The cheapest team is the one that can’t ship, sell or support. But your team isn’t just a cost factor, your team is your greatest asset.
“Why don’t you just lay off half your team to be profitable immediately?”
“We need you to take costs out of your business. You need to present a team drawdown plan.”
“I don’t understand why you need such a large development team.”
Do you think I copied and pasted those statements from some cheap business novel or soap opera? I’m afraid not. I heard all of them in the exact words stated above in my almost 10 years as the Founder & CEO of Yonder, a B2B SaaS company.
Let’s look at some hard truths about the costs and the value of the team in a B2B SaaS company.
1. The team is the largest cost block
In a B2B SaaS company, the team represents the largest cost block on the P&L. As in any service business, a SaaS company has a very light balance sheet: No machinery, no factories, no inventory. The team creates the value in the company, even if it’s not represented on the balance sheet. Heck, I‘ve been having discussions with our finance auditor about equity capital, software activation, and the value of our patent since the very beginning of our company. Those discussions are purely academic, as the value of software is hard to assess on a balance sheet (and finance auditors typically don’t understand anything about software and its complexities).
Don’t get me wrong: It is un-entrepreneurial to think of the team as just a cost factor, but it is just as un-entrepreneurial to protect low-performers or ask for ever more resources before you are profitable on the argument that it’s the team that creates value in your company.
You need a great team to build a great product, so you will most likely have to endure a few unprofitable years at the start. But not being cost-conscious on the team side will prolong the path to break-even.
2. The team is the largest asset
Who finds new customers for your business?
Who keeps your customers happy?
Who builds and maintains the product your customers pay for?
Who stands ready 24/7 to intervene in case of an operational issue or an urgent bug?
Exactly, it’s your team. Your team is your largest asset, even if you don’t see it on the balance sheet. And depending on the nature of your SaaS product, you can’t go below a minimum team size to fulfill your customers’ requirements, especially if you serve the B2B or even enterprise market.
3. The team is the source of knowledge
At Yonder, we serve two industries: Aviation and critical infrastructure. Both industries have demanding functional and non-functional requirements, ranging from authority-approved workflow processes to clustered databases and ISO 27001 certification.
Good luck if you think you can cover all these domains by yourself. You can’t, even if your name is Chuck Norris. You will need a knowledgeable team with both industry and technical knowledge.
Conclusion
There are many situations where it’s tempting to reduce costs quickly and dramatically. In SaaS companies, this is best accomplished by reducing the team size. That’s a workable approach in very large companies, as each team will have knowledge redundancies.
However, if you’re a SaaS startup or scaleup, there is a lower team size limit below which you can’t go without sacrificing the proper functioning of your company. And if your company doesn’t function anymore, you will lose customers and revenue. And then you’re dead.
So what’s the best way to avoid the team drawdown trap? Increasing your revenue. But always remember that getting more revenue will require more people on your sales & marketing team.
