In the past This year we have witnessed one of the most tumultuous periods in software history. Intrepid founders and teams have faced seemingly endless and unprecedented obstacles – from macroeconomic uncertainty and banking collapses to geopolitical instability and recession fears. For startup leaders and operators, it can seem like the blows are one after another. But know that you are not alone: even the most seasoned leaders have been challenged, as many of these headwinds are not idiosyncratic and have affected everyone in the industry.
We have unquestionably entered a new paradigm, and much of the thought leadership and industry credentials over the past decade of bullish market exuberance fail to accurately capture the nuances and operating conditions during a volatile period. Cloud leaders will inevitably experience market ups and downs depending on the market cycle.
As we approach the 24-month mark of this dark period and begin to see more light at the end of the tunnel with stabilizing macroeconomic conditions and recent breakthrough IPOs and mergers and acquisitions, we reflect on seven lessons about resilience based on the actions taken by SaaS leaders in the growth phase. took over last year to equip founders to weather future storms.
1. Leverage expansion as an engine for sustainable growth
During periods of recession, businesses must be prepared to face “double” headwinds affecting both new customer acquisition and existing customer expansion.
For new customer acquisition, it unsurprisingly becomes more difficult to obtain new logos in an uncertain market environment due to frictions such as:
- Lengthened sales cycles.
- Delayed offers.
- Increased budgetary control (e.g., requiring approval from C-suite sponsors for new deals).
- Additional justification required for new purchases.
- Frozen budgets that block purchases of new software.
- Rotation of key stakeholders.
Cloud leaders will inevitably experience market ups and downs depending on the market cycle.
All of these headwinds have a rapid impact on sales effectiveness. For example, in 2022, we saw CAC payback periods for EMCLOUD (Emerging Cloud) companies extend significantly to an average of 30 months, even reaching 40 months in Q1 2023. These statistics were dismal by compared to the previous year. benchmarks for CAC recovery periods during more exuberant market periodswhich are closer to 12 months for SMB market-focused accounts, 18 months for mid-market focused accounts, and 24 months for enterprise-focused accounts.
Additionally, while existing customer expansion moves are not immune to headwinds either, there are other levers to pull on this front, such as: