The Inside Job: October 2024

Welcome to this second edition of The Inside Job - the new newsletter from Herringbone Search designed specifically for investors, partners and growth leaders in the tech sector.

This month we provide two feature articles and a wonderful interview with a proven growth leader.

We hope you enjoy. Please subscribe, share with your colleagues and send us your feedback and ideas for future editions.

FEATURE INTERVIEW

From Crisis to Growth: SaaS Leadership Secrets with James Bagan - Cash, Sales and Scaling Insights

James Bagan , Operating Partner at Frog Capital is simply a sales and marketing legend in the SaaS and tech sector. Across three decades of experience James has exited no less than five different companies, been Chair of six, was Sales and Marketing Operating Partner for Livingbridge and a Senior Advisor at PSG .

In this exclusive interview Will Johnston asks James about his most valuable insights on navigating SaaS leadership in times of crisis and growth. From the 2008 financial crash to today's economic challenges, James draws on over 30 years of experience to offer practical advice on cash flow management, diagnosing sales problems, and building resilient, high-performing teams.

Learn why data-driven decisions are the key to sales success, how to avoid common hiring mistakes, and why firing your CRO might not be the solution in a downturn.

This is a must-watch for SaaS CEOs, CROs, and investors looking to scale their businesses in tough times.

Key Takeaways:

• The #1 mistake SaaS companies make during financial crises
• How to diagnose and solve sales issues using evidence, not opinion
• The power of resilience and hiring in scaling a SaaS business
• Why cash management is still the most critical factor for survival

Do you know a brilliant growth leader we should feature in the future? Please let us know.

FEATURE INSIGHT

Key Takeaways and Lessons When Navigating a C-Suite Search in a Tight Talent Pool

By Will Johnston

When a global software company in the translation and localisation industry approached us with a critical challenge, we knew it wasn’t going to be easy. The company needed a C-Suite leader to head up its commercial operations, overseeing teams from the U.S. West Coast to Vietnam. However, the talent pool for such a specialised role was extremely limited - just 53 qualified candidates globally, compared to the 200+ we typically find for similar searches.

The client summed up the challenge:

“We've worked with Will and the Herringbone team on several projects, but this one was different. Having recently invested in the business and completed a bolt-on acquisition, we needed to make a critical C-suite hire for operations and delivery across the group. The challenge? The talent pool in the specialised sector was limited."

Here’s how we navigated the complexities of this search, secured the right hire, and the key lessons we learned along the way.

The Challenge: A Limited Talent Pool

We began by exhaustively mapping out the global talent market. In such a niche sector, finding candidates with the right experience and skills was a challenge, so we left no stone unturned. Our efforts resulted in a list of 53 highly specialised individuals.

Key takeaway: Thorough market research is essential: In a limited talent pool, it’s crucial to conduct a deep search and map out the entire candidate universe.

Despite the challenge, our outreach yielded strong results, with two-thirds of the candidates expressing interest in the opportunity. However, attracting the right candidates was just the first hurdle.

The Approach: Crafting the Right Pitch and Ensuring Confidentiality

We knew that the success of this search would depend on getting our pitch exactly right. The role offered some attractive elements, including the chance to join the board of a PE-backed company, M&A opportunities, and a clear equity exit strategy. We refined and tested this messaging to ensure it resonated with top-tier talent.

But in such a close-knit industry, confidentiality was also a concern. Some candidates were more interested in gathering market insights than in genuinely pursuing the role. To address this, we worked closely with each candidate, offering mutual NDAs to build trust and ensure confidentiality from the start.

Key takeaway: Confidentiality is key: especially in industries where networks are tightly woven, offering NDAs can help establish trust and attract serious candidates.

Candidate Experience: Managing the Process Seamlessly

Once we had refined our approach, the next step was to ensure that the candidate experience was flawless. We couldn’t afford to lose any top candidates due to poor communication or lack of engagement.

We kept in constant contact with the client, regularly reviewing candidate profiles and feedback. This alignment between the hiring team, investors, the CEO, and the search partner was crucial to maintaining momentum and focus.

As the client shared:

"Will and his team collaborated closely with us as investors, as well as with the CEO, to ensure candidates had an exceptional experience - critical since we couldn't afford to lose top prospects. The Herringbone team maintained high levels of communication, ensuring alignment at every stage. They carefully managed candidate expectations through the final stages, and we are delighted with the outcome and love working with you guys."

After initial interviews, only 12 candidates were invited back for a second-stage assessment. From there, we created a shortlist of nine people to present to the client.

Key takeaway: Alignment across stakeholders is essential: Regular communication between the hiring team, the search partner, and all stakeholders ensures everyone is aligned throughout the process.

The Final Stage: Securing the Right Hire

As the process moved forward, the pressure was on to secure the right hire from a small group of candidates. Managing expectations and keeping candidates engaged through the final stages was critical.

The successful candidate reflected on the process:

"I frequently receive messages from recruiters, but I typically ignore them since hiring is handled by HR, and my own career moves are confidential and through my network. When Dani from Herringbone first reached out, the timing was interesting, as I was in the middle of a major company transaction. Initially, I took the call just to assess its legitimacy."?

“The key challenge was managing the process as a busy, stressed exec with limited time, in a different time zone, and not ready to commit. I tried to gracefully bow out twice, but your persistence kept me engaged, despite cancellations and rescheduling due to my travel. Confidentiality was crucial, so signing a mutual NDA was essential, given how connected my industry is. It was also important to learn the hiring company early on before deciding to proceed."?

Our persistence and dedication to creating a seamless candidate experience paid off. Despite the challenges, we successfully placed the ideal candidate for the role.

Key takeaway: Persistence and communication matter: Even when candidates are unsure or on the fence, ongoing engagement and flexibility can keep top talent interested.

Key Lessons Learned

• Exhaustively map the talent pool: Even when the pool is limited, leave no stone unturned in your research.
• Refine and test your pitch: Ensure the opportunity resonates with candidates by highlighting long-term benefits like equity and board involvement.
• Ensure confidentiality: In a close-knit industry, offering NDAs builds trust and attracts serious candidates.
• Align all stakeholders: Regular feedback and communication across the hiring team, investors, and the CEO are essential to maintaining focus and alignment.
• Deliver a seamless candidate experience: Persistence and attention to detail, especially when managing time zones and busy executives, can make all the difference in keeping top candidates engaged.

In the end, despite the narrow talent pool and unique challenges, we delivered a successful outcome by focusing on alignment, confidentiality, and the candidate experience. These elements are crucial for any high-level executive search, particularly when operating in specialised sectors with limited talent availability.

NEWS UPDATE

Herringbone Search Accepted Into the AESC

We are thrilled to announce that Herringbone Search has been accepted into AESC (Association of Executive Search and Leadership Consultants), a global organisation representing the highest standards in executive search.

This prestigious membership serves as a stamp of excellence, affirming our commitment to quality, integrity, and results. AESC’s rigorous vetting process ensures that only the top firms in the industry gain membership, and we are proud to join this elite network of executive search professionals.

Being part of AESC reinforces our dedication to delivering exceptional leadership solutions to our clients, and we’re excited to collaborate with fellow members who share our values of excellence and innovation.

FEATURE ARTICLE

Optimising SaaS Pricing: A Brief How-To-Guide For Growth Leaders

Pricing can make or break a SaaS business. Yet, so many tech companies still fall into the trap of basing their prices on costs rather than the value they deliver. For growth leaders not wishing to leave margin on the table, understanding how to effectively review, benchmark, and optimise pricing is essential to maximising revenue and ensuring sustainable growth.

In this guide we will walk you through the steps to optimise pricing for a SaaS business, outline common mistakes to avoid, and highlight key methodologies, backed by research.

1. Avoid Cost-Based Pricing: Why Value Should Lead

The Mistake:

Many SaaS companies still base their pricing on the cost of development and operations, thinking that by adding a margin, they'll ensure profitability. This approach fails to capture the actual value provided to customers, often resulting in underpricing or missing out on additional revenue from premium services.

Why It's Bad Practice:

• Leaves money on the table: Cost-based pricing rarely reflects what customers are willing to pay.
• Ignores market expectations: Competitors may be charging much more for similar or even inferior services.
• Doesn’t scale with perceived value: SaaS solutions can often solve high-stakes problems for businesses, making them more valuable than the sum of their parts.

Actionable Tip: Shift your focus to value-based pricing. Understand the tangible and intangible benefits your product brings to customers and price according to what they’re willing to pay for these outcomes.

According to research companies that use value-based pricing can grow twice as fast as those that use cost-based pricing models.

2. Employ the Van Westendorp Pricing Sensitivity Meter

The Van Westendorp Price Sensitivity Meter is a widely used tool in SaaS pricing. It helps determine the optimal price point by asking potential customers four key questions:

1. At what price would the product be too expensive to consider?
2. At what price would the product be getting expensive, but still worth it?
3. At what price would the product be a bargain?
4. At what price would the product be too cheap, raising concerns about quality?

How to Implement:

• Survey a representative sample of potential customers.
• Plot their responses on a graph, with price on the x-axis and cumulative percentages on the y-axis.
• Identify the "acceptable price range" and where lines intersect to find the optimal price point.

Why It Works: This method gives you insight into customer price perceptions and lets you balance profitability with market acceptance.

3. Benchmark Against Competitors (But Don’t Copy)

Competitor analysis is crucial in SaaS pricing, but many businesses make the mistake of simply copying competitors' prices without considering their own value proposition.

Steps to Benchmark Properly:

1. Identify key competitors within your niche.
2. Compare pricing tiers and note any differences in features.
3. Understand their positioning: Are they focusing on premium, mid-market, or low-cost segments?
4. Assess customer reviews or case studies to gauge perceived value at different price points.

Avoid the Pitfall: Simply copying competitor pricing ignores your unique value, target market, and potential pricing power. Instead, use competitor pricing as a reference and build on it by focusing on differentiation.

4. Test and Iterate Pricing Regularly

Pricing is not static. As your product evolves, its value changes, and so should your pricing. SaaS companies need to adopt a test-and-iterate approach to pricing.

How to Implement:

• A/B testing: Offer different pricing tiers to different customer segments to see which generates the highest conversion and retention rates.
• Run controlled experiments: Introduce a new pricing tier and measure customer acquisition, engagement, and churn rates.
• Adjust pricing for different regions: Pricing that works in one market might not be effective elsewhere. Test localised pricing models.

Why It Works: Testing pricing helps you find the sweet spot that maximises revenue without alienating customers. Regularly adjusting pricing ensures that you’re always in line with market demands.

5. Create Tiered Pricing with Value Metrics

SaaS businesses can benefit immensely from tiered pricing models. Offering multiple pricing tiers allows you to cater to different customer segments and capture more value.

Steps to Create Effective Tiers:

• Identify key customer segments: Define which groups of customers you want to serve (e.g., SMBs vs. enterprises).
• Design pricing tiers around value metrics: These could be based on the number of users, the amount of data processed, or access to premium features.
• Offer a ‘freemium’ option or trial: This lowers the barrier to entry and encourages users to convert to paid plans.
• Value-Based Pricing Metric: One highly effective strategy is to align pricing with the value metric that best correlates with customer success. For example, if your product helps businesses manage marketing campaigns, consider a tiered model based on the number of campaigns managed.

6. Focus on Customer Willingness to Pay

Understanding willingness to pay (WTP) is crucial when setting prices. Tools like conjoint analysis or direct WTP surveys can provide deep insights into how much value customers see in your product.

How to Measure WTP:

• Conjoint analysis: Offers a choice of different price-feature bundles and evaluates customer preferences. (Further details of how to do this)
• Surveys: Ask customers how much they are willing to pay for a particular set of features or outcomes.

Conclusion: Key Steps to Optimise Your SaaS Pricing

1. Avoid cost-based pricing: Focus on the value you provide, not just covering your costs.
2. Use Van Westendorp’s method to gauge pricing sensitivity.
3. Benchmark competitors, but don’t copy their pricing.
4. Test and iterate your pricing model regularly to stay aligned with market demands.
5. Create tiered pricing models based on value metrics that resonate with different customer segments.
6. Understand your customers’ willingness to pay and adjust your pricing accordingly.

For further information on SaaS pricing strategies check out ScaleCrush's blog

Well that wraps up another edition of The Inside Job.

If you have an idea for someone we should interview, a topic you would like us to cover or a problem you would like us to research (to do with growing and scaling tech businesses) please let us know.

In the meantime please remember to like, comment and share with your colleagues.

Ryan and Will, Herringbone Search