- Hi there, I'm Dan Martell.
Serial entrepreneur, investor and creator of SaaS Academy.
This video I'm gonna share with you how to fix a broken
(mimics airhorn) broken business model in your SaaS business
so that you can get back on track and scale your company
and be sure to stay right to the end where I'm gonna share
an exclusive resource called the Precision Scorecard
to help you measure your progress along the way.
(upbeat music)
When you build your startup it can be frustrating 'cause you're
trying to make things work but you're also dealing with a ton
of challenges around marketing and sales costs and just getting
the product built in the first place.
You know, recently I was on a growth session with a founder
seeing if there was an opportunity for me to support
them and coach them forward.
And we, you know, we walked through the process I have
which is results, reality and roadblocks.
And as I was going through kinda some of the core metrics that
I want to kind of review to make sure that their business had
challenges that I could solve, it became very apparent to me
quickly that they were running into a wall
in the next few months.
I even asked him, I said, "How much runway do you have left?"
And they're like, "Three months."
And I'm like, "Dude, if you don't fix these challenges,
"when you have a 25% monthly churn
"and your CAC that you say is $1500
"on a $3,000 annual contract value is actually twice
"that amount because what you're not considering is the heavy
"upfront investment in the set up and the data migration for
"your solution, that number's more like $2500.
"You're business is not economically,
"the unit economics are not strong."
And the reason why they kept pushing on sales,
pushing on marketing, investing in top of funnel,
investing in salespeople.
They had a team of 20-some folks.
I was like, "This is not gonna work out.
"And at the end of the day, I can't coach you because
"A) that's not where your should be investing your capital and
"B) you've got some fundamental flaws in the model that needs to
"be fixed for you to even be successful.
"And I know that you're trying to raise your next round of
"funding but that, just trying to double down on growth for
"growth's sake is not gonna get you to where you need to be."
So what I want to share with you are the six steps that I would
have given to Harry had I coached him to turn the business
around that unfortunately I just don't think he was open
to receiving on that call so here they are.
Number one, baseline your metrics.
The first thing you need to do is what I did on the call which
is get clear on what your numbers look like and if you've
got a 25% monthly churn that means within three and a bit
months you're churning through 100 percent of your customer so
just for you to go sideways you need to replenish 100 percent of
your current customers every three to four months.
So talk about that plus trying to grow.
It's just crazy.
So understanding truly your baseline metrics,
understanding your real cost to acquire a customer
and your real lifetime value of a customer, et cetera.
Even though your annual contract value might have been high.
If you're churning after three months
your lifetime value is nothing.
So that to me is the first thing is just wherever you're at in
your business, if you're struggling,
just stop and do an assessment of where you're at so that you
understand what you've got to work with.
Number two, cut expenses.
This is not a popular action item but it is mandatory.
I've gone through many pivots and iterations in my businesses
over the years where there were moments where we had to cut our
expenses, cut our team down.
Now I always say cut the meat off but don't cut the bone
because you've got your core that you need
to actually rebuild from.
But there are so many areas of a business that are people are
being wasteful or they're still paying for subscription software
that they're not using or they've got people on their team
that are not productive or not needed.
And you just need to go deep and cut the expenses and I know,
optics, it looks bad.
From a narrative point of view, if you're in a fundraising
process, you know,
contracting your team is not the thing
that's going to look good to other investors but the truth is
is you got to be around to have that fight.
You've got to stick around long enough to fight another day.
And if you don't cut your expenses then the decision of
you raising another round or
surviving is not yours to be had.
The bank account will make it for you.
So number two, you've just got to cut your expenses
right down to the bone.
Number three, correct churn.
It doesn't matter what you want for a growth rate
if your customers are leaving just as fast
that is a horrible business to be in.
And I would have took in all of the resources that Harry had and
focus 100% on customer churn.
I wouldn't of accepted a customer canceling.
I would want to know what went wrong,
where did we miss the mark.
What was the promise and what did we deliver and how did we
miss that opportunity to create and keep a customer because if
people are leavin' then there is some fundamental problems in
your product that needs to be resolved.
And that's an all hands on deck.
Look at the data.
Look at the situation and get that fixed because without that
it doesn't matter how much cool marketing you're gonna do
or how much money you think you're going to go raise,
a sophisticated investor is gonna see that number
and run away from you.
Number four, nail positioning.
Typically in these scenarios where the product is not really
meeting the mark and you've got high churn and you're trying to
grow but you're kind of plateaued it's because you
haven't really nailed a niche.
You haven't focused on a core customer segment so what I would
highly recommend is that you find a position for your product
in a market segment that you can be competitive against.
And the way I think about it is on one axis you have unmet needs
so you want a market that's got a high unmet need for the
problem or the solution that you solve in that problem space.
And then the other one is quick to buy. Right?
If you're trying to grow the business,
grow the revenue you want to solve a problem for something
that people know they have that they don't feel like they have a
solution in the market and then also get paid accordingly and
fast enough so that you're not looking at 16 month sales cycle
if you've only got 3 months of runway left.
So those are kind of the two axises that you want to focus on
to really perfect and nail your positioning.
Number five, perfect pricing.
To me, I think there's too many entrepreneurs that are leaving
money on the table.
And when I say perfect pricing
it's not only about your product.
It's not about what you're charging for a plan or some
add-on modules or whatever.
It's really looking holistically
and saying look we need to make revenue.
And if that means maybe bolting on some done-for-you services to
increase our ability to extend our runway
then that's just what you do.
I think so often these product purist founders get so
in their head about like it's got to be the product,
it's got to be the product and they shy away from services.
You know, most of the clients that I coach they're
bootstrapped founders in middle America.
You know, flyover states that have just built incredible
businesses by doing whatever it took.
And I think that if you're in a position where you need to fix
your business model and getting some extra revenue from
done-for-you services aligned with the problem that you solve
then, to me, that just makes sense.
So perfect your pricing is not only making sure your pricing is
competitive and you've got enough gross margin in your
software to continue to invest in growing but that you look for
opportunities to expand that revenue through done-for-you
services or other partnerships that can increase your total
MRR, your monthly reoccurring revenue.
Number six, ramp up partners.
One of the most cost effective ways for you to get distribution
is through partnerships. Why?
Because they subsidize your costs to acquire a customer by
them leveraging their distribution,
their audience, their customers to bring you new customers.
So yes, you might have to give up a percentage of the
reoccurring revenue to those partners but they'll get you
introduced to dozens if not hundreds of
customers at the same time.
And when I look at things like, you know,
publishing content for SEO or running paid acquisition which
costs a lot of money, you know, to other things you could do
from a product, you know, freemium or splintering off a
solution to do kind of some like free lead gen tool like a
browser extension, et cetera, partners is probably the most
effective to go quick so that you can get deals done faster.
So one partner might take you a couple months to secure and
promote but they could bring you hundreds of customers.
So I would if I was trying to ramp up revenue very fast,
I would find one or two incredible partners and I would
use a partner profile so making sure that they have
an email list, that they align with our values,
that they share the same customer segment as we're
serving and go after them in an aggressive way to just make sure
that they get the message out there because those sales will
help invest and solve the business as it is today so it
gives you more time to figure things out over the long term.
So six steps to fix a broken SaaS model.
Number one, baseline your metrics so you know
honestly where you're at.
Number two, cut expenses.
Get rid of all the fat and cut right down to the bone.
Number three, correct your churn so that every customer you are
getting today and into the future you're keeping them.
So do everything you can to do that.
Number four, nail your positioning be differentiated
and unique in a market. Nail your niche.
Number five, perfect pricing so that you're generating enough
revenue per customer engagement.
And Number six, ramp up your partners 'cause they are an
efficient way to get distribution for your product.
As I mentioned at beginning of this video,
I want to share with you an exclusive resource called
the Precision Scorecard.
This is my structure on a weekly basis.
I have my Weekly Sync and I use my scorecard to make sure that
my whole team is aligned.
So if you're trying to fix a broken SaaS business,
you're gonna want to download this resource.
You can click the link below to get your copy.
In it I share the format and the funnel structure that I use to
make sure that we map all key metrics in our business.
And I even include two different list of metrics below a million
in annual reoccurring run rate and above a million for you to
kind of grab and add to that worksheet for you to build out
your scorecard yourself.
And if you'll like this video,
be sure to click that Like button.
Subscribe to my channel.
If there's anybody you care about that you think I can
serve, feel free to share this video with them directly.
And as per usual, I want to challenge you to live a bigger
life and a bigger business and I'll see you next Monday.
- [Jaret] Sweet.
- [Dan] So now I get to break, it's like a broken.
What do we go that's broken?