S3E15 – How to scale your SaaS to 1M MRR using processes with Matt Wolach

Are you wondering how to scale your SaaS to 1M MRR? Well, the secret lies in setting up and having the right processes in place. In this episode of the ‘Grow your B2B SaaS’ podcast, Joran Hofman sits down with Matt Wolach to discuss how to scale your SaaS to 1M MRR using processes. Matt is a multi-faceted professional with experience as a founder, investor, mentor, and podcast host. His diverse background includes roles such as VP of Sales, CEO, CRO, and Director of Sales and Marketing, offering a wealth of insights on growing B2B SaaS companies. 

Matt shares his journey of overcoming sales challenges in his early days, highlighting the importance of persistence and learning from failures. Through his own ventures and client successes, Matt emphasizes the significance of developing effective sales processes to achieve growth.

The importance of Shift in Mindset 

One key takeaway is the shift from a sales-focused approach to a customer-centric one. Matt emphasizes the need to move from “selling” to “helping,” positioning sales efforts as solutions to customers’ problems rather than mere transactions.

The Minimum Requirements for Scaling to 1 Million MRR

Matt points out the bare minimum essential components required to scale a B2B SaaS company to $1 million in Monthly Recurring Revenue (MRR). Matt stresses the importance of having structured processes across the entire sales funnel for sustainable growth.

Common Mistakes in Scaling SaaS

Matt highlights a common pitfall where companies prioritize lead generation without a solid sales process in place. He emphasizes the significance of establishing effective sales processes before focusing extensively on marketing efforts.

Importance of Sales Process

To scale to 1 million MRR, having a structured and efficient sales process throughout the entire funnel is crucial for sustained growth and success.

The Importance of the Discovery Phase (Twisting the Knife Technique) 

A critical aspect discussed is the art of creating discomfort or urgency during the discovery phase by identifying and amplifying the prospect’s pain points. Matt explains the concept of “twisting the knife” in sales, where sellers delve deep into prospects’ pain points to make them acutely aware of the severity of their problems, leading to higher conversion rates.

Discovery versus Demo

The discussion touches on the balance between discovery and demo phases, with insights on when to show the product during discovery calls for optimal results.

What to Ask During Discovery Calls

Matt recommends asking tailored questions during discovery calls to unearth specific pain points and evoke emotional responses, driving prospects towards swift decision-making.

The importance of crafting a discovery process that stirs emotions and highlights the urgency of solving the prospect’s problems is emphasized for effective sales outcomes.

Matt shares success stories where clients significantly improved their close rates by refining their discovery process. By eliciting strong emotional responses and demonstrating the severity of the prospect’s issues, sales conversions saw remarkable enhancements.

How to Build Pain Awareness

The knife analogy is used to illustrate the power of making prospects acutely aware of their pain points, leading to a heightened sense of urgency and need for a solution.

Strategies for incorporating pain-inducing questions seamlessly into the discovery process are discussed, emphasizing the need for a systematic approach to elicit emotional responses from prospects.

Sales Process Audit

Matt underscores the importance of conducting sales process audits to ensure consistency and effectiveness across sales teams. By identifying and rectifying inconsistencies, companies can optimize their sales methodologies for improved outcomes.

SaaS Metric Tracking

The significance of tracking key SaaS metrics such as Customer Lifetime Value (LTV), Customer Acquisition Cost (CAC), and the LTV to CAC ratio is highlighted. These metrics provide critical insights into the financial health and performance of a SaaS business.

CAC Payback Period

The discussion expands to the concept of Customer Acquisition Cost (CAC) Payback Period, emphasizing the importance of understanding how long it takes to recoup the investment made in acquiring a new customer. A shorter payback period is indicative of a more efficient customer acquisition process.

Strategic Decision-Making

Matt stresses the role of data-driven decision-making in scaling a SaaS business. By leveraging accurate metrics and benchmarks, companies can make informed choices regarding marketing investments, customer acquisition strategies, and overall growth initiatives.

Customer-Centric Approach

A core takeaway is the focus on building a customer-centric culture within a SaaS company. By prioritizing customer needs and aligning sales efforts to provide genuine value, businesses can foster trust, loyalty, and long-term relationships with their clients.

How to Optimize Processes

Matt underscores the necessity of establishing robust processes across all facets of a SaaS business for successful scaling. From marketing to sales to team operations, having clear, standardized processes in place streamlines operations and facilitates sustainable growth.

The Importance of Personal Branding

Reflecting on personal branding, Matt emphasizes its power in establishing credibility, trust, and thought leadership within the industry. Building a personal brand can significantly enhance visibility, reputation, and opportunities for growth and collaboration.

The importance of thought leadership and sharing valuable insights within the industry is highlighted as a means to establish authority and attract opportunities. By positioning oneself as a trusted advisor, individuals can nurture strong connections and drive business growth.

Collaboration and Networking

Matt’s emphasis on collaboration and networking as essential components of personal and professional growth underscores the value of building strong relationships within the industry. Engaging with peers, experts, and potential collaborators can open doors to new opportunities and knowledge-sharing.

Key Timecodes

• (00:00)Show and guest intro
• (1:18) Why you should listen to Matt Wolach
• (2:37) Minimum requirements needed for scaling to 1M MRR
• (03:25) Importance of a Structured Sales Process
• (04:41 Common Mistake: Focusing on Lead Generation without a Sales Process
• (06:42) Creating Pain in the Discovery Phase
• (10:32)Twisting the Knife in the Discovery Process
• (15:29) Applying Discovery and Demo in the Sales Process
• (17:59)The challenges encountered while trying to scale
• (21:31) Using Loss Aversion in Marketing Materials
• (23:29)Building Processes for Scaling
• (26:46) What metric should SaaS companies be tracking?
• (31:05) Where should more focus be? LTV CAC or Payback period?
• (32:36)Advice for Growing to 10K MRR
• (33:59) Advice for Growing to 10 Million ARR

Transcription

[00:00:00.000] – Show intro

Welcome to the Grow Your B2B SaaS podcast. In this podcast, we cover all topics on how to grow your B2B SaaS, no matter in which stage you’re in. I’m Joran Hofman, the host of this show and the founder of Ready Test, which is a B2B SaaS that helps other B2B SaaS companies to set up, manage, and grow an affiliate program. Being a founder myself means I’m going to the exact same journey as you are, experiencing the exact same issues, and probably have the exact same questions. And this is why I started the podcast in the first place. Get advice from industry experts on how to grow my B2B SaaS. So if you like this content, make sure to subscribe, follow, give it a thumbs up. Let’s just dive in.

[00:00:37.260] – Quest Intro

In today’s episode, we’re going to talk about how to scale to 1 million MRR quickly. My guest is Matt Wolach. Matt is a founder, investor, mentor, coach, podcast host, and he filled roles like VP of Sales, CEO, CRO, Director of Sales and Marketing. So he definitely has a diverse background and seen from me everything on the business side. With this podcast, Skill Your SaaS in his role as a B2B SaaS Sales Coach at CELES, he helps software businesses understand how to sell more, generate more leads, and close more deals to scale to that one million MRR mark. And that is where we’re going to dive in today. Happy to have you on the show, Matt.

[00:01:12.300] – Matt

Yeah, thanks for being here, Joran. I’m really excited for this.

[00:01:15.000] – Joran

Likewise. And if people are not convinced after this intro, why should people listen to you today?

[00:01:20.030] – Matt

I’ve spent years trying to figure out exactly how to sell my own businesses. And in fact, in my early days, I struggled a lot. It was rough. I was thrown into sales of a software company because as a partnership, I was the one responsible for marketing and sales. I was really confident about it going in, and that confidence was shattered as I could not figure out how to generate leads, I could not close leads, and it was really frustrating for me, but I wasn’t going to stop there. I sweated and spent lots of time trying to learn exactly the way it would work and how it would happen and how we need to get deals in and eventually made it happen. It took a few years, but that company took off, and eventually we were able to exit that company for quite a bit of money. Did it again, started a new company, put the same process in place, except now that I had the process, it went a lot faster, which was great. So that one exited in quite a bit shorter time. But now I have clients around the world in about 50 different countries who use my process that they’re getting great results with.

[00:02:20.180] – Matt

And I guess that’s why they listen to me is because I’ve been there, done that. I’ve been through the struggle, and now I’ve seen exactly what works well to sell software.

[00:02:27.450] – Joran

I think it’s nice that you really experience the mistakes, you really experience the struggles, and you create processes out of that. We’re going to dive in that in a sec. We’re first going to cover some basics in a way. The topic here today is how to scale to 1 million MRR. What in minimum needs to be in place to even think about scaling to 1 million MRR?

[00:02:46.910] – Matt

In order to get to a million, you’ve got to be able to have process. A million MRR, that means you’re about 12 million a year. Not about, that is what it is. Which means at that point, you’ve got to have process in place. This is That’s a big learning for a lot of people is a lot of things are haphazard early. If you don’t have a very structured, clean process throughout your entire funnel, it’s going to be very difficult.

[00:03:10.260] – Joran

Nice. Before we dive into mistakes, best practices, processes, is there Anything else we need to know before we really dive into that section? Is there something like, you need to have this, you need to know this before we can even talk about how to scale?

[00:03:25.600] – Matt

One of the things that I teach with my clients is the mental shift. Shift. And one of the things that we talk about, of course, if you’re like, Oh, I got this software, I need to sell it, I need to get customers, I need to close deals, I need to sell. But actually, if we think sell, our prospect starts to feel yucky and they don’t like being sold to. Nobody likes getting sold to. So it feels yucky. And even you doing it, you might feel yucky yourself. One of the things I guess we need to understand here is, let’s have a mental shift. Let’s shift from I need to sell to I need to help. How can I help these people? There’s people out there with problems. You have a product that’s going to help those problems. So shift from I need to sell them to I need to help these people. And if I can help them, then obviously they’re going to be buying the product. And it’s so funny, when I get my clients to make this transformation, they go from being that icky-yucky salesperson to being a guide and a consultant that people are drawn to and attracted to.

[00:04:21.890] – Matt

And it’s so funny how much they start closing deals more often when that happens. So don’t sell, help.

[00:04:27.430] – Joran

Yeah, because in the end, if you help them to solve the problem, they will stick with you longer because you actually help them to solve that problem. We’re going to dive into that more deeper. Probably this is already one of the mistakes companies make scaling their SaaS, right? Trying to sell instead of actually solving the problem. Any other common mistakes companies make?

[00:04:43.830] – Matt

Yeah, I think one of the biggest mistakes companies make is they look at their… When you’re just launching, especially, and they say, Okay, we have this product we built. It’s a great tool. We need to get a ton of leads in here. And so they go out and they work on marketing. They do some great things. They generate leads. But And then they realize, we don’t know how to close these leads. We’ve talked to a few people and none of them are signing up. Why is that? And you realize, we spent all this time and effort and money on marketing, and now we don’t have a sales process or a closing process, and we don’t know what we’re doing. We’re losing all that time and effort and money that we just spent on marketing. And so actually, the order that the best companies are doing is they’re figuring out how are we going to close the people we’re talking to? How are we going to convince these people that this is the right for them, and they’re going to be much further ahead using this product than otherwise. And then once we have that sales process, that closing process, the demo process, even, now we feel good about that.

[00:05:40.630] – Matt

If somebody is going to talk to us, we have a high likelihood of them actually signing up. Now let’s go out and let’s get deals done. Let’s get things closed. One of my clients, Paul, this is a perfect example. We need leads, we need leads. And I said, Hold on, maybe we actually need to close. And so we worked on the closing process. We implemented some demo structure. We implemented even some process after the demo. And they went from a 26% close rate to an 87% close rate. And once they reach that, they’re like, okay, almost nine out of every 10 people we’re talking to sign up for us. Now we feel good about, let’s go Let’s market. Let’s spend some money. Let’s spend some time and generate leads because we know they’re going to close. It makes the dynamics, it makes all of your metrics look really good once you understand how to close because you can spend a lot on marketing and make things happen.

[00:06:28.080] – Joran

Yeah, and as you mentioned, if you dive into the metrics, you don’t always need more leads. If you just close, I guess, what you already have, then you don’t need the skills that much in that sense. I follow you, of course, and I would recommend everybody to follow you on LinkedIn. You have your own YouTube channel. I think one of your posts was also not creating enough pain in the discovery phase. Can you tell a bit more about that?

[00:06:49.970] – Matt

This is absolutely a major problem that most people have. In fact, I was just talking with one of my clients literally earlier today about this, and he’s struggling on how to do this. Even though he conceptually the right thing, he’s trying to put it in place. And we just clicked today. You could see a light bulb go off with him, and he knew he had it. He said, I’m so gitty because I can’t wait for my next call to use this tactic you just taught me. I need to make this happen. If you think about it, buyers, if it’s the right product, they should want to get started right away. If it’s something that’s going to actually solve their problems and help them, they shouldn’t wait weeks or months. It should be something that they get started with right away. But so many times we We have a buyer who waits and it delays the process, the sales cycle gets really long. It’s really frustrating. And so we need to understand how to get them to take action quickly, how to get them to say, I need this. And so many times we think, Oh, but my product is not perfect and it might be missing this, or they might not love this part of it, even though I like this part is not great.

[00:07:52.460] – Matt

And we get too stuck on, they’re not going to like us because the product is a little off. And I’m here to tell you, it doesn’t matter how great product is. You don’t have to have an awesome product to be able to sell. I’ve seen it over and over how sometimes the best products don’t win. I’ve got lots of clients who are on the brink of destruction, and I look at their product and it’s amazing, but they’re missing out on marketing and sales tactics. And one of these things we can do is have an awesome discovery process. If you put a great discovery process in place, then your buyer will feel like, I’ve got to get started right now. Let’s say you’re crawling through a desert and it’s dry, it’s hot, the sun is beating down on you, sand everywhere for miles, and you’re just crawling and crawling. It’s horrible. And you feel like you’re going to die. You’ve got major problems. You are very dehydrated. You feel like it’s about over. If somebody came up to you and they rode up on a horse and they’re like, Hey, you look like you’re in bad shape.

[00:08:48.740] – Matt

Do you want some water? Would you stop and say, Wait, hold on. Is that filtered water? Is that mountain spring water? Is that avian? That’s all I drink. So I’ve got to make, No. You say, Yeah, give me the water. I need the water right now. You don’t care what water it is. And that’s exactly what happens with your product. If you can get your buyer to realize that they’re in really bad shape and they’ve got to fix their challenges right now or they’re in trouble, then they don’t care that your product might not have this perfect thing or it might look a little weird. They’re going to need, Give me the product. I need it right now. Let’s go. One of my clients, Greg, is a perfect example of this. He came to me at a 1.9% close rate. 1.9%. If you can only imagine closing two out of 100 demos, you’d be very frustrated. He said, You’re my last chance. If you can’t help me out, it’s over. I’m shutting it down. I taught him this process. I taught him how to get people really emotional and discovered and get them realizing, I’m really hurting.

[00:09:45.800] – Matt

I need a solution right now. And he did it and it worked. And he came back to me and said, Matt, we’re now over 30% on our close rate. And even better, people are 90% closed before they ever see the product. I get them emotional and so worked up about their problems during the discovery process that they think, I’ve just got to have it. Oh, you have something that does this? Let me see. Okay, cool. That’s great. Let’s go. And they don’t even care. He shows the product for a few minutes and it’s over. He’s closing people with only showing his product for a couple of minutes. If you can get people to hate their problem and know they need to switch right now, they’re in. So figure out how to get your discovery just right so that they’re emotional and they hate their problem. And that’s the biggest lesson, Yoren.

[00:10:29.100] – Joran

Love it. I I’m still thinking about somebody crawling in the desert right now. But if you would take the client example, what process or for the people listening right now, and every business is going to be different, of course, and creating the problem is probably going to be somewhat different as well. But is there some process they can follow where they can have them hate the problem and make sure that they can start also having these close rates?

[00:10:52.240] – Matt

Great question. For this, I use my knife analogy. I have a knife analogy. It makes it really easy to understand how to do this. Basically, From my experience of working with thousands of different companies and thousands of different sellers, I’ve identified people who are selling into three different categories. You’ve got the entry-level people who just got started, and you’ve got the middle people, and then you’ve got the experts. Now, the entry-level people, let’s say you have a buyer who comes to you, and the buyer comes to you and says, Hey, my shoulder hurts. I need you to fix it. Now, obviously, we’re not doctors. It’s just an analogy. But anyway, they come to you and say, My shoulder hurts. So you look at that and say, Okay, they said the shoulder hurts. Internally, you might think, Yeah, the shoulder hurts. He’s telling me that. But I’m looking and I see a knife in their belly. They literally have a knife sticking into them. And so that initial salesperson, the early person that’s entry-level, they’re going to realize there’s a knife, but then they also say, They just told me to fix the shoulder, so I’m just going to tell them how to fix the shoulder.

[00:11:53.110] – Matt

Let’s do that. And the problem is that buyer, they might have said that the shoulder is a little bit pained, but their major problem was It wasn’t solved. You weren’t focusing on something that’s actually really important. So that’s a problem. This next level buyer, the mid-level, they go to the next step and they realize, Okay, you said the shoulder, but I’ve identified the knife. Now, this person at least understands, I need them to identify that they have another problem, that they have a bigger problem. And so what the next level seller does is they say, Hey, yeah, your shoulder, I get that might be hurting, but you have a knife in your gut. And at that point, they say, Oh, so I do. Thanks for pointing that out. That mid-level seller Great. I got them to identify what the real problem is. But then they stop there. And in fact, in many cases, that mid-level seller wants to pull it out. Our product solves it because it can do this and there’s a cool report and it’s got a drop-down. It’s amazing. Don’t do that. Don’t sell in discovery. We need them to go deeper than just identifying their problem.

[00:12:48.110] – Matt

We need the buyer to go further than just realizing that’s a thing. That’s what most people do who’ve been around sales for a while because you will close some deals. You’re going to close some. But if you want them to close fast, and if you want to close a lot of like a lot, like more than 50% of your closes or of your total demos, then we need to go to the next level. And the next level, the third level seller, they recognize that there’s a problem other than what the buyer thinks. They get the buyer to identify it But instead of pulling the knife out, they do something else. They twist the knife. They get the buyer to realize just how bad the pain is. Now, I know you’re in there’s people out there going, he said twist the knife. He’s hurting his prospect. He’s a terrible salesperson. This is why sales is bad and why I hate sales. Nope, this is an analogy. Please don’t take me for that. We’re not inventing new pain. We’re just getting the buyer to realize that they have a pain that they didn’t know about. So we twist the knife so that they realize, Oh, that’s even worse than I thought.

[00:13:44.220] – Matt

Holy cow, that is terrible. I need to fix that. And I need to fix it now because this sucks. I hate it. And so by twisting the knife, instead of pulling it out and trying to be the hero, we get them to understand just how deep the pain goes. And so how do you twist the knife? You ask them questions to get that understanding. Hey, so where would you be if you didn’t have this? And what does this mean to you personally? And even doing calculations. So wait, you told me that you’re missing out on this and this. And if I run the numbers, that means you’re missing $12,000 per month. Is that where you just talk $12,000 a month you’re losing just on this little thing? And going that deep, getting them to fully understand, Yeah, I guess it is. I never calculated. By the way, you’ll be a consultant to them at that point once you start calculating things for them and they’re going to trust you and believe in you. And once they realize that’s how bad it is and they already trust you, great. Yeah, show me what we got here.

[00:14:40.280] – Matt

And so it’s pretty incredible how you can get them to make that shift from Yeah, here’s some of my problems to, holy cow, we’re in trouble. We need a solution now by just twisting the knife. Then you will be the hero when you pull the knife out in the demo and you explain during your demo exactly how they’re going to remove the knife and they’re going to be much, much better. By the way, only about 3% of sellers know how to do this. If you can do this, you will be an elite seller. You will get to that third tier and become one of those people that has insane close rates. Like my client Mike, who closes at 71% He closes 7 out of 10 of his demos because he’s so good at twisting the knife. This is the way to do it, Joren.

[00:15:20.830] – Joran

Nice. Two things like a discovery and then demo, you took them apart. You also mentioned one of your clients only does three minutes of sharing his screen. Do you recommend all this discovery without showing the product or maybe for three minutes and then booking another call to have a demo? Is that best practice for you?

[00:15:39.140] – Matt

It actually depends. It depends on a lot of different factors, whether you keep your demo and discovery together in one call or you split it up into separate calls. There’s no one answer. The depending points are price point, complexity of the product, how the prospects even got to you, whether it’s cold or whether they’re warm. There’s all kinds of different factors we look at. But once I start working with clients, we can look at those factors and make a recommendation on what would be best for them.

[00:16:06.560] – Joran

One other question I had, you mentioned, ask a lot of questions. Have them realized that they have a pain and twist that knife? Would you see a lot that people are not comfortable asking all these questions because it can always feel like an interrogation, where you just keep asking questions and then at one point, you don’t get the answers you’re looking for. How would you help people to overcome that? What would you recommend?

[00:16:30.490] – Matt

You’re exactly right. It is uncomfortable for many, and especially for me. So I came into sales from a customer service background. And that customer service background, it was drilled into us that the customer is always right. And we did whatever we could to make sure the customer felt great and we didn’t upset them. Throw all that out the window for sales. The customer is not always right. They’re wrong. In fact, they’re wrong and they feel that they’re wrong. And that’s why they’re coming to you to help them figure out what’s wrong and how they can solve it. People go to Reditus, it’s because They need to set up a program so they can start getting more leads in. They can get people to send leads to them. They don’t know how to do that. And your product helps them great for that. They need that help. But if they went and told you something that was wrong, we shouldn’t say, Oh, that’s okay. We should react and let them know, oh, that’s really what’s going on? Oh, we need to fix that, so that they know. And so many times it hurt me early in my sales career because I was like, That’s okay.

[00:17:21.310] – Matt

No worries. It’s fine. And people didn’t realize how bad their situation was. Once I realized we need to twist the knife, then I could say, Oh, really? So you’re losing a a quarter? Now I’m challenging them and I’m getting them to understand that things are bad. And that’s a shift. It’s a shift away from what we’ve been taught. And that’s why a lot of people struggle at selling. That’s why a lot of people come to me to fix selling because they don’t know the right way to do it because it’s not intuitive. Sales is not something that you can just naturally pick up. Good sales, great sales is something that you have to learn how to do because it doesn’t just come to you. And that’s why I struggled so much at the beginning.

[00:17:58.060] – Joran

And I think this goes really well to the next question I have. I think that’s one of the challenges people have before they implement the mental shift. But what kinds of challenges will people have when they actually think, okay, yeah, I definitely need to twist the knife to keep an analogy. What What challenges will they run into? Because it’s not going to be perfect from day one, right? So what are the things they’re going to encounter and what recommendations would you have to overcome those?

[00:18:24.980] – Matt

Yeah, great question. So once they learn that twisting a knife is the right thing, the next step is, where do we do it and how do we do it? And what you want to do is actually craft your process so that those opportunities to twist the knife happen on each call. So we want to actually put it in place. For an example, one of my clients, he sells this It’s like a financial electronic medical record type thing that helps people understand. Well, basically, what he would do is he would ask them specifically, so how much are you getting here and how many clients are you winning there? And he would actually dive into that and he said, but wait, how many should you be at? Where should it be? And they told him the goals. He said, So you’re missing this much. You’re losing this much. And so if you think about your prospects, the power of something negative, something lost, is actually twice as powerful emotionally as something they could gain. So he did a beautiful job because instead of saying, Oh, so you’re wanting to actually add this and get to this number?

[00:19:23.000] – Matt

He’s saying, You should be there. You’re losing it. You’re missing out on that. And by doing that, it got the buyers to realize not, Oh, I could gain this. Let’s see. I’m not sure if it’ll work for us. Maybe I could. No, I’m missing this. I’m losing this. I need something to solve that. So you’re exactly right. You’re in it. It’s hard to know when to do it until you build in the process, until you build into the process exactly where you plan on twisting the knife. And you should know your buyers, you should know what’s going wrong. So one example, one thing that people at home can do, something that really works. Instead of asking just only standard questions like, Oh, how How many users do you have? How many locations? That’s good. You do need to get that. But let’s go deeper. Let’s have questions that we know we’re going to get good answers to. And by know, it means you have to know your market. Get to know your market. You should know their buyers, you should know what they suck at. You should know what they’re missing. And you should know that your product is solving those things.

[00:20:16.120] – Matt

And so based on what your product does and those gaps your product fills, ask those questions. Ask them. So, Yoren, you might ask, Hey, so tell me about your affiliate process that you have outlined. Oh, we don’t really have an affiliate process. You probably know that a lot of people don’t have a good process Process. So ask that. Don’t say, You probably don’t have a good process. No, it doesn’t sound… That sounds like you’re being a salesperson. But ask, Hey, can you outline me your affiliate process right now as you have it? You don’t have one set up at all? Right now, they’re freaking out. I guess we should. I should have done that. Dang it. I need something that’s going to do that for me. And now it becomes easy to get them to realize, Uh-oh, I need this knife out of here. This thing sucks. Pull it out. Help me out. And that’s what we need to do, is we need to dynamically build out the discovery process more than just, Oh, I got my questions. We’re good to go. No, let’s make sure we understand exactly where we’re going to twist the knife so we can get people feeling bad, or we can get them helped out.

[00:21:07.280] – Commercial Break

This podcast episode is sponsored by Reditus. Reditus helps B2B SaaS companies to set up, manage, and grow an affiliate program. In short, it means you’re asking other people, affiliates, to promote your SaaS. You would only pay the affiliates a kickback fee when they deliver you paid clients, making it a very cost-effective and scalable way to grow your MRR. See more at getReditus. Com. Com.

[00:21:31.250] – Joran

One question I had, though, is I really like the idea of losing out on something we’ll close a lot more. Would you recommend also, because now just talking about the sales process, the calls you have with clients, should this also come into all the marketing material you have, website, ads, etc.

[00:21:47.060] – Matt

Yes, absolutely. I actually have a friend who did some tests on Twitter. And on Twitter, he would post one thing that say, Oh, this, and talking about a gain that could happen. And then he did the opposite a couple of weeks later, posting basically the same exact thing, but talking about what’s being lost and the loss that people are experiencing. And the lost one got so much more engagement, and people were so much more emotional about it. And so through your website, it should be designed at Hey, what are you missing? What are you losing out on? What’s not there that you don’t have right now? Instead of, oh, you could possibly gain this. People are much more worried about things they could lose or that they’re missing than something they might be able to add. And it’s also hard to convince people that if you use this product, you’re going to add this thing. You’re going to be able to get to this new level. They’re like, I’m working hard right now. Are you sure? Is it going to help me get to that? Am I really going to get more leads? Am I really going to get more revenue?

[00:22:45.160] – Matt

As opposed to, you are doing the wrong process and you’re missing leads that you should have gotten. People came to your site and they didn’t convert because you didn’t have the right way to do it. That’s scarier and something it feels like I could just fix that and plug that hole. So absolutely focus on what’s the miss, what’s the loss, as opposed to what could they gain?

[00:23:03.500] – Joran

I think a lot of companies don’t do it, including ourselves. We definitely have the gaining part, but then I fully understand what you’re saying, as in people think, Can I actually reach it? Versus I’m losing out on something. It’s more of a nice to have, maybe now even, where they’re not actually having the feeling that they’re losing out on something. I can already see it in our own messaging.

[00:23:25.130] – Matt

Good. Yeah, I hope it helps.

[00:23:26.580] – Joran

Can we, I guess, look at you work with a lot of clients, any other best practices on what SaaS companies do really well, which helps them to grow quicker towards that 1 million MRR?

[00:23:37.180] – Matt

The biggest thing is continual training with the team. If you’re going to get to a million MRR, you’re going to have a team to do it. It’s not one person that’s going to be doing that. Making sure the whole team is on the same page, making sure everybody’s consistent. One of the things I do is what’s called a sales process audit. Essentially, that’s where management hires me. I go in and I basically mystery shop, the sales team. And I submit leads, and we see how long does it take them to contact me? How long does it take them to set up a demo? How hard did they try to set up a demo? If I don’t show up, do they try to get me back? What do they say on the discovery call? What do they say on the demo? How good are they at closing? What are they sending me in terms of quotes? You would not believe how inconsistent even small sales teams are. Even small sales teams of three or four people are the reps are sending quotes vastly different than each other, even for the same size deal. The reps will tell you different numbers based on, Oh, yeah, we have this or that.

[00:24:38.380] – Matt

I had one client that had four reps, and they had a team that was doing some work as a SaaS service combo. And One person said there were 15 of those team members, one said there were 22, one said there was 37, and one said 53. And so even between four reps, they all had different numbers that they were spouting out. And if it’s going to be that variable on something as easy as the number of people on the team, then it’s going to be variable on everything else. And that variability creates inconsistencies, which will mean some people are going to close, some people are not, and that’s bad. If you’re spending that money, and sales reps are very expensive, we need them all raised very high levels. We need them to all close really well. It’s pretty incredible what some of these people say on these calls. I’m having people tell me all kinds of bad things about the company. I have people say things you should never say to a prospect, things like, Oh, yeah, I guess we harassed you, meaning our team got you on a call. Please don’t say that. I’ve had people say, Oh, I’ll sell you anything you want to buy.

[00:25:40.830] – Matt

Don’t say that. That’s very salesy. You’re not taking care of their needs specifically. You’re just hoping they buy something that’s definitely not good. When I present this to management, they’re blown away. They’re always like, What? That’s nothing like what we told them. Sometimes we feel like, Oh, yeah, we’ve told them they got to do this. Guess what? Things happen. Reps are busy. They don’t always learn it the right way. They don’t always learn it the first time. They don’t always implement it. We’ve got to double check. We’ve got to follow up. We’ve got to make sure the team is on the same path. We’ve got to keep that team aligned in terms of what’s being said and how it’s being said. And these audits produce some pretty incredible things, but they also produce great results. One of my clients, Elaine, she went through an audit. They were at 11% on their close rate. 11% was the average amongst six reps. They’re now at 39% on their close rate, and in fact, it’s trending up. And so understanding exactly what the misses are and where the inconsistencies are and then how to get the team all on the same page produces some pretty incredible results.

[00:26:38.650] – Joran

Yeah, because 11% for salespeople going to 39, that’s going to be a good-They actually quadrupled revenue. Yeah, nice. And talking about metrics, you build a SaaS metric tracker document. Tell me a bit more about that. And then what metrics does it actually track? So I guess also the question is, what metrics a SaaS company should track, in your opinion?

[00:26:59.900] – Matt

Yeah, good question. First, the document, it’s called the SaaS Sales Scorecard, and you can get it at sassalescorecard. Com. I built it because I didn’t have a great way to track my own metrics. Yeah, you’ve got your CRM, and that’s nice. I never really could get it all organized neatly and perfectly right in front of me. I built it for me first, and then I gave it to a friend because, Hey, how do you track? I’m like, Here, try this. And another friend, and they’re all like, This is great. We love it. I created it so that everybody can just have it. Sassalescorecard. Com, go download it. But essentially, it’s going to give you an opportunity to just put in what your numbers were for the month. And it automatically calculates all the most important SaaS metrics. And it also gives you graphs, it shows you trend lines. But then what I also do is I put goals in and benchmarks for what you should be at. So the benchmark show you based on some of the top companies, where you should be for each of those metrics. Your goal, you can put in your own goal, and it’ll track how you’re doing it against the goal and against the benchmark.

[00:27:51.530] – Matt

It’s pretty fun. But essentially, some of the metrics we need to track, things like your lifetime value. That means if you sell a customer, what are they going to be worth to you over the course of their entire membership with you. Then, of course, you have your CAC, your customer acquisition cost. What does it cost you to acquire a customer? Now, I’m sure you know, Yarn, it’s wild how many companies don’t calculate their CAC. They don’t know how much it cost them to acquire a customer. I was talking to the client and I said, Hey, here’s a lead source. It’s one of those software advice, G2 type things where every lead that they send you is going to be about $200. They’re going to charge you $200 to send that lead to you. My client was like, No way. We’re not paying 200. I’m like, Wait, hold on. What’s your current CAC? And he had to go in there, run some numbers, run through. He’s like, Oh, we’re at 575. They’re spending 575 for every client. Their close rate is about 50% because we worked on that, which means that it would take them two of these leads to close one deal, which means it would only be $400 for this lead source to get a client that’s less than 575.

[00:28:49.180] – Matt

So knowing your numbers helps you make better decisions. They were able to understand that actually it sounds expensive, but it’s better than what we’re doing right now. Let’s do it. And so they did it and they’re taking off. It’s going really well. But understanding that is important. Now, combining those two numbers we just mentioned, lifetime value and customer acquisition cost. There’s a ratio called your LTV to CAC. Your LTV to CAC refers to how much is the lifetime value versus the customer acquisition cost we’re spending. Let’s say it costs you $1,000 per customer to acquire that customer, $1,000. If it’s $1,000 per customer to acquire them, how much are they giving you over time and how much you’re going to get over the entire lifetime for that customer? Let’s say they’re at a hundred bucks a month and they stay with you for a year. They’re at a hundred bucks a month, they stay with you for a year. That’s $1,200. That means $1,200, you spent $1,000. It’s just barely more than one-to-one. Yes, you made a little bit of profit. It’s not great. What we want in our LTV to CAC because we want a three to one ratio.

[00:29:47.430] – Matt

Three to one would be the minimum, meaning I spend one dollar, I get three dollars back or three euro. So if that’s the case, that’s a good investment. If I told you, Hey, if you spend one euro and you get three back, how many do you want to spend? Let’s keep going. I get three back for every one I spend. Great. That’s a good investment. So if your LTV to CAC is three to one or more, that’s really good. However, we don’t want it to get too high. I had one client, they were at 29 to one. We got their sales closing process so dialed in that their LTV to CAC went to 29 to one, meaning they spend $1 on marketing, they get 29 back. They were just crushing it. But what that actually means is now we have an opportunity. If we get above, say, six to 1, once we get up there, now our marketing is working really well. Our closing process is working really well. So let’s spend more money. Let’s put some more effort into marketing and get more leads in because we know that we’re going to be able to close them.

[00:30:39.070] – Matt

So that’s where, again, knowing your numbers either tells you this is something that is imbalanced on the bad end. We have too low of an LTV to CAC, or we’ve got a great LTV to CAC, let’s spend some marketing, let’s make it happen. And once you understand the metrics and the numbers, it makes it so easy to make the right decisions.

[00:30:56.930] – Joran

It all starts with that. Otherwise, you can’t make the right decision, right? They have to be dated. Ltv CAC ratio, it’s, I think, one of the most important metrics for sure. You hear now people discussing, should we actually focus on payback period rather than LTV CAC? What is your opinion there?

[00:31:12.550] – Matt

Payback period is also important. So we call that CAC Payback. If you spend that thousand, how long is it going to take for you to recoup that? If they pay you a hundred bucks a month and you spend a thousand, it’s going to take you 10 months to get that money back. Now, if your lifetime ratio with your customer is very they’re with you for three years or more, then you’re okay spending 10 months’ worth of a customer to get them because they’re going to be with you for three or four years, and it’s going to be great. And so your CAC Payback Period refers to how many months does it take to get the money back that you spent based on the amount of money they’re going to pay you per month. If you’re less than 12 months, that’s considered good. So sometimes people are like, Wait, I’m not spending $1,000 to get a $100 customer. Hold on. How long are they with you? They’re with me for three years. Why not? They’re going to be with you for that long on On average, yeah, you might have one or two that leaves after three months or so.

[00:32:02.610] – Matt

But if most of them are going to stay for a long time, then that’s a good investment. Especially when you’re talking to investors, VCs, funders, private equity, that’s one thing they look at is if something gets invested into acquiring customers, how quickly can you get it back? The shorter the CAC pay period, the better. Once you get above a year, it starts to get a little scary. You want to try and keep that low.

[00:32:22.730] – Joran

Yeah, because in the end, they want to invest money to accelerate growth. You need to have those numbers in place to actually show that the money they invest is going to turn into the multiplier you just mentioned. Exactly. Nice. We’re going to dive into the final four questions. When we talk about scaling your SaaS, what advice would you give somebody who’s just starting out and growing to 10K monthly recurring revenue?

[00:32:44.170] – Matt

I think in the early days, the biggest focus needs to be on the customer. The ones that I see struggle are the ones who don’t truly know their market. On my own show, Scale your SaaS, where I interview software founders as well like you, we talk about what is your biggest thing that you learned in your early days? Almost all of them say, I’m so glad I got to know my customers. The ones who are successful, they have tons of conversations. I’ve landed it, you need at least 25 to 50 customer conversations, not sales conversations, but purely just ask them, What are you struggling with? What keeps you up at night? What are you trying to accomplish? What do you hope to gain? And really just understanding what they’re going through. You’re going to start to see patterns after 25 or 50. Once you see those patterns, it makes it easier to develop your product to map match that market and what their needs are. It makes it easier to set up your marketing messaging and all of your funnels so that you can get that to align with their needs and how they work.

[00:33:39.340] – Matt

You can make sure your sales process and your sales scripts align with your market really well. It just creates so much value for you to know inside and out all about your prospects, your market, and what they need.

[00:33:53.940] – Joran

Yeah, and exactly the pain they’re having to make sure you can add it on the website as mentioned. Nice. If we go past the 10K MRR and we’re going to make a big jump, we’re going to go to 10 million ARR, what advice would you give SaaS founders here?

[00:34:07.550] – Matt

Let’s say you’re going to that from that 10K to 10 million, you’ve got to have all sorts of process in place. You need marketing processes, you need your sales processes, you need your team processes. It can’t happen without that. I can’t tell you how many clients I take on in the 3-4 million range, and they’re just all over the place, very scattered, and they don’t have process for this, they don’t have process for that. They admit it, they realize it. That’s what happens When you grow quickly. Oh, through brute force, an effort just made it happen. But in order to really get to that 10, you have to have the process and the structure laid out so you know exactly what’s going on here. Anybody you hire knows exactly what’s going on at each phase, and it makes it simple to plug people in and they can take off and they can be excellent at what they’re doing. Process is king getting to 10 million.

[00:34:54.250] – Joran

It will break a couple of times. I was head of customer success in my previous job. I always hated businesses as myself in previous companies. In the end, I was the one building them for the CS department. But once you start scaling, they will break because what you think is working at a certain revenue state is going to break when you have more people, more revenue coming in.

[00:35:14.730] – Matt

So true.

[00:35:15.450] – Joran

If we zoom out a bit, is there any general advice you want to give towards SaaS founders who are currently on their journey and I guess no revenue metric related to it? Any advice you want to give here?

[00:35:29.310] – Matt

I think the My biggest advice is always be thinking about what you can do to help your target buyers. So make your product something that’s going to be very buyer-focused, something that’s great for them. Align your sales efforts towards that. Make sure that your entire team knows that their goal is to get your people to be better, get your market, your targets to be better off. Through interaction with you, they should be far improved than if they did anything else. And if we have that mindset of we’re helping and we’re improving people, then they’re going to They’re going to see you as advisors. They’re going to see you as consultants, not somebody trying to sell them some product. You’re going to be an advisor. And yes, sometimes that means that you might advise them to go do something else, that maybe they’ll get better benefit. By the way, I have gotten many referrals from people I’ve turned away because I thought that they would have a better chance of succeeding elsewhere than others because they realize, holy cow, that person actually cares about helping me. Maybe there’s somebody else I can help them with. Oh, meet my friend Mike.

[00:36:28.800] – Matt

It’s incredible how many times they feel almost obligated to put you in front of somebody else because now they trust you so much and they believe in you and they’re grateful to you for helping them. And so if we can get our entire team, including ourselves, making sure we believe it, let’s help these people. Let’s get them the results they need, then that’s going to pay all sorts of dividends for you and your company going forward.

[00:36:53.360] – Joran

Yeah. Even for the employees, if you are paid to help people and you can be genuine and you can actually help them. Them, then I think it’s going to be a really fulfilling job as well, what you’re going to do.

[00:37:04.550] – Matt

Totally agree.

[00:37:05.420] – Joran

Cool. Then final question, what is one thing you wish you knew 10 years ago?

[00:37:10.240] – Matt

I think the thing I wish I knew 10 years ago was it would be the power of the personal brand. I didn’t start building my personal brand until about four years ago. I was really focused on my company brands before that. Something that I’ve known for a while but didn’t really apply it would be people buy from people. And so building a company brand is much, much than getting people to connect with another person. And a perfect example, of course, Tesla has 10 million followers. Elon has 150 million followers. It’s completely a different dynamic. So understanding that took me a while. But once I built it, it started working. My personal brand, you mentioned I’ve got my YouTube, I’ve got all my channels. There’s 60 or 70,000 people who follow me across all these different channels, and we get all sorts of inbound business from it. It’s amazing. But I didn’t understand that. I didn’t get that. It took me quite a while. If somebody else is out there thinking, How do I do this? Build your personal brand. Be a thought leader. Share values. Speak about and post all about how other people can be helped.

[00:38:11.510] – Matt

When they get help from you, they’re going to say, That’s great. I might need to know more from this person. Just like Jorn is doing right now with these podcasts, these are super helpful. He’s got an amazing lineup, and people realize that this guy wants to help, and you can go to him for what you need.

[00:38:26.490] – Joran

Yeah. To add one thing to it, I don’t have all expertise myself. So what I do is I basically ask people like Matt to come on to the show and share their expertise. And I think when you’re in this flow, having amazing guests, it’s a lot easier to keep the flow high for amazing guests. So you need to start somewhere. But once it starts picking up, then you can continue on the flow you have.

[00:38:50.860] – Matt

Perfectly said.

[00:38:52.050] – Joran

Nice. We’re going to link to your SaaS sales scorecard. We’re going to link to your podcast, Scale Your SaaS, and I will add a link to the podcast we did together on it. Add a link to your LinkedIn profile, to YouTube. But if people want to get in contact with you, like you mentioned, you’re on all these channels, what is the best way to do?

[00:39:08.720] – Matt

Linkedin is probably the best. I’m very active on there. In fact, I post a tip every day. So if you’re wanting tips on how to scale, go follow me on LinkedIn, Matt Wallach, W-O-L-A-C-H, and you’ll get tips on how to grow, how to scale.

[00:39:22.370] – Joran

Nice. Thank you for coming on. For people listening, we’re going to add a poll on Spotify, so make sure you answer that And if you haven’t done so, please leave us a review on Spotify or Apple podcast so we can grow this podcast even further. Thanks again for coming on, Matt.

[00:39:39.810] – Matt

Thank you. It was a lot of fun, Jorin.

[00:39:41.320] – Joran

Thank you for watching this show of The grow your B2B SaaS podcast. You made it till the end, so I think we can assume you like this content. If you did, give us a thumbs up, subscribe to the channel. If you like this content, feel free to reach out if you want to sponsor the show, if you have a specific guest in mind, if you have a specific topic you want us to cover, reach out to me on LinkedIn. More than happy to take a look at it. If you want to know more about where it is, feel free to reach out as well. But for now, have a great day and good luck growing your B2B SaaS.

Meet the author

Joran Hofman

Back in 2020 I was an affiliate for 80+ SaaS tools and I was generating an average of 30k in organic visits each month with my site. Due to the issues I experienced with the current affiliate management software tools, it never resulted in the passive income I was hoping for. Many clunky affiliate management tools lost me probably more than $20,000+ in affiliate revenue. So I decided to build my own software with a high focus on the affiliates, as in the end, they generate more money for SaaS companies.