In hyper-growth, one of the questions people ask is “how should I manage forecasts and targets when we are constantly overachieving?” For sure this is a nice problem to have, but it can become quite onerous, when it really doesn’t need to be. One recommendation is that companies forecast quarterly to the board and then show a simple table with the original forecast at the top and revised forecasts below.

Managing hyper-growth in SaaS

In hyper-growth, one of the questions people ask is “how should I manage forecasts and targets when we are constantly overachieving?” For sure this is a nice problem to have, but it can become quite onerous, when it really doesn’t need to be. One recommendation is that companies forecast quarterly to the board and then show a simple table with the original forecast at the top and revised forecasts below.

Managing hyper-growth in SaaS


Highlights
  • Hire PODs not people
  • When scaling fast, build sales pods based on overachievement of revenue and pipeline
  • Think of PODs as ‘stackable units,’ essentially you need to acquire a group customers that equates to the target and everything you need to help them succeed;
  • Keep a close eye on cost of acquisition and that you are winning ICP customers; and
  • Empower your PODs but have constraints in terms of costs and readiness.
Managing forecasts and targets in hyper-growth

In hyper-growth, one of the questions people ask is “how should I manage forecasts and targets when we are constantly overachieving?” For sure this is a nice problem to have, but it can become quite onerous, when it really doesn’t need to be. One recommendation is that companies forecast quarterly to the board and then show a simple table with the original forecast at the top and revised forecasts below.  “My preferred option,” says Andy Leaver, Notion Capital Operating Partner “is to keep the forecast as it was originally and overperform.” Andy explained that there is also the option of monthly targets - increasing by x% month-over-month. To ensure you hit the annual/quarterly targets. “There could also be a kicker there,” Andy continues, “in case you miss one month but make it up in another.

NB: A good way to distribute targets to ensure you constantly hit and exceed them is to assign quarterly forecasts to the sales leadership team, with a 20% lift on the board commit and then agree monthly targets with the sales team, but revise those targets monthly as you don’t want the teams slowing down.  Again assign sales targets with a 20% lift on individual sales targets vs the overall sales team target.

Ramping the sales teams and capacity

There are a few things to think about here. 

  1. Firstly, to unlock hiring sales hires, teams leaders must hit revenue targets AND pipeline targets.
  1. Secondly, remember that it is not as simple as just hiring 1-2 extra sales people. SaaS companies should think about hiring pods not people. So for example a pod may contain 2 SDRs, 1 x AE and 1 x Onboarder.

Jacoo van der Kooij, from Winning by Design explains this as creating ‘stackable revenue.’ “The concept is simple,” Jacco explains, “your stackable units are in essence your customers, inclusive of everything you do to acquire them and everything you do to keep them and help them succeed.  These units also represent revenue, and you want to stack them to the sky.” 

You can read more about Stackable Revenue here in a recent Linkined post from Jacco, Dave Boyce and Trey Allison.  

Jacco describes this as path to unlimited scale. The way to think of this and how it relates to fast growth is that you measure growth in terms of how PODs translate into units of customers. So for example a unit of growth or a POD bight include: 1 Marketer, 1 x Market Development Rep, 1 x SDR, 2 AEs, 1 x Onboarder, 1 x CSM). When that pod is at ‘customer capacity” then build another POD. 

  1. Importantly keep an eye on CAC, costs, gross margin, retention and net revenue retention to ensure you are adding the right customers and growth is sustainable importantly.

Andy also recommends companies ensure clarity on how to reconcile bookings to revenue (with possibility of clawbacks at the end of the year) to stop overselling.

We discussed this topic with a few of our CROs such as Nick Cheetham, CRO at Currencycloud, who recommended to focus on customers while empowering teams with a few constraints like cost management and readiness: “A rolling forecast makes sense to give the business as much forward view as it needs to sustain a prepared state - the length of the rolling window will need to match the longest pole in the readiness tent.” Nick believes that if growth is unpredictable, then one option is to set targets over a shorter period.

Nick continues with a word of caution that ties to Jacco’s emphasis on “stackable revenue:” “being targeted on revenue may not be the best way to drive the right behaviours in a rocket ship. Driving growth may cause all manner of customer and/or internal issues, and perhaps other metrics could be used to drive more assured sustainable outcomes.  “Overall,” he continues, “keep it dead simple, as fast growth is a little frantic. Perhaps target reps on gaining customers, and target managers on containing an explosion in costs.” 

Another CRO with experience in this area is Christophe Bodin, CRO at Tradeshift:  “Whenever I have to manage fast growth, I don’t pay too much attention to the past or to the rolling forecast as the main question becomes how do you manage the capacity and acceleration (and deceleration).  I look at QoQ growth purely in terms of target setting (targets set every quarter for next and performance against it being the operational performance metrics).” 

Nick Shaw, CRO at Brightpearl thinks on similar lines: “When you are growing very fast you just need to set targets that are realistic by rep and manage accordingly and then plan to add new reps on a monthly basis.”

In summary
  • Establish pre-agreed performance levels before hiring new PODs (majority over targets, pipeline over target) to build on the growth
  • When you make new hires think about increasing capacity across the lifecycle (‘unit of work’) = demand gen (leads), sales org (conversion) and customer success (retain/grow). 
  • Think of targets (and therefore forecasts) as a function of capacity across the customer lifecycle.
  • Maintain a contingency between sales team targets, company targets and board targets.

Lastly, remember that it generally takes at least 6 months to hire, onboard and ramp up a sale rep. It is very hard (but also very important) for fast growing start-ups to have the discipline to be planning at least 6 months in advance.

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