David Cummings on Startups

Category: Operations

  • Hindsight, Insight, and Foresight

    Lately I’ve been thinking more about about going beyond merely looking at backward-looking data and metrics (e.g. The Definitive List of Weekly Operational Metrics for SaaS Startups) and learning how historical data can be used to inform what will happen (predictive analytics). Derek Kane has a Slideshare titled Building and Sustaining Predictive Analytics Capabilities. On slide 26 he defines hindsight, insight, and foresight.

    • Hindsight – What is happening?
    • Insight – Why is it happening?
    • Foresight – What will happen? What should happen?

    http://www.slideshare.net/DerekKane/data-science-i-sustaining-predictive-analytics-capabilities

    As startups mature and improve their operational excellence, insight and foresight become logical additions to the weekly business review. Entrepreneurs would do well so start asking the questions “Why is it happening?” and “What will happen?”

    What else? What are some more thoughts on hindsight, insight, and foresight?

  • Build a Sales Playbook

    One of the first things a new sales leader (or entrepreneur running sales) should do is build a sales playbook. A sales playbook, put simply, is a central resource for tracking everything from the basics, like the elevator pitch, to the more advanced items, like differentiating from specific competitors. With more knowledge and training, sales reps speak more confidently and intelligently, helping win more deals.

    To start, make a Google Doc sales playbook and include these items:

    • Corporate information
    • Sales pitch
    • Elevator pitch
    • Market space
    • Recent trends
    • Target customer
    • Types of buyers
    • Features and benefits
    • List of references
    • Sales process
    • CRM process
    • Competitors and differentiators
    • Objection handling
    • Glossary

    Revisit the playbook on a weekly basis and ensure that the team contributes to it. With sales, the more you know, the more you sell.

    What else? What are some more thoughts on building a sales playbook?

  • Analyzing Data Over Time

    Every entrepreneur I know loves to analyze data and metrics about their business over time. How’s our revenue growing? How many daily active users are we averaging? Only, the data is often in summary form in a spreadsheet making it hard to analyze. Eventually, an analytics and reporting system is necessary to better analyze data over time and present it in an actionable manner.

    Here are some common questions to ask when analyzing data over time:

    • How are we doing this month/quarter compared to this time last month/quarter (ideally with a chart showing both lines)?
    • What’s our trailing 30-day average as measured on a daily/weekly basis?
    • What’s the rate of change on a weekly/monthly/quarterly basis (are we accelerating or decelerating)?
    • What’s our expected results for the rest of this month/quarter based on the previous data and corresponding results (predictive analytics)?

    Analyzing data over time is a critical part of every weekly leadership team. Use analytics and data platforms to automate the collection of data and generation of reports that show both the metrics and more detailed analysis.

    What else? What are some other common questions to ask when analyzing data over time?

  • Build a Bottom-up Sales Forecast

    When talking to entrepreneurs about their sales forecast, they love to talk about the market and say “if we only get 1% of XYZ we’ll do great.” Of course, the real world doesn’t work that way. Instead, it’s best to build a bottom-up sales forecast that takes into account the current sales performance and extrapolates it out based on growth rates.

    Here are a few factors to keep in mind with a bottom-up sales forecast:

    • How does the corresponding volume of sales qualified leads need to grow? Do the current marketing campaigns have capacity for more volume (many campaigns get more expensive with more volume like pay per click ads)?
    • How many sales reps need to be hired for one to work out (it’s important to note when planning that all new hires don’t work out)?
    • How long does it take for a new sales rep to ramp up and be fully trained?
    • What’s the attrition rate of existing sales reps?

    Often, if a startup wants to triple sales next year (see Triple, Triple, Double, Double, Double), they need to expand the sales and marketing team well in advance of the new year.

    My recommendation: build a bottom-up sales forecast.

    What else? What are some more thoughts on a bottom-up sales forecast?

  • Where are the Startup Goals?

    One of the lessons I’ve learned recommending the Simplified One Page Strategic Plan to entrepreneurs is that they often don’t have goals. Crazy, right? When asking for the one pager before a meeting, most of the time I get a response that they don’t have any goals yet but will put some together and send it over. After enough of these conversations, I’ve realized there are a few factors at work:

    • Entrepreneurs are focused on the here-and-now. It’s hard to work on the business when the business isn’t working yet (it’s a startup!).
    • Goals are a form of commitment. If I make a goal, it means that I want to hit it. Without goals, I can keep ambling along.
    • With goals, there’s a scorecard. With a scorecard, it’s black-and-white as to how well things are going. Many entrepreneurs struggle with admitting they’re failing.

    My recommendation is to at least track the weekly operational metrics. Start with metrics, then add goals as the business matures.

    What else? What are some more thoughts on entrepreneurs not tracking progress against goals?

  • The Definitive List of Weekly Operational Metrics for SaaS Startups

    Every SaaS startup should track their operational metrics on a weekly basis (not monthly). Now, in the early days it isn’t necessary to track a huge list of metrics as many aren’t meaningful. As the business grows and scales, the number of metrics to track scales as well.

    Here’s the definitive list of weekly operational metrics for SaaS startups:

    • General
      • Total MRR
      • Total AOV (annualized MRR)
      • Total Clients
      • MRR / Client
      • AOV / Client
      • Revenue / Employee
    • Sales
      • New MRR
      • New ACV
      • # New Clients
      • Professional Services Sales
      • Total # AEs
      • Total # Productive AEs
      • New MRR / Productive AEs
    • Implementation
      • Active Implementations
      • Implementations Started
      • Implementations Closed
      • Total # Implementation Employees
      • Total # Productive Implementation Employees
      • Implementations / # Productive Implementation Employees
    • Support
      • Cases Submitted
      • Cases Closed
      • Net Change in Cases
      • Average Initial Response Time
      • Average Resolution Time
      • Submitted Cases / Customers
      • Total # Support Employees
      • Total # Productive Support Employees
      • Customers / Productive Support Employees
      • Submitted Cases / Productive Support Employees
    • Customer Success
      • Upgrade $ (ACV)
      • # Upgrades
      • # Lost Clients
      • Lost ACV
      • Downgrades $ (ACV)
      • # Downgrades
      • Total # Customer Success Employees
      • Total # Productive Customer Success Employees
      • Net Upgrade / Downgrade ACV
      • Customers / Productive Employees
    • Engineering
      • Bugs Opened
      • Bugs Fixed
      • Support Escalations Created
      • Support Escalations Closed
      • Story Points Completed
    • Marketing
      • # Marketing Generated MQLs
      • # Marketing Generated Opportunities
      • # Marketing Generated Customers
      • New ACV from Marketing
      • % of New ACV from Marketing
    • Finance
      • Revenue (GAAP)
      • $ Billed
      • Cash Receipts $
      • Accounts Receivables
      • Percent of A/R Overdue
    • HR / People
      • Total Current Employees
      • # of Starts
      • # of Open Positions
      • Employees by Department
      • Open Positions by Department

    The fastest growing SaaS startups are well instrumented businesses. Everyone in the company should know the goals/OKRs and the corresponding metrics. Use this definitive list of weekly operational metrics for SaaS startups.

    What else? What are some more metrics you’d add to the definitive list of weekly operational metrics for SaaS startups?

  • Weekly Confidence Rating for OKRs

    Another topic from the book Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results that stood out to me is the idea of a weekly confidence rating for the OKRs. The idea is that every week whomever owns a key result reports on their confidence that they’ll achieve it on a scale of 1 to 10 with 10 being 100% confident (e.g. a value of 5 / 10 would mean 50% confident that the key result will be met).

    Think about that for a minute: how often do you do a serious gut check as to whether or not you’re going to hit your current goals. Weekly? Monthly? Never? This idea of not only assessing the confidence that you’ll hit the key result but actually quantifying it on a weekly basis is great for team alignment and communication. How often have we heard someone give regular updates about their project or goal only to realize too late that they’re not going to hit it?

    The next time you really want to drive accountability and clarity in your organization, ask for a confidence rating for each goal’s metric or objective’s key result and track it on a weekly basis. Watch as things improve and people are more focused.

    What else? What are some more thoughts on weekly confidence ratings for OKRs?

  • You’re a Systems Guy

    Yesterday I was talking to an entrepreneur about different leadership methodologies and he looked at me and said, “you’re a systems guy.” Hmm, I thought about it for a second. Yes, I’m a systems guy. Then it just came out of me, “I love systems because I don’t have to think.” Of course, there’s a ton of research and thinking to come up with the system. But, once it’s in place, I know that it’s helping get things done and I don’t have to worry about it.

    Over time the systems have to be tweaked and enhanced, but just the fact that the system is in operation and working means that it’s better than before. Now, I’m not advocating for bureaucracy. What I am advocating is making sure that things run in a sustainable, repeatable manner thereby delivering the desired outcomes.

    Some systems that I like:

    My advice: pick a system and run with it. Don’t wait for the “perfect” system when there are plenty of good ones already out there.

    What else? What are some more thoughts on being a systems person?

  • The 4 Quadrant Weekly Alignment Doc from Radical Focus

    Continuing with Radical Focus: Achieving Your Most Important Goals with Objectives and Key Results, the author shared a really interesting approach centered around a simple document for weekly alignment and accountability. The document, called the Weekly Check-in, is composed of four quadrants on one single page that represent key items to track and/or discuss.

    Quadrant 1

    • This Week’s Priorities
      • Labeled P1 or P2 for top priorities and secondary priorities
      • Things that aren’t P1 or P2 aren’t included

    Quadrant 2

    • Objectives and Key Results
      • 2 – 3 Objectives
      • 3 Key Results per Objective
      • 1-10 likelihood of hitting each key result with 10 being the best (e.g. 5/10 would mean 50% confidence)

    Quadrant 3

    • Next 4 Weeks
      • Big items on the horizon
      • Things everyone needs to know are coming

    Quadrant 4

    • Health Metrics
      • Key performance indicators for the business
      • General metrics that might or might not tie into the OKRs

    This process is easily translatable into a Google Spreadsheet or a dynamic system that automates it. Regardless, leaders would do well to implement a system with a weekly review of both the near-term tasks and longer-term OKRs/goal.

    What else? What are some more thoughts on the four quadrant weekly alignment document from Radical Focus?

  • The 4 Disciplines of Execution: Achieving Your Wildly Important Goals

    After having several entrepreneurs recommend the book The 4 Disciplines of Execution: Achieving Your Wildly Important Goals (4DX) to me, I finally got around to reading it. Quick review: it’s awesome and every entrepreneur should spend the $11 to buy it on Amazon. Here are the four disciplines:

    1. Focus on the Wildly Important
    2. Act on the Lead Measures
    3. Keep a Compelling Scorecard
    4. Create a Cadence of Accountability

    Imagine taking the core execution elements of Mastering the Rockefeller Habits or Traction: Get a Grip on Your Business and distilling it down into four disciplines and you have the 4DX book. This is important because the disciplines are all attainable and there’s less touchy feely stuff that turns some people off from the other books (e.g. I love core values and culture stuff but some people see that as being beneath them).

    Here the four disciplines rephrased into simpler terms:

    1. Make no more than one or two very important goals with a clear metric and deadline
    2. Track two or three metrics that are leading indicators for the goals (e.g. if the goal is to sign 100 new customers, a leading indicator would be number of qualified opportunities in the pipeline)
    3. Develop a spreadsheet or report for everyone to see that has the leading indicators and goal metrics (real-time, if possible)
    4. Meet once a week for 20-30 minutes to talk about what was done the previous week and what will be done the next week to hit the targets (accountability!)

    Seriously, every entrepreneur should buy the book and run this process (a couple critical goals, leading indicator metrics, central dashboard with the metrics, and a short weekly meeting talking about actions to hit the metrics). I recommend The 4 Disciplines of Execution.

    What else? What are some more thoughts on the book and the four disciplines?