How to Reduce Risks in Your Investments in Sales and Marketing in 2021
Mainsail recently published our 10th annual Bootstrapped Survey, in which we polled founders of bootstrapped software companies to learn about their outlook for the future, their plans for 2021, the biggest challenges they face and more. Following a challenging 2020, this year’s survey results were particularly fascinating. By and large, we found that founders have big plans for 2021.
When asked about their most important upcoming investments, founders mentioned:
- Building out teams
- Hiring more sales staff
When asked how they would drive growth in their business, the top two answers were telling:
- Invest in marketing
- Hire more salespeople
Yet at the same time, 49% of founders stated their biggest challenges for growing in 2021 was sales and marketing execution.
In other words, as founders identify ways to capitalize on their business potential in 2021, go-to-market investments are both a top priority and what keeps them up at night.
And this brings up an important question: How can you reduce the risk of making the wrong investment in go-to-market for your company?
Let’s break it down by reducing risks in your sales execution, then reducing risks in your investment in marketing.
How to reduce risk in your sales execution
Make critical investments before you hire reps.
Adding more salespeople is a go-to answer for many leaders when they’re looking to grow bookings. The challenge is that hiring, onboarding and enabling salespeople takes a lot of work. And if you get it wrong, it can be hard to recover from bad hires or unproductive reps. Prior to adding new sellers to your team, make these key investments:
- Understand your demand forecast and your capacity model. Hiring new sellers ahead of demand can quickly generate problems. Right out of the gate, reps might miss their quotas or struggle to generate pipeline. Before hiring, consider developing a clear understanding of the demand forecast for your business and using that to develop a headcount and capacity model.
- Invest in your infrastructure so that you build on top of a healthy system. Before adding new team members, evaluate your go-to-market infrastructure (technology, process, data, etc.) and shore up any gaps. Ideally, you’re growing your team on the foundation of a healthy system.
- Create an onboarding and enablement plan. Document exactly which skills and tools your sellers will need to master. Create any missing training materials. Generate a user-friendly taxonomy and store all materials in a single place.
Don’t skimp on key roles.
We know that for bootstrapped founders, every single incremental hire is a big decision. You can’t afford to over-hire in specific roles. And you can’t afford to carry a huge team. However, there’s an opportunity cost to running too lean, as well. Consider adding two specific roles to your team to ensure you have the right support structure in place to sell effectively.
- Sales leadership. Front-line sales leadership is critical to the success of your sales team. These people will be your coaches, your sales enablement leads, and can help fill in as excess capacity when you need it. It can be easy, early on, to underinvest in sales leadership and end up with high rep-to-manager ratios. Consider maintaining a strict ratio of no more than 8:1 reps to managers.
- Sales or revenue operations. This is an area we commonly see bootstrapped businesses underinvest in. However, sales or revenue operations can have a multiplicative impact on your results. This person (or people) will help you manage your technology, capture clean and reliable data, create strong forecasting processes and more. To help you plan and execute your strategy, this is a critical role for every SaaS business.
Diversify your pipeline.
This concept sounds straightforward but can be tricky to execute. Most likely, one lead source (marketing, partnerships, outbound, etc.) has come to dominate your pipeline. This creates risk. As you lean more on that source, sometimes at the expense of others, you end up putting more of your eggs in a single basket. To avoid this pitfall:
- Ensure you have channel diversity. As you examine your pipeline, identify channel saturation and look for opportunities to test and increase focus on one or two new channels to generate pipeline.
- Make sure your reps are always self-sourcing. We have found this is much harder to turn on than turn off. In other words, we believe that sales-generated pipeline is an evergreen channel that you can always goal your team members on. Instead of allowing this to ramp down when volumes are high, find other tasks to take off of your sellers’ plates.
How to reduce risk in your marketing execution
Set goals for pipeline and bookings contributions.
Not all marketing investments need to have a direct ROI, but a majority of program spend should be focused on driving measurable outcomes. Often, marketing teams measure success based on imprecise metrics such as Marketing Qualified Leads (MQLs). Another way to ensure alignment with sales and other business leaders is to hold marketing accountable to metrics further down the funnel, such as pipeline and bookings contributions. (These metrics should come with goals and definitions that have been agreed upon by other business units—sales and finance in particular.) This is another way to ensure that the marketing team is held accountable for business outcomes.
- Identify leading indicators to overcome long sales cycles. If you’re in an enterprise business where sales cycles are long, work with the marketing team to identify the leading indicators of bookings contributions. For example, a common framework we use across our portfolio is to measure the ratio of discretionary/program spend to pipeline contribution (robust teams drive programs with ratios >10:1, if your campaigns are <5:1, it’s time to reassess that spend).
- Choose an attribution model and stick with it. In any conversation around marketing-sourced bookings, attribution will inevitably come up as a point of contention. No model is perfect, so we recommend identifying the simplest model that your team can maintain and apply it consistently. We frequently find this to be a last-touch or influencing model.
- Balance near-term impact with long-term growth. Brands aren’t built overnight, and while in any high-growth startup, marketing has to move the needle on near-term goals, at least a portion of investments should also be spent building toward long-term growth. For example, building an audience of podcast listeners won’t happen overnight, and their impact may be hard to measure in the near-term, but that doesn’t mean they aren’t worth pursuing.
Build a solid foundation.
Many marketing teams jump too quickly to channel-level execution. Robust teams take the time to develop an understanding of the target customer, market segmentation, pain points and messages that will resonate. Don’t shortchange this body of work.
- Nail positioning, messaging, and ideal customer profile first, before jumping to channel-level tactics. We believe proper campaigns are built starting with the target customer and moving to segmentation and then messaging, and only then should you select the channel to convey the message. Don’t let your marketing team make the mistake of starting with the channel.
- Invest in operational infrastructure. Strong operational processes and measurement capabilities will provide you with a clear feedback loop to understand what is working and what is not.
Follow the Power Law of Distribution.
Now that you’ve nailed the foundation, let’s talk channels. Most successful companies get 60-70% of their growth from one or two channels. Instead of being intimidated by this concentration risk, lean into it and use it to your advantage while always keeping one eye on the future.
- Double down on your winning channels. Make your team masters of the 1-2 channels that drive the majority of your growth. Constantly test and optimize these channels at the margin to eke out every last drop of performance. The majority of your team’s time and budget should be spent here.
- Consistently test your less productive channels. Ideally, one or two of these channels could replace a current leader, if that channel starts to degrade (more competitive/expensive, diminishing response rate, etc.) you have a clear backup plan that you can turn to.
Don’t solely focus on acquisition.
It is not uncommon in growth-stage companies that demand gen is at the forefront of marketing priorities. This is okay, but don’t let it take focus completely away from the other disciplines of marketing. In particular, you should continue to invest in:
- Customer marketing. As your customer base grows, it remains important to drive engagement among your customers so you can upsell/cross-sell new and existing products, increase usage and build evangelism. Don’t underestimate the power of word-of-mouth to fuel growth, and know that strong customer marketing can accelerate this, in addition to driving expansion bookings.
- Product marketing. This critical discipline will work closely with your customers, your product team and your sales team, to ensure that your R&D dollars are well spent. It will also ensure that the new products and functionality that you release are delivered clearly while also enhancing your market differentiation.
Invest wisely‚ then execute for success
Sales and marketing can simultaneously be your source of greatest success and strongest heartburn. By addressing risks in your approach through these specific tactics, you can more confidently approach this important investment in your future.
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