldn’t be our customer’ (Charlotte Melkert, Equalture)
- Sales teams: Drop and move on. Be rigorous in qualifying out. Make a conscious decision about how many new accounts you need to have a fantastic year, and then focus on targeting the best out there. (Rami Darwish, CEO of Arrow Labs)
- Services: Double down your investment on helping organizations accelerate their journey with you (rather than targeting more billable hours). We f.ex. Transformed our POC from 6 months to 6 hours. (Jeff Jonas, CEO Senzing)
- etcetera
Every department has opportunities to accelerate the process toward repeatability. Align those efforts and tactics, and results will flow.
You have a choice here – take that opportunity.
Question for you to reflect upon
What can you change today to accelerate the process toward repeatability?
Step 6: Fuel the flywheel
We all agree that finding repeatability inside your SaaS business is essential to scale sustainably.
But repeatability only matters if there’s enough pull from the market. And to be specific, I don’t mean creating pull only at the start of the funnel.
Here’s the thing.
To scale effectively, we want to create pull across the entire customer lifecycle. But, once we accomplish that, it creates a flywheel for us, that’s hard to stop once in motion.
The big question, however, is: How? So I reflected upon that, researched over 250 podcast interviews, and here’s what rose to the surface:
- Create curiosity – Optimize your outreach around triggering their senses about what they aspire to become.
- Create desire – Think about their secret wants, hopes, need for belonging, and status.
- Create urgency – Why buy now? Optimize your SaaS sales strategy around scarcity principles and their risks of doing nothing. But avoid discounting.
- Make it easy to commit. Think about irresistible guarantees and a way to keep your entry price accessible. Note this is not about discounting.
- Make it easy to move. Think of making migrating a breeze or accelerating their ROI.
- Ensure they stay. Realize that recurring revenue is driven by recurring customer impact
- Get customers to talk about you – Think about what makes them proud – make it easy for them to share that via referrals.
- Leverage ecosystem – Think about the pull and push mechanisms you can trigger within the ecosystem around you.
As Maarten Tobias, CEO of Dimenco, recently said in one of our CEO Masterminds:
“If you can share, you can multiply.”
Just think about that.
Question for you to reflect upon:
On a scale of 1-10: What’s the strength of the flywheel inside your SaaS business? What could be the first step to change that?
Step 7: Promoting autonomy to scale faster
I often get this question: How do I rapidly scale my SaaS business?
And although it’s obvious to think about the technology or the business side, we often forget the people side.
Let me share an answer Christian Owens, CEO of Paddle, recently gave me when I talked with him about this topic:
We have two holistic mission principles. The first one is: We want to do it for you. We don’t believe in building products that help people solve their own problem; we believe in just solving the problem. The second is: Be the most helpful brand in SaaS.
If those things are true, that keeps everybody in the company oriented around building the right products. It’s how we keep all 400 people working on Paddle aligned. It’s a framework for how you make decisions. Does this advance us doing it for you? Does this help us become the most helpful brand in SaaS? If the answer to both of those questions is yes, we should do it.
Here’s the thing.
Every SaaS business starts small; it’s easy to make rapid decisions. But, the moment the business grows, it’s impossible to control every motion in the company. And this is where autonomy comes in: Enabling everyone to make the right decision without having to go one (or more) level(s) up to get instructions or approval.
Paddle secures this by organizing its business around two holistic mission principles: 1) Do it for you and 2) be the most helpful brand in SaaS. That’s all it takes to drive remarkable decisions.
Question for you to reflect upon
On a scale of 1-10, how autonomous are the people working for your SaaS business to make the right decisions? What principles could you introduce to score a clear 10?
In Summary
I started this blog with the aim of answering a question I often get: ‘How do I rapidly scale my SaaS business?’
I started by zooming out to the bigger question: Why is creating scale critical in the first place?
The short answer: Creating scale in a SaaS business is critical from a number of perspectives: Your growth opportunity, underpinning predictable traction, optimizing margins, customer value creation, customer retention, the viability of the business, and ultimately company valuation.
And because scale is all-encompassing, I’ve aimed to provide a 360 perspective on the topic – simply because scale can’t be isolated.
Finding the ultimate scale opportunity is about finding a balance between the technology side, the business side, and the people side.
My first conclusion: Embracing scaling in our SaaS business as a mindset. Those that succeed live it – every day, in everything they do.
And since it’s a mindset, I provided seven steps to start or accelerate your scale journey:
- It all starts with alignment
- Weed the desire to grow at all cost
- Eliminate the trickle-down effect
- Cherish Repeatability
- Accelerate the process toward repeatability
- Fuel the flywheel
- Promote autonomy
Every day we have the opportunity to tune how we can scale our SaaS business. Take that opportunity. Imagine where you can be in 6 months’ time.
Good luck
Additional resources to help you fix the scale problem in your SaaS business
The easiest way. Book a free call to explore if there’s a fit to do this together.
Otherwise – here are three other options
- Read my essays to create remarkable traction.
- Read my book, The Remarkable Effect
- Alternatively, subscribe to my daily email that’s laser-focused on helping B2B SaaS CEOs master remarkable traction.