If you have a path to break-even and profitability, it is an empowering position to be as a startup— you can control your destiny for the foreseeable future without hoping that VCs will start investing again. This does not mean you shouldn’t embrace opportunities to take VC funding in the future— it’s about creating as much optionality in a complex downturn environment. In this post, we summarize 8 ways we have seen founders take control of the harsh economic environment to keep their companies alive, thriving even.
(*TLDR: Find more taps and connect them to your buckets. Find more buckets and fill them with water. Keep plugging the leaks with whatever and whoever you have.)
1) Increase Your Prices
Good products are often underpriced for the right customer. Think of any product or service that is embedded in your life and ask yourself, “How much would the price have to increase before I proactively search for and commit to an alternative?” If your customer can’t imagine doing their lives or jobs without your product— you can probably increase your price. We have seen a founder succeed by running experiments by adding 0’s to their price— imagine how quickly your business improves if most of your customer base pays you more by a couple of decimal places. Easier said than done because as a founder, you have to run experiments and confront the irrational fears you have about asking for more money. For example:
Are you concerned customers will cancel the contract and you’ll lose revenue?
Is there difficult feedback about your product you would rather not hear?
Afraid you might offend them and they will never look at your opportunity again?
Have a moral or ethical concern about asking for more money?
When you think about whether you can increase your prices (or you can’t)— what assumptions underpin your evaluation? Write them down.
2) Decrease Your Cost of Acquiring a Customer
How can you find creative ways to market and sell more of your product? We have seen founders pull numerous levers to achieve this:
Target a large partner that has a large user base. For example, it could be large organizations with hundreds, thousands of your target customers. We have seen founders 7X revenue within a year using this approach without increasing the burden on product development.
Target channels where large customers gather in-person. For example, we have seen startups either sponsor or host their own industry conferences where big customers go to network, speak, and generally keep pace with their businesses— this can add millions of dollars to your qualified pipeline within days versus weeks. Furthermore:
Your existing customers (who could be speakers too) provide credibility and proof points to your offering.
You can decrease your cost of hosting a conference because you can earn sponsorship dollars from other businesses who sell to your customers too.
Leverage celebrity partnerships/endorsements. For example, if you have noteworthy celebrities/athletes/influencers on your cap table— explore co-marketing opportunities in the form of podcasts, television appearances, and social media campaigns.
As an exercise, assume you can’t spend a single dollar to acquire more customers— how else can you acquire more customers?
3) Safety In-Person, Not Just in Numbers
Never underestimate the value of psychological safety especially during turbulent times. Your leadership team and your employees are being bombarded by doomsday news: venture funding is drying, startups are dying, tech companies are laying off people in troves, customers are churning, and the world is on the brink of war.
During these times, intelligent people tend to operate in a fear state— communication decreases, people operate in silos with made-up stories, and teams are better at presenting and panicking about problems rather than coming up with proposed solutions/experiments.
We have seen founders solve for this by gathering key personnel in-person in numerous ways:
Increase in-person-first collaboration to accelerate speed of execution— noticeably less miscommunication, more context, and peer accountability. Last thing anyone wants to do in a group is be seen as the weakest link during work hours and even when you are having coffee/lunch/dinner with your peers. The last thing anyone wants to feel when they are confronted with a complex problem is they are alone at home with nothing but a computer screen in front of them.
War rooms to tackle problems— no one leaves until it is solved. We have seen this work well for pipeline generation, closing key deals in-play, preventing key customer churn, launching a new product, and helping new customers go live ASAP.
Convert in-person team offsites into 80% execution and 20% planning— nothing builds momentum like quick early-wins. Furthermore, nothing builds team confidence and camaraderie more than succeeding in-person together— the subtext is “We can overcome hard times when we do things together.”
Human beings are social creatures who depend on one another for safety— how else can you use this to your advantage?
4) Decrease Time for Contracted Revenue To Become Live Revenue
Sophisticated products can require a lot more human effort and time to go from contract to live whether that is because of integrations, collecting data, training ML modules, training users, and aligning internal stakeholders. However, we have seen startups reduce this delta with more aggressive sales and CS support. For example:
Can you push commitments to go live within a month of signing a contract? Nothing creates urgency and focus like a deadline. Customers can be incentivized to action because they don’t want to be paying for a product that they have prevented themselves from using effectively.
Not all features are as valuable to your customer as you think. For example, if you need more data to train models to deliver on an automated promise— what makes you think a single operating dashboard with a clean UI/UX isn’t valuable to your customer ahead of the data being ready? If so, does every feature in your product need to be live for the customer to experience value?
What if all your paid contracts generate positive cash flow for you months earlier? What would that mean for your business?
5) Package and Price Creatively
Is there an opportunity for you to earn more money from your target customers by delivering the same value but charging them in different ways? The 3 Part Tarif (3PT) model works well for this— you can earn SaaS Fee + % Take Rate + Fees. We have seen this work well especially at the enterprise level, leading to 2X more revenue within a short period of time:
SaaS Fee for a suite of features the customer finds valuable and wants to be able to access independently for regular use with or without a cap on usage.
% Take Rate on transaction or $ per usage volume is a great way to earn money as utilization scales and allows you to be flexible with your SaaS fee especially if you know that over time, this will be the dominant revenue driver.
Premium Service component which provides the degree of customization/hand-holding the enterprise customer typically needs. White-glove components can be costly if that is all you rely on, however, they can be a great way to be paid to increase customer retention and discover ways to improve your product.
How about modularizing your product offering similar to the ways Zoom, Intuit, and other software providers? This is especially powerful if your product already delivers many valuable features that your customers consider of different importance. Rather than over-delivering value out the gate, you can land with one module and expand with others— this increases average potential contract value per client and lubricates the sales motion as it is often easier to sell more to happy customers than to new customers.
You can also sweeten the deal for long-term commitment. For example, what else can you offer to incentivize customers to lock-in an annual contract versus month-to-month? Don’t default to discounting your way to a ‘yes’ — price is mostly a concern when value is a mystery.
6) Improve Your Deal Winning Percentages
This approach is especially powerful when you know your product is great and differentiated and you are tackling an old, archaic industry that has finally decided to embrace technology— you will find low hanging fruit! We’ve seen founders accelerate their GTM efforts with noticeable month-to-month improvements (acquisition, retention, and expansion) by:
Defining the characteristics of their most profitable customers using criteria such as satisfaction, retention, spend/headcount, and speed of acquisition.
Identifying how similar customer deals were lost in the past by listening to Gong calls and where appropriate, calling those customers again to gain additional insight/clarity. For example:
What is the delta between what we said and what they heard?
What is the delta between what we need them to understand versus what our sales people said?
Who needs to be educated on what and how? Is it the customer? Is it our sales reps? Both?
Prioritize selling to those customers and winning those accounts.
Speak to any top founder who believes there is always room for improvement— they can look at their GTM machine and identify dozens of cracks. However, this level of scrutiny was not part of startup culture during the last 10-year bull run. Do you know what your win rates are and more importantly why? If so, how could they be improved by orders of magnitude?
7) Get Your Hands Dirtier With More of The Details
Most people would tell founders to scale themselves out of the nitty-gritty or their companies won’t scale— this is true to a certain extent and for the growth stages of company development.
However, if your company is forced to be in survival mode, you will have to do more of both— oversee the higher elevation while having your hands and feet firmly grounded in the details. You often don’t have the luxury to wait for the 10X key hires you need to get the needle moving— you need to get things done now. We have seen founders discover phenomenal low-hanging fruit across sales, product, and marketing—all by digging in:
New and higher paying customers
New case studies
New product MVPs customers would happily pay to be early users even if it is only 50-60% baked because the alternative is so painful.
New complementary goods with incredible margins (19:1, for example). This is especially fast to spin-up since you don’t need to make the product yourself.
Strong product growth loops. For example, if people want to collaborate on your platform, how can you incentivize them to invite more people and accelerate network effects?
Top founders see what others don’t, and it is often because they have a unique set of bifocal lenses for both the landscape and its constituents.
8) Upgrade Your Talent
The right high caliber talent is actually cheaper than low caliber talent. We have seen founders cut a high volume of low performers, replace them with one or two new hires, and experience a noticeable increase in both product velocity and sales velocity. More specifically, one top-grade full-stack engineer and product leader achieved in a week what dozens of engineers could not achieve in 6 months. Ask yourself:
What will it take for you to bring in higher caliber talent?
Who are you ‘hoping’ can make the cut in your company?
Who are the models of excellence in your company?
Are there more models of excellence in your company or models of mediocrity?
Which low performers are you keeping because you fear the consequences of firing them now are worse than the consequences of keeping them?
In Summary
The founders thriving within the current economic environment operate with a unique working premise that enables them to make progress anyway. They often believe that:
There is always a path to success no matter what.
There is always an opportunity right in front of their eyes— they just can’t see it yet.
They already have all the resources they need to succeed— the unlock is human ingenuity and creativity.
No news is entirely bad news— it’s all feedback to do better.