10 simple ideas to help manage the burn
So for many of us in SaaS, these are always the best times. The Cloud is bigger than ever, CIOs are buying more than ever, and SaaS is still on the right track.
But public stock prices are down and venture capital is much tighter than it was just a few months ago. Many of you will want to handle the burn more carefully.
But you can’t make your way to growth. So what should a CEO do?
A few simple thoughts:
1. Drop your bottom 10%-15% sales reps, focus leads on top sales reps. This still gives you both a boost at the top (better reps close more per lead) and gives you the ability to hire more reps with the same budget.
On top as always. Maybe 1 exception – cut your worst performing reps and give their leads to top performers
— Sam Blond (@samdblond) May 19, 2022
2. Have a firm burn rate budget across the leadership team. And stick to it. Pick a set amount of money you can spend each month, period. And make all your vice presidents accountable to her. They can negotiate on their own where to spend extra income and dollars. More here.
3. Switch from any VP that does not. They almost always overspend relative to outperforming VPs. They hire mediocre people on their team. And they spend too much to try to make their plan. Dig deeper and you’ll almost always find that your best VPs are the most capital efficient (all-in) and your low VPs spend a ton but don’t have much to show for it. Founders often hide a bit from the huge direct and indirect costs of underperforming VPs. After here.
4. Spend more time with existing customers. And go rescue those on the fence. I know it’s a broken record on SaaStr, but it works. Relatively speaking, the easiest sales come from your existing customers. So spend more time with them. And go rescue those on the fence. You really can’t do anything about some of your unsubscribes, but at least half the time you can save the customer if you just show up or show up more often. This will often lead to renewal that is on the bubble.
5. Create an L4M model and update it monthly. An L4M talks with data, and it projects your revenue and burn rate more accurately than a “wish and hope” model. You can’t plan your burn if you can’t model it. More about this here.
6. Get better at collections. Make sure you collect 100% of your MRR each month, ideally 110% if you trade annually. Too many startups are better at closing deals than raising money. After here.
7. Push a tiny bit for 2 years cash on annual offers. This doesn’t always work, but at the margin, offer a bigger discount for 2-3 years money back on larger trades. Later on this may sting you, as you are exchanging more ARR for a bit more cash. But in lean times, it can be a bargain on some of your biggest deals.
8. Get renewals early and work harder on them. Related to collections above, but too many startups make renewals too difficult and wait too long for renewal checks. No matter what the contract says, submit the renewal invoice at least 60 days before expiration and request payment by the contract end date. Getting all of your renewals paid on time can move your money forward by 20% or more.
9. Make sure your sales compensation plan rewards top performers. Too often a sales compensation plan is too flat and pays too evenly. Change that. Make sure your top performers are earning big bucks and have accelerators. It is also more capital efficient for you.
10. Hit the road. Visit customers and prospects. Show up to your biggest deals in person a lot more often. Be present at all the major events in your sector, because your customers will be. It still gives your income a boost, at very little additional cost beyond a lot of time and a few plane tickets and hotel rooms.
Applying the above can often extend your cash trail by 20-30% on the spot. Without making any other real changes and without affecting growth at all.
Because you still have to grow.
Reduced sales, miss the plan for the year
Marketing reduction, miss plan for next year
It is complicated
— Jason ✨BeKind✨ Lemkin #ДобісаПутіна (@jasonlk) May 27, 2022
Posted May 23, 2022