Bad advice is everywhere these days. Hundreds of thousands of experts are telling you how to succeed in SaaS. Many of those voices are incredible, yet terrible bits of advice pops up again and again.
On top of that, founders are full of excuses preventing them from scaling.
SaaStr Founder and CEO Jason Lemkin shares the 10 worst pieces of SaaS advice, excuses, and mistakes founders make, and what to do instead.
#1 “Ask VCs for advice when you want money. Ask for money when you want advice.”
There’s a gem of truth in this. To some extent, if you have the hottest startup in the world, the full package, you can play some games with investors.
99% of startups aren’t that. You have to understand how venture capital works. VCs only see a handful of truly great companies per month and hundreds that are almost there with a hint of something interesting. No one has time to have coffee with all of those folks.
So if you’re good but not obvious, put it all out there. If you want to increase your odds of getting a deal done:
- Send the world’s best cold email
- Create the world’s best deck
- Have customer references ready to go
- Don’t play games
- Be clear on how much you want to raise, when, why, and where you’re at.
For 99% of startups, when you want money, tell VCs you want money. If you want advice, you probably won’t get it from VCs, but ask anyway.
#2 “Give the VP of Sales more time.”
It never works, folks! You can’t always expect a great VP of Sales to double sales in 30-60-90 days. Although, it does happen.
But you have to see progress in one sales cycle.
You have to see:
- A couple of good hires brought in
- Improvement on some metrics
- A big deal or two hanging out there, brought in and closed
- Things taken off your plate.
If, in one sales cycle, things aren’t improving on several core metrics, they never will.
The best VPs of Sales hit the ground running. They know the product or learn it fast, bring a couple of ringers with them, and move out low performers. They know sales processes, objections, and timings, so they bring in a few deals in the pipe to close faster.
So no, more time does not make a VP of Sales better. More time may make them better if they’re already progressing, even if it’s just 10-15% in the first sales cycle. That often compounds. You can’t expect epic improvement, but if you don’t see it in ONE sales cycle or less, you’ve made a mis-hire and need to course-correct.
Read more: 30+ SaaS CEOs Share The Signs Their First VP of Sales … Just Wasn’t Going to Work Out
#3 “We can’t afford it.”
This is something you hear from the good-but-not-great or mediocre founders who have settled into slow growth.
“We can’t afford a VP of marketing, a VP of Sales, Customer Success.”
It’s just not true! The reason you’re saying it is true is because you’ve never worked with a great one. In the very early days, when you have no money, maybe you can’t afford the base salaries. But after a couple million in ARR, you can afford any hire if they’re accretive.
SaaStr has done the math before. Every day, a founder doing millions or tens of millions in revenue says they can’t afford something that is ROI positive.
If you hire a VP of Engineering who wants a $250k comp package, all you have to do is ship two more huge features that let you close two big enterprise deals, and they’ve paid for themselves.
Maybe you don’t want to pay for that VP of Sales. But what if, instead of going from $2-$3M this year, you go from $2-$3.5/4M? They’ve paid for themselves and then some.
Once you’ve done and seen it, almost any 10x hire more than pays for itself.
What can’t you afford? Hiring someone too junior. That’s when it gets too expensive when they can’t own it, and it actually costs you money.
With the high margins, recurring revenue, and upsell opportunities we have in Saas, you’ll never see a great VP of any role not be accretive.
You can always afford a truly great VP. It’s the mediocre hires you can’t afford.
#4 Let’s add a freemium or cheaper edition. Or let’s go PLG. It will solve our problems.”
No, it won’t. PLG aren’t magic letters that fix a broken business model. Freemium isn’t a marketing strategy. Adding a free edition doesn’t magically give you millions of users to convert to paid.
Many people think it’s cheaper than a sales or marketing-led initiative, and it’s the wrong way to do it.
The right way to do freemium, PLG, or low-end initiatives is…
To say, “Things are going pretty well, but we’re losing this segment of the market. We’re going to invest, and we’re going to make a freemium or PLG or low-end edition a top-three corporate priority. We’re going all in, folks. We know it will work and have some data to back it up.”
That approach often works. But most companies aren’t doing that. So adding a freemium edition can be great and tends to make the product better because it has to be self-serve, and low-end is great if you have strong organic demand. But freemium on its own is not a GTM strategy. PLG is not a GTM strategy. Adding PLG and a crummy self-serve doesn’t solve your problems and can actually add to cost and distract your team with low-end leads.
The takeaway?
PLG, freemium, and low-end are great, but they don’t magically solve your problems. Especially if you don’t go all in.
#5 “I don’t need a real VP of X…yet.”
You always do. Whatever role it is, you need it. This is similar to saying you can’t afford a VP of whatever.
“I’ve never ever ever seen a junior marketer get you the leads that a Head of Marketing would get,” says Lemkin.
“I’ve never seen a junior product person that can’t manage engineers and hasn’t shipped significant product to market do what you hope a VP of Product does. It never works.”
A junior product person as your first product person never works. The junior marketer might work a tiny bit, but you’ll never get MQLs or SQLs and leads.
You need leaders—people who can own a number.
Someone at a $150k salary that will own a number and commit to getting you leads, revenue, and shipping features is a heck of a lot better than someone at $100k who can’t really commit to anything because they haven’t done it before.
Do you need to hire for a VP role? Yes, you do. Never settle low. Instead, aim even higher. If you think you can’t afford a VP of Marketing and are considering going for a junior hire or marketing manager, don’t do it.
#6 “Oh, they’re not a significant competitor. We beat them in every deal.”
This is a small flag, but it can scale over time.
When a founder says this, it’s a sign of a company that’s delusional on some level.
There’s no way that, as a startup, you beat Salesforce or Adobe or HubSpot or Datadog in every deal.
What you really want to see as you scale is your win rate going down, typically, because you’re getting into more markets.
It makes sense to win every deal in the very early days when you’re feature-poor, but you have one really great 10x feature. Because you have a very narrow ICP for folks doing a certain type of sales for a certain workflow in a certain geography, etc.
But after that?
You start to compete with Zendesk or Mongo or Datadog or Hubspot, and, of course, you should start losing deals because you’re feature-poor and don’t have everything those leaders do.
What do people hear when you say you win every deal?
That you’re not doing any marketing and likely not doing any outbound either. Outbound should be losing lots of deals as you scale.
That’s a good sign and will put pressure on your product team and you to build software more quickly.
And eventually…
You’ll get over that hump, and your win rates will go up. But they should go down as you approach $10-20M and only go up as you truly become a market leader.
#7 “Let’s not bother with RFPs. They’re too much work, and we lose them all anyway.”
Yes, you’ll probably lose Requests for Proposals for a long time.
As you go upmarket and Enterprise, if you haven’t done it before, a lot of things will drive you crazy. You will need to do all the Enterprise security stuff, the SOC 2, etc.
It’s a pain, but you have to do it.
RFPs are a part of it too.
They’ll bother you in the beginning because, generally speaking, they are a bit rigged.
When an Enterprise vendor goes to the trouble to put together a massive RFP, they’re required to do it, and by the time they are there and have spent all that time to issue it, they probably already know who they want to go with.
And generally, it’s the market leader.
But sometimes, they use it as a cover to buy an emerging vendor because they need the backup not to choose the market leader.
Remember, you didn’t get into the deal for nothing.
- You do have a shot.
- You’ll get better at them.
Hire someone to fill them out so the Sales and Engineering teams don’t have to.
Eventually…
You will get bigger and steal a deal on an RFP.
No matter what, going upmarket, being compliant, doing SOC 2, and doing RFPs are all part of closing bigger deals.
You have to embrace them and get good at them.
If you shrug your shoulders and say you lose them all anyway, you will lose them all.
8. “The leads are there. The problem is the sales team.”
This one’s dangerous when early-stage and some later-stage founders utter these words.
In the last 18 months, things have gotten harder in almost all SaaS categories.
There’s probably some truth to this excuse if you have a mediocre sales team that closes far less than what a great sales team does.
A great team does 2x or more of what a mediocre team does, and a truly great rep can close 9-10x what the average rep can.
BUT, if you have a lead and nothing is closing, it’s not the sales team.
Those leads are good. They’re coming in. People have found something they like, so at least some should be closing.
If the leads are fairly consistent, but sales are plummeting, you have to understand if it’s a soft miss or a hard miss.
What is a soft miss?
A soft miss is when you hope to grow 20% faster than last quarter, but you’re shorter than where you hoped, and that’s often true to the sales team.
If they can’t grow or they plateau, that’s a sign you need a VP of Sales to reboot things.
What’s a hard miss?
A hard miss is when things rapidly deteriorate with the same team normally closing deals. That’s usually a market condition.
The meta point is…
A mediocre but consistent sales team with good leads will generate some revenue.
If the leads aren’t there, you might have a problem with marketing or product. Sales is not always the solution.
9. “Our market is too small.”
This is something you’ll often hear from founders, and it’s an excuse not to go big.
The sentiment is true at first. Everyone starts out with a TAM that’s too small.
Airbnb literally started off with air mattresses in peoples’ homes.
If you have 100 customers, you can get another 100 customers. You have to stairstep it.
There are cases where you absolutely outstrip your TAM. It gets challenging to get more than 10,000 customers within any market segment.
But if you look across all public SaaS companies, most get multi-product well before they have 10,000 customers in any market.
The best founders find ways to expand the surface area.
“A market is too small” is both a truism and an excuse. There’s always another customer like the one you have.
10. “We don’t need a VP of Sales, Engineering, Product, Marketing, Customer Success.”
Some founders don’t think they can afford a VP. Others don’t think they’re ready for one yet. And then some believe they don’t need one, especially a VP of Product or Engineering.
The reason you’re saying that?
Because you’ve never worked with a great one.
Actionable Step:
If you don’t think you need any of the VPs, go meet with ten great ones because you’ll realize the great ones let you scale.
So many great CTOs don’t think they need a VP of Engineering. If that’s you, ask yourself these questions.
- How much time am I spending on code review?
- How much time am I spending refactoring the code base?
- How much time am I spending fixing old crummy code I wrote for a thing that didn’t scale?
It’s great that you know those things, but someone else can do it.
You’re the CTO.
Go build the next-generation stuff that no one can understand.
Bring in the VP of Engineering to do all the routine stuff who will also spend half their time recruiting.
Similarly, so many founders think they can be the VP of Product at $10M, $15M, $20M in ARR.
You can’t.
You don’t have 50 hours each week to be VP of Product.
When you come up on $10M or more ARR, the product, partnerships, and ways you mix up features become so complicated.
You don’t have time to follow up. You can’t keep shooting from the hip and expect to excel at it.
So if you think you don’t need a great VP of Product, it means you haven’t worked with a great one.
A great one is accretive.
The Takeaway
Go out there and absorb all kinds of great advice. But listen to two different people and understand where the biases come from and what it really takes to go big.
