By John O’Connell, Executive Chairman, ScaleUp Group
How should SMEs in the SaaS B2B market position themselves if as we all hope we are emerging from the worst impacts of the Covid pandemic?
In Part One I posed this question in the context of the world progressively emerging from lockdowns etc, hoping we are beginning to see some light at the end of a long dark tunnel. This transition will have varying impacts dependent upon industries and the knock-on effect on entrepreneurial tech businesses which are our clients. Whilst there is no one answer to this question I said one thing is for sure – the tech entrepreneurs we work with will be agile enough to adapt to whatever comes at them.
Having made difficult business, sometimes ‘survival’, choices, helped I believe by ScaleUp Group’s support, they are now getting ‘Fighting Fit’. to sustain and grow their cloud-based business in the ‘new normal’ hopefully.
Part Two addresses internal matters, especially how the management of such businesses organise and pay themselves, based upon surveys of our clients. Their average annual revenue is approx. £5 million and all are in the ‘Investment stage’ incurring negative EBITDA currently, with annual growth rates typically in the 30%-50% range. (Anything less, you are not really trying are you?)
What is striking is the wide range of pay for similar roles, which cannot be explained away simply by the differences in the size of the business. In fact, the same business(es) record either high or low packages consistently reflecting their culture and willingness to pay to attract top talent, or not. Unsurprisingly the higher pay businesses are recording higher growth rates (and larger losses) typically, confirming their focus on growth, so no surprises here and acceptable if this is a conscious strategy and appropriately well-funded.
All roles enjoy a bonus element with the CRO one, as expected, the most heavily bonused at an average of 38% of their total – or put another way approx. 53% of their base. Including the US elements, the disparity in the CRO role is quite stark, confirming the impression that the US values revenue-generating leadership more than we do in the UK, on average. (On average incidentally, revenue per head over there is c.40% more for similar SaaS businesses.)
However, averages can be distorted if a CEO/Founder is carrying out another role also plus the degree of equity they have can influence how much they pay themselves too.
|Role||VP Sales / CRO||VP marketing||VP Product||CTO||CFO||CEO|
|Ave. inc. US roles -£k||£213||£79||£113||£128||£119||£157|
|Ave. exc. US roles-£k||£158||£79||£90||£125||£102||£155|
|Range exc. US – £k – Breadth||£120-£237 2x||£75-£81||£70-£110 1.5x||£68-£237 3.5x||£79-£125 1.5x||£99-£237 2.4x|
Having decided how much the leadership should be getting paid, how should you be organised to be ‘Fighting Fit?’
Given you are a fast-growing, youngish company, averages can only be helpful up to a point here also. Nevertheless, our survey ought to be a reference point for businesses that have grown beyond a handful of people doing a bit of everything.
The Table below shows how our clients have organised themselves. On average they employ 54 people who each help generate £92k of annual revenue (£126k in the USA). But a word of caution again before you berate your salespeople is that so much depends upon your product development life cycle/maturity. In other words, if your business is still in the product creation phase then inevitably your revenue figures will be lower than when executing your ‘Go to Market’ strategy. (Feel free to berate now though!)
Companies in this survey are generally tech-heavy as is revealed by the highest number of ftes being software engineers. (One company was using its professional services staff to help flesh out the product during customer engagements.)
The revenue per head figure we applied to all functions, not just the sales & marketing one, to provide a benchmark of ‘affordability’. In other words, compared to your peer group how many sales and marketing people should you be employing, for instance.
|Averages / Functions||Sales / Mktg||Engineer. / Tech.||Prof.Ser / Cust Success||Mgt / Fin / Admin.||Grand Total|
|No. of FTEs||15||19||12||8||54|
|£K Rev. per FTE||£329||£258||£428||£631||£92|
|% of Total FTEs||28%||36%||22%||15%||100%|
It is noteworthy that the majority of these businesses, whilst still in investment mode and therefore loss-making, are tracking on their plans, so in line with why they have been funded in the first place. They all have adequate cash in the bank to continue to finance their investment in growth, plus as importantly withstand the vagaries inherent in their business model, on top of which they are robust enough to be coming through the COVID challenges, relatively unscathed. Put another way: they are ‘Fighting Fit’ for which, on behalf of ScaleUp Group, I’ll take some credit!