We recently completed an assessment with a founding team that raised $2.1 million. They have 10 active customers, no churn, and currently at a $250K run rate. The startup is in the healthcare space. The outcome of our assessment was a 4-step game plan to accelerate revenue. Someone asked the following:
“The next steps are so clear and the founder and lead investor aligned with most of the strategy. What’s the broader framework you use to determine what to recommend?"
As we mentioned last week's Insights email, we were forced to think through the broader pillars of revenue acceleration. Here they are:
Pillar 1: Product Market Fit
Product market fit is on every founder’s mind. Most founders make the mistake of believing they know everything related to the customer. They believe they are clear on the core job to be done and related jobs to be done. They believe they understand the market and the degree to which the market is saturated with solutions like the one they are bringing to market to solve a particular problem. And they believe they understand the forces required for the buyer to switch from whatever they are doing today to their solution.
By and far this is not the case.
We believe most founders should leverage product research methodologies to determine the ideal customer, the clear value proposition, and the offering they will build.
There are three research methodologies that we recommend:
- Jobs To Be Done survey
- Market Saturation survey
- Solution Switching Forces survey
Some questions to consider:
- How do you describe the value of your offering?
- Which customers do you target? Which customers do you not target?
- Can you walk me through a specific customer and use case on how they use your product? (Who do you believe is your ideal customer?)
- Can you summarize the competition and how you are uniquely positioned against them?
Pillar 2: Product Development
It’s important to have a conversation about how you build a product. For many founders it’s a simple equation of talking to customers, writing down what they say they want, and then using some methodology to determine what to build.
Uncovering the product development process is important. While we hold a 60 minute working session to help founders uncover how they are building product, we recommend some questions founders consider and discuss:
- What are your top 2 or 3 priorities in your area in the next 6 months?
- Is the product team optimal given what you know today?
- How does the product development process work today?
- How is product priority set today?
- Is there anything you would do differently in terms of process?
- What features get the most usage?
- Are there features that your customers expect you to have that you don’t? If so, where do they fit in the priority?
- What are some features you have today that customers love, but aren’t the reasons they buy your product?
Pillar 3: Operating Plan
The operating plan allows you to align finances with the revenue acceleration targets you are looking to create. The operating plan includes a clear market focus, a sense of the ideal customer and the customer's buying journey.
The operating plan allows you to set assumptions and understand the direction of growth while allowing for experimentation and learning. To build a clear plan you will need the following:
- Bottom Up Operating Model
- Ideal Customer Profile
- Buyer's Journey
- New Logo Acquisition Framework
- Customer Expansion Framework
These assets become living documents that are reviewed weekly alongside the operating plan.
The benefits of the operating plan:
- Clarity around operating model assumptions
- Launching point for revenue-related conversations
- Connecting go to market activities to outcomes
Note: We’ve written about Building the Operating Model for Accelerating Revenue previously.
Pillar 4: Customer Success
It’s clear to us through our observations that for most B2B software companies, customer success plays a critical role in revenue acceleration by helping the customer get the most out of the product. Because value creation is critical for software companies through the utilization and expansion of services, customer success is examined by demand generation channel and customer segment (see New Logo acquisition framework above).
We look for customer retention to be north of 90% and revenue retention to be north of 120% for a business to check the box on customer success. We have also observed that the definition of customer success is not uniform across B2B software companies. In many cases we witness a business leveraging customer marketing (content, community, webinars, etc.) as opposed to customer success which his about connecting 1:1 with customers, understanding their use cases, leveraging the product team to make the UX more effective, and overall focusing on customer adoption and utilization.
In the aggregate, customer success focuses on customer utilization metrics, churn/expansion metrics, and provides insights and foresight to the leadership team to better understand what can be expected from the existing customer base.
Some questions to consider:
- What does customer success need to do for the company to accomplish this goal?
- When a customer signs on, how accurately can you predict whether the customer will be successful? What do you look for?
- Are some customer segments better for the business than others? Why?
- At the 90 day customer stage, can you predict whether the customer will renew an annual contract? What do you look for? Have you ever validated this assumption? Do you track this metric or other metrics by customer cohort?
Pillar 5: Sales
The new logo acquisition framework (see above) comes in handy again as we think about evaluating the business by demand generation channel and customer segment to observe and clarify sales performance.
In all cases for sales we observe that the best companies have the following components of the sales playbook:
- Discovery Call Guide
- Presentation Guide
If we can determine that sales effectiveness is working in one part of the business, then the approach is to double down the investment in that area of the business. It is often a misconception that growth happens proportionally.
Determine where sales is working and deploy resources in that area while you determine other areas to experiment in and those areas that you will ignore. Note briefly: we ignore parts of the business because we don’t have human resources to focus attention, or we cannot get the data back fast enough to make smart decisions.
Pillar 6: Demand Generation
There are anywhere from 25 to 31 different channels a B2B software company can use to drive awareness and then move them through their journey to becoming customers.
There is only one path that we have observed time and time again that B2B software companies use to gain traction with demand generation: experimentation.
We recommend that you design an experimentation framework based on the scientific method to help you determine which two channels are appropriate for the segment of the funnel, or part of the growth loop based on the stage of growth.
Pillar 7: Aligning teams
Once you are armed with your Go To Market strategy it’s time to align the strategy with the core functions of product, marketing, sales, customer success, and finance.
Founders who see aligning the front of the house (primarily sales and marketing) with the Go To Market strategy are not leveraging their teams to their fullest potential and leave teams critical to the success of the business in the dark as it relates to revenue plans. Break in alignment and incentives are detrimental to the overall success of the business and each individual stakeholder.
Pillar 8: Vision
Craft a compelling vision, communicate the mission, and evangelize the reasons to believe. There is no one out there sharing your vision. It is up to you to craft a compelling vision and share it with your world. It is critical to communicate the mission of your business, and as you grow you must share why people and companies believe in what you’re doing.
This will become the drum beat to which you, your team, your partners, and your investors will move to. Without it, you will find it challenging to overcome the inertia to create momentum.
Pillar 9: Goal Setting
Set clear Goals. clarify purpose for these goals (by employee), and design a system to constantly review and refine the best tactics to achieve the desired outcomes.
While goals will determine activity, we have observed that by crafting both goals and purpose and reviewing these daily, 75%-80% of the work is complete. After 2-3 weeks of continuous work the brain will start to scan for the most optimal activities to engage in to help you achieve the goals you’ve set for yourself and the team.
We always tell founders that when we make our recommendations we will be 80% correct and clear. There will be 10% that we are correct on, but it’s unclear to you why and you’ll ask questions. And then there will be 10% that is easier out of order, or you tell us doesn’t make sense.
B2B software startups have capital to deploy and it’s critical to allocate resources and deploy it smartly. The 9 Pillars to Revenue Acceleration lay out the larger framework that revenue acceleration fits into.
There are many ways growth plans fall flat. Often you are expending time, money, and human capital and praying that something will work. While many believe that there is a lot of trial and error and that you must "do things that don't scale" before you can find your way (e.g. product market fit) there is an exact science to Revenue Acceleration. If you keep these 9 Pillars top of mind and refer back to them frequently, this path will not fail. Hundreds of founders have used this formula to find their way to achieving and exceeding revenue targets.