Episode Overview

Podcast: The Path to Exit
Host: Mike Lyon, Vista Point Advisors
Guest: Mike Greco, Managing Director, Vista Point Advisors
Episode: 22 | Balancing SaaS Growth: Upselling vs. New Customer Acquisition vs. Pricing
Date: November 12, 2024

This episode dives deep into the major strategies for SaaS growth, specifically focusing on how founders should allocate resources between upselling/cross-selling existing customers, acquiring new customers, and price optimization. Through practical insights, firsthand stories, and actionable guidance, Mike Lyon and Mike Greco break down the real-world pros, cons, and downstream valuation impacts of each growth lever—offering a comprehensive playbook for founders scaling towards a successful M&A transaction.

Key Discussion Points & Insights

1. The Three Vectors for SaaS Growth

Timestamps: 01:11–01:40

Mike Greco identifies the top three avenues:

• Upselling/Cross-selling (Within existing customer base)
• New Customer Acquisition (Bringing in new logos)
• Price Increases (Raising prices for current or new customers)

Quote:
"Not all growth is created equal on that side and valued the same way."
— Mike Greco (01:11)

2. New Customer Acquisition: Pros & Cons

Timestamps: 01:40–03:16

• Pros:

  • Increases market reach and brand dominance (“land grab” effect)
  • Generates network effects and buzz as existing customers vouch for the product
  • Can create positive flywheel momentum

• Cons:

  • High cost of customer acquisition (CAC)
  • Lengthy sales cycles and significant marketing spend
  • Most challenging for founders lacking sales/marketing backgrounds
  • May be the only viable option for single-product companies

Quote:
"There's huge CAC associated with that. Depending on your sales cycles, it could be excruciatingly long... it can be harder for founders to get those new customers."
— Mike Greco (01:50)

3. Upselling/Cross-Selling: Capturing Wallet Share

Timestamps: 03:16–06:13

• Pros:

  • Deepens customer relationships; harder to be replaced
  • Drives “natural” expansion when products/modules align with customer needs
  • Lower CAC because the relationship/existing contract is already established
  • Increased value provided breeds loyalty and expanded use

• Cons:

  • Limitations to what an existing customer will pay for
  • Upselling is easier when offering platforms; harder for point solutions
  • Slower growth potential compared to new customer acquisition
  • Need for specialized personnel—hybrid between customer support and sales

Quote:
"If you can capture more wallet share and get deeper into an organization, it's harder for you to get removed from that organization."
— Mike Greco (04:12)

4. Pricing Increases: The Underrated Lever

Timestamps: 06:13–08:54

• Founder Reluctance: Many founders are hesitant to raise prices for fear of losing customers; often underpricing initially.
• Types of Price Increase Strategies:
  1. No increases (rarely optimal)
  2. Rare, large jumps (e.g., a 30% increase every 8 years)
  3. Regular escalators (2–3% annually, sometimes indexed to inflation, is most sustainable)
• Investor/Buyer Perspective: Large, infrequent price hikes are discounted by buyers. Sustained, moderate increases get more credit—especially if part of a long-term practice.
• Key Insight: Price increases open operating leverage to fund other growth vectors and are considered healthy if kept at sustainable levels.

Quotes:
"Pretty much every buyer takes price up and it pretty much works every time."
— Mike Lyon (06:13)

"If 7 to 10% of your growth is attributable to pure price increases, you're starting to get into a calculus that you're discounting your NRR growth... it's just a good healthy thing to do and something you want to balance."
— Mike Greco (07:36)

5. Structuring Your Business for Efficient Growth

Timestamps: 09:54–12:36

• Product & Pricing Model: Must support natural upsell and cross-sell (e.g., tiered offerings, modularization, usage-based pricing)

• Team Segmentation:

  • Customer support vs. customer success vs. sales
  • Upsell often requires its own, distinct approach and incentives

• Feedback Loops:

  • Close interaction between support, success, sales, and engineering is vital
  • Ensures that product evolution aligns with market needs and drives adoption

Quote:
"Making sure you create a pricing model that creates natural evolution and expansion inside your customers is really important."
— Mike Greco (09:54)

6. Diligence & KPIs: How Buyers Assess Growth

Timestamps: 13:24–16:14

• KPI Focus: Buyers/investors dig deeply into customer acquisition, retention, LTV:CAC, churn, and growth sources
• Balance Risks: Over-focus on new logos can increase churn (poor fit customers or overselling)
• Quality of Revenue: Not all revenues are equally valuable; sticky, expanding, and low-churn revenue is prized
• Investor Preferences: Private equity typically looks to accelerate already-solid metrics, not “fix” businesses from scratch

Quotes:
"No founder wants to be whittled down to the success of my business is sitting on a spreadsheet. But the fact of the matter is the spreadsheet, the KPIs is a manifestation of what you're doing in the business."
— Mike Greco (13:24)

"Trading 5% of new customer acquisition growth and investing it into a customer success team to get NRR net revenue retention from 100 to 105 might seem minor, but could make huge differences in impacting what valuation looks like."
— Mike Greco (16:14)

7. Memorable Guidance & Takeaways

Timestamps: 16:14–18:11

• Not all revenue is equal—founders must focus on Ideal Customer Profile (ICP)
• Small, poor-fit customers often generate outsized churn and support burden, dragging down overall metrics
• Buyers want to see “good raw material” (consistent growth, healthy upsell/cross-sell dynamics, disciplined customer selection)
• Private equity focuses more on accelerating pricing, packaging, and sales; founders should not assume acquirers will “fix” underdeveloped upsell strategies or invent the next product for them

Quote:
"If you look closely at those customers, usually they're the small ones, usually they're the ones that aren't a good fit. So you oversold, you got them. But if you actually looked at it on a margin basis, there's a good chance you're actually losing money on those customers because they also account for a disproportionate number of the calls to customer service."
— Mike Lyon (16:14)

Notable Moments

• Clear Framework for Growth:
  Mike Greco’s breakdown of the growth levers (01:11–01:40) offers a simple tool for founders to assess where their focus should be.
• Sustainable Price Increases:
  The discussion of credit given in M&A for ongoing moderate price escalators (07:36–08:54).
• Team Structure for Success:
  Insights into team division between support, sales, and success as levers for maximizing upsell/cross-sell (09:54–12:36).
• Investor Mindset on "Good Revenue":
  Candid take on buyers' desire for quality over sheer quantity of revenue (16:14–18:11).

Final Thoughts

The episode provides a masterclass on the balancing act SaaS founders must perform between the main growth vectors. Key takeaways are: quantify and monitor your growth sources, prepare for buyer diligence by optimizing KPIs, invest in price optimization and customer success—not just acquisition—and build a structural foundation for natural expansion. These strategies not only accelerate growth but also maximize valuation at exit.

Useful for tech founders prepping for scale or exit, this episode cuts through theory to actionable, market-tested insight—directly from seasoned M&A practitioners.