Moving to an efficiency-based model is usually driven by something predictable; a new competitor who enters your space or your financial markets drying up for funding. Not easy challenges, but somewhat expected ones.
These are unpredictable times. A global pandemic has changed how you go to market, who you sell to, and many of your previous growth channels are offline. This impacts if you survive and how you will grow when the pandemic is over.
Regardless, there is likely to be a shift in what VCs care about, that is, efficiency over growth at all costs.
Moving to a capital efficient growth model is a good idea in good times and in bad. In good times, you will be rewarded with higher valuations. If bad times hit, you’ll already be a veteran at operating efficiently and relentlessly monitoring your deal https://www.varicent.com/whitepapers-studies/The-Deal-Health-Systemhealth.
Operating lean and efficiently from the top down allows you to not only weather the down times but also grow even faster during the boon times.
You can envision an efficiency growth model but it’s another thing to operationalize it and hold yourself and your team accountable.
In this post, I’ll outline the following key elements of an efficient growth model:
Instead of looking for one silver bullet, it’s important to look at all of the incremental improvements you can make at every stage of the funnel.
The growth-at-all-costs model isn’t sustainable anymore. The days of adding more demand gen programs, and more reps in an attempt to generate leads is counterintuitive to efficiency and more often than not results in a bloated, capital-heavy business model and a leaky funnel. In times of economic hardship, layoffs are inevitable because the model wasn’t efficient to begin with.
Now, more than ever, we are all expected to do more with less while still meeting our revenue numbers and making shareholders happy. But with the current crisis:
Slow and steady wins the race, so focus on the many small changes that you can do to see consistent marginal gains. The first step is to identify where there are leaks in your funnel. Here are some pointed questions to ask your team and start the conversation:
If you make a 2% change at each stage of your funnel, it compounds. It doesn't just lead to like a 2% improvement in revenue, it has a significant impact.
Image taken from The Deal Health System
These funnels have the same input – 1000 leads – but dramatically different revenue numbers. The difference between the two is sales execution. It’s small – only a 2% to 5% change in conversion at each stage of the funnel – but it nearly doubles the revenue potential for the team!
Incremental improvement is your silver bullet when it comes to scale.
It’s the 1% improvement over time that gets you the gold.
If an MQL falls in a forest, and no one is there to work it, does it contribute to revenue?
Every day your team makes a choice: when, why, and how to work a lead or account. Every lead is precious in the course of “regular” business operation and especially now when we are seeing purchasing freezes and more unknowns than ever before.
The measurable lead model is, functionally, how your team already works with prospects.
You have four questions to ask about the efficiency of your lead model:
From here you can understand the profitability of those leads (CAC) and quality of those leads (conversion to won).
Our new sales rep grader can help you increase visibility of your key sales metrics and hold sales teams accountable in a distributed work set up.
The SaaS companies who are succeeding in this very challenging market are taking bold and immediate steps to redefine and execute on efficient growth models and lean go-to-market processes. Product-led growth is one of the most efficient ways to build your business.
Product led growth is a core part of any B2B strategy regardless of your industry.
A few key takeaways to help your team adapt:
There is undoubtedly going to be a shift in what VCs care about as we weather the after effects of this global crisis. Now, more than ever - but really as much as ever - we need to champion capital efficiency models over growth at all costs.
In good times, you will be rewarded with higher valuations. If bad times hit, you’ll already be a veteran at lean and efficient sales operations and be able to ride out the storm with the confidence that you are doing everything you can.