Jake Pugliano on SaaS impact metrics, scaling, and customer retention

Product State Q&A

Jake Pugliano is a SaaS salesperson at Sendoso who has worked for Series A and Series C companies. He loves marketing, sales, GTM strategy, and believes in removing friction from the sales process to help buyers get whatever it is they’re after.
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EC: After continuous growth in tech over a decade, 2022 has brought an overdue downturn. The IPO window closed on private companies, and public tech companies have seen their stocks plummet. What are the ‘impact’ metrics that later stage & public SaaS CFOs may prioritize in 2023?

JP: There are 2 major ones.

The first one is Net Dollar Retention (NDR), which tells the story of how the entire revenue org is performing. Usually looked at as a percentage, it takes into account new business, growth, downgrades, and churned customers. Anything over 100% is a good NDR right now.

The second one is CAC payback period. This one tells you how many months it takes to recoup what you spend acquiring your customers. The late stage companies that are keeping this under 14 months are doing well right now. Both of these metrics have one thing in common: they can be improved when the prospect or customer has proper expectations about the product they're buying. Product teams can help drive these metrics mainly by keeping their sales and marketing teams honest. Too often, customer-facing teams feel the pressure to overpromise or talk about features that are ‘on the roadmap’ in order to earn business. The problem is, when the promises aren’t met, customers become unhappy, they leave, and the cost to acquire customers begins to rise.

Product teams and customer-facing teams should have a recurring monthly meeting and shared documents that keeps everyone on the same page. The best product teams will clearly outline what features and benefits can be promised to customers, and will take the initiative to make sure their sales and marketing counterparts are fully aware. Ultimately, this isn’t Product’s ‘job’ by any stretch, but the top organizations are amazing at cross-department collaboration and accountability.

EC: Growth startups (Seed thru Series B companies) may still be getting VC money. It won’t be easy, but that VC money needs to go somewhere. What should these startups be focused on to be seen as unicorn potential?

JP: As a salesperson, even I can admit that unicorn potential ultimately boils down to how good the product is. I don’t care how good your sales and marketing are, every truly successful unicorn begins with an amazing product. That said, any founder — with an awesome product — looking to be viewed as the next unicorn, should do these two things.

1) Invest a ton into the product, hire marketers early, and hold off on the sales headcount. Too often, startups hire a bunch of salespeople before they’ve established product market fit. If there's zero demand in the market for your product, you’re setting your sales team (and company) up to fail. Mass emailing and cold calling is spam. It's much more important to create a digital presence through content marketing and community before expecting buyers to have any interest in talking to you. Honestly, a 1-to-1 marketer-to-salesperson ratio in the pre-seed, and Series A phase is probably a good idea. Not only that, but the C-suite for early stage companies should be out there marketing and selling. Founders should create videos, LinkedIn posts, blogs, whatever it takes to get their brand out there.  Once there is sufficient inbound demand for your product, then you can scale sales.

2) Build relationships with VCs BEFORE you're ready to raise. VCs love talking about what they're seeing in the market, and what gets them excited to invest. Ask them about those things before you're even close to bringing in outside money. That way, you can focus your teams and KPIs on the things the VCs will want to look at whenever the time comes for you to raise. I'm not saying that networking with VCs will turn your company into a unicorn overnight, but having the right connections and advice can make a big impact on the company's direction. A big part of becoming a unicorn is getting access to enough capital so you can scale before someone else steals your idea. 

EC: Regardless of size, many companies will be overly focused on driving top of funnel acquisition instead of retention. Why should retention be a greater priority?

JP: Growth at all costs was the best strategy as recently as 2021. Interest rates had been near-0 for over 10 years, so investors had much higher appetites for risk.  VCs wanted to see revenue growth, and they wanted to see it happen fast. It didn't matter how much cash companies were burning, because there was so much money in the market. If they ran out, companies would just raise another round, and they didn't have to focus on the fundamentals of the business.  Now that rates are going to be around 4%-5% for the foreseeable future, investors will be less likely to throw their money at riskier investments.

SaaS businesses are attractive to invest in because they have recurring revenue models. Unlike many consumer goods, SaaS businesses can forecast way more accurately and keep their customers for longer.  That being said, if your customers are unhappy and don't bring you recurring revenue, you lose the majority of your appeal as an investment. I think the best way that product teams can collaborate with their customer-facing teams on retention is by joining their customer success (CS) and onboarding teams on calls wherever possible.

Product teams can be too far removed from the customer at times, and customer-facing teams aren't always the best at providing great feedback to their product teams. If members of the product team joined calls with their CS teams, I think the learnings and collaboration would be extremely valuable. I'm not saying product teams need to spend hours a week doing this, or that they even need to say much on the calls. However, I think the members of product teams would end up really enjoying collaborating on the calls and asking questions about the product that customer-facing teams might not think of or even understand.

Customer feedback is gold for any business,
and product teams can extract it in unique ways.