Baton invited recognized CS expert Rod Cherkas to share his insights about software implementation challenges facing Series C SaaS companies.
Having reached what is typically the final round of venture capital financing, Series C SaaS Companies are firmly in the late stages of their development with an established product, a proven business model, and solid revenue streams.
In this conclusion of our three-part series, we explore what happens at Series C SaaS companies during the implementation process. We dive into the changes in approach, roles, and process between Series B and Series C, and highlight what’s most important at this stage.
Series C SaaS companies have demonstrated a clear capacity for long term success, and are now focused on growing their market share through the acquisition of other companies and expansion into international markets. But in order to perform on the global stage, Series C SaaS companies must first focus on optimizing and fine-tuning their operation.
At this stage, the implementation team/professional services organization may feel like a full-blown independent business. The revenue and cost of the organization may start to be material to the company’s performance, and its contribution margin (or loss) may be meaningful. Additional challenges may arise from businesses with multiple product lines, broad geographic footprints, or new features that require different skillsets to implement and support. With these factors in mind, the organization generally must be moving toward profitability or at least break-even profitability.
Looking outside of the organization, there are also many potential benefits to growing a partner delivery ecosystem and strategically leveraging partners in business. If partners are an important part of the implementation delivery process, a partner management function may be evolving or continue to optimize itself. To position the company for success, the organization will want to ensure that partners have the enablement, training, support help, and even certifications they need to provide high quality solutions to clients. When managed appropriately, this can have a positive impact on customer retention and financial results.
Series C SaaS companies have well-defined roles and a structured implementation team, along with clear segments and responsibilities. For organizations that are still doing a significant amount of their own implementations, this stage in the company’s evolution can create new challenges for the team. There may be dozens of employees (or more) across multiple locations, all with different types of expertise. Keeping all of these teams working together toward common goals becomes a new challenge in leadership and management. Because of this, management and leadership development becomes a critical success factor, as does hiring, developing, and retaining the right individual contributor talent.
While individual team members may not like it, they may be seen as interchangeable with other fully productive team members on a resource planning chart. The organization may have also forecasted the number of resources required to optimally support the implementation backlog over a certain period, which puts more pressure on the training and development of new team members.
While series C SaaS companies already have documented processes and best practices in place, process optimization becomes a focus. Time management and utilization of resources are likely to be prioritized. As the team gets larger, ensuring that all team members are highly productive and properly utilized becomes an important factor in a group’s financial performance.
As the company continues to grow, the implementation team is likely being asked to support company revenue growth, but in a way that doesn’t require a commensurate investment of staff. Teams need to work smarter and more efficiently, but as they grow, there are generally more non-productive managers and other overhead roles required to support the client facing delivery teams. Having those client-facing team members maintain high utilization rates helps subsidize the cost of these non-productive overhead roles.
What’s Important at this Stage?
In addition to what’s important at Series B companies during implementations, series C SaaS companies prioritize the following:
- Optimization and standardization – As the organization scales and more clients enter the implementation/professional services process, the implementation team strives to improve outcomes and the experiences along the way. In order to do so, there is a push to create a highly repeatable and scalable process that delivers best practice results.
- Financial results optimization – Monthly and quarterly financial targets have an increasingly large impact on the company’s ability to hit its financial targets. There is pressure to ensure that the implementation team hits its forecasted results. Improving results in this part of the organization allows redirection of investment dollars to other parts of the company.
- Performance against industry benchmarks – There are industry metrics that allow a company to compare the performance of its implementation/professional services organization to similar outside companies. This can be particularly relevant when companies are going through fundraising rounds, as investors look for quantifiable ways to evaluate performance. Getting financial results within an appropriate range of industry benchmarks prevents unnecessary focus on this organization.
- Team Member Productivity – As teams continue to grow, small changes in team member productivity and utilization can have a material impact on financial results. There is a greater focus on ensuring that employees are productive to ensure resources are being allocated efficiently.
- Employee Retention – Since a larger number of team members are experts in their craft and able to deliver the high quality, consistent outcomes expected from the organization, employee retention becomes increasingly important. They achieve high utilization and can be sources of innovation. This is also an opportunity to coach or manage out poor performers who are bringing down results. The team is big enough now to absorb these short term gaps.
- Partner Management – At this stage, companies want to ensure that partners have the enablement, training, support, and certifications they need to provide high quality solutions to clients.
Series C SaaS companies have demonstrated their capacity for success, but in order to scale to the next level (acquisition or IPO), they must focus on fine-tuning existing processes and financial optimization. This can be achieved through increased employee productivity and retention, industry benchmarking, partner management, and standardization across the organization.