The Rant Podcast: The Do's and Don'ts on Growing Business
Adam Wells with GST and Roman Villard with AVL Growth Partners talk about the Do's and the Don'ts on Growing a Business.
GST HQ: Roman Villard with AVL Growth Partners joins me today. This is Adam Wells with Golden Section Technology at a Houston. Roman, how are you today?
Roman: Hey, Adam, I am doing great. Thanks so much for having me on.
GST HQ: Yeah, no problem. I am excited about this. This is the first collaboration of GST and AVL Growth Partners in the podcast format. I came up to Boulder from Houston last week and got to meet you in person. Get a tour free office so it was a ton of fun.
Roman: Yeah. It is rare these days, but I am glad we can make it work.
GST HQ: That will be. Boulder is a beautiful town so thanks for being so hospitable and welcoming me up there.
Roman: Yeah, of course.
GST HQ: Cool. Well, you know, we have been talking for a few months now and GST is oriented around holistic growth of B2B SaaS companies and our target market is typically precede series B. It has been great to get to know you and would love to hear just a little bit more about AVL right now in terms of what your target market is, and how your oriented. I know that we have come to some good alignment on our philosophy, if not methodology, for advising, mentoring, and guiding our customers in this B2B SaaS space towards growth.
Roman: Yeah. So, a little bit about AVL, we also focus in that seed through series B funding space. Our core industries are consumer packaged goods, services, and then primarily Tech. A lot of B2B SaaS technical services, cybersecurity. It is a lot of these things we will be talking about today will be quite pertinent to that crew.
GST HQ: Awesome. Well, I think we came up when we met with a list that was, I do not know, maybe a dozen items long. We will probably come up with a cooler name for it at some point, but do's and don'ts in terms of our recommendations for growing companies. And you know at the risk of boring our audience, I think we focused on just three for today and hope to parlay this particular podcast into more coming up down the line in a few weeks. So, do you want to touch on maybe an overview of what we are going to talk about today? And then we can dive into the first one.
Roman: Yeah, happy to do that. So do a quick reset. So, AVL works on the CFO side of the early stage company. I failed to mention that, but what we will be getting into today are three pretty fun topics that we can riff on. The first one is capital efficiency. How do you use your capital effectively and be output focused and not riff focused? The second one is building versus selling. How do you understand when to build and when to sell, and understanding your customer feedback and things of that nature? The last one is a fun one. It doesn't solve a non-problem trying to come up with something that might be a personal pinpoint in trying to translate that to a business need is quite challenging. So, Adam, I think it would be really cool to start with hearing your thoughts on capital efficiency, and how can companies be more output focused?
GST HQ: Right. Now that is awesome. I think there is always a tension between, you know, is it about the journey or is it about the end? And so, a lot of times you can think, all right, if I am measuring every step of my journey, then I am going to get where I need to go. And I think that is right from a bunch of different points of view. But I think what is important is to focus on what are the meaningful metrics that will ensure productivity towards meeting your goal. And so, oftentimes at GST, we have course advise our customers to make data-driven decisions. And I think that sentiment will kind of work its way through each of the topics that we have today. But a lot of times there is so much data out there and it is picking which pieces of data to base your decisions off of. And so, we want to recommend that those decisions are based off of the most important pieces of data and we really feel strongly that that is output focus.
Roman: Yeah. So, dig in a little bit deeper there, say I am a million-dollar ARR SaaS company that just raised two and a half million dollars. What are some of the data points that I should be looking at in terms of how to use my capital efficiently?
GST HQ: Yeah. Sure. So, you know, we are big believers in obviously talented teams that is the starting point from almost every perspective. And those teams working within systems, certain digital management systems help maximize the output of any particular talented person. And then there should be some processes that are overlaid within those systems in order to a certain degree ensure behavioral compliance by your team, but also to help produce predictable results. And so, we at GST, just from an employee standpoint are results-oriented work environment. And so, a lot of the KPIs that we set out for each of our team members are output-driven. How do they contribute to the overall goal of the company? Not necessarily activity driven. And so, if your B2B SaaS company has a million in ARR and you are growing fast, my strong recommendation would be to across the board, whether it is even on your executive team, but of course in your sales team and on your R&D team to have objectives and key results oriented around the actual results of those departments, not necessarily the effort. And so what that often comes down to is, did we meet a milestone or didn't we? Not so much, how many hours did it take us to meet that milestone? Clearly both are important in different contexts. But at the end of the day meeting the milestone is a really important, obviously determinant of success.
Roman: Yeah. I think you are spot on there and I think from a cash and CFO perspective understanding, where is the most important place to set those milestones within? Is it going to be an R&D component? Is it going to be sales? Is it going to be operations and measuring those relative to your cash spend and using investors' money wisely? It is so critical and so taking those measurables, those KPIs that you are looking at relative to you spend is super important. And growth is expensive. It is not easy. It is not cheap. It takes a lot of time and effort. So, just aligning those is something to really be aware of.
GST HQ: That is awesome. Yeah, and I think of course for our target customer segments, many of these companies have not all of them are not in a consulting business. So, they are not dealing ours. They are interested in total cost of ownership. And they are also interested in lowest residual cost. What I mean by that is, okay, we've got something done. We pushed it to deployment. Now, are we going to be generating more problems on the customer support side than otherwise? And so, in that way we are looking for total cost of ownership. We are looking for price per output. And we have got a lot of information working with which we can welcome on a future podcast. Our director of product management Eric Lee, in terms of revealing what an inefficient R&D organization looks like. Benchmarking that against a tremendous data set that we have a GST, which is 10 years of building B2B SaaS products within our walls, surveying over 300 companies and more than 50 industries. And so, we've got a great sample set of data that can let people know to what degree are you spinning your wheels? And spinning your wheels can really come from at the outset. Some decisions that are not necessarily oriented towards viewing Engineers as commodities, but when an executive ultimately takes the lowest price per hour then that does actually turn their decision into you a commodity driven decision. It might not in most cases does not end up with the lowest total cost of ownership.
Roman: Right, because there could potentially be residual effects of that lower rate that you might have to clean up in the future. I kind of want to double back to you, you mentioned how golden section has really worked with a number of companies on building products and building those services, and have a great data set to accompany that. Thinking through the conversation of build versus sell, what do you prioritize and why?
GST HQ: This is a great question. Yeah. I love this. Because we have had such a breadth of experience which with a ton of really fantastic founders. What we have seen to be most successful over the last 10 years and across all of the companies has been a really iterative approach to building and selling. And so, at the highest level, clearly any executive, any founder wants to align the business roadmap with the product roadmap, and make sure that they have got sales and marketing milestones and R&D milestones that will all culminate in a launch date. Beyond that, they want to make sure we want them to make sure that they are not basing most of their development decisions or significant number of the development decisions on assumptions. And so we have founders that have tremendous industry experience. But at the same time, we really guide them towards really honing in on what is the differentiator in their product, getting to a minimum. MVP is defined as minimum viable product, minimum valuable product, however, you want to put it. But get the way that you can deliver value to your customer in the most distilled format possible to them and then get their feedback. And so, to the certain extent, it is shortening the cycles of building. Which means building less at the outset, and then selling, and then getting that feedback loop going where you can then add on to the build and sell that again, add on to the build and sell that again. How does that play itself out and your recommendations on the full-stack CFO services side?
Roman: Yeah. It is interesting. There is a constant push and pull between spending to iterate a product and spending to sell. They are both very resource-intensive objectives. I think about somebody that we know here in Boulder who started up a company and the way that they have built their MVP and started to beta their product. What they have done is they have created a paid model or a paid subscription to allow their early stage customers to pay a minimum amount compared to what they are going to launch with. But via getting these early stage adopters on board and trialing their product, they are actively asking for input, for feedback which feeds back into that building. And so, I feel like that type of model if you can generate early stage beta type products, monetizing that is a great path to go down. But again, I would point back to budgeting state very cost-conscious. Understand how you are leveraging your investors' money. And it is a very dueling priority. It is a challenging problem.
GST HQ: Yeah, it definitely is. We recommend building out any feature whether it is a new product or a new module as lightly as possible. And choosing a beta test group that would not necessarily be an echo chamber. You know, not all of your friends and family are investors that gave you but really a good spread sample set of your target market. We are interested at GST and getting the highest return on investment for any R&D expense. And so, it is something that we are very interested in making sure that there is not an ideal state in of early stage development, but an ROI driven approach to early stage development.
Roman: Yeah. So, you mentioned echo chambers which I find very fascinating from the standpoint that founders will all often come up with personal problems that they will attempt to translate to a business solution. And they will talk to their friends and their families who will give them positive feedback, but it is very challenging to solve a personal problem in a business environment, create a product out of it. What advice would you give to those founders that might be solving a non-problem or that might need a key differentiator for their product and their go-to-market strategy?
GST HQ: Yeah. That is awesome. I think we have seen a bunch of founders that have really fantastic ideas, and we are a group of entrepreneurs ourselves and we often have these what we think are fantastic ideas. In fact, one of our portfolio company CEOs has a fantastic line, which is if I were to come up to them and say, "I have got this great idea. You want to hear it?" He said, "Well you have an idea. I will tell you if it is great or not." I just love that feedback. And I really think that it can be a mantra or a tagline for this approach is that if you have an idea do not keep it close to the vest and built and spend a quarter million dollars producing it and then launched it in some spectacular fashion. Get this network of wisdom from any sort of colleague, constituent, or customer base to really bet it out. If it is such a great idea, it will start to catch fire and you will be that much more confident and less stressed out as you are building it.
Roman: Yeah, that is such a good point. I think you would previously mention actively trying to generate micro failures along the path. And I think that is such a powerful comment just from the standpoint that that allows you to iterate, refine, and pivot your idea to a more applicable product for more widespread audience.
GST HQ: Yeah, definitely. It is really important to accelerate, you know, that if they say that deadlines are for action then increase the frequency of your deadlines. So that one allows you to make better data-driven decisions. It will allow you to iterate in kind of shorter time windows. And also, if you are doing a feedback cycle, allow you to have those micro failures that you mentioned.
Roman: Yeah, and I think it also translates to finance quite well from the standpoint that if you have those quicker goals and objectives that allow you to pivot more quickly, the person who is in charge of modeling and forecasting the changes of your product and going to market, understanding pricing. There are so many variables that are attached to what you are selling that if the CFO or the person in that seat has the ability to be more quickly come up with iterations to the model, that will better prepare you for investor conversations, understanding your true margins when it comes to bringing on new customers. And it is so so important to keep an eye on that as you iterate your product.
GST HQ: That is awesome. Well, Roman, this has been a great start. I love it. I want to keep going. We have quite a few more pieces of topics that we can touch on in the coming weeks. As a quick wrap up, what we covered today was capital efficiency. Our best recommendation there is to be output focused, not rate focused. And that holds true on both the financial side as well as on the R&D side on the build versus sell. It does not necessarily have to be a versus, but what we want to highlight there is the iterative nature to do both quickly and in a very focused and deliberate way. And then also on the do not solve a non-problem, really get out there make sure you are not in an echo chamber. Make sure that your betting ideas that will actually land and resonate with your target market. So, let us do it again. I think we will put together or build out a few more thoughts that we went over and get back to everybody in the next couple weeks.
Roman: Yeah, this is awesome. Super fun. I know we have got a number of topics that we could riff on for hours. So, greatly appreciate you having me on. I really enjoy the conversation and we will be in touch.
GST HQ: That is awesome. And Roman Villard from AVL Growth Partners, and we will have in the show notes how to contact you. Thanks for the time. Have a good afternoon.
Roman: Thanks Adam. Cheers.
Thanks for listening to our podcast! This week featured Adam Wells of GST and Roman Villard with AVL. If you would like to ask them specific questions about the podcast or their company feel free to send them an email.
Adam Wells- firstname.lastname@example.org
Roman Villard- email@example.com