Blue Horizon’s reading list is a curated collection of articles for SaaS founders and management teams. We are entrepreneurs and operators who have lived through the process of founding and scaling software companies. Here are the articles and resources we found useful this week.
The Ins & Outs of SaaS Metrics: Measuring Sales & Marketing ROI
By Christina Ross on Operator Collective
The Pareto principle tells us that a subset of customers (say, 20%) are responsible for the majority (maybe 80%) of a company’s revenue. Analyzing your LTV/CAC ratio by cohort helps you identify exactly who those most profitable customers are, as well as which customers you might be spending too much on acquiring…A high NDR means customers are climbing the value ladder. You’re offering the right things they need as they grow. Meaning: keep doing what you’re doing. If it’s low, it could signal that you’re not offering the right upgrades, the customer success experience is difficult, or a need to build brand loyalty.
Activation is a beautiful metric because it’s a leading indicator. The right activation metric empowers growth, marketing, and sales teams to understand the impact of experiments they’re running. Say for example you have a sales cycle of 30 days, but your activation metric spans the first 10 days of a user’s journey. If you have the right activation metric–you’ll understand how well your experiments are performing three times faster than you would if you simply focused on conversion.
Sales vs. The Long Tail
by Jason Lemkin
Now a Long Tail strategy generally needs to come hand-in-hand with a Free / Freemium strategy, and that isn’t for everyone. And almost all of us do have to drive up market to scale. It’s just so, so far to get really big without going at least a smidge upmarket. No, the point is just this. Your Long Tail is an asset that lasts decades, if you invest. The results can’t always be perfectly quantified. And sales may not always love all the parts of the Long Tail.
Obsess over customers and quality – Companies with excellent products that address real customer pain points with a high customer ROI aren’t going anywhere. They can thrive in spite of challenging economic environments. Make sure this is your business by staying close to your customers’ needs, consistently delivering a better product, and rapidly responding to support tickets.
How Messaging Differs for Sales vs. Marketing
by Predictable Revenue
Marketing and sales serve two different functions and therefore require different messaging. Marketing messages need to speak to a broad audience, while sales should be highly targeted to the individual. Sales messages also concentrate on pain points rather than solutions. By focusing outbound sales techniques on the customer’s pain, you’ll be able to craft a message that truly resonates.
▪️ Question the status quo – Ask if the traditional way of doing something is actually the best way, or if it’s because it’s always been done that way.
▪️ Let them fall on the grass (including you) – Falling on the grass means making small mistakes that are quickly reversible with little impact to the company or customers. By leaving space for small mistakes, we have a more independent and empowered team that can take responsibility for their own work.
▪️ Focus only on what you can control – Spend less time on external factors, like what our competitors are doing, and more on internal factors, like how we can satisfy our customers better.
Blue Horizon acquires and invests in profitable software businesses with stable recurring revenue streams. The Blue Horizon platform combines long-term capital and industry expertise with an operating model that enables businesses and their leaders to focus on growth and profitability.