How to Evolve from Startup Founder to CEO Fast

In this video, Kyle Vamvouris, CEO of Vouris, inter­views Vic­tor Cheng about the top three skills that a start­up founder needs in order to grow into a CEO. Here is a sum­ma­ry of what Vic­tor shares:

Today, I want to talk about three key skill gaps that I’ve noticed that start­up founders typ­i­cal­ly have in their tran­si­tion to grow into a pro­fes­sion­al CEO. I want to talk a lit­tle bit about my back­ground first to give you some sense of per­spec­tive of where I come from. I run an exec­u­tive coach­ing com­pa­ny called SaaSCEO.com. As you might imag­ine from the name, we focus on men­tor­ing and devel­op­ing the skills of CEOs in the SaaS indus­try.

I’ve been in SaaS for prob­a­bly 25 years before it was ever called SaaS. I’ve writ­ten a cou­ple of books. The one relat­ed to SaaS is called Extreme Growth Rev­enue. I start­ed off my career at McK­in­sey help­ing CEOs of For­tune 500 com­pa­nies – so, in that world, small busi­ness­es that have $500 mil­lion in sales.

I’ve sort of done every­thing in SaaS from prod­uct man­age­ment to prod­uct mar­ket­ing. I was very bad at soft­ware devel­op­ment 30 years ago. I most­ly focus on strat­e­gy, growth, the go-to-mar­ket side of things (which is why I shouldn’t come with Kyle) as well as pri­vate equi­ty, M&A, and board work. Everything’s sort of front-of-house that I’m pret­ty famil­iar with and have a par­tic­u­lar per­spec­tive that I’m going to share today.

I want to talk about founder skills vs. CEO skills. They’re actu­al­ly quite dif­fer­ent.

Some­times you hear the term “founder CEO,” like the CEO that was also the founder of the com­pa­ny, or founder and CEO. I think of them as two dif­fer­ent skill sets. Some­times the two skill sets can be man­aged by and deliv­ered by the same per­son. Some­times there is more of a relay race where the founder pass­es the baton to a pro­fes­sion­al CEO – some­one who was hired to be CEO but did not found the com­pa­ny. I want to char­ac­ter­ize what these two dif­fer­ent sets of skills look like then talk about the major gaps and how to close them.

Startup Founder vs. Startup CEO Skills

What founders are very good at is being real­ly vision­ary, being inno­v­a­tive, being pas­sion­ate, being fru­gal. What CEOs are much bet­ter at are, what I call, scale-rel­e­vant skills. Man­ag­ing 100 employ­ees is very dif­fer­ent from man­ag­ing three employ­ees. They have a lot more struc­ture and a lot more dis­ci­pline – those are a high lev­el of what we’re look­ing at.

What I want to talk about is three spe­cif­ic skills that founders real­ly need to grow into and rise to the occa­sion of being a CEO.

Top Three Skills Founders Need to Grow into a CEO

Num­ber one, and Kyle allud­ed to this, is data-dri­ven deci­sion-mak­ing. If you’re a pro­fes­sion­al CEO, you are look­ing at data con­stant­ly. You are doing math every sin­gle day to make bet­ter deci­sions.

The sec­ond is imple­ment­ing and stan­dard­iz­ing scal­able busi­ness process­es. I’m talk­ing a lot more about what I mean by that.

The third is dis­ci­pline exe­cu­tion.

A lot of these things, quite can­did­ly, I think most of the founders I work with find quite bor­ing. These are the things they don’t want to do, which is why I became an entre­pre­neur. Yet iron­i­cal­ly, if you’re very suc­cess­ful as an entre­pre­neur and founder, you end up in a busi­ness that real­ly needs a CEO to guide it and take it to the next step.

Data-Driven Decision-Making

Data-dri­ven deci­sion-mak­ing is the first skill you need to look at devel­op­ment. Founders typ­i­cal­ly are very vision­ary. They’re very intu­itive. They’re very oppor­tunis­tic. They see what’s not there.

So you look at a mar­ket­place – there’s no data, there’s no prod­ucts, there’s no offer­ing. It’s a very emerg­ing mar­ket. And from a blank piece of paper, the founder can see some­thing that oth­ers can­not see.

They see what’s pos­si­ble, and they’re able to notice oppor­tu­ni­ties and achieve them. A lot of the deci­sion-mak­ing real­ly is based on intu­ition and gut. In many cas­es, the founders used to be work­ing in the role that would now be the customer’s role.

It would be some­one who built a prod­uct for them­selves and then finds that oth­ers are inter­est­ed in it. But they are a pret­ty typ­i­cal founder sto­ry.

CEOs are quite dif­fer­ent in their skill set and their out­look. First of all, they’re very prag­mat­ic. They’re much more data-dri­ven, and they’re strate­gic.

“Prag­mat­ic” means real­ly get­ting the day-to-day things done. As the busi­ness grows, as there are more cus­tomers, as there are more employ­ees, the com­plex­i­ty of man­ag­ing a larg­er orga­ni­za­tion gets a lot more com­pli­cat­ed. Get­ting sim­ple things done that you’re used to doing your­self, but now you have to get it done through 100 employ­ees, is a very dif­fer­ent skill set.

 “Strate­gic” refers to hav­ing strat­e­gy – real­ly, it’s mak­ing a plan to get your out­come. I think a good strat­e­gy is reflec­tive of trade-offs. So CEOs have to make a lot of trade-offs.

When you’re an estab­lished busi­ness, if you do some­thing to acquire new cus­tomers, you might have to dis­tract and take away resources from exist­ing cus­tomers. When you have no cus­tomers, when you’re start­ing up, there are no trade-offs. Every­thing is all upside, no down­side.

It’s very dif­fer­ent as the busi­ness matures.

The oth­er dif­fer­ence is CEOs are in spread­sheets con­stant­ly. That is the one thing that comes with a pro­fes­sion­al CEO – they are very heav­i­ly in spread­sheets.

Case Study #1

I’ll give you a lit­tle exam­ple. I had a client of mine who was a clas­sic entre­pre­neur, founder, and own­er of about four or five com­pa­nies (and a dif­fer­ent num­ber of com­pa­nies every time that we talked).

I remem­ber this one phone call I had with him, we were talk­ing about oth­er star­tups (the small­er com­pa­nies). At the very end, he goes, “By the way, I also have this com­pa­ny that has about $10 mil­lion a year in sales.”

I’m like, “Oh, we didn’t talk about that the entire time. Well, tell me more about this busi­ness.”  He told me more about the busi­ness.

I asked, “What is your net rev­enue reten­tion? So, for the cus­tomers you acquired a year ago, how much mon­ey are they spend­ing today?” Inclu­sive of upsells and cross-sales.

He didn’t know…

“Okay, well, go fig­ure it out. Here’s the for­mu­la. You can Google the for­mu­la if you want and go fig­ure out what net rev­enue reten­tion is, and then email me.”

So he emails me back and says, “Net rev­enue reten­tion is 140%.” So he’s like, okay, what­ev­er. I just did the home­work, I’m done.

He finds this busi­ness incred­i­bly bor­ing. It’s not inno­v­a­tive, it’s not excit­ing. There’s no chal­lenge, there’s no chaos. He thrives on pos­si­bil­i­ties.

I take that num­ber, and instant­ly I rec­og­nize its sig­nif­i­cance because I’ve done the math so often, and I ran a quick cal­cu­la­tion. What I real­ized was this busi­ness was going to be a $100 mil­lion-a-year busi­ness with­in 10 years and prob­a­bly worth some­where between $500 mil­lion to $1 bil­lion dol­lars in rough­ly about eight years.

He had no clue that his net worth was on pace to be $500 mil­lion to $1 bil­lion with­in the decade. This is where a CEO would spot that imme­di­ate­ly, run the math, run the num­bers, and go, “Oh, this is a huge oppor­tu­ni­ty.”

We stopped work­ing on the oth­er four busi­ness­es that are all under $1 mil­lion in sales and put all this effort into this big one, and this thing has grown like gang­busters.

He had a great thing, but didn’t quite real­ize it.

Top 5 Spreadsheets CEOs Use that “Founders” Don’t

We have five spread­sheets that I find CEOs typ­i­cal­ly use that founders typ­i­cal­ly do not.

  1. Sales Fun­nel Stage Report
    First is a “Sales Fun­nel Stage Report.” If you have a sales process, which you should as you mature, you want to know how many phone calls your team made today or this week. How many meet­ings do you have? How many demos do we deliv­er? This day, this week, this month, this quar­ter. At a glance, a CEO would need to know that.
  1. Sales Fun­nel Con­ver­sion Rates
    The sec­ond sheet a pro­fes­sion­al CEO would have is what I call a “Sales Fun­nel Con­ver­sion Rates” report. That is, for exam­ple, what per­cent­age of the demos we give goes on to the next sales day, such as pro­pos­als. Maybe it’s one in three. So, for every three demos, we get one pro­pos­al.

    Maybe every two pro­pos­als, we get one close to it. That sort of ratios or per­cent­ages, depend­ing on how you like to rep­re­sent the num­bers, is real­ly impor­tant to under­stand the go-to-mar­ket side of the busi­ness.

  1. LTV/CAC Ratio
    From a strate­gic stand­point, LTV vs. CAC ratio – this is a life­time val­ue of a cus­tomer divid­ed by their cus­tomer acqui­si­tion cost and the ratio between the two. What we find is that more sophis­ti­cat­ed busi­ness­es know what the LTV/CAC ratio is for the com­pa­ny over­all.

    You might know what that is for your com­pa­ny over­all, but the more sophis­ti­cat­ed com­pa­nies know what the LTV/CAC ratio is by cus­tomer acqui­si­tion cohort. So, all the cus­tomers acquired this month vs. last month vs. a year ago by the cus­tomer seg­ments.

    If you serve mul­ti­ple ver­ti­cals, if you serve finan­cial ser­vices, if you serve man­u­fac­tur­ing, what is the LTV/CAC ratio for each of those dif­fer­ent pro­to­cols?

    If you serve cus­tomers through mul­ti­ple sales chan­nels, maybe through out­bound cold call­ing, through part­ner­ships, and refer­rals, what is the LTV/CAC ratio for each of those par­tic­u­lar chan­nels?

    If you gen­er­ate leads to SEO, what’s the LTV/CAC ratio for those par­tic­u­lar prospects vs. inbound mar­ket­ing vs. out­bound cold call­ing vs. trade shows? There are many dif­fer­ent ways to acquire it.

    The rea­son is this tells you where the oppor­tu­ni­ties are. This is what CEOs do. They do the math, they do the cal­cu­la­tions, and they fig­ure out where you are going to get the most “bang for your buck” in terms of your oper­at­ing bud­get.

  1. Churn Rates
    Churn ratios con­tribute to life­time val­ue by those same slices – by cohort, cus­tomer seg­ment, chan­nel, and lead source.
  1. Scal­ing Finan­cial Fore­cast­ing Mod­el with Employ­ee to Activ­i­ty Capac­i­ty
    The fifth one (usu­al­ly for busi­ness­es a lit­tle big­ger, such as maybe $5 mil­lion to $10 mil­lion in sales and above) is a finan­cial fore­cast­ing mod­el, a growth mod­el. If you have a good sales process, and it’s real­ly con­sis­tent, then it comes time to grow.

    If you were to want to increase sales by $5 or $10 mil­lion in ARR, how much mon­ey would you need to fund the sales and mar­ket­ing effort? There’s a finan­cial cal­cu­la­tion spread­sheet that would be able to tell you that.

    The key thing here is when you see busi­ness­es that may be over $10 mil­lion in sales, you see a lot of what I call activ­i­ty ratios per employ­ee. So an SDR. How many phone calls or cold out­reach­es can an SDR make in a giv­en day?

    There’s usu­al­ly a num­ber for busi­ness­es that are well-mea­sured and real­ly run by the num­bers. There’s a tar­get num­ber. There’s a num­ber for how many pro­pos­als and demos a par­tic­u­lar employ­ee can han­dle.

    As you scale, say from five peo­ple to 80 or 100 peo­ple, these ratios become impor­tant. Every time you hire sev­en SDRs, you need to hire one sales man­ag­er, or one SDR man­ag­er.

    All those cal­cu­la­tions around trans­lat­ing rev­enue into staffing require­ments help you fig­ure out if you have enough resources to make the num­ber you’re try­ing to get to.

    There’s a dif­fer­ence between hav­ing the report and under­stand­ing the report. Then, there’s using the report to make bet­ter deci­sions. I would dis­tin­guish between those three. I do see a lot of CEOs (or founders) who have the report, but they don’t know how to inter­pret it.

    They’re not mak­ing bet­ter deci­sions because of it. They’re glanc­ing at it and may real­ize it’s the same as last week, and they think they’re okay. I think there’s a shift. If some­one comes from more of a CFO back­ground, they’ll look a lot more at LTV vs. CAC and churn rates, but most founders do not typ­i­cal­ly come from a CFO back­ground.

    Tech­ni­cal founders don’t look at any of this. If sales are down, they think they need more fea­tures. Every sin­gle prob­lem in the busi­ness can be solved by more fea­tures… That’s kind of their bias.

    Some of that’s very sales-ori­ent­ed, in which they tend to look at the first two reports in terms of dri­ving activ­i­ty in sales, but they tend not to look at prof­itabil­i­ty.

    You may have closed a deal, but is the cus­tomer still here a year lat­er? You don’t know if they stayed as cus­tomers or left three months lat­er. Things like LTV vs. CAC and churn rates are things that typ­i­cal­ly sales exec­u­tives are not his­tor­i­cal­ly held account­able for, and cer­tain­ly not sales­peo­ple. They tend not to look at those, but that’s where the enter­prise val­ue is dri­ven by both the num­ber of new cus­tomers, how much they spend, and how prof­itable they are. This large­ly depends on how long they stay as a cus­tomer.

Implementing Standardized Scalable Processes

There are three words that nobody real­ly wants to deal with – stan­dard­iza­tion, scal­a­bil­i­ty, and process­es. That’s pret­ty bor­ing, but it does make a dif­fer­ence in terms of being able to grow.

If you look at the men­tal ori­en­ta­tion of how a founder thinks about get­ting work done vs. the CEO, it is night and day dif­fer­ent.

Founders typ­i­cal­ly just get it done. They don’t care how you do it, as long as it works, as long as it’s effec­tive, it doesn’t mat­ter. Let’s just get it done. When you have under five employ­ees, absolute­ly, just get it done.

As you get big­ger, that’s the worst approach. It doesn’t work when you have 20 to 500 employ­ees. It becomes increas­ing­ly impor­tant that every sin­gle employ­ee who’s involved in a par­tic­u­lar busi­ness process (maybe gen­er­at­ing leads, onboard­ing cus­tomers, doing tech­ni­cal sup­port calls) needs to do it the exact same way.

A lead is gen­er­at­ed via cold call­ing the exact same way, regard­less of which SDR does it. A new cus­tomer is onboard­ed the exact same way, regard­less of which per­son in cus­tomer suc­cess is involved in that.

Stan­dard­iza­tion becomes extreme­ly impor­tant because you can’t scale beyond a cer­tain point with­out it.

Definitions

Here are some def­i­n­i­tions and met­rics that you can use to assess your own process­es.

A process is a sequence of steps that are con­sis­tent and stan­dard­ized to pro­duce a par­tic­u­lar result that is also con­sis­tent.

Think of a recipe… If you fol­low the recipe exact­ly every sin­gle time, you get what you want out of it. Let’s say you bake a cake. You fol­low the same steps every time, you get the same cake every time. If you wing it, change the ingre­di­ents, change the bak­ing tem­per­a­ture, or change the bak­ing time, you’re not going to get con­sis­tent results.

A scal­able process is a sequence of stan­dard­ized steps to pro­duce a con­sis­tent result that con­tin­ues to work as you dou­ble and triple bud­get and staffing.

If you were to triple the spend­ing on sales and mar­ket­ing, do your new book­ings and new deals dou­ble or even triple? Some­times you have process­es that don’t scale. A very com­mon one is refer­rals.

Refer­rals are a great source of cus­tomers. They tend to have very good life­time val­ue. They tend to be easy to sell, but the prob­lem is that you can’t triple your refer­ral bud­gets. You can’t add three more peo­ple to the refer­ral team and get three times as many refer­rals. It doesn’t scale beyond a cer­tain point.

Common (Hopefully) Standardized Processes

Here are some process­es that hope­ful­ly should be stan­dard­ized.

  1. Lead Gen­er­a­tion
    Are you doing SEO the same way every sin­gle time? Are doing cold call­ing or out­bound cold out­reach the same way every sin­gle time?
  1. Sales Meet­ings
    When you hold a sales meet­ing, is every sales­per­son doing the sales meet­ing the exact same way every sin­gle time?

    This can be either iden­ti­cal or fol­low­ing an iden­ti­cal process. Maybe they’re get­ting spe­cif­ic data from the cus­tomer to cus­tomize the sales rep­re­sen­ta­tion, but the ques­tions they’re ask­ing should be stan­dard­ized. When they ask the ques­tions should be stan­dard­ized, and what they do with the infor­ma­tion should also be stan­dard­ized.
  1. Prod­uct Demos
    What’s the best way to do a prod­uct demo? If you get 10 peo­ple to do a prod­uct demo, I guar­an­tee you one of them will have more of their audi­ence con­vert into the next sales stage than oth­ers.

    So, you fig­ure out who’s the per­son doing demos the best and what they’re doing. How can you get every­one to do the exact same thing?
  1. Cus­tomer On-Board­ing, Cus­tomer Upsells, and Cus­tomer Renewals
    Every sort of step, par­tic­u­lar­ly, goes to mar­ket because things are so mea­sur­able on the go-to-mar­ket side. Every­thing should ide­al­ly be done the exact same way regard­less of who’s doing it. That’s the key mes­sage.

    Part­ner chan­nels could be added for scal­a­bil­i­ty depend­ing on how good the strate­gic fit is with the part­ner. If the strate­gic fit is real­ly good, treat it much more like a sales­force. You could have a stan­dard­ized process for this.

    I have a cou­ple of clients where they’re real­ly good at big part­ner­ships and get­ting hun­dreds of new cus­tomers through part­ners. What I mean by “good fit” is this: Do you help your part­ner make a lot of mon­ey?

    Think about this… Let’s say your part­ner is SAP. They’re a big com­pa­ny that lands $10 mil­lion deals. Maybe they’re miss­ing a fea­ture or capa­bil­i­ty that they don’t have in-house. Their cus­tomers won’t sign a con­tract for $10 mil­lion unless they have a par­tic­u­lar capa­bil­i­ty.

    Your com­pa­ny may hap­pen to pro­vide that capa­bil­i­ty. For exam­ple, when you part­ner with SAP, you’re help­ing them solve a $10 mil­lion prob­lem. What­ev­er you do (doesn’t mat­ter what it is), you’re allow­ing that sales­per­son to get a com­mis­sion check on a $10 mil­lion deal. That process can be very stan­dard­ized.

    If you’re pret­ty minor and make no dif­fer­ence to the part­ner, involv­ing you in a deal jeop­ar­dizes the deal and doesn’t give them any ben­e­fit, there’s no actu­al val­ue.

    If the val­ue isn’t big enough for there to be a draw from the part­ner, then the process­es typ­i­cal­ly don’t mat­ter much because there’s just no demand, or very lit­tle demand.

    Being able to close a deal affects both the indi­vid­ual rep lev­el and senior man­age­ment lev­el. If your head of sales missed their quo­ta by $100 mil­lion because they’re miss­ing this capa­bil­i­ty, and R&D says they’ll have this in three years, they’re going to push a lot hard­er because they need to meet the quo­ta now.

    I’ve seen part­ner­ships over the last 30 years fail because, at the senior lev­el, it makes sense to form that part­ner­ship. But then, noth­ing hap­pens because there needs to be added val­ue at the street lev­el. It’s got to work for both for it to work well.

Process Maturity Level Scorecard (Score 0 – 6)

I have this process matu­ri­ty score­card that is a way to rate or grade how sophis­ti­cat­ed or how advanced your process­es are. Here’s how it works:

Think of a process, let’s say out­bound cold call­ing.

Look at these six fac­tors: con­sis­ten­cy of results, per­son depen­den­cy, doc­u­men­ta­tion, new employ­ee train­ing, skill lev­el required, and deci­sion-mak­ing.

  1. Con­sis­ten­cy of Results
    How con­sis­tent are your results when you have an out­bound cold-call­ing team? If your process is pret­ty imma­ture, it’s going to be a hit or miss. If your results are very con­sis­tent (every sin­gle last year does with­in a par­tic­u­lar range), give your­self one point. That’s a mature process.
  1. Per­son Depen­den­cy
    Next, is per­son depen­den­cy. Does get­ting results out of cold call­ing depend on who’s call­ing? If it’s you cold call­ing or you clos­ing the deal, or you doing the demo, do you get bet­ter results than oth­er peo­ple?

    If the results depend on who’s doing it, that’s per­son depen­dent; that’s an imma­ture process.

    If it doesn’t mat­ter who’s doing it, that’s per­son inde­pen­dent. If you go to McDonald’s, it doesn’t real­ly mat­ter who’s mak­ing the burg­er in the bag. The burg­er is the qual­i­ty lev­el that’s been promised. If you go to any Star­bucks any­where in the world and ask for a lat­te, you’re going to get a very con­sis­tent lat­te. It doesn’t mat­ter who’s on shift that day.

    If you’re more like McDonald’s and Star­bucks in terms of your go-to-mar­ket SDR process, give your­self a point.
  1. Doc­u­men­ta­tion
    Step 3 is doc­u­men­ta­tion. Every process that your com­pa­ny has should ide­al­ly have doc­u­men­ta­tion. If it doesn’t, that’s an imma­ture process because it means the “know how” or “how to do some­thing” is in somebody’s head. Often, it’s the founder, par­tic­u­lar­ly in small busi­ness­es.

    If it’s fair­ly well doc­u­ment­ed, that’s a much more mature process, and give your­self a point.
  1. Employ­ee train­ing
    Next, is employ­ee train­ing. What’s the new employ­ee train­ing mod­el? Is it that you hire a new sales­per­son, and they fol­low you around until they fig­ure it out? Do you run them through a cur­ricu­lum? Do you do train­ing tests and assess­ments before you allow them to talk to a cus­tomer?

    If you have a set cur­ricu­lum, give your­self a point.
  1. Skill Lev­el Required
    How much skill lev­el does one need to do some­thing in your com­pa­ny? In order to do an SDR out­bound cold call, you have to know the prod­uct inside and out. You have to know the finan­cial analy­sis around the prod­uct. You have to have been in the indus­try for 25 years at a bare min­i­mum to have the con­ver­sa­tion. The high­er the skill lev­el to do some­thing, the more imma­ture the process is.

    The low­er the skill lev­el you have, the more mature the process. McDonald’s hires min­i­mum wage work­ers and teenagers to flip burg­ers in the back. It doesn’t take a real­ly high skill lev­el to cook food at McDonald’s because they have a process in the sys­tem.

    Again, if the skill lev­el is a low­er skill, give your­self a point.
  1. Deci­sion-Mak­ing
    If deci­sions are large­ly tied to one per­son, typ­i­cal­ly the founder, that’s an imma­ture deci­sion-mak­ing process. If the major­i­ty of deci­sions get made based on poli­cies, deci­sion-mak­ing guide­lines, cri­te­ria, and check­lists, that’s a much more mature process.

    That means a lot more deci­sions can be made at scale much more eas­i­ly. If that sounds like your orga­ni­za­tion, give your­self one point.

    Most pro­fes­sion­al CEOs are in that 4- to 6‑point range. What­ev­er process­es you’re think­ing about, if it’s run well by some­body who’s used to scale, they’re at the upper end of the scale.

    Founders are prob­a­bly in the 0- to 2‑level at best.

    This gives you some sense of process sophis­ti­ca­tion with­in your com­pa­ny and with­in your own skillset as well.

Case Study #2: Unicorns vs. Starbucks

I’ll give you an exam­ple. I’m based out of Seat­tle, so the big com­pa­nies here are Microsoft, Ama­zon, and Star­bucks. I came across this real­ly inter­est­ing fact the oth­er day that when a SaaS com­pa­ny has an enter­prise val­u­a­tion of about $1 bil­lion (about $100 mil­lion in sales), that’s an incred­i­ble accom­plish­ment.

That’s often referred to as a uni­corn. So in the SaaS world, $100 mil­lion in rev­enue is amaz­ing. If you can pull that off in a year, you’re like a hero, you’re on the cov­er of mag­a­zines, and there’s a good chance you’re prob­a­bly a bil­lion­aire.

Inter­est­ing­ly enough, Star­bucks gen­er­ates $100 mil­lion on Tues­day. Every Tues­day, they gen­er­ate $100 mil­lion in sales glob­al­ly. In fact, they also do that every Wednes­day. Lit­er­al­ly every day of the year, they gen­er­ate over $100 mil­lion every 24-hour peri­od. It’s real­ly bor­ing. It’s like real­ly rou­tine. 400,000 employ­ees all doing the exact same thing at the exact same place in the exact same lev­el of qual­i­ty across 60 to 100 coun­tries (what­ev­er they’re in these days).

They do the same thing every 24 hours. The rea­son that’s pos­si­ble is because of the process matu­ri­ty. To get 400,000 employ­ees to make the lat­te the exact same way is pret­ty rou­tine.

Engi­neer­ing $100 mil­lion in sales every 24 hours is a lot of bor­ing process­es, but bor­ing process­es are the ones that scale and make you mon­ey.

Three Ways to Acquire Process Maturity

There are three ways you can get process matu­ri­ty with­in your orga­ni­za­tion.

  1. Hire Lead­ers (with process exper­tise)
    The num­ber one thing is to hire lead­ers who have process exper­tise. I rou­tine­ly get involved with my clients around hir­ing a CFO, a chief rev­enue offi­cer, head of cus­tomer suc­cess, VP of mar­ket­ing, CML, and those kinds of things.

    One of the things I often look for when I’m help­ing my clients do this is, do they have process exper­tise? If you’re look­ing for a head of mar­ket­ing, have they run a mar­ket­ing team between 5 to 35 employ­ees? Have they gone through all the headaches man­ag­ing a more com­plex orga­ni­za­tion? Have they run a mar­ket­ing team that’s with­in a company’s group between $5 mil­lion to $50 mil­lion? That’s your goal.

    Have they gone through grow­ing pains? As busi­ness­es get big­ger, they get more com­pli­cat­ed, and you off­set com­plex­i­ty with process­es. Peo­ple who are used to a par­tic­u­lar life stage of the com­pa­ny, they’ve often­times learned the skill set need­ed to have process­es need­ed to man­age that.

    Man­ag­ing two soft­ware devel­op­ers vs. 200 is total­ly dif­fer­ent.
  1. Out­source (rent some­one else’s process)
    For exam­ple, this could be out­sourc­ing and tak­ing your abil­i­ty to do pay­roll. There’s a skill set need­ed to do pay­roll. There’s a skill set to do tax­es. If you don’t have that exper­tise in-house, is it worth it to learn that, or should you out­source it to some­one else?

    For things that are not core to the busi­ness, out­sourc­ing often is a good option. Relat­ed to out­sourc­ing would be using advi­sors. These would be peo­ple who are bankers, con­sul­tants, or exec­u­tive coach­es (like myself).

    Maybe you run an M&A trans­ac­tion that you don’t want to have in-house because it’s expen­sive, but you need it at a spe­cif­ic point in time, you hire a banker or some­one to help you do a cap­i­tal raise or to acquire a com­pa­ny.
  1. Increase Matu­ri­ty of Exist­ing Process­es

    This one pri­mar­i­ly focus­es on increas­ing the matu­ri­ty of exist­ing process­es with­in your inter­nal resources and inter­nal staff.

    Real­ly you should be doing all three. All the CEOs I work with who are suc­cess­ful are doing all three. They’re hir­ing peo­ple with bet­ter process exper­tise, out­sourc­ing non-core process­es, and improv­ing the in-house process­es.

Seven Steps to Improve Process Maturity

Here are sev­en steps to improve process matu­ri­ty:

  1.   Iden­ti­fy: The best per­former
  2.   Observe: What they do
  3.   Doc­u­ment: Your obser­va­tions
  4.   Switch: Every­one to doc­u­ment­ed best prac­tice
  5.   Hire + Train: New employ­ees to use new process
  6.   Ver­i­fy: Every­one is using the new process
  7.   Exper­i­ment: To find bet­ter process

Then, you repeat the whole process all over again. It’s a pret­ty sim­ple way to do this. It’s so much work in all the dif­fer­ent areas of the com­pa­ny, but this is what man­age­ment real­ly is at cer­tain sides of the busi­ness.

Discipline Execution

Dis­ci­pline exe­cu­tion real­ly is get­ting things done in an order­ly way. Not chaot­ic, with con­sis­tent qual­i­ty, quan­ti­ty, and tim­ing. It is mak­ing things very rou­tine.

Mak­ing a real­ly good lat­te at Star­bucks every sin­gle time is dis­ci­pline exe­cu­tion. Con­sis­tent qual­i­ty, con­sis­tent quan­ti­ty, con­sis­tent tim­ing.

Here’s an exam­ple of that in terms of man­ag­ing dis­ci­pline exe­cu­tion. Look­ing at per­for­mance reviews or per­for­mance-relat­ed feed­back, most founders nev­er do per­for­mance reviews. They very rarely give feed­back to their employ­ees around improve­ment per­for­mance.

Pro­fes­sion­al CEOs will have typ­i­cal­ly week­ly score­cards. Every employ­ee in the com­pa­ny has a grade of how well they did that week. Every­one in the orga­ni­za­tion senior to that per­son should be able to look at that grade.

At Star­bucks, there’s a rat­ing sys­tem. Every barista is rat­ed, and you can look at all 400,000 of them and know how well they’re doing.

Six Steps to Disciplined Execution for Every Role

Here are six steps to get­ting real­ly dis­ci­plined exe­cu­tion in every role:

  1. Goals
  1. Mea­sure­ment (ver­sus Goals)
    This is espe­cial­ly nec­es­sary and much eas­i­er to do in a go-to mar­ket.
  1. Account­abil­i­ty
    This is where peo­ple begin to fall. If there is no goal, you can’t hold peo­ple account­able. If there is a goal, but you don’t mea­sure their progress, then that doesn’t work either. If there is a goal and you mea­sure their progress, but you don’t do any­thing dif­fer­ent­ly if they miss the goal, you’re lack­ing account­abil­i­ty.

    The first three steps, I think founders are extreme­ly poor in. I will see founders who have one or two sales­peo­ple who’ve missed the quo­ta for 28 months in a row. Why are they still here?
  1. Trou­bleshoot­ing
    Why is that per­son miss­ing?
  1. Coach­ing
    If there is some­thing they’re not doing that they know they could do but they’re not, you coach them.

    By the way, Star­bucks has this whole process nailed down. If an employ­ee isn’t work­ing out, there’s a trou­bleshoot­ing process as a part of a page in their man­u­al on how to man­age a Star­bucks loca­tion. It’s a coach­ing process.
  1. Remov­ing Poor Per­form­ers
    If you can do this with­in soft­ware devel­op­ment, if you can do this with­in clients, if you can do this with­in sales, you can scale the orga­ni­za­tion and make it much dif­fer­ent because every key role has a lev­el of struc­ture and dis­ci­pline.

    I find there’s a rea­son I think a lot of founders find this dis­ci­pline exe­cu­tion very dif­fi­cult. There’s an expres­sion here in the U.S. called work­ing for the “man.” That’s refer­ring to work­ing for a big com­pa­ny that’s real­ly annoy­ing. A lot of founders quit because they don’t like that envi­ron­ment and go start their own com­pa­nies.

    They find them­selves in a very iron­ic sit­u­a­tion, which is that the founders who are very suc­cess­ful and have a big com­pa­ny, they have to become that which they hat­ed and ran away from. You have to have all this bureau­cra­cy and struc­ture and per­for­mance reviews to make a big com­pa­ny run. I think that’s one of the rea­sons founders typ­i­cal­ly shy away from that.

    The top three skills you need to learn to become a CEO from a founder are 1) Data-dri­ven deci­sion-mak­ing; 2) Imple­ment­ing stan­dard­ized scale of process­es; and 3) Mak­ing sure there’s dis­ci­pline exe­cu­tion with­in the com­pa­ny.

    Basi­cal­ly, I have what I call a free CEO skills quick start kit. It has the fol­low­ing: the list of the top five spread­sheets that you could be using, the process matu­ri­ty score­card, the check­list of doing dis­ci­pline exe­cu­tion, and a one-page info­graph­ic for dif­fer­ent ways you can scale enter­prise val­ue.

    To get this free resource, go to SaaSCEO.com/vouris. Just fill out the form, and we’ll email you those resources so you can begin using them right away.

How to Get the Most Accurate Data Possible

Get­ting the most accu­rate data pos­si­ble is prob­a­bly the num­ber one obsta­cle. Even if you want to do all this stuff, you have to set up your sys­tems in a way that are con­sis­tent.

Here’s an exam­ple. I have a client who’s in the mid­dle of try­ing to do this. They’re about sev­en or eight months in. They use Salesforce.com to man­age their sales­force. They have a sim­ple field in Sales­force called “indus­try.” About 10 years ago, it was a form field. You would type in finan­cial ser­vices, bank­ing, and insur­ance.

How­ev­er, you can’t run reports off them. You can’t run an LTV/CAC ratio on insur­ance because every­one spelled insur­ance dif­fer­ent­ly. Some abbre­vi­at­ed insur­ance by doing “ins” or “INS.” The data is incon­sis­tent.

There is a process of get­ting data con­sis­ten­cy, either going back and reen­ter­ing every sin­gle record or switch­ing to a drop-down box. Then, you can man­u­al­ly go back and recal­cu­late and recat­e­go­rize every sin­gle record into what’s now in the drop-down box.

If you use few­er sys­tems rather than more, that cer­tain­ly helps a lot. For many, finan­cial data is in one sys­tem, prod­uct usage data is in anoth­er app, and sales data is in a Sales­force man­age­ment sys­tem.

All of my clients will end up min­i­miz­ing the mar­ket sys­tems pos­si­ble. The big­ger ones will take all that data and real­ly merge it into one data­base. That’s much eas­i­er for a larg­er orga­ni­za­tion.

But you can get by with just hav­ing con­sis­ten­cy of fields that the cus­tomer ID should be the same across all sys­tems. Things like that can help make the process eas­i­er.

A good way to think about this too, just a lit­tle heuris­tic for those of you out there, is if you think about any field that you have in a CRM, or any­where you’re log­ging stuff you want to review or get infor­ma­tion, fig­ure out if you can cre­ate a pie graph of this lat­er.

It doesn’t work for every­thing, but what I find is that if the things you’re going to want to see in a pie graph aren’t in a list where you just select the ones that make the most sense, it’ll nev­er work in a pie graph because it’s just going to be a thou­sand lit­tle slices of the pie.

Most folks I work with end up hav­ing to use spread­sheets because there’s not a bet­ter, more ele­gant solu­tion.

Also, I’ll add one tip I wish every­one did ear­li­er in the busi­ness: Have one cus­tomer ID. This helps because Salesforce.com makes a cus­tomer ID to run. Your account­ing sys­tem has a cus­tomer record too. Then, your SaaS app has a cus­tomer record in the data­base.

If you can get all of them to be the same, or at least every data­base has all the oth­ers so it’s con­sis­tent, then you can export data from all three sys­tems, merge them togeth­er, and run reports.

When you don’t have that, “Vic­tor Cheng” in one report is cus­tomer one, two, three, but it’s cus­tomer A624 in anoth­er. Then there are mul­ti­ple cus­tomer num­bers for me. Maybe I change my email address, and the whole thing becomes a com­plete mess.

Closing Thoughts

Being a CEO is a learn­able skill, but it is a dif­fer­ent skill than being a founder. I think my mes­sage here is to be aware of it and decide if you want to tack­le that tran­si­tion. You don’t have to.

You can always hire some­body to do that if you’re far enough along. If you’re going to tack­le the tran­si­tion, real­ize what you don’t know and start work­ing on it at least a lit­tle bit. It gives you a bit of a blue­print of where to head.

Additional Resources

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author avatar
Vic­tor Cheng
Author of Extreme Rev­enue Growth, Exec­u­tive coach, inde­pen­dent board mem­ber, and investor in SaaS com­pa­nies.

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