Written by Part 3 of 4
How to Balance Growth And Efficiency: A Strategic Approach for SaaS Startups
The money is in the bank, the board has approved the budget so now it’s time to turn the knobs and dials. As the CFO, a key goal is to strike a delicate balance between growth and efficiency, considering the differing perspectives of our board members. Some board members advocate for the pedal-to-the-metal approach, while others emphasize the importance of preserving cash during these uncertain inflationary times. We frame a strategic approach that aims to achieve rapid ARR growth while maintaining a healthy runway. Part of doing more with less involves leveraging the channels and incentivizing these partners.
Sustainable Growth: Quality Over Speed
While rapid growth may seem attractive, we should prioritize sustainable growth to ensure long-term success. Instead of solely focusing on chasing any and every new booking (yes startups do unnatural things sometimes), the emphasis should be on delivering sticky value to customers, making sure no one churns and encouraging referrals. The aim is for a repeatable and scalable process that avoids overwhelming resources and compromising product quality and customer satisfaction.
I remember how crowded the teleconference video market was (Polycom, Bluejeans, ouch!). And then Zoom Video demonstrated a great user experience and strong customer and post-pandemic, it’s still chugging along. On the contrary, Fireye (Mandiant) could not spend cash fast enough to get new customers and while platform, cloud subscription and managed services grew readily, the rate of burn was so alarming.
Sales Team Optimization: Finding the Right Balance and Not Overhiring
As we expand our sales team, finding the right balance between salespeople and support roles is crucial. The ratio of Account Executives (AEs) to Sales Engineers (SEs) should be carefully considered, depending on the complexity of our product and sales cycle. A higher ratio of SEs to AEs may be necessary for intricate solutions that require technical expertise to address customer questions and build confidence. However, maintaining a balanced ratio is essential to avoid overstaffing and excessive expenses.
If the ratio is incorrect, the unbalanced can lead to missed opportunities and hindered revenue growth due to the overtaxed SE team supporting a complicated and complex product. Now, we’re not saying add SEs haphazardly, but the ratio between AE’s and SEs needs to make sense and the product team also needs to get involved so that SEs are not spending all their time getting the product installed to work.
Leveraging Channels and Partnerships
Collaborating with channel partners works to extend the reach of our products and services without significant upfront investments. Strategic partnerships with complementary solutions or resellers allow us to tap into new markets. However, selecting and managing partners carefully is important to ensure alignment and maximize mutual benefits. How many press releases have you seen about a strategic partnership or reseller agreement with limited success and actual traction?
I’ve worked closely with major channel partners in the past, and the Head of Channels is someone who has the ability to really force multiple the top line to drive alignment, getting users back and driving growth. Good companies leverage various collaboration tools and channel partner programs to access a broader user base and drive substantial revenue growth. Bad companies are eager to sign deals, the incentive is not aligned and these relationships die on the vine. Worse it takes time and money for the legal team to unwind bad partnerships.
The Right SPIFFs for Channel Partners
SPIFFs play an important role in boosting partner engagement, maximizing sales, and fostering a mutually beneficial relationship between your company and your channel partners. Something for something, right? Channels need the right incentives to be successful so I see SPIFFs as a give, get, collaborative relationship. Oh and dont forget to spend money developing a robust partner portal with all the collateral in the right place.
To design effective SPIFFs, consider:
- Clear and Measurable Objectives: Align SPIFFs with our overall sales strategy, with quantifiable and easily trackable goals.
- Attractive Rewards: Offer enticing rewards that motivate channel partners to put in extra effort, benefiting both parties in long-term relationships.
- Timely Payouts: Ensure prompt payment of SPIFFs to maintain their impact and encourage future efforts.
- Tiered Incentive Structure: Implement a tiered structure that rewards higher performance levels, pushing channel partners to exceed usual targets.
- Promote Education and Training: Offer educational resources and training programs to help channel partners improve selling skills and product knowledge.
- Personalization: Customize SPIFFs to suit the unique circumstances of different channel partners. Some may be vertically focused (e.g. healthcare or MFG).
- Promotional Support: Provide marketing materials and campaigns to increase the chances of successful sales. Joint webinars on a customer use case worked well for us in the past.
- Regular Communication: Maintain open communication with channel partners, keeping them informed about ongoing SPIFFs and sales trends. Channels are very local so make sure to nurse these relationships with frequency.
- Continuous Evaluation and Improvement: Regularly evaluate the effectiveness of the SPIFF program and gather feedback to make necessary improvements.
Positive Impact on the Financial Model by Incentivizing Channel Partners
Efficient top-line growth directly impacts the financial model, leading to healthier margins and increased cash flow and confidence to get more money in the next round of financing. Here are some great channels we have worked with:
Leveraging channels and partnerships can provide cost-effective avenues for revenue generation while mitigating risks associated with direct sales efforts. To enhance top-line growth, find the right partners who have deep customer relationships incentivise them and get them started through SPIFF programs. Incentives create urgency and competition, encouraging partners to prioritize our products over competitors during the incentive period.
Strike A Pose With the Right Balance
Money is harder to come by these days so make it last. A strategic approach that prioritizes sustainable growth, optimizes the sales team, leverages channels and partnerships, and incentivizes channel partners through well-designed SPIFFs will help us achieve our goals and not get yelled at by the Board.
In Part 4, we dive into “How Not to Miss The Quarter.”