From Startup to Success: The Journey of SaaSOptics with Clayton Whitfield

Randy Wootton (00:04):

Well, hello everybody. This is Randy Wootton, CEO of Maxio, and your host of SaaS Expert Voices, where we’re bringing the SaaS experts to you, to talk about what’s going on today, and what they foresee for tomorrow.

(00:15):

I am delighted to have one of the co-founders of SaaSOptics, which is one of the two companies that came together to make Maxio in 2021, Clayton Whitfield, who’s originally from Savannah, Georgia, another Georgia boy, and has had a really interesting background. Started off as an engineer, tech guy, and then became one of the co-founders of SaaSOptics. We plan to talk about that journey, his origin story, what he’s seen broadly in the office of the CFO, and then share some stories about what it means to be CEO. So thank you for joining us, Clayton. Really excited to have you here.

Clayton Whitfield (00:48):

Appreciate it, Randy. Good to join you.

Randy Wootton (00:50):

So let’s back up. Let’s roll back down memory lane to the founding of SaaSOptics. What was the idea? How did it come together, the motley crew that joined to take on this problem? What was the story?

Clayton Whitfield (01:03):

So SaaSOptics, one of the cool things that I always liked about it was, it’s a direct outgrowth of our experience running our previous SaaS business. We’d had a previous SaaS business before, and in that business we had the same problems that a lot of people turned to SaaSOptics and now Maxio for. We had a bunch of disconnected tools, Salesforce and QuickBooks and spreadsheets, gigantic spreadsheets and things like that. And so we had all those problems running that business, and we knew there was a market out there to clean that up.

(01:30):

Now, I’ll also say one thing that… We didn’t do everything right, but we were pretty disciplined guys in that previous business, so we got it mostly right with the spreadsheet and everything. But ultimately, it’s just the wrong tool for the job. When you’re trying to run a SaaS business to get your revenues right, get your metrics right, and all that stuff, especially a growing SaaS business, if you use all those disconnected tools, that puts a lot of pressure on the finance team and all those disconnected tools as you grow. And so we knew that just… Again, it’s a metaphor that my wife is sick of hearing me use. It’s like driving a nail with a pair of pliers. You can do it, you can do it, but sooner or later it’s going to fail, and you need the right tool for the job. So we knew that problem existed, so we decided to build the right tool for the job and that’s how we ended up with SaaSOptics and on that journey.

Randy Wootton (02:16):

That’s great. I know my experience with SaaSOptics, that I tell people, was I was CEO of another company, Percolate. We were, call us in the 30 million-ish range, lots of customers. And I just remember, and this was my second time as CEO, but at both companies, the amount of time and energy our finance people spent to close the books. They would spend the first eight to ten business days trying to just close the books, get your gap financials, and then they would spend the rest of the month trying to figure out what just happened in terms of ARR and gross retention, net retention, by customer, by segment, by region, and try to make sense of it. And I tell people, it felt like I was always sliding into the board meeting at the end of the month, hoping the numbers were right, and hoping that no-one had fat-fingered a cell or deleted something so that the information was different than what we represented the previous quarter or the previous month.

(03:09):

And then when we got SaaSOptics, it was like my life changed, and it went from not knowing anything until coming into the board meeting to having the information available literally on day one. When the month closed, all of a sudden you’re able to say, “Okay, so where were we from an ARR perspective, and how did that play out in terms of loss, contraction, expansion, and new?” Again, being able to break it down by customers. And it freed up an enormous amount of time for my finance team and allowed us to have productive strategic conversations throughout the month, versus just trying to get it all ready for the board meeting.

Clayton Whitfield (03:42):

Spot on. That’s exactly right. I love what you said, sliding into the board meeting with a handful of numbers you’re not sure of is such a nerve-wracking… I’m preaching to the choir here, but such a nerve-wracking feeling. And one of the things that I always loved, or really relished hearing over the years from prospects, was, “Where were you guys when I had my first business?”

Randy Wootton (03:59):

That’s right. That’s right.

Clayton Whitfield (04:02):

I still love hearing that from founders, especially second-time founders, because they have the battle scars, and you got them too. So it’s definitely one of the things that just never got old to hear that.

Randy Wootton (04:12):

And I do think that’s another thing. I’m a go-to market guy, and so you come into companies and you want to tune the go-to-market tech stack, and so you’re investing in marketing tech and sales tech and ad tech, and you’re like, “We’re going to get more prospects and leads,” and it makes a lot of sense, because as an early stage founder, what you’re trying to do is drive growth. But I think, to your point around being a second-time founder, is you recognize that you kind of have to balance the investments across front office tech and back office tech to bring it up to speed, so that you’re ready, especially if you have hopes to be invested with by VCs or PE professional money, or you’re moving from cash accounting to accrual accounting, and you’re going to need to be able to represent the ARR roll forward, and the customer cohorts, so that you can represent the business, because that’s where they’re going to spend all their time is looking at the ARR which is representative of the contracts, and making sure that’s accurate.

Clayton Whitfield (05:08):

That’s absolutely right. And that’s one thing that was always gratifying too at SaaSOptics is the population that found us earliest in their evolution as a business were second-time founders, because they knew, to your point, they knew, you got to get the go-to-market right, but you also need to… You don’t want to under-invest in the finance team, and have them constantly be playing catch-up. And the finance team, it’s stressful for them too, because if you under-invest in the finance team, the finance team then can quite literally slow the business down and nobody wants to be on that team.

Randy Wootton (05:41):

Right. You’re already a cost center. You don’t want to- [inaudible 00:05:44]

Clayton Whitfield (05:42):

Exactly right.

Randy Wootton (05:46):

You don’t want to be dragging things down. You want to make sure you’re unlocking the value. Well, good. Well, maybe…

Clayton Whitfield (05:48):

That’s right.

Randy Wootton (05:50):

That’s a great story, and again, congratulations on all your success. And so you were at SaaSOptics… When did it… It was founded in 2012, is that right?

Clayton Whitfield (05:58):

No, 2009.

Randy Wootton (05:59):

2009. Okay.

Clayton Whitfield (06:00):

Yeah, August 2009.

Randy Wootton (06:03):

So 15 years.

Clayton Whitfield (06:04):

Yes. Exactly right.

Randy Wootton (06:05):

Wow. What are some of your favorite memories in terms of inflection points of a startup, you going through that journey, having a really super successful… You were relatively low-invested in terms of how much capital is invested, I think you brought that bootstrap mentality to it, but what are some of those inflection points or your best memories of the SaaSOptics journey?

Clayton Whitfield (06:24):

So a couple that really stand out. One was… This is something you’ve probably heard me rattle on about before, but people get engaged intellectually in strategic stuff, but they write checks for operational stuff, in my experience. So one of the things that would happen in the early days, the very earliest iterations of the software, we only really did what you know as our Subscription Momentum Report. We really just had that top table, opening balance, new, upgrade, downgrade, and end-of-period balance. So that’s really all we had. And we started pitching that to people and they were like, “Yeah, it’s cool. I love it. But guys, I do this like four times a year.” Especially really early stage businesses, they might meet with their board once a quarter kind of stuff. And they’re like, “I do this four times a year. I’ve already got a spreadsheet guy. I really don’t need this. I really don’t need to pay…” What we were asking for at the time was really dirt cheap, but even then they were like, “Nope.” They couldn’t really get their heads around it, because they did it a few times a year.

(07:20):

But then we integrated invoicing, and improved on the way QuickBooks did invoicing for SaaS businesses specifically. We did SaaS invoicing, we did it really well. And once we did that, it changed the entire business. We started to grow… Because as you know, finance teams deal with invoices every single day. Somebody’s looking to invoice, whether trying to chase it down and get it paid, or it’s an invoice from our vendors, something like that. In any case, invoices happen every single day in finance teams. So we went from a product that was going to get touched four times a year to a product that was critical every single day, and that changed the entire trajectory of the business. That’s one really cool memory.

(08:00):

And the other one I would say is… This is more of a sort of origin story stuff. One day I was working on some cash projections, because as you know, you’re obsessed about that, and especially because, like you said, we had very little money, so we’re obsessed about cash projections. But we’ve been closing some sales and everything like that, and I was working on some renewals, I was working on projecting some renewals, because that’s… You get projected cash, you’ve got your cash on hand, got cash from new sales, and in SaaS, cash you can expect from renewals, as you know.

(08:29):

So I was working on a spreadsheet, because that’s all we really had at the time. We had this junky old spreadsheet that was my baby, so I was working on it and projecting some renewals and all that, trying to complete the cash projection. And all of a sudden I looked at it, and I was like, over the next six months, we’re going to have way more cash than I thought we would have, than was expected. And for us, it was a new thing to have that much cash. So it’s like, this can’t be right.

(08:53):

So I checked all my formulas, to your point, somebody fat-fingered something, I checked all my formulas twice and [inaudible 00:08:59] like that, and I was like, it still feels a little heavy on the… Like we’re going to have more cash than I thought. So I take the laptop to my co-founder’s office like, “Dude, you got to see this.” And so he looks at, he double-checks it and everything like that. So then we go to the worst deli in Atlanta, and sit down with my laptop, and we just [inaudible 00:09:14] it back and forth to each other and checking things, and it was obvious that we were going to have more cash than we’d ever had before. And it was a new phase of the business. To your point, it was an inflection point.

(09:23):

And we’re like, all right, right now we got to start hiring. Because at the time, it was just three of us smelly dudes in the business. It was just still the founders at that point. And so we were like, now we got to start hiring. So for the first time we were able to start to bring people into the team and everything like that, and it changed everything in the business. It was fantastic. It’s one of my favorite memories.

Randy Wootton (09:37):

Well, that’s great. I think that whole story around product market fit, and specifically for workflow applications, this distinction between the buyer and the user, I know I’ve been in that dynamic where, at Percolate, we were a content marketing platform, and you’d have the CMO would say, “This is great. I love seeing how marketing’s laid out, and I can track all the campaigns and see how everything cascades.” But what happened was that the user of the technology, the people that had to actually do the inputting, thought it was duplicative to the work that they were doing in their other systems and tools. And so that distinction between being able to create a tool that enables the users, the people on the front line, to be better, more efficient, and more effective, as well as having the… Not the secret sauce, but the sexy sizzle of the Sub-Mo report that people use, and the strategic level, having both of those is the ringer. But where you’re going to get paid for workflow automation is by making an operation more efficient and more effective. A daily operation more efficient and more effective.

Clayton Whitfield (10:38):

Spot on. I love that. That’s absolutely right. Yeah. I mean, everybody likes look at sexy dashboards. That’s just true. But they don’t mean anything if the invoicing is wrong to begin with.

Randy Wootton (10:47):

That’s right.

Clayton Whitfield (10:48):

If your inputs are wrong, they just… It’s useless.

Randy Wootton (10:50):

So maybe that’s a good segue into the second part of the conversation around the disruptions in the offices of the CFO, or the evolution of the role of the CFO. When you were first at SaaSOptics, I imagine you were targeting other early stage SaaS companies. They probably didn’t even have a CFO, or most of them using Bob their uncle as their accountant, or… How were they doing their finance, those small companies that you were targeting? And then we’ll talk about during their own inflection points of when they hire more seasoned and professional finance executives.

Clayton Whitfield (11:22):

Yeah. I love that. That’s exactly what was happening, especially with the first-time founders. They’re like, “Yeah, my aunt knows how to do QuickBooks,” so they just pull in Aunt Jane. And that was their first finance person, and sometimes not even a finance hire, sometimes it was part-time, that kind of stuff. And often that person came from a more traditional business. Interestingly, we’d often run into people that used to do the books for a landscaping company, and now very, very few… There’s very little crossover between a landscaping company and a B2B SaaS business, on the finance side. And so often they were out of their depth. So we often had some of our tech support people were better at SaaS finance than some of these brand new people that were brand new to the world of B2B SaaS.

(12:09):

So that was how they were doing it. Much like with their tools too, they were cobbling together people and tools. So whoever they knew that could do a spreadsheet, whoever they knew that could do QuickBooks, is who they would pull in. And then of course the market, as markets always do, started to evolve a little bit and get a little bit more mature. And then that’s when I would say that was the early rise of outsourced CFO and CPA… Fractional CFO and and accounting services. They cobbled together five, ten CPAs and some controllers and some CFOs, and everything like that, and then sell that service to these smaller startups.

(12:49):

And once that took hold, then we started to see a little bit more maturity in the market in general, because I don’t have to hire Aunt Jane now who doesn’t really know SaaS, but I can go and pay this team of seasoned professionals that are all battle-scarred, experienced SaaS finance experts, and I can hire them on a fractional basis and level up my entire company.

(13:14):

And that also, to your earlier point about the go-to-market and all that kind of stuff, that would free up CEOs and CFOs to focus on the go-to-market side, and focus on the growth, and just trust that this outsource team is doing their thing. And that was another thing that was always great at SaaSOptics is, often those teams use SaaSOptics internally themselves to support their own team, so they can support their multiple clients with a SaaSOptics account, they can support multiple clients and get that level of maturity across all of their clients, which was great. So it was a very nice hand-in-glove relationship there.

Randy Wootton (13:47):

That’s great. And so, one of the things you keep pointing to is this idea that SaaS is different. And so let’s assume that we got people who, other than my mother who’s listening to this podcast, but like my mother, probably doesn’t know what makes SaaS different. What’s the core thing that people don’t realize, if you’ve been doing lawnmower as a bookkeeper, and now you come over to a SaaS business, what are the… I can think of one in particular, but you’ve been in it a lot longer than I have. What one or two things that people really need to think about, in terms of getting the SaaS operating metrics right? They’re not gap, it’s just other way of representing how you’re getting, to your point, revenue and cash. What are the two to three things that people really need to think about?

Clayton Whitfield (14:29):

So the big thing for SaaS in particular is revenue recognition. The revenue recognition rules are just different. If you go and mow somebody’s lawn and give them an invoice or run their credit card, you basically can take all that revenue right away, because you’ve satisfied all the rules for recognizing that revenue. If, however, I sell a contract on January 1, a SaaS contract that lasts for one year, I might invoice them that day, but I can’t recognize all that revenue, because I haven’t delivered the entire service yet. So it’s obviously more complicated than that, but those are generally speaking the rules there. And so just the revenue recognition rules, you can’t claim all that revenue in a SaaS business until you’ve delivered that service. So it’s a $12,000 service, let’s say. You can’t claim all $12,000 on January 1, because you haven’t delivered the service yet. So for those of us that have been in SaaS for a long time, that’s obvious. But if you’re new to it, that’s not necessarily obvious, especially if you’re coming from more of a traditional business. The other thing I would say-

Randy Wootton (15:19):

Yeah, and I think… Oh, sorry. Just adding to that, I think, and then the distinction between paying for the software, and when you can recognize that revenue, and paying for things and recognizing the revenue for services, so statement of work services, so implementation. And then it gets complex in terms of, well, if you give people three months for free, but it’s only a 12-month contract, how does that play out? So all of that’s impacting the way you represent your ARR. And the ARR growth, bookings growth, is something that shows the future evolution of the company, and that’s what investors are investing in. They’re investing in the potential growth. And to your point, that then leads to cash, but understanding when you can recognize revenue, when do you collect cash are two different things. So keep going, you had another point in terms of SaaS, it was unique to our world.

Clayton Whitfield (16:07):

Yeah, that’s absolutely correct. Everything you just said is absolutely correct. The other thing I would add to there is, you can’t run a SaaS business unless you know what your churn is. To your point, it’s a non-gap metric, but it’s a very, very critical one. So who’s churning what dollars and what customers are churning? And things like that. You can’t run a SaaS business without knowing that.

(16:27):

And I’d also go one step further and say, you really, really need to know the composition of your revenues. You can probably run a SaaS business if you don’t know the composition of your revenues, and by that I mean new revenue, upgrade revenue, renewals, upgrades, downgrades, you need all that stuff to properly operate a SaaS business. And you can’t find that in financial statements. So anybody that’s coming to the SaaS world from another place, maybe just accustomed to looking at balance sheets and income statements, there’s no place on an income statement where you can find out what churn is. You can’t even back into it. And you really can’t even back into your revenue composition. You can see we grew revenues this year over last year, but can’t see what’s renewal revenue, what’s new revenue, what’s any of that. You just can’t see it. So you have to have metrics to run a SaaS business that just aren’t available in your typical financial statements.

Randy Wootton (17:14):

Yeah. Just building on that a little bit, I think one of the fundamental assumptions, and I’ve been in SaaS a really long time, is you spend a lot of money to acquire a customer. It’s a different type of business model. People aren’t buying a computer and they’re paying you $2,000 for the computer. They’re probably paying you lower on a per month basis, then to cover your go-to-market costs, your customer acquisition costs. And so understanding your churn, your lifetime value of a customer, means are you going to be able to acquire those companies and support them over time profitably? If you can’t, like if your gross retention in this case is below 70%, you got a real problem.

(17:50):

And so to your point, being able to break out gross retention versus contraction, so understanding which customer and segments are contracting, what’s happening there by product, by region, by segment, allows you to… Do you have a sustainable business model? So you move from product market fit to business model viability. And I think a lot of early stage founders focus on bookings growth, which then they turn into ARR growth, and then you hit that next inflection point, I don’t know, three, $5 million, you’ve been around for a little bit. You’ve really got to change the emphasis and focus on your customer retention, and what are the programs that you’re running.

(18:28):

And this is one of the things I think a lot of SaaS leaders, especially if you have early stage VP of sales who’ve never actually run the customer success motion they overlook, or don’t fully appreciate, is that’s… It’s not a cost center. Support’s not a cost center. It’s really a profit center in terms of securing and expanding your customers. Because the other piece is, to your point of, well, how much revenue is coming from expansion if you’re selling seats across divisions, or seats… How many more seats can you get next year? Or features, how do you drive features in? Because you’ve spent so much to acquire that current customer, that first customer, you’ve got to get the return and it’s usually like CAC payback periods of more than 12 months is problematic, but often it can be two to three years, and you’re like, I’m not making money on this customer until three years after we initially signed them.

Clayton Whitfield (19:18):

Yeah. And that’s a very uncomfortable feeling. But also to your point, what saves you there is your customer success crowd. To your point, they hear about the gaps in the product, they know the things that aren’t serving necessarily your customers as well as possible, and they know why they have those problems. And so to your point, yeah, the customer payback might take some time, but your support, your customer success crowd, is your information lifeline to how to serve those customers and make sure they stick around long enough for the cost to serve to go down, and for their overall contribution to your company to be sufficient.

Randy Wootton (19:58):

Yeah. You make me think, Clayton, I think we probably have talked about this before, that there are… As you think about a business, and this may lead in [inaudible 00:20:06] couple other minutes on office of the CFO, but this may lead into our conversation around what does it mean to be a CEO, is what are the metrics, the bucket of metrics? You have your finance metrics, those are dictated by gap. You’re going to have a good accountant that’s going to cover your butt on that, and to our conversation, get an accountant who understands SaaS. Even if they’re not doing the operating metrics for you, it helps for them to appreciate how you structure your reporting. Gap, you’re arguing about, does customer success go above the line or below the line? Everything else is pretty much dictated for you, and you’re just producing your balance sheet, your profit and loss, and your cashflow statement. So you have finance metrics.

(20:44):

I then think you have a set of operating metrics, which we were just talking about, gross retention, net retention, LTV to CAC, magic number. I mean, we can go on forever about all the operating metrics. In fact, Ben Murray, who is the SaaS CFO, who you and I know and have great admiration for, he runs a whole course on this. I took it before I joined Maxio, in part to refresh, in part because I was like, well, I’m going to a company that allows us to have operating metrics. I’d better know what the heck I’m talking about. But it was great. But I mean, his dashboard, there are like 27 metrics. And so when you think about operating metrics, and which ones you’re going to look at, and how do you set targets so you don’t get overwhelmed, is a huge discipline in and of itself.

(21:23):

And the third bucket of metrics I think are these investor metrics. And investor metrics are ones which you are only really reporting on a monthly or quarterly basis when you go to the board, or if you’re trying to raise money. And as a CEO with a CFO being able… I don’t know if you would have a fourth bucket, but being able to understand the relative importance of those different metrics, and the frequency at which you have to aggregate them and understand them and report on them, is critical to your ability to grow a company and secure funding.

Clayton Whitfield (21:57):

Right. Yeah. You’re absolutely right. I’m not sure I have a fourth bucket there. One thing I would say though is that… This just goes… This is my bias, because I’ve thought a lot over the years, is a lot of people just do metrics because they read a blog post on it. They don’t even know why they’re doing it, or maybe one of their board members asked them for it, not entirely sure what it tells them or how they should be using it. One of the things that I think, especially early stage businesses that are out for money, they go out and they get into a fundraising process, and get hammered with these questions from investors, and assume that they all got to do this all the time. We need to know that metric at all time, every board meeting, every… To go raise more money later on, everything like that. So they get into this cycle of not necessarily understanding why they’re doing those metrics.

(22:41):

Now, to your point, investor metrics, that’s for the investors, but operating metrics are for you to run the business. And understanding why you’re doing them, just because… Doing them just because you read a blog post or an investor asked about it is insufficient. It’s got to tell you something about the business.

Randy Wootton (22:56):

Yeah. Great. I think one… I mean, I can come up with three where there’s a nuance around what is the definition you’re using, because there is no gap. It’s kind of the wild wild west, and everyone can come up with their own definition. I know at SaaSOptics while you were there, you were doing SaaSpedia I think, and were providing a lot of YouTube videos that are still available for people, where you were explaining things, and you had your own bugaboos that you would take on, as waterfall versus roll forward, for example. But with gross retention in particular, it’s one of these metrics I find interesting, because I do think people will define it slightly different. Sometimes they just include loss, sometimes they include loss and contraction.

(23:33):

And so then when you’re trying to set a benchmark with other companies in the portfolio for your investors, or more broadly, like when Ray Wright publishes [inaudible 00:23:41] survey, to your point, really understanding what’s being included in this metric, so that you have an apples-to-apples comparison, and why is it important to think about gross retention minus loss versus gross retention minus loss and contraction, and how do you want to disaggregate that?

(23:58):

Do you have one… And the other one that pops for me is LTV to CAC, and how do you assume your retention rate there, and how that plays out with the formula, but is there another one that you think a lot of people maybe misunderstand or misrepresent?

Clayton Whitfield (24:12):

Misrepresent… Yeah, but it’s usually unintentional. It’s one of this- [inaudible 00:24:16]

Randy Wootton (24:16):

Right, or just misunderstanding. Mm-hmm.

Clayton Whitfield (24:18):

Right. Misunderstanding or an unintentional mistake. This is a conversation I’ve had with a dozen VCs over the years, is they just… Somebody inadvertently makes mistake or includes something in a calculation they shouldn’t, and that kind of stuff, as an example, include non-recurring revenues in an ARR calculation, stuff like that. Usually it’s a mistake, and unintentional, but it’s the kind of thing that invites more scrutiny when you hand that over to an investor, to potential investors, that just means they’re going to get a magnifying glass and tear your books apart. So it can often invite unwanted scrutiny that you didn’t have to have. And especially in a fundraising event, it slows things down.

(24:59):

I would say the other mistake I think people make, is to your point with the gross retention and everything like that, is they don’t segment enough. Now, part of that is, it’s hard, especially in junky old spreadsheets, segmenting your retention, your gross retention, along the lines of your customer base is tough. It’s one of the things that we kind of got right. Again, we [inaudible 00:25:22] get everything right. It’s one of the things we got right at SaaSOptics, is we had some pretty easy cohort reports that would allow you to segment your customer base pretty easily.

(25:29):

And gross retention is not created equal. Another frustration I’ve heard from VCs over the years is, they’ll see a business with an alarming retention rate or churn rate, and then they ask the prospect, their potential investee to segment it for them, so they can get a better closer look at it. And turns out, there’s only one segment of their customer base that churns at a high rate. Everything else looks okay. But blended all together, it looks like a mess, and it would be enough to send any investor running for the hills. So I would say that’s another thing that I would say, another mistake I see fairly frequently, is people just don’t segment enough, partly because it’s hard.

Randy Wootton (26:07):

Yeah. Right. And getting the data and sorting it and doing all the pivot tables on it. I rattle it off probably too quickly, but being able to understand your metrics by product, by segment, and then by region when you go multinational, is wicked important.

Clayton Whitfield (26:23):

Yes.

Randy Wootton (26:24):

Because to your point, your SMBs are probably going to churn faster, but what’s the trend? And be able to show trend over time, and then you can benchmark that. And that’s going to be different… Similar with CAC. So for example, we have a BDR construct for our early stage segment, what we call startup in SMB. We don’t have BDRs, because it’s an extra cost, and we can’t afford it at the price we’re charging. And so then you’re able to bring investment decisions and structure around go-to-market, customer success teams, by segment. And so you get to the unit cost economics of customer profitability, which I think is one of those things that is this combination of what you’re getting out of your financial statements, but it’s also this depth per unit cost of customer, that then you roll up by product, by region, by segment, that allows you to understand, are you running profitable business units? And that’s important to companies that are 1,000 customers, as much as it’s important… When I was at Microsoft and Salesforce, we did hundreds of thousands of customers. Getting that unit cost economics is critical.

Clayton Whitfield (27:26):

Absolutely right. And especially if you’re out for funding, being able to have that conversation with a potential investor is massive, and also helps you stand out. Funding is fairly competitive process, as you know. It also helps you stand out from the other people that might be seeking funding too, as like, wow, this bunch really knows what they’re talking about, and knows it- [inaudible 00:27:43]

Randy Wootton (27:43):

They have their [inaudible 00:27:43] all in one stock.

Clayton Whitfield (27:44):

Exactly right.

Randy Wootton (27:47):

Awesome. Well, good. Well, given the time, why don’t we go to what makes a great CEO? I’ve been a great admirer of you, and you’ve got just the special energy and magic. I’ve been writing on the seven secrets of success for CEOs. I’ve now added an eighth, because I’ve gotten beaten down by the people on this podcast, but the seven include… And then we can talk about which ones really you find are the most important in your own experience having been a multiple-time founder.

(28:11):

Number one is overall results. This is about delivering shareholder value, especially for someone like me who comes in as a professional CEO, behind VC or PE money. Other people have put money on the deck. You’ve got to deliver the results.

(28:24):

To inform that, number two is about establishing a winning strategy, so everyone knows what business you’re in and what you’re not in. I think early stage companies, it’s easy to spray and pray, and hope something hits. So having a winning strategy.

(28:36):

Number three, which I know you have a lot of a passion around, is shaping the culture, the vultures… The vultures. The values and standards that will guide your company over time.

(28:45):

Number four is building an effective executive team, so taking a group of people that are functional leaders and make them part of the first team.

(28:52):

Number five is managing your board and investors, so we’ve been talking a lot about that, setting the right kind of expectations.

(28:58):

Number six is allocating capital to balance the yield today with the necessary investments in tomorrow, so how do you do horizon one versus horizon two, horizon three.

(29:08):

Number seven is investing in you. So making sure you have a mentor, a coach, a peer group.

(29:12):

And then number eight is unlocking the potential of your team. How do you make sure that you’re growing your own and you’re helping people have extraordinary experiences?

(29:20):

So that’s a word salad, lots of topics there. Which ones resonate for you, you’d like to provide some insight on?

Clayton Whitfield (29:29):

So the one that… I love all of them, first of all, and I think they’re all required. I think that they are all critical to get to eventually, maybe not day one obviously, but as you evolve, they get there. I would say the one that jumps out a lot is… Two that really jump out. One is the team. One of the things that my co-founder and I talk about a lot is, we didn’t get everything right obviously, but one of the things we got really right at SaaSOptics was the team. It was an amazing team. Give me another team like that and I’ll take over the world. It was absolutely amazing. They were incredible from day one. [inaudible 00:30:07]

Randy Wootton (30:07):

And sorry, is this your executive team, or broadly every hire you had? I mean, that’s a broad statement to say everybody we hired was great, and we would take over the world. Or is there a way that you focused on… Maybe start with the executive team, the people that you hired for that early stage, your first set of senior executives. How did you think about that, and how did you ensure you got great people?

Clayton Whitfield (30:27):

It’s one of the things we… Again, we got this pretty right. And to your point, I was being overly broad. Yeah. One of the things we hired for, especially in the early days, we really had two attributes. We want people that have a high level integrity, and work really hard. Those are really the two attributes we hired for in the early days. As an example, this will be close to your heart, our very first sales rep had an English degree from the Naval Academy.

Randy Wootton (30:47):

There you go.

Clayton Whitfield (30:48):

Exactly right. On paper, anybody who was hiring for an experienced sales rep wouldn’t have hired this guy, but he turned out to be amazing. He was incredible. And so we had that… Our first of director of customer success had a theology degree. Again, on paper you would look at that person and go, “I’m not sure this is the right fit.” But these were really great hires, because again, high level of integrity and worked really hard, and they became leaders in the company, because they were early hires and things like that. And once we started hiring behind them, people naturally looked at them as the leaders, as the old guard that embodied the culture and embodied the way we thought about things. So I wouldn’t say it’s easy, because hiring is never easy, but what it became… Building a really good team became easier after those initial hires were in place, because they embodied the way we thought about things, and- [inaudible 00:31:38]

Randy Wootton (31:37):

And the values and the standards. So more about the how versus the what. One of the things we’ve codified at Maxio is what we call the great leader framework. And it’s all about capabilities, not specific skills in terms of I can run a [inaudible 00:31:51] account program.

(31:52):

One of the things I’ve been struck by and why I took the job, Clayton, was because it felt like the culture at SaaSOptics, Maxio, and Chargify, was different than a lot of the Silicon Valley companies I had been part of. People were just nicer. So what struck me is you said high integrity, worked hard, but you didn’t include two other things. Silicon Valley I think over-indexes on IQ. And then you also didn’t mention this idea of just being a nice person. How did you filter for that? Because the culture is really, in my opinion, unique in that way, that people are collaborative, they’re kind, they’re not out to get each other. It’s not a zero-sum game. It feels really different, and that must have been something that you guys embraced and articulated and hired for early on.

Clayton Whitfield (32:37):

That’s exactly right. Yeah. We had a… It’s good point. It was never really… I wouldn’t say we ever put it on a job description anywhere, but we had a kind of a no jerks policy there. And we also interviewed pretty strongly. Most everybody we ever hired at SaaSOptics went through at least three interviews. So sooner or later, if you are a jerk, or you can’t control your emotional reactions to something as simple as an interview, then you’re not going to get hired, because what happens when a customer calls up and is a little bit angry because they found a bug in the software? If you can’t control your emotional reaction in an interview, there’s no chance you can with a hostile customer or a frustrated customer, right?

Randy Wootton (33:16):

Yeah.

Clayton Whitfield (33:17):

So I’d say we naturally weed those things out in a pretty tough interview process over the years.

Randy Wootton (33:23):

Got it. And did you use a lot of back channel references, or was it friends of friends? Because I think that’s another thing is, if someone’s at a company, what you hope for is employee referrals, because if they’re doing well, they’re going to… Birds of a feather flock together. They would have a set of friends that you would want to bring across. Was that another watering hole you fished in?

Clayton Whitfield (33:41):

Absolutely, relentlessly. The sales rep I mentioned, the Naval Academy grad, he went to a small high school there in Roswell. And before you know it, we had hired almost all of his friends that he graduated with. Some that had graduated a year before, and some that graduated a couple of years after him. They were all still really tight, and they were all, to your point, birds of a feather. They were all great guys, and we hired them pretty relentlessly after that, and still in touch with quite a few of those guys, even after all this time.

Randy Wootton (34:09):

Oh, that’s great. Yeah. Talk about software being a people business, and it’s those relationships that are rooted in trust. Trust is tied to having high integrity and having a common sense for what it means to work hard.

Clayton Whitfield (34:20):

Spot on.

Randy Wootton (34:21):

[inaudible 00:34:21] it’s not a job, it’s a vocation. Okay. Well, we probably have time for one more of those eight secrets. We talked about really hiring a team and helping that team, and the cultures and values. Is there another one that pops for you with your wisdom now, looking back on the most important thing CEOs need to get right?

Clayton Whitfield (34:40):

There’s one other one that you listed, and I would call… It was allocating capital. It’s interesting how… I think it’s a critical skill, but a lot of CEOs, especially CEOs that came from the sales and the product side and founded their own thing, have very little experience with actually allocating capital. I was a product guy, I was a sales guy, and I started this business, and we’re getting a little bit of success now, but they often struggle to allocate capital. And I think finance can sometimes be a bit of a… It doesn’t have to be, but it can be a bit of a mysterious and spooky thing for somebody that’s come from the product side, to try and now all of a sudden to be allocating capital across the entire business. I think it feels a bit uncomfortable for some people. So I think it’s a critical thing to be doing, especially at the stage that Maxio is right now, allocating capital… And even before, allocating capital is a massively, massively important thing, and a lot of CEOs just are inexperienced with it.

Randy Wootton (35:33):

Yeah. I do feel fortunate… I mean, people give you grief for getting an MBA, but I do feel fortunate coming out of the military, having the opportunity to go do an MBA, learn the language of finance [inaudible 00:35:43] accounting, having the opportunity to take a class in finance, and learning how people thought about capital structure and investments. And it was a skill I had to build. And then what’s interesting is, you go through your early part of your career, you’re probably in… As a director, you’re not really spending a bunch of time thinking about finance and capital. I actually went back and took another course, finance for non-finance executives, when I was in between two CEO gigs, because I felt like, gosh, I had done this 20 years ago at business school, but it’s been a long time, I need to go refresh.

(36:13):

So I think, to your point, CEOs getting strong CFOs who are thought partners in helping to think about capital structure and investment, that’s a critical role of the CFO. But also I think the CEOs knowing that what they’re doing is playing with other people’s money, and so they got to be able to think about ROI, NPV, making business cases, how things are going to play out, what are expectations for things you’re making bets on in 18 to 24 months, instead of just solving for what I need to get done today. Because you’re never going to get to the next act if you haven’t placed some bets and are letting things play out a little bit.

Clayton Whitfield (36:47):

Spot on. I agree with all of that. I love that. I was also going to say, there’s one thing that’s not on your list, and this is very much my bias, but I saw it a lot in the early days in early stage companies. Early stage CEOs… This is 100% my opinion. Early stage CEOs I think need to be more like COOs than CEOs. Because a lot of them-

Randy Wootton (37:05):

What do you mean by that?

Clayton Whitfield (37:06):

Well, a lot of them… A lot of the conversation I heard over the years is, “Well, my job is to set the vision and to blah, blah, blah, blah.” And they extracted themselves from the day-to-day nuts and bolts. And I think in early stage business, that’s a mistake, because the nuts and bolts are where it’s at in the early days. When you’re incubating and trying to get the next stage, you’re never going to get to the set the vision stage if you can’t get past $1 million in ARR. And when you [inaudible 00:37:33] $1 million in ARR, you’re getting some things right, and the CEO needs to know at a very, very low level of detail what’s going on in the business. And if they have the ivory tower view of a CEO sits on high and does this and twists some buttons and everything like that, then I think it’s a mistake. And I saw a lot of that. So I would-

Randy Wootton (37:54):

I think that’s a good build-out of the first one I described. The number one thing you’re responsible for is overall results, and that does mean you’ve got to be in a level of detail and set up systems so you can monitor what’s happening. I mean, that’s the advertising for Maxio, is you get access to information that you as a CEO are able to inspect. You’re not relying on other people. But it’s also, how do you set up a rhythm of business? How do you do the… You get what you inspect, so what are the ways… You do it without over-functioning and micromanaging, there’s that balance, but you are the dude that the investors invested in, or dudette, and you’ve got to be able to deliver it. And if you don’t know it, you’re going to get removed.

Clayton Whitfield (38:30):

Exactly right. 100%. I couldn’t agree more.

Randy Wootton (38:32):

All right. Well, now we’re wrapping up. We talked a lot about… The speed round, I usually have three questions. What’s your favorite metric? What’s your favorite book? And who’s your favorite influencer? We talked a lot about metrics, but is there one that we didn’t address that you think is critical for people to really keep their eyes on?

Clayton Whitfield (38:46):

Yeah. This one is certainly, again, my bias, it’s sort of my golden goose, is customer lifetime value. And the reason for that is, to do a proper customer lifetime value, to get that proper customer lifetime value metric, you have to get a lot of this other stuff right too. You need to know your cost of capital, you need to know your retention, all that rolls up into the customer lifetime value calculation. So it’s a bit of a cheat, because you have to get some other stuff right to get CLV. But I think CLV is critical. I mean, who doesn’t want to know what a customer’s worth to them? And especially, segment it from there. Every business in the world should know that, or should want to know that. And so that’s definitely my favorite. It’s certainly my bias, but definitely my favorite.

Randy Wootton (39:23):

That’s a great one. And then I think you start to think about, if there are three ways to grow a business, acquire new customers, retain current customers, you have this other idea of monetizing the customers you have with pricing and packaging.

Clayton Whitfield (39:34):

Spot on.

Randy Wootton (39:35):

So customer lifetime value, how do you maximize it over time?

Clayton Whitfield (39:38):

Yes.

Randy Wootton (39:38):

What’s your favorite book, or what are you reading right now?

Clayton Whitfield (39:41):

I’m reading right now, it’s an investment book, but my favorite business book that I’ve read in the last ten years or so is The Hard Thing About Hard Things by Ben Horowitz.

Randy Wootton (39:48):

Yeah, absolutely.

Clayton Whitfield (39:48):

I love that book. Yeah.

Randy Wootton (39:50):

Yeah. I think any aspiring CEO should read that, and in your darkest moments, pull it back out and go back to look at your notes, because you know what? It’s hard.

Clayton Whitfield (40:03):

It is hard. It is hard. I agree with that 100%. It should be on every CEO’s shelf. 100%. Yeah.

Randy Wootton (40:07):

And then finally, influencers, people that you’re listening to, watching, or reading, that you think are actually saying new and interesting things versus just repeating the echo chamber.

Clayton Whitfield (40:16):

So this is a recent acquaintance, is a CEO named Maya Mikhailov. Shes CEO of Savvi AI. And she’s… So I freely admit I’ve explicitly ignored a lot of the hype around AI, because it felt just like a hype cycle thing to me, so I explicitly ignored it. It’s a little too reminiscent of the dotcom boom back in the day for me to get super, super intrigued by it. But that’s one of the reasons that I’ve been reading Maya’s stuff, is because she posts a lot on LinkedIn, and she’s got a very clear-eyed perspective on what AI is, and I’ve really enjoyed reading her stuff. So I’d say that she’s the most recent influencer for me.

Randy Wootton (40:53):

Got it. And sorry, it was Savvi AI? Is-

Clayton Whitfield (40:56):

Savvi, yes, is name of the business. Yeah.

Randy Wootton (40:58):

All right. Well, maybe we’ll try to put that in the show notes. I’m always looking for people to learn more about and learn from, so it’s great. Clayton, it’s always a pleasure chatting. Thanks for spending a little time with us, talking about where you’ve been, what you learned, and how CEOs can think about being successful.

Clayton Whitfield (41:14):

Likewise, man. It’s been great talking to you, and I’ll talk to you later.