Jacco van der Kooij: How to Get to $10M in ARR and Beyond

SaaS sales organization

Stages of companies:

START UP – <$1M ARR. The company is finding product market fit with 10-20+ customers and up to $2M in ARR in its original market/region.
GROW UP – $1M – $3M. The company has grown to $2M in ARR, and needs to bring in some best practices to scale sales efforts and start thinking about customer success to continue its growth.
SCALE UP – $3M – $10M ARR. The company is now better established with revenues of at least $5M ARR (50+ customers) and with a view to be at $10M within two to three years.

In a SaaS model, it’s entirely possible for a sales team to double revenue without doubling the team through growth in new customers as well as renewal and expansion of existing customers.

In the B2B SaaS space, there are a lot of new factors bringing exponential growth to SaaS companies:

An increase in online spend: Startups, regional businesses and global corporations alike are becoming more comfortable spending budget on SaaS services.
A bigger marketplace: Every seller now operates in a much bigger marketplace with technology giving them easy access to buyers in all markets and regions.

The term “growth hacking” is being tossed around quite a bit these days. Growth hacking is essentially the idea of figuring out a process of shortcuts to bring more growth, faster.

Keys to scaling a business and minimizing the risk of failure:

Find Product-Market Fit
Hit the Launch Window
Execute the GTM Plan

Success in executing the GTM is not measured in growth rate [%] or revenue [ARR], but rather against the growth potential within the market.

One of the keys to growth in today’s SaaS business model is to identify your product-market fit using a variety of sales and marketing channels (or GTM strategies).

These are the keys to growth that you should identify while you are exploring Product-Market Fit:

What is the value proposition that prioritizes the solution offered?
Who is the audience that has a real problem and is willing to take action?
How do we reach the audience with the real problem in an efficient and effective way?

How do you know when you are in the launch window? There are three clear, telltale signs:

Price increases: Instead of closing deals at $10K, you start closing deals at $15-20K ARR.
Win rate increases: Win rate is measured by the number of Sales Qualified Leads (or SQLs; find out more about metrics like this in later chapters) needed to win one deal.
Sales cycle decreases: The sales cycle is measured as the time between an SQL being created and until a deal is won.

You need a modern GTM model. Start thinking of your revenue as being composed of layers. For example:

Regionalize teams
Add new products/services
Pursue new accounts
Add a strategic partnership

ORGANIZATION

Here are the different milestones of the sales cycle:

PROSPECT. A person who expresses interest by visiting a website or other piece of content.
MQL. Marketing Qualified Lead, a person who expresses interest in your product and fits the target profile.
SQL. Sales Qualified Lead, a person who experiences a pain that you are addressing with your product and wants to take action.
COMMIT. Mutual commitment to deploy a solution that will achieve impact at a set time.
LIVE. Customer has been onboarded: on time, within budget and the solution can deliver impact.
MRR. The solution delivers impact again and again, and a recurring revenue stream is secured.
LTV. The revenue an account generates over the lifetime, net of churn and including growth.

How many deals should I close as a founder? Around 20-25. Not less than 10, as these first few customers will likely be from innovators, and in some cases, customers with whom you already have built a rapport. As such, they will probably not provide you with real insights if the value proposition works.

Phase 1: Start Up. In the Start Up phase, the founders are building the company and selling at the same time.

Phase 2: Grow Up. The role of your first Salesperson In this phase, you are making your first sales hire. As the first hire, they must be able to work across the entire sales process, prioritizing and handling inbound leads, and then driving them to close (while the founder continues working the outbound leads that he has generated).

If the rep hits his quota but cannot implement a solid sales process, this will not lead to sustainable growth. If he hits quota AND can establish process, then things are looking good. If he can do all of that, AND can coach others on the team, then you’ve found yourself a great hire. For application-based sales, it should be 60 days for new sales reps to hit quotas. For platform sales, it could be as long as six months.

It’s better to have a superstar person part-time rather than a so-so performer full-time.

Phase 3: Scale Up. At this point, it’s time to start creating specialized roles in sales. Clearly, you will need a few more people to make this happen, which means that you may need a funding round.

Remember, your first hire in the previous phase was your AE. In this phase, you should make the following hires: 2nd sales hire: Customer Success Manager. Your CSM will handle the success and expansion of your customer base: they must ensure they are satisfied with your product, and focus on reducing churn as much as possible. 3rd sales hire: Sales Development Representative (SDR). This SDR will follow up on inbound leads, and set up meetings for your AE. They should also help with demand generation

SALES ROLE QUICK REFERENCE FULL DESCRIPTION:

Market Development Rep (MDR). Inbound leads. Qualifies inbound leads, such as from your website or downloading a whitepaper.
Sales Development Rep (SDR). Inbound and outbound leads, initial qualification. Proactive outbound prospecting to new leads; does initial qualification of leads prior to hand-off to.
AE Account Executive (AE). The closing role. Quota-carrying reps who close sales deals.
Customer Support. Helps to resolve common issues. Manages relationships with customers, provides admin support such as password resets, etc.
Customer Success Manager (CSM). Manages customer accounts. Manages customer accounts, ensures that customers are successful in using your product or service, and focuses on account expansion.
Onboarding Specialist (ONB). Onboarding new customers. Handles the onboarding process for brand new customers to get them set up to a steady state of consumption of your product or service.

Common Pitfalls:

Pitfall 1: Not enough leads are generated.
Pitfall 2: Too many “fluffy” meetings.
Pitfall 3: Deals are not properly handed off.
Pitfall 4: There seems to be a lot of interest, but nothing is getting closed.

Best practices for a scalable sales organization:

Build your sales org in a phased approach; don’t try to hire entire teams all at once.
Organize your team into PODs, where each team has a specialization.
Decide if you are going to specialize geographically.
Clearly define roles for each member in the POD.
Define how Sales will interact with other parts of the company.

Today, we know that for a POD to be economically viable, the annual on-target earning (OTE) of this POD should not exceed 40% of annual revenue. E.g., to generate $1M in ARR you should not exceed spending $400,000 in compensation; this includes base salary AND commissions.

How to use PODs to run sprints to identify target markets? One of the key advantages of PODs is the realization that you can quickly refocus your resources depending on the market; this is very important during the early days of scaling revenue.

The POD will heat-check specific verticals/regions/segments.

Example of how to structure a sprint over time:

First two days: Train the team on use cases, and role-play a variety of scenarios.
First week: Pursue B-leads first to get familiar with responses, meet up and share best practices.
Second week: Market and organize an event, pursue your A-leads to attend.
Third week: Pursue A-leads, host events, follow-up with event attendees.
Fourth week: Wrap up, learn from best practices by measuring what worked, start next sprint.

THE SALES PROCESS

In this sales process, you can see three different areas:

Prospecting (in red), with three sources of opportunities: Outbound, Inbound and Targeted Accounts.
Sales process (in blue), with the classic steps of your conversation with the customer.
The beginning of the Customer Success process (in green).

No matter what stage your company is in, you must have a clearly defined sales process and playbook. Success in SaaS sales requires measurement, and measurement requires that you be methodical.

STEP 1. DETERMINE WHICH SALES PROCESS
STEP 2. MAP OUT THE STAGES
STEP 3. DEFINE THE STAGES

Phase 1: Start Up. In this phase, it is unlikely that you have a CRM and are probably storing sales activities on a spreadsheet. When should I start creating my first process and playbook? After the first 10 deals. Update it after 20, 30, 40, 50. Then it should be stable up to about 100 deals.

Commons Pitfalls:

Pitfall 1: No process.
Pitfall 2: Self-centered process.
Pitfall 3: Overly detailed process.

Phase 2: Grow Up. In this phase, you’re outgrowing the spreadsheet and you need to implement your first CRM before things get out of control.

Commons Pitfalls:

Pitfall 1: You are not analyzing your deals against a process.
Pitfall 2: You are hiring a sales rep and think they should be able to do it.
Pitfall 3: You are selling to several different types of customers.
Pitfall 4: You are closing deals but not providing any support post-sale.
Pitfall 5: You’re using the wrong process.

Phase 3: Scale Up In this phase, you need to get your process and CRM secured.

Common Pitfalls:

Pitfall 1: You keep the same sales process.
Pitfall 2: You want to set up your CRM yourself.
Pitfall 3: You want to use a niche CRM.

TECHNOLOGY STACK

The tool stack that you choose to use is just as strategic as the organization and the processes that it supports.

In general, we see two common options:

Using Salesforce as a CRM, with all of the SaaS services available in the Salesforce App Exchange. This sales stack is most commonly used by companies that have an Annual Contract Value of $15,000 or more.
Using tools based on G Suite (Google products) with their apps on it. G Suite is commonly used with early and high velocity solutions.

Know the difference between the layers of the stack:

Server
Platform
Application
Outsourced Services

Common Pitfalls:

Pitfall 1: Committing to payment/contract terms that are too long.
Pitfall 2: Jumping right into paid subscriptions when a free version is available.
Pitfall 3: Not using a tool for critical tasks such as document signing, or web conferencing.
Pitfall 4: Buying into a CRM/MAS right away when you don’t even have 10 customers yet.

Phase 2: Grow Up. In the Grow Up phase, you will have outgrown your heavy reliance on spreadsheets. Here you should implement a lightweight CRM, enhance your lead qualification with lead enrichment and analytics, and start to use the paid versions of some of your tools, rather than just getting by with the free versions. At this phase, you may find yourself starting to use your first outsourced services.

Common Pitfalls:

Pitfall 1: How to decide on a tool?
Pitfall 2: You are not sure how to choose, there are so many options for tooling.
Pitfall 3: You pick an excellent tool, but it doesn’t integrate with your existing stack.

Phase 3: Scale Up. In the Scale Up phase, you will now have a sizable sales team, and you will need a more robust toolset to enable your team and orchestrate more sophisticated activities.

Platforms. You need to implement the infrastructure that will likely stick with you until $50M ARR.
Customer Database
Marketing Automation System
Customer Relationship Management
Customer Platform
Applications
Cloud-based proposals
Cloud-based phone system
Real-time dashboards for board-level reporting
Outsourced Services
Call reviews/coaching

Common Pitfalls:

Pitfall 1: How to avoid an overload of tools?
Pitfall 2: It is so easy to load up on tools. How many SaaS tools is right? Numbers below are the for entire company, not just for the sales organization: Start Up: 10-20 tools. Grow Up: 20-30 tools. Scale Up: 30-50 tools.
Pitfall 3: Loading up on tools without having enough manpower to run them.

PROFESSIONAL SKILLS

Each phase of the company requires different skills. This is of course not to say that you need a different team at each phase – your team members can certainly grow their skills with the needs of the business. But founders must think about how to recruit for the current phase, and also look ahead to the next phase and the potential business and skill needs.

These are the high-level qualities and skills, by phase, that you should be looking for and recruiting in candidates:

Start Up: Self-starter, reliable performance, proven superstar, might dislike process, will help to set the tone of the culture you are looking to establish.
Grow Up: Loves to create a process and document what they are building, able to listen and learn from what goes around them, enjoys working with and learning from small teams.
Scale Up: Team performer, love to execute process, dependable nine-to-fiver, might need a bit more hand-holding and likes processes ready-made so that they can go execute on them.

Common Pitfalls:

Pitfall 1: Hiring people only when you need them.
Pitfall 2: Your recruiting process is built around candidates.

It’s crucial that new reps hear about the company strategy directly from you and the rest of the leadership. This sets the tone, clarifies where the company is headed and why.

A common mistake in onboarding sales reps is not making them get close to the product, especially if you have a technical product.

Regardless of role or skill level, keep in mind that there are a few core principles that EVERYONE on the team should be doing. Customer-centric selling principles:

Pain NOT Fit.
Emotional BEFORE Rational.
Educate DO NOT Pitch.
Assist Buying DO NOT sell.
Value in every interaction.

SALES ENABLEMENT

A little enablement goes a long way. You can kick start enablement for your team with the following:

A content journey of what material to use/when.
A few key hardworking enablement templates.
‘Posterized’ design and best practices for processes.

Vertically down the map, the customer goes through four stages:

People first do research and understand the problem.

Shortly after, they look for and research the solution.

They look for a way to see it work in action.

Then they take an action: download something, click on trial, or start to chat on the website.

Qcards are a quick reference guide that sellers can keep on their desk and easily reference at any time. The format is 5×8 cards, bound by rings, that sellers can flip through to quickly find the information they need in order to prepare for discovery calls. They include overviews of buyer personas, dives deep into their mindsets and emotional/rational pain points, and frameworks for preparing for discovery

Process chart. A sales process chart summarizes your sales process: The goal of each stage, the actions you should take in each stage, and the criteria for progressing through the process.

There are a few proven best practices that you can employ in order to quickly build a robust enablement program and content library for your team.

Create a library of:

Content for each stage of the sales cycle.
Successful prospecting emails.
Learn from your wins: With every new win celebration, interview the sales POD on the same set of questions for no more than five minutes. Record the interview and then create a QuickQuiz. Look up the person on LinkedIn and find descriptive traits that will help to understand this person’s mindset. Fill in the critical event, impact.
Identify your buyer’s process: Have each team member pick out one of their customers that they would like more of (i.e., a model of an ideal customer).
Develop your talk track: Have each rep record a random call.

Common Pitfalls:

Pitfall 1: Letting enablement assets get stale rather than setting aside some time to keep them updated.
Pitfall 2: Build enablement into team goals in some way.

THE SAAS METHODOLOGY

If you master the five principles below, you will be genuinely authentic – not because it helps you close a deal, but because during the process of executing these principles, you have become someone who cares.

Understand their pain.
First emotional, then rational.
Educate through storytelling; do not pitch.
Assist the buying process.
Provide value in every interaction.

The seven key moments we are going to focus on are:

Reach out based on a pain they may have, be relevant to them from the first moment.
Have a conversation as a human being, not a sales qualifier.
Perform a diagnosis on the customer’s situation before you prescribe a solution.
Trade, not negotiate: maintain value for your product by trading items of equal value.
Orchestrate, not onboard: redo the deal once the customer is signed.
Achieve impact, not pursue usage: look for both the emotional and rational impacts.
Grow in different areas: Renew, up-sell, re-sell, and cross-Sell.

Moment 1: Reach out to customers who have pain.

Moment 2: Conversation, not qualification.

Moment 3: Discovery/Demo Diagnose before prescribing your solution. As the saying goes: prescription before diagnosis is malpractice.

To diagnose efficiently, use a question-based framework that will work in every professional situation, from the emergency room to your favorite car mechanic.

First ask two or three questions to learn the context surrounding the issue.
Then ask questions to understand the pain.
Summarize: “So you have [this situation] and [that situation] causing you [this pain]?”.
Empathize “I hear this a lot,” or “You are not alone in this.”.
Identify both the emotional and rational impact.
Establish a critical event.

Moment 4: Close Trade, not negotiate. We encourage organizations to think of negotiation as trading, and of discounts as price adjustments, and make these price adjustments small. In trading, both parties give up something of value in order to be better off.

Moment 5: Kick-Off Orchestration, not onboarding.

You must understand that the relationship before the commitment and after the commitment has undergone a fundamental change:

Before the contract: The buyer did not want to provide too much insight into their business for fear of losing leverage, and perhaps the seller may not have been completely transparent on how things really work.
After the contract is signed: The buyer is willing to provide a lot more insight into how their business works to ensure success. This may even involve an adjusted timeline, additional budget available, and access to previously inaccessible executives. This window of mutual exposure is only open for a short while. So instead of just onboarding the customer into the product, this should be treated as an opportunity to orchestrate the entire business relationship from that point forward.

Consider creating a 3×3: Three stakeholders on your team, each who work with three stakeholders on their team.

Moment 6: Renew Ensure impact, not usage.

We know that as much as 75% of SaaS revenue comes after the customer commits to your product. Why risk future introductions, relationships, branding opportunities, and revenue stream by providing a poor or non-existent customer experience? Invest in a Customer Impact Journey early – from the sales handoff to onboarding to realizing impact and beyond.

Moment 7: Grow

Growth is a function of providing great impact to stakeholders inside an account. If a new stakeholder needs to be convinced for the first time of the impact you deliver, this is referred to as a new business win, and should be the responsibility of an acquisition-focused sales rep (AE).

Renewal of the contract – Customer Success Manager.
Upsell to a new product – Sales or Account Management.
Resell to a new a new benefactor – Sales or Account Management.
Cross-sell to a new benefactor – Account Management.

DATA-DRIVEN ORGANIZATION

There are three types of metrics that contribute to the standard data model:

VOLUME METRICS: Tracks the volume of leads, opportunities, deals and revenue.
- SUSPECT. A person who may be interested.
- PROSPECT. A person who fits the profile.
- MQL [Marketing Qualified Lead]. A person who expresses interest by visiting your website, for example.
- SQL [Sales Qualified Lead]. A person who has a pain and wants to take action to impact the situation.
- SAL [Sales Accepted Lead]. Verified by a sales pro that an impact can be achieved within allotted time.
- COMMIT. Mutual commitment to deploy a solution that will impact the problem.
- LIVE. Customer has been onboarded: on time, within budget and the solution can deliver impact.
- MRR. Solution delivers impact again and again and a recurring revenue stream is secured.
- LTV. The revenue an account generates over its lifetime, net of churn and including growth.
CONVERSION METRICS: Shows how effectively you are progressing leads and opportunities through the sales cycle (e.g., what is the lead-to-opportunity conversion rate, win rate, churn rate).
- CR1. PRO → MQL. Prospect to MQL rate, indicative of the quality of the database.
- CR2. MQL → SQL. MQL to SQL rate, indicative of the quality of lead development campaigns.
- CR3. SQL → SAL. Showrate, hand-off, indicative of the quality of the prospecting work.
- CR4. WR. Win rate, indicative of the quality of the total sales process and the sales skills.
- CR5. Onboard Churn. Churn during onboarding, indicative of quality of the client experience.
- CR6. Usage Churn. Indicative of the stickiness of the service; lack of impact results in churn.
- CR7. Growth. Upsell during usage during the length of the contract.
TIME METRICS: Shows how long it takes to move leads and opportunities through the stages of the sales cycle (e.g., time to first use, time to first value).
- ΔT1. Duration of prospecting before engagement is achieved, measured in days.
- ΔT2. Duration of the prospecting campaign, indicates the quality of sequences used.
- ΔT3. Time it takes to set up meetings and convert them into qualified opportunities (ideally <5 days).
- ΔT4. Sales cycle indicates the ability of a sales manager to navigate through the client’s process.
- ΔT5. Time to live indicates the complexity of a product, anywhere from seconds to weeks.
- ΔT6. Time until a client has achieved the desired impact, often a 12-month contract.
- ΔT7. Time to achieve penetration of an account.

There are a variety of reasons why opportunities are not closing:

No-shows: Prospects who commit to a meeting, but don’t show.
Unqualified: Prospects who, upon further review, can’t be helped by us (at this time).

Up to $1M in ARR, you are still okay to tinker with your go-to-market model, but after that, you cannot spend more than 40% of the annual cost of marketing and sales in order to acquire new customers and revenue. In other words, the cost of marketing and sales cannot exceed 40% of your revenue.

With annual contracts (often for platform sales), customers churn at a much lower rate. A common churn for annual contracts is 5-8% (annually). For monthly contracts, between 1-2% (monthly).

Common Pitfalls:

Pitfall 1: Misunderstanding platform vs. application business.
Pitfall 2: Leaving board reporting to the last minute.

CULTURE

There are four key pillars that you should adopt to realize a successful culture for your team:

A clearly articulated company mission and revenue goals.
Science-based methods.
Strong organizational trust at all levels.
Objective coaching delivered to the team.

Let’s first talk about what is often the antithesis of a science-based culture. That would be a “superstar culture.” A superstar sales culture is one that relies on high-achieving individual contributors to win big deals. A science-based culture means getting scientific and specific with the numbers.

Common Pitfalls:

Pitfall 1: Improper handoffs.
Pitfall 2: Reaching out to prospects who are a fit based on key demographics (e.g., title, location, etc.).
Pitfall 3: Treating the kickoff call for new customers simply as a time to get them onboarded with your product.

New kind of leadership:

ENDORPHINE. Makes you feel good so you can perform work. “Runner’s high” masks physical pain. Gives us consistent endurance. Makes you work hard.
DOPAMINE. Positive feeling, drive. Makes you feel happy when you achieve something. Makes you goal driven.
SEROTONIN. Feeling of pride & status. We seek recognition. Gives confidence, and reinforces social structure and compassion for others. Awards. Pride. Sense of allegiance, organization cohesion.
OXYTOCIN. Feeling of love and trust, the warm and fuzzy feeling that someone has your back. Act of generosity based on time and effort. Sacrifice time and energy to help team members.

Approaches:

A more selfish, historic approach: Focuses on training Do the Work, Work hard, Achieve the goal, Get Paid
A selfless, modern approach: Focuses on coaching Lead by Example, Give Time, Sacrifice, Share

Common Pitfalls: