Today, I want to talk about three key skill gaps that I’ve noticed that startÂup founders typÂiÂcalÂly have in their tranÂsiÂtion to grow into a proÂfesÂsionÂal CEO. I want to talk a litÂtle bit about my backÂground first to give you some sense of perÂspecÂtive of where I come from. I run an execÂuÂtive coachÂing comÂpaÂny called SaaSCEO.com. As you might imagÂine from the name, we focus on menÂtorÂing and develÂopÂing the skills of CEOs in the SaaS indusÂtry.
I’ve been in SaaS for probÂaÂbly 25 years before it was ever called SaaS. I’ve writÂten a couÂple of books. The one relatÂed to SaaS is called Extreme Growth RevÂenue. I startÂed off my career at McKÂinÂsey helpÂing CEOs of ForÂtune 500 comÂpaÂnies – so, in that world, small busiÂnessÂes that have $500 milÂlion in sales.
I’ve sort of done everyÂthing in SaaS from prodÂuct manÂageÂment to prodÂuct marÂketÂing. I was very bad at softÂware develÂopÂment 30 years ago. I mostÂly focus on stratÂeÂgy, growth, the go-to-marÂket side of things (which is why I shouldn’t come with Kyle) as well as priÂvate equiÂty, M&A, and board work. Everything’s sort of front-of-house that I’m pretÂty familÂiar with and have a parÂticÂuÂlar perÂspecÂtive that I’m going to share today.
I want to talk about founder skills vs. CEO skills. They’re actuÂalÂly quite difÂferÂent.
SomeÂtimes you hear the term “founder CEO,” like the CEO that was also the founder of the comÂpaÂny, or founder and CEO. I think of them as two difÂferÂent skill sets. SomeÂtimes the two skill sets can be manÂaged by and delivÂered by the same perÂson. SomeÂtimes there is more of a relay race where the founder passÂes the baton to a proÂfesÂsionÂal CEO – someÂone who was hired to be CEO but did not found the comÂpaÂny. I want to charÂacÂterÂize what these two difÂferÂent 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 realÂly visionÂary, being innoÂvÂaÂtive, being pasÂsionÂate, being fruÂgal. What CEOs are much betÂter at are, what I call, scale-relÂeÂvant skills. ManÂagÂing 100 employÂees is very difÂferÂent from manÂagÂing three employÂees. They have a lot more strucÂture and a lot more disÂciÂpline – those are a high levÂel of what we’re lookÂing at.
What I want to talk about is three speÂcifÂic skills that founders realÂly need to grow into and rise to the occaÂsion of being a CEO.
Top Three Skills Founders Need to Grow into a CEO
NumÂber one, and Kyle alludÂed to this, is data-driÂven deciÂsion-makÂing. If you’re a proÂfesÂsionÂal CEO, you are lookÂing at data conÂstantÂly. You are doing math every sinÂgle day to make betÂter deciÂsions.
The secÂond is impleÂmentÂing and stanÂdardÂizÂing scalÂable busiÂness processÂes. I’m talkÂing a lot more about what I mean by that.
The third is disÂciÂpline exeÂcuÂtion.
A lot of these things, quite canÂdidÂly, I think most of the founders I work with find quite borÂing. These are the things they don’t want to do, which is why I became an entreÂpreÂneur. Yet ironÂiÂcalÂly, if you’re very sucÂcessÂful as an entreÂpreÂneur and founder, you end up in a busiÂness that realÂly needs a CEO to guide it and take it to the next step.
Data-Driven Decision-Making
Data-driÂven deciÂsion-makÂing is the first skill you need to look at develÂopÂment. Founders typÂiÂcalÂly are very visionÂary. They’re very intuÂitive. They’re very opporÂtunisÂtic. They see what’s not there.
So you look at a marÂketÂplace – there’s no data, there’s no prodÂucts, there’s no offerÂing. It’s a very emergÂing marÂket. And from a blank piece of paper, the founder can see someÂthing that othÂers canÂnot see.
They see what’s posÂsiÂble, and they’re able to notice opporÂtuÂniÂties and achieve them. A lot of the deciÂsion-makÂing realÂly is based on intuÂition and gut. In many casÂes, the founders used to be workÂing in the role that would now be the customer’s role.
It would be someÂone who built a prodÂuct for themÂselves and then finds that othÂers are interÂestÂed in it. But they are a pretÂty typÂiÂcal founder stoÂry.
CEOs are quite difÂferÂent in their skill set and their outÂlook. First of all, they’re very pragÂmatÂic. They’re much more data-driÂven, and they’re strateÂgic.
“PragÂmatÂic” means realÂly getÂting the day-to-day things done. As the busiÂness grows, as there are more cusÂtomers, as there are more employÂees, the comÂplexÂiÂty of manÂagÂing a largÂer orgaÂniÂzaÂtion gets a lot more comÂpliÂcatÂed. GetÂting simÂple things done that you’re used to doing yourÂself, but now you have to get it done through 100 employÂees, is a very difÂferÂent skill set.
“StrateÂgic” refers to havÂing stratÂeÂgy – realÂly, it’s makÂing a plan to get your outÂcome. I think a good stratÂeÂgy is reflecÂtive of trade-offs. So CEOs have to make a lot of trade-offs.
When you’re an estabÂlished busiÂness, if you do someÂthing to acquire new cusÂtomers, you might have to disÂtract and take away resources from existÂing cusÂtomers. When you have no cusÂtomers, when you’re startÂing up, there are no trade-offs. EveryÂthing is all upside, no downÂside.
It’s very difÂferÂent as the busiÂness matures.
The othÂer difÂferÂence is CEOs are in spreadÂsheets conÂstantÂly. That is the one thing that comes with a proÂfesÂsionÂal CEO – they are very heavÂiÂly in spreadÂsheets.
Case Study #1
I’ll give you a litÂtle examÂple. I had a client of mine who was a clasÂsic entreÂpreÂneur, founder, and ownÂer of about four or five comÂpaÂnies (and a difÂferÂent numÂber of comÂpaÂnies every time that we talked).
I rememÂber this one phone call I had with him, we were talkÂing about othÂer starÂtups (the smallÂer comÂpaÂnies). At the very end, he goes, “By the way, I also have this comÂpaÂny that has about $10 milÂlion a year in sales.”
I’m like, “Oh, we didn’t talk about that the entire time. Well, tell me more about this busiÂness.” He told me more about the busiÂness.
I asked, “What is your net revÂenue retenÂtion? So, for the cusÂtomers you acquired a year ago, how much monÂey are they spendÂing today?” IncluÂsive of upsells and cross-sales.
He didn’t know…
“Okay, well, go figÂure it out. Here’s the forÂmuÂla. You can Google the forÂmuÂla if you want and go figÂure out what net revÂenue retenÂtion is, and then email me.”
So he emails me back and says, “Net revÂenue retenÂtion is 140%.” So he’s like, okay, whatÂevÂer. I just did the homeÂwork, I’m done.
He finds this busiÂness incredÂiÂbly borÂing. It’s not innoÂvÂaÂtive, it’s not excitÂing. There’s no chalÂlenge, there’s no chaos. He thrives on posÂsiÂbilÂiÂties.
I take that numÂber, and instantÂly I recÂogÂnize its sigÂnifÂiÂcance because I’ve done the math so often, and I ran a quick calÂcuÂlaÂtion. What I realÂized was this busiÂness was going to be a $100 milÂlion-a-year busiÂness withÂin 10 years and probÂaÂbly worth someÂwhere between $500 milÂlion to $1 bilÂlion dolÂlars in roughÂly about eight years.
He had no clue that his net worth was on pace to be $500 milÂlion to $1 bilÂlion withÂin the decade. This is where a CEO would spot that immeÂdiÂateÂly, run the math, run the numÂbers, and go, “Oh, this is a huge opporÂtuÂniÂty.”
We stopped workÂing on the othÂer four busiÂnessÂes that are all under $1 milÂlion in sales and put all this effort into this big one, and this thing has grown like gangÂbusters.
He had a great thing, but didn’t quite realÂize it.
Top 5 Spreadsheets CEOs Use that “Founders” Don’t
We have five spreadÂsheets that I find CEOs typÂiÂcalÂly use that founders typÂiÂcalÂly do not.
- Sales FunÂnel Stage Report
First is a “Sales FunÂnel 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 meetÂings do you have? How many demos do we delivÂer? This day, this week, this month, this quarÂter. At a glance, a CEO would need to know that.
- Sales FunÂnel ConÂverÂsion Rates
The secÂond sheet a proÂfesÂsionÂal CEO would have is what I call a “Sales FunÂnel ConÂverÂsion Rates” report. That is, for examÂple, what perÂcentÂage of the demos we give goes on to the next sales day, such as proÂposÂals. Maybe it’s one in three. So, for every three demos, we get one proÂposÂal.Maybe every two proÂposÂals, we get one close to it. That sort of ratios or perÂcentÂages, dependÂing on how you like to repÂreÂsent the numÂbers, is realÂly imporÂtant to underÂstand the go-to-marÂket side of the busiÂness.
- LTV/CAC Ratio
From a strateÂgic standÂpoint, LTV vs. CAC ratio – this is a lifeÂtime valÂue of a cusÂtomer dividÂed by their cusÂtomer acquiÂsiÂtion cost and the ratio between the two. What we find is that more sophisÂtiÂcatÂed busiÂnessÂes know what the LTV/CAC ratio is for the comÂpaÂny overÂall.You might know what that is for your comÂpaÂny overÂall, but the more sophisÂtiÂcatÂed comÂpaÂnies know what the LTV/CAC ratio is by cusÂtomer acquiÂsiÂtion cohort. So, all the cusÂtomers acquired this month vs. last month vs. a year ago by the cusÂtomer segÂments.
If you serve mulÂtiÂple verÂtiÂcals, if you serve finanÂcial serÂvices, if you serve manÂuÂfacÂturÂing, what is the LTV/CAC ratio for each of those difÂferÂent proÂtoÂcols?
If you serve cusÂtomers through mulÂtiÂple sales chanÂnels, maybe through outÂbound cold callÂing, through partÂnerÂships, and referÂrals, what is the LTV/CAC ratio for each of those parÂticÂuÂlar chanÂnels?
If you genÂerÂate leads to SEO, what’s the LTV/CAC ratio for those parÂticÂuÂlar prospects vs. inbound marÂketÂing vs. outÂbound cold callÂing vs. trade shows? There are many difÂferÂent ways to acquire it.
The reaÂson is this tells you where the opporÂtuÂniÂties are. This is what CEOs do. They do the math, they do the calÂcuÂlaÂtions, and they figÂure out where you are going to get the most “bang for your buck” in terms of your operÂatÂing budÂget.
- Churn Rates
Churn ratios conÂtribute to lifeÂtime valÂue by those same slices – by cohort, cusÂtomer segÂment, chanÂnel, and lead source.
- ScalÂing FinanÂcial ForeÂcastÂing ModÂel with EmployÂee to ActivÂiÂty CapacÂiÂty
The fifth one (usuÂalÂly for busiÂnessÂes a litÂtle bigÂger, such as maybe $5 milÂlion to $10 milÂlion in sales and above) is a finanÂcial foreÂcastÂing modÂel, a growth modÂel. If you have a good sales process, and it’s realÂly conÂsisÂtent, then it comes time to grow.If you were to want to increase sales by $5 or $10 milÂlion in ARR, how much monÂey would you need to fund the sales and marÂketÂing effort? There’s a finanÂcial calÂcuÂlaÂtion spreadÂsheet that would be able to tell you that.
The key thing here is when you see busiÂnessÂes that may be over $10 milÂlion in sales, you see a lot of what I call activÂiÂty ratios per employÂee. So an SDR. How many phone calls or cold outÂreachÂes can an SDR make in a givÂen day?
There’s usuÂalÂly a numÂber for busiÂnessÂes that are well-meaÂsured and realÂly run by the numÂbers. There’s a tarÂget numÂber. There’s a numÂber for how many proÂposÂals and demos a parÂticÂuÂlar employÂee can hanÂdle.
As you scale, say from five peoÂple to 80 or 100 peoÂple, these ratios become imporÂtant. Every time you hire sevÂen SDRs, you need to hire one sales manÂagÂer, or one SDR manÂagÂer.
All those calÂcuÂlaÂtions around transÂlatÂing revÂenue into staffing requireÂments help you figÂure out if you have enough resources to make the numÂber you’re tryÂing to get to.
There’s a difÂferÂence between havÂing the report and underÂstandÂing the report. Then, there’s using the report to make betÂter deciÂsions. I would disÂtinÂguish between those three. I do see a lot of CEOs (or founders) who have the report, but they don’t know how to interÂpret it.
They’re not makÂing betÂter deciÂsions because of it. They’re glancÂing at it and may realÂize it’s the same as last week, and they think they’re okay. I think there’s a shift. If someÂone comes from more of a CFO backÂground, they’ll look a lot more at LTV vs. CAC and churn rates, but most founders do not typÂiÂcalÂly come from a CFO backÂground.
TechÂniÂcal founders don’t look at any of this. If sales are down, they think they need more feaÂtures. Every sinÂgle probÂlem in the busiÂness can be solved by more feaÂtures… That’s kind of their bias.
Some of that’s very sales-oriÂentÂed, in which they tend to look at the first two reports in terms of driÂving activÂiÂty in sales, but they tend not to look at profÂitabilÂiÂty.
You may have closed a deal, but is the cusÂtomer still here a year latÂer? You don’t know if they stayed as cusÂtomers or left three months latÂer. Things like LTV vs. CAC and churn rates are things that typÂiÂcalÂly sales execÂuÂtives are not hisÂtorÂiÂcalÂly held accountÂable for, and cerÂtainÂly not salesÂpeoÂple. They tend not to look at those, but that’s where the enterÂprise valÂue is driÂven by both the numÂber of new cusÂtomers, how much they spend, and how profÂitable they are. This largeÂly depends on how long they stay as a cusÂtomer.
Implementing Standardized Scalable Processes
There are three words that nobody realÂly wants to deal with – stanÂdardÂizaÂtion, scalÂaÂbilÂiÂty, and processÂes. That’s pretÂty borÂing, but it does make a difÂferÂence in terms of being able to grow.
If you look at the menÂtal oriÂenÂtaÂtion of how a founder thinks about getÂting work done vs. the CEO, it is night and day difÂferÂent.
Founders typÂiÂcalÂly just get it done. They don’t care how you do it, as long as it works, as long as it’s effecÂtive, it doesn’t matÂter. Let’s just get it done. When you have under five employÂees, absoluteÂly, just get it done.
As you get bigÂger, that’s the worst approach. It doesn’t work when you have 20 to 500 employÂees. It becomes increasÂingÂly imporÂtant that every sinÂgle employÂee who’s involved in a parÂticÂuÂlar busiÂness process (maybe genÂerÂatÂing leads, onboardÂing cusÂtomers, doing techÂniÂcal supÂport calls) needs to do it the exact same way.
A lead is genÂerÂatÂed via cold callÂing the exact same way, regardÂless of which SDR does it. A new cusÂtomer is onboardÂed the exact same way, regardÂless of which perÂson in cusÂtomer sucÂcess is involved in that.
StanÂdardÂizaÂtion becomes extremeÂly imporÂtant because you can’t scale beyond a cerÂtain point withÂout it.
Definitions
Here are some defÂiÂnÂiÂtions and metÂrics that you can use to assess your own processÂes.
A process is a sequence of steps that are conÂsisÂtent and stanÂdardÂized to proÂduce a parÂticÂuÂlar result that is also conÂsisÂtent.
Think of a recipe… If you folÂlow the recipe exactÂly every sinÂgle time, you get what you want out of it. Let’s say you bake a cake. You folÂlow the same steps every time, you get the same cake every time. If you wing it, change the ingreÂdiÂents, change the bakÂing temÂperÂaÂture, or change the bakÂing time, you’re not going to get conÂsisÂtent results.
A scalÂable process is a sequence of stanÂdardÂized steps to proÂduce a conÂsisÂtent result that conÂtinÂues to work as you douÂble and triple budÂget and staffing.
If you were to triple the spendÂing on sales and marÂketÂing, do your new bookÂings and new deals douÂble or even triple? SomeÂtimes you have processÂes that don’t scale. A very comÂmon one is referÂrals.
ReferÂrals are a great source of cusÂtomers. They tend to have very good lifeÂtime valÂue. They tend to be easy to sell, but the probÂlem is that you can’t triple your referÂral budÂgets. You can’t add three more peoÂple to the referÂral team and get three times as many referÂrals. It doesn’t scale beyond a cerÂtain point.
Common (Hopefully) Standardized Processes
Here are some processÂes that hopeÂfulÂly should be stanÂdardÂized.
- Lead GenÂerÂaÂtion
Are you doing SEO the same way every sinÂgle time? Are doing cold callÂing or outÂbound cold outÂreach the same way every sinÂgle time?
- Sales MeetÂings
When you hold a sales meetÂing, is every salesÂperÂson doing the sales meetÂing the exact same way every sinÂgle time?
This can be either idenÂtiÂcal or folÂlowÂing an idenÂtiÂcal process. Maybe they’re getÂting speÂcifÂic data from the cusÂtomer to cusÂtomize the sales repÂreÂsenÂtaÂtion, but the quesÂtions they’re askÂing should be stanÂdardÂized. When they ask the quesÂtions should be stanÂdardÂized, and what they do with the inforÂmaÂtion should also be stanÂdardÂized.
- ProdÂuct Demos
What’s the best way to do a prodÂuct demo? If you get 10 peoÂple to do a prodÂuct demo, I guarÂanÂtee you one of them will have more of their audiÂence conÂvert into the next sales stage than othÂers.
So, you figÂure out who’s the perÂson doing demos the best and what they’re doing. How can you get everyÂone to do the exact same thing?
- CusÂtomer On-BoardÂing, CusÂtomer Upsells, and CusÂtomer Renewals
Every sort of step, parÂticÂuÂlarÂly, goes to marÂket because things are so meaÂsurÂable on the go-to-marÂket side. EveryÂthing should ideÂalÂly be done the exact same way regardÂless of who’s doing it. That’s the key mesÂsage.
PartÂner chanÂnels could be added for scalÂaÂbilÂiÂty dependÂing on how good the strateÂgic fit is with the partÂner. If the strateÂgic fit is realÂly good, treat it much more like a salesÂforce. You could have a stanÂdardÂized process for this.
I have a couÂple of clients where they’re realÂly good at big partÂnerÂships and getÂting hunÂdreds of new cusÂtomers through partÂners. What I mean by “good fit” is this: Do you help your partÂner make a lot of monÂey?
Think about this… Let’s say your partÂner is SAP. They’re a big comÂpaÂny that lands $10 milÂlion deals. Maybe they’re missÂing a feaÂture or capaÂbilÂiÂty that they don’t have in-house. Their cusÂtomers won’t sign a conÂtract for $10 milÂlion unless they have a parÂticÂuÂlar capaÂbilÂiÂty.
Your comÂpaÂny may hapÂpen to proÂvide that capaÂbilÂiÂty. For examÂple, when you partÂner with SAP, you’re helpÂing them solve a $10 milÂlion probÂlem. WhatÂevÂer you do (doesn’t matÂter what it is), you’re allowÂing that salesÂperÂson to get a comÂmisÂsion check on a $10 milÂlion deal. That process can be very stanÂdardÂized.
If you’re pretÂty minor and make no difÂferÂence to the partÂner, involvÂing you in a deal jeopÂarÂdizes the deal and doesn’t give them any benÂeÂfit, there’s no actuÂal valÂue.
If the valÂue isn’t big enough for there to be a draw from the partÂner, then the processÂes typÂiÂcalÂly don’t matÂter much because there’s just no demand, or very litÂtle demand.
Being able to close a deal affects both the indiÂvidÂual rep levÂel and senior manÂageÂment levÂel. If your head of sales missed their quoÂta by $100 milÂlion because they’re missÂing this capaÂbilÂiÂty, and R&D says they’ll have this in three years, they’re going to push a lot hardÂer because they need to meet the quoÂta now.
I’ve seen partÂnerÂships over the last 30 years fail because, at the senior levÂel, it makes sense to form that partÂnerÂship. But then, nothÂing hapÂpens because there needs to be added valÂue at the street levÂel. It’s got to work for both for it to work well.
Process Maturity Level Scorecard (Score 0 – 6)
I have this process matuÂriÂty scoreÂcard that is a way to rate or grade how sophisÂtiÂcatÂed or how advanced your processÂes are. Here’s how it works:
Think of a process, let’s say outÂbound cold callÂing.
Look at these six facÂtors: conÂsisÂtenÂcy of results, perÂson depenÂdenÂcy, docÂuÂmenÂtaÂtion, new employÂee trainÂing, skill levÂel required, and deciÂsion-makÂing.
- ConÂsisÂtenÂcy of Results
How conÂsisÂtent are your results when you have an outÂbound cold-callÂing team? If your process is pretÂty immaÂture, it’s going to be a hit or miss. If your results are very conÂsisÂtent (every sinÂgle last year does withÂin a parÂticÂuÂlar range), give yourÂself one point. That’s a mature process.
- PerÂson DepenÂdenÂcy
Next, is perÂson depenÂdenÂcy. Does getÂting results out of cold callÂing depend on who’s callÂing? If it’s you cold callÂing or you closÂing the deal, or you doing the demo, do you get betÂter results than othÂer peoÂple?
If the results depend on who’s doing it, that’s perÂson depenÂdent; that’s an immaÂture process.
If it doesn’t matÂter who’s doing it, that’s perÂson indeÂpenÂdent. If you go to McDonald’s, it doesn’t realÂly matÂter who’s makÂing the burgÂer in the bag. The burgÂer is the qualÂiÂty levÂel that’s been promised. If you go to any StarÂbucks anyÂwhere in the world and ask for a latÂte, you’re going to get a very conÂsisÂtent latÂte. It doesn’t matÂter who’s on shift that day.
If you’re more like McDonald’s and StarÂbucks in terms of your go-to-marÂket SDR process, give yourÂself a point.
- DocÂuÂmenÂtaÂtion
Step 3 is docÂuÂmenÂtaÂtion. Every process that your comÂpaÂny has should ideÂalÂly have docÂuÂmenÂtaÂtion. If it doesn’t, that’s an immaÂture process because it means the “know how” or “how to do someÂthing” is in somebody’s head. Often, it’s the founder, parÂticÂuÂlarÂly in small busiÂnessÂes.
If it’s fairÂly well docÂuÂmentÂed, that’s a much more mature process, and give yourÂself a point.
- EmployÂee trainÂing
Next, is employÂee trainÂing. What’s the new employÂee trainÂing modÂel? Is it that you hire a new salesÂperÂson, and they folÂlow you around until they figÂure it out? Do you run them through a curÂricuÂlum? Do you do trainÂing tests and assessÂments before you allow them to talk to a cusÂtomer?
If you have a set curÂricuÂlum, give yourÂself a point.
- Skill LevÂel Required
How much skill levÂel does one need to do someÂthing in your comÂpaÂny? In order to do an SDR outÂbound cold call, you have to know the prodÂuct inside and out. You have to know the finanÂcial analyÂsis around the prodÂuct. You have to have been in the indusÂtry for 25 years at a bare minÂiÂmum to have the conÂverÂsaÂtion. The highÂer the skill levÂel to do someÂthing, the more immaÂture the process is.
The lowÂer the skill levÂel you have, the more mature the process. McDonald’s hires minÂiÂmum wage workÂers and teenagers to flip burgÂers in the back. It doesn’t take a realÂly high skill levÂel to cook food at McDonald’s because they have a process in the sysÂtem.
Again, if the skill levÂel is a lowÂer skill, give yourÂself a point.
- DeciÂsion-MakÂing
If deciÂsions are largeÂly tied to one perÂson, typÂiÂcalÂly the founder, that’s an immaÂture deciÂsion-makÂing process. If the majorÂiÂty of deciÂsions get made based on poliÂcies, deciÂsion-makÂing guideÂlines, criÂteÂria, and checkÂlists, that’s a much more mature process.
That means a lot more deciÂsions can be made at scale much more easÂiÂly. If that sounds like your orgaÂniÂzaÂtion, give yourÂself one point.
Most proÂfesÂsionÂal CEOs are in that 4- to 6‑point range. WhatÂevÂer processÂes you’re thinkÂing about, if it’s run well by someÂbody who’s used to scale, they’re at the upper end of the scale.
Founders are probÂaÂbly in the 0- to 2‑level at best.
This gives you some sense of process sophisÂtiÂcaÂtion withÂin your comÂpaÂny and withÂin your own skillset as well.
Case Study #2: Unicorns vs. Starbucks
I’ll give you an examÂple. I’m based out of SeatÂtle, so the big comÂpaÂnies here are Microsoft, AmaÂzon, and StarÂbucks. I came across this realÂly interÂestÂing fact the othÂer day that when a SaaS comÂpaÂny has an enterÂprise valÂuÂaÂtion of about $1 bilÂlion (about $100 milÂlion in sales), that’s an incredÂiÂble accomÂplishÂment.
That’s often referred to as a uniÂcorn. So in the SaaS world, $100 milÂlion in revÂenue is amazÂing. If you can pull that off in a year, you’re like a hero, you’re on the covÂer of magÂaÂzines, and there’s a good chance you’re probÂaÂbly a bilÂlionÂaire.
InterÂestÂingÂly enough, StarÂbucks genÂerÂates $100 milÂlion on TuesÂday. Every TuesÂday, they genÂerÂate $100 milÂlion in sales globÂalÂly. In fact, they also do that every WednesÂday. LitÂerÂalÂly every day of the year, they genÂerÂate over $100 milÂlion every 24-hour periÂod. It’s realÂly borÂing. It’s like realÂly rouÂtine. 400,000 employÂees all doing the exact same thing at the exact same place in the exact same levÂel of qualÂiÂty across 60 to 100 counÂtries (whatÂevÂer they’re in these days).
They do the same thing every 24 hours. The reaÂson that’s posÂsiÂble is because of the process matuÂriÂty. To get 400,000 employÂees to make the latÂte the exact same way is pretÂty rouÂtine.
EngiÂneerÂing $100 milÂlion in sales every 24 hours is a lot of borÂing processÂes, but borÂing processÂes are the ones that scale and make you monÂey.
Three Ways to Acquire Process Maturity
There are three ways you can get process matuÂriÂty withÂin your orgaÂniÂzaÂtion.
- Hire LeadÂers (with process experÂtise)
The numÂber one thing is to hire leadÂers who have process experÂtise. I rouÂtineÂly get involved with my clients around hirÂing a CFO, a chief revÂenue offiÂcer, head of cusÂtomer sucÂcess, VP of marÂketÂing, CML, and those kinds of things.
One of the things I often look for when I’m helpÂing my clients do this is, do they have process experÂtise? If you’re lookÂing for a head of marÂketÂing, have they run a marÂketÂing team between 5 to 35 employÂees? Have they gone through all the headaches manÂagÂing a more comÂplex orgaÂniÂzaÂtion? Have they run a marÂketÂing team that’s withÂin a company’s group between $5 milÂlion to $50 milÂlion? That’s your goal.
Have they gone through growÂing pains? As busiÂnessÂes get bigÂger, they get more comÂpliÂcatÂed, and you offÂset comÂplexÂiÂty with processÂes. PeoÂple who are used to a parÂticÂuÂlar life stage of the comÂpaÂny, they’ve oftenÂtimes learned the skill set needÂed to have processÂes needÂed to manÂage that.
ManÂagÂing two softÂware develÂopÂers vs. 200 is totalÂly difÂferÂent.
- OutÂsource (rent someÂone else’s process)
For examÂple, this could be outÂsourcÂing and takÂing your abilÂiÂty to do payÂroll. There’s a skill set needÂed to do payÂroll. There’s a skill set to do taxÂes. If you don’t have that experÂtise in-house, is it worth it to learn that, or should you outÂsource it to someÂone else?
For things that are not core to the busiÂness, outÂsourcÂing often is a good option. RelatÂed to outÂsourcÂing would be using adviÂsors. These would be peoÂple who are bankers, conÂsulÂtants, or execÂuÂtive coachÂes (like myself).
Maybe you run an M&A transÂacÂtion that you don’t want to have in-house because it’s expenÂsive, but you need it at a speÂcifÂic point in time, you hire a banker or someÂone to help you do a capÂiÂtal raise or to acquire a comÂpaÂny.
- Increase MatuÂriÂty of ExistÂing ProcessÂes
This one priÂmarÂiÂly focusÂes on increasÂing the matuÂriÂty of existÂing processÂes withÂin your interÂnal resources and interÂnal staff.
RealÂly you should be doing all three. All the CEOs I work with who are sucÂcessÂful are doing all three. They’re hirÂing peoÂple with betÂter process experÂtise, outÂsourcÂing non-core processÂes, and improvÂing the in-house processÂes.
Seven Steps to Improve Process Maturity
Here are sevÂen steps to improve process matuÂriÂty:
- IdenÂtiÂfy: The best perÂformer
- Observe: What they do
- DocÂuÂment: Your obserÂvaÂtions
- Switch: EveryÂone to docÂuÂmentÂed best pracÂtice
- Hire + Train: New employÂees to use new process
- VerÂiÂfy: EveryÂone is using the new process
- ExperÂiÂment: To find betÂter process
Then, you repeat the whole process all over again. It’s a pretÂty simÂple way to do this. It’s so much work in all the difÂferÂent areas of the comÂpaÂny, but this is what manÂageÂment realÂly is at cerÂtain sides of the busiÂness.
Discipline Execution
DisÂciÂpline exeÂcuÂtion realÂly is getÂting things done in an orderÂly way. Not chaotÂic, with conÂsisÂtent qualÂiÂty, quanÂtiÂty, and timÂing. It is makÂing things very rouÂtine.
MakÂing a realÂly good latÂte at StarÂbucks every sinÂgle time is disÂciÂpline exeÂcuÂtion. ConÂsisÂtent qualÂiÂty, conÂsisÂtent quanÂtiÂty, conÂsisÂtent timÂing.
Here’s an examÂple of that in terms of manÂagÂing disÂciÂpline exeÂcuÂtion. LookÂing at perÂforÂmance reviews or perÂforÂmance-relatÂed feedÂback, most founders nevÂer do perÂforÂmance reviews. They very rarely give feedÂback to their employÂees around improveÂment perÂforÂmance.
ProÂfesÂsionÂal CEOs will have typÂiÂcalÂly weekÂly scoreÂcards. Every employÂee in the comÂpaÂny has a grade of how well they did that week. EveryÂone in the orgaÂniÂzaÂtion senior to that perÂson should be able to look at that grade.
At StarÂbucks, there’s a ratÂing sysÂtem. Every barista is ratÂed, 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 getÂting realÂly disÂciÂplined exeÂcuÂtion in every role:
- Goals
- MeaÂsureÂment (verÂsus Goals)
This is espeÂcialÂly necÂesÂsary and much easÂiÂer to do in a go-to marÂket.
- AccountÂabilÂiÂty
This is where peoÂple begin to fall. If there is no goal, you can’t hold peoÂple accountÂable. If there is a goal, but you don’t meaÂsure their progress, then that doesn’t work either. If there is a goal and you meaÂsure their progress, but you don’t do anyÂthing difÂferÂentÂly if they miss the goal, you’re lackÂing accountÂabilÂiÂty.
The first three steps, I think founders are extremeÂly poor in. I will see founders who have one or two salesÂpeoÂple who’ve missed the quoÂta for 28 months in a row. Why are they still here?
- TrouÂbleshootÂing
Why is that perÂson missÂing?
- CoachÂing
If there is someÂthing they’re not doing that they know they could do but they’re not, you coach them.
By the way, StarÂbucks has this whole process nailed down. If an employÂee isn’t workÂing out, there’s a trouÂbleshootÂing process as a part of a page in their manÂuÂal on how to manÂage a StarÂbucks locaÂtion. It’s a coachÂing process.
- RemovÂing Poor PerÂformÂers
If you can do this withÂin softÂware develÂopÂment, if you can do this withÂin clients, if you can do this withÂin sales, you can scale the orgaÂniÂzaÂtion and make it much difÂferÂent because every key role has a levÂel of strucÂture and disÂciÂpline.
I find there’s a reaÂson I think a lot of founders find this disÂciÂpline exeÂcuÂtion very difÂfiÂcult. There’s an expresÂsion here in the U.S. called workÂing for the “man.” That’s referÂring to workÂing for a big comÂpaÂny that’s realÂly annoyÂing. A lot of founders quit because they don’t like that enviÂronÂment and go start their own comÂpaÂnies.
They find themÂselves in a very ironÂic sitÂuÂaÂtion, which is that the founders who are very sucÂcessÂful and have a big comÂpaÂny, they have to become that which they hatÂed and ran away from. You have to have all this bureauÂcraÂcy and strucÂture and perÂforÂmance reviews to make a big comÂpaÂny run. I think that’s one of the reaÂsons founders typÂiÂcalÂly shy away from that.
The top three skills you need to learn to become a CEO from a founder are 1) Data-driÂven deciÂsion-makÂing; 2) ImpleÂmentÂing stanÂdardÂized scale of processÂes; and 3) MakÂing sure there’s disÂciÂpline exeÂcuÂtion withÂin the comÂpaÂny.
BasiÂcalÂly, I have what I call a free CEO skills quick start kit. It has the folÂlowÂing: the list of the top five spreadÂsheets that you could be using, the process matuÂriÂty scoreÂcard, the checkÂlist of doing disÂciÂpline exeÂcuÂtion, and a one-page infoÂgraphÂic for difÂferÂent ways you can scale enterÂprise valÂue.
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
GetÂting the most accuÂrate data posÂsiÂble is probÂaÂbly the numÂber one obstaÂcle. Even if you want to do all this stuff, you have to set up your sysÂtems in a way that are conÂsisÂtent.
Here’s an examÂple. I have a client who’s in the midÂdle of tryÂing to do this. They’re about sevÂen or eight months in. They use Salesforce.com to manÂage their salesÂforce. They have a simÂple field in SalesÂforce called “indusÂtry.” About 10 years ago, it was a form field. You would type in finanÂcial serÂvices, bankÂing, and insurÂance.
HowÂevÂer, you can’t run reports off them. You can’t run an LTV/CAC ratio on insurÂance because everyÂone spelled insurÂance difÂferÂentÂly. Some abbreÂviÂatÂed insurÂance by doing “ins” or “INS.” The data is inconÂsisÂtent.
There is a process of getÂting data conÂsisÂtenÂcy, either going back and reenÂterÂing every sinÂgle record or switchÂing to a drop-down box. Then, you can manÂuÂalÂly go back and recalÂcuÂlate and recatÂeÂgoÂrize every sinÂgle record into what’s now in the drop-down box.
If you use fewÂer sysÂtems rather than more, that cerÂtainÂly helps a lot. For many, finanÂcial data is in one sysÂtem, prodÂuct usage data is in anothÂer app, and sales data is in a SalesÂforce manÂageÂment sysÂtem.
All of my clients will end up minÂiÂmizÂing the marÂket sysÂtems posÂsiÂble. The bigÂger ones will take all that data and realÂly merge it into one dataÂbase. That’s much easÂiÂer for a largÂer orgaÂniÂzaÂtion.
But you can get by with just havÂing conÂsisÂtenÂcy of fields that the cusÂtomer ID should be the same across all sysÂtems. Things like that can help make the process easÂiÂer.
A good way to think about this too, just a litÂtle heurisÂtic for those of you out there, is if you think about any field that you have in a CRM, or anyÂwhere you’re logÂging stuff you want to review or get inforÂmaÂtion, figÂure out if you can creÂate a pie graph of this latÂer.
It doesn’t work for everyÂthing, 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 nevÂer work in a pie graph because it’s just going to be a thouÂsand litÂtle slices of the pie.
Most folks I work with end up havÂing to use spreadÂsheets because there’s not a betÂter, more eleÂgant soluÂtion.
Also, I’ll add one tip I wish everyÂone did earÂliÂer in the busiÂness: Have one cusÂtomer ID. This helps because Salesforce.com makes a cusÂtomer ID to run. Your accountÂing sysÂtem has a cusÂtomer record too. Then, your SaaS app has a cusÂtomer record in the dataÂbase.
If you can get all of them to be the same, or at least every dataÂbase has all the othÂers so it’s conÂsisÂtent, then you can export data from all three sysÂtems, merge them togethÂer, and run reports.
When you don’t have that, “VicÂtor Cheng” in one report is cusÂtomer one, two, three, but it’s cusÂtomer A624 in anothÂer. Then there are mulÂtiÂple cusÂtomer numÂbers for me. Maybe I change my email address, and the whole thing becomes a comÂplete mess.
Closing Thoughts
Being a CEO is a learnÂable skill, but it is a difÂferÂent skill than being a founder. I think my mesÂsage here is to be aware of it and decide if you want to tackÂle that tranÂsiÂtion. You don’t have to.
You can always hire someÂbody to do that if you’re far enough along. If you’re going to tackÂle the tranÂsiÂtion, realÂize what you don’t know and start workÂing on it at least a litÂtle bit. It gives you a bit of a blueÂprint of where to head.
Additional Resources
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How to Scale and Grow a SaaS BusiÂness
