We are already in the second month of 2023 and there have already been some eye-popping moments from the continuing Elon Musk telenovela to quiet hiring and big tech layoffs. Yet, beneath the headlines, small SaaS businesses are in a position to thrive. Let’s kick off the year with what you need to know to scale this month.
While we talk about a recession, one fact remains – in the United States corporations have reported record profits – with gains at 80% over the past two years. In fact, 2023 projections are expected to reach $12T (yes trillions) in profits.
In the past when companies are flush with cash – you might see them invest in the following ways:
- Hire more staff
- More Mergers & Acquisitions
- Research & Development for new products, technologies or services
Yet, that’s so old school. For the last decade, the big trend has become stock buybacks. What’s a stock buyback – it’s when a company pays the market price per share to buy back a portion of its share of ownership from investors. And yes, this used to be illegal until the Reagan administration deregulated, well, a lot of financial regulations (remember the 2009 crash?). With this new freedom, it’s estimated that there are $900B worth of buybacks a year.
Why do companies do this, you ask?
- Buybacks increase the value for shareholders
- They inflate the company profitability on paper (why they were regulated to begin with)
- Greed – 30% of all executive compensation plans are tied to EPS (Earnings Per Share)
There are cautionary tales out there – since many buybacks are financed with loans often creating more debt and resulting in layoffs.
Meta for instance from 2021-2022 had $48B worth of buybacks at $303 per share. Their share value is now $138 per share creating a loss of $26B or -55%. They recently announced they are cutting 11,000 jobs.
It leaves us wondering if deregulation went a little too far and if anyone will be brave enough to make a change.
The Street Five
- Another Food Delivery App – but WAIT! German startup Vytal is reimagining takeout with custom reusable containers
- Terrifying accuracy of ChatGPT can be seen in this Ryan Reynolds Mint Mobile ad
- Elon Musk sets a new Guinness World Record – for the largest loss of wealth in history, losing approximately $182B USD
- Get paid to move – in an effort to diversify aging populations in the countryside, Japan is offering families ¥1M ($7.6k) per child to leave Tokyo
- Coinbase must pay $50M to settle with NY Regulators who claimed the firm allowed money laundering due to lack of appropriate background checks. Coinbase must also invest $50M in a compliance program
The Rise of Quiet Hiring
With an unstable economy, many companies find it risky to staff up. So when in doubt, why not create something new like “quiet hiring”. To make it slightly more confusing, quiet hiring doesn’t actually involve hiring staff at all. The concept is about addressing immediate and acute business needs by “temporarily mixing up the roles of current employees” or as we like to call it “unrewarded chaos”. That’s right, the entire concept is to get your team onboard with assuming new responsibilities, leaving the onus on middle management to communicate how the changes will benefit each individual.
The Fall of AmazonSmile
Amazon shutters its charity donation program after announcing it would lay off over 18,000 employees.
Launched in 2013, the program donates 0.5% of “eligible purchases” to a charity of the customer’s choice. According to Amazon, they have donated over $400 million to U.S. charities and more than $449 million globally. That pretty much is roughly equivalent to $230 per charity.
If you drill down a little deeper – in 2015, the AmazonSmile Foundation donated ~$12.8m — 0.00012% of Amazon’s ~$99.1B in retail sales that year.
So what happens now? Customers can still make donations until AmazonSmile shuts down or just go directly to the charity itself and make their donations directly. In the meantime, Amazon says it will continue to support non-profits in a more impactful and meaningful way. Okay, but let’s hope it’s like former Amazon Founder Mackenzie Scott who has donated $14B to-date.
What you Need to Know to Scale:
With economic headwinds set for the first half of the year, it is important for small businesses to stay focused. It can be distracting by watching other companies and trying to do what they do. While we love the concept of “stealing with pride”, in this instance it’s clear. Now is not the time to follow. Now is the time to create your own product-led path by knowing your business.
If you’re a PLG business here are a few tips:
- Widen the top-of-funnel: If you don’t have it set up already – make sure you have freemium or free trial option that allows more users to test and see the value of your product. While Demos are great, they are a barrier and often involve multiple decision makers.
- Self-onboarding: Allow your customers to learn how to use your product from your product. Having a simple sign-up and onboarding process reduces the time-to-value. Engaging onboarding will speed up the time required for users to upgrade and convert into a paying customer.
- User Experience: Remember your product must solve end-users’ pain points and ideally make their life easier. Take the time and invest in ensuring that your product is easy-to-understand and enjoyable-to-use. Net/net your product must deliver meaningful value in the short-term and long-term.
Yes, product-led is a tiresome overused term, but it’s a necessary mindset in 2023. Without taking a customer approach retention and growth are at risk, so look at your current team and make adjustments to either your roadmap or current resources to ensure you’ll be around in 2024!
We all consider Silicon Valley as the gold standard for technology and startups, but why? The Upside takes a different approach – one that says you don’t need to have an office in Silicon Valley and an MBA to succeed in technology. There are new episodes every Wednesday allowing for a continued master class of sorts. Take a listen and let us know what you think!
It’s time to revisit Ben Horowitz’s The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. The co-founder of Andreessen Horowitz and very experienced entrepreneur, provides practical advice for managing the toughest problems business school doesn’t cover.