Traditionally, measuring business success requires a greater understanding of your company’s go-to-market lifecycle, how customers engage with your product and the macro-dynamics of your market. But in the most challenging environment in decades, those metrics are out the window.
Enterprise application and SaaS companies are changing their approach to measuring performance and preparing to grow when the economy begins to recover. While there are no blanket rules or guidance that applies to every business, company leaders need to focus on a few critical metrics to understand their performance and maximize their opportunities. This includes understanding their burn rate, the overall real market opportunity, how much cash they have on hand and their access to capital. Analyzing the health of the company through these lenses will help leaders make the right decisions on how to move forward.
Play the game with the hand you were dealt. Earlier this year, our company closed a $40 million Series C round of funding, which left us in a strong cash position as we entered the market slowdown in March. Nonetheless, as the impact of COVID-19 became apparent, one of our board members suggested that we quickly develop a business plan that assumed we were running out of money. This would enable us to get on top of the tough decisions we might need to make on our resource allocation and the size of our staff.
While I understood the logic of his exercise, it is important that companies develop and execute against plans that reflect their actual situation. The reality is, we did raise the money, so we revised our plan to balance ultra-conservative forecasting (and as a trained accountant, this is no stretch for me!) with new ideas for how to best utilize our resources based on the market situation.
Burn rate matters, but not at the expense of your culture and your talent. For most companies, talent is both their most important resource and their largest expense. Therefore, it’s usually the first area that goes under the knife in order to reduce the monthly spend and optimize efficiency. Fortunately, heading into the pandemic, we had not yet ramped up hiring to support our rapid growth, so were spared from having to make enormously difficult decisions. We knew, however, that we would not hit our 2020 forecast, which required us to make new projections and reevaluate how we were deploying our talent.
We did have to make a small round of layoffs, and for us, it made sense to cut back on the sales team. The cold, hard reality is there simply is not as much business to close in an environment so uncertain for so many companies. But with cash on hand, it was important that we invest in the areas where we would see the greatest return. This has included continuing to innovate, extending our product capabilities and delivering top-level customer support and services. Rather than making cuts in these departments, we redeployed people, particularly within our services organization to support short-term and strategic opportunities.
Rather than cut people from a talented product deployment team that was painstakingly built over several years, we got creative and made them the cornerstone of a sales promotion that offers free software implementations for current customers of our biggest competitor. This strategy is already helping us close business, and it’s keeping our people motivated and busy. We didn’t have to make investments in more resources to run this program, and we’re now offering a program that’s crushing the competitor.
Company culture is vital to long-term success, so it is important — if you can afford it — to retain your talented and loyal people who have helped the company develop its ethos, work ethic and purpose. There are many things that business owners and decision-makers can’t control, but company culture is one that you can, and it will sustain you through bad times and ideally position you to grow when the market begins to expand again.
Build a product or service that is essential no matter what the climate dictates. For any technology market to be successful and become a de facto standard for the way people work, it must quickly evolve from a nice-to-have solution to a must-have. My company is in a relatively niche market: close management software for corporate accounting teams, which automates basic accounting functions and drives greater collaboration across the team, whether in the office or remote.
These are important capabilities that have driven the software’s adoption, and during the pandemic and accompanying move to remote workforces, they have become essential to ensure business continuity. Our market is no exception, and I strongly believe that the impact of the pandemic on the workplace has accelerated the evolution and growth of our marketplace by at least three years.
A situation like this makes you think a lot more creatively. What is fortunate is that even before COVID-19 hit, we were already looking at our operations creatively and seeking to become more efficient, so we’re going to come out of a two-year stretch as an even more efficient company. Ultimately, this honing of operations will fuel our long-term growth.
Businesses that examine their operational efficiency, take a serious look at their expenses, gauge how essential their offering is and get creative in building a team that matches their desired culture are likely the ones that will thrive in the post-COVID environment.