The weekly Bloom is back!
News, insights and updates from the team at Bloom Equity Partners
Happy Friday founders and friends,
The Weekly Bloom is back for 2022! We are going to be dropping our bite-sized insights and news on SaaS investing + operations every Friday. We try to make it one of the best emails you get each week, and we hope you enjoy.
Quick tips for value creation: An Operators Handbook
We recently came across a Mckinsey report that analyzed the operational efficiencies of the highest performing public SaaS Co’s. The report noted that although the ‘Rule of 40’ is one of the most highly regarded metrics it’s rarely sustained by most SaaS businesses.
Below is a breakdown of a few tips to help achieve and sustain healthy operational performance;
Set realistic growth targets.
Many SaaS companies set inflated growth projections and spend that isn’t able to materialize quick enough.
Growing at a faster speed than your TAM requires a large addressable market and the ability to be only one of a few vendors.
TLDR; Set revenue growth targets based on what is organically achievable over a three-year time period and manage the entire business within those limitations.
Prioritize net retention
High-performing SaaS companies focus heavily on retention tactics resulting in net retention rates of 120 percent+.
Slower growing SaaS companies often view post-sales support efforts as a major cost burden rather than an investment in growth, often resulting in higher than normal churn rates.
TLDR; Invest heavily into retention tactics + strong pricing and product support as it can help protect your installed base + improve efficiency.
Optimize go-to-market spend
Sales and marketing expense is one of the biggest areas for SaaS companies- amounting to 50 percent or more of revenue for some high-growth businesses.
Top-quartile companies optimize sales and marketing performance by;
Allocating sales and marketing resources based on future customer opportunities, not current revenue.
Pulling granular data into integrated dashboards to allow leadership teams to see relationships from different sales and marketing activities.
Innovating go-to-market propositions that scale efficiently.
Using advanced analytics and machine learning to build predictive views of customer health which then drive retention efforts.
Build new business- fast
The leading SaaS players are able to incubate businesses thoughtfully selecting markets based on a deep understanding of customer personas.
TLDR; Given the challenge of maintaining growth over time developing new lines of business is critical for long-term growth.
Source; SaaS and the Rule of 40: Keys to the critical value creation metric
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What We’re Reading and Listening To…
News from the Industry: deals, deals, and more deals 💰
Vista Equity Partners, Evergreen Coast Capital Acquire Citrix for $16.5 Billion
Zendesk rejects $16 bln offer from private equity consortium
Securonix Receives $1 Billion+ Growth Investment Led by Vista Equity Partners
End Note 🔚
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