INVEST in Sales and Marketing! (5/10)
From Launch to Series A: 10 Prios Before You Reach 10k MRR — SaaS SMBs Ed.
About this series
This series of articles are drafted from our experience at Point Nine on the top priorities for early-stage SaaS companies.
Note that though more relevant for startups who focus in SMBs first and then go upmarket, the priorities are general enough to apply to most SaaS companies.
Dichotomy 1: Investing vs Spending in Marketing
Even if it may not be too clear, the key word here is to “invest”.
Sales and marketing are, by default, expenses and not investments. You spend money on them to get more customers.
What I mean by investing in sales and marketing is about your goal and approach to it. You’re investing in marketing when you’re in a “trial and error” mindset:
- You try to experiment to see what works and what doesn’t in order to attract and convert customers. You must try to get your whole team into this mindset. Involve everybody in the team in thinking how to further grow the business. Great ideas can come from everywhere!
- Try to get some sense of how those channels will scale and when they would saturate.
- Document those things so new people who join can get up to speed quickly.
At this early stage, you’re not trying to grow your business through spending into marketing. Instead, you’re trying to understand how could you grow your business in the next phase of the company.
Dichotomy 2: Linear vs Compounded Marketing
In my opinion, there are two kinds of drivers for growth:
- Drivers for linear growth, which means that for every input (ie. phone calls to potential customers done by your sales guys) there’s some ratio of output (ie. closing rate).
If you want to grow your output (more sales), you need to grow your input in a similar way (hire more sales people).
- Drivers for compounded growth, which means that more of the same input generates accelerated growth in the output.
Compounded/exponential growth drivers can usually be characterised by some form of snowball effect. Many “amazing” things have this kind of growth — the growth of cells in an organism, moore’s law for computers, nuclear chain reactions, etc.
Now back to the realm of marketing, when you look at the different ways a company can grow, you would probably agree that there are 2 main categories:
Linear Growth Drivers
In the first category, we can find paid marketing and outbound sales.
In both cases, for every extra pound that goes into paid marketing or hiring sales people, you get a similar level of output. What’s even more important; if you stop investing on those channels, you stop growing.
Obviously, there are some learning economies, which can make you more efficient on your biddings in adwords or enable your sales people to perform better, but if you stop your spending, you stop growing. Period.
There’s nothing bad about those drivers, specially, if you can get great unit economics in outbound and your market is very large, you have a very scalable acquisition engine. But one that requires capital, and at early stage that might be very limited resource…
Compounded Growth Drivers
Here, 4 good examples of drivers for compounded or exponential growth:
a) Happy customers: every happy customer who speaks highly of you is an amazing source of new customers (and an organic one!).
If every happy customer you get brings you another one, and that one another one …. you see that quickly your growth will accelerate.
b) Viral products: can bring exponential growth organically. The more users you bring into the product, the more reach you have and the bigger the snowball effect.
Think about slack, typeform, trello, etc., every new user exposed to it can bring growth within his company but also within other organisations that he might be working with. Obviously this is pretty much dependant on the nature of your product.
c) Referral hacks: even if your product is not viral, there are some “hacks” which allow you to bring good referrals leveraging somebody else’s eyeballs.
Think about the mixpanel stickers at the bottom of the page, the “powered by Algolia” at hacker news, the zendesk’s helpdesk URLs, etc.
d) SEO/Content marketing: you invest once into building a landing page or a blog post, and you get benefits forever from it.
Not only that, if you get your audience to follow your content, every new piece of content has compounded reach based on the previous ones — because some people will subscribe to your newsletter, follow you on social networks, etc. So every post will not start from 0 audience but rather from your previous one.
Your Priorities in Marketing at an Early Early Stage
Compounded growth drivers are amazing, when they work, but they also come with challenges:
- It’s a lot less predictable — which means you can’t control it and use cash to accelerate growth when needed.
- It takes patience and serendipity to figure out things — because exponential growth curves look flat during a long period of time!
Following, I will share some “ideal scenarios” — obviously, they don’t always work. But I think it’s great to test them in the early stages of a company, because: (a) That’s the period of the live of the company where you would have the least pressure to grow. After that, if you figure out something that allows you to grow, you will get addicted to that! (b) If they work, your life is a lot easier!
a) Try to prioritise compounded growth
Not every company can do it — well, almost all SaaS companies can do content marketing and should try to have their customers happy (high NPS!)
You should try veeeery hard to get this working. Most companies struggle bring customers to their front door. If every month you get your top of the funnel filled without having to do extra effort that month, that allows you to focus on something else — ie. making an amazing product with high NPS.
If you’ve been reading this series of posts, as you might already imagine, I recommend that you measure everything on your funnel. Without metrics, it’s impossible to get those things right — just accept that it will be pretty flat to start!
b) Do NOT hire sales people to solve problems of growth
Some companies that didn’t get their top of the funnel right think that hiring sales people to do outbound sales will solve the problem.
As mentioned, it’s great if outbound works, it means that you have a machine that can scale very well with capital. But unfortunately, at this stage you don’t have much capital available to finance that machine. So unless your pricing point is pretty high (+1k$/month), doing outbound sales very early tends to be tricky.
c) Corollary: Avoid cold calling — at this early stage!
Obviously, until you get your growth machine ready, you still need to get potential customers at the front of your door.
The best way to get your early adopters is if they come to you (organic channels) or if you can leverage the trust of somebody else (warm introductions). My view:
- Try to start approaching your network first. Once you finish with it, then ask your early adopters to make introductions. Then go after basically anybody you know to make you introductions…
- Try to get the chance to speak with people. It’s going to be a lot easier to convince somebody to use your product if they hear you than if they get an email from you. Go to conferences, do events, try to build a small community…
Cold calling is a very expensive effort in terms of resources, with extremely low returns until you know very well what the profile of your customer is.
If you’re the founder and you’re cold-calling some potential customers, you’re not spending time with your existing customers/users or improving your product. And if you try to hire somebody to do cold-calling on your behalf, they probably don’t know how to pitch your product — because even you, the founder, don’t really know how to do it!
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Please, contact me at @DecodingVC.
In case you missed the previous ones:
1. Setting the Right Goals
2. Having the Right Infrastructure & Monitoring in Place
3. Get Your Finance Plan Right
4. The Right Team & Roles
