SaaS Breakthrough – Featuring Micah Rowland

demio saas breakthrough featuring micah rowlandAbout Micah Rowland:
Micah Rowland isn’t your everyday builder. Maybe because he doesn’t build homes, cabinets, or even the software that he used to as an engineer.
As Chief Operations Officer of Fountain, Micah builds people, teams, and processes that has taken multiple companies from 50 to 250 people and $5 million to $30 million in revenue.
Fountain is a hiring automation software for the New Service economy.



Show Notes:
03:00
Helping To Drive Excellence In The Hiring Cycle
05:20
The Most Important Thing To Get Started In A Leadership Role In SaaS
10:20
The Highly Iterative Process Of Going From Idea To MVP
14:15
The Indicator That Tells You Have Product Market Fit
21:55
The Devil Is In The Details In a SaaS Business
25:30
Leaders of Early Stage SaaS Companies Need To Understand The Important Metrics
28:10
How To Know When You're Ready To Go Full Scale
31:40
Early Warning Indicators Versus Lagging Indicators
35:50
SaaS Evolution: Pricing Models Are Going To Have To Be Diversified
39:25
The Important Behind-the-scenes Numbers
41:00
Challenges Coming Up In Q4 and The Recessionary Period Looming
42:35
Lightning Questions
Transcript:

Hi, Micah. How you doing today? And welcome to the SaaS breakthrough podcast. Excited to have you here today. How you doing?
Micah [02:58]:
Thank you. I'm doing great and it's great to be with you. I appreciate you having me.
David [03:00]:
Yeah. It's going to be a fantastic conversation, we have lots to talk about. You have tons of experience and I want to dive into that, dive into your journey. But before we do that, let's talk a little bit about Fountain, the company that you're currently working at. Let's explain about what it's doing, when it was founded, who your customers are and what you guys are doing uniquely in the marketplace right now.
Micah [03:22]:
Yeah, absolutely. Fountain was founded in 2014 and our software service is one that is used by really any company that is looking to hire, which is most companies. But today, our customers are predominantly in a few different segments. One is we serve a lot of fast casual dining and folks who are out in the service economy across the country US and in Europe. Secondly, we serve large enterprises that are looking to hire contingent or contract based hourly workers.
And third is we serve a number of gig economy companies. Many of them are startups that are hiring large numbers of contractors. And really, the unifying theme across those companies is organizations that are looking to hire what we call the desk lists workforce. That is to say mostly contract basis and contingent labor, almost exclusively hourly labor across the marketplace and our product helps them to do all stages of hiring. Starting out with sourcing candidates, finding them online and bringing them in to process them through an application.
Oftentimes, we'll be helping them with interview process and then hiring and onboarding those employees as well. So, our software enables customers to do a lot of that work in a much more automated, a much more mobile friendly and a much more technology-enabled fashion than they previously have in the past and the impact of that is that a typical recruiter can process thousands of applicants in a given month instead of using old paper and pen based systems that are oftentimes a lot more work intensive.
So, we help to drive excellence in the hiring cycle across many different business types and efficiency.
David [05:21]:
That's amazing. I'm definitely going to check you guys out. I know for our hiring process which is pretty well done, pretty streamlined, I still use a lot of spreadsheets, a lot of manual email follow-ups and just kind of putting things into a Kanban board like a Trello. So, that sounds like a very helpful piece of software there. When did you actually join the team? You're the COO there. And what are you initially focusing on when you come into the company?
Micah [95:49]:
Great. I joined as Chief Operating Officer in September of this past year so in fact tomorrow the September 24th is my one-year anniversary.
David [06:01]:
Congratulations.
Micah [06:02]:
Thank you. I actually got involved with the company a few months before that though. I had been introduced by an investor. He said “Hey, take a look at this company”. I was looking for my next gig and in my conversation with Keith our founder and CEO, I initially wasn't quite sure that it was the right thing for me.
I felt like the company might be a little bit earlier stage than I was interested in going and so I got involved doing some consulting work on go-to-market strategy, pricing and things like that. And basically, what happened is the deeper I dug into the company, the more I got to know the company, the more I thought “Wow. This is actually a uniquely strong product and platform” and that it was a little bit further down the path of maturity and growth than I had realized initially.
So, I got more and more excited and a few weeks after, I had started my engagement. When the CEO came back to talk, we talked about me joining full-time and I came on full-time last September in September 2018.
David [06:59]:
That's fantastic. And when you're coming in, once you come full time and I know you were doing some consulting initially on marketing. Are you coming in to just to start cleaning up operational processes? What are you doing in the company?
Micah [07:10]:
Right. So, high level I own operations which we think of as being everything inclusive of finance, recruiting, human resources or people operations legal and security. I also, am responsible for customer success, having done a lot of customer success leadership work in the past and other SaaS companies.
And so, the initial focus was really on building reporting visibility into all of the key things that happen in the company whether that be on the customer success side, helping the team to get a solid reporting structure and regular process in place around renewals and what was happening with the revenue, that we were billing on a recurring basis, who was going to come up for renewal, how do we make sure that we're going to be in a good spot for those customers who are coming up next month next quarter.
And then, on the finance and operational side, a lot of it was again putting in place basic processes to make sure that we could at first see what's going on in the company. Where are we spending money, where are we bringing money in, how do we make sure that we have great visibility into all of our billing and accounts receivable as well as our invoicing Accounts Payable? And so, a lot of it is just blocking and tackling on the basic processes that make a company work in terms of getting visibility.
I often think that the most important thing to get started in a leadership role in SaaS is to make sure that you have a clear set of metrics and an understanding of what's going on in the company so that you know what may not be working as well as you think that you need it to be working and what you can potentially do about it.
David [08:55]:
Absolutely. You can only improve what you can measure and that makes a lot of sense. For the company itself, do you think that they're in the growth phase? Are they in a scale phase or it's a little bit earlier than that right now?
Micah [09:07]:
Right. We are in the phase where it's a little bit of scaling and it's a little bit of growth. I'd say the place the company started which was serving enterprises and serving gig economy companies, we've got a lot of things figured out in terms of how to add new customers and how to bring them into using our platform effectively.
In other areas, we have been expanding our product and looking for new ways to make sure that that product is driving value for customers out in segments that we historically hadn't served prior to about a year ago. And so, in some of those areas like fast-casual dining, hospitality and so forth.
We are scaling but we're also making sure that we focus time and energy in on all of the elements of our revenue generation process to make sure that everything is repeatable and is going to be able to successfully scale in the sense that we can repetitively add more customers in those segments where we again had to build additional product capabilities in order to be successful in the marketplace.
David [10:22]:
Yeah. That makes a ton of sense. And I know you have a lot of experience in SaaS, in the different parts of the SaaS business journey from idea to MVP stage, from that growth stage all the way to the scale stage and you guys are kind of in a different place right now. And maybe this question won't apply specifically for Fountain but maybe for a past company or something like that, we can talk about this.
But why don't you take us through the process that you typically go through from idea to MVP, lessons that people need to learn through that initial stage, maybe some hard lessons learned along the way and we'll kind of go through these different phases and just pull out some of your extraordinary knowledge from the process.
Micah [11:08]:
Right. I think the first thing that I should say about that process is that I think it's highly iterative and it's important in that process to make sure that you don't write things into stone or carve things into stone too early on before they're actually ready to be scaled and so forth. And so, I wasn't there for the first sets of those iterations at Fountain. Obviously, I joined the company when it was a little over three years old and yet, we are going through imperative idea to MVP process as we launch additional product modules and so forth.
And so, I think what I've seen is that for companies who start out in a point solution type of environment which is many SaaS companies today, you need to be making sure that you are able to get those first few customers who are paying you money, who have a subscription in place and that set of customers is oftentimes going to be your best feedback in terms of what you need to be doing with your product in order to continue to grow and expand the set of customers that are in your addressable marketplace.
And so, I think the idea to MVP process is one that requires that you repeatedly seek feedback from the customers who are using you most enthusiastically or using you most demandingly to make sure that you can follow what they love and continue to give them more of what they love.
As you start to add in people who have different use cases or who have different needs for the product that you've already built, it's very important to be able to go back to those customers and evaluate whether or not they are getting as much value as that initial set of customers was out of your product.
And if they aren't, then it's important to be able to revisit the product itself and make modifications in order to make sure that that broader swath of customers that you've started to tackle as you go into the sections of your addressable market that maybe were not initially enthusiastic about your product, you need to make sure that you can drive the same level of customer satisfaction, customer advocacy, customer usage, customer retention in those new segments.
Because I think it's easy for companies once they get out of this early product formation phase to feel like they've got it dialed in and they're ready to scale and pump up the marketing and sales spend.
And if you do that before you know that you have a really strong product market fit in all of the different corners so to speak of your addressable market, I think that's where a lot of companies run into trouble because they haven't really proven product market fit in this section of the market that is actually somewhat different from where they started or from where they've seen a lot of early success. And it's often easy to fool yourself into thinking that you've got that fit earlier than you've actually demonstrated it with significant repeatable results.
David [14:14]:
Really good answer. Very thoughtful and thorough there. And I think just kind of recap it a bit, it's be patient, take your time, open feedback loops as much as possible, focus on the value add to that customer that you're trying to bring in, learn from them, you may have to shift the customer or shift the product a little bit. My question to you would be then, what are you specifically looking for as the indicator to tell you that yes you do have product market fit?
You mentioned having multiple successful customers. Is that a number? Is that the ability to just on board and in bringing new customers and see them getting success in X amount of time? What does it actively look like so you know that “Okay, now I can bring in marketing, now I can really look to grow this now that I have that product market fit”.
Micah [15:06]:
I think it's predictability in two high level areas. First of all, predictable acquisition costs and acquisition processes. Secondly, predictable customer onboarding and retention mechanisms and metrics. So, acquisition side, you need to make sure that you understand that if you put in a certain amount of money into your marketing machine so to speak, the channels that you're spending on and the different processes that you're using to bring in customers whether that be outbound, inbound, organic SEO, etcetera.
You need to understand that if you put in a certain amount of dollars, you're going to get a certain amount of leads out of that or a certain number of leads and leads at a certain quality out of that machine that your sales teams can work on or that your salespeople can work on. And that once your salespeople start working on those leads, working on those opportunities that you're going to get a certain number of customers and revenue associated with that certain customers.
So, obviously, the goal of every SaaS business is to be highly predictable in those ways but I think it's very easy to fool yourself into thinking that you have predictability because the early stages of a company's growth, almost everybody involved in that acquisition engine is going to be the most energetic, they're going to be the most committed, they're going to be the most dedicated to the company and to the product and to the service.
And you have to recall that later on when you have five ten fifteen sales people selling that product and you have a different set of marketing messages and mix going out there into the world. You need to basically kick the tires and make sure that things are still going to work at the same level and at the same spend levels in order to get the leads the opportunities and the new deals that you need. So, on the acquisition side, I think it's really important not to fool yourself prematurely into thinking that you have repeatable acquisition.
And especially not to do that if you're actually selling to a different type of customer, customer in a different industry or vertical. You need to be able to run experiments in order to do that.
And so, the last thing that I'll say before I move on to retention and customer revenue is that with respect to acquisition cost, it's very important to have things instrumented so that the data that you're bringing in about your marketing spend and your marketing attribution, your sales investment and your sales success, you can actually have a clear view of where you're having success where you're not having success and be able to run experiments so that you can modify that over time.
I think it's very important for companies to have that have that attribution and the sophistication in analytical insight that's going to allow you to prove the predictability and to make modifications if you're not seeing what you want. So, in the retention side, really I think about things from a life cycle perspective. You've got customer deployment and onboarding that in some companies, is very involved and it'll be something that takes weeks or longer, hopefully shorter if you're wanting to really build a scalable business.
Secondly, you've got what I call the ongoing steady-state portion of the customer lifecycle where you've got a customer who is up and running seeing value and you're going to be deepening the relationship with them, helping to make sure that they actually are adopting all the features that you find are important in order for them to capture value. And then, thirdly you've got the renewal phase of the lifecycle where this customer has a decision to make about whether or not they're going to continue their contract with you.
Sign up for another year or another period of time. Whatever your contract term that you're working with is, the longer the better. And so, the metrics that allow you to understand success in each of these lifecycle phases are going to be different. Metrics for onboarding are things like how many days or how many weeks does it take you in order to successfully onboard a customer? And you need to be able to understand what it is that successful onboarding actually entails.
So that metric is going to be probably different for every company. Some companies, it's relatively simple. It's going to be the number of people who are logging in or the number of people who have accessed a certain feature or the number of people who are doing certain things in our platform, it is really the question. Whether or not they're processing applicants, job applicants through our platform and making job hires through our platform.
So, that set of metrics is going to be a little bit different. You've got to figure out what actually correlates with success. Whether or not it causes success is a question that is maybe deeper to go into. But if it correlates with success then, you can be reasonably assured that somebody coming out of the deployment phase is going to be successful. On the steady-state side of the business, traditional metrics that are used to evaluate customers satisfaction or customer willingness to stick around or NPS and customer satisfaction metrics.
I'm actually a fan of CSAT as a metric to evaluate service quality and happiness with the service quality. Whereas NPS is really more used to evaluate holistically the customers experience with you. So, I'm a fan of deploying those metrics in respective places where they apply depending on what you're actually trying to answer.
And I think it's really important to be able to deploy additional metrics in order to understand and a more granular level why customers may or may not be satisfied and whether these things affect their decision to continue with your service or they're just things that customers are thrilled or upset about but aren't really going to affect their decision. Then on the renewal side, it really comes down to tracking your revenue and making sure that you can get people into the place where they're comfortable renewing their contract.
In many cases, hopefully you have an opportunity to provide expansion revenue or upsell revenue as you expand the relationship with your customer and turn it into a more extensive contract or more see licenses or whatever the way that you price your product is. And so, those metrics are really pure business outcome metrics but I think it's also important to be tracking things that correlate with business outcomes that are actually more directly modifiable.
It's not easy to directly modify your renewal rate or your turn rate, you've got to figure out what are the metrics that actually correlate with renewal rate and turn rate and then which of those are things that you can actually change. Whether it's more customer meetings, more business reviews, more effective business reviews and the very many different service types of metrics that are going to indicate whether or not you're likely to admit.
David [21:54]:
That was an incredible answer. And since you're looking for so many different KPIs and different indicators across the board, do you think this is part of the growth process? You need to have a large number of customers to get all this different data and obviously you can't just do with like an MVP process, to help customers to understand all this. Is this part of growth? Are you going to need a marketing team to help just drive in those leads and then just kind of figure it out and then figure out what is product market fit from that?
Micah [22:24]:
Well, I think where my head really wants to go with that question is to say that the devil is in the details and in a SaaS business, a lot of what drives your ability to understand insights that are actionable for the management team or for the team that are working on the acquisition problems or the retention problems whatever that may be.
Those insights come from data and analytical excellence which comes from really asking questions in a thoughtful way and instrumenting your software in your system so that you can collect that data and understand over time what makes a difference. So, I think one of the things that companies often make mistakes on early in their lifecycle process is this question of what actually equates or entails success in a SaaS business.
So, I think sales processes, marketing processes, there are a fairly well accepted set of metrics for evaluating marketing success, pipeline and so forth. And that is to some degree, true for customer success and for the post sales environment but I think increasingly it's the case that people who are looking to evaluate the success of SaaS platforms, need to go much deeper in terms of metrics that are tailored for your business.
So, for us for instance, all the metrics that are relevant to whether or not the customer is capturing value have to do with the number and the volume of job applicants they're seeing as well as the number of locations where they're actually getting applicants the higher rates that they're seeing. These metrics are metrics that would not be relevant to a business that has a very different type of product and so in our business, it's important for us to develop an analytical answer to the question of what metrics drive success.
That's a very different set of answers for another business. And so, the discipline of understanding the relationships between those metrics and success is quite is quite important in businesses.
And so, if you're thinking about building a SaaS platform one of the key sets of people or key individuals you need to have on your team in those early days is somebody who has the analytical and strategic problem-solving skills to establish what those relationships are between success metrics and which success metrics should you use which are appropriate for your business. Because simply tracking churn metrics is not sufficient for most software businesses.
Churn metrics are the end of the journey and so if you're seeing churn numbers but you don't know how to affect the churn numbers, you need to ask yourself who in the company can go figure out what are the things that we ought to be tracking and what constitutes success on those KPIs or those metrics.
David [25:29]:
Do you think leadership themselves need to help create the understanding of what the company is actively driving towards? Where that success metric actually is, so then as a marketing member, you can then backlog like “Okay. Then we need to focus on these things” because what you're saying is there is no cookie cutter KPIs. It's specific to every company and you have to find the key indicators that will help you understand when to grow, what customers are working well, how to scale all that kind of stuff.
But do you need to have some fallback from the true values of the company? What are you actively trying to achieve? And similar to you, for us, we often look at things like the attendee engagement, attendee usage, not just accounts being opened or just revenue, we're trying to focus on you know engagement in the platform, the rate that people enjoy the platform stuff like that. Smaller details that help us understand kind of customer success there.
Micah [26:28]:
Yeah. I think it's very important especially in early stage SaaS companies for leaders in the company especially the product leaders but also the executive team, wherever the executive team is comprised of, to understand those important metrics. Because the leaders are going to be very involved in all aspects of growth and retention and if you want to be able to continue growing, it's important for the product leader to know what to focus on in terms of building the next thing or fixing what you've got.
It's also important for the CEO to be able to understand how to think about growing the company and bringing in the right talent to make sure that the team can function well in order to deliver them the business's objectives. And so, I think that one of the key things that any effective leader in the company needs to be doing is drawing attention to how do we get more insight into what into what is important for our success today in acquiring and retaining customers.
And the likely success that we'll need to have down the road when we do want to be acquiring and retaining much higher volumes of customers maybe 2, 3 or 10 times as many per week or per month whatever the timeframe is. And if you're not constantly seeking to figure out what those important things to pay attention to are, then you will be working on fixing problems that were sufficient to solve, the challenges that you faced at your current stage of growth but those may not be the same challenges that are going to be standing between you and your next phase of growth, your next round of funding, the next set of milestones that you need to reach to keep your company thriving.
David [28:08]:
Makes a ton of sense. I really like that and so you're constantly just asking better questions. What do we need to know more of, what we need to know to be better? And you're trying to stay ahead of growth there. When do you then know it's time to test scale out of maybe that growth phase and you're ready to go full scale? Is there a metric that you can feel comfortable with? Are you kind of always uncomfortable before you step into the next phase?
Micah [28:36]:
Yeah. I think of it on a marginal basis, right. So, scaling is really the question of if we add more whatever sales people, if we add more marketing dollars, are we going to get the same results from those sales people that we've got from our current salespeople? Are we going to get the same results from the next $10,000 of marketing spend that we got from our last $10,000 of marketing spend? And so, most of the time the company needs to be making decisions on a different scale from one headcount or from one marketing dollar.
But really, the analysis should always come down to what is going to happen when we add one more headcount and will that still be true if we add more headcount next month? So, I think it's really important to constantly be able to look at your per sales rep unit economics at your per marketing dollar or a thousand or ten thousand or a hundred thousand dollar unit economics in order to understand “Okay. If we add one rep, two reps, five reps, ten reps, are we going to get the same results?”
You need to look at per rep numbers and then, you need to be paying attention to the reps that you've most recently added to make sure that they're driving the same results. So, I actually think that that way of thinking about the next step in scaling is never out of fashion or out of style for a company in its growth phase. Because it's so easy to fall into the mindset where you're operating on autopilot. And of course, you may put more or less time into the evaluation of the next scaling sales rep or set of sales reps or marketing set of dollars.
But I think it's very important to be able to pay attention to that throughout the growth curves because as you again, go into new market segments or as you try and build new product modules that you're going to be selling or as you add new staff who have less history with the company, less customer knowledge and who are relying on training systems that are a little bit more established versus the early stage training which is more throw-the-folks-into-the-deep-end, all of these things change the equation a little bit.
And it's very easy for you to change the equation in ways that result in that next sales rep being less productive than you predict and you've got to be paying attention enough that you can bring that back into line with whatever the solution might be. Training, systems, product modification, pricing modification.
And so, I don't want to give a cop-out answer but I think that it's very important to continually engage in that set of analytical investigations to make sure that the scaling is going well regardless of the number and the pace of which the scaling is happening or the dollars of spend are being added into the equation.
David [31:42]:
It makes sense. Have you seen specific warning signs in KPIs perhaps or in specific scaling departments that you really have to pay attention to as well?
Micah [31:54]:
Yeah. I think it's very important to understand early warning indicators versus lagging indicators. I talked about churn earlier. Churn is a lagging industry indicator. You could talk about customer acquisition costs. Customer acquisition cost is a generally lagging indicator but in terms of developing early warning indicators. I think this is something that I think is equally important.
We talked about the importance of analytical excellence and continually investigating the right KPIs, developing early warning indicators for your business is quite important and I think the earliest warning indicators in revenue engine or about the marketing dollars that you spend especially with respect to digital marketing and things where you can actually track with very high fidelity and you can generally understand with a relatively short time frame.
When I spend X dollars I should be getting out of that early stage of the marketing funnel Y leads or Y opportunities depending on how your funnel is defined. So, I think the earliest stages of the revenue acquisition funnel are the most important in order to understand changes on the acquisition side. If you have leads that are coming out of your marketing spend, that are the same volume for a given amount of marketing spend as you've had in the past and that's a good indicator.
Because the marketing, messaging and channels is not something that changes so significantly. Most of it's not changing frequently based on the performance of individual people talking differently to customers. It's generally going to be driven by content that you've got out there and spend in order to make sure that that content shows up in the eyeballs of customers at a certain space on the website or certain advertising spaces.
And so, if you have that relatively stable system in place to spend or to deploy marketing spend and see what the results come out of it are, then I think that's a great early or warning indicator. If those results start to change, then you need to be paying attention further downstream in order to understand if the quality of the leads coming out of your marketing engine is changing. Or if the volume is changing, then maybe there's something else going on that you need to be looking into.
So, I generally intend to go far up the funnel as I can if I see problems with what's coming out at the top of the marketing funnel and into the kind of lead to opportunity conversion stage. That's where you're going to dig into and understand what's going on what's actually changed because that's the easiest set of things to control and ensure they're consistent.
Once you get into the stages of the funnel where success is determined by individual salesperson excellence, then it's much harder to understand if something is changing because of something that you've done or because this sales rep is perhaps not as strong as another sales rep or because this segment of the market is not reacting as positively to the value proposition that you're selling it.
David [35:10]:
Yeah. It makes a lot of sense. To kind of keep it there on the front, get that quick early indicator double-check lead quality. I think that was a really important thing that you touched on. Just wait even if we'd go down a little bit on leads, is the quality the same or has that change and that makes a lot of sense as far as being able to then make those quick shifts and pivots to what you need to do for messaging to get in the right growth levers basically.
Where do you see the SaaS model heading? You've been here for so long in the industry. Do you see us going in a specific direction or headed anywhere, I don't know, any warning signs?
Micah [35:47]:
I think it's a little early to tell whether or not the SaaS model overall really works for a large number of businesses that are attempting to make it work. It's easy to forget that SaaS is something that is really only about 15 years old perhaps even less depending on how you define it. And there are really only a couple of companies that I've actually reached any level of consistent profitability.
If you look at the public markets with Salesforce workday, a few others that are true SaaS companies that started in SaaS and that have built their way to consistent profitable levels the number is very small and so I actually think that there are many companies that are working with a SaaS model today that are going to have to evolve in some way. And that if the model itself will evolve, I think the principal way that it'll evolve is that the pricing models are going to have to be diversified in order to best match customer value with customer price.
The equation that matters most for SaaS is, what is the customer lifetime value that you capture for a given amount of acquisition spend? And if you can't capture a much larger amount of customer lifetime value, then you are spending to acquire customers. Long term, you'll be in trouble. The things that matter most for a lifetime value or price and retention. And so, that takes time to play out of course. You can predict that a certain customer is going to stick around for two or three or ten years.
But of course, that prediction is something that needs to be borne out over time. And if you get it wrong, especially if you get it wrong on the downside that is to say customers churn earlier than you projected. Then, you have perhaps messed up the acquisition investment you made to bring that customer run in the first place and not gotten enough of a return.
And so, all that is to say a lot of these companies have come up with pricing models that are intended to balance customer price for value captured and those pricing models take years in order to determine if it's actually right. If it's actually going to give you the right lifetime value over time. And I think many of these customer pricing models are going to have to evolve in a way that more automatically balances value for price.
And so, I think customers that have done a great job of this or companies like Twilio. If you look at your Twilio bill, it's going to be different every month and I think that's smart because most of Twilio's costs, they scale with customer usage of the service. And so, it would be foolish of Twilio to try and price a customer in a way that they decide upfront exactly how much every customer is going to pay every month. What they've done instead is to find a model that that is based on usage.
Other models that are out there incorporate elements of auction theory and the point is very few companies are smart enough to come up with the exact right price for every customer. Because every customer usage of this platform or this service is generally going to be at least a little bit different.
And so, I think the key thing that obsess model is going to have to figure out is how to balance price for value and how to do so in a way that is generally going to allow customers to automatically sort of set their own price in a way that the company doesn't have to designate a price for every single customer. Because that's too challenging and too many companies get it wrong.
And I think we're still in the very early days of seeing how many companies can actually come up with a pricing model that is not only going to balance that effectively but that they can effectively sell and that they can have their sales team communicate in a way that is intelligible to customers and potential customers in order to bring those customers on and make sure that they achieve the right lifetime value for the SaaS company over time.
David [39:26]:
Is there a specific LTV to acquisition number that you're looking for? Is it just anything over one point something?
Micah [39:44]:
Oh I think it always needs to be at least more than three. I think one point something is not sufficient because generally speaking, the business is going to have acquisition costs and it's going to have costs of retention which generally are going to go into cost of goods sold. There's a whole bunch of other spend that a business is going to be making in order to invest in its long term success and to keep the lights on.
That's been is not showing up in either of those metrics and so if you want to evaluate the success of a product, maybe having a one point something of lifetime value ever acquisition cost is successful enough. But if you want to build a whole company around that product, then you need to have a lot more lifetime value that's going to pay for the overhead costs, for the GNA costs and over time for the R&D costs. Because those costs don't show up in either the CAC or the LTV metric.
And so, I think at least three is sufficient or at least three is important and ideally, you're over five. But of course, it takes a long time to verify conclusively that ratio is there to begin with or that it's holding steady over time as you go into new segments, as you launch new product modules and as you try and expand customers and so on.
David [41:02]:
Makes sense. It makes a lot of sense. Those hidden numbers behind the scenes there. And kind of coming up to the last quarter here, a few weeks away from the last quarter of 2019, are there any challenges or maybe new opportunities that you're excited for coming up maybe from the marketing point of view for fun?
Micah [41:18]:
Sure. I think one of the challenges that is perhaps unique to our industry is we are early enough in the evolution of the gig economy and the ways that people hire a contract and contingent labor. That it's not clear how changes in the macro-economic situation will affect demand for that hiring. So, it's something I pay attention to a great deal.
The jobs, numbers and as we come into what seems to be the late stages of the economic cycle, we'll be watching very much to see as the economic cycle turns, whatever that happens. It will happen eventually hopefully not for a long time to come. We'll see how hiring organizations choose to deploy their investment spend on software tools like ours and others.
And so, I'd say that's one that is something is very important is making sure that if the economy were to go into recessionary period sometime in 2020 or even later than that, that we can continue to tell a compelling story to prospective customers as well as to our existing customers about the value that our software brings in their hiring and onboarding of new folks in their business.
David [42:31]:
Corrections are inevitable in the market. It's just when, right?
Micah [42:35]:
Absolutely.
David [42:37]:
Yeah. I think it's a really interesting point of you to be looking at the macro-economics and how it's going to affect your business. I think sometimes people are so micro focused on just the goals of a year-to-year basis that they don't think about that so I think that's really interesting. But what I want to do now for the sake of time is flip over to our lightning round questions. Just five quick questions that we can ask, you can answer with the first best thought that comes to mind. You ready to get started?
Micah [43:04]:
Yes.
David [43:05]:
All right. Let's do this thing. All right. What advice would you give for early-stage SaaS companies starting marketing today?
Micah [43:13]:
Two things. One, stress test your financial model. Look at all the key drivers of your financial model and assume that anyone or multiple of them come in 20% less than your conservative assumptions. Is your companies still going to be alive in 12 months? If that happens and if not, how do you make sure that you firm up your confidence around that particular KPI or metric?
Secondly is have a break glass in case of emergency plan. Always understand what it would take no matter how dramatic the change in order for you to make your company breakeven or cash flow positive in the next one quarter. Because a lot of SaaS companies get themselves into trouble if they can't fundraise and I'm not saying you want to take those steps, but you should always know what it would take in order to make yourself cash flow breakeven or cash flow positive within three months.
David [44:03]:
Very good advice. I really like that. What skill do you think is vital for marketing teams to improve and build on today?
Micah [44:11]:
Analytics experimentation and systems. Marketing is not fluffy. It's about numbers, it's about understanding what works and what doesn't, it's about being able to run experiments quickly nimbly and with a quick ability to analyze and understand the results so that you can make changes.
So, if you don't have somebody in your team that falls into the category of what we would call marketing analytics and operations, you need to make sure that there's somebody in your team who can do that for you so that you can constantly experiment and watch the results flow through your marketing engine, understand what needs to change and play around with things to figure out what's going to improve results.
David [44:49]:
Really love that answer. Yeah, that's fantastic. What about a best educational resource you'd recommend for learning about marketing or growth?
Micah [44:57]:
I actually am a big fan of Andrew Chen's writing and he links to a lot of other key thinkers. He has been really influential in the way that many people think about marketing and growth. Not least of which Fountain and many other companies like us. So, I'd start with him. I also think there are a lot of great resources out there that come from the SaaS industry that are linked to from Jason, Gosh now I'm forgetting his last name.
David [45:29]:
Lakin.
Micah [45:30]:
Yeah. Jason Lakin. That's right.
David [45:31]:
Yeah. He's got a great SaaS stir blog as well and he has a lot of great core answers if you look him up on Google. What about a favorite tool you can't live without?
Micah [45:36]:
I got to go back to Excel. I am a big fan of never getting so far away from the core of your business that you can't go do some analysis in Excel to understand what's really going on.
David [45:54]:
Absolutely. It makes sense. Everything you talked about in this episode is to have something like that some charts and things lined up there. What about a brand business or team that you admire today?
Micah [46:04]:
Salesforce. They never stopped trying to innovate and I think about where they started with a solution that really at the beginning was a point solution. They have continued to lead not only in terms of business growth but thought leadership with respect to innovating on their product and building additional value and additional valuable product modules over time. So, I'm a big fan of Salesforce and everything they're doing to stay ahead of the industry.
David [46:37]:
That's it. They are definitely taking us, the entire industry on this great ride. So, hats off to them. And thank you so much as well for coming on and sharing their extensive and expansive knowledge that you shared a ton really valuable insights from a long history in SaaS. So, thank you so much for coming on.
Micah [46:55]:
Absolutely. Thank you for having me.
David [46:57]:
It was really our pleasure and thank you again. And we'll talk to you soon.
Micah [47:00]:
Absolutely. Thanks David.
David [47:03]:
Thank you so much for taking the time to join us on today's episode with Micah Rowland from Fountain. It was an incredible episode and a big shout-out to Fountain, Micah and the entire team over there who have just been incredible giving you so much knowledge and sharing great tips and tricks and tactics with us today. (...)

Resources:
Learn More About Fountain:
https://get.fountain.com/
Connect With Micah:
https://www.linkedin.com/in/micahrowland/
Follow along on Our Journey to $100k MRR
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