One of the biggest mistakes scaling SaaS businesses make is thinking what they’re doing today will make them successful in the future, says Jason Burke, founder and CEO of Positive Venture Group (PVG)—a leading outsourced finance services company.
The reality is, when software businesses first start out, they’re growing and using the support and infrastructure they can afford at the time. But like in all business situations, you need to dress for what you want, not what you have, he says.
“You have to start putting in place the planning and the execution to be able to deliver on your vision for the future. Most start-ups have a great vision. It's the execution they fall short on.”
And great execution comes from smart strategy, strong leadership, and scalable solutions.
Developing a better financial solution for growing SaaS companies
After starting his career at Deloitte, Burke made the move into enterprise software in the early 2000s. Over the years he worked his way into senior finance leadership roles with a range of industry greats, including IBM, Avid, and Conversant (formerly MOASAID Technologies), among others.
Then in 2014, Burke left Conversant because he wanted to take what he’d learned during his time in enterprise business and start using it to help growth-stage companies.
“The first time I went out and worked with an early-stage growth company, I was asked to review a payroll register,” says Burke. “I hadn’t done that in probably 15 or 20 years at that point, and I said, ‘well, I can do this, but you shouldn't be paying me what you are to do this.’ That’s when I realized, there's got to be a better way to get proper finance support for growth-stage businesses.”
That realization sparked his idea for Positive Venture Group.
Jason Burke, CEO and Co-Founder, PVG
Burke thought, “if we can recreate all the goodness of an enterprise finance function and license that on a monthly basis to growth-stage technology companies, they would benefit from the economies of scale, the enterprise-class systems, and the people, processes, and technology you get when you're in a large enterprise.”
Up until that point, the finance service and support Burke just described had been completely unaffordable for growth-stage companies. Instead, what many would end up doing is hiring a more junior-level professional, giving them the CFO title, and then ultimately missing out on the really strategic advice they were looking for—and likely required—to reach their full potential.
Over the last four years alone, Burke and his team at PVG have worked with more than a hundred different clients and have helped these scaling SaaS companies raise over $425 million.
“There's a lot of validation points that show taking a methodology like this and applying it to growth-stage companies helps them to be successful,” he said.
Navigating common SaaS pitfalls with the support and financial infrastructure for scale
According to Burke, 95% of growth stage-companies to get a seed funding round never reach a successful exit. And 80% never even achieve a series A, even though they've been funded in that first seed round.
“That failure rate is remarkably high, and it’s higher than a lot of people think,” he says.
There are three fundamental pitfalls that lead to this high failure rate, says Burke. These include:
- a lack of access to capital
- insufficiently linking strategy to execution, and
- falling victim to legal and regulatory risks.
Even large organizations are subject to these pitfalls. The difference is larger organizations have experienced CFOs to guide them through.
PVG helps its clients using what it calls its ‘CFO process’. So even though these scaling businesses can’t afford the high-level talent in-house, they can still grow with enterprise-level finance strategy and support. It’s an incredible value, among the many other value-adds PVG provides to help these businesses scale.
Leveraging the expertise and weight of outsourced financial services like PVG also gives growing SaaS companies access to the level of scalable infrastructure used by billion-dollar companies.
“A lot of growth-stage businesses are penny wise and pound foolish when it comes to financial infrastructure,” says Burke. “Oftentimes that ends up being one of the key factors in terms of them not reaching the level of success the founder would want to see.”
Not only does PVG make it more affordable for these businesses to implement the level of financial infrastructure they need to be able to scale into the future, but it also provides expert guidance in terms of implementation.
For example, PVG was named NetSuite’s breakthrough business process outsourcing (BPO) partner of 2019. This means PVG can set its clients up for success with NetSuite and it’s advanced ERP and accounting capabilities. It can set also them up with other scalable infrastructure, such a subscription billing software for SaaS businesses functioning with a recurring revenue model.
As soon as you get to a certain point of size and complexity, you need systems that will scale with you,” says Burke.
Many growth-stage companies try to get by with more basic platforms surrounded by a web of Excel spread-sheets, but this manual-heavy model simply isn’t scalable.
How can SaaS businesses create strategy and plan execution for the future?
“When we're talking to any growth-stage company, we ask them to picture where they want to be in the longest frame of reference they can see in their minds,” says Burke. “I'd love to say 10 years, but if I can get most founders to predict five years, that's a pretty good stretch.”
After founders lay out how they envision their companies five or more years in the future, the exercise becomes reverse engineering that future, he says.
“So in five years, if you're going to be there, where are you going to be in four, three, two, and one year? Then, we start building a business model and a business plan that helps them think about all the different things they need to execute.”
Growing SaaS companies need to think about how they’re going to:
- acquire customers
- support their customers
- ensure they have meaningful products in market at the right times, and
- drive towards profitability and revenue growth.
They also need to determine what sort of capital they’re going to need to raise, says Burke. It’s about creating the road map to your future business, linking your business’s strategy to that road map, and then bringing it all into your day-to-day execution.
Coming up with the future dream is often the easy part. Anticipating everything that needs to happen between now and the realization of that dream is trickier.
Burke and his team help growing businesses tackle the potential pitfalls mentioned earlier, including providing expert strategic advice, connecting strategy to execution, and navigating legal and regulatory risks that can bring businesses down.
What happens to strategy and execution in times of crisis?
When changes and disruptions occur in the market and in life—such as in rapidly evolving pandemic situations like the COVID-19 crisis—SaaS businesses need to revisit their plans immediately.
Burke says CEOs need to ask themselves the following questions.
- What does my hiring plan look like right now?
- What investments am I making in the next year?
- What should I be doing to make sure that I don't lose ground?
Growing businesses need to determine their non-critical expenses in order to extend their runways as far as possible and continue driving a level of success.
From a capital perspective, many governments globally have implemented different sorts of funding mechanisms. Burke says it’s important to be aware of what’s out there to help you.
Finally, he stresses the importance of taking care of the health of your employees at the end of the day.
“Make sure you're not putting them at any risk, which means reducing travel and, in most cases, closing offices. This will help ensure your employees are healthy and available to assist you and your clients through this next period of time, as well as be ready for when we eventually come out of this.”
Successful SaaS businesses work with the future in mind
As Burke said in the beginning, doing what you do today will never get you to where you want to be in five years time. There's got to be changes. And if you want to make those changes and make them proactively, you need to plan for those changes and plan to have the organizational structures in place to be able to execute on them.
“Once we build that business model based on a future vision, we can tell a business, ‘did you realize you need $10 million to achieve it?’ Then we can start going through and determining how and when they will qualify for a portion of that $10 million. And what's the best form for that to come in?
We can build a funding plan and a funding model that helps them bridge the gap between where they are now and where they want to be in the future.”