SaaS Shift: The End of Growth at All Cost

You better start now because those who will lead eighteen months from now will be those who understand how we’re gonna create sustainable and scalable growth. And that means whether we’re using a tool effectively such as yours or whether we implement services correctly, this change is coming because growth at all cost, like I said, has come to an end. This is Revenue Makers, the podcast by Six Cents investigating successful revenue strategies that pushed companies ahead. Hey, Adam. Yes? What’s the definition of insanity? Doing the same thing over and over again expecting the same result. Exactly. And so that’s kind of what’s been going on. Right? Growth at all costs, not taking into consideration who you’re selling to, how to deliver value to your customers. I mean, we see it a lot in the SaaS landscape. We do. And we have got a great guest this week in Jaco van der Kooi from, a services consulting firm called Winning by Design. And he is a energetic, eccentric guy. I don’t know if eccentric is probably not the right word, but really, really, really engaging, talking about what the next evolution is after growth at all costs and kind of what it all means and how we can do it and how we can call an AI. Of course, we have to talk about AI and all the things in between. There you go. And you can call him eccentric. I mean, he did the podcast from his van that is parked somewhere along the coastline of California. A lot of energy, but a lot of just really great takeaways on how to plan for the future, how to drive a more scalable business, and how to start with the end in mind. So I think folks are gonna dig it. A lot of great insights. Let’s jump in. Let’s do it. Hi, Jacko. Thanks so much for joining us on revenue makers today. And before revenue makers, you were our closing keynote at Six Cents Inspire in London. So it was it brought the house down. It was a great way to end the day. And in that keynote, you mentioned the end of the growth at all cost era and really a transition towards the revenue factory. And you talked about some principles, you know, that explained why we’re going there. But can you elaborate on the key factors that drove that shift in the SaaS industry? Of all, was that fun or what? Tell me. Fun. Right? People were people were literally on well, they were supposed to be up. You had them up. There was movement. There was energy. I loved it. It was great. Right? The chest bump. It wasn’t with with me, but with the chest bump that you did with the, with our MC. Like I don’t know. Like, and that was impromptu. Right? I felt that he was standing there. He wanted to engage and go, like, let’s do it. Like, no. These are authentic moments. Right? And and they help us fantastic. Actually, that that leads us into growth at all costs. I think that what one of the the keys to growth at all costs is that it that it lacks any authenticity. Right? Like, if I just connect one dish right there. No authenticity. Just spamming people and and addressing them, you know, like, which previously was an approach that worked. And the thing that I wanna make clear is we are maturing firm growth at all cost. We’re not ignoring it. We’re not like like trying to to turn the time back. It’s like you can’t turn the time back on puberty. Right? It’s it’s a phase in life that you’ve learned from and and now you’re matured. Same thing here, growth at all costs. We’re thankful. We stand on the shoulders of what it has accomplished, but we now mature into the next phase. So I guess when you talk about, like, you drew a parallel between, like, factories, like the actual physical factory and then SaaS go to market teams, which I thought, you know, that’s a really, really great analogy. Can you kinda talk about how that is the analogy for the transformation that’s going on and how it actually like like, what does that practically mean if I’m, you know, I’m working at a SaaS company from a on a go to market perspective? What we notice is that when a company achieves about ten million dollars in revenue, its processes have matured and it starts to act and operate like a factory. Now a factory has three goals. Hey, it needs to produce more. It needs to produce more effectively. Hence, you’re starting to apply robots and stuff and and the likes of it. And you need to deliver quality. These three things map exactly to what growth looks like beyond ten million dollars. I need to keep growing my revenue. That growth of revenue needs to be affordable, sustainable. Whatever that means, we can come to terms later on on that. And I need to live with quality, and quality is the impact the customer gets. In other words, I need to get a high GRR and a high NRR out of that. Right? That’s what a SaaS and how a SaaS factory works. So it it it works alongside. Second that it does is GTM motions such as an outbound motion to enterprise or an inbound motion or x or targeted account based motion y. These motions mimic production lines in the factory. They have their own metrics. They have their own performance. And then the third one is AI in the factory is placing the in the revenue factory is playing the same role that robots play in an a physical manufacturing I applies technology and it applies technology to replace it are essentially the keys to what makes it look and feel like a factory. In theory, I think we all agree growth at all cost is not sustainable. Doesn’t mean the expectation isn’t there. Right? We are all being asked to continue to drive results, rapid growth often, and budgets are tight. You know, not so much, I think, focused on cost efficiency. Like, how how do we balance those expectations with the reality of what we need to be putting in place now to build for the future? I’ll I’ll say it’s the the simple statement is this, stop doing what doesn’t work and do more of what works. That statement in itself is simple. Right? But most people don’t know what works and they don’t know what’s not working. They just kept doing. So growth at all cost is, think put your IQ at zero and keep going. Right? And all I’m saying is, like, can we start measuring what works? What will be the metrics? How will we determine what is a good one? Right? And as soon as you enter that field, you obviously are starting to come to the conclusion, hey. I need to target my customers better. I need to give them a better experience when I speak to them. I need to treat them better when they sign on. I need to help them achieve success from the product that I promised to them. All that automatically falls out. And what you’ll see, and I found this over the years, is we continue this mindset of do more, and we’re now entering a mindset of do better, not do more. And I just wanna make sure I’m not asking you to do more better. Right? I’m not saying is that do more spam email better. I’m saying do better Yeah. I can also help with that. That’s right. And we don’t want it. And we don’t want that. And that’s where you see the market is headed right now. Right? Because we go, like, hey. Growth at all cost doesn’t work, and let me tell you what that means. Currently, with the latest metrics coming in via Dave Spitz from Bensights, we are operating at double the cost, half the growth. That’s what growth at all cost is giving us right now. Half the growth rate at double the cost. So, yes, the right metrics. But the right metrics for those characteristics and those hallmarks that you just said, Personalized. Meet your customer where they are. Talk to them about the pain points that they’re having. Right? That is a very different set of metrics. And in fact, it starts way at the beginning of are you even talking to the right companies? Have you defined the right ICP? Are you looking at leading indicators? So it can’t always be pipeline revenue conversion rates. Right? There’s many more leading factors. So how do you I guess, based on the stage, based on what’s important, what what are your recommendations as it comes to what to focus on? Start at the end. And so what do I mean by that? You mean renewal of expansion, retention. That’s right. That’s exactly right. What I’m trying to say is, like, look. What we want in our world is we want recurring revenue. That’s what we want. Like like every metric, that’s how the companies are being valued. That’s how we grow. That’s how we create client. That’s how we create sustainability if you do it right. So recurring revenue. But recurring revenue cannot be a goal. It is an outcome. It is a result of something. And that what it is a result of is called recurring impact. If I deliver to the customer what I promise, then I get it. And I’ll give you an example. I’m on Netflix and I’m on Disney. Disney, I unsubscribe. Disney is a fantastic product. Disney is a fantastic brand name. Everything is fantastic about Disney. What is not fantastic about Disney is my kids are out of the house, left the house. We’re empty nesters. I don’t need to see Star Wars again. And in that mindset, I do not get the impact out of Disney. But I did I do get the impact out of Netflix. And that means that Netflix gets my renewal. Recurring revenue is the result of recurring impact. Now how does it apply to what you’re asking for? Is that means I need to win customers who not just close, but customers who deliver me recurring impact. And that means I need to start talking to my existing customers first and not only ask them what impact that they get out of this, but carefully listening to the words, to the emotions, to everything that they are saying about it to start understanding even specific words on what they when they describe what your product does. Do that and then translate that to ICP and then start flushing the pipeline down, you know, like, with all the opportunities, and so on and so forth. You know, one of the things that and I guess this might be because I’m just kind of an emotional mush myself, so I like to go there. And I may, at any point during the rest of this podcast, just start cry on the phone. We had Adam. It’s okay. Had a real, like, crying twenty twenty or Barbara Walters type of moment where someone just sort of lets so maybe that’ll be today or not. Then we’ll see. One of us. One of us. Anyway, you talk about, like, the the the impact. We also talk about buying experiences and you talk about rather buying experiences rather than just products. Right? So there’s that whole emotional impact, which, again, very hard to measure but incredibly impactful. So how would you recommend or how would you go about, I guess, essentially trying to measure and be able to enhance, obviously, the how the product is working, how it brings value. You know, there there’s a lot of tangible there. Like, it does x, it does y, the ROI is here. But how do you go after the emotional side and really start to measure what the emotional impact can be on the buyer, which then leads to kind of what you just talked about earlier about the the impact, the recurring revenue, and so forth. All this is based on a flawed, concept. And the well, it was originally, it was fine, but the world that we’re in. And and this flawed concept, we have embraced this and we have continued this, and it is falling to pieces right now. And so the flawed concept is on the is the understanding that, for example, the trust and experience are are determining factors, very determining factors. Experience maybe trust is less so. Now where this comes from is, like, the moment in time that I buy a piece of perpetual software or on prem hardware, right, and the moment in time that I submit that signature in DocuSign, and that the customer or the the vendor ships that equipment, I take on I, the buyer, take on all the risk of that purchase. Yep. Right? Now who takes on all the risk when I buy a SaaS service? Who’s this person who takes on all the risk? That’s selling whoever’s selling it. The organization’s selling it. Who’s selling it? Now when I buy hardware, I amortize that purchase, let’s say, over five years. Right? Like, my finance department says, okay. Well, we skip that. We divide it in five years. And they may even find a bank to finance that purchase and they take the the interest rate on top of that. Right? So they but they amortize it over five years because they have to to to spread out their payments, so to speak. K. Now in SaaS, that has reversed. When I now actually has sell, I have to amortize the gigantic acquisition cost, right, which often is dollar for dollar or worse. Right? Like, we’re currently running analysis that shows that most companies in the SaaS are spending two to four dollars for the average dollar of revenue acquired. That means they need to amortize the cost of acquisition. Hence, CAC payback and nowadays what these popular terms are. Folks, that means that the risk shifted from the buyer to the seller. Anywhere else in the world that we would see such a change in risk, whether that is in in in the health care industry, whether that is in the finance industry, it would completely have uprooted the entire business. What did we do? We ignored it. We just kept the same mindset. We kept the same discount level, twenty percent. We kept the same comp plans. We kept the same VPs of sales with the same mindset. And so all this now has gotten us to this point that it no longer works. That’s the problem. So that’s one. And that the second and both are equally important. These are two forces that are pulling us and that is causing, combined that we’ve growth at all cost, this machine, this this is falling on top of each other right now. The second thing is that historically, we have had an asymmetry of knowledge between the buyer and the seller. This asymmetry of knowledge benefited the seller. The seller had more insights on the product and what it could do, had more insights on the market, had more insights on what the customer’s problem because they were talking to lots of customers like it. And as a result, there was an asymmetry and that asymmetry made the buyer want to have trust in the seller. Because of that asymmetry of knowledge, they were seeking trust. Hey. Don’t mess me up. Don’t don’t lie to me. Right? That asymmetry, at first, it got equal. Why? Because when we were buying SaaS products, there is not that much of a differentiating factor. Everybody is on AWS. Everybody operates on five nines of reliability. All the basic metrics are the same thing. So I don’t have to speak about, like, hey. How does your cloud infrastructure work? Folks, we’re on AWS. We’re on Azure. It’s backed up by right? So that brought up the level. The second thing that we then did is we lowered the capacity of our sales professionals, and we put them down where average sales professionals in the b to b space, operating with ten to twenty years of experience. We now operate sales experts with, like, three to five years experience. Right? So and the last one, AI now is giving our buyers equal or more interest. It is very common that we hear buyers say, I know more about the product that the that the seller is selling to me than the seller does. Why? Because AI provides, you know, like, relatively good information nowadays. Now as a seller, right, as a seller, I am now need to step up and that is not happening. So these three, you know, growth at all cost, risk shifting, and the asymmetry of knowledge now being, shifted to the favor of the buyer, these three are, like is the reason why we’re experiencing what we’re experiencing in the market right You know, that explains why the traditional sort of sales funnel has needed to be extended into the bow tie model that you at winning by design, you know, are really kind of taking to taking to companies. How has it been received? Like, what are you hearing? You you you run a lot of workshops. You have a lot of courses. What’s the feedback? Yeah. The number one thing on the bow tie is that it’s clarifying and people have, like like, sometimes very emotional reactions to it because it finally put things into perspective for them. Right? And folks that are listening, the bow tie is based on the funnel. Hack the funnel is nearly a hundred to fifty years old. Like, you know, all things know not always have to be bad. Sometimes old things are reason why they’re old is because they actually survived the test of time because they’re really, really good. So we believe yeah. Do we want growth loops, complicated, circular motion? That will be fantastic. You know, like, can we ignore, you know, like, a hundred to fifty years of development on the funnel? No. We can’t. So why don’t we just flip the funnel, mirror it, then we create a bow tie out of it? Left part of the bow tie is acquisition. Right part of the bow tie is retention and expansion. Simple enough. We need to pay as much attention to retention and expansion as we need to pay attention to acquisition. Right? Recurring revenue takes place where the funnel stops. Right? And so to both extent, that’s simple enough. What we find is that that that this brings together the boardroom. Because if I’m only measuring on the funnel, I only measuring on leads and opportunities and how many deals it generates, then I’m gonna manage that what I’m only measure measuring on. And now expanding that and starting to put metrics on that, whether that is MRR, GRR, NR, all the usual triple letter, you know, acronym hell that we’re all part of. Right? Like, enter all that, and now suddenly, you know, like, people say, like, finally, you know, it starts to make sense to me. Okay. So I would say this is less gonna be the crying episode, more of the run screaming episode, just thinking about all these things that we’re, we’re talking about. I’m I’ll make it to crying episode at the end. I’ll try. Okay. So if we think about a couple things you’ve sort of talked about. Right? We talked about, AI. We talked about really, we talked about self-service. Right? Because if suddenly we have this now we have this knowledge change where customer knows more. What do you think are some steps? Like, again, we all on we’re always trying to get, like, the actionable things that that we can take from from one of our episodes here. Like, companies can take to integrate, like, more AI driven methods into their outbound or kinda just bringing in stuff, like, all the things to start to kind of even things out a little bit and sort of say, okay. Like, here’s the latest outbound AI driven, whatever it may be. Like, where does someone start? What do you think are the best places to just dive in and say, okay. Let’s let’s start here and fix this. And is it taking our jobs? Yes. It is taking our jobs. May I ask, hey. How how many how many strikes were you part of of SDR strikes? You know, SDR sales development reps. How were you part of any of the SDR strikes? Oh, why was that? Because there were no SDR strikes. And why weren’t there no SDR strikes? Because no SDR in with a normal mindset wants to stay in SDR. It’s like people digging holes manually, like, with a shovel, say, like, hey. I wanna dig more holes. Right? Like like, instead it’s like they’re forming a a strike against the backhoe business, the the the the dump truck business. Right? Like, you’re taking my job away. Folks, SDR Works was never meant to be SDR work, hence the reason why nobody is complaining about it. It. So AI will take those jobs. We only use human skills and human power in order to fill a gap that was never supposed to be filled by that, and that AI will step in. So so that was the the the second part of that question. The first part of that question is where should we focus on? Look. I I saw the other day, and if you if you Google I I I don’t know her last name as well. I think it’s Amy Webb. If you Google Amy Webb, South by Southwest two thousand twenty of my comp of a company. Right? And it showed four pictures of four white male men in their mid forties with gray herring at gray hair at the temples. Right? She then demonstrated in two thousand twenty two doing the same thing. And she noticed that, you know what, it’s the exact same output. Four white males graying at the temples in the middle forties. Right? She then even start, you know, like like like spoofing it a little bit saying is like, hey. Can you show me a picture of the CEO of a tampon company? Right? What do we got? We get still a male in their mid you know, white male in their in with graying temples, just dressed simply simply with with a picture behind of tampons, so to speak. Right? Like, why is that? Because the process is wrong. And when the process is wrong, AI cannot get itself out of those broken processes. That means that processes supersede AI. So, Adam, where do we start? We start by creating good processes. And for example, as it comes to six cents, what is the right process? Target your customer right. Make sure you get your ICP correctly. Don’t go after volume. Go after quality. Measure those those customers. And if you see that they achieve quality, you let them know about that. That is all about process. And that process could go all the way down to defining an ICP ICP, or they can all go all the way down to have a fantastic discovery call this way. So, Jacko, I we haven’t cried, but we do have one question that we ask everyone who who comes on the show. What is the most ridiculous thing that you’ve been asked to do in your career? To do the same thing from all these founders and CEOs to grow their revenue, knowing that it won’t work, telling them that it won’t work, and they go like, yeah, well, we keep doing it. Look, folks, I I just want you to understand. We got right now, we just analyzed again, like, Dave Spitz and I analyzed again seventy plus SaaS companies. Okay? Eight of them are financially successful. Right? The remaining sixty four, at least forty one of them are in deep trouble and are spinning out of control. You know, but I would say ten of them are spinning out of control. Like and and and we go into those companies and what drives me absolute bonkers is that nobody is responsible for the entirety of GTM. There’s no like, there’s a person responsible for legion. There’s a person who’s responsible for sales. There’s a person responsible for customer success. But there is hardly anyone. And if they are responsible, the the it is a it’s it’s a it’s a pro it’s a soft promotion trying to promote somebody out of sales or something like that. Right? But nobody’s responsible for the entire GTM. And so this machine runs. It clearly, as the the number show, has no no significant give you another number. Do you know well, I think you do because I I I post that to the audience. Do you know how many companies to success funded startups it take to generate one startup that reaches a a hundred million? Fifty. It takes fifty well funded companies. That means it’s it’s less than and it’s now dropping to a hundred. It’s now we’re at seventy, eighty. We’re slowly going to a hundred. We have dropped from winning from from a success percentage, one point seven percent to one point five, and we’re now getting into the one point four territory. What this means is of those companies receiving a significant amount of funding, three million dollar or above of a leading a well recognized VC. In other words, we we extract family funding and and and like that from it. It takes on average, you know, like one point five percent of those companies will only make it to a hundred million dollars. And these are some of the most well backed up with some of the most intelligent people. That drives me bonkers, and that should put me to tears had I not been so many wrinkles and so little hair and this and that. Like like yeah. But we’re here to fix that. Right? Winning by Design is here to fix it with services. No. Six Senses and its mindset is there to fix that because of the the mindset is right. We need to stop. The idea of spam is fundamentally wrong. Right? It is fundamentally a problem. And I just want everybody to understand how much do you like people coming knocking at your door at, like, seven PM at night to sell you something. Like, we romanticize that still, and we say, well, it still works. Yes, folks. It still works occasionally. But the entire market, you know, like, it not only has an effect, it has an anti effect. And, yeah, we as we learn more and more about the negative effects of it, companies now start to see is that their that brand, which has carefully been manicured, is being destroyed by these spams these spam campaigns. And I think, you know, I mean, hey. We’re with you. We wrote a book on it. No spam, no forms, no cold calls. But, I will say, Jack, you know, it’s hard work. It’s not an easy transition to make. Right? It’s it’s sometimes doing what everyone’s doing is why, you know, one out of seventy companies actually succeeds. But when you put the effort in and it is people process technology systems like it is across the board, that’s when you start to see magic. I I’ll I’ll make this observation to to you, and then as the listener to this podcast, you’re gonna find yourself put into one category. Here’s the here’s the observation. Obviously, we work with many companies, over a thousand SaaS companies, thirty active SaaS companies ongoing, some large, you know, multibillion dollars and some in the ten, fifteen million dollar range. Yo. We make a recommendation. As a result, that person may find themselves out of a job because something went wrong in the process. Right? The first goal that they make is winning by designing the next job because like they go like, that won’t happen to me again. As a listener, you either are blind and you’re going to yourself as like, look, I’m sixteen months in my average eighteen month tenure. I’m gonna sit these two months out or I need to start right now. My thought here is this. You better start now because those who will lead eighteen months from now will be those who understand how we’re gonna create sustainable and scalable growth. And that means whether we’re using a tool effectively such as yours or whether we implement services correctly, this change is coming because growth at all cost, like I said, has come to an end. Boom. Mic drop right there. I can’t think of a better way to end. So thank you. Really appreciate it. A great conversation. Thanks for joining us, and, we’ll see you soon. Well, thank you for having me. But before we go, Adam, Adam, both of you. You’re gonna make us cry? What is the one key takeaway that you picked up from this, both of you, or the most important key takeaway or something like that? I’ll I I know mine. I’ll go first. Start with the end in mind. Right? Let’s replicate winning behaviors and let’s choreograph winning. Yeah. It’s exactly right. Do more of what you want and, yeah, like, and then stop doing what you don’t want. And you’d learn that by going to the app. And, you know, all the AI and technology in the world doesn’t fix anything until you’ve got the right process in place. So start there. Fantastic point. Amy Webb brought that up, you know, like well, with that said, I wanna thank your audience for listening. I know I’m a chatterbox, but thank you for having me. You’ve been listening to Revenue Makers. Do you have a revenue project you were asked to execute that had wild success? Share your story with us at six cents dot com slash revenue, and we might just ask you to come on the show. 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