Over the past months, I’ve had numerous conversations with tech-entrepreneurs on the topic of leverage. So let me highlight one critical question:
“My VCs asked me: ‘If we’d invest €4 million in your business – where would you focus this money to deliver the biggest multiplier?’
Although this seems a straightforward question, I realized that many CEOs running a B2B SaaS startup don’t have a clear answer.
They simply don’t know. The answer seems to be made up as they reflect about the question:
“Eh,… I’d invest it in my product to fix these gaps in our product.”
“Eh,… nobody knows us. So, I’d invest it in marketing to make more people aware of what we do.”
“Eh,…Our current Total Addressable Market is too small. So I’d invest it in expanding abroad.”
and so on
They all seem reasonable answers when you look at them from a 30000 ft level. But more often than not, it’s merely an answer about burning more money by doing more of the same things.
The critical question is: what difference will it make?
The essence of the question asked by the VC is one of leverage, i.e., where can they invest €1 and get €10 in return?
And this is much harder to answer.
It’s about being able to articulate with precision the high-potential areas of your business.
What unique combination of ideal customer profile, problem, and product/service has the potential to deliver that 10x return when you throw more gasoline on the fire?
It’s about getting specific – however, many make the mistake of doing the opposite. Instead of intensifying focus, they’re widening focus just because they have a lump sum of money at their disposal.
So, imagine receiving an email from your main investor today, asking this: “In the period between Christmas and New Year, I want you to reflect on the top 3 levers in your business that we could grow +10x in 2022.”
So how would you go about it? Here are three essential questions to get started:
- Is the definition of your ideal customer profile sharp enough? Hint: If it’s merely a definition of size, region, and sector, you got some room to improve. Find the 10% in that space that are your true fans and articulate how they differ from the 90% that would be better off with the competition.
- Do you have crystal clarity about the top 10 problems that are a) most valuable to solve for your ideal customer and b) most critical on their agenda?
- Do you understand which of the problems on that list you can exceed expectations on like no other alternative can?
These questions are the core ingredients of what I refer to as your Value Lever.
Knowing the answers to the three questions helps you to reflect with more precision about where you are leaving money on the table. In other words: where’s the most significant potential in your business to invest 1€ and turn it instantly into €10? Here’s where two other levers come into insight: The Viability Lever and Volume lever.
- Is it in deepening the differentiation of your product? (Viability)
- Is it in sharpening your positioning? (Value)
- Is it in clarifying your value proposition? (Value)
- Is it in highly targeted demand generation? (Volume)
- Is it in transforming sales from feature sellers into value sellers? (Volume)
- Is it in accelerating deployment by standardizing services? (Viability
- and so on
Whatever it is – Finding and articulating the top three growth levers for 2022 will help you make a bigger difference.
Need help tuning the three levers for your SaaS business to break through the invisible growth ceiling – here’s how I can help.