Articles relating to business advice
Few days ago, at the Pipeline Summit Conference, I had a chance to meet with one of the keynote speakers, Corey Haines from Baremetrics. His company gives the metrics, dunning, and engagement tools you need to grow and make profitable decisions for your SaaS business. It also allows to connect your payment processor or subscription management platform with our one-click integrations to unlock powerful insights and start improving retention.
Since measuring efficiency of business online is one of the key reasons why I’ve even decided to spend my life running internet businesses, I just had to pull Corey aside and ask him a few questions. Enjoy the read!
SaunaGrow (SG): Corey, why you’ve chosen to be focused on SaaS?
Corey Haines (CH): Baremetrics was originally built as a custom software solution for another SaaS company and then was spun out into its own entity when the founder, Josh Pigford, realized there was some real demand for it. From the start, Baremetrics was built to cater to SaaS businesses, and although now we have a wider range of customers today, the majority is still SaaS.
Personally, I consider my position as Head of Growth at Baremetrics my “dream job” because I love working with SaaS founders. I’ve been obsessed with SaaS products and the business models ever since I was first introduced to it. The recurring nature, emphasis on relationships, and scalability are unmatched in any other type of business. And SaaS founders tend to be some of the smartest people in the world — they’re fun to work with.
SG: What are the 3 first things you’re looking at when evaluating health of a SaaS business?
CH: Besides MRR (obviously), the first three metrics I look at are ARPU, User Churn, and the Quick Ratio.
ARPU is a huge indicator of the market. It also dictates churn to a certain degree, as a lower ARPU (e.g. low double digits or single digit price points) are far more prone to a higher churn rate than businesses with a higher ARPU (e.g. high double digits and above). And the movements in ARPU are good indicators of if a company is providing more value over time and creating a path to expansion.
SaaS is completely dependant on retention. While it’s still possible for a business to grow with a churn rate above 10%, it’s extremely difficult, and in the long-run, unsustainable. Your churn rate is also a strong indicator of product-market fit and how indispensable your product is to your customers.
The Quick Ratio is my favorite and least known metric. It takes all positive MRR inputs (new customers, upgrades, and reactivated customers) and divides it by all negative MRR inputs (downgrades and cancellations) to give you a value usually between 0.5 and 5.0. Anything above 1.0 means that the business is growing, and anything below 1.0 means the business is contracting. It’s a really easy way to get a comprehensive glimpse into the business at a glance.
SG: And if you were to choose 3 key elements of a successful SaaS project, that you cannot measure at Baremetrics, what would these be?
CH: The three most overlooked elements of successful SaaS businesses are the market they target, pricing and activation model, and messaging and positioning.
Unfortunately, too many SaaS founders don’t have a good grasp of who their customers are or who their future customers will be. They think they know, but usually it’s nothing more than a guess or an assumption. Investing in comprehensive market and customer research will unveil insights that you can’t find anywhere else and provide clarity across many different aspects of the business.
Pricing and activation is usually done on a whim. Pricing models are chosen based on what the founders want, instead of what works for the customer. Activation models (e.g. freemium, free trial, demo, etc) are given even less thought. But these are the intersection of every part of the business: market, product, messaging & positioning, and acquisition channels.
SG: What do you believe is the one single thing that startups do wrong in selling their services?
CH: They sell from their own perspective instead of the perspective of the customer. When marketing, selling, writing, building, strategizing, etc… founders unconsciously think, “Does this make sense [to me]?” when they should be asking “Does this make sense to them?”
SG: What would you advise to an entrepreneur thinking of launching a SaaS project?
CH: Take the time to invest in relationships — relationships with potential customers, relationships with potential technical and co-marketing partners, relationships with advisors and investors, and relationships with peers and others who have done what you want to go do.
SG: How close are you with your competitors, do you believe a fairly close relation between competitors is good or bad?
CH: I don’t have a personal relationship with any of our competitors. And no, probably not a good idea.
I don’t subscribe to the “don’t pay attention to your competitors” dogma, but I also think it’s naive to think you can be completely friendly or indifferent to them.
SG: What are your thoughts on automation? When startup should automate their processes?
CH: My personal motto is “Do things that can’t be automated.” Most everything can be scaled, but not everything should be automated.
Automate the things that you can’t add any extra value by doing manually. Or introduce automation to help you scale what you do manually. But don’t go overboard on automations.
SG: You’re often mentioning ‘minimal path to value’ What is it and why is it important?
CH: The “minimum path to value” is a framework to help think about your onboarding experience, whether through a freemium, free trial, paid trial, money-back guarantee, or consultation model.
There’s a few facts founders have to get comfortable with:
- Your software is probably less intuitive than you think
- No one cares about your features, they only care about the end result of what those features enable
- You may only get one shot to show the value of your product
So my advice is to find the “minimum path to value,” in other words, what’s the single experience you can deliver on that requires the least amount of effort from users that allows them to see enough value in the product to make a decision on whether or not it’s for them.
Remove any sequence, communication, highlight, tooltip, or other tool for guidance that isn’t absolutely necessary. And then optimize an onboarding flow that gets someone straight to the core value of the product.
SG: What is the perfect competence mix for a Team of SaaS co-founders? Who’s a must on that Team from day one?
CH: There are a few core competencies that can be called many different names, but could be boiled down to: marketing, operations, and product development.
Founders likely won’t have competencies for all three, so you have to figure out what you will own and what you’ll find someone else to fill that role.
SG: Where do you personally seek self development, do you seek peers outside your own company?
CH: I do a lot of reading books, listening to podcasts, and learning directly from peers and advisors. I spent most of my personal development time on my Kindle, Overcast app, and on Zoom catching up and learning from others.
SG: Why have you joined Baremetrics?
CH: As I mentioned before, I love working with SaaS founders, so Baremetrics provides the perfect avenue to do that. Not only that, but as a one-man growth team, I get a lot of autonomy to make decisions and work on what I think will move the needle for the business.
SG: You’ve joined Baremetrics just under a year ago, but I’m sure since then you have some thoughts already on what should be done in another way. Can you share it?
CH: One thing I can definitely improve on is communication. Specifically, communicating with team members about growth experiments as well as what I need from others. There have been a few projects that didn’t get prioritized correctly or were in the backlog for too long before realizing that it was no one’s fault but my own.
SG: As a your customer, can I pick up your brain from time to time or is what you do a pure SaaS, without human element in it?
CH: Absolutely! I meet with 10-20 founders a week to talk metrics, strategy, pricing, landing pages, onboarding… you name it.
SG: Last but not least, what do you think of SaunaGrow concept – what pros and cons can you see in it? Do you like & use sauna yourself?
CH: I’ve never actually been in a sauna so it’s hard to tell if it would be a good fit for me. If you’re really into saunas, sounds really fun! Otherwise, you may have to do some educating about the benefits of saunas and why it’s better than a regular meeting in an office or coffee shop.
SG: Thank you Corey, I am sure that San Diego may be simply to hot for regular sauna use, so whenever you’re next time around in Europe – let me show you it’s benefits! Thanks for you time and conversation!
Want to discuss it in a sauna with one of our mentors? That’s also possible.
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Life doesn’t always need a framework. Actually, in most cases, implementing one equals artificiality and an approach that is very formal. This is associated more with corporates, heavy industry or science where doing things ‘by the book’ is most common.
These were also my initial thoughts when I first heard of F.U.E.L. during a workshop in New York led by Jason Gore and Michael Costuros from Neuberg Gore & Associates. I was skeptical, also through first practical conversations done using this conversational framework.
It all changed once I’ve seen that it actually works, and it works great. Since then, as a management Team, we have used it on many occasions for challenging discussions.
While it’s not enough just to ‘read’ about the F.U.E.L. method to really feel it, as you need practice, I decided to write this article for you to get a general understanding of what F.U.E.L. consists of. I hope that with this knowledge you’d like to explore more. I’m also happy to help you & your Team, in the form of a workshop, to implement this way of thinking in your organization.
F.U.E.L. is an abbreviation for Framing conversation, Understanding each-other, Exploring options and Leading to commitments. In order to solve your challenge effectively, complete a difficult discussion, you should follow 4 steps of this process.
You start with Framing the conversation. Name precisely what is the reason and goal for the conversation. Make sure all participants understand it, write it down. It’s especially important as people naturally tend to digress from a topic. Having the ‘frame’ in place helps getting back on track.
Once you agree exactly what is it that you’re discussing, try your best to Understand each others’ worlds. It’s essential for finding a solution later on, but before you jump to any conclusions, you need the deeper understanding first. You know your point of view well, so here focus ONLY on doing all you possibly can to understand how others feel.
Once you believe that the ‘worlds are understood’, you’re moving to Exploring options. Key here is that you’re still in the ‘exploration’ mode, not ‘problem solving by propositions’. Use phrases like “What would you say about if we solve this by X” rather than “Ok, so I see that X is a great solution”. Be open, stay curious, paraphrase for mutual understanding.
Once you have explored available options, be sure to Lead to commitments. End the meeting with a clear WHO, WHAT, by WHEN and write these down. Think that a commitment not agreed to and written down is never a hard commitment. It’s a soft commitment that may be hard to follow in time.
There is a very useful handout prepared and made available by the Neuberg Gore & Associates that takes you step by step through the F.U.E.L. method depending on the context of the situation you’re using it in.
With this help, and a bit of practice, you can use F.U.E.L. for
- Influence & Problem-Solving
- Group Decision-Making
- Conflict Resolution
- Negative Feedback
- Holding People Accountable
- Repairing Trust (Cleanups)
- Role Underperformance
- Letting Someone Go (see my article on Managing People Out)
It’s one of the most powerful management tools I’ve ever used. Master it, practice, learn and pay it forward. Once you’ve used it a few times, you’ll soon realize how meaningful and effective your challenging conversations will become.
Happy to hear your thoughts on this idea, please share them ideally under this LinkedIn article.
Founder of SaunaGrow.com
We meet in a Sauna and Talk Business.
PS I could not resist. The real FUEL ;)
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Inspired by people I talk with during SaunaGrow meetings and followed by personal experience of how hard it is to let people go, I’ve decided to share with you thoughts on Managing People Out.
Some time ago, I had a chance to spend a few days with Jason & Michael on a leadership workshop in New York. That’s where I first came across the F.U.E.L. way of providing feedback and solving tough situations in a Team. While I’ve focused on F.U.E.L. in another article, during the course of this workshop we came across a very interesting process called “Managing People Out”. F.U.E.L. and Managing People Out overlap on many levels, that mentioning the two together is not a coincidence.
It’s now two years after this workshop and having seen both the “Managing People Out” done quite a few times and having practised this approach myself, I now know for sure it’s valuable and I want to pass it forward. Here it goes.
In every growing organisation there is strong pressure both on growth and on utilising all the company’s resources to its best. Resources are often used for getting & keeping the best people on board. Having said that, it often happens that someone hired in January may no longer be best for the role in December. It’s not a bad hire, and it doesn’t always mean that person got worse. For super-fast growing organizations it may simply be a sign of a situation that the role has outgrown the specific person. Example: HR Manager of a 100 people organisation may have the same title, but a totally different role as a HR Manager in a 300 people company.
The result of that change of expectations, where ability and skills do not follow needs, is often devastating for the individual, the Team and the company as a whole. Low performers are dragging a company down and demotivate the rest of the Team. As much as it’s never too early to let someone go, it’s a very natural thing that this process is unpleasant and is often delayed. Why is it so? There are a number of reasons. Starting from a fear of changing something, risking the breaking of the established Team’s spirit, disrupting the company’s operations and last but not least: people are generally good, and no one likes hurting people.
That, however, is often a wrong perception of the reality. By allowing a low performer to stay with the Team we’re hurting both the Team and the individual more than by letting them go. I am far away from the old-style corporate approach urging to always fire 10% of the least performing staff, as this is damaging for people’s motivation, dignity and engages them in a rat race. Yet in many situations more empathetic managers are too soft when it comes to evaluating the work of others and providing negative feedback on time. I’ve been there myself and have made the mistake of letting people go too late, without a proper feedback process in place. I hope I am wiser now and that you’ll learn from my mistakes.
As much as letting people go is almost always hard, with the approach shown by Jason Gore in the Managing People Out process, it’s much more healthy and… humane. In a nutshell, here are the steps you should follow:
- Give feedback. When you’re not satisfied with someone’s performance, voice it. When doing this remember that their success is your priority and goal. People do change, allow them to do that soon enough. And assume positive intentions & use the F.U.E.L. method or any other that helps you in getting feedback across in an organized and effective way.
- Quite often the giving of feedback helps to improve things on its own, but when it doesn’t you go a step further. You acknowledge the past, name the elephant in the room, that the changes are not seen or not going fast enough. It’s important here to listen as much as give feedback. It’s a two-way communication. This is a great moment to explore options on how to make it work better. Don’t push for solutions, explore them as you understand the other person’s world better.
- Make clear commitments. What task, goal, thing needs to happen, and by when, in order to see the needed improvement at the desired level. Commitments should be written down, often revisited and checked. This process may take long weeks if not months. Checking on the process is vital, otherwise you’re wasting time and resources.
- Things can go great, the person will improve, understand the role better, become more motivated than ever. But on the opposite side, it can also lead to a broader understanding of why this will not work. That’s where you clearly state that you have both tried this & that and it didn’t work out. Also, at this moment, don’t push for your solutions. Try to come to joint conclusions. Pausing during this conversation and allowing your employee to actually speak may not be easy, but powerful.
- Often a result of such a process (if not getting better) may be that a person will decide to leave your organisation even without you needing to fire them. It’s better that way, for the individual, the Team and the company.
It’s worth noticing that the described approach should not be used when you need to reduce your cash burn rapidly. This is an ongoing process that needs to be executed constantly to maintain a highly performing Team.
Also note that this process only works if you can assume positive intent and truly believe that there is a chance of serious improvement. If deep inside you don’t believe in it, you’re likely to lose a lot of your time. The sooner you kickstart this process, the better for the individual, you and the Team.
It all might sound quite obvious, but hopefully, having read this article and heard the short podcast from Jason, you’ll begin to do this intentionally and not just intuitively.
Be good, value your Team, help everyone on the Team to grow. Inside or outside of your organization. It’s your duty as a leader and a good manager.
Founder of SaunaGrow.com and exCEO of AirHelp Poland
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Can you think of a cooler trend in business recently than AI, ML and generally: automation? Artificial Intelligence, Machine Learning and all types of ‘big scaling’ is something that seems to be a vital part of the ‘pitching bingo’. Most startups are proud to be including these while trying to convince investors to join their projects.
Recently I’ve heard a great summary of these actions. How to differentiate machine learning from artificial intelligence? Well, apparently if it’s written in Python it’s ML, when it’s AI, then it’s done in Power Point. I love this comparison, as it shows how artificial it is and how little ‘junior entrepreneurs’ know about when to automate their businesses. In other words, in most of the cases AI still exists only in Power Point presentations and it’s the machine learning that barely starts it way up in the daily reality. More on that below.
There is a good (audio)book that is worth your consideration when it comes to choosing the right moment for automation and scaling. It’s “Nail It Then Scale It” by Nathan Furr & Paul Ahlstrom. Dive deeper when you have a moment.
In simple terms, real AI is something most businesses will still not need within the next decade nor would it be financially efficient to be investing in that field. When it comes to ML, a ‘machine’ usually takes a lot, a lot of data in order to ‘learn’ its ways to help in process automation. By ‘a lot of data’ I don’t mean tens and hundreds of records of data, but hundreds of thousands and more. For the majority of businesses, this will take years to gain enough data to be even thinking about the proper use of ML.
Having said that, there is much you can do in between. Believe it or not, there used to be business before artificial intelligence and machine learning. I am not talking only about pure human intelligence, but also about the algorithms and process optimizations that can be done much cheaper, quicker and in a more financially effective way.
While meeting my clients via SaunaGrow.com (yes, in a sauna) or while listening to startup pitches as an investor at BlackPearls.vc I often observe the same scenario. The Team that has merely started its business and is in a very early stage wants to scale up their business through AI, ML and automations. Much too soon. Why?
There are few major reasons why you should not consider automation (or its higher forms) too early.
- Cost of automation, incl. planning & IT development is extremely high when compared to manual work.
- In most cases, the lack of full knowledge of the process means also that the resources invested in automation are simply wasted. You’re not building the thing that is needed at that time.
- Automation often means increasing the distance between you and your customers. You don’t want to be doing that too soon.
There is of course a point at which the scale of your business will justify automation, but in most cases, that moment is further than you initially think. As an example – at AirHelp most of our processes were very manual even when we were serving 3k customer enquiries a month. It started to be useful to automate at the level of 10-50k customers and became essential only after reaching the goal of 100k customer enquiries a month. Now, having helped over 14M air passengers, the company’s processes are very much automated. Today even with c.a. 100 product & tech specialists on board, it’s still not always so obvious which part of the process should be automated next.
In the initial years it was way easier and more effective (time & money) to increase the size of a Customer Service Team. That has given us more data and opportunities to realize what parts of the process are the real bottle necks and require automation in the first place. The priorities here were changing pretty much every quarter as we got wiser as a Team. For that to work well, you need the best people in place. At AirHelp, that would not have been possible if it were not for Natalia Laskowska – best VP of Operations ever. Her knowledge of the processes and ability to build a great Team is best in class and has helped the company grow in the right direction at an amazing speed. I’ll touch on the people element of automation and growing business in a separate article, as it definitely requires dedicated attention.
To sum it up. Learn from this process. Whenever you think of automation, consider the cost of that process and the alternative cost. Can’t you use your IT resources better and in the meantime deal with increased manual workload in a more efficient way? Make a simple business case whenever you’re about to add a new ‘automation task’ on your roadmap. Delay tech driven automation without stopping process optimization.
Founder at SaunaGrow.com, exCEO of AirHelp Poland.
Let’s meet in a sauna to talk business.