I am a partner at OpenView, responsible for leading investments and being the point person for several of our portfolio companies. I joined the OpenView team when it was still part of Insight Venture Partners and helped architect the spin-out of OpenView in late 2006. When I joined the team at Insight in 2005, I was part of the investment team in Platespin, was a board member of that company, and saw it to its acquisition by Novell. Prior to Insight, I was one of the principles of eEye Digital Security and was COO of the company from late 1999 to 2005. I joined eEye pre-revenue and transition when it was on a $15M annual run rate. In that role, I was responsible for building eEye’s first distribution model, including online, direct and channel sales. Prior to eEye, I was a senior consultant at Booz Allen & Hamilton, in the Operations Management Group. I have a BS in Computer Engineering from Northeastern University and a Master of Engineering Management from Dartmouth College. Husband to a gorgeous pediatrician and father to two wonderful children. My family is from Iraq, I was born in New York and lived in Baghdad, Cairo, Beirut, Amman, Hanover NH, Indianapolis, New York, New Orleans, Laguna Beach CA and Boston. I am also an avid fan of Manchester United.
Blog: http://bit.ly/aIWlOQ Profile: http://www.linkedin.com/in/firasraouf

“The content and views expressed in this blog do not necessarily reflect the views of OpenView Investments, LLC, its affiliates or portfolio companies.”
 

1. Hire a CFO: I won't dwell on this point, as I've written about it here.
2. Get your financials in order: get your financials GAAP ready. Time to say goodbye to Quickbooks and cash accounting.
3. Build your economic model and operating dashboards: More on that here.
4. Get a financial audit by a reputable accounting firm: there's nothing like an audit to ensure your compliance with basic financial accounting. Make sure to dive deep into the audit firm's assessment of your financial operations and processes for areas that you can improve upon.
5. Get a legal audit by a reputable law firm: in an acquisition, your company will go through a super extensive legal due diligence audit which will uncover all sorts of issues. These issues will delay the closing of the deal. A mini-version of this due diligence typically happens when a company raises an institutional VC round. But in the case of VC audit, companies typically don't do much with the due diligence findings after the investment is done. I encourage companies to do their own audit with their own law firm, and use the findings to make process and documentation changes to clean up their legal infrastructure.
6. Start taking investment banking meetings: there's lots to be learned from bankers that cover your space. For one, investment bankers have a wider lens to your market, to the larger companies in it (acquirers); and the competitive landscape around you. As they get to know your company, they are more apt to bring it up in their discussions with potential acquirers.
7. Get your board of directors in order: more on that here.

1. Pick a banker that best covers your market: use that relationship to get a perspective on all the possible acquisition prospects, their priorities, their appetite, and how best to engage them.
2. Start building relationships with prospects - start with product integrations: the most effective way to get a perspective acquirer's attention is to demonstrate how an incremental revenue stream can be built for them around your product. So get a product integration built first.
3. Start building relationships with prospects - follow with joint selling: once you have an integrated solution, start marketing and selling it... Then engage the prospect's sales team in the process.
4. Retain the banker for a "soft sell" process: retain a banker to go out and solicit interest in a partnership or "strategic" funding.  It provides the banker with an excuse to reach out and have the conversation, without giving the impression that the company is actively looking for an exit.
5. Take an inbound offer and shop it: This is where it gets tricky, and why you need to have all your ducks lined up before you get to this point. The cliche of "great companies are bought not sold" holds very true. And what I say is that "greater companies are bought in a competitive bid." Ideally, you would receive an inbound offer for acquisition (assuming the offer is not perfect)... and you take that offer and use your banker to shop it around. Which would ideally create a bidding situation that maximizes your outcome.  

• One of the founders is a former regional sales rep. In the startup he co-founded, he becomes VP of Sales because he's the only member of the founding team that has sold something before. He does a good job through the first few startup years, getting some revenue through the door and starting to hire and manage a handful of sales reps. He's what is typically referred to as the Renaissance Rep. The company raises money to expand growth; expectations rise; and the sales team and process complexity grow exponentially. He starts to get overwhelmed by the process and management complexity. He starts to get stressed out, other managers get stressed out. The board gets stressed out... CEO finally takes the initiative and replaces him with a new VP who is qualified to take the sales team through the next level of growth.
• Founding CEO is a passionate and driven individual with a vision to build a unique solution to a market problem. He grinds through the startup years, endlessly tinkering with the product and the operations of the company until something clicks. Company generates revenue and is starting to grow. When revenue is below $3 million, he is fully able to run the whole show as the sole senior manager. As the company starts to grow beyond that level, he starts recruiting senior managers to help him. Suddenly things are not going so well. Building a cohesive senior team is proving very hard. Goals become elusive and execution begins to drift. With some prodding from the board of directors, the CEO realizes that he does not have the skill set to run a larger and more operationally complex company and agrees to step aside to let a more experienced CEO take his place.

1. True leadership CEOs: These are CEOs that are able to take the seed of an inspiring purpose behind the existence of their companies (the WHY in Simon's talk), and use it to fuel the creation and growth of an enterprise. They are able to use that purpose to inspire their employees to be committed, passionate, and to produce the exceptional. They inspire (through their employees) the desire within their market to be part of that purpose (by buying products/services of those companies). And they inspire their customers (by delivering on the promise of their products/services) into becoming evangelists that draw in more customers through word of mouth.  An obvious example of these CEOs are Steve Jobs and Barak Obama (although the jury is still out on Barak's ability to renew and up-sell his current customers!)
2. Managerial CEOs: These are CEOs that do not inspire. Rather they execute and lead their employees in the pursuit of exceptional execution and success. Mind you, there is nothing wrong with these types of CEOs. Not every successful company had to have a true leadership CEO. Many companies have become great big companies by out-executing their peers. I put Bill Gates in that camp.
3. Incapable CEOs: In my world, these tend to be founders who landed in the CEO position because of their founding status. These are CEOs who do not have the skills or the rapid learning ability to become effective leaders of their companies. These are CEOs that don't have the inspirational or the managerial leadership to grow an early stage software company.  There is no shame in that. The worst thing that an incapable founding CEO can do is to allow pride to get in the way of the decision to step aside. There is no shame in making that decision. In fact, a founding CEO stepping aside to allow a more capable leader to take the helm is a sign of true, inspiring leadership in itself.

• CEO closely watches the quarterly one-year new customer bookings to determine when to hire new reps while maintaining profitable distribution economics. Suddenly in one quarter, the bookings go up significantly, prompting the CEO to hire new reps. Only to find out two quarters later that the rise was attributed to the sales team booking three year deals (a new trend for the company.)  The company's head of finance did not note that shift in his quarterly reporting. As a result, the company had over-hired in sales, and the distribution economics were negatively impacted.
• One company experiences quarter over quarter growth in new customer bookings. With that growth, the company ramps up new sales rep hiring. A year later, existing customers churn at a 50% rate. A new CFO comes in to clean up company financials, only to discover the core issue. It turns out that the company did not have a formal process for reps to book deals. In some cases, sales reps were using an email confirmation from a prospect to book a sale (only to have the customer refute the sales upon invoice). In many cases, the reps were mis-representing sales as perpetual licenses instead of recurring.  The company ends up writing off $1M in sales, and realizing that the sales economics of the business were much worst than initially reported.
• One sales team heavily discounts professional services to win deals. While this enables the team to hit quota, the overall gross margin of the business begins to suffer, without an obvious correlation to the sales team's behavior.

1. Get a solid handle on the drivers of your distribution model. Figure out the distribution economics that will support your expansion plans. Make sure that your distribution model is designed with those economics in mind, especially as you begin to grow the team. More on distribution economics here.
2. Build your operational dashboard to track the top 2-3 drivers of your distribution economics. For example, make sure that you are closely monitoring new customer bookings, number of new customer bookings, and the average transaction per customer. Examples of running sales as a process here.
3. Make sure that your VP of Sales (or sales manager) understands the distribution economics you are aiming for. Design a compensation package that aligns the VP of Sales to the desired economics. More on senior manager compensation here.
4. Align your sales process, and more importantly the compensation structure of your sales team, to support your distribution strategy. For example, if you don't want the sales team to be hunting large accounts at the expense of smaller deals, make sure that you are incenting your team to deliver the associated number of deals every quarter... and don't just drive them to hit a top-line number. More on evolving your sales process here.
5. Conduct a quarterly retrospective using the operational dashboard in comparison to the realities on the sales floor. Probe into anomalies showing up on the dashboard and dive deep enough into the sales process to uncover symptoms of process or behavioral deviations that can turn into significant issues.
6. Always be thinking about how the sales team needs to evolve over time. Is it time to split up new sales from existing account management (more on that here)? Is it time to introduce professional services? Why is the gross margin getting lower (is the sales team discounting services to win deals?)

1. For a CEO who is strong in sales and marketing, a CEO who is driven to push top line growth... I would want to have a CFO who can use the operating metrics of the distribution model to temper the CEO's top line drive. The role of the CFO in that case would be to keep the sales and marketing side of the house as capital-efficient as the business needs it to be. Speaking of which, you should read my post on What is a Profitable Distribution Model.
2. For a CEO who is product or marketing oriented, and not operationally/process centric... I would want a CFO who plays the role of the COO; a CFO who can take care of building and scaling the operational processes and infrastructure within the company while the CEO is focusing on product or market development. Speaking of which, you should read my posts on Operational Dashboards.
3. For a CEO who is not into the details and is not analytically focused, I would want the CFO to assume the role of operational co-pilot. The CFO would engage the functional senior management teams to pull together the right set of functional metrics/analysis that provide the right insights to the annual/quarterly planning.
4. For an inexperienced CEO... I would want to have a CFO who brings extensive operating experience -- again, to be the CEO's co-pilot.

1. An inexperienced Finance Director delivers to management and the board sets of financials that don't always tie. In those financials, the numbers that were being reported as one year new customer bookings turn out to be multi-year bookings. This revelation meant that the company had been over-hiring in sales using the wrong assumptions on overall distribution model economics.
2. An inexperienced Finance Director does not implement the appropriate procedures for closing and recognizing a sale. Sales team reports bookings that are not validated with signed contracts by the customer. Subsequently, over $1M in bookings are written off as non-renewable. These bookings were a significant driver to hiring decisions which ended up burning lots of cash.
3. An inexperienced CEO does not understand the financials and economics of the business. Decisions made in accelerated growth of the company resulted in high cash burn. Key issue is the impact of opportunistically closing professional services heavy sales, where the gross margin on that revenue was resulting in cash burn. Basically, the CEO (and the board) could not really tell what was driving the cash burn.   

• Invest in a senior Finance resource early (CFO or VP of Finance). Look for someone who has experience in building companies from your current size to 3x that size.  Don't let the cost of this resource stop you from hiring the best talent you can recruit. It will pay for itself many times over.
• Recruit a credible audit firm and go through an audit (but not before you hire the CFO/VP that can prepare you for an audit.)  An audit is the best way to ensure that you have your house in order.
• Use the partner at the Audit firm as your financial adviser (to augment your CFO/VP). There's lots that the Audit firm partner can do to help you and your CFO/VP focus on, when it comes to the right next steps in evolving your finance function. Also invite him to your board meetings as an observer.
• Do the same with a legal firm. Hire a credible legal firm and have it do a legal audit on your company. This audit invariably uncovers issues with your current corporate structure, option plan, contracts and other such matters. Make the legal firm partner an adviser to you, and ask him to help you identify the next steps in your evolution. Also, invite him to your board meetings as an observer.
• Get an independent board member that plays the role of the board-level CFO. This would be a former CFO who has taken more than one company public and has experience sitting on boards.  This board member would be responsible for providing your CFO with the necessary air-cover. And he would be responsible for setting up more formal audit and compensation committees.

1. Pay for performance: CFOs can help shape pay for performance structures by getting to know shareholders’ expectations through their interactions with analysts and major investors.
2. Financial discipline: It’s important for CFOs to focus on what is affordable, albeit striking a balance with what is competitive.
   
3. Risk and internal controls: As executive compensation plans are key to attracting, retaining and motivating talent, CFOs should establish a rigorous process to understand how incentives influence employee behavior, how those behaviors aggravate risk and what steps or controls should be put in place to minimize the risk.
   
4. Bridging the information gap: Aside from managing risk, CFOs could spend considerable time with both the audit and compensation committees to bridge the potential knowledge gap on compensation and financial performance."

• Scorecard. The scorecard is a document that describes exactly what you want a person to accomplish in a role. It is not a job description, but rather a set of outcomes and competencies that define a job done well. By defining A performance for a role, the scorecard gives you a clear picture of what the person you seek needs to be able to accomplish.
• Source. Finding great people is getting harder, but it is not impossible. Systematic sourcing before you have slots to fill ensures you have high-quality candidates waiting  when you need them.
  
• Select. Selecting talent in the A Method involves a series of structured interviews that allow you to gather the relevant facts about a person so you can rate your scorecard and make an informed hiring decision.These structured interviews break the voodoo hiring spell.
  
• Sell. Once you identify people you want on your team through selection, you need to persuade them to join. Selling the right way ensures you avoid the biggest pitfalls that cause the very people you want the most to take their talents elsewhere. It also protects you from the biggest heartbreak of all—losing the perfect candidate at the eleventh hour.

1. Product Marketing
In my mind, product marketing is a function whose sole existence is to prepare a product to be sold, and equip a sales team to sell the product efficiently. Product marketing is a function that needs to be joined at the hip with Sales. Product Marketing, among other things, is the owner of content -- including product pitches, competitive positioning, and establishment of value propositions.

Product marketing is responsible for existing market segmentation and research (in collaboration with product management which focuses on future product research). Product Marketing will draw information about win/loss, competitive differentiators, customer pain points and implementations, and many other sources including the Sales team. Product Marketing will pull all that information into internal and external content that helps increase the efficiency of prospect customer adoption and prospect conversion into paying customers.

For more read Market Segmentation - The Means to More Profitable Growth

Product management then works with Sales Operations (in early stages, the product marketer fills this role) to develop and deliver sales rep on-boarding and ongoing training. Sales Ops will ensure that the decks, collateral, and information provided by the PM will be used uniformly and consistently. Sales Ops will ensure that sales is certified on all materials. Sales Ops and Product Marketing will work closely on what is or isn't working on a continuous improvement basis. Again, for early stage companies, the PM has to fill the role of Sales Ops.

In this role, the profile and skill sets of a product marketer are as follows:

• Exceptional understanding of product technology (for a non-techie) including the ability to understand and describe the product architecture; product differentiators; and the ability to do a product demonstration to a technical audience. I find that the best product marketers are ones that started off as developers or sales engineers, migrated to product management, and then to product marketing.
• Empathy towards the development and/or product management team. The product marketer needs to be able to "hang out" at the technical side of the house. He/she needs to be able to draw upon the knowledge on that side of the house in support of building the tool sets required by prospects, partners, and the sales team.
• Empathy towards the sales team. The PM needs to live with the sales team. In fact, the PM should sit with the sales team on the sales floor.
• Exceptional written and oral communication skills: the PM has to be able to write like there's no tomorrow and be able to be a master communicator with prospects, partners and customers.

• Highly creative both conceptually and graphically
• Exceptional written communication skills
• Broad and deep skill sets in marketing through myriad on-line and offline marketing channels
• Exceptional ability to multitask many projects -- large and small -- simultaneously
• Strong experience in managing analyst and influence relations programs

• Small Funds Have a Better Performance Profile than Large Funds with Seven Times as Many Funds Achieving a 3x and Greater TVPI (total value to paid-in capital) Multiple
• Among the Funds in SVB’s Portfolio of Investments that Outperformed their Respective Cambridge Associates Benchmark, Small Funds Fared the Best, Surpassing the Benchmark by Over 50 percent in Many Cases
• Fund Sizes Have Declined Since 2007, largely due to the reduction in raised funds after the 2001 dot.com bubble burst; and again after the 2008 downturn
• Small Funds Have a Better DPI (Distribution-to-Paid-in) Profile than Large Funds
• Ten Year Returns for Venture Have Fallen 32 Percent in One Year

1. Leverage specialized industry expertise: smaller funds are not compelled by the need to deploy large amounts of funds... which reduces the need to expand beyond a core segment or portfolio company stage. By focusing on a core segment, the fund is able to achieve a higher level of expertise within that segment... and in turn be able to demonstrate a competitive advantage within it.  
2. Better alignment with investors: smaller fund GP compensation tends to be much more driven by carry (profit based compensation) than management fees. This creates a more direct alignment between LP needs (reduced fees and increased profits) and GPs.
3. Fewer homeruns are needed to return the fund: Smaller fund sizes, and hence fewer investments, force managers to focus on capital efficiency. Capital efficient businesses have a lower risk profile and a higher probability of returning at least the invested capital. More on this here. 
4.  Ability to complement large funds: I'm not too sure about this one... The report positions smaller funds as ones that are relied upon by larger funds for syndications that leverage the former's expertise. 

1. Put yourself out of work:  The number one issue that expansion stage companies face is their founding executives becoming a bottleneck to the growth of the business. This is especially so in the case of the founding CEO and/or CTO. So my number one advice to founding CEO's is to be extremely focused on shedding the work that they do on a daily basis. In other words, delegate, delegate, delegate. When a CEO proactively sheds work, two things happen: either he has a qualified manager to delegate to... or he realizes he needs to recruit one.  Which brings us to priority number two.
2. Start building your senior team:  The expansion stage is all about building a highly qualified and cohesive management team. And it takes a LONG time to build that team. I have worked with a number of our CEOs on building senior management teams, and it has taken us 18-24 months to dial in the right set of executives each time.  Why so long?  Because it takes a couple of attempts to find and recruit the right team. To build a team of 6 senior managers takes anywhere from 8-10 attempts (recruit then on-board then wait to see if the manager is good and fits in... if not, let him go... then recruit another, on-board him, wait to see if he is good and fits is... and so on). More on this here.
3. Make your first senior hire a CFO:  I have had so many debates with expansion stage CEO's on the importance of hiring a CFO. Many resist this hire, thinking that it is expensive and that it's too early to make. HUGE mistake. The CFO should not be measured by his cost. He should be measured by the enterprise value he brings to the table and the bandwidth he provides the CEO. More on that here and here.
4. Develop the company's management system: As software companies grow, they require a more formal management system. A management system allows the CEO to work with the senior team to set the company's vision, mission and priorities. And it provides the mechanism through which annual, quarterly, monthly and daily goals are set and executed upon. More on that here.
5. Build a cohesive board of directors: Board meetings, and the dynamics within them, is one of the most challenging changes for the first time CEO. Typically, board members come in with their own egos (typically big ones), and their own agendas. Investors have to balance the interchange between wearing the investor hat and the company hat. The founder has to learn how to represent the interests of the company and the employees (dispassionately, even when that means letting go some of the early staff members.) More on this here.
6. Enjoy what you do: the expansion stage is a completely different experience from the start-up phase. I actually enjoyed the start-up phase much much, more than the expansion stage. To the point, where I actually resigned from eEye on my 5.5 year anniversary to pursue another start-up (which ended up being OpenView). If you don't enjoy being the CEO anymore, replace yourself and do something you like doing (within your company.) There is no sacred rule that says you should remain as CEO.

1. Don't exclude your prospective customers from the early product development cycle. Don't try to go out with a fully baked beta assuming that if you build it they will come. Engage your prospects early on, build in their feedback within an agile product development cycle.
2. Don't ramp up your sales and marketing support before you release your product. The founders should be the first marketers and the first sales reps. More on this in Sales Learning Curve and the Renaissance Rep. 
3. Begin the customer development cycle right along the product development cycle. Have measurable customer development milestones that mimic the milestones of product development. Make them meaningful and don't make them about the product.
4. Stop selling your product and start listening for the customer's pain point. Learn how the pain manifests itself and how the customer wants the pain relieved.
5. Develop a repeatable sales and marketing process. More on SaaS Sales Models here.
6. Adopt an Agile approach to your customer development cycle.
7. Only begin ramping up your company once you have figured out the true alignment between your target customer, their pain point, your solution and the sales/marketing experience that your customers wants to be taken through.  Read about the Ideal Path to Expansion Stage.

I have always wondered why SaaS companies pay so little attention to the usability of their software. And when I say usability, I don't mean how usable the software is by its developer/designer/CTO. I'm taking about usability from the perspective of the eventual user of that product. The CUSTOMER...

From my perspective, the key reason is:

• SaaS products are first built by developers, starting with a founder-CTO's vision of how technology may solve a business problem. That results in a developer's perspective of how the end user should/would use the product.
• The company for the first start-up years looks for customers to buy the solution. And the company ends up with a mish-mash of customers across many different segments, each with its own use patterns.
• The development team starts to evolve the solution to meet the inbound requirements from these disparate customer segments. This creates complexity in the product, and results in the 80-20 syndrome (80% of users use 20% of functionality).
• The company then starts to focus on a couple of core segments. The development team then works hard to untangle the mess and redirect the product more specifically to those segments.
• Once the company reaches reasonable scale and has access to capital, it finally invests in a UI/UX engineer to improve the user experience. 

• Usability testing is one of the best things people can do to improve web sites
• Since most organizations can't afford to hire someone to do testing for them on a regular basis, everyone should learn to do it themselves.

• It works because all site have problems
• It works because most of the serious problems tend to be easy to find
• If works because watching users use your product makes you a better designer

1. A morning a month is all we ask: create a program whereby each month, you bring in a handful of users in to use your product in a scripted product usage environment. The user behavior is monitored and recorded, followed by discussions on what the development team learned about the usability issues the users ran into.
2. Start earlier than you think makes sense: developers have a tendency to want to finish a product before getting it tested. Start earlier than that. Start while the product is being developed, and as soon as there is a version that a user can use. The more agile and immediate the feedback, the sooner the development team will be able to address design improvements.
3. Recruit loosely and grade off a curve: don't over think who you should invite to the tests. Yes, ideally you would find the perfect fit to your customer persona. But don't lose time trying to find the perfect fit. Most of your usability problems will be found by whoever you use.
4. Be disciplined about building the agenda, the script, and the test cases. And make sure that you have your infrastructure in place for a seamless test.
5. Make it a spectator sport: invite your developers to the test (not in the same room, but through a camera.) The more developers see users actually struggling with using the product, the more they will hold that memory when coding.
6. In debriefing, focus ruthlessly on the most serious problems. If you submit yourself to the temptation of tackling the easier problems first, or submitting to what the CTO thinks are the most important problems, you will never get rid of the most serious problems.
7. When fixing problems, try to do the least you can do. There are two principles for fixing things: tweak, don't redesign... and take something away.

You will find most of what you need at the book's companion website www.rocketsurgerymadeeasy.com.

So why is this such an important topic for OpenView's expansion stage software companies? Because they all have adopted agile product development. Which has allowed them to dramatically increase the output of their development teams. This has placed a lot of pressure on the usability of their products.

We are now actively advising our portfolio on creating competitive advantage through better product usability rather than through cranking out new product features. 
 

Here's a dilemma most expansion stage software companies face... "We've been pounding the phones acquiring new customers, and have realized that our renewals and up-sells are not where we thought they would be... Which is making us less capital efficient, because we're having to shift some of our sales efforts to existing customers. Where did we go wrong and how should we allocate our sales resources between new and existing customers?"

It is quite a dilemma for a software start-up... In the start-up phase, new customer acquisition is a natural focal point.  You need to engage as many customers as you can as quickly as you can with the lowest cost possible. And since the dawn of software sales, new customer acquisition has been the key focal point of driving growth. More on this here.

The interesting shift in the software market is the emergence of annual or monthly subscriptions as the primary source of revenue. This shift has evolved hand in hand with the emergence of SaaS as the predominant vehicle for delivering software solutions. 

What the subscription licensing model has done is shift the balance of power from new customer acquisition to existing customer retention and up-sell.  Why?  Well it's all about distribution economics. More on this here.

In the old days, software companies sold perpetual licenses... Which meant that the bulk of the revenue was coming from new customers in the first year of acquisition. Sure, the subsequent 15-25% maintenance over many years ends up being a key source of perpetuity revenue (ask Oracle and Microsoft.)  But the renewals in a perpetual model are much easier to renew, because the amount is much smaller than the original purchase price.

In that model, the bulk of sales and marketing expenses are focused on acquiring new customers. License renewals are left to Finance to deal with, unless it was for really big deals or if the vendor has a portfolio of products to sell to the same customer.

In this perpetual license model, we tend to use a high level metric where a dollar in sales and marketing should produce 3-4 dollars in new customer bookings (or net profit if the gross margin is less than 90%).  The uplift is supposed to pay back sales and marketing costs, and all the other costs in that first year. And as long as the cost of renewing maintenance is lower that the maintenance renewal revenue, what you would have is a perpetuity model. 

Then comes the subscription license, and the model above falls to pieces. With subscriptions, three things changed. First, new customer, first year revenue dropped dramatically. Second, the complexity and cost of renewal in the second year went up dramatically. Third, the opportunity to up-sell additional licenses to customers got bigger.

And Bam!!! The economics of software distribution completely changed. The days of expensive software sales guys pounding the streets from meeting to meeting closing big deals are gone... The day of spending millions of dollars on expensive advertising is gone. The name of the game is on-line marketing and inside sales. 

So how has this impacted distribution economics?  Read here.

How does this impact how SaaS companies approach sales and marketing? 

First, by lowering the cost of new customer acquisition. This manifests itself in a stronger reliance on on-line marketing.  Lots could be said about that, but look into lead management, content management marketing and influence marketing.

Second, by leveraging inside sales. Lots could be said about that which will find here and here.

Most importantly, SaaS companies are having to focus on the operational and sales aspect of maintaining and up-selling existing customers. This is where the largest shift in software distribution is taking place.  The key elements of keeping and up-selling existing customers are:

• Institute a customer on-boarding best practice process where the customer signs off on being properly ramped up on your product. Each new customer should sign-off within the first three months of purchase.
   
• Leverage key indicators to verify the success of the on-boarding process, and to trigger alarms when a customer's usage begins to trend down. These are typically indicators like log-ins per day, average time logged in, transaction volume through the systems, etc.
• Create an account management team within sales that inherits the customer after he is on-boarded. Account management should be compensated for driving additional sales to existing customers. 
• Institute an account management contact model and track it as closely as you track your new customer acquisition process.
• Institute a customer satisfaction survey to identify customers that are unhappy (as a backup to those that are identified by the account management team.)
• Make your product manager be very close to the account management team to pick up on product issues that customers are having.
• Make existing customer renewal + up-sell a key performance indicator for the senior management team.

• Promote the OpenView brand to our prospect persona (our persona target is the early to expansion stage software company CEO)
• Generate a large volume of insightful, quality content to share with our community (our community being expansion stage software companies)
• Drive up our organic rank on a long tail of relevant keywords (not because organic search is our best source of prospects... we're using this approach as a demonstration for our portfolio companies)

Our blogging initiative is firm-wide, and started off with a commitment by our "CEO," Scott Maxwell. Scott then worked on us to get our commitment to support the program by submitting blog posts on a weekly basis. So, in order for your company to have a successful blogging program there must be a commitment by the CEO to hold everyone accountable to submitting blogs regularly. 

We then invested in a blogging platform. Our platform of choice is Compendium, which we found to be the best platform for the enterprise. The key features of Compendium that suited our purposes are the enterprise administration features and the "compending" feature of the product.

We then allocated a full time resource to be the blogging initiative owner and administrator. Devon Warwick is that person, and here are some of her suggestions for running a successful blogging initiative: 

• Hold every person accountable to submitting one blog post a week, and have a blog due date for each team each week
  •   At OpenView we have 5 internal teams – each day of the week, a different team has to submit its blog by 6pm
  •   If a person is not able to submit his blog for some reason, he must inform the blog administrator before 8am on Monday morning
• Each blog post must be longer than 5 sentences, must contain a minimum of 3 keywords, and must be relevant to the business in some capacity
  • Blogs that are rejected for not meeting the following criteria must be resubmitted with the appropriate edits within 24 hours
• Referencing other sources/ideas is fine, but the composition of the article should be a minimum 80% our own ideas, maximum 20% someone else’s ideas 
• The blog administrator should send out a weekly report that includes the firm’s top bloggers (most pageviews), general observations for the week (keywords being used, overall popularity of the blog each week, and finally, tips on how to improve your post or market it better.
• The admin should sign up to Google Analytics and review it a couple of times a week to check out the stats. Everyone must be aware of the value that the blog is bringing to the business in order for people to take it seriously. The weekly report is a great way to remind people of why blogging is worth everyone’s time.

Other best practices we found at AtTask, which is leading the portfolio in its blogging initiative:

• Coworkers “retweeting” each other’s blog posts increases visibility and draws more visitors
• Including keywords in blog titles helps SEO rankings tremendously
• Monitoring Google rankings by manually entering keywords into the search engine on a weekly basis to see where your content is on the list/page allows you to better understand your SEO efforts.
• Reading/Commenting on other Industry thought leaders blogs enables you to build a connection with that person (In turn they will most likely comment on your blog post and/or reference you in one of their posts, thereby increasing visibility of your brand and driving more visitors to your site.)

Creating a competitive advantage through blogging is a thing of the past... A blogging initiative should be one tool in your overall content marketing strategy... with a focus on driving more relevant traffic to your site, and driving up your organic search results around a long tail of relevant keywords.