Prediction

75% of SaaS companies will go out of business over the next 3 years. 

Including some big names. 

Unless … 

They finally accept that the age of sales-led growth is over and adopt a customer-led growth business model. 

And even then there’ll be a high dropout rate because the transition is not simply pulling a switch. 

It also does not work by prescription. 

The entire organization must undergo deep changes starting at the top.

Here’s what needs to be done:

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1. Mindset

This is the hardest part. If you can’t change the way you think about your customers, their outcomes, and their growth none of the other changes matter. 

There are major areas where change is required:

• From quantity to quality → the number of customers does not matter, their profitability, growth, and success potential does.

• From instant to delayed gratification → it takes longer to monetize customer success through expansions, upsells, and referrals than acquiring new customers. But you can acquire a customer just once while you can grow them into x10 or more) their initial size in the long run.

• Customer success is not the responsibility of a single team. If you don’t support your CS team with a great product, the right customers, and capable customer support, you will set them up for failure.

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2. Working with data

Almost every single SaaS company sits on piles of data.

But it lacks the quality and depth to provide real insights and knowledge. Without context, all you will ever do is “advanced guessing”. 

Here’s the data you actually need: 

• Customer profitability and growth potential

• Customer goals, problems, needs, and outcomes

• Performance metrics (quality, time, and costs)

• Customer feedback on what works, what does not, and why

• Verified Ideal Customer Profiles

• A thorough churn analysis

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3. End-to-end processes

Thinking and working in silos is a major reason for poor customer experiences.

SaaS companies need to adopt a process organization with the input “customer” and the output “success” that runs through every department. 

Customer success does not start after the purchase but with attracting the right buyers.

A customer that comes with the wrong expectations will fail and churn. A customer that does not possess the required skills, knowledge, and mindset will fail and churn. 

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4. Customer relationships

Implementing the customer-led growth business model is only the beginning.

It’s a living organism that requires proper nurturing to mature and grow. The source? Meaningful customer feedback. 

That does not mean you have to do everything that your customers want. It means doing what is best for your customers.

There’s no better way to get these insights than talking to your customers. Not when they are already on their way out but at the very beginning. 

Building customer relationships is not nice to have.

It gives you access to your customer's business and the more you know about them and their needs, the higher the odds of success.

It’s also positively impacting their loyalty even when things don’t always work out as expected. 

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5. Goals and incentives

The last piece of the puzzle for a successful transition is to change goals and incentives accordingly.

As long they compete with each other customer-led growth is doomed to failure because incentives drive people’s behavior. 

If you want to align everybody on customer-led growth you need to tie everybody’s bonuses to GRR, NRR, and/or LTV.

Metrics that reflect long-term and quality growth. For a smoother transition and less resistance, I recommend doing it gradually.

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The clock is ticking.

The transformation should have started 6 months ago.

The next best time is tomorrow.