The nasty side effects of bad PLG
What it costs you to mess up your Growth
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The five claims about PLG are:
You're Artificially Capping Your Share of Wallet
You’re Losing Money on Credit Card Processing Fees
You Miss Out on Valuable Feedback by Not Talking to Customers
PLG Can Only Scale So Far Without a Sales Team
Even PLG Darlings Don’t Fully Rely on PLG
Let’s dig into it:
1. “You're Artificially Capping Your Share of Wallet”
[..] Salesforce's enterprise deals can range in the hundreds of thousands or millions of dollars annually, with complex pricing structures and customized contract terms. Imagine trying to DocuSign your way through such a deal on a web portal?
I’ve seen this understanding from quite a few CFOs and CRO’s over the past years. It’s absolutely correct that this happens rarely to never for really big enterprise deals.
But, closing enterprise deals self-served is not what you should try to do with product-led growth in the first place.
A good product-led growth motion operates with two levers:
Expansion through customer growth: We try to grab enterprise value before it becomes enterprise value over time. Brian Halligan spoke about this at SaaStr (paraphrasing): “Hubspot would not be able to survive at the current valuation with just SMB clients, we survive on the fact that some of these customers become enterprise customers due to their own growth and success over time”.
The working hypothesis behind this statement is that it is much easier to acquire small clients in large numbers and keep them, and scale with them, as opposed to having to switch them at an enterprise level from their existing solution.This is uncomfortable for CFOs and CROs because if you compare the flat acquisition numbers between both your sales and plg funnel, sales almost always win out on paper.
Sales assist rather than replacement: A good PLG motion supports sales to close, not replace it. The truth about any company is that we try to charge as much as we can for the services we offer. That money lives in B2B upmarket segments, and that will never change.
If it’s easy to build and sell, you can’t charge a lot for it because it would be easy to build and sell for your competition as well.
While you can use PLG to reduce your cost of acquisition alone to get a little bit of small business clients in, you’re leaving a lot of money on the table if you don’t leverage its other strengths:A better product: PLG products have much more quantitative data to work with and get transparently and swiftly punished if they don’t deliver value in the market: that’s why Hubspot is easy to use, and Salesforce, after decades, still isn’t (and never will).
A PLG company will therefore more likely prioritize initiatives to make their product easier and more efficient to work with, where a pure SLG (Sales-led Growth) company will prioritize qualitative feedback from Sales only (“We’re missing just this one feature! I promise! Just ship it”)
Sales feedback optimizes acquisition methods in a company and shifts the risk to the customer. PLG companies optimize retention and take the risk on themselves as a differentiator.Way easier to sell: A great PLG product is so much easier to “sell” on its core value because a salesperson can “show” rather than just “tell”. This goes from interactive demos to easy-to-validate claims. “Don’t believe me? Try it out yourself after our call.”
Even if the signature might be happening in a physical sales meeting, the PLG part of your product might still have done the heavy lift, and you might not have noticed it.
The uncomfortable truth about PLG is that you must let go of some control instruments you’re used to. Attribution is way harder. It’s not just either Gary from sales or the website that closed a client; it’s a mix between both very commonly and customers on all segments tend to jump from one channel to another without you ever hearing about it.
This requires more innovative incentivization plans for Sales (which reward expansion revenue) and requires Growth teams to consider more than just onboarding flows and landing page experiments, but the entire customer journey, including Sales and Customer Success.
Having said that, you will absolutely cap your share of wallet if you don’t structure PLG in this way and treat it as a separate function from sales.
2. You’re Losing Money on Credit Card Processing Fees
Credit card processing fees typically range from 2.5% to 3% of the total transaction amount. If your customers are paying for annual SaaS contracts worth tens of thousands of dollars, these fees quickly add up.
He’s absolutely right. But it’s not just a fee problem
As companies scale and hire their first CFO, you can bet your matcha latte that sooner or later, the good ones look into the entire payment setup on two dimensions: cost & risk.
For a scale-up, credit card providers hold a lot of power over you in both good and bad ways. The fees are one thing, but the other is that if your dispute rates go up or Mastercard decides that it doesn’t want to do business with you, you’re at risk of losing your entire business.
Bank wires are in a less volatile environment: banks.
The reality of a PLG business with only monthly subscriptions is that your entire revenue is at risk every month. Everyone has to renew every month with you. This means that technical or external market reasons can ruin your day fast:
As Dave Kellogg once said on my podcast, “You drive really close to the road with PLG”
You have to account for that risk and realize that the convenience you offer to your customers is costing something here.
So it’s not just the transaction fees; you’re introducing a risk to your business that someone has to pay for.
Some good practices for a scaling PLG business are to mitigate:
Drive customers with heavy rebates into yearly plans (reduces risk) and drive down fixed transaction flat fees. A common mistake here is not giving enough rebates, as you might think this is about getting more money from your customers who would otherwise churn. It’s risk management as well.
Offer high-value clients the opportunity to switch their subscription charges to bank wires (as CJ describes) while giving them rebates. (Their CFO will take the win gladly.) The bigger the client, the more likely it is that they will agree to a binding contract, since they can’t switch solutions this fast anyway. Specifically target clients who have increased spend with you recently. Chances are, they didn’t have time to look at that themselves yet.
Deal with it as you start to go past 10 million ARR. It should be your CFO’s number one item to do an audit of the risk and fees (and potentially advocate for building more reserves). If you don’t have Sales / Customer Success, this is the time to explore a first hire to structure a plan.
As before, this is not an either-or deal, and a good example of why you should have both. As much as you cannot afford to collect every payment manually, you can’t afford to have every customer as a subscription payment as you grow.
3. You Miss Out on Valuable Feedback by Not Talking to Customers
“Another great case in point is Airtable. The company began purely as PLG, allowing users to self-serve, set up their workspaces, and pay by credit card. But when they started landing larger accounts, they realized they were missing out on understanding customer pain points—especially from larger teams managing complex workflows.”
I violently disagree with Airtable as an example, but agree on the overall point because it’s so painful and stupid:
No amount of analysis of behaviour and quantitative data will inform you about the intentions of your customers and users.
Imagine you run a gym. You can track the movement of every one of your visitors, how many times they use each machine, and when they come and go, and how many times they use the restroom. Full 100% coverage of someone’s behaviour.
And yet, you still have no idea “why” they come to your gym by looking at this data.
Do they want to become fit?
Do they need it to deal with their anger and go to the gym because of that?
Did their doctor tell them to do it?
Do they want to look better?
Do they go because their friends go to that place, and that’s how they get some together time?
Yet the “Why” is the number one thing to know in order to find a solution for it and differentiate yourself from your competition.
Now think about the complex demands of a B2B organization. You have to talk to people to get a chance of understanding their context and motivations. If you don’t, you cannot build for their motivation.
The right way to do it in a well-integrated PLG motion is:
We talk to sales to form a hypothesis (qualitative)
We validate and weigh the hypothesis against quantitative data (quantitative)
If you are a founder or even product leader, and you don’t talk regularly to customers and sell your product to see what works and what doesn’t: your product will start to suck and fall behind.
Using PLG as an excuse not to have to sell enterprise deals yourself or talk to customers is a cardinal sin. It usually materializes by hiring a sales leader too early and outsourcing that.
You will have more time in the day to build something that no one wants. Ship only what matters.
Customer sentiment is key to that.
Airtable.
Airtable threw out the baby with the bathwater. Their solution was to gut everything about PLG to deal with an obvious problem, which was not to understand their customers and target the big ones.
I can tell you with a painful certainty that it is way easier to fix and add this qualitative understanding through sales into a PLG company than the other way around at scale. It takes time to move upmarket, but it’s definitely manageable.
There’s a reason why almost no Sales-led company manages to integrate a good PLG motion, and it has everything to do with their existing processes and how inflexible they’ve become over time.
That’s not the case for PLG companies; bringing a good growth motion and enterprise sales can be done, even if it takes time. Having said that, I don’t know what Airtable has tried in this regard, but the leadership team didn’t see any other recourse than to gut it completely.
I’d wager they will come back to PLG with time in some form or another.
(Airtable: You can slide into my dm’s <3 )
4. “PLG Can Only Scale So Far Without a Sales Team”
“Here’s the harsh truth: PLG hits a ceiling at a certain point. If you want to move upmarket and land bigger deals, you’ll need an account-based sales team to handle the complexity and relationship-building required for enterprise customers.”
Absolutely, I’d go even further:
It’s almost impossible to scale beyond 10 - 15 million ARR nowadays without sales.
To conclude from that, that Sales is more important than PLG is based on the misconception that it’s either PLG or Sales-led for your acquisition. Sales is still selling a product that has been built, and PLG companies (Slack being an excellent example) tend to have products that are easier to sell because they are easier to use.
CJ says, “Those big deals were done between people.”
I’d adjust the statement a bit: “Those big deals were closed between people (slg) and enabled with a product which proved in the market that it’s useful and wanted (plg).”
Important: The practical advice here is to start layering in Sales in pure PLG companies above 10 million ARR, but not before (exceptions apply ofc). Figure one distribution out first.
Conceptually, it’s absolutely valid to separate the demo part of a sales conversation to be all PLG, while the signature and details are done through high-touch conversations.
If you don’t do any PLG at scale your product is impossible to sell and sucks.
If you don’t do any SLG at scale, your sales conversations are impossible to navigate for B2B buyers, and they don’t even look at you.
You need both.
5. Even PLG Darlings Don’t Fully Rely on PLG
If PLG is so perfect, why don’t even the biggest PLG companies fully rely on it? It’s because they understand the limits of PLG for scaling into large enterprises.
Atlassian is one of the biggest advocates for PLG [..] Despite its claim to fame for having "no sales team, the company has a growing enterprise salesforce to cater to larger customers"
Absolutely correct. I’ve already written above on why there’s no pure PLG company, and it’s frankly annoying as well how a lot of surface analysis from other people are getting this wrong.
There’s no such thing as:
“A product that sells itself for free”
Even Mark Roberge, whom I highly respect, fed this narrative falsely in the past: “You can’t compete with a sales team against a product that has 0$ acquisition cost”.
Ok, you might not have a sales team, but your product is still not built on love and happiness. You’re just investing more into R&D. How is that not a cost to acquire customers?
The problem is how easy it is to attribute the cost of a sales rep to your cost per acquisition, where you cannot do that as easily with a pure PLG product. It’s easy to do a budget like that.
But it’s like the LinkedIn bro’s with their ridiculous posts “Here’s how to spend 0$ on your next marketing campaign” and then they explain to you how you can spend 2000 hours of your personal time so you don’t spend a $.
Free? Really?
This is again about control… Not enough leads? Let a couple of salespeople go/adjust their targets. It’s “easy” in Sales.
It’s a challenge to be a CFO / Revenue Leader in a company that has PLG and SLG combined because everything blends into each other and is not that easy to attribute anymore. It undoubtedly complicates your balance sheet and the board discussions that you have.
But as with everything in business life, long-term revenue comes first in successful companies, and process follows after.
Summary
“PLG will get you out of the gates—validating product–market fit, slashing CAC, and lighting a fire under early adopters. But if you’re shooting for enterprise scale, you can’t kid yourself that logos will sign themselves.”
[..] It’s not an either / or. It’s a better together.
Beautifully said. I’m glad that we seem to get to a more nuanced understanding of PLG that is not just driven by product absolutists who have an unreflected view of “PLG or die” for the clicks.
It’s a cross-functional challenge and a table stake you have to deal with sooner or later. The B2B market is demanding it more and more, and you have to learn as an organization how to do it right, otherwise no one will even consider you when they evaluate you.
Don’t have enough?
CJ and I recorded an episode together recently and I encourage you to give it a listen if you would like to understand more about how the economic situation is affecting us all, whether you care about financials or not.
I respect CJ as a CFO and financial educator in the tech space a lot, and wanted to expand on his viewpoints.
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Great piece Leah. Love the gym analogy.
We need to integrate both approaches nowadays because the buyers keep rejecting the support of sellers in commercial relationships or purchasing decisions, and prefer an autonomous purchasing process until they get confirmation of the value promised, where PLG plays a connecting role to human interaction if needed. But from my perspective, this interaction should be natural, coming from the user, avoiding being forced by the seller.
It's like the nice momentum where I don't need to sell because I am being bought (selling organically on autopilot)
This is thoughtfully written, and perhaps even better than my original piece in terms of "insider knowledge" and golden nuggets. I highly encourage others to read.