RV169 - The Changing Financial Dynamics of B2B SaaS and Tech Companies | Go To Market Live Episode 13
Apr 21, 2024
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Explore the evolving financial dynamics of B2B SaaS and tech companies, focusing on valuation multiples and investment strategies. Learn about optimizing go-to-market expenditures, rethinking sales and marketing investments, and becoming a business-savvy executive. Discover the importance of investing based on net new ARR and cutting out inefficient spending to improve overall financial health.
Valuation multiples trigger reevaluation of sales and marketing investments in SaaS businesses.
Invest based on net new ARR for a reasonable CAC payback period, not total revenue percentage.
Cut out inefficient sales and marketing spending to enhance overall financial health.
Marketing spend adequacy should be assessed based on net new customer acquisition, not total revenue.
Deep dives
Understanding Financial Dynamics in B2B SaaS and Tech Companies
Financial dynamics in B2B, SaaS, and tech companies are changing, affecting how sales and marketing expenditures impact a SaaS business's financial profile. This involves questions about roles like SDRs, salespeople, marketers, and financial decisions on customer expansion versus acquisition. The podcast discusses the shift from the growth-at-all-costs era and the pressure on various line items, especially sales and marketing spend.
Elevating Marketing and Sales Teams to Executive Status
To be considered a key component of a company, marketing and sales teams need to act as business leaders first and department contributors second. The focus should be on operating like a C-level executive, irrespective of job titles. By emphasizing a business lens in decision-making, leaders elevate their influence within the executive team.
Reevaluating Marketing Spend Allocation
Traditional methods of allocating marketing spend based on a percentage of revenue may be flawed in a recurring business model like SaaS. The podcast challenges the notion that a percentage of total revenue is a good indicator for marketing spend adequacy, offering insights on a more effective approach based on net new customer acquisition.
Analyzing ROI of Google Ads and Marketing Efforts
The discussion delves into evaluating the return on investment of marketing efforts, particularly Google ads. Emphasizing precise metrics like cost per engaged visitor and conversion rates, the speaker highlights the importance of data-backed assessments to optimize marketing strategies effectively.
Addressing Marketing Strategy in an Evolving Market Landscape
With an eye on founder branding and feedback-driven content, the podcast emphasizes a need for rapid iteration and customer trust in a saturated market. It hints at potential shifts in content consumption dynamics, focusing on authentic messaging to navigate an increasingly complex and competitive market.
Furthering Financial Literacy and Comprehension
To enhance financial literacy, individuals are encouraged to engage in real-world financial exercises like starting a small business. Additional steps include accessing benchmarking data, leveraging free online business classes, and gaining exposure to financial dynamics in private and public companies.
Upcoming Focus on Financial Dynamics Spreadsheet
The next episode will spotlight a detailed spreadsheet dissecting revenue sources, growth rates, and expenditure allocation between expansion and net new revenue. Insights from this analysis aim to optimize investment strategies to maximize growth and improve bottom-line profitability.
In this week’s event, Chris tackles the evolving financial dynamics within B2B SaaS and tech companies. He delves into the substantial shift in valuation metrics applied to these organizations and explores the consequent pressure this places on their go-to-market expenditures, particularly in sales and marketing. With a strong emphasis on becoming a business-savvy executive rather than remaining confined to departmental roles, Chris lays out a blueprint for rethinking investment strategies.
Following a detailed exploration of financial metrics and how they've historically influenced investment behaviors, Chris steps through his thoughts on how companies need to reallocate their budgets with a greater understanding of net new ARR versus total revenue. This episode sheds light on the urgent need to redefine the way financial decisions are made from a C-level perspective, steering away from traditional sales and marketing investments towards a more fiscally responsible approach.
The Impact of Valuation Multiples: Chris examines how the compression of valuation multiples triggers reevaluation of sales and marketing investments in SaaS businesses.
Investing Wisely: An emphasis on investing based on net new ARR for a reasonable CAC payback period, rather than a percentage of total revenue.
Optimizing Go-to-Market Expenditures: The necessity of cutting out inefficient spending on sales and marketing to improve overall financial health.
Be a Business Leader First: Chris’s call to marketers and sales leaders to prioritize business acumen over functional roles in driving their departments' success.
Future Predictions: Insight into upcoming shifts, such as the increasing significance of founder and personal brands, and the challenges in content trust.
If you want to have a conversation with Chris and present your current questions, roadblocks, or projects you’re working through, make sure to attend this weekly event every Tuesday at 12 central. Register here.
Can’t make the event but have a question for Chris? Submit it here.
The next Expert Session, featuring Crissy and Charlie Saunders of CS2 Marketing, will be Wednesday April 24 at 12pm central. Register here.
Thanks to our friends at Hatch for producing this episode. Get unlimited podcast editing at www.hatch.fm
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