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9 things I've learned working with early stage SaaS teams.

Whether you’re a CEO, a marketer, or part of a founding team that’s worried revenue isn’t heading in the right direction - this one’s for you.
Getting a marketing and sales team hitting some kind of meaningful revenue quota is hard, especially from a standing start. It’s something I’ve done a number of times and there are a bunch of questions I’ve had to answer the hard way, and there are mistakes I’ve made that others can learn from. Whether you’re a CEO, a marketer, or part of a founding team that’s worried revenue isn’t heading in the right direction - this one’s for you.


1. Your first sales hire is your CEO.

If your CEO (or someone else on your founding team) can’t walk into a room and get people excited about your product you’ve got a problem.

Your CEO’s going to be your first account executive. In fact, they’re probably going to be your only AE until they’re consistently hitting 125% - 150% of an AE’s quota. (When I talk about the role of an Account Executive, I’m talking about the person who takes qualified opportunities from first meeting through to close.)

Why?

1. With your CEO being your AE, it’ll be easier to build out and test your sales process. You’ll know you’ve got your best sales person on the job. Assuming they’re not completely hopeless failing to hit quota is most likely to be an issue with something else like:

  • Lead volume
  • Lead quality
  • Positioning
  • Sales process
  • Product
  • Pricing

2. When you hire your first AE(s) you need something to benchmark against. If your CEO’s hitting an AE’s quota and your new hire isn’t, you’ll figure out that it’s your onboarding process (or your new hire) that’s the problem faster and save a whole world of pain.

And what if your CEO says they can’t sell (or that they’re too busy to do sales)? Unless there’s someone else on the founding team who can (and is willing to) take this role you’ve likely got a big problem.

You can have the best product in the world, the happiest team in the world, and the best written code in the world. Even a great network of contacts. But if you can’t sell, you’re going to fail.

Marketers:

You have a vested interest in sales working well. As much as you might think your “number” is leads or MQLs or something, unless those leads turn into revenue you’re going to fail.

Help your CEO leverage their time better. You should be working with them on messaging, providing data to support them as they develop their process, and helping them build the process into a system that can be replicated as you start to build out a sales team.

2. Create a revenue plan and set targets based on data, not hope.

Saying “we have to be able to acquire a customer for $500” doesn’t mean you will. You need to have a sales and marketing plan based on the best data available. And you have to iterate on that constantly as you learn more.

Here’s why:

You’re competing against your competitors for attention - whether that’s paid or organic.

Those competitors are probably aiming for an LTV:CAC (lifetime value : customer acquisition cost) ratio of 3:1 (i.e. the lifetime value of a customer is three times more than the cost of acquiring them).

This will determine the amount of money they’re wiling to spend to acquire a lead or close a deal.

So if you’re selling a similar product at a similar price, and aiming for a similar LTV:CAC ratio you can expect your customer acquisition cost to be similar too.

Yes, you might come up with an incredible campaign that drives down CAC in the short term, but don’t assume you’re always going to be able to out-think the competition. Especially if you’re in a competitive / crowded market. You’re likely vying for the same attention which means you’re likely using similar channels, and therefore bidding against those competitors. So your cost of eyeballs is going to be similar.

Whilst you may be able to rely on just the most cost effective channels in the very short term, they likely don’t scale infinitely and you CAC:LTV is likely to gravitate towards 3:1 over time.

Plus, if you’re spending less than that (LTV:CAC of 4:1 or 5:1), you’ll probably want to increase CAC to acquire more customers and grow faster anyway. If your LTV:CAC looks more like 2:1 or 1:1, it might be time to re-evaluate your approach unless you have the runway to cope and are very confident about what your churn / LTV looks like.

Be realistic about what it’s going to cost you to generate a lead, and then the conversion rate of leads to close. You need enough marketing or sales development budget to create enough pipeline.

Over time, you’ll start to build your own data. But until you have your own, you can use benchmarks and assume you’re going to under-perform by 25% until you get your customer acquisition process running consistently.

3. Make decisions and do things that are good for today’s reality.

Stay your course.

Things change, fast. Your market, the VC market, the competitive landscape. It can be easy to keep switching up your strategy in response.

Don’t change your customer acquisition and retention strategy every time you read something new; you’ll never try something long enough to learn if it works and to scale it.

Don't pretend you’re bigger than you are.

This is an easy mistake to make, especially if you’ve come from a larger company or been part of an early-stage team that’s grown quickly in the past.

It’s easy to get caught in the trap of pretending you’re bigger than you are or investing in things because “they’ll be important when we raise that next round”.

They probably will, but worry about them once you’re consistently hitting your revenue plan. And that most likely means doing things that don’t scale create in order to the revenue you need right now.

One exception here. Documentation. Document everything. Once you’ve worked out how to do something, document the process. Tried something and failed? Document it so you don’t have to learn it again later. Tried something that worked well? Document it so you don’t question yourself in the future when that approach stops producing such great results for a couple of weeks because it was the school summer holiday.

Documenting what you learn is a great discipline that helps you think clearly and saves you huge amounts of time. You gain valuable headspace, your new hires can get up to speed on the history of the business fast, and your team can follow proven processes rather than reinventing the wheel. Notion’s my favourite tool for creating and sharing documentation.

Don't miss this month’s target for worrying about scale.

There’s an expectation in mid-market SaaS that to raise a round on good terms you need to be showing x% month-on-month revenue growth and be able to sustain or increase that rate of compound growth once you raise.

And this creates a tension.

Should you be doing things that don’t scale to hit this month's number, or worrying how you’re going to deliver the number (that’s getting exponentially larger) in 6 months’ time.

In an ideal world you’d be hitting your number today and testing / building a plan for 6 months’ time. And if you can, that’s great.

But if budget and time are scarce (which they likely are) don’t sacrifice your number today for a hope for the future .... or you may not even get there.

4. Don’t assume your best channels will scale infinitely.

In your early days it’s likely you’ll be able to generate enough leads to fill the pipeline and hit your revenue number from referrals and relatively low cost acquisition channels. But, just because you can acquire a quality lead for $100 today, doesn’t mean that scales infinitely.

Great that you found a keyword to bid on that’s $5 / click but if you can only generate three leads / month off it and all the other keyword you’d consider bidding on are $50 / click, CAC’s going to go up fast.

Great that your CEO can sell to her own network at an ACV (average contract value) of $50,000. But how does that compare with the ACV of deals closed from leads you have no existing relationship with?

This is all fine. Just be aware of it. Don’t plan your whole model for future growth on these numbers, and make it clear to the rest of the business that this is “nice while it lasts” but that it won’t be the same forever.

When planning for the medium term, be realistic about the cost per lead, conversion rate of those leads to customers, and ACV of customers attracted through the channels you’re planning to test. And make sure you have an idea of the upper limit of how far those channels will scale.

5. Make sales and marketing data public.

Once you have a revenue plan that you’re fairly confident in, share it with your whole team then share your progress against the plan with them too. It’s fine to change the plan if you need to. And it’s fine to miss it from time to time. But you’ll build trust and accountability if you share it.

Don’t overwhelm people with too much information (everyone has their own job to do) but as a minimum I’d suggest having a public graph of:

  • Weighted value of MQLs created against target
  • Weighted value of opportunities created against target
  • Value of opportunities closed against target
  • Weighted forecast revenue against target


And celebrating wins is important. Why not set up a slack channel so that anyone who wants to can keep track of the new leads coming in, opportunities getting created, and deals getting won.

This shouldn’t take more than a few minutes to automate out of your CRM.

6. Agree Sales and Marketing SLAs.

Marketing and sales teams have to work together. It’s not uncommon to hear of sales teams that are frustrated with marketing for providing terrible leads whilst that same marketing team are complaining that sales don’t follow up leads properly.

By agreeing, up front, what’s expected from each party and then reviewing the data together regularly, you can get everyone working together to achieve the same goal. After all, everyone’s number is really “revenue” at the end of the day.

What sales should expect from marketing

Sales needs a predictable stream of the right leads. I’m assuming that sales are doing the qualification here, but if marketing is owning sales development or qualification, then just replace MQL (marketing qualified lead) with SQL (sales qualified lead) here.

  1. Number of MQLs provided
  2. Value of those MQLs (treat this as a revenue forecast so if the MQL has a 5% chance of becoming a customer with an ACV of £1,000 their value is £50).

What marketing should expect from sales

Marketing needs to know that leads are being followed up properly so all their effort bringing them in doesn’t go to waste.

Following up in a timely manner makes it easier to diagnose what’s going wrong if leads aren’t closing. Is it lead quality, the positioning, the price, the product?

Some ideas for the sales SLA:

  1. Length of time before a lead is followed up (I’d suggest less than 5 minutes for high intent leads like demo requests).
  2. The number of times a lead is followed up with over a defined time frame before being disqualified or recycled.
  3. Keeping the CRM system up to date with the progress of leads through the sales process so that marketing has the data they need to make the right decisions about acquisition channels thery're testing.

Oh, and every lead should be treated as a potential future customer. Until you can’t cope with the demo volume, meet everyone. Don’t over-qualify. A seemingly “bad fit” lead that you treat incredibly well today might well move to a different company in 6 months’ time, remember how well they were treated, and come back to you with a huge opportunity.

The SLA scorecard

Create a scorecard for marketing and a scorecard for sales. Define what you're agreeing to and record progress against the target. Then review it together, weekly. Here’s what I think should be on your scorecard as a minimum.

  • Number of MQLs created
  • Marketing revenue (total weighted value of MQLs created)
  • Number of leads where the time to contact SLA was missed
  • Number of leads where sales have missed the “number of touches” SLA
  • Value of opportunities created
  • Won revenue by source
  • Time to close won / lost
  • Reasons for won/lost opportunities

Oh, and agree what an MQL, an SQL, and an opportunity are up front before setting the targets. Different teams have different definitions and criteria for these different stages of qualification. Again, these criteria can evolve over time as you start to learn what does and doesn’t work. Just make sure everyone's clear on what they mean for you today.

7. Don’t give up on channels too early (and commit enough budget to test them).

I was recently testing a new source of (theoretically) high-intent traffic. Cost per click was around $25 and we were expecting a 4% conversion rate to opportunity.

So we’d need 25 clicks to acquire an opportunity (spending $625 in the process).

$1,500 (approximately 2 opportunities at the average forecast cost) into the budget, we’d not generated a single opportunity.

There were calls to cut our losses there and then but I pushed to keep the test running (we’d agreed an initial spend of $6,000 to test the channel).

And it worked.

At the end of the $6,000 spend, we’d generated 9 opportunities worth a combined total of $86,000 ARR. At an average close rate of 20% that’s $17,200 of weighted pipeline (or an ROAS of 2.86).

This turned out to be a good acquisition channel (not the best, but not bad either) and if we’d given up too early in our test rather than letting it run its course we’d have lost out on an important source of new business.

Not every test will work out this way and I could have been wrong. but sometimes you have to trust your gut and take calculated risks. To be successful, you have to be willing to try things you believe in, and to fail.

8. If Marketing can deliver the leads, hold off hiring SDRs.

Without marketing laying the foundations, your sales team’s going to fail. There’s a huge list of things that your competitors already have and without those basics your sales team’s always on the back foot ....

  • Messaging
  • Website
  • Email cadences
  • Objection handling scripts
  • Lead data
  • Case studies / reviews / social proof
  • Relevant content for all stages of the buyer journey
  • Establishing a CRM

The list goes one.

So once these are in place?

Let’s assume you can get 50% of the way to your $1mm revenue target through “founder sales”.

The other $500,000 of leads need to come from somewhere else.

Option 1: Outbound Sales Development

Since Aaron Ross wrote “Predictable Revenue” scaling outbound sales development has seemed more and more realistic as an acquisition channel for early stage SaaS startups selling to mid-market and enterprise accounts.

But the reality is it’s super hard and will probably take 6 months to ramp (or a lot longer depending on the experience of your team).

It's easy to spread yourself thin and it's likely to fall to the marketing leader to build an outbound team in the early days.

And whilst it's sold as scalable and predictable, outbound's not easy. Plus, there are plenty of risks in starting too early. If you have a niche market, or you’re targeting a smaller geography you risk burning through the market with poorly thought out outbound campaigns (however well intended).

I’m not saying don’t do it. It may be right for you. And I’ve been able to ramp outbound SDRs in a sales team to hit quota within 3 moths even at seed stage startups. But it’s not a risk-free journey.

But I do believe there's a place for SDRs in early stage startups - supporting marketing with their campaigns.

Option 2: Marketing

For marketing, demand gen is number 1 in early stage SaaS (see number 9 below).

I’m increasingly an advocate of sales development sitting within marketing. It makes responsibilities clear. Marketing’s responsible for creating the opportunities. Sales is responsible for closing them.

Certainly up to the $1mm revenue mark, where your CEO is inevitably leading sales, your marketing leader is most likely to have the capacity and skills to support your first couple of sales deveopment hires and get them onboarded properly (don’t under-estimate the amount of effort required here).

And when SDRs are sitting in marketing, it becomes easier to run properly co-ordinated campaigns to ideal target buyers.

For example:

  • You’re generating inbound leads: Your SDRs book the meetings for the sales team.
  • You’re running an event: Your SDRs call your prospects to invite them.
  • You’re identifying companies visiting high intent pages on your website that aren’t in your pipeline yet: Your SDRs run an outbound campaign to those account alongside targeted ads that marketing are running.

SDRs supporting marketing activity is, in my experience, a better use of the investment than completely cold outbound.

But don’t feel that having SDRs is essential to start with. Modern marketing automation platforms like HubSpot mean a lot of the work of meeting booking, lead nurture, and event invites can be automated without increasing headcount (which costs time in terms of training as well as the cost of salaries, commission etc).

9. Demand gen is number one but you should do brand too. Balance short term and long term.

As a marketer myself, I massively value brand. And I’ve worked with businesses where building a brand is the only way to enter a specific market.

The challenge is that brand building takes time. It’s not a one-campaign wonder.

But the majority of early stage SaaS businesses have limited runway and need to show they can acquire customers, fast. And at different times you have to weight your budget in favour of either demand gen or brand.

Yes brand speeds up the sales cycle, improves conversion rates, increases referrals ..... the list goes on.

But first you have to deliver leads. If the sales team is crying out for leads you can’t say “we’ll have leads in 6 months from all the work we’re doing now”.

For most early stage (particularly pre series A) SaaS businesses you’ll likely weight your limited marketing budget in favour of demand gen.

That said, there is some low cost brand stuff you can be doing.

For early-stage startups, think about how you can get free or very cheap attention. Produce quality content that’s relevant to your audience (and that doesn’t just mean blogs - it could be video, building an audience on social media, responding to questions in forums, becoming a trusted source for journalists in your industry .... ).

Starting to build a content engine is a great way to meet interesting people in your industry and begin to understand your audience more deeply. A rising tide lifts all boats.

Oh - and don’t sacrifice reputation for short term cash. Running a poor quality outbound sales campaign, or taking on lots of bad-fit customers is a guaranteed way to damage your reputation in the market.


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