The startup mantra is scalability. Build your product and IP. Leverage it for high growth that attracts investors. Repeat for the next funding level and continue until you exit.
Tech scalability is well known. Code is the ultimate example of reusing a resource at virtually no cost.
Sales scalability though is still a mystery. Marketing and sales are a custom, personnel-intensive, and thus costly part of company operations.
But that doesn’t have to be the case.
In Scaling Sales: From Craft to Machine Jeff Bussgang writes about successful sales models. Sales teams though are just a part of sales and marketing process.
Here is how you engineer a complete solution.
1. Avoid sucky marketing. Scalability happens with accelerating returns, not the linear marketing like advertising that Wilson warned against.
2. Understand customer sales psychology. A typical product sale is actually a series of customer buying decisions. This Point of Decision approach requires separate marketing and sales processes with appropriate offers.
3. Manage the entire funnel. Every step of the marketing and sales process needs to be optimized from prospecting to lead gen to lead nurturing to sales conversion to repeat or upsales.
4. Employ a marketing system. Just like the tech investment in reusable code, a marketing investment in Point of Decision automated campaigns for direct or rep-closed sales features a low recurring cost. Incremental sales have a much lower allocated marketing and sales cost that hikes margins and accelerates profitability.
This is what we do at Revenue Typhoon and Power CMO.
Good old fashioned revenues are making a comeback of sorts, not that they ever went out of fashion.
I earlier wrote that Traction is Job 1. Ash Fontana’s presentation is getting a lot of press these days. Sales often are more important than product or team as a factor in VC evaluation. It’s certainly critical in reducing risk.
At BAE Investments & Workshop we see a wide range of startups from concepts to those seeking several million dollars in funding. You don’t have to have revenues. Our program helps plug holes like that. But there is no denying that traction is and has always been important.
Indeed revenues are becoming currency in deals. The Next Stage of Angel Investing: Revenue-based Funding from the Texas Entrepreneur Network highlights revenue sharing as an emerging vehicle for startup funding. Typical deals have a 3 to 5% revenue share that’s capped at a 3 to 5X return. It’s venture capital meets factoring.
The run to cash is a natural economic response to the changing capital markets. Demand has increased with the rise of self-funded and angel startups, while later stage money continues to tighten with diminished IPO and VC markets and low returns. It’s why many angels today have moved to real estate deals.
If you’re an entrepreneur, the question is how well are you positioned for revenues? If you wait until you start looking for VC money, you’re too late.
The tech culture today is tightly focused on product, as it should be. As I noted in Exponential marketing VC Fred Wilson proclaimed “Marketing is for companies who have sucky products.”
But it’s becoming increasing clear that revenues are just as important. A revenue strategy needs to be designed and executed earlier rather than later in your startup’s development. That’s exactly what we do at Power CMO where we work with both investors protecting their investments and entrepreneurs. We couple innovative revenue-focused marketing strategy with a marketing system for regular, reliable, and scalable revenues. Give us a call at (972) 200-3490 to see what we can do for you.