David Cummings on Startups

Category: Sales and Marketing

  • HubSpot Growth: $300,000 to $3,000,000 in ARR in Six Months

    In Mark Roberge’s book The Sales Acceleration Formula, he talks about implementing HubSpot’s first sales compensation plan when they had $300K in annual recurring revenue and 100 customers. Six months later they had 1,000 customers and an annual run rate of $3 million. Today, HubSpot is on a revenue run rate of over $200 million per year (NYSE:HUBS).

    From a SaaS perspective, going from $300K ARR to $3M ARR in six months is amazing. Lemkin’s SaaS Law is as follows:

    if you can go from $1m to $10m in 5 quarters or less, then your market is huge.

    While this HubSpot example is going from $300K to $3M in six months, I’m sure they went from $1M to $10M in five quarters or less. And, of course, today they’re north of $200M run rate, proving that the market is huge.

    This is an exceptional example but a great datapoint nonetheless. Entrepreneurs should look for small, fast growing markets that will eventually be huge.

    What else? What are some more thoughts on this example of HubSpot having tremendous growth in the early days and that representing a huge market?

  • Metrics Spreadsheet for Every SaaS Company

    Lately I’ve been talking to more entrepreneurs that have product/market fit and are working to find a repeatable customer acquisition process (see 5 Steps to Startup Success in 30 Words). Now, sales and marketing metrics become critical and it’s time to figure out what works. Christoph Janz has the best Google Sheets Dashboard for SaaS companies:

    Visitors & Signups

    • Visitors
      m/m growth
    • Signups beginning of the month
    • New signups
      – Organic
      – Paid
    • Total new signups
      m/m growth
    • Visitor-to-signup conversion rate
    • Signups end of month

    Paying Customers

    • Customers beginning of the month
      – New customers
      – Conversion rate
      – Lost customers
      – Churn rate
    • Net new customers
    • Customers end of month
      m/m growth

    Monthly Recurring Revenue

    • MRR beginning of the month
    • New MRR
      – New MRR from new customers
      – New MRR from account expansions
    • Total new MRR
    • Lost MRR
    • MRR churn rate
    • New new MRR
    • MRR end of month
      m/m growth
    • Avg. revenue per customer
    • Avg. revenue per new customer

    Customer Acquisition Costs (CAC)

    • Marketing spendings
      – Marketing spendings per signup (blended)
      – Marketing spendings per paid signup
    • Sales spendings
      – Sales spendings per new paying customer
    • Total CAC (blended)
    • Total CAC (paid signups)
    • Time-to-recover CAC for paid signups (months)
    • CLTV (e)
    • CLTV/CAC (paid signups)

    Cash

    • Cash beginning of month
      – Cash coming in
      – Cash going out
    • Net cash burn
    • Cash end of month
    • Runway at current burn (months)

    SaaS entrepreneurs would do well to use the Google Sheets Dashboard for SaaS companies. And, if inside sales is employed, take a look at the Google Sheets Dashboard with Inside Sales.

    What else? What are your favorite metrics for SaaS startups?

  • Inside Sales Plus Face-to-Face Events

    Earlier today Stuart McLeod tweeted they do inside sales combined with face-to-face events for his startup Karbon.

    I’ve seen several startups follow this same strategy with strong results and I expect more to emulate it. Inside sales is great for all the reasons talked about before (see Rise of the Inside Sales Rep). Only, it doesn’t have the same human element that comes with being in-person that expensive field sales provides. Face-to-face events act as an efficient way to build stronger rapport and connections that are required in B2B sales.

    Here are a few more thoughts on inside sales plus face-to-face events:

    • Inside sales is used to both close deals (account executives) as well as drive prospects to demos and face-to-face events (sales development reps)
    • Running events in the major NFL cities covers the population centers so that a large number of prospects are within a short distance of a program
    • Stronger relationships result in better communication, feedback, and experiences (B2B products are much more dependent on people helping people than most technologists like to admit)
    • Modern tools like Attend for B2B events combined with Pardot for marketing automation help orchestrate the face-to-face programs

    Look for more B2B startups to employ an inside sales plus face-to-face events approach as the core to their customer acquisition strategy.

    What else? What are some more thoughts on the inside sales plus face-to-face events customer acquisition strategy?

  • Account-Based Marketing for Dummies

    Tonight Terminus launched their new book Account-Based Marketing for Dummies (disclosure: I’m an investor). From the publisher:

    This practical guide takes the intimidation out of account-based marketing in today’s highly digitized world. You’ll be armed with the knowledge you need to increase your reach in real time, giving you greater exposure to other decision-makers and influencers within an account. You’ll discover how, through a combination of marketing technology and online advertising, your messages can be displayed where and when your customers already engage online.

    • Align your sales and marketing teams for greater success in your ABM efforts
    • Analyze data to identify key accounts
    • Target your messages for real-time interaction
    • Integrate your campaign with marketing automation software

    Want to learn about account-based marketing? Buy the book today. Also, learn more about Terminus.

  • Sell in Advance of the Roadmap

    Last year I was talking to an entrepreneur who was recounting how they had just lost a big deal they thought they were going to win. Curious, I asked for more details. The prospect was pitched by a competitor where the competitor spent an hour doing a vision call talking about their direction, upcoming features, and general approach to the market. This call, which was about what was potentially going to happen, sealed the deal.

    Entrepreneurs need to sell in advance of the roadmap.

    Meaning, have a vision for the future and sell features and benefits that are coming soon, not purely what’s there today. Now, this can get tricky as we’ve all had sales people promise us things that were not true. That’s not the idea here. The idea is that when prospects buy a SaaS product, they’re not only buying what the product can do today — they’re also buying what the product will do tomorrow. Find the right balance between making sure the prospect will get value right away and promising things to come.

    Don’t underestimate the importance of selling in advance of the roadmap — customers are also buying a vision of the future.

    What else? What are some more thoughts on the idea of selling in advance of the roadmap?

  • Modern BANT Sales Qualification

    Jacco Van der Kooij has a great article up titled BANT Sales Qualification for a New Era. BANT (budget, authority, need, timeline) has been around for decades as a way to qualify sales prospects. Personally, I’ve used BANT for many years as it’s logical and a great starting point in the absence of a more specific methodology (most sales people don’t use any methodology). Only, Jacco argues that BANT needs to be modernized based on factors like SaaS being less of an upfront expense so budget isn’t as big of a concern as it used to be, decision making often goes through a process, as opposed to a specific person, and more. Here’s Jacco’s modern BANT with a new order:

    • N = Need = Impact on the customer business
    • T = Time-line = Critical event for the customer
    • B = Budget = Priority for the customer
    • A = Authority = Decision Process the customer goes through

    Every entrepreneur needs to go read BANT Sales Qualification for a New Era right now.

    What else? What are some more thoughts on modern BANT sales qualification?

  • Quick Math to Determine if Inside Sales Makes Sense

    When talking to seed stage SaaS entrepreneurs, a common question is “should we do inside sales?” Naturally, it’s important to take into account factors like average sale price (e.g. new committed monthly recurring revenue), average sales cycle, complexity of sale (e.g. can junior inside sales reps sell it or does it need more specialized expertise), and more. Here’s the quick math to determine if inside sales makes sense:

    • Take the gross margin of the product (SaaS is typically 70-80%)
    • Use the average deal size in the first year (e.g. $5,000 in new annual recurring revenue)
    • Decide on the cost of salary and commission for the desired type of sales person (e.g. $35k base and $75k on target earnings)
    • Run the math for the example above:
      $75,000 + taxes for the sales rep = $85,000
      70% gross margin times $5,000 per deal times X number of deals = $85,000
      24 deals at $5,000 per deal = $120,000 times 70% gross margin = $85,000
      24 deals are required for the sales rep to make sense.
      With 12 months per year, the rep needs to sell two deals per month.
    • Note: this assumes the rep does all the work and doesn’t require leads from marketing. When you add in heavy marketing costs, the number of deals the sales rep has to sell often doubles.

    Inside sales makes sense when the average ticket price and deal volume are high enough to warrant the expense.

    What else? What are some factors to determine if inside sales makes sense?

  • Terminus Raises a $7.5 Million Series A

    Earlier today Terminus announced their $7.5 million Series A round (disclosure: I’m the founding investor). Terminus started in 2014 in the Atlanta Tech Village and has been spreading the flip my funnel message about account-based marketing to thousands of people.

    From before, here’s how Terminus works:

    • Existing leads and contacts from the CRM or marketing automation system are automatically imported using dynamic rules (e.g. take all the leads/contacts with an active opportunity in the pipeline)
    • Based on job titles, additional contacts are retrieved from the targeted companies through multiple data sources (e.g. NetProspex and others)
    • Similar to retargeting, ads based on rules are shown on mainstream sites to everyone identified in the account (e.g. show specific ads based on where the account is in the sales cycle)
    • Ad click-throughs and impressions are tracked to tie results back to effect on pipeline acceleration in the CRM

    Congrats to Eric and team on closing their Series A. Here’s to building an enduring company.

    Know any B2B marketers? Have them take a look at Terminus.

  • 5 Ideas for Prospect List Building

    Back in the very early days of Hannon Hill we had six customers of which two were in higher education. Now, even though it wasn’t enough to be statistically significant, these two colleges loved the product and provided great feedback (usage is oxygen for a product). Sensing an opportunity in higher education, I bought a giant book from Barnes & Noble that reviewed every college and university in the United States (over 4,000 schools). We divided the book in half and started calling people involved with managing all the public facing .edu websites. Today, hundreds of colleges and universities use Hannon Hill to manage thousands of websites and millions of web pages.

    Here are five ideas for prospect list building:

    1. Look for lists of fast-growing companies like the Inc. 5000 or the Deloitte Fast 500
    2. Research tradeshow attendees and exhibitors like Dreamforce or SaaStr Annual
    3. Implement an email finding tool like Email Hunter
    4. Use crowdsourcing tools like Amazon’s Mechanical Turk to flesh out prospect fields
    5. With the lists, run prospecting campaigns on a sales acceleration platform like SalesLoft

    Prospect list building is a critical part of the startup process. Just remember: nothing happens until something is sold.

    What else? What are some more ideas for prospect list building?

  • 5 Sales Tips for Seed Stage Startups

    After talking to many entrepreneurs, I’ve found that one of the co-founders (usually the CEO) sells the product to the first 25+ customers (ideally 10 Unaffiliated Customers). Once the startup raises money, or starts generating enough revenue, the most common next step is building out a sales team in search of a repeatable customer acquisition process (see tips going from product/market fit focused to customer acquisition focused). Here are five sales tips for seed stage startups:

    1. Decide if inside sales makes sense
    2. Build a sales playbook
    3. Develop an ideal customer profile
    4. Hire sales reps in pairs
    5. Follow Predictable Revenue using SalesLoft
    6. Bonus: Resist the temptation to hire a VP of Sales

    For entrepreneurs where sales comes naturally, this part is fun and exciting. For entrepreneurs less comfortable with sales, this part is incredibly hard. Regardless, use these five tips and increase the chance of sales success.

    What else? What are some more sales tips for seed stage startups?