Execution Separates Great SaaS Ideas from Great SaaS Businesses
By Justin Talerico
Feb 07 2019
If you’re a $1M+ annual recurring revenue SaaS company, you probably had a pretty great idea. You also likely had at least a passable strategy to get to that first milestone of success. And you must have had some semblance of a product. But the odds remain very low that your $1M+ ARR will scale to $10M, $50M, or $100M plus. The reason is that executing against all that is really, really hard. You have to know what to do and then actually do it. And that usually means building, convincing and inspiring your organization to do amazing things — every day. SaaS execution is what separates ideas from successes, and you’re far from alone if you’re struggling with it.
There’s Plenty of What to Do
While there’s no shortage of execution risk, there’s also no shortage of people telling you what to do… increase your gross margin; reduce your churn; increase your usage; lower your customer acquisition cost (CAC); and so on and so forth. Even lower-level directives like hire a VP sales; increase marketing-generated deals; or improve culture; are fraught with high levels of execution risk. There’s a lot that can go wrong in each objective, and when they get combined, the number of ways they can go sideways multiplies.
And Less of How to Do It
In my experience, the shortage of information lies in how to actually execute. I’m not talking about the theory of how to execute. I’m talking about getting from point A to point Z without a major fender bender. I feel like there’s a predisposition to view SaaS execution as the low-level detail that’s far less valuable than high-level strategy. But I continue to see a whole lot of awesome high-level strategy that goes nowhere. You need both. Focusing ON the business instead of IN the business can’t mean spending all of your time on what to do rather than how to do it.
From a management perspective, some of this comes down to design. For example, CAC is not an execution metric. It’s too high level for that. CAC is incredibly important, but it’s the result of lower-level execution metrics that result in CAC changes. As a team, marketing can’t optimize for CAC each week. They have to focus on execution metrics they can change like cost-per-qualified-lead, or conversion rate, or inbound-to-qualified-opp ratio. But someone has to set expectations around each of those execution metrics and ensure that they are exceeded. Those expectations are the hows linked to the what of improving CAC. And the ability to manage to those expectations is executional bliss.
5 Big Areas of SaaS Execution Risk
If 80% of what makes SaaS companies tick is ubiquitous, then it makes sense that SaaS execution risk areas are pretty consistent. From my perspective, these are the most critical executional soft spots that we see over and over again.
SALES SAAS EXECUTION RISK
The first place we see growing SaaS companies falter is in sales hiring and process. Playbook maturity — including methodology, comp structure, measurement, management style, and culture — directly impacts performance and scalability. And all of that tracks back to who gets hired and when they get hired. If that critical sales leadership hire is botched, everything suffers. That means sales execution depends on defining the right candidates for leadership, finding them, identifying the winners, and landing them. There’s a lot of executional risk in that sentence alone.
PRODUCT SAAS EXECUTION RISK
SaaS product development is another area rife with execution risks. There are the lower-level ones like open source maintenance; IP security; and non-competition/non-solicitation. But then there are the big ones like recruiting, retention, culture, product management, accountability, customer feedback loops, and roadmapping. When more than one of those buckets goes sideways, bad things happen. Again, the original sin that raises product execution risk is recruiting senior leadership — which tracks back to identifying what’s needed, finding people who align with those needs, and pulling them into the organization.
CUSTOMER SUCCESS SAAS EXECUTION RISK
Customer success is a big one. Lower-level problems that can turn into major ones include customer communication channel limitations; customer health measurement/usage tracking; and customer listening processes.
Higher-level executional holes widen when the customer success function is poorly designed into the organization; when the team’s headcount is undersized for the function; when incentives or skillsets are misaligned with outcomes (often in upsell/expansion); when measurement is siloed or nonexistent; and when processes are weak or absent.
Customer success execution risk gets its own special set of amplifiers that it shares with marketing. Customer marketing is often a point of failure that bubbles up to churn, lifetime value, and CAC recovery. The executional challenges here are deep as customer marketing is often neglected, and even more often a distant, second-class citizen to prospect marketing. The ultimate risk is the absence of a formalized customer marketing program. Beyond that, customer health segmentation; upsell messaging; high-retention feature education; communication channels; and cadence are often poorly executed.
And we haven’t even tickled the mother of all customer success execution risk buckets: onboarding. With direct correlation to adoption, time-to-value, customer satisfaction/NPS, and ultimately renewal or churn, it’s absolutely critical to execute onboarding like a rock star. Here the potential potholes are legion beginning with a lack of customer centricity; lack of urgency in the cadence; misalignment to customer goals; misalignment with high-retention features; poor transition from sales to customer success; weak content; weak milestones and measurement; and poor customer communication. There’s a lot that can and does go wrong in onboarding.
MARKETING SAAS EXECUTION RISK
Marketing seems to suffer from bigger transgressions more than smaller ones. The most common far-ranging executional failures include under-developed customer, buyer, and user profiles (undermine targeting); weak point of view (undermine messaging); misalignment with sales or in measurement (undermine accountability); and capital-inefficient demand generation (blow up the balance sheet). Like other weak areas, marketing’s woes start with identifying the right leadership characteristics, finding those candidates, and choosing the right one. Then you’re looking for a repeatable process (agile), with defined go-to-market plans, an accountable culture, and business-aligned KPIs. There’s a lot to execute against there.
OPERATIONS SAAS EXECUTION RISK
Sometimes ops is neglected in the growth conversation. Or at least the tendency is to go there last when looking for lift. To an extent, that’s fine. But there’s huge customer friction execution risk in ops that tracks back to very real growth metrics of adoption, retention/renewal/expansion, and churn. Everything from contracts to payments/AR communicates customer centricity or hostility that sets the tone for the relationship.
Ops has other critical execution risk areas like recruiting, culture, human resources, and benefits admin that directly impact talent acquisition and retention — which were already identified as chief execution risks in just about every other department. So if ops stinks at execution, other stuff is likely to stink down the road.
There’s a Lot that Can Go Wrong
That’s not a newsflash. We all know there’s a lot that can go wrong. And a lot that goes right despite that. But it is worth evaluating how well we’re executing across the key business drivers for SaaS. And it’s worth focusing on de-risking execution to improve the high-level metrics that make our ideas successful. The truth is that growth, gross margin, and capital efficiency are super-powered by great execution. Can you be successful without it? Yep. But the odds rise with the quality of execution.