💡 Pro-tip: most ANZ vendors don’t think strategically about their SAM & TAM. A little investment in product, along with a re-configuration of the S&M function can usually grow both the TAM and SAM in big ways. Taking the product to the US is usually move #1. And there are lots of tricks to doing that right. This is a huge area of opportunity for most ANZ tech companies, and they’re not good at going global. Unlike their American contemporaries. 1. International expansion: mounting a US attack is usually move #1. Aus companies look at NZ, UK and CAN as their "next markets". Not smart. The US should be priority #1, #2 and #3. There are 2x as many people in California alone as there are in Aus, and they're tech savvy buyers who love good product. Many Australian companies don't go international early, and they don't know how to attack the US market well. This is something we have done many times with great success as CEOs, and with companies we have helped. 2. Add reseller channel if not present: This is a quick and powerful way to rapidly expand the sales footprint, and enter foreign markets like the USA and the UK. Building an engine to recruit, motivate and manage 500+ channel partners has tricks to it, but once it's humming, it's an awesome way to scale up your global S&M attack. We had 1,000 partners with Infrascale (with 1.2 full-time sellers per partner on average), and they drove our success. We had 50 of our own people in S&M, and 1000 out in the field with our partners. It's a true "force multiplier". BTW - this usually means substantial product changes are needed to make it "partner friendly" (both to sell, and to manage), and that's cool. The ROI on that R&D is off-the-charts good. 💡 Case study Product + GTM changes: with one of my companies we determined in diligence that the possible TAM in ANZ was much bigger than the vendor realized, and the global TAM was enormous (billions annually). They sold low because they didn't see it. There were some key things that needed to be added to the product to capture this improvement. Immediately upon closing the deal, those product changes became priority #1 #2 and #3. Within 12 months we increased the TAM from $100M AUD to $1Bn globally. We increased the SAM from $50M to $250M. The SAM was capped because the sales model didn’t support selling anywhere other than ANZ and the USA.

1. Core activities: 1. Dedicated renewal & upsell function: Put a renewal and retention team in place. Comp them heavily on the renewal rate, as well as x-sells and upsells. 2. Upsell to Gold: In the pricing/packaging work (see below), come up with at least one Upsell tier (perhaps with more features, or just better training and support and SLAs). The renewal team has two jobs: 1) keep customers happy so they renew now, or on their anniversary; 2) upsell customers to the “Gold” package. 2. Key Measures of Success: we aren’t “done” optimizing until we achieve these 1. Gross dollar churn: Less than 5% per year 2. Gross logo churn: under 10% per year, so long as its the smaller logos only we are losing. Cross-check against gross and net dollar churn. 3. Gross dollar churn: under 5%. Offset by x-sells and upsells. See Net Dollar Retention. 4. Net dollar retention (NDR): at least 110%. Most important metric. 5. NPS: immediately upon completing the acquisition, do an NPS study. This is then repeated every 6 months. Baseline against category norms, but we want to see NPS at +50 or so over time. Aim for an increase of 10 points every 6 months if its too low to begin with. There is a law of diminishing returns here.

1. Core Changes & Activities: 1. Implement hunter/farmer: if the team is not already divided into these two clear activities, put it in place. Comp the hunters heavily with commission. It’s OK to spend 1.5 years of margin to win these customers, and your hunters are going to get a good chunk of this. Thats good. The farmers are the renewal/upsell function discussed above. 2. Add Hunter reps: most ANZ vendors under-invest in sellers. Hire several more. One of the easiest improvements that can be put in place immediately after the re-structuring of S&M is done (discussed throughout this doc). Note that the reps you want to add the most of are the Hunters. Their cost is heavily driven by signing new customers. If a newly hired Hunter isn’t working out, it won’t cost you too much (little commission) and the problem is self-solving (the rep will quit because they can’t eat). 3. Offshore prospecting team: immediately start building a 2-4 person business development team in an offshore market (Philippines works very well for ANZ time-zone). This team will do outbound prospecting, and flip over Leads to the onshore sales team once two of BANT (budget, need, authority, timeline) has been established. 2. Key Measures of Success: 1. CAC ratio: paying less than $1.50 for $0.90 in recurring gross margin. 2. CAC payback: is a function of gross margin and CAC ratio. Payback on net new should be under 18 months. For sticky enterprise customers 18 months is OK.

1. Core Changes & Activities: • Price increases: There is usually an opportunity to either a) immediately do a one-time increase in price (if contracts allow), using the acquisition as the impetus; or 2) telegraph that there will be a price change on the next Jan 1 that arrives; or 3) ideally both. Aiming for 5% price increase each year for existing customers, and at a minimum must be above inflation! 💡 Case study: with most companies we have worked with, they can successfully push through 30% price hikes immediately after the acquisition or investment round. Each company would just blame the incoming investors and inflation. Some customers grumbled, and for them, we made an exception and didn’t increase their price. Works beautifully. • Packaging & bundling: Take the main product (usually there is one product making up 75%+ of the ARR) and create three sku’s of it: bronze, silver, gold. All the current customers are automatically put into silver. You can use bronze to acquire new customers more easily. Gold is there for the upsell/renewal team to sell, and to create psychological pricing pressure in customer’s minds. 2. Key Measure of Success: 1. Upsell rate: Within 12 months, XX% (20% is a good target) of existing customers have been moved to the Gold tier. 2. Contract migration: Within 12 months move at least YY% (70% is a good target) of existing customers have been “forced” onto the new contracts with the increased pricing described above.

1. Core Activities: 1. Audit: Skills audit of all teams. Bucket employees into Must Keep, Should Keep, Neutral, Should Probably Go, Must Go. 2. Cost analysis: done against industry and market data to determine average cost per head per function and deviation +/- from market mean. 3. Gap analysis: Find the holes. What are the skills we need in the company that we don’t have, or we are paying too much for? Create a hiring plan to plug those holes over 6 months. 4. Retrenchment: after the acquisition there will be a bunch of folks that leave. Thats OK. Its an opportunity to upgrade every one of those seats. Then there will be folks that stick around who really shouldn’t be there. They have to go. Move fast after the acquisition to move them out before everyone “gets used” to a new normal. Rip off the band-aid fast. 2. Key Measure of Success: 1. Keepers stick: Ensure that NONE of the people in Must Keep leave; ensure that VERY FEW of the people in the Should Keep category leave. Ensure that ALL the people in the MUST GO bucket leave. 2. Employee NPS: Do an eNPS survey immediately upon acquisition. Do another one each quarter. Track the improvements. 💡 Pro-tip: whereas you cannot get customers to complete an NPS survey reliably more than a couple times a year, with eNPS you can do it as often as you like. I used to do it monthly using an automated tool. Tools like Employment Hero make this super easy.

We find that most companies that have grown-up around a couple of key founding executives have pretty weak processes in place when we arrive. This limits scale. We are trying to build a well-oiled machine that can reliably take $1 of investment capital, invest it into S&M, and reliably produce at least $1 of ARR on a go-forward basis. It can be as much as $2 in CAC if the GM on the ARR is high and the dollar churn is low (should ideally be negative). The two big areas we focus on for process improvement are sales & GTM processes on the one hand, and product development on the other. In one case, you want a "revenue" machine, that takes "dollars" as an input, and produces "happy recurring revenue" as an output. For the product development machine, we want a system that takes $1 worth of investment, and as an output produces high-quality working software that will drive revenue. Get those two things right, and you're off to the races!

1. Measure twice, cut once: Evaluate the current back-end on which the system is built, and being delivered from. Optimize it, change it, or re-negotiate it. For every part of the back-end infrastructure ask: 1) do we need this; 2) can we get this cheaper from another vendor? 3) can we deliver this with equipment we get on a capital lease? 4) can we renegotiate this if we have help from our VC/PE (economies of scale)? 2. Key Measures of Success: 1. likely to be in the 75% range upon acquisition. Otherwise question why you did this deal? It’s OK to buy companies where the GM is lower if you have a clear and vetted plan to get it up above 70% quickly with a series well understood and costed changes. 2. Drive this up towards 90%, depending on the type of product. 3. Most likely to end up 80%+ 💡 Pro-tip: there is nearly always cost optimizations available when it comes to the back-end. Either reconfiguring the current Cloud infrastructure set-up, or changing vendors can yield big savings (like 30%+ on the hosting bill). We have experts that can help. Capital leases are an under-used tool. By getting equipment to run the backend on capital leases, you will pay the same amount of cash, but at the end of the period you own the asset. During the lease there are big EBITDA benefits from capitalization. So this is both an accounting hack, as well as a real operational benefit.

Most of the steps above fall into either increasing the revenue portion of the P&L. Here we are going to focus on lowering the ongoing operating costs of the business. It's quite possible we will increase the investment into S&M. But OPEX we will attack with rigour. This work will often result in certain functions being moved to lower-cost delivery locations offshore (e.g. for customer support, and for non-core engineering functions). We prefer to take a "blank sheet of paper" approach: each functional leader will be asked "if you were to build this department from scratch knowing what you know now, what would you build?". This often yields an answer that is very different to what is actually in place. Lower OPEX everywhere except S&M (where we might increase): 1. Key measures of success: 1. operating profit margin: above 30% 2. EBITDA margin: above 30%. With capitalization of R&D and part of COGs (see capital leases) this should be trending to high-30’s. 3. Engineering spend: 15% of revenue or less; 4. S&M spend: 25% of revenue or less; Bonus Lever! Strict BOD Governance & Risk mitigation: 1. New board, including independant experts. 2. New reporting package. Monthly & quarterly OKR reporting (using Ken’s One-Page CEO approach). 3. Annual financial and cyber security auditing.