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The SaaS Growth Q&A: January 2017

By Ryan Law on Wed, Jan 18, 2017

Growing a SaaS business is downright difficult. There are few "easy" decisions, and even fewer people willing (or able) to help you make those decisions.

We see the same difficult questions turn-up time and time again, so we're collating our answers to help you quickly and efficiently improve the growth of your SaaS company. We're also reaching out to you, and asking you to challenge us with your hardest growth questions.

Today, we're tackling the pros and cons of startup accelerators, analysing essential customer success metrics, and offering our top tips for securing new customers.


Q: Do you think accelerator programs are effective for start ups?

Ryan answers:

There’s a huge discrepancy between good accelerators and bad accelerators, and the creation of startup accelerators is, well… accelerating - so it’s hard to answer this in anything other than a nuanced way.

BUT we can be certain about the efficacy of some of the bigger, more established accelerators, namely Techstars, 500 Startups and Y Combinator.

Data from Mattermark shows that these three accelerators alone are responsible for almost 10% of all Series A deals in the US.

Ten percent! From three programs!

So while bad accelerators abound, the big name, super-popular accelerators are big and super-popular for a reason: they offer a disproportionately good shot at the big time.


Q: WHAT CUSTOMER SUCCESS METRICS SHOULD BE MEASURED IN A SAAS STARTUP?

Emily answers:

There’s a handful of super-important customer success metrics you should measure:

  1. Churn - both customer churn and revenue churn (more info about the difference between the two)
  2. Engagement and usage - daily and monthly active users, and onboarding engagement
  3. Customer Satisfaction - through net promoter score to measure intention (would they recommend you to a friend, in theory), and viral coefficient to measure their action (have they recommended you to a friend)

The most important one to keep an eye on is churn, because if you’re losing a ton of customers every month it’ll make it difficult to grow your startup. Engagement and satisfaction are also really important, though, because they show you whether or not your users are actually getting value from using your SaaS.

If it’s helpful for you, I’ve written a much more in-depth guide to getting started with Customer Success, which has a section on the most important Customer Success metrics and how to calculate them.

Customer Success 101.png


Q: As a CEO of a successful startup, what is your advice to a new startup to get clients?

Will answers:

  1. Don’t accept any client that comes your way. 
    You’ll regret it. Remember that sales is a two way street: you need to qualify the client, as much as they should be qualifying you. Is there expansion potential? Do they meet the minimum requirements needed to get the value you offer? Would I go for a beer with them? (Especially if you’re selling a service, and will be working closely) Are their values/beliefs aligned with our own where it matters? 

    This is one of the most important items on this list, and it often gets overlooked. You don’t want any customer, you want the right customers. Bad clients are toxic: employee retention will suffer, client satisfaction will suffer, churn will be high, you’ll get a bad reputation, you’ll be more stressed, you’ll grow slower (long term) etc… It’s a toxic negative cycle, and much harder to undo damage than prevent it.
  1. Get out there and speak to your Ideal Customers. 
    Find them however you can. Don’t just jump into trying random sales/marketing tactics. The better you can understand your Ideal Customers’ wants, habits, needs, desires, problems, challenges, personalities, demographics, etc… The better you’ll perform. 

    With a deep understanding of the customer comes a whole sea of client acquisition opportunities.
  1. Test tactics before scaling them. 
    Don’t dive in and spend $50k on Google Adwords. Identify the leanest way to test a tactic and get enough data back to assess your experiment as a Success or Failure. Failures either need to be modified and re-tested, or scrapped if the data indicates it’s hopeless. 

    Successes should be scaled up quickly, to capitalise on the opportunity as soon as possible (assuming you can support the growth, and deliver on your promises).
  1. Master a few channels, don’t spread yourself too thin. 
    Don’t try to do everything all at once. You’ll suck at everything, trust me. Once you have found some success, look to double down in these areas rather than diversify.

    You need focus in the early days. Diversification can come later: Startups usually vastly underutilise how far they can go with their existing Successful Channels, instead always chasing the “silver bullet” to solve all woes. They never find it, and waste a lot of time & money changing everything all the time.
  1. Agree a split between resources spent on successes vs experiments. 
    Its important you always experiment, but the majority of your time should be focused on your successes once you have some. 80/20 is a good rule: 80% of your time doing what already works; 20% trying new things to see if they outperform what you’ve already got, or help it to perform better.
  1. Test all assumptions as fast, and as cheaply as possible. 
    Don’t develop a $40k campaign on the back of an assumption you’ve made about your target market. Much better to test the assumption by speaking to your existing clients / market first. 

    The first step is often the hardest: identifying the assumptions you’re actually making. You need to work it back as far as you can.

Here’s an example of what often goes wrong:

CEO: "We’re not generating enough leads. I read a blog post the other day about Facebook Ads. XYZ generated ABC leads for Y with it. I think we need to get into this."

Marketing Manager: "Can you send me the link? We’ll get right on it! What budget is available?"

CEO: "We should be able to find $20k or so. I think it’ll work great."

Marketing Manager: "Okay, we’ll work out the best way to get started as soon as possible."

Note how at no stage is any data/customer insight used to guide the decision. The CEO is chasing the “Shiny Object”, and the Marketing Manager is just going along with what the CEO suggests, wanting to please.

Rather than running a very small scale test first, they then jump in with $20k (which will likely get blown with no real results). The company will then conclude that Facebook Ads don’t work for their business, and switch off to the idea of ever testing anything on Facebook ever again.

Watch out for it. While the problems appear obvious written down here in front of us, it’s easy for this type of behaviour to creep in if you’re not highly conscious of recognising it.


Have a question you'd like answered?

Can't tell your accelerators from your incubators? Looking for new ways to grow your customer base? Struggling to work out if you've hit Product/Market Fit?

If you have a burning SaaS growth question you'd like answered, get in touch, and we'll include it in our next SaaS Growth Q&A.

 

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