The Scaling Spiral: Tackling the Elephant in the Room

Yesterday I commented on a very good post by Kyle Racki the CEO of Proposify with the title “If I can just hire more engineers we’ll be able to get more features built.”

The essence of the post was that if your existing team/processes are not running well, then adding headcount will only compound the problems. Yes, it's true. Yes it's obvious and Yes it is, on the whole, being ignored

They say a good post gets you thinking, and that one certainly did with me!

During the day I kept thinking about the post, how accurate it is, and more importantly how often we’re seeing exactly this within the #SaaS space.

It’s like an elephant that's in the room, but no one wants to acknowledge seeing it!

A company grows and starts seeing PMF. MRR growth is looking strong, NPS is growing, and churn is low. New logos are being added. AEs are ‘almost hitting the target, but the next Q is looking strong’. BDRs are booking demos, not enough ‘but they’re getting there’.

The future looks great! Then a round is closed….$$$ come in…

Let's scale! We’ll add 4x BDRs to 4x the number of demos we’re getting, 2x extra AEs to cover the increase in demos the BDRs will deliver. Another 2x CSMs to cover all the new deals the AEs will close from the increase in the demos…. And so on.

It can’t fail, right? It’s simple maths. If 2x delivers Y, then 6x will deliver 3Y. Easy.

Well no, it certainly can, and often does, fail.

The reason is quite simple. Unless the processes have been proven (over time, not just 1x Q), then there are no foundations for scaling. You are simply compounding problems.

Then for example, in the Sales/CS function, the CSMs complain they are not onboarding enough new logos, and the AEs are then blamed for not closing enough business. They pass the buck onto the BDRs for not delivering enough quality leads for demos. The BDRs are fired (or just leave as they’re not earning what they expected). A re-hiring process starts. That takes 2-3 months PLUS 3 months ramp-up. You are now 6 months behind your growth plans

While the BDRs are getting up to speed, the AEs are struggling for leads. Then the firing/quitting starts again, this time with the AEs as THEY aren’t reaching their OTEs.

It's cyclical. It’s time-consuming. It’s costly. And it’s very damaging to the business. It is extremely difficult to stop the slide once it starts. Then imagine the extremely awkward conversation with the Board of Investors… so, you know the plans we presented for this round, well the recruitment hasn’t quite worked out. We know we could scale, but unfortunately, we had a bunch of bad hires. Any chance of another round, please?

One reply to the post used the analogy of a boat that is leaking, but you’re putting more people into it. Think about it, it's true. I likened the post to building a house with no foundations, on sand. As you build upwards, the house starts leaning, and you wonder why!?

Unfortunately, the SaaS space has a gravity towards vanity metrics.

How many times do we see posts along the lines of…

“Awesome! We’ve just raised 8m on a valuation of 24m!”... when their ARR is 1.3m! Good luck with the next round!

“Just scaled our BDR Team from 5 to 10… growing fast!” … You might have been with 5, but chances are you won't with 10 unless the foundations, framework, and processes have been proven.

“Growing super fast! We’ve just hired new AEs for EMEA and Canada!” … Guess you have demonstrable scalability with all your processes and those markets are proven.

“So busy we’ve hired 2x new CSMs” … Were your existing CSMs running at 90%+ utilization? Maybe not.

If there is something we have learned working in the SaaS space, it’s …

Plan for growth, but only execute it when you NEED to

Only execute when you KNOW your foundations and processes have been proven

Step, don’t jump. Remember the climbing Everest analogy? Climb, camp, regroup. Climb, camp, regroup… and so on. It has never been more important

In ‘normal’ business, we plan, grow, and execute, one step at a time. Why do we assume SaaS is special and different? The core strength of a successful business is sustainability. You build the foundations, prove them with data, then build incrementally.

Maybe we’ve all been spoiled in SaaS. Crazy valuations. Crazy rounds. Crazy growth targets. Crazy IPOs or acquisitions. Crazy expectations too!