A Guide to Profitable Growth, by Joe Hyrkin

The ProGro Business

A Guide to Profitable Growth for SaaS Startups

By Joe Hyrkin

eBook

About Joe Hyrkin Joe is the CEO of Issuu, the world’s leading omni-channel content tools and publishing platform. Through the Issuu Story Cloud, Issuu enables millions of marketers, brands, and creators around the world to digitally share and monetize their content anywhere.

He joined Issuu in early 2013 after more than 20 years of leading startup/growth companies in executive, business-development, and product roles. He served as CEO of Reverb during two rounds of financing; in addition, as head of SingleFeed, Joe oversaw that firm’s acquisition by Alibaba. Before that, Joe held sales and leadership positions at Gala Interactive, Yahoo, Flickr, and Virage. He directed the Economist Group’s business in China and has extensive board and tech-advisor experience.

Joe was educated at the State University of New York in Albany and as a foreign student at Beijing Normal University in China. Joe is a frequent thought and industry leadership contributor to the likes of Inc, Entrepreneur Magazine, Recode, Techcrunch, CNBC, Fox Business, Blooomberg and has spoke at numerous conferences and events globally including Web Summit, The Horasis Summit, Founder’s Forum, The Wrap’s Grill Summit, The Issuu Generators Summit, and more.

What We’ll Cover 7

Why ProGro

11

What ProGro Means to Your Business

13

Beyond Valuation

15

ProGro and Pricing

23 ProGro and Analytics 27

ProGro and Scaling

31

ProGro and Marketing

37

ProGro and Raising Capital

42 ProGro and Your Next Move

A DEFINITION

ProGro: Conceived by Issuu CEO Joe Hyrkin, ProGro is an operating principle for early- to mid-stage SaaS startups that affirms the value of growth and profitability.

“I look at the notion of profitability as a barometer for the opportunity to grow and build a successful business.

If profitability is not one of the core principles of operation, then SaaS businesses are missing the whole foundation of delivering sustainable value to their customers.”

– “Issuu’s Joe Hyrkin Talks Profitable Growth in the Age of Disruption,” SaaS Mag, Nov 2020

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Source: SaaS Mag

Issuu: The ProGro Business Issuu is a popular SaaS content publishing and marketing platform that helps creative people grow their businesses and inspire their audience. Content marketers, small business owners, and designers rely on Issuu to transform static designs into highperformance content for every digital marketing channel.

The world has changed a lot in the last fifteen years.

The iPhone. Social networking. The cloud. As digital rapidly changes our world, digital publishing platforms like Issuu provide the connective tissue that brings people and organizations together. Consistently profitable, Issuu has achieved sustained success operating with a ProGro mentality.

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ARTICLE

The Rapid-Growth Playbook for Early-stage Startups

NEWS

5 Growth Hacks to Accelerate Your Startup

HEADLINE

The Dos and Don’ts of Rapid Startup Scaling

AD

Profitability Versus Growth: A Balancing Act

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Why ProGro ProGro: Profitability and Growth For startup leaders, the focus (and pressure) on hitting ever more aggressive growth targets is pervasive. And for good reason, because while growth is the lifeblood of the startup, profitability is the oxygen.

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WHY PROGRO

Too often, we prioritize growth at any cost.

To hit our customer acquisition targets. To substantiate valuations. To show VCs and the market we’re on a trajectory to unicorn status. So we can raise even more money. Growth, growth, growth at all costs. Even if there’s no there there. For every Atlassian, there’s a WeWork. For every Netflix, there’s a Quibi.

The concept of profitable growth isn’t new. As any business owner can tell you, at the end of the day we all aspire for profitability and growth. The difference is the mindset. How you go about growth, and what steps you take along the way. Working towards profitability and growth based on productmarket fit and repeatable and scalable customer acquisition funnels, not by purchasing growth with an unsustainable CAC (customer acquisition cost).

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Image source: The Information

“No one is ever going to tell you to stop spending money.

Facebook and Google will never ask if you have a viable product in order to keep buying their ads. It’s important to continually come back to your purpose. What is the impact I’m trying to have with my ad investment?

As you spend money on ads, keep coming back to the impact: is this money to build growth for growth’s sake, or attention in the press? Or are we building products that are meaningful enough for customers to value.”

– Joe Hyrkin, CEO Issuu

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“Customers rely on you.

They are building their own businesses and if you can help them in a real way, they will pay for that help.

Profitable growth means stability for you, your customers, and your employees... creating a relationship of trust and mutual benefit.”

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- Joe Hyrkin, CEO Issuu

What ProGro Means to Your Business ProGro is all about longevity. The ProGro mindset demonstrates to customers “you can count on us.”

We’re going to be here with you the whole way. It demonstrates to your team (and their families) that their jobs are secure. They can focus their time and energy on building the business with you, and not on sprucing up their resumes for the next opportunity.

Profitability allows you to focus time and energy away from the distraction of raising money. It allows you to focus your team’s creativity and your own thought processes on ways to grow the business. ProGro doesn’t mean you won’t ever take funding, it means that your priorities are geared towards sustainable growth, profitability and funding that will build continued profitability, not just valuation.

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“In the SaaS world, we spend way too much time overemphasizing growth and valuation at all costs.

I believe part of the reason there was so much chaos in the first six months of 2020, and why we’ll probably see more fallout through 2021, is companies had to scramble to become profitable.”

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- Joe Hyrkin, CEO Issuu

Beyond Valuation Surviving in the startup world often means seeking investment from VCs and other sources. But the ProGro business has options in addition to Sand Hill Road.

Importantly, the ProGro business isn’t solely focused on reaching a certain level of valuation.

The ProGro model is about creating valuable products and value for employees and investors sustainably. It’s about creating a business where customers can rely on you. It’s about building a legacy of value, not simply valuation.

Source: Investopedia

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“Startups get caught up in the trap of raising money to get them to the next phase when they have to raise more money. That’s the time to start charging. Put more time into figuring out pricing than into raising money. You shouldn’t be raising additional funding if charging for what you offer isn’t at least on the very near term roadmap. In fact, that’s one of things I would argue:

If you can’t figure out how you’re going to make money within a reasonable timeframe, you shouldn’t raise more money.”

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- Joe Hyrkin, CEO Issuu

ProGro and Pricing Discover your value Align pricing strategy with the value your company delivers to the market.

When you’re moving to a ProGro model, pricing is a good place to start. All too often startups fail to spend enough time focusing on a pricing strategy that truly articulates their value. Don’t price based on what others are doing, instead consider what value you deliver to the customer. Price and structure pricing for the product you offer and market you’re in. There’s too much time spent on everything other than pricing.

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PROGRO AND PRICING

Revenue is a proxy for the value you’re delivering.

Just because people aren’t paying doesn’t mean your product isn’t valuable. It might mean the way you’ve packaged and tiered your product isn’t clear. And pricing is the primary proxy for knowing whether or not you’re doing it well.

Don’t get caught up in the never-ending loop of raising money just to get charged up to sustain growth for the next round of funding. If this loop feels familiar, consider your price point: what are you charging? What value does your product bring to the market? Not charging for your product? You should be.

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HELPFUL TIP

ProGro businesses incorporate a focus on pricing as early as possible.

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PROGRO AND PRICING

Choose wisely Feature-based, freemium, metered. Oh, my!

Defining pricing strategies

Feature-based: Per feature pricing tiers

Freemium: The freemium business

by assigning a value to the functionality

model is a tiered pricing strategy where

available in each tier. Higher-priced

the paid packages are supplemented

tiers are associated with a greater

by a free, entry-level tier.

number of features. In other words, customers only pay for the features that they are interested in.

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HELPFUL TIP

Choosing the right pricing strategy is critical. Instead of freemiuming your way to massive DAUs (daily active users), the ProGro business understands that charging a premium can actually increase conversions.

Metered usage: Also known as ‘Pay as

Per user/seat: Perhaps the most

you go,’ usage-based pricing relates

popular model among SaaS offerings,

the cost of your product to the amount

per user/seat pricing ties a price to

customers use it.

each user — and increases the price for each additional seat.

Source: CoBloom

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PROGRO AND PRICING

Applying ProGro Evaluating your pricing strategy Let’s say your company sells a B2B SaaS collaboration tool. (Imagine something like Trello.) A per user/ seat pricing model is perfect if your product is used by many employees. Your value and scalability only increases with each additional user/employee. But per use pricing may leave revenue on the table, unless you have hundreds of users per customer.

Driving ProGro pricing If you’re selling a SaaS product that’s more expensive — say, a content management solution that’s well above $100 per month — a per user/seat pricing model may miss out on revenue if your customers are only purchasing a few seats. In this scenario, a model maximizing profitability — for example, metered usage — is worth considering. As a ProGro business, take the time to do your due diligence on which pricing strategy will sustain you long-term.

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ProGro and Analytics Measure well Building a strong analytics foundation.

Defining metrics that matter Equally important to setting up pricing, building a solid analytics infrastructure should guide your decisionmaking from the get-go. There’s no magic formula, but understanding and watching the following analytics will help you in your goal of sustainable profitable growth.

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PROGRO AND PRICING

MRR/ARR: Monthly recurring revenue (MRR) and annual recurring revenue (ARR) are key for SaaS businesses. They’re used to plan a predictable stream of monthly (and annual) revenue and are essential for understanding the growth trajectory of your business.

Burn rate: The rate at which you’re losing money. Burn rate is a proxy for understanding your runway.

SIDE NOTE

Growth at all costs companies are famous for having heavy burn rates, but with ProGro as your guide, you can dive deeper into the numbers that matter to help slow the flow.

CAC: Customer acquisition cost (CAC) represents the costs to acquire a new customer. According to Hubspot, your Lifetime value (LTV) to CAC ratio should be 3:1. That is, successful SaaS businesses seek a model where the value of customers is around 3X the cost to acquire them.

LTV: Lifetime value (LTV) is an estimate of how much the entirety of a customer’s relationship with your 24

Source: Hubspot

PROGRO AND PRICING

company is worth. An essential forecasting metric, LTV can help you determine marketing budgets, pricing models, and is a key indicator of successful ProGros.

Churn: There’s no other way to slice it: churn means lost customers. While you do want to focus on the number, that “healthy churn goal” of 3-5% isn’t the most important thing to consider.

Focus on the why. Why are they leaving? Sometimes there is legitimately nothing you can do about churn, but other times customers couldn’t see the worth of the product like you can. Focus on onboarding to help them see that value, strengthening relationships with customers from the start, strengthening your product lineup, CSX, or even incentivising those who are leaving to give you another chance.

SIDE NOTE ON CHURN

Another analytic to consider is the “at risk” customer: those who probably aren’t going to renew. Try to get ahead of customer dissatisfaction. You’ll be surprised at how critical a simple touch point can be at this juncture.

Source: CoBloom

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ProGro and Scaling Focus on product/market + profitability/growth fit A ProGro business scales responsibly.

There are countless volumes written on product/ market fit, but very little about profitability/ growth fit. Is your product one where growth and profitability can align or is your product one that is a VC investment sponge?

You may be rapidly growing. You can take a $100M and spend it on SEM and social and run a range of digital marketing campaigns, and you will get more customers. But your customer acquisition costs (CAC) will continue to increase as you grow.

ProGro businesses understand you can’t just focus on spending marketing dollars to get people in the door, you must consider the profitability/growth fit.

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PROGRO AND SCALING

Know as much as you can.

Testing, Testing, 123.

Why testing is ProGro. Testing gives your marketing efforts an edge. When you know your market, you have a clearer view of how to move your company forward. My advice? Test everything: channels, messaging, offers, pricing — everything.

A/B testing: A testing methodology — often used in digital marketing — that compares two variations of the same asset. ProGro businesses often A/B test marketing efforts (such as Web page designs or subject lines in promotional emails) to optimize performance results.

Multivariate testing: Instead of A/B testing, multivariate testing focuses on multiple elements at the same time. According to Yoast, multivariate testing is most effective for testing smaller elements of a Web page, such as the combined effect of various headline, image, and text options.

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PROGRO AND SCALING

Our favorite tracking and testing tools Website performance insights and user journeys: Google Analytics

Mixpanel

A/B testing: Optimize

Mouseflow

Optimizely

HotJar

CrazyEgg

Unbounce

Event monitoring and automation: Segment.io

Mulesoft

Snowflake

Zapier

Source: Yoast

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ProGro and Marketing Understand your customer engagement cycle ProGro businesses constantly explore ways to add value to the customer experience.

A ProGro business will focus on spending marketing dollars to get people deeply engaged and to deliver impact that makes a real difference in people’s lives. Pinpointing your most-valuable marketing efforts requires a continual focus and refocus on understanding what’s driving value.

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PROGRO AND PRICING

The Saas Marketing Funnel A marketing funnel is a model that describes your customers’ journey.

Companies with leaky funnels (often indicated by a high churn rate) are eventually unsustainable. It’s important to understand your marketing funnel, map your customers’ journey, and learn where to bolster efforts.

Remember that the goal isn’t just to get the customer to subscribe; the goal is to retain your customer over a long period of time.

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l

Attention Interest Desire Action

Onboard Retain Expand 33

PROGRO AND MARKETING

What you can do now Applying ProGro to your marketing strategy.

Leveraging all marketing channels (paid, earned, owned) to drive retention and referrals is a surefire way to lower your CAC and increase LTV. The product as a marketing channel.

From in-product messaging to new feature intros to simply building a better product, at Issuu we’ve found that sometimes our best marketing channel is in fact our product and the customers that love it.

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PROGRO AND MARKETING

AN ISSUU EXAMPLE

Issuu runs a successful weekly webinar series that attracts hundreds for every live session. The webinar is free, and while we would love to convert every single webinar attendee to a paid subscription...that of course is unlikely.

With a ProGro mentality, we ultimately want to understand how the webinar drives value to our customers and engages them more in using the product, which in turn contributes to profitability. So we value what brings our customers value, not simply more webinar sign-ups.

Source: Issuu Webinars

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ProGro and Raising Capital Aligning on ProGro with investors ProGro businesses have investors who understand ProGro. Remember how we said don’t go out and get funding to have growth for growth’s sake? That doesn’t mean a ProGro company is explicitly against funding, it means that funding should be seen as the opportunity to fuel growth and profitability. You want to raise money to service customers and the market, not to justify your last raise.

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PROGRO AND RAISING CAPITAL

Growth fueled by raised money does not necessarily equate to growth that’s aligned with a market. You can always buy customers. But the sustainability of the business, the ability to expand your engagement with those customers, the ability to communicate the value of your product to your customers, that’s a ProGro business.

A ProGro business and a growth-at-all-costs business are two very different organizations.

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“The scorecard for a startup is not headcount and it’s not capital raised.”

– Russ Heddleston, CEO DocSend, The SaaS Podcast, Dec 2020.

Source: SaaS Podcast

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PROGRO AND RAISING CAPITAL

Stages in your startup fundin

Funding Round

Pre-Seed

Ser

Stage Focus

Proof of concept/ prototype

Reven

Common Elements of Growth

Hiring

Devel Opera Brand

Amount of Investment

$10K - $1MM

$10M

Resources for ProGro startups: Masterclass on funding 40

ng journey

ries A

Series B

Series C

nue growth

Growth

Large scale expansion

lopment, ations, ding, Marketing

Hiring, Market expansion, Buying businesses

Acquiring businesses, International markets

$15 - 25MM

~$50MM

MM

Source: How Series A, B, & C Funding Works for Your Startup

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Your Next Move Putting ProGro to work for your business If you’re on the cusp of raising (even more) money, the first thing to ask yourself is whether or not you’re scrutinizing your plans like a ProGro business.

Are there pricing strategies that can determine whether or not you have a viable business to begin with? Are there cohorts in your customer journey that you’re not engaging with? Can you leverage existing channels to deliver more value? Above all, are you building a product or service that people want to pay for?

Your biggest growth channel is the experience you deliver.

ProGro businesses operate from the principle that growth and profitability should cooperatively guide decision-making, especially in early- to mid-stage SaaS startups.

Are you ready to be a ProGro business?

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The all-in-one content creation and distribution platform.

Getting started is easy Using Issuu is as simple as uploading, enhancing, converting, and publishing your content in minutes.

Other helpful collaboration, planning, statistics, digital sales and customization tools come as part of the Issuu cloud-based software platform.

Flexible plans Join millions of businesses, content creators, marketers, educators, publishers and industry professionals who rely on Issuu to create and deliver high-quality content to audiences on every channel and device with speed and ease. Give the free trial a go, or purchase a monthly or annual subscription.

Visit www.issuu.com/pricing to find the plan that works for you.

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