The SaaS Startup Transformation Guide

Want to turn your scrawny SaaS startup into a muscle-bound beast? Get your company into the kind of world-beating shape that you know it’s capable of? Then this...

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Want to turn your scrawny SaaS startup into a muscle-bound beast? Get your company into the kind of world-beating shape that you know it’s capable of? Then this guide to transforming your SaaS startup is for you! Take your business from sickly to shredded in just 90… OK, OK, you see where this is going – strength and fitness training as a metaphor for SaaS startup growth strategies – clever, right? Well actually, there is significant merit in the comparison. So, bear with me.

Who are you and what are your goals?

Usain Bolt y Kenenisa Bekele

Do you plan on becoming the next 200lb, 6ft 5in, muscle-bound sprint superstar, cut from the same cloth as Usain Bolt? Or are you more of a Kenenisa Bekele – 5ft 5in, 123lbs, smaller, leaner and the king of long distance? Two hugely successful athletes at the top of their game but with very different talents and goals and, therefore, following nutrition and training programs that are quite distinct.

In fitness as in startups, recognizing your potential and defining your goals is key. Your competitive advantage is what makes your business unique, it’s your genetic make-up, and it defines whether you have the potential to become a billion dollar, mass market unicorn aiming for an early acquisition or IPO, or if you’re destined to be a smaller, more niche player, looking to dominate your particular vertical in the long term. Identifying your competitive advantage early will help you to pinpoint the best growth strategy for you. It will determine the level of funding required and the best source for that funding, the kind of management team and advisers you should seek out, whether to be more product or market-focused, etc.

Select the right training partners and coach.

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As with any endeavor, ensuring that you have the right people around you who are aligned to the same goals as you is vital. Your co-founders need to share your vision, to be supportive but also challenging, and to drive the company as a whole to be the best it can be. Another key point is to assemble a team with diverse skills-sets from which you can learn and personalities that balance each other – can you imagine trying to manage a team full of Usain Bolts? A charismatic, super-talented leader is a great asset but for every charismatic leader there should a team of equally super-talented individuals who contribute just as much to the success of the company.

Getting good external advice is also key. Having a coach, a mentor, an advisor, someone who has been around the block, been successful at the same game before, and can provide guidance from experience and steer your startup in the right direction is not optional if you want to be the best. Thinking you can do it on your own in a market that has become ultra-competitive is simply naïve. Does it help if that mentor is personally invested in your success? Absolutely – but it may also be valuable to seek impartial advice from time to time from experienced outsiders who know the game and would like to see you do well.

Get the right nutrition.

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Thinking of the capital required to sustain or grow your business as nutrition is actually quite a useful way to frame your thoughts. If you want to build muscle and get bigger and stronger, you need to take in more calories than you burn through exercise so that the excess goes toward gaining mass. In startup terms, this is akin to the venture capital style of funding that has been prevalent in SaaS startups in recent years. Large infusions of VC funding are used to stimulate rapid, exponential growth and companies like Box and Salesforce have achieved this by investing these funds in sales and marketing activities that simply wouldn’t be possible if they were relying on their own customer-generated revenues to sustain the effort.

Some would argue that these companies have in fact overdone it on the calories and have gotten a bit fat around the middle. The old body building technique of going through a bulking period where you eat like crazy, get as big as possible as fast as possible before eventually cutting the fat and retaining the muscle to reveal a leaner physique comes to mind. The bulking period is relatively easy, but the cutting period can be a difficult and painful adjustment. This is the pattern that has been followed by Box, whose sales and marketing spend once stood at 166% of revenue but has reduced to 80.4% in Q1 of this year.

The issue here is that structurally, the body and the company alike, adjust and get used to the larger mass and can struggle to reduce in size and become leaner without sacrificing energy and performance. Some products are so capital intensive that VC is the only way to get them off the ground – if this is the case in your startup, make sure that the capital comes with the right advice as to how to use it wisely. Your investors should be the kind of coaches who don’t just want to see you get as big as possible as fast as possible before offloading you but rather are interested in your long term success and sustainability as a business. It is also ok to bootstrap it, stay lean, and just utilize as much capital as you need to stay lean and keep moving forward.

Train like a decathlete.

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When it comes to training, many of us have a tendency to spend more time on the exercises we enjoy and at which we are most proficient. If we’re naturally strong and enjoy strength training, we’ll focus on the weights to the detriment of cardio. If we think brute force and mass is our greatest asset, there is some sense in optimizing that and maximizing our competitive advantage, but we must also work on our weaker areas. Becoming too big and heavy might be detrimental to speed, flexibility, and agility. Focusing too much on staying lean may leave you vulnerable when strength and power are the order of the day.

The lesson here is that in the dynamic, ever-changing market we operate in, we need to be all-rounders. In sporting terms, think less sprinter or long distance runner and more decathlete. You will need the speed to sprint 100m but the endurance to be competitive over 1500m. You have to be strong enough to launch the shot put yet light enough to clear the bar in pole vault. While everyone has their favorite, strongest event and the one their banking on, you won’t win without being an all-rounder. The disciplines may be different in the startup world – product, engineering, sales, marketing, customer success, HR, finance, etc. – but the principle remains sound.

NEVER Skip Leg Day!

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It is a classic mistake among body-builders. They develop these enormous, sculpted upper bodies and forget to train their legs. You’ll look good with your shirt off, sure, but when it comes to the reality of competition, those shaky legs will be found wanting. When it comes to a SaaS company, your product is always the legs on which you stand. It is easy to fall into the trap of feeling that your product has been developed sufficiently and it’s time to start focusing on getting out there and selling it. To go back to the case of Box, when your sales and marketing accounts for 138% of revenue and research and development only accounts for 37%, you’re skipping leg day! Now, don’t get me wrong, Box still has the potential to be a great company, it’s just a little out of proportion. Based on its latest results, it seems to be taking steps to rectify this but it will take more time and a lot more hard work to get back into real competitive shape.

Which leads me to my last slightly dodgy sporting metaphor for building a successful SaaS startup… No matter how talented you are, no matter how good your genes, your coach, your teammates, your nutrition, your training program, you will achieve nothing without good, old-fashioned, hard work. You need to be prepared to work your butt off if you want to be successful.

No pain, no gain!

by Michael Cullen @michaelcullen87

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