The New CRO’s First Job is to Raise Prices

So we had yet another uncomfortable renewal call the other day.  This one, with a vendor where we’ve been a case study on their website for 5 years.  Where we’ve referred them tons of other customers. Where we are already one of their 5 largest customers. One where we helped them spec, architect and ship one of their top product enhancements.

The renewal call wasn’t going to fun in any event. It’s 2024. Every renewal call is an attempt to just raise prices. But this one was worse: a new CRO joined the call.

“We’re doubling prices”, the CRO said.

What? We asked why. He said “inflation”, and that “our costs are going up”.  OK, but double?

We asked him if he knew we were a reference account. He said, “No, I’m still getting to know the business”. I see.

We asked him if he thought doubling pricing with zero notice was fair. He said, “It doesn’t matter.”

Yes, this sounds awful, and it was awful. But it was his job. A new CRO that owns renewals and upsells at a business whose growth has slowed is going after your top customers. Like a heat-seeking missile. If new deals aren’t closing, and there is pricing pressure, the obvious target for the new CRO is actually your top, largest customers. Get them to pay more. That moves the needle the quickest in tougher times.

Bear in mind I’m not a CFA, CPA, or professional financial advisor. But I have been through it. And so I know this is a more difficult question to answer than you might think.

The other day at our most recent SaaStr Miami Super Meetup, I was with a founder that had made $50m over 18 months ago. He still hadn’t figured out how to invest it!

Here’s my best advice:

First, resist the urge to invest in anything specific at first. It’s OK to take a pause and reset.

Don’t invest in restaurants or real estate ventures you don’t understand. No kooky ideas. A few start-up investments are fine, but don’t do much. You have to learn.

Second, understand how you think about inflation. This is a lot of money. One option is to Do Nothing — For a Little While.

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You first try to move them into an individual contributor role.  If that doesn’t work, then move them out.

This is one of the most frustrating outcomes, when a very talented co-founder becomes “unrealiable”.

You should try to keep them, if you can, and they don’t become a negative influence on the company. Because they know so, so much.

But what “unreliable” really usually means is they just aren’t as committed as you are. And oftentimes, that’s completely logical.

Startups are so hard, and it’s so hard to see success in the early days. It’s logical one co-founder may be less committed, and become “unreliable”. Especially if you are working for $0 or a very low salary.

It’s almost un-fixable, however. You can try to transition them out. Or you should at least not have them manage anything. That lack of reliability will translate into a toxic culture of folks who are less than 100% committed.

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Are we through the endless price increases we saw in 2023?

Apparently not.

A stunning 63% of you are raising prices in 2024. That’s up from 54% in 2023.

Personally, I’m a fan of only raising prices if you’ve earned it, and focusing on raising prices on new customers, not just the base.

But maybe the days of earning it are in the past.  The days of Endless Pricing Increases in SaaS seem to be here maybe … forever.

Yes, most of us at first under-price and then slowly raise prices as we gain confidence. It’s because (1) we aren’t trained sales leaders, and (2) we worry most about not losing the deal.

Founders know the value of a key logo can be 10x-100x the value of the contract itself. Most especially in the early days. Closing those first 10, 100, 200 customers proves your value, your reason to exist, demonstrates traction, etc. When we finally get a good lead, we just don’t want to blow it. We want to do whatever it takes to win it.

And that’s OK. In the end, it won’t matter too much if your first 100 customers pay you $50,000 in total or $100,000. It will matter, but not too much. What will matter is that you don’t squander the leads, that you make them happy, that you learn from them, and that they refer others to you.

But after that, you need some professionals.

A sales leader will be much better than you at maximizing the revenue per lead. Often 2x better. And she’ll be better at closing than you are. Most founders are good “middlers” — great at demos, explaining value, etc. — but not great closers.

Add a true closer, and someone better at maximizing deal size, and a dedicated sales leader may do 4x+ better than you as head of sales.

But maybe not in the beginning. Not when just not losing deals matters most.

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