The 3 Part Framework for Designing Efficient B2B SaaS Organizations in 2024 and Beyond
Over the last year, the SaaS world has experienced several unwelcome trends: rising costs of acquiring net new ARR, the highest churn rates in recent history, and immense pressure to preserve cash.
Now, as businesses look to emerge from these turbulent times, we need to not only learn how to “do more with less” but also to “do different with teams we have.” Afterall, 70% of B2B SaaS companies operating expenses are taken up by headcount.
There are two critical drivers behind these changes and it helps to look at each individually and collectively in order to chart a path forward:
- The B2B buyer journey is increasingly multi-threaded, different with each customer segment served, and driven by self-guided discovery and education.
- Increasing cost of capital influences both buyers and sellers:
- On the customer side, it requires helping budget owners build confidence in forecastable value realization in the near-term time frame
- On the vendor side, it requires maniacal focus on understanding unit economics by customer segment and by time-based cohort
These factors are driving B2B SaaS companies to reconsider their traditional siloed approaches to customer engagement, requiring a re-think of the competencies that they need in each of the roles that engage with the customer.
In each customer engagement instance, the design of the engagement must be geared to 1) increasing Customer Lifetime Value mainly through higher price corresponding to greater value delivered (either at inception or predictably over time) or lower churn; and 2) traceable cost of each mode of engagement attributable to the right customer bucket by segment and cohort.
This requires critically thinking through what not to do in each touchpoint – letting go of old habits that are no longer effective.
This article is a collaboration between two highly experienced leaders, one a CFO and the other a CRO, who aim to provide a framework for approaching these changes. While it is not a perfect approach, it does enable a process of thinking through a new organizational design that aligns your GTM activities with the Buyer’s engagement and the support needed to full value realization. To demonstrate this approach – realizing many roles will be impacted – we use Business Development Representatives (“BDRs”) as an example.
While the Buyer journey has evolved (critical Factor 1 above), we feel that the most impactful axis to start from is the Buyer’s preference or self-directed ability to engage with Product in their journey prior to purchase. We also recognize that for some categories of solutions, this is simply not possible. For example, you can’t download and try a new billing system. To simplify the analysis you will be doing, we have come up with three broad buckets, illustrating a spectrum of user engagement with the product before committing tens of thousands of dollars.
Using this spectrum, our analysis outlines three areas where changes will be necessary for each role through the lens of the Buyer journey:
- What goals and jobs to be done are needed
- How you measure effectiveness of each role
- How do these roles fit into the organization
We then propose to consider the impact of the new organizational design on the unit economics of each customer segment.
The following discussion is for illustration purposes, not an exhaustive recommendation; that will depend on each business.
Goals and Jobs To Be Done
Depending on where in the self-directed spectrum your company (or segment) falls into, the role of the BDR is substantially different:
- With Product-led, system signals drive the BDR motion to engage where needed to reduce friction and accelerate value realization
- Product-led Sales motions are more focused on accelerating the multi-threaded learning journey, building relationships through collaboration with content and peer connection
- Pure Sales does not change much with the goal being to help the Buyer accelerate their discovery of potential value through direct interaction
Based on the differences in the Jobs to Be Done for each role, effectively measuring performance needs to be different:
- Product-Led Growth motions must leverage system signals to accurately identify when the BDR is needed and the resulting impact of their efforts. Other potential metrics could include driving “stickiness” in continued use and virality of adoption through coaching
- With Product-Led Sales, trust building and collaboration are the key drivers resulting in measuring multi-threaded engagement (“touches” or minutes / hours engaged) with the ultimate metric of pipeline creation by segment. There is also the case for a continued relationship to drive expansion and preemptively reduce churn
- While seemingly traditional, Pure Sales motions need to shift to multi-threaded MQLs and SQLs with an increasing reliance on collaborative partner co-sourced opportunities
So What: Organizational Design
With clarity on the Goals, Jobs to Be Done and Measurement, the question of organizational design comes clearer into view:
- Organizational alignment requires that business development roles are closest aligned to those who can directly impact their success and can benefit the most from the direct feedback that the BDR can offer on a daily / hourly basis
- Ongoing skill development is critical in the process of transitioning to a new org design, including for those leaders taking on BDRs for the first time (such as Product Management.)
- For the BDRs themselves, each motion results in different compensation, proximity and potential career paths
The roles, methods, and quantity of engagement with the customers will vary by segment. Thus, it’s critical to allocate the cost of the BDR team only to those segments where BDRs engage.
Your FP&A partners should be able to match the costs (salaries and vendors) with 1) customer segmentation provided by the Revenue Operations team; 2) generated revenue from the billing system of record; and 3) key data on product usage provided by the Analytics team.
For businesses with more mature data systems, RevOps, and Finance teams, exclude customers where leads came without BDR involvement, for example where AEs generated their own pipeline.
With a discussion that requires this level of focus and depth, we recommend a leadership offsite to push this analysis forward.
Homework Before Your Offsite
As the degree of self-guided product usage prior to purchase is the primary axis of our framework, it is critical that everyone be on the same page on the level required by the Buyer. Also understand that your B2B SaaS company may serve multiple segments and each could have different motions based on Buyers’ desires.
We recommend a working group consisting of Product, Marketing, Sales and Customer Success do this analysis in advance, get consensus from that group and begin discussions with a brief presentation of findings. Ensure that an “outside-in” expertise is included in this working group, i.e. you are not just segmenting the current customers but also potential customers.
After the Offsite
There are a nearly infinite number of variations that will come out of these discussions. We do expect you’ll have a “target organization” that looks very different from the one in place today. This will impact many functions in their post-offsite work:
- CROs / GTM leaders and Customer Success leaders will need help from HR to convert jobs to be done, metrics and comp plans into new “to be” job descriptions and then assess the change gap required
- Product leaders will likely have to do this as well if they are assuming increasingly customer-facing roles
- CEOs will need to assign a leader that will act as “change driver” to ensure that the above have methodical change plans. Ideally, this leader is reporting directly to the CEO during the transformation
- CEOs must set the pace and cadence for rapid but effective organizational evolution
- All leadership must communicate and secure buy-in from their teams for these changes – this is the layer where your strategy succeeds or fails.
- By virtue of the exercise of role competencies, metrics and alignment to Buyer journey, every function’s leader will need to instrument or put systems in place to measure these new performance metrics
- Customer segmentation needs to be implemented throughout the GTM tech stack. If this is impossible to do in all systems quickly, start with one
- Develop a framework for CAC to LTV calculation going forward and a hypothesis of where different segments will fall. If you can, develop a starting point, i.e. your best guess of the CAC to LTV for today’s business
- Empower customer-facing organizations with a methodology to use with customers to quantify and forecast expected value realization
To be clear, measuring what matters is not unique to 2024 or any other year. The above is to make sure you reassess which KPIs are measured for every team that has had its jobs-to-be-done changed and change your systems accordingly. Your unit economics are unlikely to change if your job descriptions don’t change; and activities won’t adjust to new JDs if your measurements don’t change!
2024 Is the Year of “Doing Different”
The Buyer journey has evolved and for many B2B SaaS companies, their evolution hasn’t kept pace. For some this change will be dramatic. For others, this evolution won’t feel like revolution. Regardless, something has to change and 2024 is the year of “Doing Different” for your customers’ sake.
In general, our conclusion is to perform this analysis / exercise with every Go-to-Market team that you have, and also the teams that you don’t have but that your customer journey necessitates you having. Ultimately your customers’ continual realization of value is what will drive Customer Lifetime Value and in turn, your company valuation.
The faster this evolution happens, the sooner growth rates, profitability and valuations will rise.
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