#10 Strategies work only to the extent of their execution
For every SaaS business which has achieved success with one or other growth strategies there are thousand others which keep struggling with same strategies in silent desperation.
Truth is, growth strategies fail far more frequently than they succeed, but once a case study of XYZ startup’s success mentions its strategy, it becomes talk of the town.
For every hubspot which hit gold with its blog, there are hundred and thousands of companies whose blogs see no traffic. For every Zoom which has seen exponential growth riding on its high viral coefficient, there are thousands of SaaS products which get no click on their share buttons.
To some extent, there is an element of product-market-strategy (PMS) misfit. Quite understandably, one strategy can not be used for all kind of businesses. However having said that, generally the problem does not lie with product-market-strategy fit but rather in the execution of a strategy.
If there are inefficiencies in the way a strategy is executed, it will not produce results. It may seem like that a strategy has not worked but a closer look can reveal deep inefficiencies in its execution.
✔️ Execution is a skill and a competitive advantage. It requires focus, judgement, tactical maneuvering and many other abilities. However with the help of systems and procedures a SaaS team can up level its execution. Today I am discussing some of the key systems and models to improve growth execution.
Where You Want To Go?
Our friend X has a plan in mind to travel to the best places in the world. He had read in blogs that travelling is fun and people should travel to best places. This is how he got interested in it. He goes to the airport and hop on a flight in which he saw the highest number of people getting on. On arrival he realized that this is not the place he wanted to travel to and started cursing his luck!
It may sound far-fetched, but this is what most people do. They do not clearly decide the destination and end up in a place which they might not like.
For your SaaS business, do at least one of these:
Decide a revenue figure you want to achieve in 6 months as well as in 12 months. This will need no market research or data analysis. You have built the product, you already have an understanding of the market, just take a few seconds, take out a sheet of paper and write down the figures. Going ahead you can create a new sheet with updated figures if you feel like changing it in future, but for now, take a stand.
Why Revenue? - Revenue justifies everything. It justifies product, market and value. People will not pay you even a dime if they are not getting more value out of your product.
Decide number of active users you would like to have in 6 months and in 12 months. This goal is suitable if you intend to give away the product for free. Active users are a subset of registered users i.e. only those registered users who are using your product at high frequency, say daily or thrice a week or likewise (depending on the nature of the product) will be categorized as active users. Just take a call, listen to your hunch here, this thing does not need a lot of pondering. To a large extent your hunches here are correct.
Decide what you want to achieve and add an element of your hunch for some sanity, that’s all.
To early stage bootstrapped SaaS businesses I am always inclined to suggest revenue target, as growth in revenue solves everything in their case.
For funded SaaS companies or for those where founders have other income streams and are not dependent on immediate financial returns from their SaaS business… they can if business model suggest, look for growing number of active users though even for them revenue is still a better goal to have.
Where are you now?
In case of SaaS businesses there is one inflection point to consider - Product Market Fit (PMF).
What does PMF mean?… when a significant number of early users are using your product with high engagement and high satisfaction, it means this group of people are being able to solve their pains with your product, they are liking your product, your product is fit to solve their problems.
The terms “significant number”, “high engagement” and “high satisfaction” need to be judged based on the product and the market. For one SaaS product, 200 active users spending 30 minutes everyday would signify PMF while for another 5000 active users spending 5 minutes every alternate day may mean PMF. Whatever the case is if your SaaS product is delivering value to your target audience, they are happy with it and find it natural to recommend it to others.
“The number one problem I’ve seen for startups, is they don’t actually have product/market fit, when they think they do.”
Why PMF is important?
PMF verifies two things:
You have built a product which delivers value and delights its users.
You have discovered a large market which is in need of your product.
Now the important thing you need for growth is to discover ways to tell more and more people within your market about your product. Of course you still need to improve product but now you have a reliable product which when shown to your audience will be liked by majority of them. You can live in a certainty that you are upto something.
❓ Without PMF, imagine waking up everyday with the questions -
Is this thing that I am building has any value in the market or is it just a hobby?
Can there ever be enough engaged users of my product to make it a financial success which I always desired?
The certainty that PMF brings (or uncertainty in its absence) will reflect in growth activities. The validation of the idea and the market will make running growth activities measurable tasks.
✅ Before PMF growth activities are aimed at understanding market and improving product to reach PMF.
✅ After PMF growth activities are aimed at scaling the business.
Whether you have achieved PMF or not, just keep in mind the above points regarding growth activities. Milestone of PMF directs the growth activities and this is why I have discussed PMF in today’s newsletter. I will discuss ways of achieving PMF in future editions.
You can always feel when product/market fit isn't happening. The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of "blah", the sales cycle takes too long, and lots of deals never close.
And you can always feel product/market fit when it's happening. The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account.
Alright, so take out the sheet you have used to mark your 6 months goals and answer the following:
Just simple Yes or No. That’s all. No story, no theory, just one word answer. Do it now and you are good to move to next step.
Anchor Your Daily Actions With KPIs
KPI = Key Performance Indicators
Once you start working on growth activities, you will need a framework to judge whether you are moving in right direction or not. This is where KPIs come in picture.
✔️ KPIs of a company are a set of metrics which measure its health. Based on the nature of your business, its stage and your goals, you decide a few metrics to keep track of and then whenever you take a growth action you measure its success based on the improvements it has brought to these KPIs. Whatever brings most positive improvements in KPIs is the best strategy for your business. That’s it!
There are a number of KPIs which a SaaS business can select from. However some metrics are more useful than others. Be very careful in selecting the metrics you want to focus on because if you focus on wrong things, you will get wrong results.
For example, if you focus on landing page traffic and new free trial signups, your daily actions will invariably be focused on improving both of them. This may lead you to improve landing page copy, run ads for site traffic or build content for SEO. This will look exciting for a while until you realize that six months have passed and none of the growth activities have lead you closer to the revenue (or active users) goal you have set above.
So, what you should do is to think clearly and select a metrics which when acted upon and tracked daily will really lead you to success. Take your PMF stage into account here.
✔️ In general, retention and MRR are good KPIs to track.
Retention indicates that your product is delivering value to its active users. This is something that you always want. If you have not reached PMF, focus on retention will force you to improve product, on-boarding and product education resources. If you have reached PMF, focus on retention will keep you alert about customer feedback, support tickets as well as help you to achieve exponential growth [growth as a function of existing users].
Post Product-Market fit, you will realize that ease of value discovery drives retention to a large extent.
Monthly Recurring Revenue is another important KPI you should focus at. MRR accounts for both new registrations and churn. A slightly better KPI than MRR that you can look at is Revenue Growth Per Month. This is growth in percentage, which sometimes a better indicator specially for early stage startups when actual numbers are too small to keep a team motivated.
When analyzing revenue, breaking it into following parts will help you gain deeper insights into growth:
New MRR = MRR gained due to new signups in a month
Churned MRR = MRR lost due to churned users i.e. those who cancelled their subscription during the month.
Expansion MRR = Additional MRR gained from existing users due upsells, cross-sells, sale of Add-ons etc.
Existing MRR = MRR due to existing users, rolled over from previous month.
✔️ Once you break MRR into these four variables, you will learn exactly where the problem is, are you not getting new users or are you facing a lot of churn (i.e. low retention), are your up-sell strategies working or not…and so on.
Select one or two more KPIs based on your market and product. Select those which delivers real value, are track-able and can help you prioritize growth strategies. So in total you will have around 4 KPIs to work upon and track.
To begin with find current values of all selected KPIs and define target values. This will give you measurable goals. Take out your sheet and fill the values for all the KPIs.
Once you have finalized KPIs, discovered current values and decided the target values, you are all set. Whenever you are in doubt about any growth activity, think through its impact on your KPIs to gain clarity.
Setup Data Systems
Data systems help track various data like website traffic, conversion, source of signups, result of A/B tests etc.
Data systems are very foundation of growth activities. You always want to keep an eye of the data and then design your growth strategies based on the data.
I generally prefer using Google tag manager and then adding various analytics software within it. This is a simple and effective system.
✔️ Bare minimum you would like to setup things like Google Analytics, Facebook Pixel, some tool similar to Ad Roll for re-targeting and hotjar or any one of its alternatives.
✔️ In my experience, reading HTTP header data [request header] and building a small function to save it in your database along with registered users’ details will be helpful too. It gives two things:
A simplified access to web traffic data without the need to check Google Analytics dashboard.
A view of registered users’ activity on your website.
Take out your sheet and note down the software you are using or plan to use for data systems.
Daily ritual of a warrior
Setting up data systems is not enough if you can not track the data points. Make it a habit to daily track key data points. If there are no tools available to compile all data at one place, use excel sheet. First thing in morning compile most important data for previous day in an excel sheet. Usually it will take anywhere between 5 minutes to 15 minutes, invest this much of your time. It will keep you grounded and help in designing better growth strategies.
Make a google sheet where you and your team will log issues that are blocking the growth, a Trello board will also do, anything that is simple for you and is up in a minute. Make it a point to discuss these issues daily. If you can correctly pin point a problem, you will find the solution today or tomorrow.
Stay nimble for tactical maneuvering. Plans are created to give you a direction. Plans usually go haywire on the field, that is not something to worry about, in fact that is how plans usually are. Stay nimble and open for tactical maneuvering.
If you are talking about your startup, landing page copy or anything else on community forums than be very careful and stay focused at KPIs. Say for example you have shared your new landing page on a forum and someone pointed out that your designs seems to be copied from the design of XYZ.COM, what will you do? Will you go back and change the design? My suggestion would be to say something appropriate on the forum and then move forward. Do not engage in any activity which does not affect your growth process without a proper data analysis, quantitative or qualitative.
Product, research, channel, strategy..all of these are very important, but understand very clearly…a lot of business success is pure execution. Make speed of execution and iteration of growth experiments your strengths.
Smashing a few myths
First mover’s advantage is an advantage only in MBA books. In market, first mover is seldom an advantage. Last mover is an advantage. Gold is when first mover does it so good that it is almost like a last mover….actually it is better than gold…like diamond….or maybe platinum.
Be extra cautious of yourself if you have got an idea which ‘no one has ever thought of before’.
Growth on internet is NOT LINEAR. Growth efforts compound, so are their results. There will be days with 1% growth and there will be days with 10% growth.
You need no strategy for first few users. First 20 users will come from pure hustle, unless you are a seasoned celebrated entrepreneur with large twitter following.
Adam Wesolowski, Growth Strategy Director at Ladder.io
Ankur: What one organic growth strategy would you recommend to early stage SaaS startups?
Adam: My answer would be: build and analyze your funnels!
This is maybe not something that comes to your mind when thinking about "organic", but definitely should be a starting point in all growth related activities - without understanding your funnel and data it's impossible to take proper growth decisions.
Mental Models For Founders
I first learned about mental models from a blog post. It was Charlie Munger’s ‘Worldly Wisdom’.
Since then I have developed a few simpler ones on my own. Took a while to get used to them, but they help. These are in the simplest words possible, as that is the best way to communicate.
We make decisions every day, professional as well as personal. More often than not, facts and data at hand are not enough to have a clear vision. Mental models help in seeing through the clutter and working under constraints. Here is a list of my mental models:
Common wisdom is superficial.
Most of the worldly matters are multi-variate events. It is a fallacy to attempt a diagnosis of them using emotions and assumptions.
Ignorance and knowledge both can be the source of confidence. Be sure to know which one at play.
Every magician knows the vanity of his tricks. Don’t be fooled by them.
Daily thoughts make us what we are. Choose a livelihood which can help to generate desired thoughts.
It is very difficult to brute force something using only mental faculties. Experience is necessary. Intellect blooms with experience. Experience is not measured on time scale.
Mind plays trickery all the time. Error of judgement is the most common reason for failures. Double and triple check your first ideas. Run an infinite loop of WHY, till you get the answers.
Neither it is possible nor beneficial to attempt to understand people’s motive. Focus on the task at hand.
Understanding the root problem should be the goal. Solutions come easy.
Break a complex problem/situation into many smaller and easier parts. Then solve each of these parts independently.
Twitter on possible ad fraud scenario
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