When we started Teamleader, we liked to read the GrooveHQ blogs – they were full of practical tips on how to build a startup, and Groove CEO Alex Turnbull was incredibly transparent about GrooveHQ’s MRR growth.
Blogs like those helped me think about my own company. And having successfully gone from 5k to 100k MRR in less than 24 months, what better way to help others than by sharing our story.
Here’s how we did it:
Lesson 1: Organic comes later
In the beginning there was only one part of the sales engine: Me.
I did literally everything – from lead generation to setting up meetings, to going to the meetings, to client onboarding and client management. Pretty standard as a first time founder, I guess.
As we went on, I was spending more and more time meeting clients, and I also felt that of the ten meetings we had, we closed about seven. I thought: I need to get in front of more leads so I can close them.
Intuitively, we put our first hire onto the job of calling leads to set up meetings, because that’s what we needed most. We found out later that this is called ‘inside sales’.
What’s important is that we didn’t hire a marketer, but a sales guy first.
Looking back, we think it was an important factor of our success.
Everyone talks about SEO and content marketing, but as a startup, you don’t have time to wait until the benefits of SEO and content marketing kick in – you need leads and sales now. You need to focus on the “hard” sales stuff initially and focus on your top-of-funnel later.
Our mantra since then is that ‘organic comes later’.
I always received a ton of feedback on those early sales meetings, and we tried to accommodate them as fast as we could, as much as we could. We got into a rhythm of deploying new features on Friday – ‘Feature Fridays’.
We still have those, and customers love it.
While developing new features helped us get to product/market fit, my co-founder kept me honest during those early days and wouldn’t allow for individual customizations – even if customers said they would only buy if we implemented feature X or Y (which happens all the time).
Having been through that phase, I also know how to push back when the sales people tell me, “If we only have this feature, we can sell”.
Don’t fool yourself (or let your sales people fool you): You should be able to close sales based on the product you have, not the one you promise.
Lesson 2: Low ARPA? Go virtual
Phase two was about finding a repeatable and scalable sales model. At that point, I had too many meetings to handle marketing, so we hired an intern as our first marketing guy.
Now we had a sales engine of three people: One person to generate leads, one to set up meetings with leads, and me to close them.
At that point, I started looking for a clone for myself – a ‘closer’.
Recruiting a sales person is tricky since they’re usually quite good at selling themselves! To make sure we did it right the first time, we got help from an outside recruiter. In the end, you have to trust your gut. We hired a guy who seemed ambitious and passionate about sales, someone who believed in the product. Turned out to be a good choice as he’s now our head of sales for Belgium.
Some things we’ve learned since: A good closer needs targets that are not easy to hit. When they do hit their targets, you need to celebrate the hell out of their achievement.
When recruiting, we usually ask them to sell us our product. At that point, they might not know the nuts and bolts of the product, but it’s a sure way to spot sales talent.
By this point, we made another important change in our sales process: We reduced physical visits and switched to mainly calls and online meetings.
The reason is our ARPA (average revenue per account) is fairly low is because we sell to SMEs. We just can’t afford to send a sales person to close every sale, but doing sales via online meetings works.
SMEs are busy and they just want to get on with their work. They don’t necessarily need you to come down to have coffee with them.
Lesson 3: Divide and conquer
I consider myself a sales guy. I get a rush from closing a deal. After that rush, I instinctively go looking for a next sale to make. It’s just who I am. However, if you want to be successful in SaaS, you need to invest in customer success, because otherwise churn will kill your business.
Customer success was a bit of a revelation to us, and we went to the Totango Customer Success Summit in San Francisco to understand it better.
The trip (as well as reading every single blog that David Skok ever wrote) convinced us that one thing is crucial when building a scalable sales organization: The need to define and – more importantly – to separate the roles in your sales team.
Today, we have four separate roles in the sales team – all clearly defined – and we avoid having them spill over into each other.
- The marketing person needs to generate leads
- The inside sales person has to score the leads and prepare them for a sales meeting
- The sales person needs to close
- Customer success has to get them on board – and keep them there
To make sure that every person in the sales team understands exactly what their role is, we give them one KPI each. This KPI can differ, depending on which of the four roles the person has, but it can also differ between members with the same role.
This keeps them 100 percent focused on their own job. We don’t want a closer to worry about onboarding or vice versa.
When scaling up, this has an added benefit.
As you grow and get more leads, you can then hire a new sales person to close them. Close more sales, and you can hire a customer success person. This helps you create very clear metrics about when to hire new people.
Another reason why you want to create a strict division between your sales people is that the four roles require different types of people. Our first customer success person was trained as a teacher. She would probably not be a good closer, but she loves helping people and that’s what made her a powerful customer success professional.
Of course it’s crucial to worry about churn, ARPA and conversion rates, but your clients get better as time goes by.
At a certain point, your customer success team will clean up your customer base. That might result in a higher churn rate for a while, this will be corrected by your increased opportunities to upsell to your remaining client base.
Lesson 4: Outbound sales was not for us – and it might not be for you, either
At some point we ran smack into David Skok’s observation that:
Your existing lead generation reaches a maximum, and your next lead generation source will always be a bit more expensive than your last.
In our case, it meant we were out of Adwords: We’d increased our budget to a point where it couldn’t be spent anymore.
It sounds like a luxury problem, but it isn’t: We needed more leads to keep growing. At this point, we discovered Aaron Ross’ Predictable Revenue – which I read three times in a row. Ross suggests adding cold calling to the mix.
We duly downloaded his template, started implementing it in our sales organization and… utterly failed.
Culturally it just doesn’t work in our current markets (Belgium and the Netherlands). I went to a few networking events in my home town, and quite a few people remarked that they felt a bit spammed by our outbound sales approach. It was hurting our reputation, and we decided to stop outbound sales after six months. Also, our ARPA is probably too low to use the model successfully.
Another thing we learned at this stage is that there is a duality between good metrics and faster growth.
On the one hand, the next lead source is always more expensive than the last – so your customer acquisition cost goes up. However, during scaling we found another parameter that can increase the acquisition cost.
In the very beginning, I trained our new salespeople. Once we started scaling, we asked our very best sales people to train newcomers in the sales team. It seemed like a logical idea, and it probably was. But it can cause a spike in your customer acquisition cost: Your very best sales people are busy training the new guys!
Keep an eye on it, but don’t worry too much – if you hired good sales people, they should more than make up for this.
Lesson 5: It’s the little differences
Which brings us to the real scaling, a crucial skill for European startups: Invading new territories.
Every new market initially pushes you back to phase 1: finding product/market fit. Every market is slightly different, and you need to calibrate your product, marketing and sales to it. The advantage is that you can skip phase 2 and to straight to phase 3, because you already have the playbook from lessons learnt before.
One of the more difficult questions for us was: where will we go? To the UK or Germany because of the market size? Or to a smaller market that is easier? Making the wrong bet would cripple our company.
We thought long and hard about it and chose the Netherlands – because it was close to Belgium in terms of language, cultural fit – and it was nearby.
Valuable lessons learned: buyer personas don’t differ that much (there is hardly any difference in the top-of-funnel to trigger leads), but there are big differences in barriers and proof points to overcome those objections.
One of those funny little cultural differences we found is that Dutch clients wait till the end of the trial to sign! In Belgium, when someone is trialing the product and they like it, they convert to a paid plan. In the Netherlands, they wait until the very last day of the trial to convert.
Of course, there were more profound differences: there was more competition in the Dutch market, we did not have a network there, and there was a risk that the Dutch operations would become an island. But fundamentally, we were ready. We know how much MRR a sales person does – there are dashboards, metrics and KPIs for everything – if something is off we catch it quite quickly.
That might be the most important advice to founders: to scale is to measure. If you don’t have solid metrics for your operations – especially your sales – you are not ready to scale, and definitely not ready to attack other markets. Since our successful entry into the Dutch market, we have also set up operations in Germany, France and Spain.
Lesson 6: Scalable sales work for small ARPAs
Finally, Jason Lemkin of SaaStr says that you probably need to go enterprise to really scale – as in: sell six- or seven-figure deals to large enterprises. I’m quite proud that we managed to scale our sales and that our company is selling to SMEs at low ARPAs.
We did this by being ruthlessly efficient, and by focusing the entire company on efficiency. By being in touch with so many leads constantly, we know very quickly which approach works and which one doesn’t.
In the future, we want to become even more efficient, most notably by focusing on marketing automation, lead recycling and referral marketing – all to decrease our customer acquisition cost even further.
And our biggest challenge will be: To grow from a local to a multilocal organization, by overcoming the barriers that entering a new market brings with it.