Culture: SaaS Companies and the Stall
- August 5, 2016
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Jason Lemkin’s post about SaaS companies stalling out at $20M s a good read. In it, he uses a fictional company that is growing 14% a month on a $5M base of annual recurring revenue to make a point about these types of companies:
“It will never last. There’s no chance they can keep it up.”
OK, I say. Agreed. But what’s going to stop company X from continuing to grow at outlier rates?
“You’ll see,” they say. “I have so many companies in my portfolio that totally stalled out at $20m ARR”.
The really interesting finding from his research into his own deal-flow is that the ones that struggle have low Net Promoter Score (NPS). They don’t love their product. This might show up as churn, but when the product is good enough, but not loved, it shows up in NPS instead:
The ones that stall out at $20m ARR, or thereafter? They all aren’t beloved products. They all have low NPS.
Of course your mileage may vary on the precise revenue numbers but it is really interesting data for anyone looking at SaaS businesses.
Jason makes great arguments in his post: ” First, if you aren’t measuring NPS and CSAT yet — start NOW.”
But I would put a different emphasis on the conclusion: Customer satisfaction is more about culture than about measurement.
At BP3 we spend a lot of energy on our customers’ outcomes. One way – maybe the most important way – to measure customer outcomes is by measuring net promoter score and customer satisfaction. But just focusing on those measurements isn’t enough. Customers have to be a core part of your culture, of your company’s belief system, to get the most out of customer outcomes. If everyone is on the same page that taking care of customers comes first, then the rest comes a lot easier. But if it is just about the scores and your compensation plan, then you’re leaving a lot on the table because you’re appealing to your team’s wallet but not to their sense of purpose. Customers as culture appeals to the soul and purpose of your company in a way that NPS never will.