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For SaaS Companies, Alignment is a Key Driver of Success

Much has been written about success criteria for SaaS companies. These criteria are often expressed as growth or profitability metrics, such as growth rate and Rule of 40. Customer success metrics typically include net promoter score (NPS), customer health score, or churn rate. Some measurements focus on efficiency and health, such as customer acquisition cost (CAC), customer lifetime value (CLTV), and months to recover CAC. These metrics, and many more, are handy tools for managing and measuring success in a SaaS business. Metrics matter, but success will not be achieved if specific components of the business lack alignment.

ScaleUp and Go-To-Market Fit Alignment

Late last year, Winning by Design published an excellent research paper that asked, Has SaaS Lost Go-to-Market Fit? The paper postulates, "The current challenges facing SaaS are consistent with a loss of GTM Fit. The SaaS industry prematurely scaled GTM motions in recent years, driven by the ‘grow-at-all-cost’ philosophy.” Because SaaS companies valued “swift economic returns for stakeholders” over careful scaling (ScaleUp Fit), impressive growth was frequently achieved “but with declining unit economics.” Declining growth rates, increasing acquisition costs, and declining net revenue retention (NRR) are all symptoms of failure to align ScaleUp and Go-To-Market Fit. The resultant decline in unit economics does not bode well in the new world of SaaS, where a path to profitability matters.

Top-of-Funnel (TOFU) Lead to Disposition Alignment

For a business to successfully move from ScaleUp Fit to Go-To-Market Fit, it must align core demand generation processes and definitions across functions. (For the sake of brevity, we will focus on new customer acquisition.)  Marketing, Sales, and RevOps must align on the best tactics and strategies to create TOFU and advance opportunities. Systems must be common, protectionism must be shed, and accountability must link directly to acquiring customers on the optimal profit and revenue profile. Marketing cannot simply acquire leads. Sales cannot merely close deals. RevOps cannot exist solely as a process monitor, translator, and referee. Finance cannot merely report what happened and approve expenditures per the budget. Instead, these functions must align on process and share common and interdependent goals. They must behave like a singular organism – a revenue growth engine.

Land and Expand Alignment

In addition to the research paper mentioned above, Winning by Design (WBD) has an excellent framework called the “Bowtie” which describes how and why the land and expand motions must be aligned. Many SaaS companies make the mistake of investing heavily in new business acquisition motions and churn prevention. In doing so, these businesses violate the 1st Principle espoused by, “Recurring revenue is the result of recurring impact.” Churn prevention, in and of itself, does not promote recurring impact—instead, myopic focus on churn prevention results in trying to save customers more than growing them. To create better alignment, SaaS companies cannot focus simply on winning and churn; too much is missed in the middle. Once a deal is closed, it must be “activated,” and “first impact” must be quantifiable and measured. Making this work requires alignment across opportunities, wins, activation, first impact, and recurring impact. The importance of this cannot be overstated. After all, most SaaS companies' profits are earned long after the initial win. 

Outset shines in helping organizations create Go-To-Market alignment and plan for long-term outcomes. Please feel free to contact me if you'd like to learn more. My email is daren@outsetops.com.

Also, check out Winning by Design and their Revenue Architecture framework. Outset has no formal relationship with Winning by Design, but we admire their work. You can find them at https://winningbydesign.com/.