As he does in his blog with astonishing frequency, David Cummings last week put his finger on a pervasive problem in startups: complexity of messaging. To cap-off a characteristically well-constructed case for communicating with simplicity, the post concludes with this guidance to operators: “The next time you describe your product, competitive position in the market, or value add, reduce the complexity of the verbiage. Increase the understandability. Make it clear.” Such great advice; and I’ve been thinking about it all week. But, like many things in life, it is easy in theory // difficult in practice. So, I’ve tried here to stand on the shoulders of a giant, and offer 10 tips & tricks that we’ve employed in our own efforts to follow David’s counsel toward clear messaging:
“Fuzzy writing = fuzzy thinking”: My first boss repeatedly used this line to admonish against messaging that lacked crispness. His point: before you put pen to paper, take the time to REALLY think the messaging all the way through. Doing so will materially tighten the output and save time.
Go Solo: For heaven’s sake, don’t group draft. So often sub-scale companies strive for inclusivity and seek to incorporate input from many parties into their messaging. It’s painful for all and rarely produces good results. Many perspectives are absolutely good / needed…but many voices are not. When it comes time to codify the message, have one person own it.
Go Pro: All middle school students allegedly learn to write. So, it stands to reason that even the smallest of startups has the resources to craft its own messaging. But clear, concise, compelling writing is deceptively difficult. There is no shame in outsourcing this responsibility to experts.
Go Pro 2: To further plug the outsourcing model, professional writers are often surprisingly affordable. And, beyond their sheer expertise, outsourced writers bring valuable perspective / objectivity to the task. Finally, the mere act of engaging someone to ghost-write forces real up-front clarity of thought within the company (see point #1 above).
Go Analog: In today’s digital world, even the earliest messaging drafts tend to start on a keyboard. But, with apologies to trees, a piece of scratch-paper can be an invaluable aid to crafting one’s message. Writing down by hand one’s ideas tends to allow for total freedom and enable non-linear thought (which is surprisingly hard to replicate digitally). On the other hand, when one can easily cut and paste with a click of the mouse, it tends to breed more verbiage — frequently at the expense of brevity.
10–20–30 Rule: In his classic book “The Art of the Start,” Guy Kawasaki promotes an approach to startup pitch-decks that includes a simple rule: “A PowerPoint presentation should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points.” This is a great forcing mechanism for clear messaging — it really is hard to comply with the 10–20–30 Rule while using a lot of jargon and buzzwords.
80/20 Writing Rule: Spend 20% of your time on the first draft…and 80% on editing / un-writing. This is likely a terrible strategy for journalists with strict deadlines…but there is no end-date on optimizing company messaging. Take advantage of that fact to let the message marinade and evolve over time.
80/20 Presentation Rule: A corollary to the rule above is to dedicate 20% of presentation prep time to slide creation, and 80% to nailing the talk-track. Rarely is this rule followed. But, in terms of clarifying the message, it really pays off.
Solving versus Doing: Some of the most jargon-laden company messaging results from trying to explain “what the company does.” Instead, focus on “what problem the company solves.” The Jobs-to-Be-Done framework can help a lot here.
Go Metaphorical: As humans, we like stories and images. They are powerful and we can remember them.These are attributes worth striving for in company messaging. Leveraging metaphors can help reduce the complexity of messaging, while also making it far more appealing. But, a few words of caution: (1) test to ensure the metaphor is truly clear and valid — mixed or inaccurate analogies are actually counterproductive, and (2) unless the business / product actually relates to war or sports, avoid metaphors that use those topics. I’ve made this mistake…just…don’t.
In short: David Cummings was dead-right — in terms of company messaging, make it clear! Hopefully these tips make it a bit easier to do so.
In September of 2020, I attended SaaStr Annual and wrote about it here. It was my first fully virtual multi-day conference; and there was a real novelty factor to it. Seven months and several digital conferences later, I’ll admit to eagerly awaiting the return of in-person industry events. Still, I was pretty fired-up to take part in SaaStr Build this week; and it did not disappoint. The return on my time-invested was high, with a mix of valuable takeaways and follow-up research to do. My hope in this post is to succinctly share some of my personal highlights with anyone interested but unable to attend the event. Specifically, below are 5 content takeaways and 5 general observations, hopefully in under 5 minutes of reading. Ready…go.
CONTENT:
Growth Endurance: As at SaaStr Annual in September, the “State of the Cloud 2021 with Bessemer Partners” was a total highlight. If you can spare an hour, spend it watching the session (and you’ll still have 3 minutes left over to make a cup of tea). Among the gems was Mary D’Onofrio’s explanation of Growth Endurance(Current Year Growth Rate / Last Year Growth Rate) as a new key SaaS metric and a good explanation for (a) high current SaaS multiples and (b) the differences among the Good, Better and Best SaaS players. For the time-constrained, her introduction of this important concept begins at the 28:15 mark of the video.
Go-to-Market Rules: From the same session, Elliot Robinson offered a great summation of three G-t-M strategies deployed by top SaaS companies: (1) product led growth, (2) usage-based pricing, and (3) cloud marketplaces. While they are all compelling, I find the usage-based pricing topic to be most easily applicable to virtually all SaaS businesses — and one that we so often get wrong. As he eloquently nets it out, UBP is when customers can say, “I’m paying for what I’m getting value from.” Easy to say, hard to do. Jump to minute 38:51 of the vid to pick up at this topic. Separately…I was also excited to see Elliot include in Bessemer’s predictions for 2021 this forecast: “The vertical SaaS wave becomes a tsunami.” Yaaas!
Leadership: Another bright spot was a session led by Roy Mann and Eran Zinman, co-founders of Monday.com: “Our Top 5 Mistakes in Scaling with Monday.com.” Like millions, I’m a user of Monday.com; and I was intrigued to learn from Roy and Eran. They shared 5 things that worked well for them and 5 that didn’t; and they were disarmingly candid and self-effacing throughout. I particularly enjoyed the “5 things we’d do differently,” which picks up at the 24:42 mark of the recording. Noteworthy to me among these was, “Just because you have leadership…doesn’t mean you have a leadership team” (which picks up at the 30:59 mark). Oh man, so true…and so worth the effort to get it right. I’m reminded of Patrick Lencioni’s “5 Dysfunctions of a Team” and the concept of the “First Team” espoused by the protagonist Kathryn (beginning on page 135). This video and that book both hammer home this critical point.
5 Metrics: My hands-down favorite session of the event was Tomasz Tunguz’ “The 5 Metrics You Should Track to Maximize Your Company’s Valuation with Redpoint Ventures.” The clarity and simplicity he brought to this confoundingly complex (but extremely important) topic is impressive and rare. Although there are no real surprises among the five metrics discussed (revenue growth, gross margin, cash-flow margin, net dollar retention, and sales efficiency), the double-click into each was invaluable. For me, the most enlightening was the explanation / discussion of Sales Efficiency (aka Payback Period) which starts at 15:24 in the video). That said, I feel this whole session is an instant must-watch for any SaaS company leadership team. Tomasz also referenced a forthcoming blog where he will explain how he translates these metrics into an actual company valuation. I’ve not seen that yet, but I believe will become available here soon — can’t wait.
Monster Year: 2020 was awful in countless ways. But the last 12 months have been absolutely insane (in a good way) for SaaS. And while SaaS’ growth is commonly acknowledged by anyone who follows the industry, this conference really put it in perspective for me. Armed with a trove of statistics to make their case, the Bessemer team described the recent past as a “monster” time, which seems pretty apt. A good reminder: when pandemic fatigue can make every day seem like Groundhog Day….that’s definitely not the case in the SaaS world.
To COVID or Not to COVID: As in every industry conference the world-over, there was a ton of talk about coronavirus — no surprise. What was remarkable to me was the dichotomy between references in the present tense (“…in a COVID world…”) versus a soon-to-be-past tense (“…as we emerge from COVID…”). It struck me that while the SaaS industry has generally gotten a lift from COVID, it will be interesting to see whether / how smart companies think ahead to the next phase of our reality while avoid being stuck in a moment that will hopefully soon pass.
No More “New Normal:” It’s official: my least favorite pandemic-era term is “the new normal.” Aside from it being an unwelcome reminder of bad-news and tedious lock-downs, I wonder whether it is instantly obsolete. “The new normal” strikes me as unnecessarily self-limiting, particularly for an industry as dynamic and fast-evolving as SaaS. The only thing that seems “normal” is a constant state of rapidly accelerating change…and that isn’t really new. Rather, anything normal seems fleeting. Okay…I’ll get off of my soap-box now.
Efficient, not Effective: In reflecting on my own participation at SaaStr Build, I realize that I have undeniably become more efficient in participating in virtual events. I’m better at navigating the sessions, flagging content I want to revisit, and simultaneously managing my typical non-conference workload. But was I a more effective attendee? No way. I was frequently distracted, more likely to miss scheduled sessions (though I could certainly access recordings), and generally more likely to session-hop (similar to how I flit around at in-person events). To be clear, this is NOT a commentary on the quality of content at the event — that was bomb-proof. This is more of an introspection around the limits of my own digital endurance. I’m reaching the end; and I suspect others might be also.
Freemium Wins Again: Many SaaS businesses have optimized around an effective freemium model. SaaStr appears to be one of those businesses. Admittedly, I opted for the free attendance package to this event; and I am quite grateful to SaaStr for the opportunity to consume such valuable content at no charge. So much so, that I definitely plan to upgrade next time — not because I didn’t get value from my free options…but, rather precisely because I DID. Freemium wins again.
Parting Thought: To make up for having cheated above, I’ll add one last point. I commented in September on the general air of uncertainty at that time and the silver lining at SaaStr Annual of a related (and welcome) vibe of community / humility among attendees. With SaaS multiples at all-time highs, that uncertainty seems to have been replaced with open bullishness at SaaStr Build; and the event certainly offered ample grounds for optimism in the space. My hope for the SaaS community in the coming quarter+ is that we continue to experience sustained market strength…AND / BUT that the same sense of community also endures. Here’s to 2021.
Valuations for publicly traded SaaS businesses are bananas right now. At the time of this post, Zoom’s enterprise value relative to its last twelve months of revenue (EV / LTM) was an eye-popping 58.41x. Veeva’s EV / LTM ratio was 37.02x; and “lowly” Salesforce’s was 10.03x. And it’s not just the stock market; valuations for privately owned SaaS businesses are also flying high. Against this backdrop, a colleague recently shared with me commentary from a similarly frothy time for software businesses. In mid-2011, legendary venture capitalist Bill Gurley tackled the topic of business valuations in his Above the Crowd blog with this article: “All Revenue is Not Created Equal: The Keys to the 10X Revenue Club” (5/24/11).
In this piece, Gurley makes a compelling case against the use of revenue multiples as a means for valuing businesses (“…the crudest valuation tool of them all”). But, seemingly acknowledging the ubiquity and simplicity of revenue multiples relative to his favored Discounted Cash Flow analysis, he then goes on to comprehensively explain the characteristics of high-quality revenue companies versus low-quality revenue companies. These differences, he argues, are what accounts for high valuations (10x+) for some companies, and not for many others. In some ways, the article offers a fun look-back to a seemingly quainter time (e.g. LinkedIn had just gone public that week in 2011, and analysts were skeptically scrutinizing its implied multiple of 11.8x — 15x forward revenues). But it is also a timeless study, with many insights that remain applicable today. With that in mind, below is a quick re-cap of Gurley’s Top 10 business characteristics for gaining entry into the “10x Club,” along with some added thoughts about how these apply today within Lock 8 Partners’ core focus area of small-scale SaaS businesses:
Sustainable Competitive Advantage: This is a question of barriers to entry or “moats” as Warren Buffet famously described them. Gurley references Coca-Cola for its deep moat (sophisticated distribution channels, global brand, secret recipe) relative to that of RIM (fleeting and difficult-to-maintain tech advantage). Given their small size and relative immaturity, early-stage SaaS businesses tend not to have well-established barriers to entry. Feature sets, ease of use, and customer service are often cited by operators as competitive barriers, but those are (at best) shallow moats. A notable exception, in our minds, is deep domain knowledge or subject matter expertise in vertical SaaS plays. Additionally, SaaS businesses that provide workflow automation become so embedded in their customers core processes, it’s difficult to imagine the business operating without them. In combination, these tend to be hard to replicate, particularly when used to cultivate an active community of loyal advocates (more on that below).
Presence of Network Effects: Per Gurley, “In a system where the value to the incremental customer is a direct function of the customers already in the system, you have a powerful dynamic that tips towards winner take all.” In other words, it’s the customer base, stupid! We’ve seen this for years with social networks and telecommunications networks, where the addition of an incremental user makes the network more valuable to all other users . The company that seems to have nailed this recently is Peloton (currently trading at 29.18x revenue). Competitors can certainly manufacture sophisticated exercise equipment but replicating / combatting Peloton’s loyal, networked community is going to be a tall order. A less traditional network effect can show up in small-scall B2B SaaS businesses when a solution emerges as an industry standard within a vertical market, and administrators start self-identifying and touting their expertise in that solution. We saw this in the early days of both Blackboard and BoardEffect; we knew we were going to be tough to beat when people started connecting the brands to their job descriptions on LinkedIn.
Visible Predictability: The world has evolved quite a lot since 2011; and the benefits of SaaS subscription models that Gurley describes in detail are now well understood, de facto standards. In our minds, the predictability of a SaaS subscription model is its most important and valuable attribute. Irrespective of whatever else goes on in a business, if it maintains a gross dollar retention rate of 95%+, it has a rock-solid foundation on which to build. With high renewals: investments in the future can be confidently made, slow-growth years can be endured, and hiring mistakes can be overcome. And while there is a lot of justified attention on Net Revenue Retention these days, we still prize high gross dollar retention above virtually anything else when evaluating a business.
Customer Lock-in / Switching Costs: This is about lowering customer churn; and it is inversely related to the prior point (retention). Businesses with low churn have higher customer lifetime values, and they are rewarded with higher company valuations. As Gurley points out, “Switching costs can take many forms — technical lock-in, data lock-in, high startup costs with a new vendor, and downstream revenue dependencies are just a few.” We’ve observed that such lock-in can either be voluntary (“why would we ever want to leave vendor X?!”) or involuntary (“we’d love to switch, but it’d be too painful.”). And since small-scale SaaS businesses simply don’t have tons of market power, their stickiness is far better and more sustainable when based on loyalty versus “hostage taking.” This can be assessed through customer calls, Net Promoter Scores, and social media sentiment. Although a bit contrarian, we value voluntary loyalty-based switching costs far more than technical or data lock-in.
Gross Margin Levels: Gurley nails this one head on: “…You cannot generate much cash from a revenue stream that is saddled with large, variable costs.” Because of their low marginal costs (more on this to follow), SaaS businesses tend to be blessed with attractively high gross margins. But not always. Particularly in smaller, bootstrapped SaaS businesses, management teams will try to complement their software revenue with a services component, implementation revenue, or embedded third-party products — all of which tend to have lower than average gross margins (versus pure SaaS product revenue). Furthermore, gross margins can be easily overstated in smaller businesses, as management teams sometimes don’t properly allocate personnel expenses (often accidentally); and we’ve learned that this is an area worthy of close examination when assessing small-scale SaaS businesses.
Marginal Profitability: According to “The 10x Club” marginal profitability is when, “all things being equal, higher revenues create higher profit margins.” This is also sometimes referred to as “flow through.” Positive flow-through is a benefit of scale, and SaaS businesses typically do well in this regard. Why? Because each new unit from selling existing software to a second customer (or third, or 1,000th) introduces very little in terms of new, incremental expense. As small-scale SaaS businesses prioritize growth, profitability will certainly decline, but incremental expenses tend to be concentrated in sales and marketing (not COGS, per the point on Gross Margin above). As a result, its easy to see where even small-scale SaaS businesses can achieve positive flow-through as they begin to scale.
Customer Concentration: Given the importance of visible predictability (Point 3), “all things being equal, you would rather have a highly fragmented customer base versus a highly concentrated one.” This is almost a matter of course in big, publicly traded companies — it’s hard to get too terribly big without a diverse customer base. But countless small-scale businesses are sustained by a few large anchor clients. Such concentration makes any investor nervous. Ideally in our minds, no customer accounts for more than 2.5% of revenue, so the pain of any customer drop is minimal. Lowering that bar to a real-world standard, we prefer that the top 10 customers in aggregate account for less than 25% of a business’ top-line. Beyond that, the higher it is, the scarier it gets. For bootstrapped businesses, it is also worth comparing annual free cash-flow against the revenue from a cohort of top customers. If losing any of those top customers would result in a cash shortfall, it’s likely time to further diversify the customer base or manage spend until doing so becomes possible.
Major Partner Deficiencies: “Investors will discount the price/revenue valuation of any company that is heavily dependent on another partner in some way or form.” There is often a great deal of tenuousness among businesses that overwhelmingly base their model on behemoths such as Google, Facebook, Microsoft, Salesforce, and others. As Gurley points out: “No one wants a partner policy or algorithm change to have unpredicted negative impacts on a public company. These risks are accounted for with lower valuation multiples.” This risk is even more pronounced among small-scale businesses that have virtually no influence over their larger partners; and we are admittedly skittish about such situations.
Organic Demand versus Heavy Marketing Spend: “All things being equal, a heavy reliance on marketing spend will hurt your valuation multiple.” Interestingly, Gurley’s article doesn’t mention the word “viral,” but today’s readers will recognize this description of companies that grow even without heavy marketing spend. This concept has even evolved into a popular KPI (Viral Coefficient) that measures the average number of new users an existing user generates. Calendly is a current solution that seems to have truly nailed this — admittedly, I signed-up to pay for my own account after the very first time I saw someone else use it. Although virality tends to play less of a role in B2B SaaS (particularly at the enterprise level), word of mouth marketing still exists, particularly in vertical markets. We look for segments where prospective customers do not necessarily compete with one another (i.e. in healthcare, non-profits, education, and local governments) and are willing to collaborate with peers from other organizations. Client references abound in these segments; and those remain the cheapest and best marketing a company could ever hope for.
Growth: “Nothing contributes to a higher valuation multiple like good ole’ growth.” Unless that growth is accompanied by sustained losses, which Gurley explains with valuable nuance. In recent years, the Rule of 40, has made this concept even easier to grasp. In short, this establishes a benchmark whereby the combined (A) growth rate + (B) profit margins should exceed 40% among top-performing companies. Some extremely discerning growth investors have even raised the bar to the Rule of 60% or higher. The message is clear: businesses should balance growth with profitability. Unless, of course, a business is growing astonishingly fast; in which case, it can also be wildly unprofitable, still exceed the Rule of 40, and remain a hot commodity (at least until growth cruelly begins to slow).
Conclusion:
Managing this 10X Scorecard can seem daunting; many of the components are interdependent. And in small-scale, resource-constrained SaaS business, the tyranny of the urgent can overwhelm even the best laid plans. While year-end brings the customary focus on the planning for the New Year, aligning those plans with your equity value aspirations is good discipline. Because, regardless of whether you’re doing $1M or $10B of revenue — and regardless of whether it is 2011 or 2021 — the characteristics of what makes a quality business remain broadly the same: sticky product, competitive moat, high gross margins, and bankable counterparties are critical for long-term success…and the market will value your business at its discretion.
Tis the season…not for jolliness…but for annual forecasting. Countless companies spend the month of December frantically closing out the current year, while scrambling to codify goals for the fiscal year ahead. So, for many small-scale SaaS businesses, this is decidedly NOT the most wonderful time of the year. Rather, when it comes to financial planning and analysis, it can be a time of feast or famine. Famine in this case is represented by simply not doing any intentional planning. A surprising number of small software companies don’t share fiscal goals with their teams, or even set formalized financial plans whatsoever. Feasting, in this case, occurs when a leader’s eyes are bigger than their mouth, resulting in an unreasonably aggressive growth plan based on exuberant hope more than rational thought. Perhaps this is less like feasting, and more like binge-eating junk-food (in that it is based on impulse, offers a temporary jolt, induces sickness soon after, and is terrible health-wise in the long-term). But neither of these extremes is necessary; and a thoughtful plan does not require gobs of bureaucratic process (one of the primary excuses offered for this feast / famine dynamic). Rather, we’ve seen that the simple concept of triangulation can efficiently produce the building blocks of an informed financial plan that balances multiple perspectives on the business. Here’s how it works:
First thing first, this approach focuses overwhelmingly on setting the top-line goals for a business. The long-pole in the financial planning tent is this top-line goal (also known variously as: revenue, bookings, ARR, and sales). This is because sales performance ultimately dictates the money flowing into the business and highly influences the expense levels the business can sustain. Note: admittedly this is more nuanced in businesses with outside funding, but eventually holds true as they mature toward cash-flow breakeven. Bookings are also the most highly variable / least-controllable aspect of any plan, as discussed in this prior post; and getting the top-line goal wrong can unleash a cascade of pain throughout the entire business. For these reasons, setting an appropriate top-line goal is the critical step in developing a sound plan. The reality is, that this goal must be ambitious enough to please financial stakeholders, realistic enough for the team to execute with confidence, and based credibly on relevant historical data (while also not being shackled to the past). A tall order, indeed.
To ultimately arrive at an appropriate goal, we like to start by pulling together three different top-line targets based on three distinct views into the business. Later we’ll compare / contrast / compromise across the three resulting targets, hence the term triangulation. The three perspectives in play are (1) top-down, (2) left-to-right, and (3) bottoms-up, as follows:
Top-Down: Exactly as it sounds, this perspective typically comes from someone in a senior role (e.g. founder, CEO, board member, investor) taking a birds-eye view into the business to determine a revenue growth goal. Unsurprisingly these tend to be quite ambitious and generally unencumbered by on-the-ground realities that could stand in the way of goal-attainment. These are also often oriented to support an impressive growth narrative (“We’re going to grow 100% next year!”) or establish an inspirational milestone (“$10M in ARR or bust!”). The benefit of top-down goals is that they tend to be “stretch goals;” the downside is that they can induce some unsustainable “growth-at-all-costs” behavior or set the business up for failure. Almost always, the top-down goal is the highest of our triad of targets.
Left-to-Right: This is a forecast based on historical performance and trends, whereby past years (on the left side of the spreadsheet) inform future years (on the right). Such objectives typically reflect the perspective of someone in a Financial Planning & Analysis role and are based on some reasonable application of past performance to predict future results (“We’ve grown year-over-year bookings 25% on average for the last 3 years…so we’ll forecast 25% growth next year”). Anyone who has spent time in early-stage SaaS businesses will quickly spot the pros and cons of such an approach. Specifically, although past is prologue, these businesses are operating in extremely dynamic environments; and reliance on past data has only limited utility.
History…only so helpful
Generally speaking, Left-to-Right tends to be the middle-child in our family of goals — neither the aggressive hyper-achiever, nor the black-sheep slacker — just…meh. (Note: this last statement comes from a card-carrying middle-child).
Bottoms-Up: This approach constructs a bookings goal from the bottom up and represents the perspective of the person / people responsible for driving day-to-day sales results (e.g. CRO, VP of Sales, VP of Marketing). This perspective starts from $0 on day 1 of a fiscal year and assumes “nothing happens until someone sells something.” More mechanically, it establishes a bookings forecast from its component parts by building up a notional population of representative sales deals across a time-period. This approach tends to incorporate multiple inputs into detailed models, including:
Number of fully-ramped sales reps
New quota-bearing hires / time to ramp new hires
# of deals a fully-ramped rep can close per month / quarter / year
Average contract value (ACV) per deal
Conversion rates from sales opportunity-to-close
Conversion rates from lead-to-opportunity
Conversion rates of website visitors-to-leads
Conference, webinar, user group attendance…related conversion rates…and much more
The resulting forecast from such an approach tends to be quite conservative, sometimes prompting accusations of sandbagging by its advocates. Almost without fail, this will be the lowest among our trio of prospective top-line targets.
Triangulating: Simply quantifying each of these different perspectives is certainly a step toward a more inclusive and informed top-line goal. But a bit more work at this point is what yields the real progress. The truth is that the three different methodologies produce widely divergent results, both in terms of target figures and the rigor used to arrive at them, so compromise is necessary. Graphically, these could be plotted like this.
Top-line goal-setting
Each goal has its own shortcomings, and none of these goals tends to unilaterally offer an ideal bookings target. Without further discussion, these different data points simply shine a light on the misalignment that commonly exists across the various stakeholders. This can look like this:
Top-line goal-setting
But these inputs also provide the forum for an interactive discussion around the drivers of each. Optimally, organizations can move beyond this zone of Uninformed Conflict simply by asking pointed questions of each goal:
Top Down: What are the specific results needed to support a compelling growth story? What organizational changes are necessary to support attainment of those results?
Left-to-Right: What conditions are consistent with the past, such that a continuation of past performance is a reasonable expectation? What market / operating changes might raise performance expectations (product improvements / upsell offerings, better sales training, improved marketing collateral) or lower them (increased competitive intensity, unpopular compensation plan, additional funding for a key competitor)?
Bottoms Up: What assumptions in the models are overly pessimistic? What are the key variables that drive the most performance improvement; and what can be done to with surgical focus to relax constraints on those variables?
This exercise forces people out of their default perspectives and drives productive (albeit, often uncomfortable) discussions. Inevitably, this drives more informed goal-setting and better alignment across the business…and quite frequently, it helps move the top-line goal up and to the right in our now-familiar graph:
Top-line goal-setting
Conclusion: The top-line goal is critical to annual planning efforts. To be fit for purpose, it must balance ambition, credibility, and executability. Only by clearing this bar will it fully serve its multifaceted purpose: to please optimistic financial stakeholders, satisfy the inherent skepticism of internal number-crunchers, and pass the “red-face test” among the troops. Admittedly, this is only a start; and many other components are needed to really nail annual planning. But getting this goal right is a great foundation around which to build; and triangulating across these multiple perspectives is a simple way to inform this process. Plus, doing so is a good way to make the New Year something really worthy of celebration by all stakeholders.
There is an old English adage: Just because you can, doesn’t mean you should. As explained in this HBR article and per the website PhraseMix, “This phrase is usually used to give advice to someone who’s using their money, power, or skill in a way that’s not very wise.” This sentiment has particular relevance to leaders of small-scale SaaS businesses — not as a warning against an unchecked abuse of power, but rather as guidance around how they spend their most valuable commodity — time.
Taking a step backward, entrepreneurial leaders are overwhelmingly encouraged to be scrappy. Countless well-worn terms underscore the seemingly universal acceptance of this common wisdom: hands-on, roll-up the sleeves, leading from the front, wearing many hats, and servant leadership, to name just a few. The truth is that these terms are commonplace because this approach works well in growing small-scale businesses…until it doesn’t.
First, let’s look at some of the important benefits of a “can do” attitude in a hyper-engaged leader:
Learning: There is great downstream benefit for leaders to spend time in a business’ early days learning its various facets and functions. If you know how to do it, the thinking goes, then you know better how to hire someone to do it later. Ben Horowitz makes a particularly good case for leaders gaining first-hand functional knowledge in his classic book “The Hard Thing About Hard Things.”
Team-Building: All of us perform best for leaders we trust; and being in the foxhole with the troops is an excellent way for leaders to build a foundation for outstanding collective performance. Conversely, command-and-control no longer works in growth companies (if it ever did in the first place).
Financial Stewardship: In the capital-constrained (often bootstrapped) environment of early-stage SaaS businesses, frugality is a lauded virtue. Many stakeholders value thriftiness among company leaders; and the concept of a CEO as “chief cook and bottle washer” is often a celebrated one.
In these and other situations, leaders are motivated and rewarded for jumping into the fray with a versatile, “no-job-is-too-small” mindset. But these precise behaviors backfire as businesses begin to scale:
Learning: Leaders that want to understand everything, truly understand nothing. Their learning curve becomes a bottle-neck and also a burden for others in the business to bear (“Ugh…I need to spend the afternoon teaching my luddite boss how to do X…”).
Team-Building: While people need to trust leaders, they also want to feel trusted by those same leaders. With all respect to foxholes, leaders demonstrate this trust in others by stepping away and giving teams the space and autonomy to do their thing.
Financial Stewardship: Cost-conscious leaders who selflessly insist on tackling low-value tasks inevitably divert their attention from strategic endeavors that deserve to be prioritized. When “no job is too small,” leaders tend to miss the big picture. We call this “majoring in the minors.” I was admittedly charged with doing this in my early days as a people-leader…and it’s not a compliment.
So how can leaders pull out of the weeds and find the right altitude, while keeping their feet on the ground? The truth is — like most issues of leadership — there are no easy answers. But disciplined leaders can consistently ask and answer a few questions to help make course corrections to help them fly right:
Learning:
How will my investment in learning [Topic X] help the business?
Whose time / what company resources will I consume to learn [Topic X]?
How will my decision add to / detract from someone else’s opportunity to learn [Topic X]? Do I need to learn this more / less than someone else in the organization does?
Team-Building:
Who will do [Task Y] if I don’t do it? How will that impact their professional development and / or their engagement with the company and / or their ability to execute on their core responsibilities?
If I do [Task Y] what signal am I sending to that person? To their boss? To their peers? To their direct reports?
What impact will my doing [Task Y] have on the team dynamic and its overall health? In the near-term? In the long-term?
· Financial Stewardship:
What is the ROI on my taking on [Task Z]? Specifically, how much will it cost the organization; and what is the pay-back on that cost? Note: It’s worthwhile to have calculated and check against your actual hourly rate. A few recommendations on this: (1) base this on a 40-hour work week / 50 week year (so as to avoid an artificially low rate for the many workaholic execs out there), and (2) include all variable comp (again, to avoid an artificially low comparison).
What is the opportunity cost of my taking on [Task Z]? In other words, what else could I be doing with this time, and what is the comparative value? Note: I like to use “selling on behalf of the company” as the constant basis for comparison. Given that top-line growth is the biggest driver of company value, the most valuable activity a senior executive can be engaged in is…exec selling in support of the team responsible for generating bookings. And, since SaaS companies are often valued at a multiple of Annual Recurring Revenue (ARR), a logical hurdle for any activity is that it had better drive 5X the dollar value of what an executive could reasonably help sell in that amount of time.
What would I need to pay someone to do this meaningfully better than I could? Note: Tie goes to the runner here…if you can break-even relative to the cost of your own time — outsource to someone who specializes in [Task Z]!
The road from “small-scale” to “growing” rarely follows a consistent, upward path; and there are few easy answers to the question of whether a leader should be above or below the “I can do that” line at any given moment. Rather, it’s useful to maintain a flexible mindset on this front. This will help leaders determine when to ascend or descend across various “altitudes” of learning, team building, financial stewardship, and many other responsibilities that fall under their purview. In a complex and constantly changing environment, it is well worth it for wise leaders to ask whether they “should” do things, even / especially when they clearly can.
It was 2001; and my boss was impressive — some would say intimidating. A whiz-kid founder and CEO of a fast-growing start-up that had raised capital at lofty valuations, he was precociously business-savvy and had a seemingly unshakable self-confidence. All of which made it that much more remarkable when he put his hands up and uttered those unforgettable words: “You convinced me.”
The truth is that we had very different leadership styles; and I often found myself filing the minority report when it came to debates among our company’s leadership team. But on this day, (and many times thereafter), I was grateful to be offered the opportunity to successfully make my case. I remember being surprised that day about the outcome itself, and about the impact it had on me — I’ll never forget that feeling of having a real voice in the business. Fast forward twenty years: I participate in many similar business debates, but now I often find myself in the senior role. I’ve learned that those same three words have enormous power, not only to make someone’s day…but to profoundly influence how businesses tackle challenges. I try to keep them top of mind and use them whenever possible. Below are some thoughts on why this practice works so well and some safety precautions when wielding this powerful tool.
At a primal level, it’s obvious why this can be such a potent approach — it is a succinct and unambiguous way for leaders to share decision-making authority with less senior folks. Beyond that, though, some subtle nuances make it consistently effective in small-scale growth companies:
Growth Posture: Companies that are stagnant can operate in a command-and-control way, with rigidly unchanging roles and responsibilities. That is wholly untrue in fast-growing businesses. The only way to scale is with agility and delegated decision-making. Otherwise, leadership inevitably becomes the bottleneck. Takeaway: This approach clearly signals that everyone is expected to meaningfully think and contribute, not just follow orders.
Meritocracy of Ideas: Although many tech companies aspire to offer meritocratic environments, the reality is far more complex. But this simple act of leaders being “convincible,” creates an isolated instance where the best ideas truly win. In terms of getting to a good answer, this is an incredibly powerful step. Takeaway: This small act won’t change the world…but it almost certainly will create a better environment for navigating a particular issue at any moment in time.
Open Mind: Let’s face it, company leaders tend to be a pretty smart lot; and they often have access to far more information than others in the organization. This combination can create a myopic sense among leaders that they are best positioned to make all decisions. But when one is available to be convinced, they are quite literally opening themselves to a whole world of new and valuable perspectives. Takeaway: Being convincible turns the passive concept of open-mindedness into something readily actionable and based in trust.
Underrated Humility: Countless studies of leadership point out the efficacy of leaders demonstrating humility and practicing vulnerability (two of my favorites are Jim Collins’ “Good to Great” and Daniel Coyle’s “The Culture Code”). What better way for a leader to genuinely embody intellectual humility than to verbally acknowledge to others that his / her position has been revised by their input. Takeaway: In a world where it can be a real challenge for many leaders, this is an easy way to credibly embrace the highly effective trait of vulnerability.
Like any powerful instrument, though, using this approach comes with related dangers. Below are a few cautionary thoughts for the safe operation of this tool.
Clarify What Worked: It’s not enough for leaders simply to communicate that their opinions were swayed; rather, it’s important to explain what did the trick. If logic, reason, risk, results, and data were the central pillars of the winning argument, be sure to articulate that. Doing so will ensure similarly constructed arguments from others in the future. But be careful — if leaders simply reward the squeakiest wheel in a debate, they should be prepared to acknowledge that and to deal with the consequences. As Walker White says: “You get what you tolerate.”
Don’t Manufacture Opportunities: People are smart, and they can smell insincerity a mile away. Don’t take an artificial position, for the express purpose of later making a public show of changing it. That is a great way for leaders to predictably erode their own credibility. Like letting your kids win in board games — they know you’re doing it…and they don’t like it. Make them earn it; it’s better for everyone.
Don’t Say it If You Don’t Mean It: If the business case hasn’t been convincing, don’t falsely claim that it has. This can be tempting for leaders, particularly when dealing with the previously mentioned squeaky wheel. But don’t succumb to this near-term temptation; it only creates problems downstream. Which, in turn, can lead to…
Looking back, I realize how much I learned from that boss back in the early 00’s; and no lesson was more valuable than this one. Having a legitimate forum to change our CEO’s thinking offered a feeling of empowerment that I still haven’t forgotten. And, I was a member of the senior leadership team…which further highlights just how impactful it can be when leaders create this type of environment all throughout their organizations. A big step in this direction can be taken with three simple words: “You convinced me.”
From time to time, we use this forum to share observations and trends from webinars or virtual conferences (here); and sometimes we invite guest-bloggers to offer insights from their own experiences (here and here). This post does both of those things at once. Our friend and peer, Mike Dzik, is a Growth Partner at Radian Capital (full disclosure: one of Lock 8’s investors), where he works with Radian’s portfolio companies on their respective go to market strategies spanning marketing, sales and customer success initiatives. Last week, Mike attended the TOPO Virtual Summit a three-day virtual conference for sales, sales development, and marketing practitioners; and he was generous to share with us his impressions of the event. He’s also agreed to allow us to share those observations here on Made not Found. So, with no further ado, I’ll turn it over to Mike, below:
I hope everyone is doing well and off to a fast start for Q4. I spent some time attending the TOPO Virtual Go To Market Summit this week and wanted to share 5 key themes surrounding 2021 (below).
Painkillers over Vitamins: Buyers are looking for faster impact. 90% of enterprise buyers are focusing on tactical results and improvements within the first 90 days after purchase. While many sales have evaporated during COVID, the deals that are getting done are being done inside shorter sales cycles (Days to Close (DTC) is dropping) as contract values are expanding (Average Contract Values (ACV’s) are rising). Takeaway: Now more than ever, focus on the “painkillers” in your pitch, not the “vitamins”.
Speed Wins: Speed and agility on your GTM motion are now the two biggest keys to success. Speed with regard to changes in marketing message, deck/demo, pricing and anything else that helps you out-maneuver bigger/more entrenched competitors is essential during times of stress and uncertainty. Takeaway: Don’t fall in love with your message; rather, try new approaches and refine them in the context of a rapidly changing market landscape.
Double Down on Community: In times of crisis, people turn to trusted business contacts and ask them for recommendations on how to solve problems. Word of Mouth (WOM) is a huge catalyst to buying decisions right now. If you have a large user community, figure out how to cultivate it more than ever. If you don’t currently have an active community base, think about taking steps to start building it now. Takeaway: Activate your community — even more than usual — as a highly credible component of your market message.
Get your “Revenue Operations” Program Straight: You need to unify your data, systems and process across your GTM motion for maximum clarity and understanding. This is a more complex effort than just having a Sales Ops function and it can be hard / expensive to implement. Takeaway: In spite of the high effort required, Revenue Operations yields greater visibility into the business for faster decision making, which is critical in the current business climate.
Sales Enablement is Key: Sales Enablement is a relatively new term, but it is fast becoming key to growth. You need to adapt and change your GTM motion quickly in this turbulent period and having sales enablement dialed-in can help you with new plays, new case studies, new collateral and messaging. The AE to Sales Enablement ratio has gone from 30:1 in 2017 to 20:1 in 2020 showing how companies are investing more, not less, even in a downturn. Takeaway: investing in enabling the success of revenue generators is worthwhile, even when making such investments can be hard to justify.
Thanks, Mike, for these pearls. There are so many good virtual events out there; and it is impossible to free up the space to attend them all. We’re grateful to benefit from your participation in, and distillation of, the thought leadership coming out of the TOPO Virtual Summit.
-Todd
The television series Undercover Boss has been a guilty pleasure of mine for years. Now entering its eleventh season, the show features “high-level corporate execs (who) leave the comfort of their offices and secretly take low-level jobs within their companies to find out how things really work and what their employees truly think of them.” For cringe-worthy viewing, this one totally hits home for me.
But I also like the show’s more serious theme of “walking a mile in someone else’s shoes” in order to deeply understand that person’s experience. At Lock 8, we’ve adapted this concept to help provide insight into a key focus area for small-scale SaaS businesses. Whereas Undercover Boss leverages this approach to offer candid employee-level views into the internal workings of companies, we hope to shine a light on the experience a customer has when evaluating, selecting, and adopting a B2B software solution.
On the surface, this is a straightforward endeavor, involving a few simple steps:
Pretend you are a prospect or potential customer of your company’s product
Go through the steps of buying / implementing / using that product
Record your experiences (good, bad, and ugly) throughout that process
Articulate what would be the absolute ideal experience for what you just went through
Identify the gaps between #3 and #4 above; build a plan to eliminate those gaps
Simple enough, right? Not really. Like so many things, this is easy to do poorly, and extremely difficult to do well. To help make it easier, this post will share a few tips relating to each of these deceptively challenging steps.
1. Pretend You Are a Prospect: At its most basic level, this is a role-playing exercise, so it’s absolutely critical to play your role well. This may be relatively easy for the undercover bosses referenced above (they get a cover legend and a disguise; and they go), but it is more complicated to get inside the mind(s) of a purchasing committee for a large and complex corporate enterprise. We’ve learned that it is definitely worth investing the time and effort to make it real: have a dossier, real personas, real business problems you’re solving for, deadlines, budget constraints, and even political motivations. Even go so far as to designate a few people to play different decision-maker roles. Balance the company profiles to reflect your current (vertical) targets, your buyer personas spectrum and the maturity of organization using your solution. Marketing absolutely should help develop these resources. Here’s a snapshot of just part of a dossier created by a portfolio company that recently executed such an initiative.
An additional point about this step: BE OPEN! Unlike the undercover bosses, for whom secrecy is paramount, this should NOT be a clandestine endeavor. The reality in software companies is that everyone somehow touches the customer experience. Likewise, our experience is that people in early-stage SaaS business are all operating in good faith, so there is no need to trick anyone or attempt to trip them up. Rather, everyone needs to know you’re undertaking such a journey; and each functional area needs to be part of the process. Now…you may need to make the case: why it’s important; why we need to get it right; who’s involved; what we’ll be doing; how we’ll share feedback. But these are all further arguments for doing this out in the open. Equally important: everyone at the company should hear later what was discovered, and to view the information as a learning opportunity, not a judgement. Nothing makes people more nervous than being excluded from understanding what’s happening behind the scenes or feeling like this is a test.
2. Go Through the Steps: Uh…what steps? Whereas most businesses have established a sales process with related stages and activities, these usually assume a company-centric approach, and overwhelmingly ignore the customer perspective. Customers’ motivations / activities / dynamics are effectively infinite, so identifying their purchasing steps can be paralyzingly complex. To simplify, we like to organize our efforts around “major stages” of the customer’s lifespan with a software solution. Although every product / system / technology is unique, there is a relatively small number of macro-phases on the customer journey; and these are generally consistent across different solutions. The purpose of the mental model and accompanying graphic below is to align perspectives, offer a shared vocabulary, and provide structure to the exercise.
On the principle that a picture is worth a thousand words, I’ll hope this graphic is self-explanatory. In summary, as we engage in countless customer “buying” and “owning” activities, and we organize them into these six phases: (1) awareness, (2) evaluation, (3) decision, (4) on-boarding, (5) use, and (6) advocacy. One note of caution: for complex solutions, this may end up being a grueling multi-month process. It’s important to know what you are signing up for in advance…and what your customers are going through to buy / use your products.
3. Record Your Experiences: A disciplined collection of notes will generate consistency of insight and evaluation. With more than one person involved the experience, it’s important to provide a consistent way to gather intel and feedback. That said, this doesn’t require over-thinking; and a simple note template suffices. We like an “Experience and Expectation” framework (“what did I expect?” and “what did I experience?”) to structure things. Then, just codify the experience in a linear way — capture in detail and in chronological order what happened and how it impacted the buying / owning processes outlined above.
4. Articulate the Ideal: It’s nearly impossible to simply dream up the ideal client experience, just like it is unheard of to nail product-market-fit on version 1.0 of a solution. Instead, it pays to inspect and adapt. Thankfully, the early steps of this exercise, and the current-state baseline they provide, offer an awesome foundation from which to iterate toward a vastly enhanced client experience. As a result, this step can be as simple as revisiting every step along the journey and answering the following question: “what would have made this much better?” In the best case, this can lead to a wholesale re-thinking of the journey; at a minimum, it will radically improve the existing steps of the experience.
5. Identify gaps; build a plan: For the activators in the crowd, this is the payoff where you can begin to implement necessary improvements. But be careful about succumbing to temptation. It is alluring to focus energy on an ad hoc basis to address the low hanging fruit that can be fixed easily. The problem is that this approach can break any number of existing processes that — although they may be sub-optimal — generally work today in the context of the current approach. So be careful about what you choose to “fix” as a one-off — it could just break other areas of your process. Although it requires more patience and offers delayed gratification, an orchestrated program overhaul will undoubtedly yield more substantive improvement of the overall client experience. Make a plan and take your time in executing it. Our experience is that the “customer experience re-engineering” project to come out of this exercise may take months or even years to implement.
As with most pressing, cross-company business issues, initiatives like creating an awesome CX Journey can take on a life of their own. Proceed with caution here; ensure that anything and everything you chose to do ties back to your overarching business needs. Such an effort must involve more than just the bosses; and there is no need to go undercover — doing so will allow companies to walk in their customers’ shoes…a journey well worth taking.
As a card-carrying introvert, I’ve always found industry conferences to be exhausting. Likewise, over recent months, Zoom Fatigue consistently crushes me by mid-day Friday. So, I figured that a pandemic-induced remote conference would be some kind of “snakes on a plane” hybrid, uniquely designed for my personal torture. But, having just concluded my first honest-to-goodness attendance of a multi-day virtual trade conference, I am pleased to report that I was totally wrong. Rather, the SaaStr Annual at Home conference this week was engaging, informative, and — I can’t believe I’m writing this — energizing. Having been freed from the relentless distractions and demands of in-person conferences (networking, generating leads, striving to optimize investment in Travel & Entertainment), I paid much closer attention to the valuable content sessions than I normally would. I also appreciated moments of respite throughout the day which offered the opportunity to sense-make across sessions. The net result was a solid set of takeaways for a fraction the time / effort (and $); and I thought I’d share an eclectic mix of conference tidbits below.
1. “ARR is a fact, churn is an opinion:” This was a gem from one of my favorite sessions led by Dave Kellogg, who offered a fast-paced “how-to” of useful SaaS metrics. The specific point here is that churn can be defined and manipulated in many ways (true!), with collateral damage to the integrity of other metrics (also true). The broader point, which he supported with compelling data — focus on what matters to value-creation in the business. Roger that. (Session: “Churn is Dead. Long live Net Dollar Retention with Dave Kellogg”).
2. Remaining Performance Obligation (RPO) Intro: As a quick-and-dirty definition, RPO can be thought of as deferred revenue plus backlog. The Motley Fool offers a deeper explanation here, in connection to Splunk. This item came from the same “Churn is dead” session, which was the first time I’ve heard RPO referenced in connection to private companies. Makes total sense, and I’m eager to think about this more in the context of usage-based business models. (Session: “Churn is dead. Long live Net Dollar Retention Rate with Dave Kellogg”).
3. Managing Complex Change: Arquay Harris of Slack led one of my favorite sessions, and not just because she threw out the term Kobayashi Maru in her talk (her content was valuable and preso style was super-engaging). She referenced Sylvia Duckworth (the introduction to whose work alone was worth the price of admission) and shared the deceptively powerful graphic below which captures elements of managing complex change.
I’ve written here about principles of leading change, but I think this graphic captures these concepts in an amazingly clear, concise, and digestible way. There is a 100% chance I’ll be re-using this visual down the line. (Session: “The Secrets of Managing in All Directions with Slack”).
4. Committee Buying: It’s not our imagination, there is much more buying-by-committee mid-pandemic among enterprises who are increasingly risk-averse, cost-conscious, and looking to consolidate their technology investments. Lots of work to be done around understanding more / new buyer personas and how to sell into a flatter organization where any single person has veto power. (Session: “Buying Patterns in the Enterprise: Who’s Really Buying & Why in a Post-Covid World with G2”)
5. Privacy Debt: Bessemer Venture Partners shared six predictions around the 2020 State of the Cloud (janky photo below):
Why Can’t I Get PrScr to Work When I Need It?
The one that really resonated with me was: “Privacy debt will be the new tech debt.” In short, SaaS players that have not been making consistent, diligent investment in their solutions’ privacy envelope will undoubtedly face a reckoning where significant, costly catch-up on this front will be unavoidable. I suspect tech debt will continue to be a problem for many companies, so I’d maybe argue that privacy debt is yet another straw on the camel named “Tech Debt.” (Session: “State of the Cloud 2020: The COVID Beneficiaries Edition with Bessemer Venture Partners”).
6. Fun Still Matters: Ben Chestnut, founder and CEO of marketing platform giant Mailchimp, shared a great story of the moment when his development team transitioned from being mercenaries (less-productive clock-watchers) to missionaries (self-motivated true believers). It was when they started programming Easter Eggs into the solution. The point? Having fun is incredibly powerful in terms of culture, talent retention, brand, and so much more. True that — awesome interview. (Session: “Learning from the Lows: How Mailchimp Navigated Economic Uncertainty”).
7. Vertical SaaS Rules (Part 1): There were a number of sessions that focused on issues relating to vertical-specific SaaS businesses. We are big fans of vertical SaaS at Lock 8, so I enjoyed these immensely. Damola Ogundipe talked about how being a vertical SaaS solution gives Civic Eagle a leg-up in recruiting because it is easier to identify for culture and passion (and not just talent) relative to horizontal players. (Session: “Underserved Markets for SaaS Companies with Backstage Capital, Avisare, and Civic Eagle”).
8. Vertical SaaS Rules (Part 2): Songe Laron, CEO and Co-Founder of Squire made a compelling argument for why vertical SaaS solutions have an inherent advantage over their horizontal peers in terms of increasing average revenue per unit (ARPU) within their focused customer base. That same session underscored the corresponding point that market sizes for vertical SaaS players were often a whole lot bigger than they first appear…and that domain expertise in that market enables savvy operators to unlock TAM that remains hidden to the casual observer. Exactly! (Session: “Vertical SaaS 2.0: How Barbershops Are Creating a SaaS Rocketship with CRV and Squire”).
9. D&I — Early but Mighty: The topic of diversity and inclusion was understated, but never far from center-stage at this conference; and it came up in various organic ways throughout many sessions. I also attended one session where it was the explicit focus (“Which D&I Initiatives Really Work: The metrics you should be tracking with Notion Capital”). That session crystallized a shared conviction that advancing D&I in SaaS businesses is not only the right thing to do, but that it is also highly correlated with value creation…even as we are still early-on in the collection of supporting empirical evidence. In sum, I sensed that (a) this will be a major focus for SaaS businesses that acknowledge there is much to be done, (b) there is early demonstrable progress being made, (c) it doesn’t appear that anyone has all the answers, and / but we are feeling our way together.
10. “On” and “In the Business” versus “Out”: There is a well-known distinction between “working on your business” versus “working in your business.” What I have sometimes found off-putting about software conferences is the seemingly obsessive focus on “working out of your business.” By that I mean placing overwhelming emphasis on exits, liquidity, and valuation. Don’t get me wrong, those things are extremely important; but they can also suck all the oxygen out of the room. In this crazy, tragic COVID reality we are living through, I found that NOT to be the case at this event. Rather, I found that people were very much focused on “working on their businesses;” and it was really refreshing.
And…1 to Grow On (Humble Pie is Comfort Food): Similar to the point above, there can be a lot of posturing that occurs at SaaS conferences, and this tends to escalate in direct correlation with SaaS company valuations. Although SaaS multiples remain durable, the past six months have been enough to inject a bit of humility into all of us. This seemed evident in most sessions, where I perceived a genuine air of people wanting to support one another and offer humble assistance where possible. It created a comfortable environment for a conference; I certainly hope this aspect of our current environment has some staying power.
It is a good thing to be “coachable,” meaning capable of being easily taught and trained to do something better. It’s easy to understand why companies consistently seek to hire and reward coachable behavior in their teams. Based on this definition, I’d argue we all want to be coachable. Unfortunately, our egos often get in the way. This likely explains the countless books and articles that provide tips on how to become more coachable. These serve a valuable purpose; and I don’t have a beef with any of them. With one exception: their guidance seems to overwhelmingly focus on junior level professionals, and to largely ignore senior executives. At Lock 8, we strongly believe in the power of coaching to elevate the performance of executives and (correspondingly) the businesses they lead. This post shares some experiences and observations around coaching / coachability for people who need it just as much as anyone — seasoned senior leaders of small-scale businesses.
Contrary to popular belief, the need for coaching does not decrease as one’s proficiency / expertise / seniority increases. Elite performers of all types (e.g. athletes, performing artists, authors, painters, etc.) all tend to utilize more coaching, not less, as they advance in their respective fields. Want evidence: have you noticed the sideline of a big-time football game in recent years?
And yet, an anecdotal sampling of articles about coachability in the workplace shows an overwhelming focus on the most basic aspects of the topic. One recent article from a highly respected publication offered five tips for being more coachable — and all five of them focused on responding well to feedback. Although requesting / receiving feedback is an undeniably valuable skill, I’d argue it is a necessary, but insufficient condition to being coachable. For executives aspiring to become more coachable as their careers progress, simply getting better about asking for feedback won’t move the needle.
This all has been top-of-mind for me lately: I recently resumed working with an executive coach, after a six-year hiatus from doing so on a formal and consistent basis. The experience has been really positive. And it has been a reminder that there are wide variations in these coaching sessions, with some being truly groundbreaking and others not so much. Reflecting on this, I’ve realized that the variations are largely of my own making. Certain behaviors elevate the results, while others undermine my efforts to be coached. In short, the outcome depends on how “coachable” I’ve been in connection to a particular session. Below are some observations around my recent exec coaching experience, in hopes that they will help other execs who are looking to optimize their own coachability.
Nike Rule: Just Do It. Seriously, a huge step toward execs becoming more coachable is making the commitment to formally work with an executive coach. This seems obvious, but it’s surprisingly hard. First, there is a lot of inertia against taking the plunge. Second, it can be expensive. Third, I personally have found it consistently challenging to find a coach I actually WANTED to work with (perhaps more on that in a future post). Finally, we tend to convince ourselves that receiving regular (or even irregular) feedback from various colleagues / employees / peers / board members is tantamount to coaching. It’s not –it’s just varyingly structured feedback that should be absorbed and internalized, but also viewed through whatever prism it’s being delivered. Conversely, establishing a formal exec coaching relationship (and paying for it), immediately fosters a coachable mindset in the person being coached.
Embrace vulnerability: Leaders generally are relied upon to provide guidance and strength to others. And while we’ve largely / thankfully outlived taboos against company leaders showing weakness, a complex dynamic exists for them across the concepts of vulnerability, safety, and competence (I made a quick video on this topic here). The result is that there are precious few situations where leaders can fully display vulnerability. Coaching sessions are that place. Let it all out — personal doubts, fears about the business, nagging weaknesses — they are all open topics, with no negative repercussions for raising them. If naming a problem is a first step toward solving it, then these sessions are the safest place to take that all-important first stride. Run to it.
Be Prepared: Aside from being one of my favorite musical numbers from The Lion King (1994), “Be Prepared” has become my new motto for these coaching sessions. It strikes me that there is a near-linear correlation between time spent on active preparation in advance of a coaching session, and the productivity of the session itself. My best results roughly reflect a 1:1 ratio (60 minutes of prep per 60-minute session). This generally falls into two buckets: (a) writing down thoughts as follow-up to topics / exercises that arose in the prior session and (b) codifying (and sharing with my coach in advance) a set of themes that I’d like to explore in the upcoming session. This allows my coach to optimize our time together and dig-in with real focus, while still leaving room for unscripted exploration. The less I prepare, the more I devolve into free-association without purpose — which strikes me as being in direct conflict with the definition of coachability above.
Talk More, Smile Less: With all due respect to Aaron Burr in Hamilton (“Talk less, smile more”), being coachable demands unapologetically open and honest voicing of one’s positions and beliefs. This runs counter not only to Burr’s advice, but also to what we are encouraged to do from a young age (“We have two ears and one mouth for a reason…). But talking things out is a necessary component of being coachable, especially for external processers like me. This guideline applies not just to our fears / concerns (per the vulnerability point above), but also to our hopes and dreams. Brazenly expressing our most ambitious goals, irrespective of how insanely audacious they may be, will spur a constructive discussion about the current realities, options available, and execution required to achieve them.
Ask to be Asked: As thoughtful coaches will assert, their role is not to dispense advice or impart gems of wisdom, but rather to ask provocative questions. This point is especially true in the context of coachable executives, since we don’t typically do this for ourselves. Left to our own devices, business leaders are adept at coming up with answers / solutions — it’s what we do. But we are less good at asking and holding ourselves accountable to answering deep questions. We are just too ____________ (pick one: busy / invested / scared / lazy / committed to the current path(?)) to do it consistently. That’s what executives should ask coaches to do for them. The less I expect my coach to tell me stuff, the more I empower her to ask tough questions, the better our results are. As a related aside, this point should help debunk the common misconception that a coach needs to be more expert at a given pursuit than the person receiving the coaching. Wrong. If this were true, how would Beyonce or Roger Federer or Simone Biles select a coach? Spoiler: They all have coaches whose role is to help these G.O.A.T.s challenge themselves.
Read, read, read: I find that my coachability rises on weeks when I’ve read a wide range of business-related books / blogs / articles. This one might also seem obvious; reading undeniably expands our knowledge base, which naturally improves our ability to learn. But I include it here for what might be an unexpected reason: Reading about the business challenges and successes of others reinforces just how unremarkable my own are. I find this oddly reassuring and helpful when it comes to (a) keeping things in perspective, (b) taking feedback less personally, and c) avoiding the pit of despair when things feel like they are running off the rails. Reading is a great reminder that someone is always tackling something much harder and much more effectively than me at this very moment.
To finish where we started, we all want to be coachable. Like anything worthwhile, it takes hard work and some intentionality to make material improvement. Meanwhile, I’ve been enjoying working out the kinks as I’ve re-entered the world of working with an executive coach. And it really is worth the effort. As we say at Lock 8 all the time: coaching’s impact effects not only the person receiving the coaching, but also the team they lead and the organizations they drive.
