Salesforce CEO Benioff regretted scaling back in 2009

Sending
User Review
0 (0 votes)

Here’s the deal: if you cut your sales hiring and scale back your expectations — you may end up regretting it. Marc Benioff did.

In 2008–2009, at the height of the panic, I was at Salesforce and Marc Benioff responded to the (much bigger and real) global economic crisis by cutting back on expenses and hiring fewer sales people.

We had just crossed $1B in ARR — and despite ups and downs would keep growing to $10B in ARR and now on the path to $20B.

He regrets it to this day.

Behind the Cloud

Here is Marc Benioff talking about it one week ago:

I think that really played out in a surprising way with a level of strength in 2009, 2010 and 2011 the financial crisis. That if you look at our revenue curves, it looks like it never happened because whether our bookings are up or down one quarter or the next, the strength of our revenue model and the resulting cash flow and commitment we’ve had to incremental operating margin over 21 years has really paid out to have a level of durable capability for the company that I think is been unprecedented in the technology industry.

This applies only to fast growing SaaS or similar companies. In some ways, fast growing SaaS companies were built to be an exception.

Are you growing really fast?

If you are a SaaS company or similar, it takes 2–3 quarters for your sales reps to become productive. If you cut hiring of sales people now, the impact won’t be felt now but a year from now when most likely COVID 19 would be a distant memory like SARS or MERS.

The real question you need to ask first is. Are you growing really fast — say over 50% growth for Series B/C company. Because if you are, and what you sell is something Salesforce, Slack, Workday or whatever — you are probably best of — by continuing to grow. Maybe even double down since your competitors will likely struggle to raise capital even.

(But don’t be delusional. Most companies are not fast growing, high margin SaaS businesses that know how to execute. Standard restrictions therefore apply.)

The shift to cloud did not slow down in 2009 and it won’t in 2019

The move to cloud and other secular shifts are not going to slow down for Coronavirus.

If, however, you are growing reasonably (but not high by your standards) or have a business that has dependence on travel (Booking.com, Uber, AirBnB) or rely on discretionary spending by consumers — all the advice here applies.

But if you are growing like Salesforce did, keep going.

-Fin-

Epilogue

“When someone congratulates me on a good quarter they don’t realize those results were fully baked about three years ago.”

Jeff Bezos, Amazon

(Cross-posted @ Storm Ventures)

Leave a Reply