🏴☠️ ⚡️ Issue #15 - Portfolio Performance Wrap: Sprint no 3
Welcome! This newsletter is dedicated to acquiring and operating Micro SaaS firms. Join us every Saturday morning for a chapter of this month's issue...
Welcome back!
This month, we are officially transitioning to a weekly newsletter providing a chapter of the issue. The hope is to provide more consistent and digestible content.
Let’s get on with the show!
Part 1 — 🎯 DEAL TEAR DOWN - Software Suite for Wedding Venues with $98k ARR
Part 2 — ⚙️ OPERATING CONCEPT - A honey pot of investment memos from BVP
Part 3 — 🛠️ OKR TEAR DOWN - Partner Enablement to Drive Trial Sign Ups
Part 4 — 🏆 PORTFOLIO PERFORMANCE WRAP - Sprint #3 (5/22-6/30)
🏆 PORTFOLIO PERFORMANCE WRAP
📺 WATCH:
📻 LISTEN:
🥅 BY THE NUMBERS
To kick us off, let’s take a look at MRR and active subscriber growth over the last 90 days:
MRR & ACTIVE SUBSCRIBERS, TRIALING 90 DAYS
Comments & Observations:
We’ve seen a 3.5% increase in MRR (+$694.79) and 4.1% growth in Active subscribers (+21), which is purely a function of word of mouth and legacy referral systems
If we look at that growth on a monthly basis (~1.16%), we sit right between median and top quartile for SaaS generating $0 to $25k MRR; this provides a very solid foundation to stack new growth loops upon. We need to see monthly growth at or above 3.1% (after churn) to be elite
There is substantial volatility week-to-week, reenforcing the conventional view that WOM and loosely managed referral systems are not predictable growth mechanisms
Let’s now dive into the business scorecard, which consolidates the metrics that are most critical to the business in our view:
WEEKLY PERFORMANCE, ROLLING 30 DAY VIEW
MONTHLY PERFORMANCE, YTD VIEW
Comments & Observations:
Trial Signups (#): We’re grateful to see a 19% increase in trial signups, on the heels of a new website and tightened messaging. Furthermore, there is a seasonality headwind at play (the summer / fall is peak season for our ICP and not conducive to switching software vendors), which provides greater confidence the website and messaging are on track. YTD we’ve seen a 15% decline in trial sign ups, likely caused by diminishing returns on the businesses’ sole growth loop (WOM and referrals). The most important thing to note is ~32 trial signups a month is not enough throughput to validate our tactics re optimizing onboarding to improve the percentage of users who Achieve Onboarded, and ultimately, go on to become Paid Users. We need to giddy up on establishing new growth loops, which is our core focus the next 6 months with a strong foundation now in place (tech stack, product release schedules, support channels, etc.).
Achieved Onboarded (%): We saw a 44% decrease here last month, though as noted above, the biggest concern is trial user throughput. We simply can’t draw conclusions with numbers this small. We’ve given the onboarding experience a solid shot of steroids and now need to fixate on establishing a critical mass of monthly trial sign ups (50+) before revisiting to further optimize. YTD we’re at 8%, which is a far cry from our target 20% (median rate for comparable SaaS). Improving an average is difficult, as you need to consistently outperform to lift the average over time. “Impatient with action, patient with results.”
New Paying Users (#): Trial Signups and Achieved Onboarded are leading indicators for what really matters to the business, New Paying Users. At the risk of kicking a dead horse, we need more trial users coming through the funnel, which has now come into focus as planned. Looking at YTD, New Paying Users is in structural decline with a 32% decrease. Time to focus on growth. Lez go!
Trial to Paid Conversion (%): 12.5% is our target (median rate for comparable SaaS). We are sitting at 8.5% YTD, which is acceptable in the context of where we’ve placed focused until now. There is risk this metric will worsen as we drive more Trial Signups (increasing the numerator), though we now have a quantified definition of our ICP so intentional growth will bring more quality through the funnel and should offset this tendency. I’ll say it one last time - we need more quality Trial Signups before revisiting and optimizing for this conversion rate.
Churn (#): The business possesses elite retention (98.5%, or 1.5% churn), which was one of the core characteristics that motivated the acquisition. We saw a 23% uptick in churn last month, though YTD is holding strong at 1.07%. In SaaS, nothing kills momentum and progress like a leaky bucket. We made huge structural improvements to the support infrastructure; most notably, a full re-haul of the support and product documentation intended to enable users to better help themselves. We’re happy with churn at this point, though we’ll continue to monitor this metric like a hawk.
🛠️ EXECUTION DIAGNOSIS
We will analyze our execution in the context of the OKRs themselves. Our method includes an execution score, a reflection / diagnosis, and a view on how best to move forward…
OBJECTIVE #1:
Achieve median Trial to Paid Conversion rate (~20%) to maximize ROI on investments in TOF.
KEY RESULTS:
12.5% trial users who 'achieve onboarded' to build confidence in that thesis
Build and release trial user prompts for remaining activation goals as a hedge re our thesis above: email sequences (3x), support articles (~4x), in-app user guides (4x)
EXECUTION SCORE: 3 / 4
REFLECTION / DIAGNOSIS:
We lack the required volume of Trail Signups to meaningfully pull this average in any direction, though we had flashes of brilliance in Week 26 and 27 with an Achieved Onboarded rate of 12.5% and 16.67%, respectively. All to say, this Key Result was misguided, we should have placed focused on generating Trial Signups and revisited this metric in subsequent sprints.
MOVING FORWARD:
Lifting conversion rates (or averages, in general) in a 6-week time period to achieve our long-term target is naive. We lost discipline. Moving forward any rate of improvement will be a function of base rates and maximum 20% improvement to that base rate.
OBJECTIVE #2:
Establish a repeatable customer support model without increasing churn above 2%
KEY RESULTS:
Thoughtful support and product documentation backlog with ~60 net new support articles per week (assumptions: 6hrs / day, 30min / article)
Establish base rate for Knowledge Base traffic and searches
Establish base rate for ticket volume, resolution time, and non-repeatable support tickets (ie customization requests)
Sunset Zendesk, establish Hubspot as consolidated System of Record (SOR)
EXECUTION SCORE: 4 / 4
REFLECTION / DIAGNOSIS:
Though we are happy with execution, sequencing a foundational tech stack migration in parallel with the Seller’s Exit and a transition to our Support Team had us over our skis. We lost focus on sticking the basics and managing key risks, namely Key Employee risk. Transitioning the Support Function to then migrate the tech stack is a more appropriate sequence.
MOVING FORWARD:
LASER FOCUS ON MANAGING KEY RISK(S), WHICH INFORMS A RUTHLESS SENSE OF PRIORITY / SEQUENCING.
OBJECTIVE #3:
Comprehensive understanding of our ideal customers and existing channels for acquiring trial users
KEY RESULTS:
Develop a quantitative definition of our ICP based on user data and market research.
Understand how trial users find us by conducting customer surveys
Understand how trial users find us by summarizing findings from GA4 and Ahrefs
Identify ~3x optimizations to existing channels
Stable / improved new trial users per week following the website launch
EXECUTION SCORE: 4 / 4
REFLECTION / DIAGNOSIS:
Our ICP analysis could be a bit misguided as we did not apply an elite level of rigor, combining firmographics with revenue and product-level engagement. That said, we have an excellent point of departure for targeting new users with intentional acquisition campaigns in subsequent sprints. Separately, decomposing organic traffic is difficult when the product is included in user domains, as this is erroneously recognized as organic traffic to your domain, when in fact it’s traffic from your user’s customers to their respective digital surface area (ie www.PRODUCT.USER.com). Surveys were enlightening and reinforced our view that this is a highly community / referral driven buyer journey.
MOVING FORWARD:
Build on our foundational view of our ICP by layering in revenue and product usage dimensions. In addition, core optimization activities will involve ambassador enablement and refreshing our presence with primary affiliates.
🌱 ACHIEVEMENTS & LEARNING
TOP LEARNING LESSONS
Apply a ‘lifecycle’ framework to implementing tech (ie establish required business impact > vet vendors via an objective scorecard > implement new with legacy existing in parallel > use new and fine-tune > sunset legacy > train on and document new)
Goals are a function of base rates and marginal improvement
Clearly identify the work streams / decisions that need cross functional collaboration and bake collaborative steps into the work stream itself
Operating leverage is a function of building playbooks and delegating low-impact tasks, NOT delegating playbook builds or owning the entire scope of the work stream such that the owner is bogged down in low-impact activities
Cherry-pick a power user(s) as your domain expert and provide compelling incentives for engagement (ie billable time, rev share, etc.). This user has insights across persona empathy, product roadmap, acquisition, and beyond. Worth every penny…
TOP ACHIEVEMENTS / HIGHLIGHTS
Fully refreshed support content
Consolidated system of record (SOR) across commercial info, support history and product usage
Content jump-start well underway, chatGPT provides an extraordinary arbitrage opportunity here
Ambassador program straight rolling