Editor’s note: This post is adapted from a presentation by Mark Roberge at the 2019 SaaStr conference. Mark is a Senior Lecturer at Harvard Business School and the former CRO of HubSpot. He’s also the author of the award-winning book, “The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling to Go from $0 to $100 Million.”
Most founders and CEOs are focused on how fast their companies are growing revenue. And while that’s important, the reality is that what they should really be focused on is revenue retention. That’s because it’s much easier to ramp up your business once you’ve mastered revenue retention than it is to fix a retention problem while you’re still scaling.
To be clear, scaling a business up successfully is about more than just achieving product market fit and then hiring 20 sales reps. Do that without having checked all of the right boxes and you’ll wind up firing those reps a year later. As we’ll see, a much better approach is to establish a framework around product market fit that’s measured by customer value creation. Only once you’ve got that in place are you in a position to start thinking about scaling up.
Prioritize customer success and value creation
Sales has historically been obsessed with revenue, when in reality it’s customer success that they should be focused on. After all, sales is about customer value creation and revenue is simply a byproduct of that. That’s important to recognize in today’s world of SaaS subscription models where it’s just as easy for customers to leave you as it is for them to sign up. Practically speaking, that means that if you focus all of your energy on new sales, you’re going to experience a lot of churn.
That’s especially problematic in the age of social media. These days any customer can publicly share the experience they’ve had with you, whether it was good or bad. At a time when the first thing people do is google you to see if you have a one-star or a five-star rating, it’s critical that your sales efforts be focused on customer success.
Measure customer success
Churn is a silent killer because it’s a lagging indicator of a serious problem. Rather than wait for customers to churn, you need to get in front of the issue and and establish leading indicators to show what your customers are doing straight off the bat.
Leading SaaS companies have identified certain behaviors in the early adoption phase that signal that they are long-term, high-value prospects. For Slack, it’s when 2,000 team messages have been sent. With Dropbox, it’s when a customer adds one file to one folder. For Hubspot, it’s when someone uses 5 of 20 features within the first 60 days. Any customer that doesn’t do these things is identified as “flaky.”
The takeaway is that it’s important to know what a customer has to do during the first 30 to 60 days of using your product to signal that they are a good long-term prospect.
Focus on consistent customer value creation
If only 27 percent of your customers are using your product every day in the first two months of signing on, you need to ask yourself why and identify how you can do better. Listen to what the customer is saying and come up with a plan to get it right. Don’t hesitate to involve the whole company here. The more meetings you run dedicated to customer value creation, the faster you’ll hit the right spot.
Achieve sales and marketing alignment
Sales and marketing aren’t always on the same page. But considering that most customers start their journey with marketing and progress through to sales, aligning these two business functions can give you an important advantage.
To even the playing field, marketing needs to separate lead flow by the quality of the customer, the quality of the company, and the quality of the engagement (did they download an eBook for example or have they requested a demo?). Marketing needs to be given a revenue quota based on lead value, rather than number of leads.
Remember, when marketing hits its goal, sales will too.
What to look for in a sales hire
The ideal sales hiring formula is different for every company and it’s all about context. The attributes that make a car salesman successful, such as pressuring to close and objection handling, aren’t what your customers want.
In this sphere, the top attributes of successful sales reps are coachability, curiosity, intelligence, work ethic, and prior success. Managers and directors should establish the areas they need to coach each rep on, and establish a data-driven sales culture to measure success. Everyone involved should then be held accountable to good coaching.
Pace yourself and build slowly
Mark’s biggest piece of advice is not to run before you can walk. Don’t scale up before you have a solid foundation to build on and robust recurring revenue and customer retention. To learn more, check out Mark’s entire talk here: