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9 Things for SaaS Founders to Consider When Building an Executive Team

Mar 5, 2018

Ninety-six percent of businesses fail before their tenth anniversary, according to Bill Carmody in his August 12, 2015 article. Once an organization gets past the first few years, it has proven that the proverbial dog has eaten the dog food. So what is causing so many companies to crumble before they reach the decade milestone?

It isn’t because these companies’ founders aren’t extraordinarily capable. Successful founders overcome overwhelming risks armed with healthy self-confidence all the time. But that confidence can backfire as their companies continue to grow. As you build your executive team, there are steps you can take to move from great potential success to actual success, propelling your company to that 10-year mark and beyond. Below are nine ideas to help you beat the odds. Most constitute valuable advice for any founder, but some are particular to software entrepreneurs.

1. The 80% Rule

Founders by definition are confident in their abilities. When confidence translates into believing that you are better at getting the job done than anyone else on your team, it becomes a problem. Even if you are the best at a given task, hire people that are 80% as good as you at it, and them let them do that task. In the early days, you were likely the lead client contact. You’ll now have to cede that role to someone else without leading your customers believe you are ignoring them.

2. Provide a Clearing

Now that you’ve hired someone who is good but perhaps not up to your level at a particular task, get out of her way. If you continue to look over her shoulder or are a back-seat driver, you will never scale your company at the rate you would like. There are likely people who understand how to optimize a recurring revenue business and new technology even better than you. Let them blaze that new path.

3. Celebrate Mistakes/After Action Reviews

If you hire great people and let them do their jobs, good things will happen. But bad things will as well. When they do, don’t get angry. Instead, identify the mistake that was made with as much specificity as is practical, celebrate with your team the initiative that caused that mistake to occur, determine its cause, and resolve not to make that same mistake again. We call that an “after action review,” patterned after a similar process used by the Air Force. It will ensure that you don’t inhibit initiative.

4. Honor Truth

In the early days of a startup, a loyal team is one of the most important characteristics of a winning team. However, when loyalty translates into trying to please the boss rather than delivering bad news or honest truth, the organization suffers. Remember the emperor with no clothes? Convincing your team that truth trumps loyalty is a critical ingredient in long-term success. Treading that fine line between those who are simply politically savvy climbers vs. those who are providing you with a clear vision is going to be one of your most difficult tasks.

5. Introduce Outside Perspective

Teams that have been together for a while tend to become insular. Not only do they exclude new ideas (“that’s not the way we do things”), but they spurn outsiders altogether. One of the most important things a leader can do is continuously bring new perspectives into the group. Add new people from other industries, join a peer group of other executives to learn their ideas, read about other successful ventures, and keep a clear view about what is going on outside of your company. Competitors may come from anywhere even though they are not on your radar or in your industry today – think: Amazon becoming a parcel delivery service.

6. Write it Down

Young teams tend to invent processes as they go. This may work great early on. Over time, as the team and your organization grow, you don’t want to waste cycles having new people reinvent existing methodologies. Study the business model of your predecessor SaaS companies as well as new up-and-coming competitors. While your businesses may differ, there are likely many things you can learn from them. Document these processes for subsequent generations of managers. This doesn’t mean that these processes can’t or shouldn't be changed, it just means that getting there will be much faster. We’ve coined the idea that if “it isn’t recorded, it doesn't exist.” Trying to get humans to remember is always a risky strategy.

7. Ask for Help

When founders find early success, they sometimes exchange their confidence for hubris. Thinking that you know all the answers is a lightning rod for future failure. The most powerful thing a leader can do is ask for help. While this might feel like revealing a weakness, it is just the opposite. Asking for help empowers you and compliments the person you ask. Besides, the SaaS industry continues to evolve, and you might even learn something new.

8. Be Objective

When teams weather early battles together, they tend to become very close. And while this is often a good thing, it can fog the lens of objectivity. Companies grow at a different pace than do team members. Like a snake that naturally sheds its skin in order to grow, it will be necessary to shed team members along your company’s growth path. This doesn’t mean someone has done a bad job. It just means that the new challenge is not in their wheelhouse. Remain objective about whether your team is up to the current task at hand. And if you can’t bear to part with an executive, find someone else who can do it for you.

9. Take a Vacation

Many founders fall into the trap of always having to be present. This is both detrimental to the founder’s health and mental wellbeing as well as to the effectiveness of her team. Taking a vacation, preferably to a place with poor cell phone service, requires your team to step up and the founder to let go. While this might feel scary, you will be surprised at how well your team performs without you.

If you are honest with yourself, you will find that you are running afoul of at least some of these suggestions. Adjusting your game to adopt the behaviors of a few more will give you a better shot at transforming your early magic into a lasting foundation that helps you beat the odds.

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