How to Excel at Product-Led Growth
We’re all familiar with the hustle culture, “rise and grind” mentality. CEOs and founders maintain that the only route to success is through 18-hour workdays and pushing oneself to physical and mental limits.
Although we know this approach is unhealthy, many of us continue to do it because we think it’s the only way to secure funding and reach that rare $1B valuation. This week’s podcast guest believes otherwise.
Matt Melymuka is the Founder and Partner of PeakSpan Capital, a growth equity firm that takes a “contra-silicon valley” approach to scaling. Matt joined the Predictable Revenue podcast to discuss what’s wrong with this revenue growth at all costs model.
The problem with prioritizing revenue growth above all else
Most of the pressure for rapid revenue growth comes from outside the company, from venture capital investors. These investors expect a certain number of their companies to go to zero, which is why they push revenue growth at any cost.
The capital loss ratio of any given venture firm is typically 35% (meaning 3.5 out of every 10 companies will go to zero). With those odds, it’s easy to see why most venture firms choose to remain generalists and push the same revenue growth goals on every company.
Although an investor may push to scale from two to 100 reps, such rapid revenue growth isn’t necessarily the healthiest choice for your company.
The risks of rapid revenue growth
When a company experiences rapid revenue growth, that $1B valuation may come with a cost. If the company hasn’t scaled sustainably, there’s an inevitable dropoff, and founders are often left without an exit plan.
If you raise a massive amount of money at a high price, not many companies can afford to acquire you. Matt often sees founders who have backed themselves into a corner by raising so much so quickly. If you choose to go that route, understand that you may need to reach $3-4B before selling.
Another drawback of raising funding early on is that you become reliant on the capital market to fund the business; you raise one round of funding only to get to the next. Companies that have to grind in their early days learn resilience and resourcefulness, and they become very capital efficient.
What to do instead
Instead of aiming for the $1B unicorn, start with a more attainable target. For example, if you’re starting at $2.5 million, focus on reaching $7 million before moving on to your next revenue goal.
This slow and steady approach will help your company reach goals in a much more aligned way, and build resilience along the way. Matt and the PeakSpan team now have three companies approaching the $1B mark, all of whom have focused on this slower revenue growth approach.
How sales fits into sustainable revenue growth
Building consistent, repeatable sales performance is key to revenue growth–but often difficult to achieve when the company begins hiring too quickly.
Before hiring more reps, Matt recommends starting with the sales infrastructure: training and onboarding programs, enablement tools, and playbooks. Hiring more reps won’t be effective if you don’t have those foundations in place.
If you need help hiring, training, or scaling your sales team for predictable revenue growth, our coaches can help. Click here to learn more about our sales coaching!
Final advice for founders looking to raise capital
Focus on growing sensibly and prioritizing capital efficiency. Don’t get pressured into massive revenue growth goals, thinking you need to do so to secure funding. No one knows your company better than you do–set ambitious but achievable goals, and then stay the course.
If you want to connect with Matt to learn more about a sustainable approach to revenue growth, reach out via LinkedIn or email matt@peakscan.com.
We’re all familiar with the hustle culture, “rise and grind” mentality. CEOs and founders maintain that the only route to success is through 18-hour workdays and pushing oneself to physical and mental limits.
Although we know this approach is unhealthy, many of us continue to do it because we think it’s the only way to secure funding and reach that rare $1B valuation. This week’s podcast guest believes otherwise.
Matt Melymuka is the Founder and Partner of PeakSpan Capital, a growth equity firm that takes a “contra-silicon valley” approach to scaling. Matt joined the Predictable Revenue podcast to discuss what’s wrong with this revenue growth at all costs model.
The problem with prioritizing revenue growth above all else
Most of the pressure for rapid revenue growth comes from outside the company, from venture capital investors. These investors expect a certain number of their companies to go to zero, which is why they push revenue growth at any cost.
The capital loss ratio of any given venture firm is typically 35% (meaning 3.5 out of every 10 companies will go to zero). With those odds, it’s easy to see why most venture firms choose to remain generalists and push the same revenue growth goals on every company.
Although an investor may push to scale from two to 100 reps, such rapid revenue growth isn’t necessarily the healthiest choice for your company.
The risks of rapid revenue growth
When a company experiences rapid revenue growth, that $1B valuation may come with a cost. If the company hasn’t scaled sustainably, there’s an inevitable dropoff, and founders are often left without an exit plan.
If you raise a massive amount of money at a high price, not many companies can afford to acquire you. Matt often sees founders who have backed themselves into a corner by raising so much so quickly. If you choose to go that route, understand that you may need to reach $3-4B before selling.
Another drawback of raising funding early on is that you become reliant on the capital market to fund the business; you raise one round of funding only to get to the next. Companies that have to grind in their early days learn resilience and resourcefulness, and they become very capital efficient.
What to do instead
Instead of aiming for the $1B unicorn, start with a more attainable target. For example, if you’re starting at $2.5 million, focus on reaching $7 million before moving on to your next revenue goal.
This slow and steady approach will help your company reach goals in a much more aligned way, and build resilience along the way. Matt and the PeakSpan team now have three companies approaching the $1B mark, all of whom have focused on this slower revenue growth approach.
How sales fits into sustainable revenue growth
Building consistent, repeatable sales performance is key to revenue growth–but often difficult to achieve when the company begins hiring too quickly.
Before hiring more reps, Matt recommends starting with the sales infrastructure: training and onboarding programs, enablement tools, and playbooks. Hiring more reps won’t be effective if you don’t have those foundations in place.
If you need help hiring, training, or scaling your sales team for predictable revenue growth, our coaches can help. Click here to learn more about our sales coaching!
Final advice for founders looking to raise capital
Focus on growing sensibly and prioritizing capital efficiency. Don’t get pressured into massive revenue growth goals, thinking you need to do so to secure funding. No one knows your company better than you do–set ambitious but achievable goals, and then stay the course.
If you want to connect with Matt to learn more about a sustainable approach to revenue growth, reach out via LinkedIn or email matt@peakscan.com.
Product-led growth can be a massively successful go-to-market (GTM) strategy for many companies–but only if they get it right.
Joel Smith and Vanessa Roberts joined the Predictable Revenue podcast to discuss how to excel at product-led growth. Both Joel and Vanessa are coaches at Dan Martell’s SaaS Academy, a B2B SaaS coaching program and community. They shared their insights on how to make product-led sales work for your business.
What most companies get wrong about product-led growth
Product-led growth is a GTM strategy that leverages the product as the primary driver of adoption and retention. On the surface, this often looks like a “try before you buy” model, but there’s a lot more to this strategy than first meets the eye.
The most important aspect of product-led growth is using the product to sustain positive feedback loops, in which customers continue to buy and recommend the product. Over time, this generates substantial revenue growth.
Many businesses understand the power of product-led sales, but there are a few key mistakes that hold them back from reaching the potential of true product-led growth:
Not prioritizing user experience
User experience is the cornerstone of product-led sales. For customers to come back, experience has to be at the forefront of product design.
Focusing on features over goals
One area product-led sales strategies often fall short is in their marketing, by focusing on features rather than the goal the product helps customers achieve. Products should be designed and built with the customer’s goals in mind.
Not understanding the perfect fit customer
Beyond generic personas and avatars, product-led growth requires an in-depth understanding of the customer. Customer feedback is critical to improving the product, which in turn improves the user experience and fuels more product-led growth.
Businesses need to understand which features are most valuable to their customers (and why). It’s almost impossible to scale product-led growth without that information. In contrast, collecting regular data from customers can provide a clear roadmap of where to take the product next.
Are you struggling to create or understand your ideal customer profile? We can help you identify the gaps and opportunities in your sales strategy to create predictable revenue. Take a free call with our experts to learn more.
Why choose a product-led sales approach
The main reason to consider a product-led growth strategy is that it couples customer acquisition with product experience, making the entire sales funnel more scalable. And with customer acquisition costs rising, product-led growth offers a cost-effective alternative to traditional strategies.
At its most effective, the positive feedback loop works on its own to bring in new customers, reducing the burden on sales and marketing. Referred customers are also less likely to get stuck at the top of the funnel. Done right, product-led sales can fuel growth almost on autopilot.
How to build a product-led growth strategy from scratch
Put user experience first
As mentioned above, user experience is a crucial part of product-led growth. Enable self-service from the start, and make the onboarding process as frictionless as possible. Design a product with features that automatically fuel retention and make customers want to stick around.
One way to increase customer retention is to implement micro surveys. These should only be a few simple questions and take less than two minutes to complete.
For example, a popup survey that asks users: “Were you able to finish what you came to do today? If not, what were you trying to accomplish?” Use insights from the surveys to improve user experience and fuel sales and marketing.
Build for viral growth
Viral product-led growth is when users cause the spread of a product, largely through word of mouth. Companies that have done this well include Zoom, Gmail, and Slack.
There are several ways to optimize your product for this kind of product-led growth:
- Design it to be used by multiple people
- Make it “shareable” so users invite their friends
- Add features that accrue benefits (the more they use it, the better it gets)
- Add mounting losses (make it hard for people to switch away from the product)
Understand the job to be done
This comes back to understanding your customer. Study how and why people adopt products in your category, and how they weigh their options and make decisions. Use market research to better communicate your customers’ goals. Again, micro surveys are a great option here.
How Pirate Metrics factor into product-led growth
The Pirate Metric framework is a set of five metrics that product-led growth businesses should track at each stage of the customer journey, from acquisition to referral.
Acquisition
Acquisition metrics can include website hits or leads per channel, anyway in which your customers find you. It’s important to be intentional about how you connect with perfect-fit customers and choose the channels they’re most likely to already be active on.
Activation
Activation refers to the initial user experience. Metrics include how many people signed up for a free trial compared to how many completed onboarding.
Activation metrics are particularly important to product-led growth because this is the stage where you create fans. If you want your product to spread through viral growth or word of mouth, then you need to deliver on what you said you were going to.
Think about how you can affirm for customers that they’ve made the right choice. And remember that your customer doesn’t need to be an expert on the product by the end of onboarding–they just need to receive value and clarity.
Revenue
At this stage, you’re converting free customers to paid. Metrics include minimum revenue, break-even revenue, and revenue that exceeds customer acquisition costs.
Retention
Retention rates are critical to product-led growth. You need to know what features are correlated with bringing people back to your product and how often those features are used, as well as what methods are most effective for retaining customers (for example, upsells, cross-sells, case studies).
A cancellation capture system or feedback form can also help you understand why customers choose not to stay–and work to counteract those problems.
Referral
Referrals are the last piece of the puzzle for product-led growth, although it’s best to think of these metrics as a continuous cycle rather than a linear process. If your product-led growth strategy is successful your referral rate will feedback directly into customer acquisition.
Final thoughts on product-led growth
Successful product-led growth companies know that user experience needs to come first. Start with one perfect-fit customer, learn their goals, and create a product that solves a problem in that customer’s life. Keeping your customers happy will lead to a positive product-led sales loop.
If you want to learn more about product-led growth visit SaaSacademy.com or click here to book a free Growth Session.
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The tips in this book will help you navigate a better outbound process, one that focuses on human connection over quotas. Because ironically, focusing on your prospect instead of the sale will make you a more successful sales rep.