Strategic marketers always aim to deliver a lion’s share of the online market, but, much like the jungles and grasslands ruled by the lion, the online market is loaded with competitors vying for the same consumer prey. In order to thrive in this kind of environment, strategic marketing must possess a combination of strength, intelligence, and timing.
A lion hunting for survival surely recognizes that it is involved in a zero-sum game with the incredibly high stakes of life and death. While strategic marketers are not subjected to a literal life-or-death scenario, the stakes are indeed so significant that it requires one to adopt the mindset of the king of the jungle.
Why is a Strategic Marketer king of the online jungle?
The strongest lions understand when it is best to take a calculated risk, when to be patient, and when to be aggressive. The same must be true of strategic marketers looking to differentiate their brand from a host of competitors, which is why the most effective strategic marketers are rightly characterized as the kings of the online jungle. In order for strategic marketers to become more effective and efficient as hunters, it is absolutely critical to develop a deep understanding of their figurative prey, the consumer.
Consumer prey: Attacking with respect and knowledge
In his book Born to Run, Christopher McDougall discussed the relationship between the lion and gazelle by writing, “Every morning in Africa, a gazelle wakes up. It knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn't matter whether you're the lion or a gazelle -- when the sun comes up, you'd better be running.”
As the lion wakes up each morning to hunt the gazelle, it is not only aware of the task at hand; it is also aware of every one of its past successes and failures. A strategic marketer must also be aware of how important it is, to paraphrase McDougall, to be up and running the moment the sun comes up. Running without a purpose, however, is hardly likely to yield the desired outcome.
In order to engage in purposeful, effective marketing, the strategic marketer must apply the lessons learned from previous experiences while also tirelessly pursuing the attention of consumers. The most effective strategic marketers seek the attention of consumers through strategies that show respect for, and demonstrate an understanding of, the specific consumers within a particular target audience.
Navigating and conquering the online consumer hunting grounds
It is only with a healthy dose of respect and knowledge that a strategic marketer is able to navigate and conquer the online consumer hunting grounds in the same way a lion is able to navigate and conquer the hunting grounds of the jungle and the grasslands. In the world of strategic marketing, the stakes are so high that merely surviving is not quite enough; strategic marketers must adopt a carnivorous mindset that allows them to ascend to the throne of the online jungle.
Reed Gusmus is the director of marketing at QASymphony, where he is responsible for utilizing his exceptional B2B digital marketing expertise to develop marketing plans capable of generating new customer acquisition while also stimulating ample revenue generation.
I talked in my last post about the value of numbers in running your business. For many entrepreneurs financial information looms largest when they prepare a business plan. I am still looking for as many people as possible to share your opinion on both these challenges –– final reminder I promise.
Some sort of financial forecast is integral to any startup business plan. There is no need to explain to founders why this matters. A good business plan can be the key to unlocking investors' wallets. I meet a lot of entrepreneurs who are focused on this stuff. Yet more often than not, they are a bit sheepish when it comes to the numbers.
In the glory days of amateur rugby the spirit of the game sometimes overcame the urgency for results. At these rare moments, Bill McLaren sometimes used to quote a mythical Irish wit “the situation is desperate but its not serious.” (See origin)
Financial forecasts in startup business plans remind me of this philosophy. A set of financial projections is essential to the whole fund raising process. But in truth they don’t count for much. Investors make decisions based on the team, the market size, the level of innovation/ disruption and maybe the business model.
Financial forecasts - why bother?
There is a good reason that financial projections don’t figure high on this list. In early stage, innovative businesses, the link between forecasts and reality is pretty tenuous. The business has no track record to act as a guide. The risk of failure is overwhelming. Most VCs and angel groups invest in 1-3 out go every 100 business plans. Then expect only 1 in 10 of those to succeed. No-one has the expertise or experience to beat these odds.
Investors talk all the time about being risk takers. And they are but that is not a good paradigm for how the process works. The key factors in any investment decision are all about reducing risk. The best chance of success lies with having a great founding team. A huge market also reduces the risk of failure. And so on.
Nonetheless, preparing a set of financial forecasts is an essential part of the process. You have a choice. Get lost in the process and pray that no-one asks about your numbers. Or use it as an opportunity to think about your business plan and enhance your credibility.
3 ways your business plan numbers are different
The way to tackle this is not to think about getting the forecast right. It will be wrong - get over it. These numbers are different for three main reasons:
The Chairman's view
The key to business plans is not precision. It is storytelling. A good financial forecast is driven by the business plan. The revenue numbers reflect the market opportunity and the sales model. For example, enterprise SaaS leads will take a lot longer to turn into revenue than SMB free trials.
Cost calculations are the same. Once you explain your business model, the structure of the cost base should be clear. Your audience will know where their money is going to be spent.
More important, investors want to see how that translates into growth. Its like filling up a car. Easy to do but hopeless if you don’t know where to find the accelerator pedal.
A lot of entrepreneurs take professional advice when producing a business plan. Nothing wrong with that. Remember you are not selecting for technical skills. These are important but easy enough to find. You pick a designer than can make your story come to life in pictures, fonts and colours. Select an advisor that can paint your business by numbers.
The startup world is all about the future. Founders talk about creating the future. Seizing the opportunities of a golden age. Never been easier to start a company. So you might ask, why bother investing time and effort in past performance?
Those board reports feel as if they are nothing but a mechanism for keeping investors and non exec directors happy. Annual accounts are even worse. They feel like ancient history. The numbers don’t make sense. For certain they don’t shine a positive light on the great things your company is doing.
Its all pain and no gain. Yet this misses some important point. Here are four simple reasons why that thinking is wrong. This stuff matters.
“I had also, during many years, followed a golden rule, namely that whenever published fact, a new observation of thought came across me, which was opposed to my general results, to make a memorandum of it without fail and at once; for I had found by experience that such facts and thoughts were far more apt to escape from the memory than favourable ones.” Charles Darwin
Four lessons from history
Any of these is a good enough reason to get some consistent reliable metrics about your SaaS. What about accounting numbers though. Aren't those for the birds?
Accounting rules are relevant
In some respects yes. The rules vary from country to country. Part law and regulation, part accounting standards. Accounting standards in turn are half local and half international. All before you get to the interpretations of well paid professionals (like what I used to be).
It can be quite hard to understand the story published accounts are telling. That is not a good reason to discard this data altogether. For a start standardisation and rules are limiting but also useful in some cases. Investors like comparing numbers. Knowing they are all prepared to the same standards adds a lot of value. And you need to be able to convince investors.
Most angel investors don’t make a big deal over this. Take a longer view and the situation changes. VCs and corporate investors want to see proper accounting numbers. The same is true for or any form of exit - trade buyer, financial buyer or IPO. Tom Tunguz wrote a good article on this exact point. Published when the accounting rules for SaaS changed this year.
Not only that, they want to know how you get from the figures you look at every day to the formal accounts. When I did due diligence, one of the first questions on the checklist was “Have the management accounts been reconciled to the financial accounts?” Its still there.
So you need to ask yourself, what happens when someone appears with deep pockets. Do you want to present the numbers with confidence? Or scramble around delating diligence until you are ready?
The Chairman's View
So numbers matter. Get the right financial information and you can make better decisions. Use your numbers to present your business with more credibility. Yet preparing and managing this stuff is still a burden. And it can feel that there is very little help out there. I plan to change that. Share your opinion and be among the first to hear how managing financial information can be faster, easier and better.
Please share your opinion - Sunstone Financial Information Survey
TL:DR I have noticed that many entrepreneurs, investors and others struggle to prepare and understand financial information. I plan to change that. First, I want to understand whether this is a real problem and how widespread it might be. I have included a link to a short survey which explores the challenge. I am hoping you will complete this and share it with your networks. I want to get as wide a range of opinions as possible from people who like you.
This is my first post for some time. Over the last few months I have been taking time for a bit of reflection. I don’t really do ashrams or meditation or mindfulness. So for me this mainly means playing a bit of golf and having lots of coffees and lunch and chats.
I embarked on this almost by accident. Certainly without any sort of plan. The trigger I guess was the good luck my wife and I have experienced in the last year. Because of that, I find myself with the freedom and headspace to take on a bit more. I have been working with startups and early stage companies for four years now. I feel I can make a greater contribution.
Out on the links, the thought rattling around in my head has been: How can I leverage my time and experience better to make a real difference to the growth and dynamism of early stage technology businesses. This sound quite formal when I write it down but its really not. Its a theme I keep coming back to day after day, shot after shot, latte after latte.
Pursuing this idea I have had a ton of great discussions with people who want to make a difference. Many of them are already spending time, expertise and money to help. We all know its making a difference.
Yet every time I talk to anyone it feels like I am missing something. It doesn’t matter whether I am having coffee with an entrepreneur, walking the fairways with fellow investors or engaging in a discussion group with people committed to the startup ecosystem.
The conversation is full of ideas about scale, ambition, innovation and priorities. Focus on how we can help companies achieve more sales, raise more investment or become more international. Its all great but….
At some point after an especially early morning, a different way of thinking clicked into my head. Maybe people like me should stop thinking about where we are going. Leave that to the entrepreneurs. Instead of fuelling ambitions or chasing moonshots, why don’t we focus on making the day to day stuff easier for founders and teams?
Once you start thinking like this lots of sources of friction and pain present themselves. Much of this I can’t do anything about (IP — please will someone disrupt this one!).
Over a little time I have started focused on something I think I can help with. Numbers. Numbers always cause problems. Forecasts and projections, business plans, budgets, valuations and anything that looks forward. Board reports, operational v financial v accounting, cash flow or profit, KPIs and so on.
I have noticed that many of the people I talk to struggle to prepare and understand financial information. Professional expertise in this area is expensive and does not always meet startup needs. I plan to change that.
First, I want to understand whether this is a real problem and how widespread it might be. I have included a link to a short survey which explores the challenge. I am hoping you will complete this and share it with your networks. I want to get as wide a range of opinions as possible from people who like you.
If it is of interest, I will be happy to share the outcome of this survey with you. You will also be on the priority list to get early access to the next steps in my plan to make finance faster, easier and better for startups.
Here is a link to the survey https://sunstone1.typeform.com/to/w6r0ot your support is much appreciated.
A time comes when a B2B SaaS company starts to think about sales to big companies. Becoming an enterprise SaaS in other words. It soon becomes obvious that getting enterprise sales is not easy. Then its a short step to the place where you decide its time to start hiring sales people.
There is a bit of consensus in Scotland right now. A lot of companies are on the cusp if they can just get the right sales team onboard. The problem is great sales people are hard to find. And expensive.
I sit in a lot of conversations about how much to offer sales people. For most SaaS founders it feels like a big risk. The salary alone can add 20 or 30% to the monthly burn rate. Then comes the vexed question of commission. How much should you offer for on target earnings? What is a reasonable target?
At this point I like to confuse the issue by offering my thoughts. I don’t think targets and commissions are a good model for rewarding sales in general. I believe they are terrible approach for a SaaS startup.
The four killer flaws
Commissions based on the achievement of targets (or quotas if you prefer) are popular for three reasons. First they are simple, clear and easy to measure. Second the targets can be tied in to your overall revenue goals. Finally, sales people generate real value. And this is the established way of rewarding them for it.
All these arguments sound attractive. Everything is a balance though. And there are four big reasons why this traditional thinking does not stand up:
There are bunch of conflicting incentives and messages inherent in traditional per head sales quotas. I love this article by Steli Efti, a true sales guru, pointing out the downside risks of getting this stuff wrong.
Luckily there is an alternative that avoids many of these pitfalls. And it grows naturally with your business.
How team targets work
Most of my career, I worked towards team based targets. In a startup this is dead simple. You need to have one goal. Everyone in the business has to have a laser focus on achieving that single goal. So everyone shares the same target. Hiten Shah explains the importance of this.
As you grow, different teams will emerge. Targets and objectives will grow more complex. But each person will be a member of one or more teams. They share objectives with everyone in the team. This leads to a natural process. Objectives grow and diverge with your business. They are not made up to fit with “iconic,” expensive, big name hires.
In a large business, most senior people are part of more than one team. The effect is that everyone has a different set of objectives. Each individual target is shared with the team but no two people have the same combination.
For example, in my last year I was leading two major account teams and part of an industry business unit team. I had shared objectives with each of these teams. Yet no other individual had the exact same combination of teams and objectives.
Be clear team targets do not mean splitting objectives up into separate portions. Each member of the team shares 100% of the same target.
The Chairman's View
How does this affect reward? First and foremost everyone gets rewarded better because the business performs better. Teams work towards the same goals. People support each other. Incentives are unify not divide.
Performance reward in this system has to be based on total contribution. Simple numbers matter but they don’t tell the whole story. Total contribution gives you the opportunity to look at everything. Close sales, build relationships, deliver great customer service, product innovation - whatever really matters.
You can take the chance to factor in the important cultural things that get left behind in a sales culture. Respect, diversity, honesty and personal growth all matter. So recognise them.
Its true that total contribution is much harder to measure. At the same time it is fairer.
Leadership earns more respect. The right behaviours are supported and encouraged. Well worth the effort.
“The purpose of business is to create and keep a customer.”
One of the challenges with selling SaaS to the enterprise is intrinsic in the nature of big companies. We talk about an enterprise customer as a single, unified entity. Even use the ultimate abstraction by describing wins as new logos.
This is not the real world.
Companies don’t buy stuff. People do.
Enterprises are just large collections of people. You don’t have to convince all those people to buy. But it might feel like it!
The conventional sales manual recognises this challenge. You will be advised to map the people in your target customer. Classify them as influencers, buyers, decision makers, blockers, coaches and so on.
Sophisticated techniques such a Miller Heiman will be even more precise. Making distinctions such as economic buyers versus technical buyers to refine the model.
The trouble is this just doesn’t work. Each large company is like a miniature country (or even a mid sized one in some cases). It has its own culture, practices and ways of doing things. There is no standard model.
Time to go to the fairground
I think of this like the old fairground favourite, the hall of mirrors. You walk past a series of mirrors which distort your reflection in various ways. Tall or short. Fat or thin. Squashed or twisted. On and on, laughing or crying.
As you pass through you will see images which flatter you, a couple of absolute horrors and a bunch of caricatures to keep you smiling. But everything you see is you. A merry melange of ways to see the exact same thing.
Turn the kaleidoscope onto your SaaS
Your customers are the same. They experience the world differently from you. The clear, simple problem your SaaS solves is fractured and contorted through different lenses.
Yet each individual in your enterprise customer is looking at the same thing. Your product, your company and your team. Selling into this environment is about understanding these perspectives and dealing with the response.
Put yourself in your customer's shoes
Every reflection is skewed by the change that your SaaS will make for the individual looking at your product. You may be dealing with managers, C Suite, users, procurement officials or just nosey finance people. Everyone is influenced by change.
So the best way to understand how your SaaS is reflected is to stand where you customer stands. Look at the product from their point of view.
A good example of this is procurement. Sellers tend to think of procurement as a department that buys things. Yet more often than not this is wrong. Procurement’s job is to do deals. This enables others in the business to do the actual buying.
So the way to make procurement feel good is to show them a great deal. Not to make it easy for them to buy.
Meet the cast
Of course not every procurement function works like this. Like I say, there are no standards. But in every enterprise there are a few familiar characters you may recognise.
They are best identified through their own words:
Your problem is my day job. Or in other words the cost reduction will be the salaries of some people influencing the decision.
Your problem is invisible. This is a variant of the old Henry Ford comment about people looking for a faster horse. Sometimes people are so familiar with their environment they can’t imagine a different world.
My IT guy tells me your solution is a high security risk. This person probably hasn’t talked to IT. Most people don’t understand technology risk but it makes them nervous.
I love your company and your solution but there’s a fire over here and I need to put it out. Your SaaS is the most important thing in your world. It may be very small potatoes for some customers.
Its not my job but I have the best interests of this company at heart and I’m not sure about you. You may be told straight up that you are too small. Or you may have found someone completely outside the loop sniffing out a risk.
How do I know you will deliver what you promise. Anyone who buys IT will have a long legacy of disappointment and broken promises. It will take more than a couple of customer case studies to convince them.
Can you guarantee this team will be available throughout. Often people feel they are buying S for service not for software. Services are delivered by people and customers buy people they know.
We don’t like to be on the bleeding edge. There are many variations on this theme. Some people simply don’t like change. Even if they know it will be for the better.
I don’t have the time and resources to implement this. The total cost of ownership is not only money. Change needs space and its not always there.
The Chairman's View
You could adopt the Bruce Lee approach and take the fight in every direction. As in the famous closing scene from Enter the Dragon. Or you can learn from the sales gurus and treat all of these statements as objections rather than real concerns.
I prefer a less adversarial approach. Where possible work with these people. Change their view of your SaaS and you will help them realise the benefits faster. That is the basis for a sustainable customer relationship.
You should also be sensitive and listen for problems that will not go away. If the fire is in the factory, turning up at head office with a hose will not work. When your customer is not ready to buy, don’t try and sell.
The original hall of mirrors is in the palace of Versailles. It was designed to reflect the glory of the Sun King. And it closed out the real world. We all know how that ended. Don’t let the enterprise version blind you to reality.
This post is about psychology. Inspired by one specific facet of motivation and behaviour that is often overlooked. Why does winning drive some people to achieve extraordinary things and leave others cold?
Let me start with a health warning. I am not a professional psychologist. I have never studied psychology or had any training in the discipline. You could say that I am not even a rank amateur in the field.
I do know one thing about psychology. It underpins everything in economics and business.
If you want to understand better. Let me make two recommendations.
For a great business perspective on psychology then listen to a world class amateur in Charlie Munger (on human misjudgement).
Or get the professional view from Thinking Fast and Slow by the Nobel Prize winner Daniel Kahneman.
(Note that Professor Kahneman is a psychologist yet his Nobel is in Economics.)
All I have to offer is observations of real people in all kinds of business situations over the years. Unsystematic and anecdotal evidence if you like. Much of it gathered through business activities that revolved around winning and losing. Or at least were characterised in those terms.
I have enjoyed many great, even elaborate social occasions in celebration of wins. I have listened to ten times as many speeches or presentations bemoaning the fact that we don’t celebrate victory enough. And sat around countless tables analysing and agonising over every detail of a campaign.
In every case, the definition of victory was a business deal. Often a big sale to an important customer. But mergers, acquisitions, new hires, promotions, partnerships, procurement agreements are also seen in the same terms.
Don’t get me wrong, I enjoyed the parties (although I am getting a bit old for these things now).
Yet something always felt a little hollow. I didn’t feel the same rush that bubbled and popped in many of my friends and colleagues. It took me many years to recognise the reasons. For me, winning the deal or making the sale is the beginning not the end.
Selling versus doing
I was drawn into consulting because I like to help businesses become better. Since I found my way into SaaS and startups, I have kept to the same focus. Grow faster, be more efficient, develop new strategies, change culture, improve margins, enter new markets and many more. That’s how I have fun.
Making the sale or closing the funding round are means to an end. They give me the right to start doing what I love.
Sales or deals are a hard and painful process. Fuelled by adrenaline, myth and lots of late nights. The energy generates excitement. But the result is no more than another box ticked. There has been no value for the client. Nothing has been billed.
Closing the deal is the start of something for me. The process of creating value. The pressure to deliver. The sense of achievement. All begin after the win.
I don’t feel stress in a deal. Only when the overture ends and the show begins. Delivering what I have promised is the greatest pressure. Seeing the benefits realised offers the only real job satisfaction.
My world is very much services. Its an environment where the customer only pays after the job is done. The service provider is only as good as the last experience. Perhaps this means securing an engagement can never really be a win.
Yet I think the same principle holds true for product. If I pick your product off the shelf and pay for it, the sale is made. Is it good for your business if I hate it as soon as I open the box. No. Again the process of value and the customer relationship only begins after the sale.
Leopard or Impala - What makes the SaaS ecosystem?
I believe there are two basic types here. But the traditional type A/ type B comparison doesn’t work. So lets call them Leopards and Impalas instead. (I have also heard ducks and eagles but that was from an idiot so lets move on.)
I choose Leopards as the symbol not Lions because Lions are mangy, smelly, lazy scavengers in the wild.
Leopards are the hunters. Silent killers who stalk their prey and live for the hunt. The leopard is a beautiful, natural machine. Sounds pretty cool huh?
Then we have the antelope. I choose Impala to represent this crowd. It is the most common species in the Kruger Park and they are also sleek and stunning. Plus they are about the biggest antelope a leopard would take on as prey.
They gather in herds to defend against predators. When one moves, they all follow. The group takes precedence over the individual every time. The alternative is death.
By now its clear which type you want to be. And this type of image is common and widely accepted as a motivational tool. Hunters and farmers. Predators and Prey, Winners and losers. You can hear that motivational speaker revving up as I write.
But stop a moment and consider this. Impala graze the grasses, bush and trees. They keep the savannah clear and pristine. And they thrive and grow in huge numbers.
There are 2,000 leopards in the Kruger National Park……and 160,000 Impala.
So which species is more successful? Which model of evolution would you rather follow? Maybe that superficial impact is not so convincing.
I loved Yuval Noah Harari’s book Sapiens. One of the ideas that struck me most came early in the story of human evolution. Around 10,000 years ago our ancestors made the move from hunter/ gatherers to farmers. We developed reliable crops and gained control over a handful of animal species.
Its natural to talk about domesticating cattle and grains. But did man domesticate wheat or wheat domesticate man?
The Chairman's View
Its obvious that leopard and impala are both essential to the eco system. I think the same is true in business. Those who see a sale as victory are needed to drive through the obstacles and pain of the sales process. This is especially true for Enterprise SaaS.
Those who are only happy when their customer sees value are also essential. That’s how great products get built and excellent service is delivered.
A great business has a good mix of these two types. Its worth taking the time to recognise them and make sure you are developing that type of diversity in your team.
Both types are equally vital to creating value in your business. Too often I see rewards skewed towards the leopards. Sales are seen as some kind of rainmakers. A special breed who deserve super rewards.
This is a mistake which is embedded deep in business culture. The myth lasts long and spreads far. But sales do not generate value. They may close the deal. Success is a product of every element of the team.
Remember this when thinking about incentives and rewards. And think about it when you are building a business. Building a sustainable business requires the whole team.
Any B2B SaaS needs to demonstrate a clear source of sustainable competitive advantage. Sometimes you will see this called barriers to entry. Warren Buffet likes to talk about “defensive moats”.
Whatever the jargon, its essential.
Both to your strategy and to any business plan or investment pitch. Yet its an area surrounded in myth and misconception.
A changing world
My attention was drawn to this subject by a handful of well argued and fascinating articles.
Christoph Janz takes a different view of the shift by arguing that there is a dissonance between SaaS and the VC model.
I won’t try to draw out all the arguments. You can read the detail for yourself or take it from me these are all smart people with good points to make.
The general theme is clear. The source of competitive advantage in B2B SaaS is changing. Moving from network effects and economies of scale to a new paradigm based on artificial intelligence. Or at least smarter, more algorithm driven automation.
Practical options for your SaaS
At an abstract level, these arguments make sense. The technology will pull the market in the direction of more intelligent applications.
Yet we are still only scratching the surface of the opportunities SaaS offers to drive business change. And in any case, one trend will not be the only source of competitive advantage for a whole industry. So where will the edge be for B2B SaaS?
Great customer value is always first.
Keep demonstrating that your customers love your product and your service. And track the value they derive from your SaaS.
Customer lifetime is not just a bit of maths based on churn. Its the whole of your business.
Build great team is the best foundation.
There is no route to business success that does not require a team of great people. No amount of AI will change that. And its a prime source of competitive advantage.
Just think about Accountants or Lawyers. There are thousands of firms. All offering the same services and using the same business model. All the big 4 and the magic circle offer is great teams. People transform them from one man bands into multi billion dollar giants.
Helping your customers change is the key to growth.
This is the biggest barrier to the adoption of B2B SaaS. A business only realises the value of new technology through change. No amount of clever hardware or software is sufficient in isolation.
There is a huge amount of business value out in the SaaS marketplaces today. But too many businesses can’t see it or don’t know how to get it. Make this happen and you will win.
Mining and using data taps an unexploited resource.
Look back at Sarah Guo’s slide. Its deceptively simple. Get access to data no-one else has or find better insights from data.
Its not as easy as it sounds but the potential is huge. Businesses of all shapes and sizes are drowning in information. The prevailing mood is that its all too much. More of a threat than an opportunity. This is the wrong way to look at it.
Find a smart way to use data and build from there.
The IP elephant in the room
This by no stretch of the imagination a complete list. Every business needs to find its own unique competitive advantage. These are just some suggestions about where to look. There is one deliberate omission - intellectual property.
I spend a disturbing part of my life listening to debates about IP.
Who owns it? What rights is the University seeking? How far does the patent extend? How much can be shared in an investment pitch?
Its one of the biggest areas of friction in the company growth here in Scotland.
Patentable IP is not a source of competitive advantage in software.
Like very rule there will be exceptions to this but they will be once in a generation rare. In reality a focus on IP and patents is a disadvantage in starting or growing a SaaS business. There are three reasons for this:
Trademarks, copyright and the unregistered skill and talent of your people (or know how as the lawyers describe it) are all worth having. Chasing patents or arguing over ownership of formal IP are not. They have the effect of strangling your business at birth.
Software is not the place for this kind of IP.
The Chairman's View
Customers and a great founding team are essential to create any business. Building on and protecting these requires a clear and sustainable competitive advantage.
This will be unique to each company. And B2B SaaS offers a world of opportunity to identify that edge. Make sure it is clear and realistic. Focus but remember its a fast changing landscape.
Nothing lasts forever and a bunch of smarter people than me have described the future. Be aware of this but don’t be afraid. And don’t fall into the trap of fixed and defined IP.
I leave you with a different way of thinking. Jason Cohen asks a great question. How would you gain competitive advantage if you build everything in public?
I have spent quite a bit of time over the last few weeks writing a business plan. Its a bit of a retro experience for me. These days I spend much more time reviewing and advising rather than doing.
Apart from a long overdue return to real work, this has been a reminder of some key challenges. The business plan I am working on is for a funding pitch. Why else would you bother?
This is reality for most entrepreneurs. At some point you have to do one.
Framing your sales pitch
In preparing for battle, I have always found that plans are useless but planning is indispensable.
Regulars will know this is one of my favourite quotes. The meaning is clear when you are fund raising. The purpose of both planning and plan is to support a sales pitch. Selling shares in your company to investors. (Please never “giving equity away”.)
Because its a pitch, your business plan is much more than a technical description of how you aim to grow your company. This is about presentation and storytelling. And its about a clear message. Not a range of scenarios for debate and discussion.
Most often the value from planning is helping evaluate options before making a decision. In an investment pitch, that value is thinking through the best story to tell your audience.
How happy is the ending?
Your first dilemma is aggression v realism in the numbers.
People and narrative sell the business but investors buy the numbers. As a struggling entrepreneur, fighting for your first few sales, can you really see $100 million revenue in 3 or even 5 years?
Yet that is what investors want to hear. The easy option is to offer exponential growth. Creating the forecast is remarkably easy. With no track record, your projections can be anything you like.
Then the dilemma hits you. Will anyone believe it? How do you convince investors that the dream is doable?
How credible are the characters?
That brings you to the next dilemma. For the numbers to be believable, there are at least three other articles of faith. Team, market and product.
In each case, you need to sell investors a combination of proven reality and potential.
What are the limits of the genre?
At the risk of extending the literary metaphor, your business plan sits in a well understood genre of fiction. Investors have a set of expectations and plenty of experience looking at this stuff. And this is the true dilemma at the heart of everything.
Raising startup investment is a game with well established rules. They vary a bit between individual Angels, syndicates like those which operate here in Scotland, VCs and other market players. But the rules exist and they can be hard for entrepreneurs to learn.
Once you uncover the rule book, the temptation is to play it to the letter. And you will not be short of well meaning advisors who recommend just this approach.
Yet it won’t work.
The hardest rule to abide by is simple - surprise me. Every investor wants to see something unique. A passion or a solution or a hook of some kind that makes your business stand out.
Stray too far from the playing field (sorry drifted into a different metaphor) and people will think you are crazy. Stick within the white lines without deviation and the same audience sees you as boring.
The Chairman's View
There is the ultimate unanswerable question. How do you stand out from the crowd? Emphasise the unique genius of your business proposition while playing to the prejudices and preferences of your target investors.
No answers to this one.
But one big piece of advice. Make sure this is where you focus when developing your business plan.
Do the basics and use your thinking time to wrestle with the last dilemma.
Business tools provide handy shortcuts and improve efficiency. Used for their intended purpose good business tools can lead to massive productivity improvements. Apply them the way they were designed and you will get results.
Enterprise SaaS companies are both builders and users of such tools. And one of the clear benefits of the SaaS model is making better, more innovative tools available to every business.
But SaaS does not overcome the biggest danger with any tool. Start using business tools for the wrong purpose and they can become an instrument of torture not a source of value.
CRM and its reporting arm sales pipelines are one of the most misused tools around today.
Your SaaS pipeline is for asking questions not making decisions
They provide an excellent snapshot of the future health of your business. Your SaaS can get a clear indicator of future revenue and with a bit of effort some good data on which sales processes or sales teams are driving growth.
However, many people take this one step too far. CRM and pipeline data becomes a tool to manage. A mechanism to make decisions. And therein lies the danger.
Good pipeline data is a great way to ask the right questions. Don’t let the data get polluted by a bias towards preset goals and targets. Good decisions flow from answering good questions not just from abstract, summarised data.
Enterprise SaaS sales - Dynamics not statics
This is most obvious for enterprise SaaS sales.
Each sale is the culmination of a long cycle with many twists and turns. Its not out of whack to spend six months building an enterprise relationship and another nine months to achieve the first sale.
And in enterprise SaaS you are also looking for upsell. Each sales opportunity is only part of a wider relationship picture.Ongoing revenue, new ideas, expansion sales, service challenges and the rest.
Your pipeline is just a snapshot at a point in time. Every stage is like an individual window that captures only those opportunities that are in a specific position at a given moment.
It doesn’t matter whether you use the categories I outlined a few weeks ago in Simple SaaS
Or adopt a more conventional structure. Your pipeline is a valuable yet static view.
An enterprise relationship is like a dynamic living organism.
Think of it like comparing your turnover to your growth rate. Turnover tells you how well you have done but its a static figure. In the past. Growth is dynamic. A much better indicator of where you are going.
Manage enterprise SaaS customer one by one
Relationships are dynamic and unique. Each relationship needs to be treated as a special case and managed as such. More accurately, for enterprise SaaS we are talking about the group of relationships that forms you customer contacts for each enterprise organisation.
Customer A and Customer Y may be in the same “pot” from a pipeline reporting point of view. But they will have arrived there by very different routes. The account team will be planning their own specific next steps. And value of the relationship will depend on how those plans are executed.
“Strategic” sales choices like: “lets push all of these to the next stage this quarter” or let’s make sure every customer is offered this special new feature” are counter productive. They distract from a focus on customer need and they risk upsetting the delicate balance of the relationship.
The Chairman's View
Sitting on Boards, pipeline is one of the first things I look at each month. It gives me a great pulse check on the business. And it help find the right questions to ask the management team.
But I also like to listen to the CEO or the Sales Director talk about the market. This gives me a much better feel for the dynamics than the report.
When I ask my questions, I am not looking for simple answers. I want to hear specifics. Plans to convert important relationships. Actions to address customer problems or concerns. Change to strategy in response to the customer’s business dynamic.
All about a unique approach for each enterprise SaaS customer. Designed to maximise the company’s chance of developing a strong relationship that generates value for both sides.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.