Hitting a $1 million annual run rate is one of the most important milestones for any early-stage company.
After talking to several well-known Silicon Valley investors, I realized that when they look at our company, they ask themselves: “Wow, they’ve hit a $1 million run rate, how fast will they grow now?”.
Yes, that’s right. Reaching a $1 million run rate shows everyone you’ve reached product-market fit and have developed a scalable business development strategy.
For this reason, scaling to a $1 million run rate within one year was our most important milestone. We’ve reached this goal in just 7 months, using only our own platform, Growbots, to scale our outbound sales channel.
As we grew, we had an epiphany. If you’re growing 20% MoM and have a scalable business model, you actually don’t need additional outside funding to fuel your growth…
The truth is, an early stage B2B company can grow quickly by mastering just one customer acquisition channel: outbound sales. In the following paragraphs, I’m going to share with you the Growbots recipe for getting early traction. It can be used by any company selling software. I’ll start with the most important ingredient.
Getting in front of customers
From my experience as a founder of 3 different companies in Europe, Asia, and the US, I will tell you one thing: customers won’t just come knocking on your door while you sit back and wait for them. You have to make the effort to get in front of them, or customers won’t notice you. For some reason, entrepreneurs think that if they have a great product then customers will automatically find them.
This misconception is what John T. Gourville calls the “9X Effect” in his book, “Eager Sellers & Stony Buyers”. He argues that consumers overvalue what they already have by a factor of three. Companies, on the other hand, overvalue their innovations, also by a factor of three.
This means there’s a lot work ahead of you to attract customers. And you can’t just get a few – you need to think about how to scale.
Early growth strategy
While drafting your early growth strategy you should optimize for 3 factors:
- Customer Acquisition Cost
- The number of customers you can get from the channel (scalability).
Going to events and pitching people sounds like a good idea from a cost and conversion perspective, but it’s not quick or scalable. Writing content people love is an amazing idea. Unfortunately, it will take you months to start generating just a handful of quality sales leads using this strategy.
The reality is, no matter how you generate leads, you’ll only close about 10% of the prospects you started a conversation with. So if you want to get 10 new customers, you’ll need to schedule at least 100 demos. For the sake of scalability (and sanity) you should choose the strategy that will allow you to fill in your sales pipeline with hundreds of new opportunities the most quickly.
Can you think of a faster and more efficient way of getting in front of customers than creating a list of all the people who might need your product and simply asking if they’re interested?
This is exactly how outbound sales works and how we grew to a $1 million run rate in less than a year. But before you start reaching out to potential customers, you need to ask yourself 3 very important questions:
- Who is most likely to buy my product?
- Who is going to pay the most for my solution?
- How long is the estimated sales cycle among my different customer types?
To accelerate growth you need to focus on the customers who are most likely to: a) buy your product, b) pay more than your average customer and c) won’t need 6 months and multiple approvals to make a purchase.
I can’t stress the importance of my last point enough. A long sales cycle is the biggest obstacle you need to overcome to achieve rapid early growth. Instead of trying to land one $100k+ enterprise deal for months on end, it’s much better to pursue a dozen smaller deals that will close much faster.
You want to be like our customer and friend, Sam Caucci from SalesHuddle. He managed to close his first deals within the first month of kicking off his outbound sales process.
There are many ways of defining your target customer to make sure you are targeting the right people for your outbound sales. Here are two of the most popular:
But these will only work if you have a clear focus. Once you define your customer profile, stick to it, and optimize your efforts to increase the number of deals from that segment. The next step is to get in front of those potential customers.
Which outbound sales strategy is the best for me?
You once had to have a team of salespeople searching for potential customers, qualifying and contacting them. But today there are many ways of running a sales development process.
“Today, sales development has become a strategic revenue-generating function for the vast majority of high growth companies, particularly in B2B technology. […] Sales development is an organization that sits between the marketing and sales functions of a business and is in charge of the front-end of the sales cycle: identifying, connecting with, and qualifying leads. Simply put, this organization is tasked with setting up qualified meetings between a salesperson and a potential buyer with a high probability of purchasing a product.” – Wikipedia.
As an early-stage founder, your options are very limited. You could hire a sales development associate but this is a huge investment ($34,623 – $70,963 according to Payscale. In most cases the best people will cost twice that)
Until recently, your only other option has been to assign the responsibility of sales development to one of the company’s founders. But today, thanks to sales development automation, you can achieve results that used to require an army of people by eliminating all of the manual, repetitive tasks from the process.
What can be automated
Here’s the usual daily to-do list of a sales development representative that can now be automated:
- Qualifying companies for outreach (confirming that they match buyer persona)
- Identifying appropriate decision makers within the company
- Finding contact details of chosen decision makers
- Outreach to qualified prospects and follow-ups
- Objection handling and scheduling demos with qualified leads
Sounds like a huge amount of work… and it is.
There’s good news, all of those activities can be easily automated; but there’s a caveat. You need to forget about cold calling. It’s much less effective and really just a terrible use of your time.
There’s a constant debate about the effectiveness of cold mailing versus cold calling. Doing a simple math problem should clarify why you simply can’t bet on cold calling.
Let’s assume that you work 8 hours per day and you dedicate all of your time to cold calling. An average salesperson makes 8 calls per hour which means you can do 64 cold calls per day. The average cold calling channel gives you a 2% demo/appointment rate. This means that after a super-productive and exhausting day, you may only schedule one demo.
Given the data on the average conversion rate from a demo to a deal (10%) you would need to be cold calling 8 hours a day, for 10 days straight just to close one deal. What happens if you want to call 2 times more people? You simply can’t!
What you should focus on is closing activities instead of spending time on prospecting and outreach.
Scaling cold mailing to $1 Million in annual sales
Cold emails don’t have the limitations of cold calling, you can easily contact 100+ new prospects every day without burning out your sales team. Plus, the average conversion rate from an “email send” to a “demo” are much higher than cold calling. We’ve found that our average conversion rate here at Growbots is 3.5%.
But it is possible. We’ve seen a huge number of early-stage companies achieve amazing results from outbound sales automation. The numbers speak for themselves. For example:
- Sahil Chaturvedi from Ader was spending his whole day on Linkedin searching for prospects. This was before he decided to automate the process. He knew his buyer persona, but he simply couldn’t scale the process by manually searching for each potential customer. After two months with Growbots, Ader’s campaigns have brought more than 250 leads.
- Roman Morris from SupportNinja was in a similar situation. After his first week with Growbots, he managed to schedule 36 demos for his sales team.
It’s important to remember, sales is a numbers game. So you need to carefully plan your pipeline in order to get to a $1 million run rate.
Let’s assume your average deal size is $8,000. That $8,000 is paid upfront and your sales cycle is around 3 months (with a free trial). Your conversion rate from a cold email to a demo will initially be around 1%. After a few versions will probably grow to 3.5%. Here’s how your first year might look like:
As you can see, the first months are usually dedicated to building your pipeline and optimizing your conversation rate. Everything you do within the first 6 months is dedicated to building a strong foundation for future growth. Don’t worry, it’ll pay off because you’ll experience steady revenue growth when deals start closing.
Contacting a few thousand people every month is impossible unless you have some automation in place. So what does the automatic sales development process look like?
The automatic sales development process
You first need a source of high-quality contact details of decision makers working at companies that match your buyer persona. Next, you need a tool to automate your cold email campaign, so you don’t have to contact everyone on your list separately and send follow-up emails manually (yes, you typically need to send 7-8 emails to get the response). Most importantly you have to make sure that anyone on the list you’ve created is not one of your customers before you upload the data to your CRM.
So, what are the most important things you should consider before choosing a solution?
- Quality of the data – You don’t want your emails to have a high bounce rate because it will affect your email deliverability for future outreach. Sending thousands of emails with more than a 15-20% bounce rate is an easy way to get caught by spam filters and get your domain blacklisted.
- Ability to customize – As a startup, you are going to have a ton of ideas you want to test, especially with list building. You could define a type of target and hire a remote freelancer to build a list for you, but this isn’t always good. What if you notice a specific characteristic of your targets that causes them to convert better? You would want to update your list to go after targets like them. If your system is unable to customize easily, these changes will cost valuable time and money.
- A seamless workflow – Keeping your contact database in spreadsheets or uploading numerous CSV files from one tool to another is almost always a recipe for a giant clusterf*ck. You’ll end up sending emails to the wrong lists. Even worse, can send them to people who should never have received it in the first place.
- Reliability – You really don’t want an email automation tool that accidently sends multiple follow-ups instead of just one. Just as bad, one that sends another email to the person who already responded to you. It’s also crucial to be able to stop any campaign at any moment, so you can stop sending emails to everyone from a company that has already set a meeting.
There are multiple solutions out there that specialize in one specific step in the process. But with Growbots you can keep everything in one place. Our team will help you set up everything in an hour or less and will be standing by to ensure your outbound sales campaigns get results. We’ve already helped our customers successfully send over a million sales emails and we want to share with you what we’ve learned works best.