“When Will The Enterprise Technology Market Slowdown End and How Do The Best SaaS Companies Manage Through It” Part 3: Planning and Budgeting for a Down Market

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 last two installments of this series, we discussed Peter Falvey’s assessment of the current SaaS market, and Scott Landry’s suggestions for how to devise effective strategies for building value and maintaining morale.

In this third and final post, we will explore Bart Cloyd’s session, entitled Planning in a Down Market. Here, Bart builds on the insights of our previous two speakers and lays out vital considerations for charting a path forward and designing a budget that can withstand the uncertainty of the moment. You’ll learn:

  • Strategic themes for planning in a down market
  • How to garner support for difficult decisions
  • What metrics will make or break your down market budget

Can you plan for the unpredictable?

As the final speaker for Akmazo’s CXO Roundtable, Bart Cloyd looked into what sort of strategies SaaS companies can use to budget for the future, even as we don’t know when the slowdown will end.

“Plans are useless, but planning is indispensable,” said Dwight Eisenhower. For many, this feels like the perfect summation of the contradictions of the moment—ambiguity and uncertainty make it so that no plan will actually map perfectly to what challenges you end up facing; however, planning still remains the best way to ensure success.

Strategic Themes for Planning in a Down Market

According to Bart, there are two major priorities that enterprises should keep in mind as they develop their plans and budgets: balancing growth and profitability, and maintaining flexibility.

In the case of the former, there are a number of ways to ensure you find the proper balance without tipping too far one way or another. Helpfully, Bart divided his suggestions into three categories:

Sharpen FocusCost Optimization vs. Customer FocusTargeted GrowthInitiatives
  • Focus on most profitable customers, products, verticals, regions, initiatives, etc.
  • Reduce, and/or downgrade initiatives
  • Cash. Cash. Cash.
  • ‘And’ not ‘or’
  • Position cost structure around sustainability (i.e. generate cash to fund growth)
  • Customer retention
  • Growth remains critical for enterprise SaaS. However, the cost of growth can not be ignored
  • Double-down on ‘efficient growth’
  • Trade-offs: short vs long term
  • Existing customers vs. New logos

When it comes to maintaining flexibility, a solid plan should be focused both on ensuring resilience while navigating the complex and uncertain conditions of the moment, and promoting optionality whenever possible.

Milestone-Based ApproachRemain Opportunistic
  • Drive linkage between strategy, operating plan and budget
  • Emphasize optionality in uncertain market
  • Gated approach forces disciplined spending, operating rigor
    • ‘Results for Investment’
  • Emerge stronger, better positioned for growth
    • Neutral+ cash flow
    • Customer satisfaction and retention
  • Opportunistic growth
    • Mergers and acquisitions
    • Upgrade talent

Garnering Support for Difficult Decisions

In many cases, the hardest part of budgeting is not pinpointing which projects or expenditures need to be cut, but ensuring that cutting them doesn’t damage morale across the organization. Whether with layoffs or the halting of product initiatives, these changes can cast a shadow over how teams view their organization, its stability, and their future there. As such, it’s critical that leaders work to assuage concerns and garner support for these difficult decisions from personnel, so staff doesn’t feel as though their concerns or priorities are being ignored.

When it comes to how to do this, Bart believes that a mindset of optimization is key. By making sure you frame each choice in the context of how it will support the company and, as a result, team members, you can remove the stigma or frustration around specific cuts. Yes, a product development project may need to be put on hold for now, but—by pausing it—you’re ensuring it can get the attention it deserves when economic headwinds subside. No one likes to see trusted coworkers depart, but now the organization can devote more resources to helping those who are still there grow within the business. It’s crucial to help everyone in your enterprise understand that whatever difficult decisions need to be made are being made for their betterment. As Scott pointed out previously, when those decisions are stalled the fallout can be even more damaging than what the initial cuts appeared to be.

Key Financial Metrics

Finally, Bart wrapped his session by providing the audience with some more important metrics to keep an eye on when it comes to crafting and adjusting budgets. He suggested that organizations separate these into two categories: leading and lagging. By doing so, your business will be in a better position to directly leverage them for decision-making.

Leading IndicatorsLagging Indicators
Measurable metrics that support operational rigor and feed decision making when leveraging a gated approach

  • Lead Generation & Pipeline Ratios
  • Length of Sales Cycle
  • Usage Metrics/Product Adoption
  • Customer Engagement Metrics
  • Customer Satisfaction/Sentiment
  • Capacity Metrics (Roadmap Planning)
Performance-based feedback that assists in informed decision-making and identifying areas for improvement/change

  • Free cash flow/cash burn rate
  • Annual Recurring Revenue (ARR) growth
  • Revenue Retention (Gross vs Net)
  • Customer Acquisition Cost
  • Benchmark Op
  • Ex Ratios

Stability and flexibility—the two keys to success

It can sometimes seem hopeless to try to build plans and budgets for rapidly changing markets, especially when the conditions seem antithetical to what you previously considered priority. But it’s not. In fact, it’s the best way to make sure you come out the other side.

As Bart explored, looking at growth and profitability in tandem and preparing to be flexible are the best solutions when designing your budget for the upcoming year. Sure, the plan may not be perfect, but it will provide a clear and logical roadmap that will help you continue to build value while making tough cuts easier to make. 

It may not be simple, but nothing worth doing ever is. 

We hope you’ve enjoyed Akmazo’s Roundtable Recap Series. As Peter Falvey, Scott Landers, and Bart Cloyd showed us in each of their sessions, with the right mindset and appropriate adjustments, SaaS companies will be able to keep their course in spite of challenge and uncertainty. Yes, sacrifices will have to be made. Yes, priorities will have to be realigned. However, there are still many avenues via which to thrive.

All of us at Akmazo extend our thanks to our three speakers and everyone who was able to attend and ask questions. We also thank you, our readers. If you were unable to attend When Will This Enterprise Technology Market Slowdown End and How Do the Best SaaS Companies Manage Through It?, we hope you’ll tune in for our next installment of the Roundtable series. In the meantime, remember: never let a good crisis go to waste.

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