Culture: you're not that big
Preserving agility and "small" culture while scaling your SaaS business
Growth is a great thing - after all that’s the dream on which most B2B SaaS startups are founded, yet few are able to achieve. They might spend years as a small, nimble team sifting through product-market fit. And finally, it pops. It might be gradual growth over time, explosive growth over 12 months, or a change of control that brings in new investors and team members. Whatever the situation, you can count on two things.
First, it’s a lot of work. There will be many functional challenges of adapting to growth - building a demand gen engine, scaling founder-led sales, instituting disciplined product management, instrumenting the business with the right systems & data, etc.
Second, a cultural tension will build. Comments like this start to surface:
“I used to get a lot more information about the business”
“I think we’re losing the familial culture we used to have”
“Decisions are taking much longer to get made”
“It’s harder to connect the work I do with the impact to the company”
These can be daggers to founders and executives, particularly from long-standing employees that have been with you from early stages of the journey. Is this just the reality of getting bigger, or is there a way to maintain the agility and culture of being small while the business grows? I may just be an optimist, but I’ll make a case for the latter.
Coming to grips with size
Stating the obvious - as the business gets bigger, team size will get bigger. In B2B SaaS, the largest makeup of operating expenses is payroll. Therefore as revenue grows, team size must grow. The rate at which team size scales in SaaS may look differ between (a) pure software and tech-enabled businesses, (b) product-led growth vs. heavy enterprise-sales motions. For illustrative purposes, going from $1M to $25M may result in team size growth from <10 employees to 150.
Ok, so let’s come to grips with the fact that in order to achieve any BHAG goal you’ve set for your company, the size of the company is going to be significantly larger and the layers between individual contributors and the CEO will multiply. This matters because it inherently becomes more difficult to foster a “small” culture, where team members are used to frequent, direct communication with the CEO to understand strategy, get validation on performance, and to receive direction on key decisions. I say more difficult because at 5-10 people, the level of organic collaboration is natural. There’s maybe 1-2 people managers and one of those is the CEO.
The TRAP of getting bigger
Just because it’s more difficult to maintain that “small company” culture doesn’t mean throw in the towel.
To make this digestible, let’s segment the tangible facts of being big from the act of being big. Here are some facts - being bigger typically may come with larger budgets, more team members & resources, more management levels between individual contributors and the CEO.
The trap however, is that the culture, or act of being small can no longer exist and that the positive attributes that made up the “small” culture will automatically be overshadowed and subsumed with bigger company culture. Typical small company descriptors…
CEO accessibility
Transparency of information
Agile decision making and adjustments
Sense of belonging
Impactful work
Team of “builders”
I’d argue that the best outcomes for companies journeying through the growth stage from $5 to $30M in ARR should strive for all these same attributes. All team members should:
Feel comfortable surfacing issues and ideas to the CEO and executive team
Know the strategic direction of the company
Feel that information is transparent allowing them to do great work and make sound decisions
Feel a sense of belonging and community with their colleagues
Be in “building” mode (more on this)
Making it real
So, how do founders and CEOs make this a reality? It’s not a clear cut formula but here are some lessons learned in working for and with co-founders and CEO’s through this growth stage.
Stay small // you’re not that big
Put your facts and convictions on display
Flatten the organization
Hire and foster “builders”
1 | Stay small // you’re not that big
First, acknowledge that you’re not that big. Yes, team size will naturally scale with revenue growth, but at this stage, companies really aren’t that big no matter if you’re at $5M in ARR or at $30M in ARR. The largest software companies like Workday and Twilio (let alone enterprises like Amazon and UPS) are a totally different scale managing tens of thousands of employees.
Board members, investors, and advisors will challenge you to scale the business - you’ll need to develop and implement a repeatable sales process, establish disciplines in product management, institute scalable customer support, fix predictability of accounts receivable, the list goes on. Resist the urge however, to apply that thinking too quickly to your culture.
When your small, agile execution in a market with larger, more resourced (but heavier) competitors can be your competitive advantage. Remember, one of the facts of being small. You’re less resourced. Can you imagine being less resourced AND less agile than your larger competitors? Your chances of success would be slim to none.
2 | Put your facts and convictions on display
Next, there’s a need to align your team on a unified strategy, vision, mission, values, and near term objectives. When it’s you and 10 other people, frequent bite-sized communication is doable in a combination of 1-1 and group settings. Many team members signed up to be a part of the missional cause or close community - so, direction can be fueled (and refueled) based on a collective sense of missional purpose, customer feedback, or exciting product bets. In situations where your perspective changes, the overhead to re-communicate direction isn’t that high either.
At 100 team members, strategy, vision, and objectives though communicated initially by the CEO, must be reinforced by managers - managers who most likely will never be able to fully embody the same level of missional purpose as a founder or CEO. Thus, putting facts and convictions on display becomes much more important. This is for all individual contributors but also enablement for managers to understand the WHY behind decisions, strategy, and objectives. Perhaps even more importantly, foster autonomy, drive progress, and articulate reasons to believe.
Components can change, but key components should be visible and understood by all in the organization
Strategic Operating Plan - summarizes what business the company is in, what customers it serves, the differentiated products & solutions that are provided, key financial outcomes, and the company-wide priorities and initiatives for the year.
Product roadmap - the accompanying product investments that drive customer and business outcomes.
Budget - further definition of business and financial outcomes (though not all components shared with individual contributors)
Scorecard & operating rhythm - whether it’s Rocks, OKRs, or a business scorecard. This is the drumbeat of regular business reviews, all-hands, departmental reviews, and score-carding that puts the progress of the business on display…and generates ideas to course correct.
3 | Flatten the organization
Alongside of rooting yourself on the facts of the business and establishing tools and rhythms to communicate, is organization design itself. For the time being, keep the organization as flat as possible. It takes time to get a well-oiled operating rhythm in place where messaging is well cascaded and feedback loops are organic within departments and cross-functionally. The more layers of management, the less effective communication becomes. Let me qualify “less effective”:
Slower - by definition, more layers means it takes longer for information to cascade down and across the organization
Filtered - each manager, well intentioned, may feel the need to filter information to their discretion.
Less autonomy - the more layers, the more perception by the individual contributor that they are the last people to know. Their feedback is less relevant and more distant to the CEO.
This is the opposite of what want to drive transparency, accessibility, and belonging.
4 | Hire and foster “builders”
In start-up mode the need for “builders” is obvious since companies are building everything from scratch. During the growth stage from $5-30M, companies can get ahead of their skis in “scale-up” mode. The tendency is to hire “optimizers” in preparation for scaling, bringing in seasoned executives or individual contributors who have seen what a scaled enterprise looks like. The problem is this:
Seasoned executive “optimizers” - SaaS growth-stage businesses are constantly changing and even if something exists, there’s a high likelihood that what was initially built was based on assumptions that have meaningfully changed. “Optimizers” from larger enterprises want to tweak what exists. This doesn’t work if the underlying assumptions are different. In many cases, it may be faster and better to take note of past learnings and start fresh with a new design. For example, if the ICP has shifted up-market, instead of leveraging past sales stage conversion data to modify stage exit criteria, it may be better to refactor the sales motion all together to fit the needs and expectations of larger customers.
Individual contributors “optimizers” - the mentality for individual contributors is also different. They’re used to direction being cascaded down multiple layers and working on bite-sized well-defined problems that are contingent on well-documented processes in place. That’s rarely the environment growth-stage B2B SaaS is in where team members need to have a hand in defining the problem and building the process rather than being reliant on that direction to be given.
What does this have to do with “staying small”? You can’t facilitate a small and agile culture alone. “Builders” will naturally help. They proactively identify problems and present solutions, want to have a voice in the strategic direction of the company, and will challenge you to be transparent and accessible. Ultimately, they become the future leaders of your organization that allow you to scale even more.
Are you experiencing the tension of growth with maintaining the agility and culture of being small? What tactics have you deployed to maintain accessibility and foster a sense of ownership and belonging? Comment below!