The New Growth Lever You Can’t Afford to Ignore with Paddle Chief Customer Officer Harrison Rose

Jason. Thanks, Lizzy. Hey everyone, I'm Harrison Rose, co-founder of Paddle. So today we're gonna be talking about revenue delivery and how your lack of revenue delivery strategy is gonna be the thing that holds you back in 2021. I'm super conscious we only have 20 minutes, so we'll fly through that content in record time and hopefully leave some time at the end for questions as well. So let's get to it. So we all know that the future of software is SaaS, otherwise we wouldn't all be here at SaaStr virtually today. But scaling a SaaS business really isn't for the faint of heart. We're all busy building long-term relationships with customers that we need to work hard on every single day, and all of us have more competition than ever before. In light of this competition, it's costing us huge sums of money to acquire and retain customers. And today, these customers are coming from all over the world, putting huge demands on our teams. And software is every year an increasingly regulated market. Now, these conditions are reshaping SaaS companies forever. We're seeing a systemic shift to a new scale-up model. And what do I mean by that? Well, yesterday, it was all about hypergrowth at any cost. It was a land grab about chasing the customer. And essentially a laser focus on ARR growth. But today, the market has shifted. We're in the age of SaaS efficiency. And this might be something you've heard more and more about over the past couple of days at SaaStr. Today, the success of a SaaS company is now being measured by things like lifetime value of a customer and net dollar retention. It's the long-term customers with really strong relationships they're at the core of all of the success— successful SaaS companies today. And these shifts in the landscape are being talked about by VCs all over the world and some of the speakers you've heard from over the last couple of days. Now, in this age of SaaS efficiency, net dollar retention is the measure of our success. And 109% net dollar retention is the new standard to hold ourselves to as SaaS company leaders. I mean, if we just take a look at the IPOs in recent years, what's true about all of these incredible companies we're looking at on this slide? They're all playing by a new set of rules. A set of rules that focuses on the customer and building long-term value. Each and every one of them has best-in-class net dollar retention, and their efficient growth is being rewarded. If we just look at Snowflake as an example, these guys went public a few months ago in the largest software IPO ever. And they had 158% net dollar retention IPO. So look at another example, Twilio had 155% NDR IPO. These are super impressive metrics. But before we continue and think about NDR in the context of your company, let's look at how we calculate net dollar retention. So how we calculate it can be seen on screen. Ultimately, NDR is a measure of how you're performing as a business. It takes into account the customers you've already worked hard to acquire, your current MRR. It then measures your performance across renewals and expansion revenue to spit out your current net dollar retention. It is the best measure of revenue health out there. But how do we use it, right? So if our NDR is strong, having done this calculation, let's turn the tap on and acquire more customers in the knowledge they'll stick around and grow with us. Whereas if our MDR is poor, let's try to work out what's going wrong across renewals and expansion before lasering in on acquisition. But how do we reach some of those world-class MDR rates in our own businesses? Now, it's not just about having the right product strategy or just about having a well-executed go-to-market strategy. If we weren't virtual today and we had an audience in front of us, I might do a hands up as to who had those two things nailed down and covered. But what this third lever that we want to talk about that folks don't know about is revenue delivery. This is a largely undiscovered and underutilized growth lever. It's our revenue delivery strategy, which is that final growth lever which will drive performance across acquisition, renewals, and expansion and help us meet those MDR goals. Before we talk about revenue delivery strategy and how it can help us, let's actually discuss what revenue delivery is, because every single SaaS business out there has revenue delivery, whether they realize it or not. And revenue delivery is the systems, the tools, the processes, and the teams that all of us have in place to sell our products. But what people fail to recognize is that it's these tools and their readiness that have a direct impact on our ability to acquire, retain, and expand customers. And by association, our net dollar retention rates too. But what I see, there's a problem with today's revenue delivery. And that problem is that today's revenue delivery infrastructure isn't growth ready. And we can draw some comparisons with other infrastructure you need to run your business to demonstrate that. For example, you wouldn't have a room in the back corner of your office with your servers in now that growth-ready platforms like AWS are here for your product and engineering infrastructure. Similarly, it's laughable to think of running your go-to-market infrastructure on spreadsheets now that growth-ready platforms like HubSpot are available. So why would we settle for anything less with our revenue delivery infrastructure? In doing so, our performance and our growth are getting held up. Our complex set of tools, like payment gateways, subscription management tools, and tax platforms, wreaking havoc in our organizations. You're in this constant state of firefighting. We're maintaining, or worse, trying to modify the stack based on market or customer demands. And with every change you make or tool you add, you're creating more and more silos of data. And the result is poor performance across acquisition, renewal, and expansion. Now, this chaos will have massive consequences on your ability to perform in 2021. And let's reflect on that year ahead for just a moment. I mean, who here listening has done their 2021 planning? Perhaps you've already gone through and had that hiring plan approved by the finance team. Maybe the financial plan itself has been approved by the board. I know I ran my board through ours just a few hours ago. Maybe you're at a point whereby you've already run the company through your product strategy and roadmap for the year, which people are excited about. You might have even finalized that go-to-market strategy for 2021. I would assume that this is true for most people who are listening, or where most of us are at this point. We've ticked those boxes, we're ready to take that short break over Christmas and then go back at it again next year. But the big question remains: how many of us have mapped out what our revenue delivery strategy is for 2021? I'd imagine it's very few of us. And I can't stress enough that not thinking about your revenue delivery strategy is going to negatively impact your performance across all three of acquisition, renewals, and expansion next year and limit your ability to execute against that 2021 plan. So we can look at a couple of examples to illustrate this. Perhaps you're planning significant globe expansion in 2021. Maybe based on market research, you're wanting to grow in the French, German, and Swiss markets. Just bear with me on this. Hypothetical, you know, it's exciting times ahead for you and your company. So what are we doing as a part of that 2021 internationalization strategy? Well, the product team have thought about how they can support this. Maybe they're rolling out a fully localized user experience in each of these regions that you're planning to target. Your CRO and your go-to-market teams have also formed a strategy to support this plan. Maybe they know what local hires they want. Maybe they've vetted a bunch of local recruiters that are going to help them hire those folks. Too. Perhaps they've localized a bunch of sales collateral they know is going to be needed in the sales process, maybe even some landing pages. Perhaps they've even gone as far as drawing up that list of strategic lighthouse customers you're going to go after in the region. But there's a problem. Nobody in your organization has thought to consider what revenue delivery requirements we're going to have when pursuing this strategy and moving into these new regions. For example, customers in these markets are going to want to pay locally in euros or Swiss francs, and not having these currencies will reduce conversion, and this negatively impacts acquisition. Next, maybe we want to be able to route credit card transactions through local acquirers. This ensures the highest possible payment acceptance, and it keeps that involuntary churn low and that net dollar retention rate high. At Paddle, our data shows us that 50% of transactions under $50 in the German market take place over PayPal. We've also seen those PayPal payments have a much higher retention rate than card payments. So what do we want to do? We want to support PayPal when moving into this new German region as a business. And also in 2021, when moving into these new markets, we also want to stay compliant, right? Are we able to charge, withhold, and remit the sales tax in the region to ensure we're not accruing a huge tax liability which could cause us issues at our next fundraise? Or maybe even big fines from local government. What's the story here? It's not considering your revenue delivery strategy is going to scupper your success in 2021. All of these requirements will be talked about as the unknown unknowns going into the region because all of them are going to negatively impact acquisition, renewal, and expansion, which impact our NDR, unless we think about them, right? Because with the right revenue delivery infrastructure and the right revenue delivery strategy we could wholly avoid some of these pitfalls and be able to purely focus on execution. Let's look at a second example together and a different one that maybe will resonate with others listening in. Perhaps your 2021 strategy is to move upmarket. Maybe this was delayed this year due to limited travel due to COVID, but 2021 is going to be the year that you finally crack those mid-market and enterprise customers. I'm sure that's true for a number of you listening today. So what are we doing about that? So from a product perspective, to support that strategy, the team have maybe done their discovery and know what's required in order to be successful. Maybe they're rolling out enterprise-style functionality like two-factor auth, and maybe they need to meet a number of different performance SLAs that maybe you've contractually committed to. And lastly, perhaps they're rolling out more granular permissions because larger teams are going to be using your product. These are all pretty generic requirements we might think about when moving upmarket. From a go-to-market perspective, perhaps you've hired your outbound sales team for the first time. Maybe you've even got that go-to-market infrastructure ready to go. I don't know, maybe you've bought a tool like Terminus to support and run your ABM campaigns, ready to go out and drive demand and support that sales team. You're ready to go from the go-to-market perspective. But what have we forgotten? We've forgotten the revenue delivery strategy which is going to make going upmarket a success in 2021. Perhaps you're going to need to invoice customers for the first time at scale, and those folks are going to want to pay in local bank accounts over local banking networks. Meanwhile, you want to avoid losing 2% of that colossal deal size to foreign exchange. Maybe— well, certainly these invoices you issue are going to need to be tax compliant. And you're also going to need to deal with a way to handle those invoices that are unpaid at scale, dealing with that delinquency. And all of this needs to go into an ERP for revenue recognition and finances purposes. Again, the point I'm trying to illustrate here is that your lack of revenue delivery strategy is going to slow you down as you try and execute in 2021 and negatively impact your performance metrics and MDR. Ignoring this stuff is a bad idea. Not thinking about what currencies or payment methods your future customers might want will result in poor acquisition performance. Not considering things like local acquiring are going to increase involuntary churn. Maybe your strategy next year is rolling out a new product that you want to cross-sell, something we didn't talk about in one of those examples, but not considering your cross-selling capabilities it's going to mean that we don't hit those expansion MRR goals, and again, our NDR will falter. Now, there is a way to avoid this, and in order to do so, you need growth-ready revenue delivery infrastructure, and that needs to support this kind of growth-ready revenue delivery strategy. Because without those things, a huge chasm exists between where your revenue delivery is in your business today and where it needs to be in order to support your 2021 strategy. And this is the, the pain that we want to avoid. So I'd encourage all of you listening in to do today is to go out and assess where your revenue delivery is at today and assess its readiness for your 2021 goals. And when running through that readiness and wondering what good even looks like, I'd encourage you to consider the following things. Your revenue delivery should be improving performance across all three of acquisition, renewal, and expansion. It should give you visibility into performance so you can react to what the market is telling you with speed and with confidence. Throughout 2021, as you're thinking about executing against that strategy, you want to avoid the need to persistently add tools, change processes and integrations, because alongside your own delivery infrastructure, because that work's going to slow you down and be a distraction. Lastly, your revenue delivery infrastructure should ensure you're compliant. No matter what your plans are for 2021. And better yet, it should offer an experience your end users demand and respect. That was your kind of checklist to take away. And thank you so much for listening. Paddle is the first kind of revenue delivery platform exclusively focused for B2B SaaS. And I'd love the opportunity to kind of answer some questions about what your revenue delivery looks like, or what your revenue delivery strategy might be for the year ahead. Both today in the Q&A and in the days to come on some of the links you can see on the slide there. Thanks again for listening, everyone.

Great. Harrison, we've got a few questions in the queue, so I will start with those. Question is, what's the difference between revenue delivery and revenue delivery strategy? And who should own the revenue delivery strategy?

Mm-hmm. Yeah, no, that's an amazing question. And it's really important to kind of understand those distinctions too. So when we talk about revenue delivery, um, this is something that every software company has. It's the tools, the processes, the people you have to sell your product. And as we just described, its readiness impacts your ability to acquire, retain, and grow or expand customers. Now, this is different to your revenue delivery strategy. A revenue delivery strategy is thinking about those tools, processes, and people in a strategic way. It's asking yourself, do I have the right stuff in place in order to meet my growth ambitions for 2021 and beyond? Like, is my revenue delivery growth ready, to use that phrase again? So they're the kind of distinctions between the revenue delivery itself and a revenue delivery strategy. And in terms of ownership, which I think was the last question, it's tough. Revenue delivery is vast and it touches many facets of the organization. And it often doesn't have a single owner. At mass scale, sometimes like a head of payments, and that lack of ownership though is often the reason it gets neglected. So you may not be ready to necessarily elevate ownership of revenue delivery to like a single person, but what I'd encourage you to do as a founder or CEO listening to this is ensuring that you kind of own a revenue delivery strategy and ensure that it's been thought through. Ensure you know what teams and what they need to do in order to contribute towards getting that revenue delivery infrastructure to where it needs to be for your year ahead, because if not, your performance is going to falter.

Thanks, Harrison. Yeah, we actually had a question while you were speaking to that about how do you get the organization aligned on prioritizing revenue delivery? So I think you spoke to that, but any other thoughts around that question?

Yeah, I think it comes back to a broader point, right? So your product strategy and your go-to-market strategy are things that are talked about all the time as being things that need to be aligned. And you'll be asked a question as a revenue leader, Does this product strategy help you achieve your goals for the year ahead? And you should be thinking about revenue delivery strategy in the same way. Do these three things complement one another? And if the answer is yes, it should start to become easier to align around what that revenue delivery strategy should be. Because ultimately every decision you're making there should be supporting the higher-level goals that you have for the year ahead. And not only supporting them, but hopefully accelerating towards them as well, whether that's improving your conversion rates or reducing that voluntary churn or helping you move into a new market. It's the revenue delivery infrastructure that should enable that too, if that makes any sense.

Great, thank you. We've got another question from Adrian, and we probably only have about— this is perfect timing. I'm launching a new product next year and wanted some advice on cross-selling with existing products. What would you advise as a strategy?

Yeah, and it's all going to depend on the product and how you want to cross-sell it, at what point in the user journey, and things like that. I think if we're talking in terms of revenue delivery and your strategy there, like what infrastructure are you going to need to support the cross-selling of that product? I'd encourage you to map out what you want that user experience to look like. Are we going to be cross-selling this and adding it to a bunch of existing plans and existing subscriptions from customers that are there today? Is this going to be a cross-sell that takes place over email, way into the customer journey? Map out how you want the cross-sell to work and then just make sure that you have the infrastructure to actually support that. But again, I'm more than happy to dive into some more details with you there, Adrian, after the fact, given I'm getting nudges on time. But hopefully that was helpful.

Excellent. Well, those were our questions. Harrison, thank you so much for joining us today. And everyone on the line, thanks for joining us at SaaS for Scale. Have a great afternoon or evening. Take care.

Thank you. Bye-bye.