How to Address Slowing Growth in SaaS Companies

The shift from seats to agents pressures SaaS margins. At the same time, the longstanding practice of getting enterprise customers to pre-commit and also prepay for functionality they may never deploy will get harder as CIOs look to free budget for their own LLM costs. To weather the storm, some SaaS companies have increased prices. This boosts revenue and margins in the short-term but can't be done repeatedly and creates even greater scrutiny over shelfware as procurement teams right-size and shift contracts to "pay as you go." To achieve sustainable growth, SaaS companies need to become hyperefficient at sales and marketing. Here are common ways to do so and who's doing it well: 1. PLG. Shopify and Atlassian exemplify efficient go-to-market based on product-led growth with free trials, low-friction upgrades and upsells. Their sales teams only need to get involved in the biggest opportunities at the largest accounts; every other step in acquisition, commercial transaction, activation, onboarding, and growth is self-service and automated. 2. Vertical SaaS. Guidewire Software and Veeva Systems are laser-focused on insurance and life sciences, respectively. Rather than casting a wide net, they spear-fish with deep domain knowledge and purpose-built solutions for that industry's specific workflows and regulatory requirements. Guidewire doesn't need to buy Super Bowl ads– their annual customer conference is the Super Bowl for property & casualty insurance executives. Nearly zero GTM effort is wasted– unsurprisingly they're the two most efficient on the list. We modeled Hearsay Systems after both these companies, and this focus allowed us to win incredible market share among Fortune 500 banks & insurers despite only raising $60M in totality. 3. Relocate operations to lower-cost regions and AI. This is private equity's favorite playbook to take costs out of companies they buy. Field sales continues to shift more to Zoom, which means you can hire AEs anywhere. Inside sales contributes a greater % of revenue as PLG motions are established. AI handles top-of-funnel leads qualification and generating marketing content and campaigns. 4. Focus on gross revenue retention. Because of high customer acquisition costs in #SaaS, leaky buckets are margin killers. Use LLMs to help customer success teams analyze product usage, segment cohorts, and identify opportunities to increase value realization. Put in guardrails to prevent sales reps from overselling an account, as doing so only creates churn in the next renewal cycle. 5. Introduce another product line. This only works if your new product has the same buyer as your existing products. Many SaaS acquisition pro formas fail to actualize for this reason, as it's not actually feasible to have the same AE sell both old and new products. Every SaaS company right now needs to double down on one or more of these levers in the AI era.

Possibly the most underrated, silent, and dismissed revenue “killer” in SaaS right now?☝🏼 No, I’m not talking about 1/ churn 2/ ability to sell to new logos 3/ outreach 4/ AI enablement for reps (which all 4 are most certainly valid “killers”) but…what’s not talked about nearly enough? 👉🏼 your dormant users. and…the real problem? 👉🏼 customers who are still paying but have stopped using your product. Sure, they LOOK like wins on the wild dashboard your team views- but in reality they’re literally one renewal cycle away from disappearing — (Think about it…💭) Here’s why this is such a forceful + silent revenue killer ⬇️ 1/ false retention confidence = on paper, they’re still customers (yay), but they’re not engaged — and they aren’t expanding 2/ no growth opportunities with no usage which = no value = no upsell, no cross-sell, no referrals (yikes) 3/ unpredictable churn = you think your pipeline is solid, right?! Meh, until they all leave at once (“what pipeline”?) Few thoughts on how to turn this around (before this becomes your reality) ⬇️ — ditch “logins” as a success metric, track meaningful actions instead (eg: are they actually using key features/inviting their team/results? — catch stagnation EARLY. (aka: if usage drops then trigger a proactive, people-first approach outreach…pls not another automated email) — make “reactivation” a revenue play. (As in: treat those dormant users like “at-risk pipeline”…meet them where they talk and live the most and have a well timed convo to bring them back to life before churning) New logos are magical, totally. I’m with you. But if that’s the sole focus…how are you keeping those who are paying customers engaged/up to date/driving revenue on your behalf? + who is tracking this at your company? (how?) ++ is this a total miss that someone (you) could/should bring up internally — and up to the top? ^^ big PS, your title doesn’t define what you can bring up to the c-suite. So go for it.👌🏼 #revenue #saas #customers

B2B SaaS revenue growth rates have slowed by over 50% in the past 2 years. And CAC Payback periods have skyrocketed by nearly 100% in the same period. These two effects combined put massive pressure on core financial metrics, business profitability, and enterprise value. The root cause of this is Go-To-Market Bloat (GTM Bloat) where B2B companies invest significant money in Sales & Marketing and do not get the appropriate return on investment. Sales & Marketing is by far the largest expense on a B2B company P&L - on average 40%-60% of total revenue; and 2-3X more than they spend on Product Development, Engineering, and R&D combined. GTM Bloat occurs across the entire go-to-market, including People, Programs, Process, and Technology. (1) People - Too many headcount on each GTM team, caused by outdated financial planning models, in addition to the overspecialization of roles on GTM teams (SDR, MDR, Solutions Consultant, AE, Onboarding Manager, CSM, AM, etc.). Or 90-person Marketing team that should be 35 people. Average sales quota attainment of ~40% is another clear indicator of headcount bloat. (2) Programs - This mostly happens in the Marketing budget. B2B companies dramatically overspend on large scale events and digital performance marketing - up to 15% of total revenue - and do not get anywhere close to an appropriate measurable ROI on these significant expenses. (3) Processes - Teams, meetings, reporting cadences to support programs that don’t work. SDRs to follow up with “leads” and get a meeting less than 1% of the time. Inefficient processes create significant bloat especially when operated at scale. (4) Technology - Buying an ABM tool for $200k per year and barely using it. So much bloated headcount increases license & seat costs for all SaaS subscriptions by 2-3X. Too many $100k+/year point solutions used by 1 department or team and not integrated or essential to the full GTM. __ Solving GTM Bloat is the #1 opportunity in a B2B company today to increase enterprise value. This is now a CEO, CFO, and Board Level issue. Eliminating GTM expenses that do not provide appropriate ROI could increase EBITDA by 20% or more. Restructuring the existing investments in GTM to deliver the appropriate effectiveness could increase growth rates by up to 2X (e.g. from 18% to 36% YoY). Or more than likely, the solution is a mix of both of these - eliminating low ROI expenses to improve EBITDA and doubling down on strategies that are already working to create breakthroughs in growth rate. #gtm #gotomarket #finance #b2b #sales *Benchmarks on public SaaS growth rates and CAC payback periods ℅ David Spitz and BenchSights. Shoutout to David for some of the best work in the industry connecting GTM with Business Financial metrics based on actual data (not surveys or inaccurate aggregated data). **At Passetto, we see similar, yet more amplified trends in our standardized analyses of CRM & Financial Metrics of private middle-market B2B companies

In my customer conversations the No. 1 problem I hear these days is that it’s getting harder to grow SaaS businesses. Organizations are struggling with retention and expansion because of shrinking budgets and increased scrutiny by CFOs. Customers are no longer willing to buy seats “just in case” their employees need access to the product. To add insult to injury, layoffs mean there’s fewer seats needed. There are many things SaaS vendors can do to fix this, such as better qualification, or making sure they’re delivering value and improving onboarding. But the one thing I keep reminding CEOs and Founders, is to double down on API plans and promote usage of their product vs. relying on per-seat revenue - here’s why: - Enterprise processes are often headless, and would be better served by automated integrations and agentic workflows powered by APIs - Integrations run in the background and provide value to users without necessitating interaction. A consumption model makes sense here, rather than a per-seat license - API Integrations, once set up and running (yes you need to secure them and monitor them too), will generally be sticky and not be subject to displacement So, consider augmenting your per-seat licensing with a consumption model and make sure you have a solid API monetization strategy to boost your net revenue retention. Please chime in in the comments if you’re already doing this and have seen results or can recommend best practices. #APIs #SaaS #Revenue