Harvest to Growth

How to rebuild a growth engine in a neglected software business without destroying the P&L.

The profitable trap

A software business shows 25% EBITDA margins. Revenue is flat, maybe down slightly. The board is comfortable. Cash flow is positive. What’s the problem?

The problem is that you’re harvesting, not building.

Software businesses decline slowly. Recurring revenue creates a long tail. Lose 8% of customers a year and you still have 92% of revenue. The business shrinks but doesn’t collapse. Cut costs to match — reduce R&D, thin out support, let the sales team drift — and margins actually improve.

This can continue for years. Each quarter looks acceptable. The P&L suggests a healthy business generating cash.

But you’re destroying value. The product stagnates. The customer base ages. Retention erodes. New acquisition slows to a trickle. What looks like a profitable business is actually a melting ice cube with good accountants.

The P&L doesn’t reveal this. Revenue, margins, EBITDA — all the standard metrics can look fine while the underlying business deteriorates. You need a different lens to see what’s actually happening.

Recognising harvest mode

Harvest mode has a specific signature. Learn to recognise it.

Revenue is flat or declining, but margins are stable or improving. This is the tell. In a healthy business, flat revenue with improving margins might signal efficiency gains. In a neglected business, it signals cost-cutting masking decline.

Net new customers are negative. More customers leave than arrive. The installed base shrinks. But because existing customers generate recurring revenue, the P&L impact is gradual.

R&D spend as percentage of revenue has declined. The product isn’t evolving. Technical debt accumulates. Competitors pull ahead. Customers notice, slowly, then all at once.

Sales and marketing spend has been cut. No investment in pipeline. The sales team is small, focused on renewals, not expansion. New logos are rare.

Retention is eroding but masked by blended metrics. Overall retention looks acceptable because long-tenured customers stay. But cohort analysis reveals newer customers churn faster. The average is hiding a trend.

Pull these metrics for any software business. If you see this pattern — margins holding while growth investments have been stripped — you’re looking at a harvest.

The danger is that harvest mode can feel sustainable. Cash flows. The team is small and profitable. Why change anything?

Because the business is worth less every year. A software company’s value comes from its future cash flows. A shrinking base with no growth engine has a short future. The P&L shows profit. The DCF shows decline.

The turnaround constraint

Recognising harvest mode is the easy part. The hard part is reversing it.

The instinct is to invest in growth. Hire salespeople. Increase R&D. Launch marketing campaigns. Spend your way back to growth.

This fails for a specific reason: you’ll destroy the P&L before the growth arrives.

Growth investments have payback periods. Hire a salesperson today, they’re productive in six months, their pipeline converts in twelve. The cost hits immediately. The revenue arrives later.

In a high-growth startup, this is fine. You’re burning cash anyway. Investors expect it. The growth rate justifies the burn.

In a harvest-mode business, you don’t have that luxury. The P&L is the only thing keeping stakeholders calm. Destroy it with aggressive investment and you’ll lose support before the turnaround materialises.

This creates the core constraint: you have to rebuild the growth engine while maintaining financial discipline.

This is its own skill, distinct from startup growth, distinct from mature SaaS optimisation. It requires thinking in terms of payback periods, cash conversion, unit economics — not just spend.

Fix the bucket first

The first instinct in turnaround is to invest in acquisition. Get revenue growing. Show momentum.

This is backwards.

If retention is broken, new customers leak out as fast as you pour them in. You’re paying acquisition costs for customers who won’t stay. The unit economics don’t work. You burn cash without building value.

Fix retention first. This is unsexy work. It doesn’t show up in headline metrics for quarters. But it changes the economics of everything that follows.

Start with cohort analysis. What’s the retention rate for customers acquired in each of the last eight quarters? If newer cohorts retain worse than older ones, something in acquisition or onboarding is broken. Find it.

Look at time to value. How long does it take new customers to reach activation milestones? Customers who activate in month one retain at dramatically different rates than customers who take four months. If activation is slow, fix onboarding before you fix acquisition.

Examine churn reasons. Pull the last fifty churned customers. What did they say? Product gaps? Support issues? Wrong fit from the start? The pattern tells you where to invest.

The retention threshold sits around 95% gross retention for most B2B SaaS. Below it, you’re running to stay still — acquisition just replaces churn. Above it, growth compounds. Every percentage point of retention improvement is worth more than the equivalent in new acquisition.

This is counterintuitive. Boards want to see growth. Retention work is invisible. But the maths is clear: a business retaining 90% needs to replace 10% of its base annually just to stay flat. A business retaining 95% needs to replace 5%. Same growth rate, half the acquisition cost.

Fix the bucket before you pour more water.

Rebuild product before you sell harder

With retention stabilising, the next instinct is to scale sales. Hire reps, build pipeline, push revenue.

Still too early.

If the product has been neglected, you’re selling something that doesn’t compete. The sales team struggles to differentiate. Win rates drop. Discounting increases. You acquire customers at worse economics who then churn faster because the product doesn’t deliver.

Neglected products have a specific pattern. Feature velocity has slowed. The roadmap is dominated by maintenance and bug fixes. Competitors have launched capabilities you don’t have. The UI feels dated. Customers are asking for things that aren’t coming.

You need to reinvest in product before you scale sales. Not a complete rebuild — that takes too long and costs too much. Targeted investment in the capabilities that matter most for retention and competitive positioning.

Talk to churned customers. What would have kept them? Talk to lost deals. What did the competitor have that you didn’t? Talk to successful customers. What do they value most?

The intersection of these conversations reveals where to invest. Usually it’s a handful of capabilities, not a complete overhaul. The product doesn’t need to be best-in-class across every dimension. It needs to be defensible in the areas customers care about.

This is where discipline matters. The temptation is to build everything customers ask for. That’s expensive and slow. Instead, identify the three to five investments that would most improve retention and win rates. Fund those. Say no to everything else.

Product investment has a longer payback than sales investment. You won’t see the results for six to twelve months. But without it, sales investment is pouring money into a leaky funnel.

Sequence acquisition investment

With retention stabilised and product competitive, now you can invest in acquisition.

But not all acquisition is equal. Harvest-mode businesses usually have broken unit economics — acquisition costs that don’t justify the customer value. Before you scale, you need to understand the economics by channel.

Pull CAC by acquisition source. Inbound versus outbound. Paid versus organic. Partner versus direct. The numbers will vary dramatically. You’ll find channels with twelve-month payback and channels with thirty-month payback.

Scale the efficient channels first. This seems obvious but harvest-mode businesses often have it backwards. They’re investing in expensive channels because “that’s how we’ve always done it” or because the sales team prefers them.

Payback period matters more than LTV:CAC ratio here. A channel with 3:1 LTV:CAC but twenty-four month payback consumes cash for two years before breaking even. A channel with 2.5:1 LTV:CAC but ten-month payback is self-funding within a year.

In a turnaround, cash is the constraint. Favour faster payback even at slightly lower ratios.

Contract structure is a lever most turnarounds underuse. Moving from monthly to annual billing shifts payback forward by months. Moving from payment in arrears to payment in advance transforms cash dynamics. Multi-year contracts with upfront payment can fund the entire acquisition cost on day one.

These changes feel small. They compound dramatically. A business billing annually in advance can grow twice as fast on the same capital as one billing monthly in arrears.

Price increases are often available. Neglected products frequently underprice relative to value. Customers who’ve been with you for years are paying rates from a different era. A disciplined price increase — communicated well, tied to product improvements — flows directly to margin and funds reinvestment.

The metrics that matter

The P&L will lag. Revenue growth comes after investment, sometimes by quarters. You need leading indicators that tell you reinvestment is working before the headline numbers move.

Retention by cohort. Are newer cohorts retaining better than older ones? This is the first signal that product and onboarding improvements are landing.

Time to activation. Are new customers reaching value milestones faster? Faster activation predicts better retention.

Pipeline coverage. Is the sales pipeline growing relative to target? This leads revenue by one to two quarters.

Win rate. Are you converting more opportunities? This signals product-market fit improving.

CAC payback by channel. Are your efficient channels scaling? Is payback stable as you grow?

Cash conversion cycle. Is cash generation keeping pace with growth? Are billing and collections disciplined?

Track these monthly. The P&L will tell you what happened last quarter. These metrics tell you what will happen next quarter.

The board needs to understand this distinction. Early in a turnaround, the P&L may look worse — you’re investing ahead of returns. The leading indicators tell you whether that investment is working. If retention is improving, activation is speeding up, and pipeline is building, the P&L will follow. If those metrics aren’t moving, the investment isn’t landing — and you need to adjust before more cash goes out.

The multi-year frame

Turnarounds don’t happen in quarters. They happen over years.

Year one is diagnostic and foundational. Understand the true economics. Stabilise retention. Identify product gaps. Clean up operations. The P&L may look worse — you’re investing while revenue is still flat.

Year two is rebuilding. Product improvements land. New acquisition channels scale. Revenue starts to inflect. Margins may compress as growth investment hits. This is the hardest year to hold — the P&L looks worse before it looks better.

Year three is compounding. The growth engine is running. Retention is strong, so growth sticks. Unit economics work, so growth is profitable. Margins start to recover as revenue scales over a more efficient cost base.

This trajectory is predictable. It’s also hard to hold. Boards want improvement every quarter. Investors want growth now. The temptation is to declare victory too early, or to cut investment when margins compress in year two.

The discipline is holding the multi-year frame when quarterly pressure builds. This requires trust — between operator and board, between management and investors. The leading indicators provide the evidence that the trajectory is working. But someone has to believe the story long enough for it to play out.

The integrated discipline

Going from harvest to growth is a specific skill. It requires holding multiple disciplines together.

You need to see what the P&L doesn’t show — the eroding retention, the stagnating product, the broken unit economics beneath the acceptable margins.

You need to sequence investment correctly — retention before acquisition, product before sales, efficient channels before expensive ones.

You need to understand cash dynamics — payback periods, billing terms, working capital. Growth that destroys cash isn’t growth, it’s just spending.

You need to measure what matters — leading indicators that reveal whether reinvestment is working, before the P&L catches up.

And you need to hold a multi-year frame — the patience to let compounding work, the discipline to hold the course when quarterly pressure builds.

This is the Numbers discipline applied to turnaround. Not reporting on the business, but understanding it deeply enough to know where investment will actually create value.

Most declining software businesses aren’t dying because the market disappeared. They’re dying because someone stopped investing. The customers are still there. The value proposition still exists. The growth engine just needs rebuilding.

The P&L won’t tell you this. It will show you a profitable business worth holding. The numbers beneath the numbers show you what’s actually happening — and where to invest to turn harvest back into growth.

This essay synthesises ideas from:

• The Unit Economics Test
• Payback Over Ratios
• Profitable and Broke
• The Retention Threshold
• From Data to Information

See also: Reading Guide for the complete collection of Field Notes.