The Resilient Entrepreneur, Edition #62
Hi there
I hope you had a great week!
Here are the topics in today's edition:
- The Cheapest Team Is The One That Can't Ship, Sell, or Support
- Stop Nurturing Problems - Start Resolving Them with the OODA Loop
Please reach out if you have comments, questions, or suggestions for articles!
Talk soon 👋
Tom
KickKerK
LEADERSHIP FOR RESILIENT ENTREPRENEURS
The Cheapest Team Is The One That Can't Ship, Sell, or Support
A founder’s reality check on balancing costs, talent, and the race to profitability.
“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.
LIFE HACKS FOR RESILIENT ENTREPRENEURS
Stop Nurturing Problems - Start Resolving Them with the OODA Loop
Why successful teams skip the drama and use this military-inspired model to fix what’s broken.
Successful teams don’t waste time discussing problems; they solve problems. That’s easy to say but much harder to do.
To solve a problem, you need to decide before you start acting on the problem. For this, let’s turn to the OODA loop for help: It is a decision-making model originally developed in the military, but can be used for any problem.
What does OODA stand for? It’s an acronym for observe — orient — decide — act.
See where we’re going? The OODA problem resolution framework doesn’t contain a step to discuss a problem.
Let’s look into the four steps of the OODA loop in detail, and the pitfalls in each step that lead to unnecessary discussions.
1. Observe
In this step, you observe that there is a problem in your company. This can be a customer complaint, an employee who wishes to discuss her salary, a tool that doesn’t work the way it should, a water damage in your office — any kind of problem.
Problem-nurturing means finger-pointing, debating why the problem happened in the first place, and insisting on finding the root cause before fixing the problem.
Problem resolution means, first of all, acknowledging that there is a problem. In case the problem involves a customer, a short communication to the customer that we are working on the problem is also part of this step.
2. Orient
This step is arguably the most important step in the OODA loop. It’s about making sense of the isolated problem in a wider context.
Does this customer complaint fit into a pattern of a larger problem, or is this a new or isolated complaint? Is it just the same employee asking for a salary raise over and over again, or do we underpay our team as a whole? Is the water damage in our office originating in our premises or on higher floors?
Problem-nurturing in this step of the OODA loop is dangerous because you lose valuable time. Think of first aid as an example: You can’t complain about the delayed arrival of the ambulance due to heavy traffic; you just need to stop the bleeding, or the patient will die.
Problem resolution means two things in this step: First, take immediate actions. Stop the bleeding, communicate with customers, and so on. Second, gather facts and develop possible courses of action for fixing the problem for good.
3. Decide
In this step, you compare the possible courses of action you developed in the previous step, weighing their advantages and disadvantages before making a decision. In this way, you can avoid running off in the wrong direction with good intentions, but ultimately missing the target.
4. Act
Once a decision has been taken, take ownership, solve the problem, and get it done. If you’re in a leadership position, communicate your decision to your team so the team can act in accordance with your decision.
Conclusion
Because the OODA loop is a loop, it’s not finished after step 4; it starts again at step 1. After every action, observe if the action solved the problem, if you need to adjust your solution, or if a new problem has emerged.
Living the OODA loop is an attitude of constantly improving and solving problems analytically rather than nurturing them. If you live the OODA loop, you will be fast, flexible, and always moving forward.
Compare this to politics, where problems are nurtured for years. Maybe the OODA loop would do some good to our politicians, too.
About Me
Growing a company 📈 in uncertain times 🔥🧨 is like running a marathon—it demands grit, strategy, and resilience.
As a tech entrepreneur 💻, active reserve officer 🪖, and father of three 👩👦👦, I share practical insights and experience on entrepreneurship and resilience in The Resilient Entrepreneur, my weekly newsletter.
When I'm not solving problems, I recharge and find inspiration in the breathtaking mountains 🏔️ around Zermatt 🇨🇭.
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