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Episode in a Tweet: A small spinout firm turns into a major SaaS company with tens of millions in venture capital and billions of annual billings on the platform.
Quick Background: Josh McCarter led the spinout of a small firm and with great leadership and a big vision, re-focused the company into new markets and the company experienced explosive growth. As a software-as-a-service (SaaS) company, Booker’s platform empowers firms such as spas, salons, dance studios, and photographers to manage their appointments, their staff, and their customers, and, importantly, be able to transact with those customers. With a recent acquisition, Booker has become an end-to-end platform that a service-based business can use to both run their operations and grow their sales.
Transcript: Download the full transcript here.
1. When you are looking for funding, here are several things sophisticated investors want to see.
Across all rounds of funding, investors “look at the CEO and the team, because if they don’t believe that you’ve got the track record or that you have the ability to assemble a team and inspire leadership and confidence in that team, they’re not going to put money in because you can’t build a business without that,” said Josh. In a second round of funding, investors are much more focused on the financials and the business metrics. And in a third round of funding, you can expect lots of questions about burn rates, customer retention, sales and marketing strategies, technology systems, and other detailed aspects that shed light on the viability and growth potential of your business.
2. Resist the temptation to implement every new piece of software that comes along.
Josh said, “We get calls everyday on different types of software, different development platforms that are coming out. You can literally run your business into the ground just trying to stay on top of every bit of new software that comes out so be very careful in how much time you allocate here.” In addition, you can save some time by keeping an eye on what your competitors are using. Leverage your network of contacts to find out what other people are using and how well it’s working for them.
3. Be proactive, not reactive in how you allocate your time.
While this may not be typical of every Entrepreneur of a fast-growing company, here’s roughly how Josh allocates his time.
- 20% on sales and marketing
- 20% working with his senior leadership team
- 20% with his product and tech teams
- 15% meeting with non-senior leadership staff as part of corporate culture and communication
- 15% meeting with strategic partners and developing new partnership deals
- 10% working with his outside investors and introductions from those investors
What does your day look like?
4. In a SaaS business, metrics such as customer retention, ARPU and CAC are critical to judging the viability of your business.
Since SaaS models are typically based on subscription revenue, “You have to pay attention to how long people remain a customer,” said Josh. This is often expressed as a churn ratio, or the percentage of clients that leave over the course of a year. How much you are selling to a particular customer, called ARPU, average revenue per user, is a highly relevant number as well, because the amount that they’re paying you times the amount of time that they stayed with you, which is your retention, tells you how much value you’re going to get out of that customer. And CAC, or customer acquisition cost, tells you how much it cost to acquire a customer. By putting these and other numbers together, you can get an excellent picture of your SaaS business and determine exactly how fast you can grow and how much money you’ll need to fund it.
5. Sometimes you have to pull the plug on long-term ventures that you’ve put blood, sweat and tears (not to mention big dollars) into.
“It requires tough decisions sometimes to shut down initiatives that you’ve spent 2 or 3 years building up and have rallied the company around and then have to go back and say, ‘Hey, you know, this just isn’t turning out to be as scalable as these two other bets so we’ve got to shut it down,'” said Josh. It takes discipline to make these decisions and while they may be painful in the short-term, they position the company for faster growth down the road.
1. If you’re looking for funding, you won’t get it unless you’ve surrounded yourself with a great team. Regardless of your funding round, investors always look at the quality of the team. Do you have any weak links in your leadership team?
2. Be very intentional in how you allocate your time. You can always find ways to generate more revenue but you can never get back your time. Make sure your calendar reflects your priorities and will move the needle for your company.
3. Identify the key metrics for your business and manage them rigorously. SaaS companies have very specific metrics that govern how successful they’ll be. Do you know your metrics and are you rigorously managing them?
Transcript: Download the full transcript here.