S2E19 – Strategic Finance: getting from Product-Market Fit to Go-To-Market Success

Embarking on the journey from product-market fit to go-to-market success is a pivotal moment for any SaaS startup. It requires a strategic approach and a keen understanding of market dynamics. The CFO plays a crucial role in guiding the company through this critical transition. In this episode on the Grow Your B2B Podcast, we explore the important aspects and best practices that can help startups navigate this journey successfully. Our subject matter expert is Joyce Mackenzie Liu the Founder and CEO of Pegafund a company that provides fractional CFO services and leadership upskilling to high growth, investor-backed SaaS businesses.

Joyce shares her insights on strategic financing for SaaS companies, particularly in achieving product-market fit and go-to-market success. She emphasizes the importance of understanding product metrics, customer feedback, and financial stability to determine product-market fit. Joyce also highlights the significance of having accurate financial reporting and leveraging SaaS metrics to make informed strategic decisions for growth. Furthermore, she discusses the evolving role of the CFO, emphasizing the need for business intelligence and commercial expertise in a rapidly changing market.

Why you should listen to Joyce

In the fast-evolving world of SaaS, financial decisions play a pivotal role in determining the success trajectory of a business. Joyce’s extensive experience, having worked with over 100 companies, positions her as a seasoned guide in the complex realm of strategic financing. As we navigate an era defined by uncertainty, Joyce offers a unique perspective on leveraging financial knowledge to make informed and tactical decisions for sustainable growth.

Defining Product-Market Fit from a CFO’s Perspective

Joyce delves into the multifaceted lens through which she defines product-market fit as a CFO. She emphasizes the significance of three interconnected aspects: the product itself, customer understanding, and financial metrics. The product’s value proposition, measured through its ability to reduce costs and increase revenue, serves as a key indicator of product-market fit. Joyce stresses the importance of closely examining early customers, their pain points, and achieving stability in gross margins for a SaaS company.

How to recognize that a company has achieved product market fit?

Achieving product-market fit is the first milestone for a SaaS startup. It involves ensuring that the product addresses a mission-critical need for the target market, reduces costs, and increases revenue. Data-driven decision-making and a deep understanding of customer pain points are essential during this phase. The CFO’s role in this stage is to analyze product metrics, customer acquisition costs, gross margins, and financial stability to gauge the company’s readiness for the next phase.

Transitioning from Product Market Fit to Go To Market Success

Transitioning from product-market fit to go-to-market success requires a shift in focus towards scalable customer acquisition strategies. This phase demands a disciplined approach to identifying and doubling down on the most effective customer acquisition channels. The CFO’s expertise in financial planning, forecasting, and resource allocation becomes instrumental in aligning financial strategies with the go-to-market plan to ensure sustainable growth and profitability.

Measuring ROI from Go to Market Strategies

Measuring the return on investment (ROI) of different go-to-market strategies is crucial for making informed decisions. The CFO’s role extends to tracking and analyzing the effectiveness of these strategies, including payback periods, customer lifetime value, and average contract value. By aligning financial metrics with commercial aspects of the business, the CFO enables the leadership team to make sound strategic decisions that drive the company’s growth trajectory.

The future role of the CFO

Looking to the future, the role of the CFO is evolving in response to changing market dynamics and economic uncertainties. The modern CFO is expected to possess a deep understanding of business intelligence, commercial aspects of the business, and the ability to navigate through economic cycles. As market conditions continue to evolve, the CFO’s role becomes more critical in driving efficient growth and navigating the challenges of a dynamic business landscape.

In conclusion, the journey from product-market fit to go-to-market success is a complex yet transformative phase for SaaS startups. The CFO’s expertise in financial planning, data analysis, and strategic decision-making is pivotal in guiding the company through this transition. By leveraging financial acumen, aligning metrics with commercial strategies, and adapting to market dynamics, the CFO plays a pivotal role in steering the company toward sustainable growth and success.

Key Timecodes

• (0:28) Show and guest intro
• (1:24) Why you should listen to Joyce Mackenzie Liu
• (2:33) What is product market fit
• (5:29) How to recognize that a company Has achieved product market fit? 
• (7:57) What does go-to-market success actually mean?
• (9:0) Common financial mistakes companies make while trying to achieve go-to-market success?
• (11:27) How to get your books in order
• (12:06) The financial challenges when transitioning from product market fit to a successful go to market strategy
• (16:12) Which financial metrics take on increased importance after reaching product-market fit?
• (19:37) The best practices which impact the success of go to market.
• (24:21) How to measure the ROI (Return on investment) of the different go to market strategies.
• (26:28) What is the future of a CFO? 
• (30:31) How to grow towards 10K MRR
• (31:04) How to grow towards 10 million ARR
• (33:38) What Joyce wishes she knew 10yrs ago

Transcription

[00:00:00.000] – Intro

Welcome to Growing a B2B SaaS. On this show, you’ll get actionable and usable advice. You’ll hear about all aspects of growing a business to a business software company, customer success, sales, funding, bootstrapping, exits, scaling, everything you need to know about growing a startup, and you’ll get it from someone who’s going through the same journey. Now your host, Joran Hofman.

[00:00:28.220] – Joran

Welcome back to the Grow Your B2B SaaS Podcast, where we discuss all topics about growing your B2B SaaS. As a SaaS founder, you don’t always have the financial knowledge to make smarter decisions and faster, which is needed if you want to go from product-market fit to go-to-market success. That’s where a CFO comes into play. My guest today is Joyce McKenzie-Liu, the founder and CEO of Pegafund , which provides fractional CFO services. Joyce has over 20 years of experience, has worked with over 100 companies from high-growth startups to public companies and helped them to upskill their knowledge, define the strategy and raise their NAC funding grounds. Next to this, she invested in companies herself, been a board advisor and runs her own subtext newsletter which is called Design the skill. Welcome to the show, Joyce.

[00:01:15.750] – Joyce

Thank you. Very excited to be here.

[00:01:18.290] – Joran

Good. Let’s dive right in. You’re living in Amsterdam, so you’re aware with the Dutch bloodness. I’m just going to give it straight. Why should people listen to you today?

[00:01:27.450] – Joyce

Great question to start with. A loaded question as well. First of all, they should be listening because I’m on this podcast. So I guess that’s pretty fortunate to be here and thanks for inviting me. Secondly, I think we are at a very critical turning point in not only in the SaaS ecosystem, but I think overall in the world. We are at a defining moment in history, and I think the companies that are built now and over the next decade are really going to be ones that define a new breed of SaaS. However, there’s still a lot of uncertainty and I don’t think anyone has a crystal ball. The more you can focus on the numbers and the finances and really leverage that to make strategic, tactical decisions on growth, on which customers you go after, which investors you work with, and how you define your product roadmap, the more likelihood of success you’ll be as we navigate this new normal.

[00:02:22.950] – Joran

Yeah, and we’re definitely going to touch upon things about the new normal. The topic of the day is strategic financing, getting from product-market fit to go-to-market success. Let’s cover the basics first. From a CFO perspective, how do you define product-market fit?

[00:02:37.660] – Joyce

Great question. I’m sure every CFO will have a slightly different answer, but I look at it through three different lenses which are all related to together. The first is, of course, the product. And the product is really in terms of understanding, ultimately comes down to value proposition. And what I mean by that is the best SaaS products are there to reduce cost for the user and for the business, as well as increase revenue for the business and for the user. So to the extent that the product can do both and there’s clear ways of measuring, that is a great way to get to product market fit because it makes things easier in terms of understanding who are your ideal customer profiles, how you price and package your solution, how you differentiate to competitors that are out there. That’s the thing. I look very closely at product metrics and how those ultimately demonstrate value to the user and to the businesses that you serve. The second part is really looking at the customers. In statistics, you have this rule of thumb that a sample population of 30 or more is considered statistically significant. I think the same rule can be held true when you look at early-stage startups in the sense that your first 30 customers, your first 50 customers, 100 customers are really critical to defining the direction that the company is heading towards and really deeply understanding their pain points, how your product is a solution to those pain points is really critical.

[00:04:17.960] – Joyce

Oftentimes when I see companies at later stage struggle with go-to-market success is because they actually haven’t really nailed the product market fit for their first 30, for the first 50 customers. And then the third piece, which is unfortunately not talked about enough, but I do think it’s something that deserves getting more and more attention, is actually looking at your financials. Specifically for a SaaS company or a business that has a majority element that is reoccurring in nature like a subscription business. The gross margin and the stability around the gross margin is a really good indication of whether a business has product-market fit.

[00:04:54.230] – Joran

I love your taking, of course, the CFO approach here. To summarize it, so basically look at product, the value prop, so make sure you either reduce cost, increase revenue, and find ways to measure it. For example, ourselves, as if we generate MR from B2B SaaS companies, so we have a clear dashboard where we show exactly how much our clients are making. Then customers, first 30 to 50 to 100 customers are critical for the direction. I think that’s where you also touch upon the ICP because basically you’re going to define who is the actual ideal customer profile and then financial make sure your gross margins and stabilize them. Let’s go to the second term, product-market fit. How do you know, how do you recognize that a company truly achieve product-market fit?

[00:05:38.270] – Joyce

I focus first and foremost on the gross margin stability. I think even looking at that, it sounds simple, but actually there’s a lot of nuance in just even getting to that gross margin in the first place, which actually starts with making sure your books are in order. It’s quite common, and I’ve seen this even with companies up to 10 million pounds or euros in AR, that you’re operating purely on statutory reporting. In other words, Dutch GAAP, German GAAP, UK GAAP, which is important from a compliance, from a pay and taxes accurate perspective. With those sets of books and the way you look at your PNL is not useful for making decisions for the business. In order to make decisions for the business, and this is also why investors ask for SaaS metrics, etc, You actually need to get into place what’s called management accounting. And managed accounting for a SaaS business is governed under IFRS. So it’s under a different set of principles. It looks at accruals based accounting, and that actually requires you to restructure the mapping for your books and your chart of accounts such that you can actually produce a SaaS P&L, which then allows you to produce SaaS metrics.

[00:06:50.650] – Joyce

And what often comes up when you go through this exercise as a business is questions around where do people fit within an organization? Because in the early days, everyone’s a generalist and you’re wearing multiple hats. As you go on that journey, typically from I would say 2-3 million to 10 million plus in AR, you start specializing more. And so when you start specializing questions around, for instance, customer support and customer success, how much of that falls above the gross margin line, as in part of cost of sales versus below gross margin line? And how much of that is in OpEx, which is to essentially support the running of the business versus actually upsell expansion, which would be potentially you could consider a part of CAC. These questions come into play. It’s really understanding actually your organizational design and how that then impacts how you look at your SaaS PNL.

[00:07:43.030] – Joran

Yeah, makes sense. Make sure you have your PNL in a SaaS way, basically. That’s the thing here. I will ask a bit more questions regarding growth margin line and best practices, but we’re going to cover first the basics and then dive in. Because when we go from product-market fit to go-to-market success, the last basic question, what does go-to-market success actually means for you? And then with the CFO.

[00:08:06.400] – Joyce

Hat on. Yeah, it’s a challenging question to answer, to be honest, because there’s no one-size-fits-all answer for all companies. I think it depends a lot in terms of which market you go after, what part of the organization you sell into, whether you sell into business units versus infrastructure. So all that comes into place. But generally, I would say for a SaaS business that’s high growth, you tend to achieve economies of scale somewhere between five on the small end and 30 million on the high end. So go-to-market success is achieved somewhere between that range. And it depends a lot on the product that you built, the market that you’re going after, and ultimately whether there’s a predictable channel in which you’re acquiring customers that’s proven to be repeatable, scalable, and ultimately something that makes sense to continue investing into in order to grow and scale the business.

[00:09:01.830] – Joran

Yeah, that makes sense. I think it could be repeatable, scalable and profitable, that’s for sure. But we’re going to dive right into that. I guess when we look at maybe first mistakes, you went to too many companies, right? You looked in many kitchens, as we say in Dutch. What is the most common financial mistake companies make while trying to achieve go-to-market success?

[00:09:21.070] – Joyce

I would say firstly, not having their books in order, just the most basic. But actually you’d be surprised how often and how common that is. And it’s also understandable as well because typically finance is something that’s done by the founder CEO who doesn’t have a finance background and is often hasn’t worked in large organizations where they’ve worked closely with finance. So you don’t really know what best practices look like until you make a mistake or someone tells you, Hey, this is not the right way to do it. So actually getting your books in order and making sure you have a SaaS PNL in place, not just a regular PNL in place, and then ultimately making sure that you’re closing your books every month, not once a quarter to pay your taxes, but every month within eight days after the month end so that you can produce SAS PNL and a management accounting. So then you can use that to ultimately look at your SaaS metrics. That’s, first and foremost, what I think is really important to get in place and is often a common mistake for both bootstrap and venture-backed companies. Then secondly, once you have that in place, it’s making sure that as a team, you’re talking about the key insights every month and using those key insights to trigger media actions on who to hire, which customers to spend time with.

[00:10:38.960] – Joyce

What is the pipeline telling you in terms of who you should spend time with and not spend time with? Then ultimately, what is the product metrics telling you in terms of how that maps to your pipeline and your financial numbers? I always say ultimately, SaaS metrics and most financial reporting are lagging indicators of success. But the leading indicators of success are ultimately your product, your customer metrics, and your pipeline. But what it does do is hold the business and the team accountable for the plans that you’ve made and to really make sure that the vision you have in the business is ultimately going to turn to valuation continuously every month, every quarter.

[00:11:17.710] – Joran

Yeah, makes sense. In order to have the leading indicators, customers, and pipeline, you do have to have your financial metrics in order. They do align. Maybe one question because you mentioned not having your books in order is the most common mistake. Is there advice that maybe you could give certain tools to use or maybe how to structure things from early on to avoid this common pitfall?

[00:11:39.210] – Joyce

I think it’s really making sure that you have a really solid bookkeeper or accountant, whether externally or internally, who has worked with high-growth companies and ideally has worked at SaaS companies as well, because that will just save a lot of time and pain and effort. And then really making sure that you have proper controls in place around, Yeah, ultimately how you track the numbers, your expenditure, and your monthly reporting. Yeah, nice.

[00:12:05.600] – Joran

When we dive into challenges, what are some financial challenges when transitioning from product-market fit to a successful go-to-market strategy?

[00:12:14.120] – Joyce

I think there are as much financial challenges as business challenges in the sense that I think as you transition from product-market fit to go-to-market, but you go through typically a business that goes from generalists to specialists. The reason you do that is because there’s just not enough time and resources in a day for everyone to do everything. So it’s really important to actually align ultimately the vision you have in the business with how you design the organization, with how you incentivize people to perform according to the plan. Specifically, where it comes to finance, and finance can be really valuable, is to really do the forward forecasting and planning accurately and to also build enough flexibility into your financial operating model such that you can adapt your hiring plan every month or every quarter based on actual performance inside the business. So you go from looking backwards to ultimately looking forwards and really holding people accountable to the decisions that you made by actually looking closely at the data and making sure that there is really solid data hygiene and repeatable processes around capturing that data and communicating that data.

[00:13:22.290] – Joran

I think that’s always the biggest challenge, making sure that the data is accurate, what you’re going to work from. We use so many tools and every tool has a different number always in there and you never know why it is. But getting that in order and actually figure that out, I think that’s indeed a really good one to make sure.

[00:13:37.590] – Joyce

You get that. Yeah, definitely. I would say to your point, actually, I think most startups and scaleups suffer from overtooling too early. I think tools make sense when your data hygiene is really at a certain maturity and processes are at a certain maturity as well. Tools don’t solve those challenges. There’s almost a risk of if you implement too many tools too early, you create more chaos in getting to that really solid data. Then also having clear definitions that everyone is in agreement and alignment on. You’d be surprised the number of times I worked with companies and the definitions around what is an MQL, an SQL, an SQL is completely different depending on who you talk to within the business.

[00:14:19.190] – Joran

That’s why I always cover the terminology because everybody has a different way on everything within SaaS. I think other personal experience, like I worked at Leadvie one where I joined as an employee left when they were 130. I went through the route. Firstly, it was really nice when we made the transition to forecasting. Instead of saying, Oh, we have way too much work, we need to hire people, and then we’re always too late, versus, Okay, this is going to be our growth. This is going to be our MR. We need to hire more CS people because of this. And it’s just going to give you so much more control as a leader within the company because you can be ahead of things and you can tell management why actually things should happen if we’re going to grow this way.

[00:14:59.370] – Joyce

Yeah, totally. And it’s to your point, the control gives business efficiency. And it takes away the stress and the pressure from the co-founders as well as each functional department leader in experimental decisions that you don’t yet have data to support will work out. Oh, yeah, I think it’s super important to be agile in how you make decisions by actually making sure that you’re continuously looking at the data, agreeing to the definitions. And everyone is, as they say, singing from the Statington book.

[00:15:32.010] – Commercial Break

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[00:16:12.300] – Joran

We’re going to talk about metrics, what financial metrics become more critical post-product-market fit? And you already mentioned gross margin line. Any other metrics?

[00:16:23.360] – Joyce

Yeah, definitely. So gross margin, going back to the SaaS PNL, the benefit of having that in place is because it allows you to look at gross margin, CAC and CAC payback, and then OpEx or your overhead as a result of that. Those are generally the three buckets for… Actually, you can also apply to any business. It doesn’t have to be a SaaS business necessarily, but understanding an OpEx is to illustrate how much does it cost to run a business. Your CAC and your CAC payback shows you how your customer unit economics are working. And so looking at that and comparing to your customer ACB, TCV, as well as pipeline ACB and TCV, gives you the confidence to know whether you’re actually targeting the right customer segment and how quickly you should continue investing into marketing and sales and what the natural tension friction is between top of the funnel, middle of the funnel, and bottom of the funnel. Those are really important to look at. And then, of course, as well, it’s the overall efficiencies on a more granular level that feed into CAC and CAC payback. So looking at ultimately sales, CS compensation, and how that ties to overall net new that’s coming into the business and looking at ratios around that, that’s quite important.

[00:17:37.260] – Joyce

And when you have that in place, then it helps you also be more accurate around your earlier point in terms of looking at how long it takes to hire people. I think every business, whether it’s a startup or public company, underestimates how long it takes to hire people, especially in the markets that we are today, and then also how long it takes for those people to then become productive. If you don’t have your onboarding materials in place, then your new employees can’t really be enabled to do their job. So that time to hire, time to ramp and having accuracy around that and ultimately building that into your financial operating model and then actually looking at that every month is super critical.

[00:18:16.780] – Joran

I guess for the people who are not familiar with the terms, CAC as customer acquisition cost payback is basically how long does it take for you to earn the money back, which you invested to acquire a client. Acv, average contract value. You mentioned TCV, which I don’t even know.

[00:18:31.120] – Joyce

Total contract value. Oh, there you go. We have multi-year contracts.

[00:18:36.270] – Joran

Got you. And one thing I missed, or I think maybe is not that important anymore and you can tell me more, customer acquisition cost versus lifetime value. Is that something we still look at or is it more payback period?

[00:18:47.630] – Joyce

Yeah, I think it’s an interesting one and I think definitely still worthwhile looking at. I think the point I would challenge around that is what is the average lifetime value of software in general? If you look at how software was built 10 or 15 years ago, the lifetime value is much longer. Think about Microsoft, how long that software is being used. Today, when you have SaaS solutions, it’s very difficult to know what a steady-state lifetime value of software look like. Yes, it is meaningful. I think it’s more meaningful when you’ve gone through one or two renewal periods.

[00:19:19.720] – Joran

Yeah, makes sense. So not look at it at the beginning, but purely look at the beginning payback period and then look at it when you have.

[00:19:25.080] – Joyce

Those renewals. I think it’s worthwhile tracking, but then how meaningful does it tell you? Yeah, maybe when you’re at a later stage in a business where you’ve gone through at least two renewal cycles with your current customer base.

[00:19:36.660] – Joran

Yeah, makes sense. We looked at mistakes, we looked at challenges. Maybe let’s look at some best practices. Can you share an example where strategic financial decisions were made based on, I guess, having a CFO in place or making sure you look at the proper data which impacted the go-to-market successfully?

[00:19:54.400] – Joyce

One example is in one of the companies I worked with, we went in and looked at forecasting and planning and putting that in place, and ultimately to achieve a plan for the company. We had three different scenarios around that plan: base case, optimistic, and downside. Then, of course, then we tied those plans to people’s compensation and bonuses from a leadership level, which then cascade down below. And in going through that exercise and that process, which meant that we had to dig quite into the pipeline and quotas, et cetera, we just realized that actually the sales team quotas weren’t set correctly because we were missing a whole AE. If you do the bottoms of capacity planning, we actually couldn’t get to any of the three scenarios that were set for the team. And unfortunately, that then resulted in us having to make some changes around the leadership team. In this particular case, we made the head of sales and CS for an interim period of time. And then afterwards, we then hired a head of CS. A head of sales and CS then fully took on ownership for head of sales. That’s one example, and that’s why it’s really critical to do that top-down, bottoms-up planning, which I think many companies are going through now, especially given that if you want to do it, it typically takes 6-10 weeks to really do that exercise in collecting the data, socializing it, getting buy-in, and ultimately aligning all the teams and people within the business to do that.

[00:21:24.240] – Joyce

But when you do that, it allows the business to adapt really quickly to any changes in the market or within their team. That’s one example. Another example, which is tied to go-to-market success, but ultimately is more from a funding perspective, is another business I worked at, they were getting feedback, also bootstrap. They were getting feedback from talking to different investors, in particular, VCs at their cap table was going to be a problem for them to raise funding around. And so the CEO of this business wanted to understand why is this the case? What is it about my cap table that makes it unattractive for me to get funding? And in going through… So what we ended up doing here is we did the 16 hours of in-depth training on the investment landscape, different types of funding, VC growth, private equity, strategic, and then ultimately understanding how that then impacts strategy, budgeting, and planning, we arrived at the conclusion that actually for that business, it did make sense to take a verticalized approach to go to market. Rather than focusing on two or three different industry verticals, we should focus on one and prove traction in that particular vertical in Europe first.

[00:22:34.950] – Joyce

And then for the next funding round, then we would look to raise additional capital to potentially target a larger market like the US or other markets across Europe.

[00:22:43.830] – Joran

Yeah, I think it is really nice. As you mentioned, it does take quite a bit of time, right? I think you mentioned six to eight weeks, it’s.

[00:22:48.990] – Joyce

Often- And sometimes as well. Yeah..

[00:22:52.840] – Joran

Exactly. And you need to get the data right first. So that might take a couple of weeks as well. And I think it’s indeed not the most fun thing and the founder wants to do, but in the end, it helps you to get ahead, spotting those potential bottlenecks, saving time in the future. So it’s a good practice to do. We all keep this in mind as well for ourselves.

[00:23:11.540] – Joyce

Yeah, and I don’t think it doesn’t have to be fun. I think it can be fun. I think often, unfortunately, finance is viewed as one of those things that are very scary and it’s like a necessary evil to grow the business, which I don’t think it has to be. I think that ultimately comes down to the soft skills of the finance team that you have on board, whether they can really make the whole exercise relatable and fun and engaging. So yeah, I think there are finance people out there that do have a sense of humor and can make it something that’s digestible and not something scary.

[00:23:41.440] – Joran

Yeah, and I think you mentioned relatable and I guess fun, but maybe even understandable as well because a lot of people don’t understand it. And if you can actually have people understand it, then it becomes somewhat fun as well.

[00:23:53.600] – Joyce

Exactly. And I think finance, similar to engineering and a lot of more technical disciplines, is guilty of using a lot of fancy words and terminology that can only be understood by people that work in the industry. But actually, it’s not really necessary. I think it creates more barriers to understanding than necessarily the outcomes it achieves.

[00:24:16.350] – Joran

Yeah, there’s definitely a lot of terminology going on within finance. I’m going to just put one in there already. How do you measure the ROI, so the return on investment of the different go-to-market strategies? We already talked about payback period. That’s definitely one. Any other things you would look at?

[00:24:30.890] – Joyce

Yeah. We’d be actually just touching upon this. Why do we care about ROI today in the market? Return on investment is basically saying, Okay, I have this vision as a founding team and as a leadership team, and therefore I’m putting this strategy and this plan in place. Does my strategy and does my plan actually produce the results that I have in mind? And ultimately also in what time frame? Am I getting that, as you said, ROI in this quarter, in six months, in one year, in two years, in three years or more? Sure. I think what’s important when you go through your planning process is actually to be really concrete on the timeline that you expect for certain investments. For example, when you invest in outbound sales, it’s unrealistic to expect ROI on outbound sales in six months. It’s just not because you need to hire people, you need to train them, you need to onboard them. They need to build collateral. They need to build their own book of business, etc. However, if you look at something like paid advertising or marketing, for instance, on LinkedIn or this podcast, the ROI on that is much more immediately measurable because you’ll immediately see how many impressions come about.

[00:25:38.840] – Joyce

What is the conversion to leads from those impressions, et cetera? I think it really ultimately comes down to tracking all the different stages of the funnel of the user and buyer journey and how it ultimately, I call it the Widget Factory. Raw materials go into the Widget Factory, final products come out of the Widget Factory. Really understanding how that maps to your user-buyer journey and seeing what does that actually produce in terms of conversion to close customers.

[00:26:07.920] – Joran

I love that we’re talking to a CFO, but you use so many terminology from the customer perspective. I released product metrics, user-buyer journey. I think it’s like in any other type of business is uncommon to really talk about these things. But in SaaS, as you mentioned, it’s really important to look at the actual product at SaaS metrics and then financial metrics will follow. Maybe one question looking into the future, how do you see the role of CFO changing?

[00:26:33.570] – Joyce

It’s a great question. It’s quite a big one to tackle. I think in some ways the CFO has changed, and in some ways it hasn’t. It’s changed in the sense that there are a lot more tools out there to make decisions and make better decisions, faster decisions, particularly as it relates to the revenue and business model for a company. But not only do we have advancements in AI, which makes things like content and infrastructure a lot easier to build and scale. But also there’s just a lot more user, customer, business data out there that can help you figure out the niche that you’re going after very quickly. I think the modern CFO has to be really switched on into understanding how that ultimately impacts decision making and ultimately aligning everyone around the business on how we measure the data and interpret the data and trigger action based on that data. So that whole business intelligence piece becomes even more critical than it was in the past. Then I think the other thing is really the expectation on the CFO today is I think even more higher pressure than it was in the past, mostly because we’re in markets of high uncertainty and there’s just a lot of different variables that come into play.

[00:27:53.880] – Joyce

In many cases, I think compared to, let’s say, the last five years, the role of not only the CFO, but the finance function in particular is a lot more critical and elevated in our organization compared to the last few years where there’s been a heavy emphasis on sales and marketing. So it’s really, I think, understanding the commercial parts of the business becomes super critical and just being a generalist that doesn’t have deep business model expertise, I don’t think will fly in the markets that we are in today.

[00:28:23.200] – Joran

I think I read somewhere a stat that more CFOs become CEO. I think based on what you said, it makes sense because they have to understand the commercial part of the business, the expectations go up, business intelligence becomes more critical. They have to align people within the business. So it could be a logical step. Is that something you see.

[00:28:40.320] – Joyce

As well? Yeah, I think we’re seeing more case studies with public companies, CFOs becoming CEOs. I’m not sure how much of that is necessarily change in skills versus what the market needs and what the business needs. We’ve gone from 10 years of a bull market, which means we’ve gone through over a decade where money was essentially free and cash generation and return on investment for that money was being pushed down the road because that’s just how our macroeconomic system had been structured. So there wasn’t necessarily any consequences for not showing immediate results. Today, we’re operating in a market where most developed markets, the interest rate is between 5-8 %, and that’s for government. Every day cost of capital, if you look at cost of capital for a VC fund or a bank, it’s much higher depending on the risk of the business or the consumer that they’re working towards. So that means money is no longer free. Money is actually quite expensive. And then on top of that, you have inflation. Those two things work against a business in terms of growth and therefore the emphasis on efficiency but continued growth becomes even more important.

[00:29:47.770] – Joyce

Therefore, in this situation, it becomes natural that more CFOs are taking on CEO roles. I’m not sure every CFO is suited to take on CEO roles because ultimately, you still want… I think the CEO’s job is to really drive vision and strategy for the business and take risks. Some CFOs by nature are not designed to take that risk. Indeed, you also do see CFOs become CROs, the businesses as well. That’s also something that we see more and more, but I think it’s more specific to what the markets are needing and the skill set of that particular individual that matters.

[00:30:23.330] – Joran

Nice. Cool. We are going to come to the final four questions. I would like to ask a question related to a certain state. What advice would you give a SaaS founder regarding achieving go-to-market success when they’re still starting out and grow to 10K MR?

[00:30:40.140] – Joyce

I would say get your product right. Make sure your product is really solving a mission-critical need. Ideally is not just cutting cost for your customers, but also increasing revenue. These are the products that are most sticky that grow the fastest that have long-term LTV. Really make sure that your product is solving something that is effective for whoever you’re going after.

[00:31:03.970] – Joran

Makes sense. If we go past the 10K MR, we achieve that. We’re going to grow to 10 million ARR, which is a big step. What advice would you give here?

[00:31:12.840] – Joyce

Yeah, indeed. I think from 10K to 10 million ARR, there’s many, I would say at least three or four step functions together. Usually, you see the 10K to about two or three million AR as being one stage, and then 2-3 million AR to around five to seven million AR being another stage and then beyond that, then you get to 10 and then there’s 20 and then 30 and then 50. Each stage doesn’t get easier actually, unfortunately. It does get easier when you figure out the one channel you have that you can acquire customers really well, predictably, efficiently, repeatedly. Just really, and in the beginning, you’re going to be testing across many different channels. Very quickly doing iterations to figure out what works, what doesn’t. But just identifying that one channel, that core ICP and not deviating too much from that and just being disciplined and continuing to double, triple-down on those, I think will take you a long way.

[00:32:11.620] – Joran

Yeah, definitely makes sense. It perfectly aligns with what you already said before. Maybe a more general question. What advice would you give startups or maybe even CFOs navigating the journey from product-market fit to go-to-market success?

[00:32:25.620] – Joyce

I’m obviously biased, which means I think getting your books in accounting order is the first starting point for sure. Then ultimately leveraging that to then look at your metrics and aligning that with the commercial and product parts of the business. I think that’s super, super critical. Then beyond that, there is a difference. What I’ve learned over the years is there is a difference between, let’s say, founder CEOs who have lived through an economic cycle and those that haven’t and the number of years of work experience that someone has and also their depth of domain expertise. That can be the same whether it’s a bootstrap or VC-backed business. For those that haven’t, who are likely 35 or 40 or under that haven’t gone through a recession, make sure you’re surrounding yourself with people that have gone through it and take advice and really listen to that because I don’t think we’ve seen the bottom of the cycle yet. Let’s hope things improve next year. Who knows? No one has a crystal ball. But I think you can be really tactical in a recession to actually grow much faster. But it means really making sure that you are surrounding yourself with people that have the experience of doing that.

[00:33:36.750] – Joran

Nice. Then the final question, this can be more personal. What is one thing you wish you knew 10 years ago?

[00:33:45.080] – Joyce

Yeah, I think it comes down to really understanding human psychology, which is ultimately what change is about within a business. One of my key learnings, actually really in the last, I’d say, few years, is that change is hard. Like humans in general, especially in the startup world, you strive on change and constant creation. But also inherently, people are just resistant to change. Ultimately, you can’t change if you don’t have self-awareness, you don’t have business awareness. A lot of founders, they have happy years. They don’t know what they don’t know until the mistakes are made. And also when it comes to changing behavior, people don’t change because they’re told they need to change. They change because they want to change. So I think it comes down to really making sure, which is related to the previous point that we had, is really making sure that you’re surrounding yourself with people that have gone through that journey that you have yourself and always thinking two or three steps ahead to avoid the common pitfalls and challenges that those people have already made. There’s no point of making the same mistake twice if someone else has already done it.

[00:34:54.770] – Joyce

Just leverage their expertise.

[00:34:56.590] – Joran

Yeah, and this is one of the reasons why we have the podcast so we can learn from somebody else’s mistake. But do indeed get to community, find people who already did it or went through it, I guess that’s I think the best advice you can always get. Cool. We are coming to the end. I guess for people listening, if you want to get your books in order, you want to get ahead of your financials and being able to forecast things, then with a fractional CMO, for example, like Joyce, definitely get in contact with her. How would people do so?

[00:35:23.580] – Joyce

You can reach out through LinkedIn, through our website, through our design to scale newsletter on Substack. Very open to chatting if you’re on that journey.

[00:35:33.280] – Joran

Cool. We’re going to add the link to your LinkedIn profile. We’re going to add a link to Begger Fund, add a link to the Substack newsletter, so people will be able to find you in these different places. Thanks again for coming on to the show, Joyce.

[00:35:45.480] – Joyce

Thanks for having me. Enjoy the conversation.

[00:35:48.660] – Joran

Cheers. Thanks.

[00:35:50.280] – Outro

You’ve been listening to growing a B2B SaaS. Yoron has been ahead of customer success before founding his own startup. He’s experiencing the same journey you are. We hope you’ve gotten some actionable advice from the show, and we hope you had fun along the way. We know we did. Make sure to like, rate, and review the podcast in the meantime. To find out more and to hook up with us on our social media sites, go to www.getreditus.com. See you next time on Growing a B2B SaaS.