We've reached the point in the market where the "best practices" we've been taught are no longer applicable when it comes to growth. Using data from millions of customers and thousands of companies, Patrick will debunk much of the dogma that drives our mental models around building a business, before offering up a practical guide around pricing, building the right product, retention, and targeting the right customers - all to ensure we're building a sustainable, thriving business.

1. Brought to you by
Back to the fundamentals (maybe)
TURING FESTIVAL - AUGUST 2018

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5. Similar traits
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6. • Old in software years
Similar traits
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7. • Old in software years
• Raised $100M+
Similar traits
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8. You
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9. You
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10. You
Brought to you by

11. You
Brought to you by
• Really good tech

12. You
Brought to you by
• Really good tech
• Some great design

13. You
Brought to you by
• Really good tech
• Some great design
• Low money

14. You
Brought to you by
• Really good tech
• Some great design
• Low money

15. You
Brought to you by
• Really good tech
• Some great design
• Low money

16. You
Brought to you by
• Really good tech
• Some great design
• Low money

17. You
Brought to you by
• Really good tech
• Some great design
• Low money

18. You
Brought to you by
• Really good tech
• Some great design
• Low money

19. You
Brought to you by
• Really good tech
• Some great design
• Low money

20. Brought to you by

21. Brought to you by
This is not how you build a business.

22. Brought to you by
You can’t best practice your way to success.

23. Brought to you by
“Wait - how do you even know large, bearded man?”

24. Brought to you by
I’m no one.

25. Churn
tribution
Financial
Unit
Price
Survey
Willingness to
In-App Usage
Drastically reduce churnRETAIN
Actionable, accurate insights to make you
smarter about your business (for free)
SUBSCRIPTION METRICS
Proprietary pricing software for
monetization
MONETIZE

26. We’ve collected more market data and
seen inside more growth businesses than
anyone else out there.
Brought to you by

27. Brought to you by
We’re going to go through a ton of data.

28. Brought to you by
Everyone will be unhappy.

29. Brought to you by
Everyone will be unhappy.

30. • Company Level Cliches
• Product Problems
• Growth Terribleness
THREE MAIN AXES OF BEST
PRACTICES WE’LL EXPLORE
— GETTINGBACKTOTHEFUNDAMENTALS
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31. Brought to you by
Company Cliches

32. “Funding is necessary for growth”

33. “VCs are basically demons”

34. Funding messes with unit economics

35. FUNDING IMPACT STUDY
CAC Higher Amongst Funded Companies
Customer acquisition cost (CAC) has increased significantly over the years due to market saturation of
marketing vying for consumer attention, but CAC amongst funded companies outpaces everyone else.
BLENDEDCACRELATIVETOFOURYEARSAGO
SOURCE: 2018 PROFITWELL CAC STUDY
0%
25%
50%
75%
100%
5 YEARS AGO 4 YEARS AGO 3 YEARS AGO 2 YEARS AGO 1 YEARS AGO Today
Upper Quartile Funding
Funding
No Funding
WHEN MEASUREMENT WAS TAKEN
N
611
N = 611 companies
Brought to you by

37. Funding helps with growth…

39. …but only so far.

41. “Don’t focus on competition”

42. CONSUMERS ARE GETTING HAMMERED
Number of Competitors in First Year in Business
Companies started more than a year ago had far fewer competitors in their space than companies
started today.
AVERAGE#OFCOMPETITORSINTHEIR1STYEAR
AGE OF COMPANY
2016 SOFTWARE MARKET SURVEY
0
5
10
5 YEARS OLD 3 YEARS OLD 1 YEAR OLD
9.7
4.8
2.6
N = 1432 software founders and executives
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43. CAC COMPETITION BENCHMARKS
CAC Lower Amongst Competition Focused Companies
Customer acquisition cost (CAC) has increased significantly over the years due to market saturation of
marketing vying for consumer attention, but CAC amongst competitor focused companies is lower.
BLENDEDCACRELATIVETOFOURYEARSAGO
SOURCE: 2018 PROFITWELL CAC STUDY
0%
15%
30%
45%
60%
5 YEARS AGO 4 YEARS AGO 3 YEARS AGO 2 YEARS AGO 1 YEARS AGO Today
Overall
Competitor Marketing Strategy
WHEN MEASUREMENT WAS TAKEN
N
507
N = 507 companies
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44. PRODUCT COMPETITION BENCHMARKS
NPS is Lower for Competitor Focused Product Teams
NPS is falling overall, but companies who are focused on competition from a product perspective are
seeing lower NPS scores overall indicating you shouldn’t focused on competition to build product.
AVERAGENPSSCORE
YEARS AGO
SOURCE: 2018 COMPETITOR STUDY
0
7
13
20
27
33
40
5 YEARS AGO 3 YEARS AGO 1 YEAR AGO
5.22
12.08
24.11
10.2
19.5
33.8
Overall
Competitive Product Strategy
N = 231 companies
N
231
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45. “Work life balance is important.
Founders need hobbies.”

46. FOUNDER IMPACT STUDY
Hard to Grow Quickly Without Being All In
Companies with Founders who score high on our work-life balance index tend to have companies who
are growing much slower than those who score low on the work-life balance index.
MIDSPREADYOYGROWTH%
SOURCE: 2018 PROFITWELL FOUNDER IMPACT STUDY
0%
25%
50%
75%
100%
2012 2013 2014 2015 2016 2017
49.3%
55.7%54.1%
45.3%
47.9%
51.4%
30.9%31.8%
27.5%29.4%
32.2%32.7%
Balanced All In
N
182
N = Minimum of 182 companies per segment pulled from the middle 2/3 of companies in terms of
growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate.
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YEAR MEASUREMENT WAS TAKEN

47. FOUNDER IMPACT STUDY
Companies with Founders with a Hobby Grow Slower
Founder who have a hobby they dedicate an average of 10 hours per week to tend to have slower growing
companies compared to Founders without a hobby or ones that take up less than 10 hours per week.
MIDSPREADYOYGROWTH%
SOURCE: 2018 PROFITWELL FOUNDER IMPACT STUDY
0%
25%
50%
75%
100%
2014 2015 2016 2017
51.2%53.1%54.1%
46.2%
40.5%43.0%
37.0%38.9%
Hobby No Hobby
N
182
N = Minimum of 182 companies per segment pulled from the middle 2/3 of companies in terms of
growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate.
Brought to you by
YEAR MEASUREMENT WAS TAKEN

48. • Funding requires scalpel, not sledgehammer thinking
• Competition thinking will help unit economics, but not product
• Work-life balance and hobbies likely will mean slower growth
BUILDING A COMPANY IS
INSANELY TOUGH
— RETHINKTHECOMPANYCLICHES
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49. Brought to you by
Product Problems

50. “Focus on one product for growth”

53. “Features = growth”

54. The relative value of features is declining.

55. THE MARKET IS DROPPING OUT BENEATH US
Consumer Willingness to Pay has Declined Over Time
Software willingness to pay has declined significantly over the past few years due to increased options
and higher demands.
WTPAS%OFWTP4YEARSAGO
SOURCE: 2017 CONSUMER WILLINGNESS TO PAY STUDY
0%
30%
60%
90%
120%
5 YEARS AGO 4 YEARS AGO 3 YEARS AGO 2 YEARS AGO 1 YEAR AGO TODAY
Core Features
Single Sign On
Integrations
Analytics
WHEN MEASUREMENT WAS TAKEN
N = Varies by line, but minimum of 10,000 customer respondents per line
N
921k
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56. You need value metrics.

59. “Steve Jobs didn’t talk to
customers…you don’t need to either”

60. Brought to you by

63. We’re building the wrong product.
Brought to you by

64. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
THE MARKET IS DROPPING OUT BENEATH US
Measuring consumer sentiment to what we’re building
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
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65. 2017 SOFTWARE MARKET SURVEY
THE MARKET IS DROPPING OUT BENEATH US
Measuring consumer sentiment to what we’re building
Relative Value of Attributes
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66. 2017 SOFTWARE MARKET SURVEY
THE MARKET IS DROPPING OUT BENEATH US
Measuring consumer sentiment to what we’re building
Relative Value of Attributes
• Taste
• Country of Origin
• Temperature
Brought to you by

67. 2017 SOFTWARE MARKET SURVEY
THE MARKET IS DROPPING OUT BENEATH US
Measuring consumer sentiment to what we’re building
Relative Value of Attributes
• Taste
• Country of Origin
• Temperature
Willingness to Pay
• Price elasticity for a cup of coffee
Brought to you by

68. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
THE MARKET IS DROPPING OUT BENEATH US
Measuring consumer sentiment to what we’re building
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Taste
Brought to you by

69. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
THE MARKET IS DROPPING OUT BENEATH US
Measuring consumer sentiment to what we’re building
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Taste
Temperature
Country of Origin
Brought to you by

70. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
THE MARKET IS DROPPING OUT BENEATH US
Measuring consumer sentiment to what we’re building
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Taste
Temperature
Country of Origin
Brought to you by

71. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
WE’RE BUILDING THE WRONG PRODUCT
Calculating the expected impact of product on growth
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Differentiable Features
High Value/High WTP
Brought to you by

72. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
WE’RE BUILDING THE WRONG PRODUCT
Calculating the expected impact of product on growth
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Differentiable Features
High Value/High WTP
Add-Ons
Low Value/High WTP
Brought to you by

73. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
WE’RE BUILDING THE WRONG PRODUCT
Calculating the expected impact of product on growth
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Differentiable Features
High Value/High WTP
Add-Ons
Low Value/High WTP
Core Features
High Value/Low WTP
Brought to you by

74. -50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5
Revenue Drivers
2017 SOFTWARE MARKET SURVEY
WE’RE BUILDING THE WRONG PRODUCT
Calculating the expected impact of product on growth
DEVIATIONFROMMEDIANWTP
RELATIVE PREFERENCE MAGNITUDE
Differentiable Features
High Value/High WTP
Add-Ons
Low Value/High WTP
Core Features
High Value/Low WTP
Trash Land
Low Value/Low WTP
Brought to you by

77. CLEAR WINNERS AND LOSERS
Comparing Cust Dev Strategies of Companies
Acquisition based growth companies grow at a smaller rate than those with a balanced growth
approach (growth from all three pillars of growth).
YOYGROWTHRATE
SOURCE: 2017 STUDY ON CUST DEV
0%
25%
50%
75%
100%
2012 2017
44.821%
31.72%
Minimal Customer Development
Aggressive Customer Development
N
687
N = Minimum of 687 companies per segment pulled from the middle 2/3 of companies in terms of
growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate.
Brought to you by

78. CLEAR WINNERS AND LOSERS
Comparing Cust Dev Strategies of Companies
Acquisition based growth companies grow at a smaller rate than those with a balanced growth
approach (growth from all three pillars of growth).
YOYGROWTHRATE
SOURCE: 2017 STUDY ON CUST DEV
0%
25%
50%
75%
100%
2012 2017
59.08%
44.821%
17.43%
31.72%
Minimal Customer Development
Aggressive Customer Development
N
687
N = Minimum of 687 companies per segment pulled from the middle 2/3 of companies in terms of
growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate.
Brought to you by

79. • You probably need multiple products sooner than later (at least
for growth)
• Features are no longer keys to brute force growth
• You need to understand your customers better to properly
build the right product these days
PRODUCT FOCUS HAS NEVER
BEEN MORE IMPORTANT
— PRODUCTREQUIRESFOCUS
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80. Brought to you by
Growth terribleness

81. “Discounting is effective”

84. “Brand is for retail products”

87. “Acquisition is everything”

88. WE MAKE MATTER SO MUCH WORSE
Which Pillar is the Most Important in Your Business
Founders and software executives overwhelmingly put their support behind acquisition based growth
instead of caring about monetization or retention.
%OFTOTALRESPONDENTS
PILLAR OF THE BUSINESS
2017 SOFTWARE MARKET SURVEY
0%
50%
100%
MORE LOGOS MORE $ PER CUSTOMER KEEP CUSTOMER LONGER
21.1%
7.58%
71.32%
N = 1578 software founders and executives
N
1578
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89. Acquisition is just to survive now,
not to grow.

90. WE FOCUS ON THE WRONG FUNDAMENTALS
Impact of Improving Each Pillar of Your Business
Monetization and retention based growth far outpaces acquisition based growth. This impact is getting
greater over time.
%IMPACTONREVENUE
SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS
0%
5%
10%
15%
20%
ACQUISITION MONETIZATION RETENTION
2.35%
3.32%
2008 - 2012 2013 - 2016
N
734
N = Data from 734 software companies
PILLAR OF THE BUSINESS
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91. WE FOCUS ON THE WRONG FUNDAMENTALS
Impact of Improving Each Pillar of Your Business
Monetization and retention based growth far outpaces acquisition based growth. This impact is getting
greater over time.
%IMPACTONREVENUE
SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS
0%
5%
10%
15%
20%
ACQUISITION MONETIZATION RETENTION
9.32%
15.89%
2.35%
6.71%
12.7%
3.32%
2008 - 2012 2013 - 2016
N
1.4k
N = Data from 1.4k software companies
PILLAR OF THE BUSINESS
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92. • Discounting is terrible. Stop it.
• You need at least the semblance of a brand strategy.
• Pricing/Retention are more important than ever
GROWTH IS IMPOSSIBLY HARD
GIVEN THE DENSITY OF THE MARKET
— GROWTHISTOUGH
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93. Brought to you by
Fundamentals > Best Practices

94. Brought to you by
A lot of you aren’t going to focus on any of this.

95. You
• Hungry to grow
• Some great design
• Low money
Brought to you by

96. Brought to you by
This breaks my heart, because
you have everything to win.

97. Brought to you by
You just have to put in the work.

98. pc@profitwell.com
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