How Founders Should Think about GTM - Part 1: People
Congratulations, you’ve raised a round! How are you thinking about deploying this for your B2B distribution model? We’ve pulled together a three part series for founders to help them think specifically about go-to-market (GTM). This post will focus on the People. The next two will look at the Processes and the Systems.
You’ve built your product through sleepless nights, team-wide white-boarding sessions, and lots of hard work. Now it’s time to take it to market. If you’re an early-stage startup (Pre-Seed, Seed or Series A) typically, you’re the company’s de facto head of sales on day one. You’ve landed those initial ten beta customers, incorporated their feedback for the product and messaging, and been on the front lines of customer support. Now’s the time to stand up your foundational go-to-market (GTM) function — complete with the people, processes and systems to accelerate sales execution.
Focusing on go-to-market during this next phase of growth can be challenging for founders. And frankly, determining what to do with your GTM strategy can be paralyzing. The opportunity costs of waiting to action your GTM plan are measurable, and the implication can be significant in rapidly evolving market conditions.
The toughest part of growing Segment from $0–200M+ ARR was letting go of product (which I understood) to focus on go-to-market (which I didn’t). In 2017 I was really struggling with this. — Peter Reinhardt, former CEO of Segment
Creating and implementing a GTM strategy can often be an incapacitating topic for founders and leaders. I know it because I’ve lived it. I’m joined today by Bill Schwidder. Bill has built sales strategy and operations functions from the ground up at places like Desk.com, Zenefits, and Narvar and is currently VP of Corporate Development at Salesforce. So I thought who better to help guide your thinking as you strategize or refine your own GTM plan.
This post is divided into easily digestible sections, each with either a suggested list of key actions or key questions at the end of the section. If there are things you want to know, but we haven’t included here, don’t hesitate to reach out!
A strong GTM plan can be the difference between mediocre success and breakneck growth. Companies that have accelerated through the ARR plateaus have done so by executing on a concrete GTM strategy (think Snowflake starting with financial services & healthcare or Slack with tech & dev teams). So whether you’ve just started building or you’re at $5M in annual recurring revenue (ARR) and looking to grow 2x year over year, here’s a roadmap on how to think about translating aggressive growth targets to an actionable plan.
All businesses go through a natural evolution of stages, from building your minimum viable product (MVP) to adding fuel to the fire and multiplying your GTM organization. Typically the GTM team includes your sales and customer success and the supporting functions like sales & success strategy and revenue operations. These teams will execute your strategy to engage with prospects, turn them into customers, and expand their relationship with your company. For this exercise, we’ll focus on companies with established product-market fit (PMF) that have started onboarding their first few pilots or customers — likely through founder-led sales.
A solid sales and customer success function is built through great people, processes, and systems. Focus on landing the right team, establishing your key GTM processes, and setting up initial essential systems. In this series, we’ll take you through how to stand up each of these in the early innings of building out your foundational GTM function.
People: From Founder-Led Sales to Dedicated Sales Hires
Moving from founder-led sales to making your first dedicated sales hires is difficult. The plunge to hire is deep; it requires a founder-led leap of faith to hand over the selling reins and is an essential milestone in maturing the business. Moreover, at the same time you’re developing the strategic framework to think about sales headcount as a lever to achieving your top-line goals.
Remember, it’s chess you’re playing, not checkers. The company is scaling rapidly, and your role as CEO and founder is to ensure the growth continues. Maybe, you’ve already built up a successful self-serve business, or perhaps the company is surviving on founder-led sales. As CEO, you see a clear path to the next meaningful growth tier. Scaling the business is becoming a burden as your time spreads too thin. Business activities like hiring and interviewing consume tremendous amounts of thought and energy, and scaling the product and making those first marquee customers successful is a time-intensive priority. Minutes are now your most important commodity, and you are officially too stretched to focus on bringing in the next cohort of critical customer wins. It’s time. You need to land those first critical sales hires and begin building a long-term strategy for scaling your company’s GTM function. And that’s precisely what you should do — go find those hired guns who will work tirelessly to win that next series of important customers.
Don’t decision straddle. Commit, and hire those first sales reps. Actually, splurge, and hire two of them. If you only hire one — whether they’re underperforming or excelling — you’ll never know if it’s them or if it’s you. And those first sales hires need to be hungry, but more importantly, they should be proven. Don’t fall victim to the trap of hiring unproven AEs. Company growth is on the line, and as CEO, you need top talent with a proven track record of success. Job jumpers, people unwilling to quantify a track record of success, those reluctant to show their prior-year(s) W2s, individuals who appear uninterested or incapable of rolling up their sleeves, etc. — need not apply to this future unicorn.
Don’t feel compelled to reinvent the wheel. Seek out companies you admire who have grown their top-line by scaling the GTM function. Look at the pedigree of the AEs they’ve hired, and more often than not, what you will discover are AEs who have tasted success at scaled business and are working to bring those disciplines, processes, and values into their new companies. Use these mental notes to establish your hiring profile and if needed, spend the money to retain a firm to help with your search — again, minutes are your most important commodity, and you’re not a professional headhunter.
Capacity Planning 101
Now that you’ve hired your first few AEs, how do you think about this going forward? Time for capacity planning 101. Sales capacity planning allows you to connect the dots between your top-line goals, sales headcount plan, and current team performance. It allows you to bridge the gap between your revenue goals and your team’s current capabilities, thereby arriving at a sales headcount plan for the year.
Selling capacity is your best friend. Start simple when thinking about selling capacity, e.g., how much quota you need on the “street” to hit your ARR targets. The principle is simple. AE selling capacity drives ARR growth. To illustrate the point, attached is a simple capacity model to understand how many reps are required to hit your ARR targets. Leverage this model to take the annual target from your finance plan and back into the sales headcount you need to cover that. We typically look for annual quotas of around $400k for SMB, $600k for Mid-Market, and $800k — $1M+ for Enterprise. Keep in mind that most startups target $500K+ in ARR at minimum before going to raise their Series A.
Wait on the VP. If you build it, the VP will come. Time and scale will help define and dictate when you need to bring in that first VP of Sales. Typically, companies bring in a dedicated sales leader when the selling team hits four to six quota-carrying individuals or when the business is around $1M in ARR. But don’t be afraid to start building relationships with potential future leaders, especially in today’s market.
- Identify your AE target profile, including potential companies you want to recruit from.
- Build your sales capacity model (or use ours) and take your financial plan and back into your sales hiring needs.
- Gut check some of your Quota-to-OTE ratios.
Now that we have the basics of ‘people’ covered, let’s dive in to looking at how to think about Processes.