Aaron Ross, Jason Lemkin: From Impossible to Inevitable

Systematizing Success

The Seven Ingredients of Hypergrowth You’re not ready to grow … until you

• Nail a Niche.
• Overnight success is a fairy tale.
• Speeding up growth creates more problems than it solves.
• It’s hard to build a big business out of small deals.
• It’ll take years longer than you want.
• Your employees are renting, not owning, their jobs.
• If you’re an employee, you’re letting frustrations stop, rather than motivate, you.

Nail a Niche

“Niche” Doesn’t Mean Small

Lead generation is the # 1 lever that drives revenue growth and can create hypergrowth.

If you can’t predictably go out and generate leads and opportunities where you’re needed, win them, and do it profitably, you’re gonna struggle.

One of the indicators that you’ve Nailed a Niche is that you’re consistently able to find and sign-up unaffiliated customers.

Niche here means focused. On a specific target customer with a specific pain. Regardless of how many types of customers you could help, or how many of their problems you could solve.

Hypergrowth doesn’t come from selling many things to many markets, covering all your bases (really, dividing your energies). Hypergrowth comes from focusing on where you have the best chances of winning customers, making them successful, building a reputation of tangible results, and then growing from there.

Where’s the easiest place for you to build momentum now? What’s the path of least resistance to money for you?

It also means focusing your unique strengths (not all your strengths) where they can create the most value (not any value ), and: Solve a specific pain for An ideal target customer in A believable, repeatable way, With predictable methods to (a) find and (b) interest them.

The Arc of Attention and Trust Gap ideas are vital to understanding why there’s a problem, and what to do about it.

There’s a painful difference to evolve from selling to Early Adopters who trust you, to Mainstream Buyers who don’t. Geoff Moore called this “crossing the chasm.” We call it bridging a Trust Gap.

This is the Trust Gap: The difference between marketing to people who already know us or our brand, and people who don’t, and aren’t willing to invest anything to figure us out. And the difference between being able to market to Early Adopters (15 % of the market) versus Mainstream Buyers (85 % of the market).

Your message has to be simple for them to both understand and easily act on, or else they’ll move on before ever giving it a chance.

Learning how to reframe your ideas to appeal to people’s dinosaur brains makes sense when you consider the tiny window of attention you get. Even if it’s frustratingly hard to do at first, or feels sales-y. You can’t fight the Arc of Attention.

Signs of Slogging

Consumers don’t buy what they need; they buy what they want. But businesses don’t buy nice-to-haves.

It takes a lot of energy to buy and use something new, so if you’re a nice-to-have, it won’t stick. Nice-to-haves fall to the bottom of the “must do” list.

“Sell money” means proving to customers that your product will help them make more money, spend less of it, reduce the risk of losing it, or stay compliant (avoiding fines and legal risk). Demonstrate how spending money with you will make them more money.

If you say you’ll “increase revenue” or “decrease costs,” you sound just like everyone else. What’s equivalent to money in their mind — leads? Close rates? Social activity? Collections?

A distinct learning from this is that while people were interested in purpose and freedom, what they wanted to buy (at least from me) was money, which at the time was through outbound sales consulting. One was a need, the others were nice.

It’s hard to think about much else when you’re struggling to pay the bills.

If you learn how to win at One Thing, you’ll know how to win at the Next Thing.

“Here’s the problem we are the best at solving … with our repeatable solution we have delivered 100 times. Do you have it? No, you don’t have it? Do you know anyone else who might be interested?”

How to Nail It

It’s easier to make the pond smaller than make the fish bigger: It’s easier to retarget, refocus, and reframe yourself than to change your products and offerings. To grow past word-of-mouth marketing, you have to stand out. It’s easier to stand out and win deals in a smaller pond. When you share too many things that you excel at (too many ponds), it’s more likely to confuse prospects than impress them.

Let’s look at what helps determine how ripe a niche is for you.  

• Popular Pain. And the pain has to be common enough. Specialize in a specific pain you solve, but don’t get so narrow that you can’t find anyone that has it.
• Tangible Results. Where can you show concrete or detailed results?
• Believable Solution. Why should they believe you and your claims? There are two sides to this: (1) They have to believe you can deliver, and (2) they have to believe it’ll work for them, including their own ability and capacity to do it.
• Identifiable Targets.
• Unique Genius.

The next steps are going to help you list out, prioritize, dig into, select, and act on a primary and secondary niche.

• Step 1:  Make a List. List your top 5 to 10 customers and/or types/categories of projects by size of deal or impressiveness of results. If people hired you for just one thing, what is it or would it be?
• Step 2: The Matrix. Once you get a broad list together, rate or rank them across five aspects (Popular Pain, Tangible Results, Believable Solution, Identifiable Targets, Unique Genius).

Next, we’re going to break them down into a more detailed matrix. It will help you find blind spots — especially with the “Pain- Solution-Result” breakdown we’ll get to.

Everyone adapts this approach to their own unique situation, but essentially this is the model. Niche: Which opportunity or use case from the list are we talking about?

Popular Pain: A general label of the problem customers need solved.

Power Person: Who are the people you aim to help, and who have the most power over buying your stuff? What roles are the typical decision-maker and influencer/helper?

Business or Personal Pains: What specifically does that one person deal with on a day-to-day basis? Not the company as a whole, but that one person.

Solution: What do they need and want in order to solve this?

Results: What are the identifiable outcomes that customers get? What can you measure, track, or gauge?

Proof: To charge based on value, or to market and sell to Mainstream Buyers, your lead generation and sales teams need proof.

It’s always better to “show” rather than “tell” (stop talking and prove it).

• Step 3: Choose Now pick a primary opportunity to pursue. If you have more than one great one, you can pick a secondary opportunity to test and compare against the first.
• Step 4: Validate
• Step 5: Campaign to Learn Now and Grow Later

If you feel like you are ready to start targeting that niche, you should be clear enough by this point to start a lead generation program around it.

It’s not the leads here that are important — yet. It’s the learning.

Essentially, what you’re doing here is four things:

• Define a target list.
• Decide on how you want to reach out, what’s the minimum required preparation needed before you can start campaigning?
• Finally: Stop procrastinating and just send the first campaign. Speed of learning creates speed to growth.

If you are planning to sell to an enterprise/businesses of any meaningful size: Don’t forget the 20-Interview Rule. The 20-Interview Rule is simple: Before you write a line of code, finalize your niche, or take some other kind of leap, interview 20 real potential customers.

• You need the first five interviews just to truly understand the white space and the current opportunity.
• You need the next five interviews to confirm your pattern recognition.
• You need interviews 11 – 20 to nail your pitch and hone your thesis.

Get narrower. Get to that one thing people really want from you. To whom or when are you most needed? Remove the clutter to make it easier for the right customers to see why they need you.

Your Pitch

No doubt you can find a million formats and templates for elevator pitches on the Internet. Here’s one sample format that’s worked for us: Start by saying, “You know how some people have [problem]? Well, we [solution and/or benefit]. For example, [one sentence case study].”

Geoff Moore (author of Crossing the Chasm) has another template you can also try: For [target customers] Who are dissatisfied with [the current offerings in the market], My idea/product is a [new idea or product category] That provides [key problem/solution features]. Unlike [the competing product], My idea/product is [describe key feature (s)].

When they’re first meeting you, they don’t care about what you do or what stuff you sell — whether you’re SaaS, services, an auction site, mobile, whatever. They only care about what you do for them.

Focus on those customers with a burning need you can solve — not on the ones that think you’re “cool” or who should or could need you.

What kind of person / company most needs what you have to offer?

Create Predictable Pipeline

LEAD GENERATION ABSOLVES MANY SINS

Too many companies obsess over a single form of lead generation and ignore the others.

Partners aren’t a fourth kind of lead. They are a different type of customer. Whether they are channel partners, resellers, marketing partners, or anything else, you’re acquiring and supporting them as customers — or should be.

Seeds—Customer Success

Seeds in many ways are the best type of lead, but they aren’t perfect. Pros: Highly profitable — word-of-mouth leads are the fastest to close and have the highest win rates. Cons: You have much less control over how fast they grow.

The best way to methodically grow your seeds is with a repeatable program or with systems that ensure your customers are successful. This field is now commonly called Customer Success Management or just Customer Success.

Customer Success is not about increasing customer satisfaction, but creating revenue growth.

Target Churn Metrics in SaaS Customer churn (or “logo churn”) of 15 % or less per year, or just over 1 % per month, based on the number of customers who leave. Revenue churn of 0 % or less per year, based on the revenue that leaves and offset by revenue from the customers who buy more. One Customer Success Manager per $ 2 million in revenue, to help you gauge the size of the team you’ll need.

• Rule 1: Customer Success Is Your Core Growth Driver
• Rule 2: Customer Success Is 5 Times More Important Than Sales
• Rule 3: Start Early, Hire Early. In SaaS, Customer Success is a “single-digit hire” — one of the first 10 hires.
• Rule 4: Visit Customers in Person. Must meet on-site with five customers a month (that’s 60 per year). Get two customer badges every year as a bonus (that is, you visit so often they give you your own ID badge). A phone call is not a meeting.
• Rule 5: Customer Success Needs Financial Responsibility and Metrics. One bad assumption is that “a great product will automatically create happy customers”. Customer Success needs to own some financial results: usually at least on retention rates and perhaps even on upsell revenue.
• Rule 6: Evolve Customer Success Goals and Metrics as You Grow

Customer Success Indicators

• Contract data: Customers stagnating, or renewal or key dates coming up
• Support interactions: Lots of low-priority tickets, or customers that have stopped calling
• Billing/payment history: Delayed invoice payments, perhaps due to frustration
• Product and feature usage: Which features are sticky and who’s using them
• Marketing engagement: Unsubscribing to newsletters
• Survey feedback: Negative input from key person
• Sponsor changes: Exec contact leaves, new CMO

Data can’t alert you to every problem: You will always need humans talking to humans to uncover and resolve issues. But this data will help you to: Develop triggers for when to intervene proactively before bad stuff happens.

Standardize interventions so that each Customer Success Manager is using the same set of best interventions. Frustrated customer support agents help create frustrated customers.  Get agents away from the phone: Spending 40 hours a week on the phone and interacting directly with frustrated customers can be a recipe for agent burnout.

Use technology to help customers as well as yourself: Don’t forget that technology is not only about improving the experience for customers but also reducing your costs.

Continuously listen to feedback.

The support team is the voice of the customer. Some organizations overlook the support team and all their valuable knowledge.

Create a career path: Your best employees won’t want to stay in the same job their whole lives; they’ll want to grow.

Inbound marketing has matured enough that we can see the dark side: “inbound lead dependency” and reactive cultures.

Nets—Marketing

Pros and Cons of Marketing-Generated Leads

• Pros: Often easy-to-generate high volumes of leads.
• Cons: Even free leads aren’t “free” — there can be high fixed costs for generating leads (mainly time and salaries)

THREE UNCOMMON APPROACHES OF HYPERGROWTH CMOs

• Complete Funnel: Combine Inbound Marketing and Outbound Marketing Funnels
• Team: Build Revenue Teams, Not Siloed Sales and Marketing Teams
• Measurement: Marketing Needs to Be Measured on Sales and Pipeline, the Goals That Matter

Inbound marketing is pull strategies and Outbound marketing is push strategies.

Your inbound strategy needs to change with the times.

Inbound is seen as the new (er) way and Outbound marketing is seen as the old way. Marketers don’t realize how effective Outbound marketing can be.

Account-Based Marketing is a popular example today of Outbound marketing. You choose the companies you want to target, and based on the tier (usually determined by deal size), you are building one-to-one, one-to-a-few, or one-to-many outreach strategies.

“For the next 10 years, Outbound marketing will be the biggest driver of growth.” — Meena Sandhu

SDR = Sales Development Rep, a junior salesperson that supports the quota – carrying Account Executives. Inbound SDRs respond to marketing leads, Outbound SDRs do the prospecting.

How is it that my performance as a marketer could be measured based on how many “eyeballs”/impressions I got on a specific campaign?

The same goes for:

• Number of website visitors
• Number of social media followers
• Open rates
• Number of top of funnel leads
• Cost per lead, and so forth.

None of these metrics matter on their own and they are not directly connected to the bottom line. Don’t make the mistake of choosing marketing goals that aren’t tied to sales and the business goals overall. What matters to a business is growth in customers, growth in revenue, minimizing churn and increasing LTV, and accomplishing these goals in the most efficient way possible.

Mistake: Overfocusing on Per-Lead Cost, and Ignoring Quality.

The ultimate qualification of a lead s done only by Sales (the Account Executive). Defining Sales Qualified Lead: an Account Executive conducted at least a first Discovery call or Demo, and has “Accepted” it into their pipeline – even if it’s very early (often the case if it came from Outbound). That Account Executive commits to owning and following up on it.

So many companies hire a head of marketing with a strong resume, from another strong company. But they hired someone from corporate marketing, rather than demand generation.

Corporate marketing (such as at Adobe, Google, or Salesforce.com) is all about protecting and promoting the brand after you’re already big.

Demandgen folks are all about the numbers: Spend X dollars and create Z leads, which should be worth five × X dollars in revenue. Demandgen folks can figure out corporate marketing. Corporate marketing cannot figure out demandgen. Ever.

Jon Miller is the cofounder and CEO of Engagio, a platform for Account-Based Marketing (ABM). Previously, he cofounded Marketo.

In 2006, when Jon cofounded Marketo, he was blogging before his product team wrote a line of code. It was simpler to build a content-based brand 10 years ago, before buyers were hyper-saturated in content. “Companies today need to be focused on pushing your message as well instead of only waiting for customers to come to you.” — Jon Miller

“It’s risky to rely on a purely content – driven demand generation funne ,” says Jon. At Marketo Jon saw that when they hit that $ 20M – $ 30M revenue mark, they started seeing diminishing returns on inbound. This is when he started experimenting with combining my marketing experience with Spears , as Aaron Ross calls outbound prospecting.

As Jon describes it, there are four ABM “Styles”:

• Style 1 (Strategic): Your biggest opportunities, say more than $ 1,000,000, targeted with completely custom (aka expensive) content and campaigns.
• Style 2 (Scale): Potential deals of $ 100,000 – $ 1,000,000. Highly focused programs, moderate personalization.
• Style 3 (Programmatic): Opportunities ranging $ 50,000 – $ 100,000. Broad outreach such as email and direct mail. Light personalization.
• Style 4 (Targeted Demand Gen): Reserved for deals that are less than $ 50,000, following traditional sales and marketing approaches.

A marketer’s job isn’t done when the opportunity is created. Marketing will evolve to include “Customer Marketing,” getting measured on pipeline and revenue from customers, and growing their lifetime value.

The “magic bullet” in creating this Account-Based Marketing revenue team: shared goals, metrics and target accounts between sales and marketing, then working together toward them, and keeping up regular communication to spot and fix the inevitable problems.

Marketing with partners is the simplest way to expose new people to your brand.

Spears—Outbound Prospecting

Spears are one-to-one campaigns, such as targeted outbound prospecting or business development initiatives for getting appointments with anyone who’s not coming to you — whether customers or partners.

Salespeople who do everything (prospecting, responding to marketing leads, closing and managing accounts) end up doing many things poorly instead of one thing well.

Even HubSpot and Marketo, two of the companies that started the inbound movement, have big teams of outbound prospectors to speed up growth, increase market coverage, and teach vital skills to their sales teams.

Outbound prospecting shouldn’t be a burnout job, if it’s done right. And it’s not about interrupting people who don’t need you; rather, it’s about reaching out in friendly ways to find the people who do.

When salespeople have been trained as prospectors, they develop the mind-set and skills to be entrepreneurial and make things happen instead of waiting around for something to happen for them.

Avoid “inbound dependency” and reactive teams: Salespeople who get only inbound leads become dependent on them.

If you want to go big with outbound prospecting, it works best when you have these four conditions in place:

• You can sell deals that are large enough to be profitable, usually $ 10,000 – $ 20,000 in lifetime value.
• Your value proposition is easy for a prospect to understand and say yes or no to.
• You’ve Nailed a Niche and know very clearly what kinds of companies need you.
• You’re selling something they “add in” without having to rip-and-replace a prior system.

Here are some conditions that make it more challenging or less profitable:

• You’re not differentiated, or your different because “we have the best service/most experience.” That won’t fly with outbound — too vague.
• Crowded market: Related to the earlier point, some markets are just extra crowded with thousands of players.
• It’s not a management priority: Management hires an intern to dabble, then they forget about it, or they’re just too busy to give it time.
• Unrealistic expectations: The CEO believes all prospecting needs to be done only by salespeople, and doesn’t believe in dedicated prospectors.

In 2011, Predictable Revenue came out and helped reignite outbound prospecting. Since then, the problems of outbound keep evolving.

• Human error is growing. Email and call automation has increased human error. A new knee – jerk reaction to problems is “send more email!”
• Overdependence on a single technique, whether it’s researching, or cold calling, or templates, or…
• Obsessing over simplistic metrics like email open and response rates, at the expense of understanding the entire funnel.
• Task, tool, and app overwhelm.
• Phone calls aren’t obsolete: Don’t let reps succumb to “phone fear.”
• Dashboard problems.

Teams get Sales Specialization wrong. Common: Making an SDR do both inbound lead response and outbound prospecting — they don’t mix!

The way the math works out with prospectors, revenue comes faster by finding bigger deals, not by pursuing every single opportunity.

Growing sales at portfolio companies (as opposed to other methods like cost-cutting) is the best way we’ve found to triple value fast.

Potential acquirers will pay a lot more for a faster-growing company than a slower-growing company. So organic sales growth is our # 1 focus.

To triple valuation in three years, we set three targets (base, target, and stretch plans) for both revenue and EBITDA and always backcast to hit the stretch plan. Base Case is for financial planning, Target Plan is the management commit, and the Stretch Plan is our aspirational target.

We set aggressive targets for each step in the funnel, and backcast our way to the number of sales activities (#of calls, #of emails, #of social touches, etc.) needed to achieve the new target (ignoring conversion improvements for now).

Elements of a Perfect Meeting:

• Rapport — Create a human connection for at least a few minutes with good energy.
• Needs Established — Discover the client situation and needs. Discovery by curiosity.
• Pitch Quality — Articulate value of offering to prospect in a relevant and customized way.
• Deal Sizing — Quantify the value of you offering. Ask about budget.
• Decision Making — Discover decision-makers and decision-making process.
• Time Frame — Discover the time frame of the deal process.
• Next Steps — Mutually agreed to and always a next meeting on the calendar.

We reward Perfect Meetings with an incentive (up to $ 100 each).

Our mandate was to increase the growth rate from 10 % to 30 % and triple its value in three years. Our plan: Hire a Chief Revenue Officer (CRO).

• Specialize sales roles
• Build a team of outbound Sales Development Reps
• Hire an outbound outsourcing company
• Coach salespeople on “The Perfect Meeting”
• Shorten sales cycles by simplifying proposals and contracts
• Shift PPC spend to highest performing market segments,
• Provide better tools for SDRs and salespeople to build lists
• Create world-class follow-up within Outreach.io

Some of those points are simple, but nothing on the list is easy to implement well. Anyone who claims otherwise is trying to sell you something.

Assess your willingness and your team. Measure and set the goal.

Then create a Forcing Function to create leverage — like taking an investment, publicly announcing a goal, or hiring/assigning a key executive to lead the effort — and burn your bridges to force the changes you know need to happen, but have been putting off.

Zuora sees a shift of businesses to the “Subscription Economy.” Customers love avoiding a big upfront payment and / or simplifying renting or servicing. Businesses love the recurring revenue. Zuora enables businesses of all industries and sizes to price, package, and sell their products on a recurring basis.

Zuora looks to see if they fall into one of the “Eight Growth Initiatives,” signaling they are serious about considering a major shift to subscription:

• Launching a new product or service
• Going international
• Move into new segment (Up-or Downmarket, Launch Self-Service or Sales Assisted, Multichannel)
• Pricing and packaging model change
• Cross-sell/upsell additional products
• Massive sales team growth
• Reduce churn
• Acquisition/spin off of business line

Zuora’s Founder and CEO Tien Tzuo encourages companies to picture a three-room environment — sort of an art gallery, where you from walk room-to-room seeing different things, but all the rooms share a common theme. In this metaphor, “Room 3” houses your product or service. It shows off all its features and functions. “Room 2” is the home of your customer’s feelings, needs, pains, both business and personal. Usually, CEOs and revenue leaders spend most of their time in Room 3, and the rest in Room 2. “Room 1” is the biggest missed opportunity in marketing and sales. Tien estimates 99 % of company leaders and salespeople ignore this room. This room deals with evolving trends in the world, and how businesses need to adapt. CEOs need to connect the Room 1 topics to what’s in Rooms 2 and 3 in a way that makes sense to prospects.

For customers who have bought into the idea of going subscription, how do you actually make it work? They struggle with deciding on pricing, architecting a sales model, the right metrics, and how to tier products or segment customers.

Outbound Marketing + Outbound Prospecting = Account Based Outbound

Zuora mixes different functions into what they call a Franchise Team. These teams may be focused by industry or geography, but the mix usually looks like this:

• A Regional Director overseeing the Franchise
• Up to 10 salespeople + one sales manager
• Five ZBR prospectors + one ZBR Manager (because ZBR messaging is so tailored, one ZBR Manager manages 5 – 6 ZBRs)
• Three Sales Engineers
• One Global Services representative
• 0.5 Marketing Managers (one manager supports two Franchises), who acts as a “mini-CMO” for the franchise, tailoring centralized content for their teams

At SaaS and differentiated companies, one well-trained Outbound SDR can set up 12 – 20 Discovery or Demo calls a month. Of those, 8 – 10 end up in the sales pipeline as Sales Accepted Leads (SALs). We’re using baseline averages.

We like to see 20 % of those SALs close… so in baseline scenarios, assume a range of one or two new customers per month per Outbound SDR.

SALs per month can be as low as one per month for large deals in challenging niches or complex enterprises, or up to 15-plus per month for highly transactional SMB sales.

Outbound deal sizes are 3 to 10 times larger than the average of inbound sales, because you target bigger opportunities and avoid smaller ones.

Salaries make up the bulk of an outbound team investment:

• Outbound SDRs: For each fully loaded (including benefits and overhead) prospector: $ 60,000 – $ 125,000.
• Manager: $ 150,000 (full-time, fully loaded) or prorate that by time involved if they’re juggling other responsibilities (such as a VP directly manages the team).
• Sales Tools: Assume $ 4,000 per year per Outbound SDR for apps such as list-building, CRM, and sales enablement.
• Training or consulting: $ 3,000 to $ 150,000-plus.

Predictable outbound prospecting is about The Dashboard. Without an accurate dashboard, whether you’re building your internal team or using an outsourcing firm, you don’t know what’s working or not, or the “real” results.

Inbound SDR (lead response) and Outbound SDR roles, metrics, and dashboards have to be separated.

Win Rates of Outbound Deals — goal: 20%.

Problems arise when leaders are overly focused on the quantity of activities (calls, emails, and meetings), and not paying enough attention to the quality of the output, or the trustworthiness of the dashboard itself.

Outbound prospecting isn’t an extension of inbound lead generation. It’s a different beast. It’s a wonderful problem to have a wealth of inbound leads coming in. But it can lead to sloppy practices in leadgen and sales when teams “get fat.”

Inbound leads need to be contacted within minutes or hours, which interrupts the large blocks of hours needed to prospect. Inbound leads take hours or days to qualify, while outbound appointments take two to four weeks to qualify. Inbound call metrics and ratios are different than outbound call metrics and ratios.

Buyers go through three phrases: Why change? Why now? Why you? Outbound prospects usually are at Phase 1 (“Why Change?). Inbound leads are likely already at Phase 3 (“Why you?”), after already deciding that they need a change and when. They haven’t decided on which solution yet.

What Executives Miss

When you get so caught up in the day-to-day busy-ness of marketing, lead generation, and app configuration, it can be easy to miss the forest for the trees.

Pipeline reports are crap for predicting the future, because they are more often about hope than truth.

But there’s a better metric, your Key Metric, which you should track and score yourself on — and hold your VP Marketing and VP Demand Generation team (s) to — is Pipeline Creation Rate (or PCR; also sometimes called Lead Velocity Rate). PCR measures your growth in qualified leads and pipeline, measured month-over-month, every month. PCR is real-time, not lagging, and it clearly predicts your future revenues and growth — and, even better — your growth trend.

You don’t get into true hypergrowth mode until you can get beyond your networks (Early Adopters, 15 % of the market) and can sell to “regular people” (Mainstream Buyers, 85 % of the market). When growing a company, there’s a big milestone in getting your first 10 – 20 paying customers for a new product or target market. Usually these customers are Early Adopters, part of the 15 %. The feedback from these Early Adopters is more positive, and generally does not reflect that of the general masses, which is the other 85 %.

Mainstream Buyers won’t buy on faith; they buy concrete “things.” They need to sell projects internally, to their VP or the CEO or CFO. To do that, Mainstream Buyers need everything spelled out: what they get, expected results, the time frame, cost, risks, and steps.

Mainstream Buyers often will go to your website and three others, submit “Contact Us” inquiries, and sit back to have you and the other companies educate them about the space.

Rather than bemoaning, “Why don’t they get it?,” just accept that it’s not their job to figure you out. Start learning how to speak their language and how to help them buy.

Standard LTV calculations don’t account for the “second order” viral and word-of-mouth customers — the ones that come in later, from the first customer referring their friends. In other words, your average LTV should be higher, because the first customer should get extra credit for helping bring in their friends to your company.

So your all-in CLTV, including second-order revenues, could be two times your current estimate.

Remember that the second-order effects compound. This is where Seeds become a growth driver. They’re essential to fast, profitable growth.

Make Sales Scalable

Learn from Our Mistakes

TOP 12 MISTAKES IN BUILDING SALES TEAMS

• You hire a sales rep to sell before you can prove you can do it yourself.
• You hire a VP of Sales to sell before you prove you can do it yourself.
• Any of your first two to three sales reps are folks you personally wouldn’t buy from.
• You insist reps # 4 – 400 are folks you personally would buy from.
• You underpay.
• Not (intentionally) going upmarket faster to Double Your Deal-size.
• Not firing a bad VP Sales in one sales cycle.
• You ask your VP of Sales to carry a bag for too long.
• You hire someone who last sold Nu Skin.
• You hire because she worked at Salesforce/Box/DropBox/ABC Famous Company.
• You allow any great reps to leave. You should strive for 0 % voluntary attrition, not to fire the bottom one-third.
• Not doubling the plan.

It’s easier to learn from failure. Because what went wrong is obvious and leaves a resounding impression you can’t ignore. Learning from success is harder, because success covers up mistakes.

• Lesson # 1: Stop Blaming Others. You need to help drive the organization to the solution to the problem. If you are facing disaster, and you tell your CEO what needs to happen and he refuses to do it, then quit.
• Lesson # 2: Build for the Present, Not the Past. Step back before you copy down the prior playbook, and look at the numbers and funnel. What should work the same? What might need to be changed or adapted or re-created?
• Lesson # 3: Hire the Best — Period. Surrounding yourself with superstar talent should be a constant goal.
• Lesson # 4: Pay Well for Success
• Lesson # 5: Make Sure the CEO Fits. Pick the wrong CEO to work with and you’ll be miserable. Top Five To-Do’s for Great Sales Leaders:
  • To-Do # 1: Drive Deal Size Up as Quickly as Possible
  • To-Do # 2: Great Reps Perform in 30 Days. If your gut tells you that person was a mis-hire, your gut is probably right.
  • To-Do # 3: Honesty Is Critical , Up and Down the Sales Stack
  • To-Do # 4: Great Sales Teams Stay Together
  • To-Do # 5: Outbound (Spears) and Inbound (Nets) Aren’t Either/Or, They Are “Yes”

Specialization: Your #1 Sales Multiplier

Specializing sales roles is a cornerstone of Predictable Revenue. As a quick review, one of the biggest sales productivity killers is having salespeople do multiple roles.

Let’s look at the case of juggling prospecting and closing, as an example of why it’s such a problem:

• Ineffective: Experienced sales people hate to prospect, and are usually terrible at it.
• Erratic focus: Even if a salesperson does do some prospecting successfully, as soon as they generate pipeline, they become too busy to prospect.
• Unclear metrics: It’s harder to break out and keep track of key metrics (inbound leads, qualification and conversion rates, Customer Success rates…) when multiple functions are done by the same team.
• Less visibility, accountability:

Without specializing, your team will struggle.

The Four Core sales roles:

• Inbound lead response
• Outbound prospecting
• Closing new business
• Post-sales roles, such as account management, customer success and professional services

At big companies, meaningful change requires involving lots of pieces: people, politics, legacy practices and systems, all of which make change harder and more complex.

SPECIALIZATION: TWO COMMON OBJECTIONS

• Objection # 1: It’ll Hurt Customer Relationships Doesn’t passing off a prospect or customer from one person to another create problems? Shouldn’t the same person be building a relationship from day one with a customer, then owning and maintaining it? Prospects and customers get better service when you specialize .
• Objection # 2: “Those Four Roles Don’t Fit Us”

We realize some of you still need help convincing your team to go all in with specialization.

Here are the four essential reasons for doing it:

• Effectiveness: When people are focused on one area, they become experts.
• Farm team/talent: Having multiple roles in sales gives you a simple career path to hire, train, grow, and promote people internally.
• Insights: By breaking your roles into separate functions, you can easily identify and fix your bottlenecks.
• Scalability: Specialization makes it easier to hire, train, measure, grow, and promote people across the board.

Sales Leaders

It’s hard for a manager to be effective with more than 10 direct reports.

Top Five Things a Great VP of Sales Does

• Recruiting. You hire a VP Sales not to sell, but to recruit, train, and coach other people to sell.
• Backfilling and helping his/her sales team. Helping coach reps to close deals (not doing it for them).
• Sales tactics. Training, onboarding. Territories (yes, you need them). Quotas, comp. How to compete. Pitch scripts. Coordinating FUD (fear, uncertainty, and doubt) and anti-FUD. Segmenting customers. Reports. Ensuring everyone on the team, including themselves, can get what they need from the sales/CRM system.
• Sales strategy. What markets should we expand into? What’s our main bottleneck? Where should our time and money go? What few key metrics tell us the most about the health of our team and our growth?
• Creating and selling deals themselves. This is last of the top five. Important for select deals.

Don’t hire a VP Sales until you are ready to scale, build, and fund a small, growing sales team.

What Kind of VP Sales Do You Need?

• Type 1: “The Evangelist” (gets you from nothing to $ 1 – $ 2 million). The Evangelist is someone who is smart and passionate about your product from day 1. The problem with Evangelists? They’ve never actually built or scaled or systematized sales.
• Type 2: “Mr. Make-It-Repeatable” (go from $ 1 million to $ 10 million). This job is about taking “something is happening here and there and we’re not always sure why” to “something is happening over and over again and we know why.”
• Type 3: “Ms. Go Big” (go from $ 10 million to $ 40 million).
• Type 4: Mr. Dashboards. Unfortunately, this is what you get a lot of when you try to recruit out of the Big Companies. Mr. Dashboard really understands how to sell up. How to make an internal presentation.

Your VP Sales needs to be smarter than you in sales, sales processes, and building and scaling a sales team.

Hiring Best Practices for Sales

Hiring Best Practices for Sales Your people and culture determine your destiny.

• Pattern recognition: If you haven’t been in sales yourself, it’s harder to spot salespeople who can talk, but not walk.
• They’re selling: Salespeople are good at selling themselves!
• Slow data:
• Expectations: Yours are unrealistic.

Here’s how to de-risk your first sales hires.

Technical leaders: Even if you’re an introvert or too busy coding to meet with customers… do it. It doesn’t matter how fast you code the wrong feature.

Phase 0 (Optional): Outsourcing

• Phase 1: Hire a Sales Development Rep (SDR) to Support You
• Phase 2: Hire/Promote a Salesperson. A salesperson should bring in 3 to 5 times their total compensation.
• Phase 3: Grow to Four People
• Phase 4: Hire a Leader to Grow What You Have

The idea of builders versus growers can be useful anytime. When you’re in an exploration phase of figuring out how something should work, such as with a new company, sales function, or program, look for people who like to figure things out: Builders. When you have a system all figured out and just need to hire more people into it, look for people who are great at following a predefined system: Growers.

WHEN DOING SOMETHING NEW, START WITH TWO

Now you may somehow have enough capital to hire a VP of Sales and a bunch of reps right then and there. But most likely, you won’t have the resources to hire a whole sales team upfront. You’ll want to start with one experienced rep. And there’s only one problem with that: No matter how well that rep does, you won’t learn anything. You need at least two to learn. Here’s why: If your first rep does poorly, you’ll have no idea why.

If your first rep does well (our experience), you’ll still have no idea why.

Mark Roberge was HubSpot’s Chief Revenue Officer and built the sales team from $ 0 to more than $ 100 million. Mark developed a four-part strategy while scaling his team from nothing to hundreds of reps: Hire the same type of successful sales person. Consistently train them the same way. Provide each salesperson with the same quantity and quality of leads. Have the salespeople work the leads using the same process.

Mark spent 40 % of his time on recruiting. Interview strategically: Mark developed criteria for hiring for sales success, even if people didn’t have a sales background.

After hundreds of interviews and hires, he found five indicators of future success.

Coachability ( # 1 ! ) Prior success Work ethic Curiosity Intelligence

After a month , new hires pass a 150-question exam and six different certification tests on the HubSpot product, sales methodology, and the concept of inbound marketing.

Take coaching seriously. The biggest impact on sales productivity comes from your managers’ effectiveness in coaching their people. HubSpot uses a matrix – driven sales coaching model.

Paul Fifield is the Commercial Director at UNiDAYS and former CRO of Ceros. Paul’s recruiting process isn’t specific to sales; it can be adapted for any kind of role at your company.

• Step 1: Create a clear picture of who you want to hire.
• Step 2: Write authentic, interesting job descriptions.
• Step 3: Include a video in the job description.
• Step 4: Spread the word.
• Step 5: Assign homework.
• Step 6: Define evaluation criteria.
• Step 7: Interview candidates at least twice — first by phone, then by video or a meeting.
• Step 8: Set comp expectations.
• Step 9: Extend offers and celebrate acceptance!

Scaling the Sales Team

CSO Insights ‘ studies show an average sales team’s annual turnover of around 25 %, with half quitting and half fired.

Imagine that you work at a growing company, and you might be hitting or beating team-wide sales goals. But internally the team’s struggling with growing pains, such as:

• Missed quotas
• Team attrition
• Ramp times keep lengthening for new sales hires
• Rep count is growing faster than leads

Your sales “system” and environment have enormous effects on salespeople, either helpful or hurtful. Until you fix the systems, you’re going to struggle getting repeatable success. Your ability to scale a sales team depends on making everything a system.

Mark Roberge. The biggest problem Mark sees today in the sales world: sales doesn’t care enough about customer success.

To Mark, a root problem is sales compensation. Sales teams obsess 99 % over their attention on contracts, revenue, and commissions, and what happens post-sale gets the leftovers.

Mark proposes incorporating a customer lifetime value trigger into your comp plan. Churn and retention are the best indicators of customer lifetime but they take too long to tie to your sales comp.

Mark recommends adding tiers to your sales roles, each with clearly documented milestones to hit. Each milestone should have a sales component, a productivity component, and a customer lifetime component. If you hit all three, you get promoted to the next level.

Do you know which of your salespeople are creating great customer experiences, and which ones are too aggressive or overpromising?

Big companies seem to take forever (6 – 12 or more months) to decide to buy your “no-brainer” service that — to you — they clearly need. Big companies usually make group decisions, are risk-averse, and it can get complicated. More people involved means longer decisions. The nature of the beast is it’s harder for them to buy. So, in selling to them, one of your jobs is not to “sell,” but to help them buy.

Here are five tips for accelerating big-ticket sales cycles:

• Find a champion and help them sell internally
• Focus on prospects who need you and can buy faster
• Clarify your “Ideal Customer Profile” and identify how this differs from companies who buy from those who just look.
• Confused prospects say “No.” Whatever you wrote up to impress your professors or investors just sounds like bullshit in the real world.
• Show, don’t tell. Why should they believe you and your claims?

FIVE KEY SALES METRICS

• Number of open opportunities in total and per rep. A common number for a SaaS rep doing low-five-figure deals to juggle is 25 – 30 opportunities.
• Number of closed opportunities in total and per rep. Your reps should be closing a certain number of sales deals each month (whether won or lost).
• Deal size. Measure the average value of your closed-won deals.
• Win rate. Measure the number of closed opportunities, in a specific closing period, that you won. A sales rep with highest consistent win rate may be talented at sales, or talented at sandbagging / cherry picking.
• Sales cycle. Measure the average duration or time (typically in days) it takes your team to win a deal.

For Startups Only

In the vast majority of six-figure contracts, virtually every seven-figure contract, and quite a few five-figure contracts there’s always a services component. And it almost always seems to average out to 15 % – 20 % of the annual contract value.

In medium and larger customers, there’s always change management to deal with when bringing in a new vendor.

Your buyer wants to do the least amount of change management possible by herself. If you can do the training for her for a few bucks and it saves her a ton of time, that’s an amazing deal.

In medium and larger customers, they often have no one to do the implementation work themselves. So even if you weren’t saving your customer money — by helping with implementation, rollout, support, and so on — they probably have no one to do this internally anyway.

Wall Street and VCs and acquirers and everyone will still consider you a 100 % SaaS company if less than 25 % of your revenues are nonrecurring.

Through my venture capital fund, the SaaStr Fund, I look for two and a half things when I’m investing in companies: great founders, better than average economics (how easily they make money), and a space that may be interesting in a year or two.

If you have true enterprise customers, they’re going to last around five to seven years. If you sell to various small businesses on a credit card, they’re going to churn out at 3 % to 4 % per month. Which may not sound like a lot, but 4 % monthly churn means losing about 48 % of your customers in a year.

Let’s say you are at $ 10 million ARR and decently funded; you’ll probably have 100 headcount by this point, or at least by $ 15 million ARR.

On the sales side, we’ll need about 40 headcount at $ 10 million ARR (to grow 100 % the following year):

• One VP of Sales, and probably a VP or Director of Sales Ops, and at least one analyst.
• Say 20 sales reps to fully hit the $ 20 million ARR plan because we’re adding $ 10 million in ARR next year.
• At least eight SDRs to handle lead generation, outbound prospecting, and responding to inbound leads. Situations vary widely, but a 1:3 ratio is good for modeling purposes.
• Probably three to four sales directors to manage the 25 reps.
• By $ 10 million ARR, you’ll probably want to have two to three people in field sales for big deals.
• In Customer Success, we’ll probably need about 20 headcounts. Assume $ 1.5 million ARR per CSM
• A VP to manage them, two directors to manage half of the CSMs each.
• In marketing, four to eight employees: VP Marketing Director, Demand Gen Director, Field Marketing (events, etc.) Content Marketing Product Marketing Probably, Marketing’s own Lead Qualification reps to manage the MQLs (two to three).

Assume the majority of your headcount at a $ 10 million ARR SaaS business is not building product, but helping to sell, market, and support it.

Double Your Deal Size

Deal Size Math

But 9 times out of 10, don’t expect a freemium model to generate most of your revenue. Especially if you want to Go Big.

Assume you can get $ 10/month per paid user. To build a $ 100 million business, you’d need almost a million paid seats to hit that. Assume a 2 % conversion rate, for simplicity’s sake of active users converting to paying customers. You’d need 50 million active users.

Freemium alone has a ceiling. But it builds your brand. Don’t count on making a big business out of small deals or customers.

Not Too Big, Not Too Small

The size of the deal doesn’t determine the sales cycle length; that’s affected by things like:

• Clarity in Nailing a Niche, especially becoming a need, not a nice-to-have, for executives
• The number of people involved in a buying decision.
• Selling on value, not price, and with unique advantages customers can’t get elsewhere
• Your ability to show believable proof of results

Mark Suster envisioned customers as three kinds of animals — rabbits, deer, and elephants — and came up with the metaphor “Most startups should be deer hunters.” For early-stage companies, he said to focus on the deer (good-sized deals) and avoid the rabbits (too small) and the elephants (the largest companies and deals, which are difficult to sell to and service, very demanding, and hard to make successful).

There’s a difference between being patient and being passive.

If you have multiple segments with 10 % or more revenue, you need to service them all in some fashion. But one segment has to be number one.

Going Upmarket

The sales rep’s job is to be a trusted guide, a consultant, helping prospects through an often-complex evaluation and purchasing process.

Think about adding a layer:

• If the one-seat freemium thing is working for you, add a Team or Enterprise Edition.
• If you’re struggling with nailing down your pricing, remember: Pricing is always frustrating and never perfect When in doubt, it’s easier to start with higher pricing and then lower it, than to start low and raise it later.
• Maybe anyone can use what you’ve got, but who would find it especially valuable? Who needs it?

High-end pricing and deals get complicated. A complicated pricing structure may “perfectly” capture revenue, at least in theory, but in reality, complex pricing makes it harder for customers to buy, and harder to keep track of what has or hasn’t been delivered.

One of the myths of SaaS and many online apps is that the products are so good, so easy to use, and so quick to deploy, that the product sells itself and you don’t need salespeople.

In many ways, the purpose of enterprise sales is to help customers get through their own internal buying processes.

The true purpose of salespeople is to create new value for customers.

Even though the enterprise sales process has many steps and stages, it ultimately has to answer three questions for the customer: why buy, why buy from you, and why buy now.

The key here is to seek first to understand and then second to be understood. Listen first, sell second.

The sales team’s job here is to help a potential customer define success in three distinct buckets: (1) business criteria, (2) architecture/scale criteria, and (3) feature and functional criteria.

Do the Time

Embrace Frustration

A drastic change might be required to Nail a Niche or get on the path to scalable growth.

With any big change or investment, you’re going to obsess with how long it’ll take, how much it’ll cost and whether it’ll affect sales at all.

When your bicycle tire’s leaking air but not flat yet, it feels easier just to keep pushin .

Embrace Employee Ownership

A Reality Check

Your employees are renting, not owning, their jobs.

You’re passionate and committed to what you do, which leads you to forget that many others aren’t, or that they haven’t learned yet how to execute as you do. And they won’t, unless you embrace Functional Ownership.

What if employees always knew what they needed to do next, without having to be told or managed all the time? As an executive, it’s impossible to implement new growth ideas as fast as you want to, as fast as is needed, unless your people embrace them. Otherwise, you’re stuck in the mud.

It’s not the people that are the problem, it’s the system of management that needs to change.

Financial Ownership alone doesn’t create both the Functional Ownership and the “oh shit, it’s really all on me” moments of 100 % responsibility that inspire people to go beyond the bullet points of their job description. Delegation isn’t true ownership. Employees need Functional Ownership, to feel like they own something, to learn how to act like owners.

People support what they help create — the size of what they own doesn’t matter as much as the reality of their ownership.

For Executives: Create Functional Ownership

A Simple Survey: Six Questions

• Context: What’s your role?
• Likes: What do you like about?
• Dislikes: What don’t you like about?
• The twist: If you ran things, what would you do differently?
• Catch-all: What else is on your mind?
• Optional:

Five Aspects of Ownership

• Single, public ownership
• Forcing Functions
• Decisions. People only get better at decision-making when their boss lets them make decisions on their own, and then learn from the consequences.
• Tangible results
• Learning loops

Taking Ownership to the Next Level

Start with Three Questions

• What needs an owner?
• Who should the owner be?
• What’s the initial Forcing Function?

Help people find their individual strengths, desires and genius, to work together as a group of talented individuals, not clones.

We are not categorizing employees by how they think and feel inside their heads, but only by how they appear to others, based solely on their actions (or lack thereof). The Four Types (+ 1)

Axis 1: Motivation (Ambition + Passion)

Axis 2: Agitation (Frustration + Communication)

• (Mini) CEO: This is your natural internal entrepreneur, who isn’t afraid to take charge of a program and push it forward.
• Careerist: These are people who are content to climb the career ladder. Capable. Problem Solving. Trustworthy. Dependable. Usually a pleasure to manage.
• Clocker: Someone who is there only for the paycheck, clocking in and out and doing little else.
• Complainer: Complainers are great at identifying problems, but either don’t know how to fix them, make excuses, or are just plain stuck.
• A fifth type: Toxic. A small percentage of people are sociopaths, psychopaths, chronic liars, or just plain toxic. They are abusive to work with or for.

Define Your Destiny

Are You Abdicating Your Opportunity?

Money and passion are like water and food. You need both, though you can last only a few days without water (money) while you can go for weeks without food (passion)… even if it’s unpleasant.

Happiness is a funny thing. It’s transitory, often coming and going on a moment’s notice. And happiness today can be the enemy of happiness tomorrow, if you let it make you complacent.

A company is responsible to employees, not for employees. It can create the conditions for your fulfillment: a safe work environment, no assholes, fair pay, career opportunities, and an honest culture. But it can’t be responsible for making you happy — just as it can’t be responsible for keeping you entertained or interested.

Creating Forcing Functions made of up simple ASSes:

• Announce to others that you’ll create a …
• Specific Outcome, by a …
• Specific Date

Tell some people what you’ll do, and when you will do it.

You know you’re doing it right when your Forcing Function makes you flip between feeling anxious and feeling excited.

Here’s an alternative ABC if you’re new to selling:

• Ask questions
• Be honest
• Customer success

Try starting with what you’re already doing. Don’t assume that meaning will come only from quitting your job and finding some exotic new occupation.

There’s nothing wrong with those goals, but start by finding more meaning in the little things you already do every day.