When to Ramp Go-to-Market Spend

Vik Duggal, Growth Consultant, on when to ramp your go-to-market spend

Vik Duggal is an engineer and business executive who is currently a full-time independent consultant and coach. He’s also a Venture Partner with NextGen Venture Partners. As a consultant, he has worked with over 50 growth stage companies helping them accelerate revenue. He actively writes about B2B SaaS growth and consulting. Prior to his current role, he was an operations and revenue executive for VC-backed and bootstrapped startups. Vik has led teams that have collectively driven over $100MM in contracted revenue and raised over $100MM in VC funding. He currently resides in East Cobb, Georgia with his wife and son. Vik began his career as an engineer at The Boeing Company in 2000.

What you’ll learn from Vik:

  • Three research exercises to run before you spend $$$ on go-to-market
  • What to look for in a first salesperson
  • The business metrics that indicate you’re ready to scale
  • How to allocate spend between sales and marketing
  • PLUS: some free go-to-market templates he’s used in the past

CB: Put yourself in a founder’s shoes – you’ve just raised a round of financing and you want to invest in your go-to-market. What do you do first?

VD: I love this question. Many startups either in whole or in part are a solution looking for a problem. You have to put your detective gear on and investigate. There are three research methodologies I recommend using prior to investing heavily in go-to-market. The goal is to understand the needs of your target customer and how your value prop relates to other market participants. The first exercise is called “jobs to be done”, which is rooted in the idea that people buy products to get jobs done. People don’t want a quarter-inch drill bit, they want a quarter-inch hole, right? By understanding the outcomes that customers want to create, it becomes easier to identify where there are unmet needs from the existing solutions available in the market. 

The second exercise is called a “market saturation survey”. It’s a short survey that helps founders understand if their target customer is underserved or overserved, and how mature the market is. If the market is young and underserved, you can focus your value proposition and differentiator on a “primary job”. If the market is mature and overserved you may have to differentiate around “secondary jobs” as your value proposition. A primary job is like cutting the grass, and secondary jobs might be bagging clippings, edging beds, leaf blowing, etc. 

The last exercise is called “solution switching forces”. Like jobs to be done, solution switching forces help you uncover the forces at play when a buyer decides whether or not to purchase a solution for a job. The purpose is to understand what the triggers are that make people switch to a new solution for the same job, or why one solution was chosen over another. This process gives a lot of insight into what really matters to the buyer, which can help inform your messaging and positioning during the sales process.

When applied this process should take a business 3-6 weeks to set up, run, and analyze the data. This will serve you well as you consider how to deploy resources against marketing and sales.

CB: So you have some newly found clarity on the problem you’re solving. How do you approach this problem specifically when it comes to hiring your first sales rep?

VD: Many founders are tempted to bring on a sales hire fairly early. Try not to, but if you must, I recommend you find someone who has the DNA of a sales rep and a product marketer. Obviously you want someone who can close deals and help customers, but you also need that first salesperson to clearly articulate feedback from the sales process back to the marketing, product, and engineering teams. There will need to be a strong go-between that can support founders.

Be transparent about not having a well-oiled machine for a sales process. There are people in the market who thrive in an environment like this. This person must be able to help you identify your ideal customer profile (ICP) and buyer journey, which will help you as a founder get the company to that next goalpost in maturing go-to-market. There are a few common career trajectories I’ve seen for this person within startups. They either grow into your best salesperson, take over customer success and run the early customer success team, move into the first product marketing role given their understanding of the customer and problems they face, or act as special projects for the CEO given they are able to work cross-functionally. If they are good one of those paths will work out well for the first sales rep and the Founders.

Here are some free assets I’ve created to get you started.

CB: Let’s tie this all back to business metrics. What KPIs are you watching, and when do you feel confident enough to ramp up spending on your go-to-market?

VG: The two metrics I’m watching very closely are logo retention and revenue retention. Logo retention is monitoring customer count over time, whereas revenue retention factors in account growth factors like up-sells, cross-sells, etc. I really start feeling confident when logo retention hits 90% and revenue retention breaks through 120%. That tells me we have a strong fit with our target customer base and the machine is working. In fact, a cohort analysis slide would be my recommended first slide in the board deck.

I will caveat this by saying that I don’t just monitor these metrics at the highest level. I like to segment KPIs to match the business as closely as possible, which helps me understand what areas of the business are really driving the most success. For example, if you have multiple license tiers or sell into multiple industries, I would want to know the logo and revenue retention for each tier and/or vertical. This way I know where to allocate more capital and when. When looking at where to spend many times it boils down to how many people you have and how quickly data is coming back to you to make decisions.

CB: How do you think about allocating spend between sales and marketing? How do you decide which department gets that next incremental unit of spend?

VG: I can speak for hours on this topic alone! But, I’ll try to be as concise as possible. The first step is to understand your funnel and identify where things are getting stuck. Let’s use the top of the funnel as an example. I’ve actually created a custom model for my clients, but in essence, I’m using a hybrid of Dave McClure’s Pirate AARRR! model and Gabriel Weinberg’s Bullseye Framework. They essentially tell you that there are between 20-25 different marketing channels and at any given point two or three of those will be the best for your business. 

My first step would be to make sure the SLA between sales and marketing is being upheld; if leads are often sitting there and waiting to be worked by sales because they’re too busy or first meetings are getting booked more than a few weeks out consistently, that’s a good indicator that you need another salesperson. If the SLA is being upheld and sales can handle more leads, I’m going to look at the channels we’re choosing to invest in out of those 20-25 and see if there are experiments we can run to improve performance. 

Best way to reach Vik:

Email: [email protected]
Twitter: @vikdug

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