Mark Roberge wrote “The Science of Scaling”, which I believe is one of the most profound pieces of business thought leadership since Clayton Christensen wrote The Innovator’s Dilemma. His eBook is free and can be found on the following site and is a must-read for every startup and scaleup SaaS revenue leader.
A central theme of his book can be found here:
As entrepreneurs, the first metric we mention when describing our business is revenue. As investors, the first question we ask is about revenue growth. In board meetings, the first slide shown illustrates revenue. “Triple. Triple. Double. Double.” This phrase, meaning triple revenue in year one and two then double revenue in year three and four, is the perceived blueprint for future unicorn status. We don’t prioritize customer retention. We are obsessed, almost out of the gate, with revenue growth. And it’s killing our businesses.
As a former Customer Success leader historically responsible for retention and expansion revenue, I could not agree more with Mark’s conclusions. Today bookings are the core metric we use to manage our sales, and to a lesser extent our customer success teams. Although we all know retention is the backbone of every SaaS company, most organizations tend to over-index on closing new logos. Part of the problem is that it’s hard to quantify how customers derive value from our products and services. This is especially true in organizations with products that support multiple use cases. Mark does a great job of defining the elusive topic of product-market fit and introducing frameworks for how we can quantify and influence PMF over time.
Eric Yuan, Founder and CEO of Zoom, clearly shares many of the same sentiments as Mark. His thoughts were captured during an interview in 2021 while Zoom’s revenues were $4 billion ARR.
“If you always, every day, think about growing fast, I’m pretty sure you always think about how to get more customers, more prospects. If you do that you’re probably going to lose the focus to focus on making the existing customer happy. The most important thing is to make sure the existing customer is happy rather than chasing after the new prospect.”
I am writing a series of blog posts to illustrate some of these problems and introduce new frameworks and philosophical approaches for creating better customer outcomes while building more sustainable companies.