Leader to Leader: Advice for Growing Software Businesses Today
As uncertainty continues to prevail in the broader economy, many enterprise software companies must adjust their operational approach – from one focused on growth at all costs to one that prioritizes more free cash flow, earnings and adherence to the Rule of 40. With this shift, it’s paramount that business leaders ruthlessly prioritize the underlying drivers that enable long-term profitability and resilience.
Creating value and achieving profitable growth have long been priorities for companies within Vista Equity Partners’ (Vista) ecosystem. Yet, with high inflation, rising interest rates, a tight labor market and geopolitical uncertainty, it makes good business sense to zero in on the operational strategies that will enable success in this new market paradigm.
During Vista’s 2023 CEO Summit, over 60 of our CEOs gathered to share some of the operational strategies they’re prioritizing today. Here’s what enterprise software leaders need to know.
Sales: Focus on Value Selling and ROI To Grow Your Top Line
Many sales teams may begin to experience prolonged sales cycles, as well as more gates and decision makers, as discerning customers weigh their options with a keener eye toward budgetary constraints. That said, enterprise software can help customers “do more with less” and address many of the challenges they face today. Clearly demonstrating the return on investment (ROI) for customers and soliciting sales based on value can help increase bookings during challenging market conditions.
How To Win: Tuning ROI calculators to show cost savings as well as revenue drivers while focusing pitches to address specific pain points can be effective ways for software sales teams to sell on value and drive increased bookings. Reallocating resources to focus more on the installed client base can help with retention by cross-selling and upselling existing customers.
Leadership: Prioritize Developing an All-Star Executive Leadership Team
The people at the helm of your organization are ultimately responsible for enabling and accelerating the company’s growth and success. While it’s always important to ensure you have the right people in the right roles, it becomes even more critical in an environment where capital is more expensive, sales take longer to close and the margin for error is smaller. Assessing whether you have the right talent to tackle the business imperatives of the day should be every leader’s top priority.
How To Win: Many CEOs agree that there is no formula for success when finding, developing and retaining the right executives. However, using the 9-box talent review can be an effective and transparent tool to help leaders understand where they are performing well during 1:1s or quarterly business reviews. Similarly, when searching for executive talent, many leaders recommend pairing the Who Interview Method with cognitive aptitude tests to find “A” players.
Costs: Bring the Organization Along on Your Cost Savings Journey
Shifting from a growth-only mindset to one that prioritizes profitability requires an organization to take a critical look at existing cost structures and consider where there may be room for improvement. Oftentimes, leaders try to minimize the broader organization’s exposure to budgetary adjustments to avoid creating fear and uncertainty. Ironically, a lack of transparency can negatively impact both growth and profitability.
How To Win: The uncertainty in the broader macro environment is well documented, and shielding employees from the realities of the situation negates a leader’s ability to successfully implement cost-saving strategies that may protect jobs and compensation down the line. Being transparent about adjustments can help promote a “see something, say something” culture and effectively rein in excess spending by empowering employees across the organization to find and identify cost savings.
Talent: Think Critically About Your Remote Work Strategy
Software is predominantly a people-first business, and since the pandemic, the facilitation of remote work has become a prerequisite for many job candidates and employees. When managed thoughtfully, remote work can expand applicant pools, particularly among underrepresented candidates, reduce office footprint and improve productivity. However, remote work can also make collaboration more difficult and minimize social engagement opportunities – particularly for junior employees.
How To Win: When developing a remote work strategy, it’s important to think holistically about potential impacts on productivity and employee retention. Bringing remote employees into the office during onboarding can help them acclimate to the company culture and expectations, which can have a positive effect on Employer Net Promoter Scores (eNPS) and reduce employee churn. Similarly, having onsite executive meetings in office locations can help ensure that company leadership is more visible, which often boosts morale and promotes stronger cultures.
Innovation: Focus on Innovation That Drives Growth
When cost and profitability are the priority, it can be easy for leaders to put innovation on the backburner. But profitability and innovation shouldn’t be mutually exclusive. In fact, thwarting innovation can restrict long-term growth and success. It’s important to remember that innovation can take many forms beyond just product development, and with a nimble and lean approach, organizations can simultaneously enhance innovation and increase profits.
How To Win: To ensure innovation is grounded in the needs of the business, it’s important to assign objectives that prioritize innovation to specific individuals and teams, and make sure they have a measurable goal around achieving their target. Tasking a small group with a focused, measurable mandate can help to address a stagnant product suite. Leveraging frameworks like Amazon’s PRFAQ process and Geoffrey Moore’s Zone to Win can help to maintain focus.
For over two decades, Vista has helped enterprise software companies prioritize the value creation strategies that enable growth and success. To learn more, click here.