Inc - 10 Simple Ideas to Help Manage the Burn

So, for many of us in SaaS, these are still some of the best of times.  The Cloud is bigger than ever, CIOs are buying more than ever, and SaaS is still on a roll.

But public stock prices are way down, and venture capital is much tighter than it was outside of AI Mania.  So many of you will want to manage the burn more carefully.

But you can’t cut your way to growth. So what should a CEO do?

A few simple thoughts:

1. Let go of your bottom 10%-15% of sales reps, concentrate leads in the best reps. This always gives you both a top-line boost (the top reps close more per lead), and gives you room to hire more reps at the same budget.

2. Have a firm, management-team wide burn rate budget. And stick to it. Pick a fixed amount of cash you can burn each month, period. And make all your VPs accountable to it. They can negotiate themselves on where to spend incremental revenue and dollars.

So Toast is one of the most iconic B2B leaders out there. We’ve all used Toast 10s or 100s of times by now.

But while the brand and market penetration is strong, the business model is challenging.  It still loses money on the hardware, and the payments side is fairly low margin (28% or less). The software license is high margin, but it’s only 20% of the total revenue.

So Toast has had to not just get efficient like everyone else these days, but extra efficient.

So what did it do?

• It forced reps to close 13% more locations per sales rep.  In essence, increasing quotas 13%.
• And it shrunk territories -27%.

A double whammy from an AE’s perspective. That makes their job 40%+ harder.

And what happened?

Well — it worked. And fast. At least for now.

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We’ve crossed over 10,000 posts, podcasts, sessions, braindates, and answers on SaaStr, and we held off for a long time on writing on most other VC tropes. But I thought it might, in these times when valuations have taken a hit, and VC is under stress, to update our “Top 10” list of things that are relatively easy to do, now, that will make your investors and board happier.

If your investors never help … or even if they are driving you nuts … your life will still be better and easier if they are happier.

I would fire both.

An underperforming rep that gets a pass just lowers the bar for everyone, unfortunately. No matter how nice they are.

If it’s OK for Bob to always hit 30% of quota … then you just won’t have enough pressure and urgency on your sales team. You can’t have that.

You also can’t have ethical lapses on your sales team. Not material ones, at least.

Yes, sales execs will often push the limits. But they can’t cross ’em. Not only will that bite you later — and it will — but it will again encourage similar lapses in the rest of the team. Everyone will soon be breaking the rules. It will become institutionalized.

Both of these reps, in different ways, are toxic and detrimental to your success.

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Unlike many positions, I say 0 if possible. In fact, one of the 10 most unforced errors I see founders make is hire someone too junior to get marketing going.

If you are, say, $500k in ARR, you can’t hire a CMO that needs a team of 15-20 around her/him. You just don’t have the capital or infrastructure.

But what I’ve learned time and time again is you need to hire the most senior marketer you can that will still do the work.

Why? You need someone that will hold a number, a commitment. To leads, to pipeline, to opportunities, to revenue. Whatever stage of the funnel makes sense for you, you need someone that can own it.

Most junior marketers simply have not had the experience of owning a number. They may have helped. They may have managed a spend. They may have even supported a sales team.

But owned it? You need someone usually at director or above to get that experience.  Almost always.

And if you hire a director from a more established company, she/he is probably going to want to be a VP at yours. 

It’s happened to me twice, that “moment”. It was the same thing both times:

When they just didn’t show up to a critical meeting.

Founder conflict is unfortunately pretty common. I was blessed in my first start-up to never have a second of it. That’s really about as good as it gets in start-up land. Since then, I’ve always had some, to varying degrees. In the end, almost all founder conflict comes from asymmetric commitment.

It’s hard to deal with a situation where you are more committed than a co-founder, but my lesson learned is at least try. Even a 95% commitment from someone that can do magic can be a decent bridge strategy at least. So my general advice is try harder! At least try to make it last a little longer if they are insanely talented.

But below a 95% commitment doesn’t work.

The classic one for me is when they just don’t show up to something important. No notice, no heads-up, no email or Slack ahead of time. They just don’t show up.

That’s something founders just have to do — you gotta show up.

Not going may be a natural reaction to stress, a need to take a break, etc. It’s not done out of malice, or lack of Google Calendar skills. It’s just something folks that disengage do, for some reason.

But my learning is when you see this sign — it’s too late. It can’t be fixed. They don’t have the minimum commitment to make it happen.

Move on to Plan B.

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