SaaS is still a growth market, SaaStock founder and CEO Alex Theuma told the crowd of 1,000+ SaaS founders and leaders gathered for three days of learning and networking in Austin, Texas. Growth has slowed, of course, but it is one of the best markets in terms of industries globally, with 18% growth expected this year.
That said, the days of growth at any cost are gone, and SaaS companies must now be guided by efficiency metrics that point to profitable growth. As evidence of this shift, the importance of adhering to The Rule of 40 metric came up in several of the educational sessions at the industry trade show, which drew attendees from across 55 different countries. This is a gold standard indicator of profitable growth for SaaS companies – growth rate when added to free cash flow rate should be equal to 40% or more.
Popular sessions at the event reflected this relentless focus on efficiency for SaaS companies, including “The New GTM Playbook to Unify Your Business,” “Marketing Leaders: 5 Key Moments to Drive Revenue Growth and Customer Retention,” and “Five Ways to Help Your Sales Team Close More Deals this Year.” Audience members were eager to learn and share advice on challenges they’re facing – which spanned go-to-market, product-led growth, competition, market conditions and the hiring environment.
Our team was there, and has a few key takeaways to share for those in the industry.
No. 1: In a tough selling market, remember that buying is hard. Some 40%-60% of B2B software purchases end in no-decision, according to April Dunford, Founder and CEO of Ambient Strategy. In a whimsical and memorable session on building a sales pitch, she compared the consternation that befalls B2B software buyers to her recent trip to buy a new toilet. She was greeted with dozens of options, some clearly better than others. Features overwhelmed her to the point of inaction – at first, abandoning the purchase altogether – only to convert when a salesperson helped her clearly identify her key needs and problems to sort through the choices. Buyers don’t want “a windtunnel of features,” she said, they most often crave perspectives on the market, and just need help navigating the alternatives.
No. 2: There are new SaaS success metrics. Peaka’s CEO and Founder Mustafa Sakalsiz offered up one of the most information-packed sessions of the event in a 10-minute, rapid-fire talk, revealing “The Top 5 KPIs You Should Be Tracking to Scale in 2024.” He included:
- Churn rate (which includes not only customers that are lost, but accounts that are declining in spending and product churn on a user level)
- Net Revenue Retention Rate (NRR)
- The Rule of 40
- Gross margin
- Burn multiple
Bonus for marketing leaders: The best marketing leaders align with finance, Jellyfish CMO Kyle Lacy pointed out in his session, because it is important to consider how they think about efficiency in the business.
No. 3: Leading companies are digging deeper into intent data to sell. Customer acquisition costs have increased by 100% since 2019, according to analysis by David Spitz, Founder and CEO of BenchSights, presented at the show by Chris Walker, CEO at Passetto. Success in this new era of efficient growth requires using data to optimize GTM processes – to identify and cut waste in the process. Walker dropped this staggering stat: 40-60% of SaaS companies’ total revenue is spent on marketing and sales. In a mature B2B GTM engine, you’ll create millions of data points to say what’s working and what isn’t – and they can inform how to invest and allocate resources to deliver ROI.
Inefficiencies can hide in lots of places, and we had many conversations this week with attendees who were surprised to discover just how inefficient their cross-border payment processes actually are. Dissatisfaction with high and unclear fees, delayed or short payments, and customer experiences with the process were all consistent themes. We know from our research that the complexities of collecting payments from international customers gets in the way of growth – 95% of 300+ finance professionals in a Flywire-commissioned survey said that they could deal with exchange rates in an easier way, and they could accelerate their global expansion efforts. SaaS pros are relentless innovators – and in our first SaaStock, we found a lot of openness on how to better tune the payments processes as a value and efficiency driver.
4 fun things heard on the show floor
Most-used acronym of the week: ICP - Ideal Customer Profile
New acronym to watch:RAG - Retrieval Augmented Generation - a technique for enhancing accuracy and reliability of large language models.
Coolest SaaS title: Head of Social Marketing (belongs to Chris Cunningham, Founding member of ClickUp)
Most interesting use of generative AI: Writing a tech conference themed song…in real-time… in the country genre… on the topic of a fictitious scenario of “when the wifi went down.” Gem lyrics included: “The room fell silent. In the midst of the chaos, something beautiful went down, people started talking face to face.”