Taking Instagram photos is my hobby. In this series, I post a few photos on Friday that I recently took.
This is a guest post by Thomas Smale, Founder of FE International.
The SaaS business model has enjoyed monumental growth in recent years, and though nearly ubiquitous at the enterprise level—with 73% of organizations expecting nearly all of their apps to be SaaS by 2020—the vast majority of SaaS businesses are owned by hard-working entrepreneurs and are either owner-operated or run by small teams. Not surprisingly, the ever-increasing popularity of the SaaS model has resulted in a corresponding rise in demand from investors and buyers attracted to the potential for SaaS businesses to realize predictable, recurring revenue and steady, incremental growth.
If you’re the owner of a growing SaaS business, you know what it takes to build it into a successful enterprise—and chances are you’ve wondered how much your business is worth. When arriving at an accurate valuation of a given SaaS business, an established M&A advisor will take dozens of factors into consideration in order to take a holistic view of the business.
In this piece, we walk through the basics of valuing a SaaS business, with a specific focus on areas where owner intervention can positively impact the value of the business.
SDE vs. EBITDA vs. Revenue
The first step in arriving at an accurate valuation of a SaaS business is determining the current revenue of the company, which is most commonly done in one of two ways. For SaaS businesses with an estimated valuation of $5M or less, the Seller’s Discretionary Earnings formula is applied. For businesses with an estimated valuation of over $5M, we typically employ the Earnings Before Interest, Depreciation, and Amortization (EBITDA) method.
A relatively straightforward method of determining earnings, SDE is calculated by taking the gross revenue of the business, then subtracting any Cost of Goods Sold (COGS) and non-discretionary operating expenses. Then, because many SaaS businesses valued under $5M are owner-operated, the owner’s compensation is “added back” into the final earnings determination. Other acceptable add-backs for the purposes of determining SDE might include discretionary expenses passed through the business for tax purposes, such as travel. Without these “add-backs” the true earning potential of the business may be obscured. The goal of using SDE is to give potential buyers as accurate a picture as possible of current earnings and profitability of the business.
Valuations of companies with an estimated value of $5M or higher are more complex and typically use the EBITDA formula.
Again, the goal is to arrive at an accurate earnings picture. SaaS businesses valued above the $5M threshold typically are not solely owner-operated, have multiple shareholders, and a management team in place. With EBITDA calculations, any owner compensation and discretionary expenses are subtracted from earnings in order to give a clearer picture of earnings power. Additionally, by discounting expenses like interest and taxes, EBITDA provides an accurate snapshot of the operational efficiency and earnings of a SaaS business.
In some circumstances, SDE or EBITDA may not provide an accurate measure of the true earnings potential of a SaaS business. For a fast growing, young SaaS business, EBITDA could come to zero or even less, but the business might still be an attractive acquisition for buyers who are interested in its growth potential. In such cases, it is possible to predict earnings based on projected growth. Such determinations are not without their hazards as they rely solely on growth forecasts that are by nature volatile, and highly subject to change.
Revenue multiples are also employed in larger, more strategic acquisitions. Again, the goal is to put large, often one-time, investments in areas such as development into perspective and to uncover the true earnings potential of the business.
Finding the most accurate way to determine the earnings power of a SaaS business requires a nuanced approach, sometimes utilizing a combination of all three of the methods outlined above. It is vital to determine an accurate picture of current earnings and future growth potential in order to assess a SaaS business’ attractiveness to buyers.
Once the net earnings of a SaaS business are determined, the next step is to determine the multiple that will be applied to the business in order to arrive at the listing price. To do this, we examine hundreds of different data points. Broadly, these boil down to the transferability, scalability, and sustainability of the enterprise. On a more granular level, some of the most crucial valuation drivers include:
Based on the factors above, amongst others, SaaS business valuations typically fall within the 2.5x to 4.ox of annual profit (SDE) range. Obviously, this is a broad spectrum. If the SDE of your SaaS business is $100K, that’s the difference between a valuation of $250K and $400K.
The four most critical factors determining the multiple for a SaaS business are:
- Age of the business
- Amount of time the owner is required to spend on the business.
- Whether the growth of the business is trending upwards or is stagnant.
- The rate at which customers stop using the SaaS, or “customer churn.”
Key SaaS Metrics
As mentioned above, the rate at which customers leave your SaaS business is a critical factor in determining the valuation multiple. There are many nuances to calculating churn, but the simplest way to is to take the number of customers who have unsubscribed from a SaaS over a specified period—typically a month or a year—and divide it by the number of total customers at the start of that period. The percentage derived from this equation equals the churn rate. When measured over the long term, churn has a substantial impact on revenue. Take the example below of two SaaS businesses, one with a 5% annual churn rate and the second with 20% annual churn:
CAC and CLTV
Customer Acquisition Cost (CAC) refers to the resources and monetary investment required to acquire a new customer. Taken in tandem with Customer Lifetime Value (CLTV), CAC is a powerful way of measuring the efficiency of a company’s sales and marketing processes. If CAC exceeds CLTV by a wide margin, this will have an adverse effect both on the valuation multiple and the long-term success of the business. A CLTV/CAC ratio of 3:1 is considered ideal.
MRR vs. ARR vs. Lifetime
While selling “lifetime deals” on platforms like AppSumo may be a tempting way of boosting short-term cash flow, relying heavily on discounted lifetime and annual plans can have a negative impact on valuation. Buyers strongly prefer Monthly Recurring Revenue (MRR) to Annual Recurring Revenue (ARR) and lifetime plans. In order of value:
In order to reach a premium valuation, a SaaS business should aim to achieve a 4:1 ratio of MRR to ARR. MRR is valued at double the rate of revenue derived from lifetime plans.
How to Increase the Value of Your SaaS Business
While some critical valuation factors, such as the age of the business, cannot be proactively impacted by the owner, there are many ways to increase the value of a SaaS business, such as:
- Reduce Customer Churn: Improving onboarding procedures and reducing waiting times for customer support are just two of many ways to reduce churn rate.
- Outsource/Reduce Owner Involvement: Many buyers are seeking passive income from a SaaS business. Reducing the amount of time an owner must spend on a business through outsourcing and streamlining business processes will lead to a higher valuation.
- Document Source Code: Code is the backbone of any SaaS. Ensuring that code and documentation follow contemporary coding best practices will increase value, as will documenting the code to make it easily understandable and transferable to a new owner.
- Safeguard Intellectual Property: Any intellectual property (IP) related to the business, including trademarks, copyrights, and patents, should be duly registered and legally transferable to a new owner.
- Avoid Discounting and Promotions: While offering discounted annual or lifetime subscriptions may be appealing in the short term, any benefits are likely to be outweighed by the long-term impact on revenue.
How to Sell a SaaS Business
While there are numerous platforms when the time comes to try and sell a SaaS business, these can be broken down into four categories:
- Marketplace: A popular option—particularly for owners of small SaaS businesses with a valuation of $30K or less—marketplaces such as Bizbuysell have their advantages. Upfront costs to list an online business are low, and the well-established marketplace sites get a considerable amount of traffic. Due partially to the low barrier to entry, there are thousands of websites listed for sale, so it can be a challenge for a business to attract the attention of a well-qualified buyer. While upfront costs may appear negligible, the cost and effort required to vet buyers, conduct due diligence, protect IP through Non-Disclosure Agreements (NDA), prepare contracts, etc. can add up quickly. Even with an NDA in place, there is an element of risk inherent in sharing confidential information with unscreened buyers. For some sellers, the length of time it takes to finalize a sale through a marketplace—typically six to nine months—may also be a concern.
- Auction: Similar, in principle, to an eBay for online businesses, auction sites share many of the pros and cons of selling on a marketplace site. Auction buyers are often bargain hunting for businesses valued at $5K or below, though there are occasionally successful sales of larger SaaS businesses on the platform. That being said, these platforms bring with them a lack of due diligence into the businesses they list and proper vetting of buyers. For SaaS businesses with a high risk tolerance looking for an independent listing process, selling on an auction or marketplace site can be a good fit. For more established SaaS companies, the increased visibility and low upfront costs these sites offer may come at the expense of undervaluing the business or unspotted discrepancies that can hinder a successful sale.
- Using an M&A Advisor: Experienced M&A advisors are judicious about which SaaS businesses they represent. Detailed financial records, historical site analytics, and upward trending growth are common prerequisites. Although there is a standard commission of 10-15%, an expert M&A advisor can provide a pre-vetted network of motivated buyers, expert due diligence, and the legal experience to ensure the deal goes smoothly. These and other factors help cut the average sale time down to four to eight weeks for qualified sellers. Moreover, the higher fees are often more than offset by the higher valuation and corresponding sale price that the business achieves, thus most often leading to a higher net profit for sellers than a marketplace.
- Direct Sales: If you have a proven track record of success in operating and selling SaaS businesses, a direct sale may be a viable option. The seller will be responsible for all legwork such as due diligence, legal documentation, and buyer outreach, so, unlike when using a broker or marketplace, there should be no fees or commissions payable upon successful execution of a sale. However, the expenses accrued due to hiring lawyers, accountants, and other third-party contractors might quickly outweigh any savings in this regard. Additionally, unless you have a network of buyers you trust, you risk exposing valuable information about your company to unscrupulous suitors.
Regardless of whether or not you are currently considering an exit, a thorough understanding of how to value a SaaS business creates the opportunity to positively impact the asking price. If you are interested in having an experienced M&A advisor value your SaaS business at no cost and help you determine if the time is right to sell your SaaS business, don’t hesitate to get in touch.
This is a guest post by Shayla Price, a freelance content marketer.
SaaS recruiting requires a human resources team dedicated to the needs of the company and the job candidates.
If you’re seeking to hire the best talent, your business should take the necessary steps to create a pleasant experience for everyone involved. Sammi Caramela, a contributing writer at Business News Daily, explains:
“Hiring new talent is an inevitable and critical part of being a business leader, and it’s more complicated than just reviewing resumes and conducting interviews.”
Before posting your next job ad, take a moment to craft a plan. Here are five strategies to strengthen your SaaS recruiting process.
1. Determine your hiring needs
Hiring is a collaboration that involves several key stakeholders in your SaaS company. Without the right people at the decision-making table, you may waste time and money searching for candidates.
Depending on the position, you should enlist the help of senior managers, middle managers, and individual contributors. Together with people operations, your whole team can determine the business’s goals for hiring new talent.
Starting to recruit before you understand your team’s needs squanders resources and the candidate’s time. Below is an email I received after an initial interview and confirming a second meeting. The company decided to hire an internal team member for the role.
These types of interactions can ruin your reputation with qualified talent. It shows disorganization within your team and a lack of appreciation for the candidate.
The good news is that these situations are preventable. By designing a hiring plan before posting a job ad, you know exactly how to execute your talent search. You can decide the level of experience, the required skill sets, and the budget for the role.
It’s not in your SaaS’s best interest to begin the recruiting process without a strategy. Collaborate with your team and evaluate the current skill gaps in your workforce.
2. Avoid discounting candidates
Recruiting is an extension of your brand. It reflects how you treat your employees (and customers).
It’s important for your hiring team to approach candidates with respect. If not, you risk destroying your brand’s image and gaining an adversary.
Give candidates the same courtesy you expect from them. This expectation includes arriving to interviews on time, responding to emails in a timely manner, and avoiding combative language in an interview. Michelle Braden, president and CEO of MSBCoach, agrees:
“I have found making people wait when they have a scheduled appointment with you, interviews included, leaves a person feeling devalued and disrespected. Keep this in mind and honor your appointment times.”
Also, be mindful of how you approach the overall interview. Train your team to ask questions from a neutral standpoint, rather from a perspective laced with assumptions.
Don’t ask: I don’t see X tool on your resume. Do you know how to use X tool?
Ask this instead: Are you trained in X tool? If so, tell me more about your experiences.
Negatively-phrased questions puts the candidate in a defensive mode. As a result, you receive poor responses and might possibly make an unfavorable impression
Interviews aren’t just for you to evaluate future employees. Candidates are interviewing your company, too. So make an effort not to embarrass your team.
3. Minimize trial projects
Every SaaS team searches for a skilled candidate who can perform specific job duties. To assess a candidate’s work product, most companies assign a trial project. This assignment allows candidates to showcase their skills, while giving the hiring staff a glimpse into how an applicant approaches a problem.
Trial projects offer value to the recruiting process. Candidates get to see what type of work the job entails, and the hiring team receives confirmation of the individual’s skill level.
However, without specific internal guidelines, trial projects can become a deterrent to recruiting the best talent for your job opening. Through my own experiences, I’ve noticed hiring teams straying away from the purpose of trial projects.
Companies are demanding brand-specific projects that require more than eight hours of work. They are fishing for ideas on current tasks in their pipeline and getting free help from their job candidates. This practice is unethical and drives talented people away.
In the example below, this company asked me to complete four deliverables within two days. They wanted a research process document, content pitch, content outline, and a 300-500 word introduction.
The solution is to minimize your trial projects. Start by defining the purpose of the assignment. What do you want to learn about the candidate? Select one to two skills to test.
Also, move trial projects to the end of your hiring process. Only two to five candidates should be completing an assignment.
Excessive trial projects place an undue burden on the candidate and your team. You can alleviate that pressure by having more focus in your assignment.
4. Give undivided attention
Juggling the responsibilities of hiring top talent is an overwhelming process. From posting on job boards to scheduling interviews, it’s vital that candidates receive your undivided attention.
Distractions ruin the hiring experience. It’s also a sign of disrespect to the candidate. So, what counts as a distraction? It includes anything that interrupts your attention in the interview.
For instance, you don’t want to eat your lunch during a meeting with a job applicant. You also should avoid replying to emails or responding to Slack messages. Here’s expert advice from Hirenami:
“Human touch is crucial. Your hiring department should be responsive to any questions, and guide candidates along the way. Meet them where they are, rather than expecting them to come to you. The smoother the process is for your candidates, the more likely the top talent will be to make it through to the final interview and decision.”
I’ve experienced interviews where the hiring manager walked on a busy street or sat in a loud coworking space. These distractions aren’t helpful. All interviews should take place in a quiet room.
Coach your team about the significance of being mentally present in the interview. By listening with attentive ears, you open the door to the right talent.
5. Be transparent ASAP
Honesty and integrity should be present throughout the entire hiring process. It provides a baseline for your team to measure its performance.
Recruiting isn’t a perfect operation. Unexpected obstacles can halt everything. That’s why your team must develop a plan to resolve these issues.
By doing so, you can allocate your team’s time to more pertinent tasks, and candidates can make better decisions about their job search.
Take a look at the email below. After completing three interviews and a trial project over several weeks, the recruiter informed me the position would be on hold.
These issues can give your business a bad reputation. Candidates leave disgruntled and questioning your team’s transparency. If you’re going to place a position on hold, it’s imperative that you do it before interviewing candidates.
Reduce any unappealing hiring snafus by communicating with candidates frequently. You can provide them with a hiring timeline that outlines every stage of the process, from the number of interviews to potential delays.
More importantly, you never keep the candidate’s job search stagnant. If you’re not going to hire the person, it’s your responsibility to send a follow-up email as soon as possible.
Job candidates understand that unforeseen circumstances can alter the hiring process. When that happens, your team must take action to quickly notify candidates.
Hire with respect
SaaS recruiting is more than resume submissions and phone screens. So, ditch unhealthy habits, like requiring complex trial projects. Instead, strive to offer candidates full transparency. With this strategy, you add respect and dignity to your recruiting process and your brand.
Want to read more about hiring? Check out Omer Molad’s article, Why hiring is the growth hack you never considered.
Birds of a feather tend to flock together, but that’s why they call them ‘bird-brains.’ Here’s how, and why, to diversify your Twitter feed.
Twitter Stats & Social Facts
Tech doesn’t just have a diversity problem in the workforce – tech workers and leaders often live in an online social bubble of, well, men. Mostly white men.
When the echo chamber of our tech community continues into our online social communities, it’s too easy to find yourself in a homogenous bubble that is so large and opaque that it eclipses the world outside of it.
And that is dangerous to us as people, as world citizens, as tech makers and users.
Yes, the Twitter feed diversity problem is real.
Not-so-fun fact: Elon Musk didn’t follow a single woman on Twitter until October of 2016 – and only then because a Motherboard article called him out on it. Musk isn’t alone. The Guardian looked at the Twitter accounts of several male tech leaders and found that they followed between 2 and 11 times as many men as women. The CEO of Google, Sundar Pichai, for instance, followed 238 men and 29 women at last count (also in 2016).
And that’s just the male to female ratio. They didn’t even touch on people of color or the LGBTQ communities.
When you consider that most founders of tech startups in America are white, and the average white American only has one black friend (75% of white Americans don’t have any black friends), it’s clear that not only do most of us in tech live and work in our bubble – we’re so far in it that it’s hard for some to imagine how to climb out.
I suggest starting to diversify your life and work by inviting in different ideas and opinions on Twitter. No, it’s not going to fix the diversity problem in tech or lead to world peace. But at least it’s a start.
How can you diversify your feed?
As with making most changes, awareness is the first step.
It’s easy to look at the list of people you follow on Twitter and feel fairly satisfied that you do have a diverse group. The human mind is funny that way. We see what we expect to see. Try this app, Proporti.onl, to see how your feed really stacks up. If you’re surprised by your results and feel like you’ve got a long way to go, that’s okay – I’m still working on diversifying my feed, too!
Consider all types of diversity
Diversity doesn’t just mean ethnicity or the spectrum of LGBTQ – it’s also about cultural diversity. People who believe, think and act differently than you. That isn’t to say you should befriend people who don’t share (or who are actively against) your core values. But try to recognize and respect other ways of being.
Don’t just add – listen
James Governor, co-founder of RedMonk, wrote about his effort to diversify his Twitter feed and made a very important point:
It’s not enough to add people who are different than you – you also have to listen to them. And that’s not always comfortable.
“You will certainly find yourself challenged. […] Question your assumptions. Get out of your comfort zone. You’ll be smarter for it, and learn crucial lessons in empathy. Sometimes it’s the little things.”
The benefits are worth the effort. When you listen with an open mind to what different people are saying (and yes, complaining about) you gain insight into how to treat people with more sensitivity and communicate more effectively.
As James Governor also says, “following a broader range of people means that suddenly – surprise! – it’s a lot easier to find amazing speakers for tech events.”
Perhaps, most importantly for us in tech, this is an exercise in empathy. When we have empathy – the ability to understand and share the feelings of another – we build better products, better user experiences, and better relationships in and outside of work.
Not sure where to start? Here’s my shortlist of diverse voices who are sure to add unique, smart perspectives to your feed
You might see, or hear, that I’m leaving Zest.is – the innovative marketing content stream that is co-distilled by marketers. It’s true. I am. It’s a cause I believe in (better content for all! Hand-picked!), people I genuinely like, and a community of peers I respect.
It’s like one of those break-ups where you remain friends, because you’reboth really great people, and it just didn’t work.
But, in the interest of examining the question of when to leave a community, I’m not going to leave my story at that. This also isn’t a blame game – not at all.
Here’s what happened.
Zest’s brand voice has extremely tight parameters that I could never quite jam myself into. I tried. I failed, a lot. And I had some ideas I thought were great (20+ years of experience will do that to a person) but the Zest team rarely agreed. My writing style is devoid of exclamation points and buzzing excitement – which are Zest trademarks. I’m just not that perky, folks.
I felt like I was trying to cram my square-pegged self into a lemon-shaped hole, and it wasn’t working. They knew it, I knew it.
Leaving was a mutual decision – and not in the way people say “oh, it was mutual” when it clearly wasn’t. Mutual for realsies. I wasn’t a good fit for what they needed; they weren’t a good fit for the value I could provide.
And when that happens, sometimes it takes a little while to diagnose. That in-between time feels terrible, like you’re constantly failing, like you suddenly know nothing and can do nothing right. It felt like there was a blanket put over my fire, because I’m so passionate about what I do.
These are the symptoms of bad fit.
When there’s bad fit, you’re not the only one who suffers. Your manager, your team, your community all suffer. It’s better for everyone to part ways.
This isn’t about how Zest did me wrong. They didn’t. It is about how to make the right decision about moving on from a startup, or community, or any relationship that you love when you’ve reached an impasse.
If you’re in a community or a job or a relationship – whatever it is – and your gut feeling is that it isn’t working out, you’re probably right, and it’s nobody’s fault.
I only have nice things to say about Zest. They’re good people. In many ways, it’s like losing a really good friend. I felt that close, and I still love what they stand for and what they’re doing.
A word or two from Yam, Zest’s CEO
Sometimes you fell in love with someone but you can’t put your finger exactly on the reason of why you fell in love with that individual.
This is not the case here. I fell in love with Nichole in the moment she suggested her first content in Zest.
It was love from first suggestion.
After that, we built together her job description and kicked off our partnership.
Working together as a team is the equivalent of living together, right? You have your ups, your downs, you need to show flexibility, carness, be mindful and take the full responsibility for each other.
We excelled in most of the above, but what we did not excelled in, felt like something we can’t overcome at this point of time.
Eventually, like in many other breakups, it’s not a case of “it’s not you it’s me”, nor “it’s not me it’s you”. In this case it’s a timing issue. Timing reflects on where Zest is today, where its brand maturity is and also, where I’m as a CEO is on this axis of timing.
Nichole, is our first love. I appreciate her as a person and as a professional.
I’m sure that our yellow brick roads will cross each other’s again at a later stage.
It’s a good vibes kind of a mutual breakup.
Love you so much, Nichole, and wishing a tonnnnn of luck and good karma in your next adventure/s
Co-Founder and CEO
There’s no one B2B SaaS marketing strategy that will win the day all by its lonesome self. A good strategy will perform best when grounded in a holistic, company-wide commitment to customer success.
With that in mind, here’s my ‘recipe’ of sorts:
- Analyze what your customers need to succeed with you (aka. Their ‘success potential’) and . This will help you target your ideal customers – the ones who need your product, can succeed with your product, and will probably love your product.
- Create a ( ) process that moves the customer closer to their ideal outcomes. Ie. rather than just teaching them how to use the tool, move them through the process of using your tool to get measurably closer to reaching their goal (and then celebrate every milestone so *they* know they’re getting closer to their ideal outcomes!). In-app messaging, with tools like , are ideal for this.
- Drive engagement through Customer Success. This can be done with the that Trevor Hatfield and I devised. ; it leaves out a vitally important part of the equation. Writing customer success content (content that helps customers reach their ideal outcomes) is the other part, because successful customers increase referrals and decrease acquisition costs.
- and light a fire under your retention efforts.
- Design a solid to win back customers who are considering canceling (they haven’t churned yet!). Consider creating an ‘offboarding workflow’ that asks the user what their reason is for wanting to cancel, then presents a solution – like educational content or contacting support – as an alternative to cancellation.
Yeah, none of these fall under the typical marketing purview, I know. But, in my opinion, these are the steps you need to take to build the kind of sustainable, customer-centric business that’s so beloved, your customers will do your marketing for you. (Don’t worry Marketing department, they won’t take your jobs – just make them easier!)
I also wrote extensively on about.
As a SaaS consultant and professional content curator, I have an enormous reading list for SaaS. These resources are among my favorite and give much fuller, more complete and nuanced perspectives on SaaS.
– Covers entrepreneurship, startup lessons, venture capital and inside scoops on startups making the news.
Founder/CEO of Reforge, formerly VP of Growth at HubSpot,doesn’t ‘blog’ – he writes essays, and they’re amazing.
– CEO at HubSpot, Author of Inbound Marketing book, MIT Sr. Lecturer.
– Blog and lots of ebooks about everything SaaS, penned by Joel York.
– Not exactly SaaS, but it’s a great resource for SaaS copywriting tips.
– Gia Laudi and Claire Sullentrop are independent consultants and advisors for places like Unbounce and Calendly. Every week, they send weekly video workshops on marketing.
started Crazy Egg, KISSmetrics and Quick Sprout – 3 good reasons to read everything he writes (plus titles like “Growth hacking was invented with a mint julep and two beers.”
blog has beautiful original art and really high quality articles that are fun to read.
Inturact – Wake up. Kick SaaS. Repeat.
– This one’s mine – but that can still be a favorite, right?
– Posts and podcast from Chief Sumo (at Sumo & AppSumo) Noah Kagan
– Most posts are on growing, scaling and managing.
– This blog focuses entirely on growth, who’s doing it and how to do it better.
– All things Customer Success.
– Angel investor Christoph Janz’ thoughts on startups, SaaS and early stage investing.
is a venture capitalist at Redpoint and peppers his posts with marvelous graphs.
[I would love to add more women and non-binary people to this list, please reach out if you know of any who have amazing blogs about SaaS!]
I don’t own a SaaS company myself, but I am a consultant for many SaaS companies. What I’ve seen work best for my clients when it comes to churn is to first look at how they’re doing from a Customer Success perspective.
- Are they attracting customers who have the potential for success with their product?
- Does their onboarding process get their new customers closer to reaching their ideal outcomes (and does the SaaS business understand what their customers’ ideal outcomes are – because that’s not a given).
- Has the onboarding process been optimized to help new customers bridge success gaps, celebrate milestones, and trigger red flags for customer success (or customer service) if the new customer runs into trouble?
These first three steps are vital to setting up customers for success.
From there, I recommend not starting from a place of “Why are customers churning?” but rather “Why are my best customers staying?”
Focus on doubling down on what you’re doing well. You can’t afford to divert resources from what people love about your product and company so you can try to plug the holes in your bucket.
Finally, you can look at which customers are leaving (and check whether or not they’re your ideal customers – maybe they should leave), and why they’re leaving.
Then organize the Whys by what you can fix fastest, with the least amount of resources, for the biggest impact, and tackle them one by one.
I also recommend creating a community for your SaaS, whether it’s on Slack (BubbleIQ reported ZERO churn among the customers in their Slack community), Facebook, or it’s a DIY-community that you’ve built, that way you can get super close to your customers.
You may not associate self-care with the hard-headed, purely rational context we often think of when talking about making decisions but that doesn’t make it any less important. In this episode of “How do you know?” by Andra Zaharia, we discuss self-care and decision making.
Do you have a data silo problem?
- Do customers complain of having to explain everything about their business to sales, and then to customer success, and then again to customer support?
- Is customer support hearing about the same issues, over and over again, that aren’t being addressed by product?
Those are just two of the most frequent symptoms of data silos. Here are some more, reported to us by our friends at Segment.
- Inability to answer complex questions about your customer journey.
- Inability to quantify the impact of a given campaign against down-funnel, often offline conversations (like Salesforce lead status updates).
- Inability to affect targeting criteria in a given channel based on interactions that occurred in another (ie. you’re spamming users across channels when they’ve already converted or signaled their preferences in another.
What do all of these silo symptoms have in common? They all damage customer experience, and they all result from data not being shared between teams and departments.