MV #005: The Thrill Is Gone
Lessons, stories, observations and analyses on software sales, building companies and creating customer value.
Read time: 8 min
👋 Hi there, happy Sunday!
📦 What’s inside?
Thank you for subscribing. As promised, in my weekly edition of More Value, you’ll get 4 things delivered directly to your inbox.
Curated highlights from thought leaders in B2B software
Lessons on how to become a better value seller
Analyses and observations from the B2B software industry
Unfiltered, personal stories from working in big tech and startups
🤔 Why cuts won’t cut it… - Looking beyond layoffs
The thrill is gone in startup land. According to layoffs.fyi 652 startups cut 81’774 employees in 2022 (source). Sadly, just cutting people is like taking painkillers. They relieve pain in the short term but don’t solve the underlying problem.
A holistic approach creates value long term.
The BCG team wrote a great piece on Medium here. It follows the narrative many readers of More Value have read about in the past few months: Growth at all costs is over.
The statistics clearly show that high growth / low-profit company valuations fell way more than low growth companies. The assumed future growth expectations of the high flyers were corrected downwards drastically.
between December 2021 and June 2022, the enterprise value (EV) to next twelve months (NTM) revenue ratio of relatively high growth, low profit SaaS firms fell from 19.7 to 5.5, a 72% decline. By contrast, lower growth, higher profit SaaS companies fared (relatively) better, declining 47% from 15 to 8"
Layoffs alone make companies smaller but not better. Improving efficiency and productivity requires additional actions. What are the additional actions?
Double-down on the customer base to drive net revenue retention
Sharpen sales model to incentivise/retain top talent
Trim G&A on core activities
Invest in understanding your ICP (ideal customer profile) deeply
Review business model and pricing/packaging to explore untapped potential
Focus on core product portfolio. Customers won’t like to experiment
My personal addition, review or introduce processes to gain efficiencies
Only 15% of companies with $50m revenue were able to increase sales and margins during the last four downturns BCG Henderson Institute. Obviously, most founders like to think they’re in the 15%.
👉 My take
As a startup leader: Now is the time to think about building a solid core in your function. Focus on process efficiencies. Fewer employees mean less capacity for slack.
If you’re not planning on working more hours, you need to figure out how to sharpen the focus. Audit your team’s activities and drop non-value stuff.
Does your team really need to support this post-sales activity if you’re in sales?
Do you really need to join that webinar to drive thought leadership?
Will this project impact your KPIs, or is it a nice-to-have?
When that is done, improve the efficiency of the remaining work.
Ask things like:
Why is there no template for this?
How often do you have to do that?
How long do you wait to hear back for these types of questions?
Create templates, standardise and make things efficient. That’s what will unlock more value as you move back into growth eventually. My post on that topic with more detail is here.
As a salesperson: Your sales cycles will get longer in a recession. If you’re selling into the technology sector, remember that what is happening internally at your tech startup is also happening to your prospect.
It’s all about gaining efficiency. Not having to buy from 3 vendors when one does the trick is a great consolidation play for some.
Think about your pitch deck. Has it been refreshed since your kickoff at the start of 2022?
The world was quite different then. Your message might not resonate. Rethink that so you can effectively sell.
🥞 Sunday Deep Dive - International Expansion
I said it: Go big or go home. (my original LinkedIn post). After some great comments and messages, I wanted to dive a bit deeper.
Over the last 3 years, I built the international team of a startup and witnessed dozens of others expanding from the US to Europe.
There are lessons that I drew from this. But it all comes down to going big or going home.
In a noisy world with over 2000 software categories, abundant capital for startups (that’s changed now), and an incredibly competitive fight for budgets, startup CEOs need to be decisive in their international expansion plans.
A quick checklist for successful international expansions
1. The landing team
Hire a full landing team. Don’t just hire a single rep hoping they’ll market, generate pipeline, demo, close deals, and look after customers. Europe is not just another sales territory like the West, Midwest and East. It’s a completely new market with its own nuances and requirements.
Anyone who says, “Yeah, it’s not the Valley. I remember when we launched in Texas. It was quite different too.” has no idea. Europe is fundamentally different.
2. Cross-functional teams
A full team doesn’t just mean a bunch of sales reps and SDRs. It means one of each from every go-to-market function. AE, presales, SDR, customer success, Services and Marketing.
3. Ratios and building a brand
“Build it, and they’ll come” was never less true than it is now. People have not been waiting for your category-defining, game-changing SaaS.
You’re one in a million. Focus the firepower on getting traction through overproportionate investment in top of funnel. Many companies that land in Europe now apply SDR:AE ratios of 2:1 at the start. Equally, they hire marketers from the start.
Now with the pandemic behind us, field marketing is back too.
4. Executive sponsorship
You absolutely need full executive sponsorship for HQ to invest in a new region.
It’s not just about headcount but also the commitment that execs will travel to Europe to meet prospects and customers.
It’s the investment by HR in supporting local activities to create a strong culture and set up an office.
It’s an investment by board members to connect with other portfolio companies that have expanded and share learnings.
Other things include hiring East Coast resources to help with better time overlap. How about another presales engineer in Boston? Or someone on Deal Desk in New York? The extra hours of overlap will save salespeople a lot of sleepless nights and make life easier for your customers too.
5. HQ alignment
With executive sponsorship, team members in the new region need to align closely to HQ with functional partners. This is especially true for product.
Europe has so many nuances. Product needs to have a tight feedback loop with the expansion team to inform their roadmap. If not, you’ll always be playing catchup.
Eventually, investors want to see 10-20% of total revenue come from international markets. If you build a product that only works in the US, you will fail. Here are a few more questions you can ask:
Do you have privacy options for your product?
Do you support multiple currencies or languages?
Do you provide the ability to host data locally?
Do you have local customer success, or do you need to wait for the US?
Do you sell via partners or always direct?
Do you account for risk-averse buyers and have a land and expand motion?
Do you expect the same ASPs and cycle lengths in Europe?
Do you have pricing and packaging aligned with the maturity and needs?
Do you have a marketing message tailored for the market?
Do you tailor your pitch for what typically is a much less mature market?
➡️ Food for thought using Salesforce
Here’s an interesting perspective.
Salesforce launched in 1999. Every one of your buyers in Silicon Valley sees Salesforce as the legacy CRM. It’s been around forever. It’s clunky. It’s old.
In Europe, Salesforce has been growing much faster than in the US in the past few years. Why? Because many companies are still on Excel and homegrown CRMs. Salesforce for many in Europe, especially continental Europe is the latest and greatest. It’s the Lambo of CRMs.
If you’re selling CRM-related technology that integrates with Salesforce but is 10x better, you need a good business case.
Many of your European buyers will not feel like spending a ton of money on something they thought Salesforce could do.
Your entire go-to-market, from marketing, pitch decks, and demos to post-sales support, needs to account for that difference in market maturity.
🥹 The best of LinkedIn this week
Is it really your persistence that got the prospect to finally talk to you after 2 years of trying? Probably not.
Why I was happy about a team member who thought they FAILED.
🗞️ In other news
CEO of SUSE on the European tech scene
When I first arrived, European tech was really still in its infancy. The successful homegrown companies, there weren’t many. You could count them on one hand. You couldn’t string together the European tech scene in a way to create a cohesive tech ecosystem.
That’s it for More Value this week. Times are harder now. You have to prove value more than ever.
🎸 The Thrill is Gone but hopefully not for too long. Here’s B.B. King for you.
🤓 Don’t know me? Here’s the about section.
My name is Semir Jahic. I’m a self-confessed news junkie, and I’m also a student of startups and obsessed with what it takes to build something of value.
In More Value, I’ll share what I’m reading, learning, and observing to help you create more value.
More value is for go-to-market professionals in Sales, Customer Success, Delivery or anywhere in the enterprise software industry.
If that’s you, subscribe.
🙏 That’s it. Thank you for reading.
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