“When Will The Enterprise Technology Market Slowdown End and How Do The Best SaaS Companies Manage Through It” Part 2: How to Operate in Difficult Markets

Welcome to Akmazo Capital’s Roundtable Recap Series, in which we are breaking down our latest roundtable event, When Will This Enterprise Technology Market Slowdown End and How Do the Best SaaS Companies Manage Through It? Led by Akmazo Chairman and Founding Partner Jaime Ellertson, this event brought together Peter Falvey, Managing Director of Shea & Company; Scott Landers, two-time CEO and CFO; and Bart Cloyd, CFO of JRNI.

In the first installment of this series, we discussed Peter Falvey’s assessment of the current SaaS market, and how these conditions are forcing mid-size SaaS companies to change their approach to driving value.

In Part 2, we will explore Scott Landers’ session, entitled Operating in Difficult Markets. Here, Scott builds on Peter’s insights by presenting actionable recommendations for how, specifically, to conduct business when faced with such massive headwinds:

• What does effective leadership look like? 
• What need to be your priorities?
• What metrics should you privilege?

Scott answered all these questions and more, and we are excited to provide you with his suggestions. 

Dealing with the known unknown

Taking the stage at Akmazo’s roundtable, Scott Landers looked at how to build value in the new normal as Peter Falvey described it. As for his own forecast of how long it will last, Scott agreed with Peter—this could be the new normal for a while. In fact, as he explained, this uncertainty, in and of itself, makes the current situation even more difficult for businesses. 

As Scott explains, the crucial thing for enterprises to understand about this market period and why it has been so difficult for SaaS companies is ambiguity—ambiguity kills markets. Put in less dire terms, this means that when it’s hard to forecast the future or predict when a downturn might end, SaaS companies are necessarily less confident in investing in new software, and customers less willing to spend on solutions that aren’t mission-critical. 

Developing the Mindset to Succeed

In the face of ambiguity and challenge, strong leadership becomes more important than ever—it’s what compels companies to push forward and helps teams to develop creative solutions to the hurdles before them. 

For Scott, this is best encapsulated by Henry Kissinger’s famous adage about the nature of leadership: “The goal of the leader is to get the people from where they are to where they have not been.” In short, this quote designates the role of the leader as one of motivation and guidance. In difficult times, it’s not the leaders who make demands that succeed, but the ones who prioritize supporting their people on the way to what may be an uncertain destination.

How does this map onto the current SaaS landscape? Well, first, Scott suggested replacing “people” with “shareholders, employees, and customers.” These are the three groups that a leader (or, in many cases, a team of leaders) will need to support through the remainder of the downturn. Second, Scott designated key points of concern that each of these groups will likely raise. Shareholders may be concerned about how your business can possibly find that ideal outcome when the math and markets have changed so much. Employees need to believe the business can still achieve even though they’re being asked to do more with less. Customers must understand that both you and they are in the same position, and mutual success is the goal.

The key to satisfying all parties through periods of ambiguity comes in finding balance between the needs and wants of everyone who has a stake in the company. In order to do this, Scott identified five key areas to devote your attention:

• Identify your “big rocks”: In order to continue to achieve your goals while reducing spending, you need to decide which initiatives are genuinely important. As Scott put it, “There are only so many rocks you can fit in your bucket. The big rocks need to go first.”
• Act quickly: Any changes you make should be made as soon as possible. The longer you wait, the more instability you have to weather.
• Avoid the drip: Acting quickly is especially important when making budgeting decisions. For many, it’s tempting to cut in drips, but businesses who don’t make their cuts swiftly and decisively will take longer to get back on track.
• Transparency: In everything you do, make sure your employees feel kept in the loop. Changes are already tough to adjust to; they’re more difficult when teams can’t see their rhyme or reason.
• Focus on the people you have left: There’s a good chance you’ll have to make cuts to your staff. To prevent dips in morale, make sure to invest in those who remain.

Identifying Your Important Metrics

In order to continue to drive value and achieve success in the current market, you need to have a true sense of what actually constitutes value, because—as previously discussed—priorities and expectations have shifted among investors. As such, Scott provided what he sees as the most important metrics to keep an eye on.

For customer metrics, gross and net retention are by far the most important numbers to keep an eye on. However, you need to get particular. Divide your customers by vertical, by geography, by size, by which of your offerings they’re using. Once you have all of that information, matrix it and see where you’re actually seeing a return on investment, and where your profitability is dipping.

For structural expenses, look at long-term value vs. customer acquisition cost. Consider how much you’re spending on administrative projects, sales and marketing, and research and development. Which of these branches are paying off? Which aren’t?

Finally, take a hard look at the activity of your personnel. What do they do? Where does their time go? Map and measure that, and compare it to what you’re seeing elsewhere if you need to make staffing decisions.

There’s no getting around it, Scott emphasized—times are difficult. However, it’s in difficult times that companies are made. If you approach your business with the right mindset, an eye on balance, and a clear sense of what is important, you can still thrive despite your challenges.

Strong leadership and decisive action provide a way forward

Per Scott, one of the greatest challenges facing mid-market SaaS companies at this moment turns out not to stem from the conditions themselves, but from the inability to address them swiftly and confidently. Without clear direction from decision makers, organizations are more likely to flounder, morale sinking and budgets crumbling. However, those businesses that know what’s important, know what to look for, and know how to communicate that across the board are the ones who are most likely to stay afloat.
We hope you’ve enjoyed this second post in our Roundtable Recap Series, When Will This Enterprise Technology Market Slowdown End and How Do the Best SaaS Companies Manage Through It? Tune in for our next installment, in which we’ll break down Bart Cloyd’s notes on how to plan and budget in downmarket times.