Kill what is not long term, Evaluating sales performance, Value of simple pricing - Tactician #0018

08/12/2023

STRATEGY

Paras Chopra, Founder at Nintee (digital health startup), points out that Supercell (the company behind the massively popular Clash of Clans game) is valued at $32M per employee, reminding us of how important prioritizing long term revenue opportunities at the expense of short term are in "Notes on how Supercell is run"

• "They seem to be killing 9 games for each game they release. Some of these games have been in development for years."

• "Why are they killed? It’s because these games don’t meet their internal benchmarks (primary of which is 30-day retention)."

• "Supercell’s mission is to make games that players play on forever (decades), so if the 30-day retention figure isn’t getting met, they get killed."

• "The killing decision is not made by the leadership, but in fact by the team that’s working on it.

  • When teams are communicated clear benchmarks to beat, they keep asking themselves this question: should we continue to iterate on the game and try to beat the 30-day retention number, or should we work on the next idea which would have better potential?"

• "By the way, the name supercell comes the way the company works. They’re groups of lots of small game development teams (each 10-15 people max). They’re given freedom to do whatever they want to – but success or failure is defined clearly in terms of metrics."

•  "Building hit products with a team of just 10–15 people requires hiring absolutely the best people possible."

SALES

Jason Lemkin, SaaStr Founder & VC, provides guidance on the expected timeframe for new sales hires to reach their target performance in “Dear SaaStr: When Should I Expect New Sales Hires to Be On Target?“

• "At least by 1.5 sales cycles.  And yes, that’s true today, too.

• "You should know well before that if you are managing her or him — you’ll usually know by half a sales cycle."

• But if you have say a 60-day average sales cycle, and a new rep isn’t more or less on target by month 90 … or at the very least 60%-70% of the way there … she or he probably never will be.

PRICING

Haje Jan Kamps, Founder & Pitch Coach at Pitch Guide, warns startups against the pitfalls of prematurely introducing complex pricing models in “Keep your business model simple”

• On the Problem with Complexity in Startups:

  • "[...]in the context of a pitch deck, premature complexity is a huge red flag to investors."

• Allure of Complex Pricing Models Can Be Tempting but Misleading:

  • "Indeed, who wouldn’t be enticed by the prospect of variable pricing, tiered packages, or the alluringly intricate matrix of options that promise to maximize revenue from every conceivable customer segment?"

• Complexity Leads to Operational Challenges:

  • "But with every new idea and pricing tier comes exponential complexity."

  • "Customer service, accounting, product development and even the sales process and landing pages all become way more complicated than they need to be."

• Investors May View Complexity as a Red Flag:

  • "To investors, the complexity of multiple business models can be problematic as well."

  • "Each revenue stream adds complexity and defocuses your product efforts."

• Transition to Complexity Should Be Timed Appropriately:

  • "That’s not to say complex pricing models don’t have their place. As a company grows, diversifies and understands its customer base better, a more nuanced pricing strategy can be both feasible and advantageous."

  • "Initially, a startup’s focus should be on growth, customer acquisition and understanding the market."

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