Maxmizing SaaS Outcomes: Building the Depth of Your Team
Editor’s note: This is the sixth post in a series in which Georgian Partners’ Advisory Board member, Gab Goncalves, describes how he created value at PeopleAnswers, the predictive talent analytics software company he founded in 2001. If you haven’t already, we encourage you to read his previous post on building a compelling revenue model or start at the beginning of the series with his post about how to create a clear value proposition.
Many aspects of your business will impact what revenue multiple you’re able to achieve when exiting your SaaS company. In my experience, the depth and quality of the management team is definitely a contributor to optimizing exits. Of course, that’s easier said than done.
When to Hire
I’ve seen plenty of entrepreneurs who make the mistake of not knowing when to let go of aspects of their role. In the early stages of a company, a founder/CEO often has to be the go-to person for a wide range of key positions. One common mishap is holding onto those positions for too long and not knowing when to let go so that the company can scale up. As the CEO, take a look at your org chart as the company grows. Are you at the center of every decision? Do you have more than six direct reports? Do you feel like you are better at executing on your vision and strategy than your management team? These are all signs that your management team many not have enough depth.
Know when to let go. Part of building out a better team is recognizing that you need someone else to take a specific aspect of your business further than you’re able to. Recognizing that someone else can do the job better than you can isn’t a shortcoming; it’s a sign of leadership.
Selecting the Best Candidates
During the early years at PeopleAnswers, one of the many hats I wore was that of VP Sales. A few years into it, I realized that it was time to bring in a professional, but I was unsure of how to best do it. Apprehensive about the task at hand, yet realizing its importance, I decided to hire a consultant to help me execute it. The process that the consultant led me through resulted in the hire of a talented executive, many years ahead of what PeopleAnswers should have landed at the time. He went on to play a key role in the outcome of the company. What I learned in the process was so effective that I now use it for every key hire I make.
The consultant started by leading me through a long conversation about all the things I hoped a great VP Sales would do. We detailed strategic and tactical (what’s and how’s), from top to bottom. As always, when you start pealing the onion, there are more layers to it than it seems. When we exhausted the thorough discussion, we grouped and titled our desires and needs into five to seven competency buckets. We then developed a few short, open-ended questions for each competency that would help us evaluate the candidate’s true capabilities for each. Finally, we identified what kind of traits would earn a candidate a score of 1 (bad) all the way to 5 (best) for each competency. The goal was to make the evaluation process as objective as possible.
As I talked to candidates, I would serve up questions from my competency list and then score the answers in my notes based on the traits I had previously identified. At the conclusion of the interview, I would sum up the competency scores to arrive at the candidate’s overall score. This process was great because it helped me objectively identify at the best possible candidate for PeopleAnswers. Regardless of what football team the candidate favored, how sharp he looked or any other subjective measure, I knew by following this process that I had focused on all the right things in identifying the best person for the job.
So take a rigorous approach to hiring. Don’t rely on gut instincts when hiring your senior team. Instead, identify the top core competencies that you’re looking for in a particular role, taking the time to refine them until you’re confident they’re right. Then, measure all of the candidates you’re considering for a role against that competency filter, scoring them accordingly. By taking a rigorous, analytical approach to screening candidates, rather than being overly reliant on your instincts, you’ll find that you wind up with the best person for each role.
How to Land Them
Even if you can afford to buy yourself management depth using high salaries and large equity grants as the primary drivers (which I don’t recommend), these days the kind of executives who will make a difference are hard to land. Unless you’re Google / Cisco / Apple /Microsoft / etc., there will always be an outfit that is willing to out-spend you when it comes to executive talent.
In my experience, it really boils down to you being able to articulate your vision for the company and your vision for how this high-potential candidate will help shape that outcome. Everyone wants to play an important role in a decisive battle. You need to paint a picture so compelling that the candidate will forgo the more lucrative offer from the cross-town, better capitalized startup, to join your team. Of course the comp and benefits package matters, but don’t lead with them. Lead with vision.
Now Onboard Them
Even before any of your new team members are in place, you need to be mentally prepared for the transition. That means giving that person the latitude that he or she needs to do the job, without you interfering. Your job as the CEO is to provide strategic direction, leadership and support. Let the experts you so diligently hired execute it for you. If you have done your hiring job well, your executive team should be able to execute their responsibilities better than you, so get out of their way. Just tell them where to go and why it’s important getting there, and then support them where they need it.
Rinse and Repeat
At PeopleAnswers, we were able to build a better company by ensuring that our management team was as deep and capable as possible. And it was a move that paid off in spades. Not only was the company more successful as a result, it was also one of the factors that led to our $200 million valuation when we sold the business in 2014. I truly believe that when our acquirer saw the depth and quality of our management team, they valued the company more — both in appreciation for what this team had built and as an indicator of future potential.
Like what you’re reading? Then check out the next post in this series about making your customers happy.