Doing More with Less: How to Maximize Revenue | Mark MacLeod

September 6, 2022 - Mark MacLeod

Doing More with Less: How to Maximize Revenue

All markets are cyclical. They go up and down. Expand and contract. The startup funding market is no exception.

After the longest bull run on record, CEOs got used to a world where capital felt free. It was abundantly available on exceptional terms. Tiger Global and peers put fuel on the fire by competing to offer the biggest checks with the fastest closing.

Those days are over. Public tech stocks are massively down. And when the public capital markets sneeze, the private markets catch a cold. Especially, later stage (series B and up).

The days of doing more with less are here.

Source: Bessemer Venture Partners

A band of mercenaries

One of the biggest financial issues CEOs have faced recently has been an unprecedented level of salary inflation. Potential (and current) employees have felt more like hired mercenaries. Salary increases have been massive in almost every role.

This was potentially fine when money was freely available. But….

For one, it is less available now. But even if it was still as available, business models have not kept pace.

If revenues, and more importantly, pricing for current customers, is not growing at the same pace as your salaries (typically your largest expense), then your operating margins are suffering. It becomes harder and harder to get to profitability.

It’s time to face reality and maximize revenue

The implications of this are clear: We can’t have it all. We need to simplify. We need to find ways of doing more with less, to maximize revenue per employee, and have each team member deliver more revenue.

In practical terms, this means:

Simplify: Review your current list of key projects and strategic initiatives. Which ones will contribute to meaningful revenue growth in the next 12 months? Consider delaying or removing projects that don’t drive revenue in the near term.

Roadmap: Related – which initiatives are tied to clear customer requests that will drive new revenue/ reduce churn in the near term? Use this as your filter for what makes the cut.

Instrumentation: Every department in your business needs to be instrumented to identify and then optimize operating and productivity levers. For example, if you typically hire a new customer success rep for every 100 new customers, first, what measures tell you that this is the right number? Two, can you find ways to get more efficiency from each rep?

Talent reviews: Most tech companies are remote now. Absent instrumentation and accountability it can be hard to know who is crushing it vs mailing it in. This is an issue. Without creating a police state, you need systems to know who your key people are and who needs to find a new job.

Create a profitability plan for future funding today

If your company is burning money, then every day that you don’t optimize your financial performance you make it harder to raise more capital or get to break even.

There is no free lunch. Even when money felt free to raise, the expectations on that capital were still there. Perhaps even more so because of the rich valuations. We always needed to drive performance and efficiency from that capital.

We could postpone the inevitable when capital was easier to raise, but we were just fooling ourselves and making it more likely the founders’ common shares would be worthless if and when you eventually sold your business.

Now is the time to take charge of your business, massively increase focus and simplicity, focus on revenue growth above all else (since this is the single biggest driver of investor, strategic partner and talent interest. Don’t rely on capital markets being there to bail you out. Drive return on the capital you have already raised.

Photo by Prateek Katyal on Unsplash

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