Scaling and R&D in a SaaS Company
L-SPARK: For starters, what does a SaaS company monitor in terms of their metrics and KPIs if they want to take their company to the next level?
BL: A lot of people don’t want to know the answer, but fact is, they need to determine if their product is being used. You have to know who it’s being used by, how frequently and how relied upon it is within a company. It is also key to know if it is a junior tech or CEO that is using your tool.
If it’s a valuable application it will have deep use, be ingrained in reporting strategies and will be used beyond what you thought it would be.
It’s important to look at the ratio of end user engagement and active open items that need resolution. The more open tickets you have, the more your R&D team has to keep fixing what they thought they finished, and not building the next iteration of the product.
L-SPARK: Is it possible for a SaaS company to scale too quickly?
Bruce Linton: It’s more a matter of scaling too soon rather than too quickly. It’s not a problem to scale rapidly if what you deploy doesn’t result in a multiple compounding problem that you’re trying to fix.
I’ve observed scaling too soon, because you don’t often get a redo — if I convince you that you should use this and it’s really a bad experience because it’s too soon and there’s not enough robustness of features, am I going to be able to convince you a second time, ‘trust me, I have it right.’
L-SPARK: Should R&D be an ongoing focus for SaaS companies?
BL: One way I like to describe R&D is as the practice of ‘customer listening and creating’. There’s a great time to be doing the ‘customer listening and creating’, which is all the time.
It’s always a good time to know what’s going on with your customers, especially as that customer base grows. With a couple of thousand end users, it becomes remarkably clearer what you should do rather than if you only had 200. There’s always three or four top priorities that everybody across the most demanding group want and if you have a big enough sample size, you’re pretty sure you should build that.
L-SPARK: What makes SaaS companies attractive to investors?
BL: The ability to scale — if you get it right, you can get everything. If you get it wrong you still have a cycle to try to get it right again. Traditionally the scaling challenge for software companies looked great compared to hardware companies because all you had to do was generate disks and ship them to people, and then get them to install it on their network, but it still seemed easier than selling them the hardware. Now all you have to do is get your customers to click in 3 places and the software is deployed.
There’s a reason why it’s a busy street — however; beware: it’s also difficult to differentiate due to the high volume of traffic.
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