Nordic B2B
Software Growth
Against the odds, Nordic B2B software companies have performed well throughout the pandemic.
Against the odds, Nordic B2B software companies have performed well throughout the pandemic.
At Monterro, we felt it was time our community came together to share its insights and experiences of this unusual year – so we launched our Nordic B2B Software Growth Benchmark survey.
The response has been fantastic. We had over 125 respondents across the entire Nordic B2B software sector (companies ranging from €0-1M through to >€50 in revenue).
And, since we know the real value of a piece like this lies in the quality of its respondents – our survey demographic is predominantly CEOs, Founders, and Co-founders.
But getting great quality data is only half the battle – insight is what drives businesses forward.
So we’ve packed this report full of expert advice to help you:
- Benchmark yourself against Nordic peers on key metrics
- Understand the region’s challenges (and how to overcome them)
- Find new ways to grow your business
- CEOs, Founders, and Co-founders68%
- Other C-levels32%
Snapshot of key findings
The results from the Nordic B2B Software Growth Benchmark gave us a full picture of the market, but five things stood out. We’ve identified what the ‘growth champions’ are doing differently. Let’s dive in.
Growth is the single most important metric for the companies we surveyed.
- 77% placed it as a top 3 metric.
- 25% of the companies grew more than 40% in 2020, and 29% are expected to increase their growth rate 2021.
Upsell/cross-sell on existing customer bases was the most common activity to accelerate growth 2021.
- Despite this, just 19% of the companies surveyed have net retention as a top metric.
- A further 1 in 4 aren’t measuring their net retention at all.
Internationalisation is high on the agenda for many companies to accelerate growth, but also a major obstacle.
- 40% placed internationalisation at top of agenda.
- 40% struggle with it.
Sales Execution is a major challenge for all of our survey respondents.
- And over 45% of respondents said it was also their top scale-up priority.
Hiring and keeping the best talent are a particular obstacle for small and mid-sized companies.
- Over 54% of companies with revenues €5-10M identified it as a key challenge.
Growth is the #1 metric for the Nordic software companies
Growth is paramount
Growth is the single most important metric across all company sizes. 77% of all surveyed companies rated it as a top 3 metric.
Companies with €0-1M in revenue placed cash balance second – such companies may be dependent on external financing for continued operations owing to their developmental stage.
Profitability becomes increasingly important for larger and more mature companies but still doesn’t take top spot compared to growth.Recurring revenue drives growth
Companies with a higher share of recurring revenues also reported higher growth rates for 2021, which highlights the stability of the B2B software industry.
This is especially true of smaller companies (<€5m in revenue) who are expecting to increase their growth rate during 2021 vs 2020.
Are you a growth champion?
A growth champion is a company with a growth rate of 40% or more in a fiscal year. Roughly 25% of the companies we surveyed fell into this category.
Let’s explore what they did differently…
What makes a growth champion?
Growth champions invest well. Early expansion to new geographies and/or verticals are critical to maintain a high growth rate – growth champions make sure this is a priority.
And, since returns can come several years later with SaaS businesses – many growth champions are operating at negative or break-even profitability to fund future growth.
Share of recurring revenue is higher for growth champions. Focusing on building true recurring revenue enables sales teams to deliver on higher growth targets.
Growth champions build larger sales and marketing teams. Sales and Marketing make up 24% of the organisation for growth champions vs 16% for other survey participants.
| Growth champions | Others | |
|---|---|---|
| Avg. revenue, EURm | 5.9 | 13.5 |
| Avg. EBIT margin % | 0% | 11% |
| Avg. share of recurring revenue | 77% | 69% |
| Avg. share of sales and marketing FTEs | 24% | 16% |
Growth champions: smaller deals and better measurement
The average Annual Contract Value (ACV) per customer is lower for growth champions
These KPIs highlight whether your business model can support its growth long term.
- Growth champions achieve a high sales velocity by focusing on a larger volume of smaller deals – creating strong growth numbers.
- Gross churn rates are similar across the board but growth champions report a higher net revenue retention.
- This indicates they’re monetising their existing customer base more effectively through upselling and cross-selling.
Growth champions adopt key SaaS metrics
Growth champions embrace metrics such as:
- Customer Acquisition Cost-Payback (CAC-payback)
- Lifetime Value to Cost of Acquisition (LTV/CAC)
- Net Revenue Retention
| Growth champions | Others | |
|---|---|---|
| Avg. ACV per customer, EUR | 27k | 39k |
| % share with focus on SMB customers | 47% | 28% |
| Avg. gross churn (value) | 4% | 4% |
| Avg. CAC-payback (in months) | 9.0 | 8.3 |
| Avg. net revenue retention | 113% | 107% |
| Key metric: Sales or bookings | 15% | 25% |
| Key metric: CAC-payback | 26% | 7% |
| Key metric: Net revenue retention | 26% | 16% |
Upsell/cross-sell on existing customer base is top of the agenda
“Customer Success Management is a mindset, it needs to permeate the whole organisation for it to actually be effective.”
Upsell and cross-sell is key, but few track customer retention
Our results showed that expanding upsell on existing customer bases is top of the agenda to accelerate growth, with 44% of businesses listing it as their primary concern.
In spite of this, only 19% have customer net retention as a key metric and only 1 in 4 knew their net retention.
Larger companies have an increased focus on net retention and also have a higher percentage of their employees working in customer success or professional services.
Combined, these two factors can unlock great value – businesses can grow with their existing customers. But good execution is needed to avoid increased service costs affecting margins.
The importance of Net Revenue Retention
Net revenue retention is a core metric for successful SaaS companies.
Strong SaaS companies can grow without adding any new customers. The top quartile companies in our survey reported an impressive net revenue retention of over 120%.
Interestingly, smaller companies in the survey reported higher net revenue retention.
This underlines how difficult it is for larger companies (who have more mature customers) to grow unless they have a great customer success team.
Net retention is built on customer success
There are many factors that contribute to a strong net revenue retention. But investing in a good Customer Success Management (CSM) strategy is key for high customer retention.
Here are our best tips.
Give the CSM team clear responsibilities and ensure that a culture of transparency and accountability permeates the entire organisation.
CSM representatives should start building customer relationships right from the onboarding phase.
A good CSM persona has a “farmer” quality – but don’t forget they’ll also need to close deals and hit targets.
When building a department from the ground up, start with generalists who can handle all elements of customer success. As you grow, create specialised roles so you can channel your team member’s skill sets appropriately.
Make sure the CSM team focuses on strategic level relationships. Keep customer support issues separate. This means you’re providing maximum value to your clients.
You can’t improve what you can’t see. So make sure you have a good measurement strategy. This should include customer health scorecards which help streamline and standardise the selling process, and to identify any issues early on.
Internationalisation is key
Internationalisation: opportunity vs. obstacle
40% of the software companies we surveyed placed international expansion at the top of the agenda.
But it isn’t all smooth sailing – in fact 40% in our survey also listed it as a major obstacle to scaling their business.
The dos and don’ts of internationalisation
International expansion brings a raft of new opportunities and new challenges.
We’ve assembled some of the lessons our experts learned the hard way.
Adopt an opportunistic mindset
Nordic companies often expand to other Nordic countries first. But getting the best market fit for your product always outweighs proximity.
Identify warm leads in other regions, pre-existing relationships, and alignment between your software’s capabilities and the region’s needs.
Keep your new region connected
Problems can quickly set in if you fire and forget your new regional teams, so commit to visiting your new divisions. And not just for a meeting – spend quality time with them regularly.
Don’t take on too much too soon
Start small and take things one region at a time. Remember, you don’t know what you don’t know. Identify a vertical that you can gain success in, then land and expand.
Don’t overlook local insight
When it comes to hiring – you need to balance regional insight against knowledge of your company culture. You’ll need a minimum of two people to start with:
Sales: Hire locally as they’ll know the culture of the region.
Customer support/product expert: Move from ‘the mother ship’ as they know the culture of the company.
Sales execution is the top challenge when scaling a software business
Sales Execution
Sales execution is the top challenge for all types of companies according to our survey.
Sales execution is how you guide each opportunity through the sales funnel and ultimately close the deal.
A disciplined sales execution process is key for scaling and maintaining sustainable revenue growth.
Laying your sales execution foundations
In order to execute your sales goals, you’ll need the right sales methodology.
While there are hundreds to choose from, there are four fundamentals you need to have in place regardless.
Standardise these definitions with marketing, inside sales, or sales development teams. Define your markets and verticals (and be very specific about them). Address how handovers will be dealt with.
Identify the different stages of the process, what needs to happen in each, and who is responsible for making it happen. Track progress across the process.
Nurture leads with relevant, engaging content to build relationships and trust. This can improve future conversion rate.
There are many but here are a few we suggest: Pipeline volume (number of qualified opportunities). Sales cycle length (time from market qualified lead to closed deal). Conversion/win rate (number of opportunities won). These metrics allow you to track your Sales Velocity (how fast you’re making money) which is essential for scaling and growing your sales.
Spotlight on CAC-payback
CAC-payback is the best measure of the efficiency of your go-to-market engine. It measures how fast you recoup all direct costs of acquiring a customer.
For the 85% (approx) of companies who measured their CAC-payback, the median payback period was 6-9 months.
As a rule of thumb, CAC-payback should be around 12 months. 36% of the respondents had a CAC-payback of between 6-18 months.
<9 months: While these metrics are impressive, it also indicates that these companies leave money on the table. E.g. Through insufficient investment in sales and marketing.
>18 months: Indicates recouping growth investments takes too long, leading to increased operational risk and a higher need for capital to fund growth.
The smaller companies surveyed reported healthier CAC-payback numbers, highlighting the benefit of lean sales and marketing cycles, and agile approaches.
Small and mid-sized companies struggle to find and keep talent
Hiring and keeping talent
Our survey results show that hiring and keeping talent is an area that divides the market.
While hiring and keeping talent becomes an increasingly tricky challenge for companies as they grow, once they reach >€10M revenue there is a clear drop off point.
This indicates that hiring and employee retention challenges remain for small and mid-sized businesses such as:
- A lack of strong employer branding to attract people.
- A perceived lack of job security and career progression when compared with larger organisations.
- An expectation that salaries will be lower or ‘perks’ packages will be less comprehensive.
Strategies for hiring and keeping talent
To help small and mid-sized companies overcome recruitment and retention challenges, we’ve put together a list of strategies:
Involve anyone that will have a say in the recruitment early on, and put the SMART goals for the position in the brief.
What’s it actually going to be like working for you (beyond the bean bags)? What’s “the why” of your company? What’s your company trying to achieve?
Clearly communicate what growth opportunities there will be, what skills employees can learn, and what their development path might look like. Consider if you’ll offer shares or stock-options, and make sure the salary is competitive.
This is a big thing you’re outsourcing, so get references for the person you’re trusting with the task.
Key takeaways
And that’s it. At Monterro, we are firm believers that we are stronger when we share our insights. We hope this has given you a lot of food for thought to assist you on your B2B software growth journey.
Here’s a reminder of our key takeaways…
To master growth, learn from the growth champions
- Sales and Marketing are vitally important, but it takes real investments in the organisation to achieve that growth. And don’t forget to adopt key SaaS metrics.
International expansion starts with calculated courage
- Look for the best market-fit for your product rather than your closest market options, adopt an opportunistic mindset, be bold, focus, and don’t rush.
Do your homework before hiring
- Get internal alignment before you advertise, assess your company culture, and make sure offers are attractive.
Accurate upsell/cross-sell measurements are vital
- Ensure that customer retention is a key metric, hire ‘farmers’ with business skills as CSM representatives, and develop a rock-solid CSM program around them.
Sales execution needs a solid foundation
- Define what makes a qualified lead, establish a clear sales process, develop nurture campaigns, and don’t forget to measure CAC-payback.
About the respondents
Additional graphs and tables of our results.
More about the respondents
- >90% from domestic market35%
- >90% from the Nordics27%
- >90% from Europe15%
- Global35%
- On-prem9%
- SaaS on private cloud17%
- SaaS on public cloud50%
- Hybrid23%
- 0-30%11%
- 30-50%9%
- 50-70%19%
- 70-90%25%
- >90%36%
Company structure
Key metrics
| €0-1M | €1-5M | €5-10M | >€10M | |
|---|---|---|---|---|
| Growth | 65% | 80% | 82% | 80% |
| Profitability | 22% | 27% | 45% | 57% |
| Sales pipeline | 30% | 41% | 27% | 20% |
| Sale/ bookings | 35% | 20% | 17% | 23% |
| Cash balance | 48% | 17% | 9% | 0% |
| Customer net retention | 13% | 15% | 23% | 27% |
| Customer churn | 22% | 20% | 18% | 23% |
| NPS/ Customer satisfaction | 13% | 17% | 9% | 23% |
| CAC/LTV or CAC payback | 9% | 15% | 18% | 7% |
| ARPA | 4% | 12% | 5% | 7% |
| Utilization and Billability | 0% | 2% | 0% | 13% |
| Sales per quota bearer | 4% | 0% | 5% | 0% |
| Other | 4% | 2% | 9% | 3% |
Top on the agenda to drive growth
| €0-1M | €1-5M | €5-10M | >€10M | |
|---|---|---|---|---|
| Hiring and retaining talent | 39% | 44% | 55% | 30% |
| Sales executions | 61% | 49% | 14% | 43% |
| Succeeding globally | 30% | 34% | 45% | 40% |
| Go to market strategy | 26% | 39% | 23% | 37% |
| Low awareness of solution | 48% | 37% | 23% | 17% |
| Product execution | 22% | 26% | 23% | 33% |
| Transforming on-prem to SaaS offering | 4% | 7% | 23% | 20% |
| Funding | 22% | 17% | 9% | 3% |
| Competitive pressure | 4% | 12% | 14% | 17% |
| Churning customers | 4% | 2% | 9% | 10% |
| Changing customer demands | 4% | 5% | 9% | 7% |
| Other | 4% | 2% | 5% | 7% |
| I don’t know | 0% | 0% | 5% | 0% |