First pump! You just blew past $1m in ARR after 3 hard years, and secured your term sheet for a decent seed round even in the current environment.
Time to start scaling your GTM team, put your foot down on the accelerator and drive towards a £100m valuation at Series A.
12 months on, head in hands, you’re looking for a new sales leader, dreading your monthly board meetings and wondering why growth is so anaemic and inefficient when you had clear product-market fit over a year ago!
This is the story I’ve seen time and again from founders, usually ranging in revenue from $500k to over $5m.
The arch is always the same…hit initial traction, scale the ambition and team to match, then run into an entirely different set of problems they hadn’t anticipated on the road to $10m.
This is why just 0.4% of startups ever hit the $10m ARR milestone (and far, far less make it beyond that).
I’ve spoken to dozens and dozens of companies in this situation, and recently had a Series-A investor confide in me that without fail, post-raise, their portfolio companies hit a revenue growth brick wall that takes several quarters to painfully overcome, almost always with a significant leadership turnover.
What’s going on?
Different problems, equally difficult.
Getting to PMF and initial commercial traction is fraught with problems, from affording to pay a team to convincing prospects to take a punt on your product, to raising that initial investment.
However as you start to try and scale your go-to-market, you’ll run headlong into three major issues across strategy, operations and execution. And based on my experience to date, almost no founders seem prepared for them.
Let’s dive into each of them.
Reason One: Your GTM Strategy breaks
You’ll be familiar with the phrase ‘What got you here, won’t get you there’ from the leadership coach and author Marshall Goldsmith…well nowhere is this truer than most SaaS businesses’ approach to their GTM strategy.
The issues can generally be broken down into 4 sub-challenges, with at least one of them present in every single business I see struggling to scale their revenue at the pace and predictability they want.
Issue #1 – Your GTM Strategy is Undefined!
This is super prevalent…the GTM strategy still lives in the head of the founder(s) and their earliest hires, who’ve learned from each other and the market over time, through osmosis.
Taking time out from getting shit done, to document your strategy, just doesn’t feel like the right priority.
Even when they’re looking for the next wave of hires, founders figure that they’ll train them on the job, and like the current team, these new employees can learn by doing.
Then the new hires don’t ramp. Or perhaps they do eventually, but to succeed they start doing things their own way. Which kicks the issue down the road, and ultimately confuses the hell out of the next wave of hires because everyone is giving them conflicted advice on how to succeed.
Either way, not having a well documented GTM strategy inevitably leads to one of two outcomes, both of which put the brakes on revenue growth.
They are:
- New hires simply don’t work out and can’t figure out how to be successful (this includes the very expensive VP Sales!) which leads to a revolving door of talent and all the time and cost suck associated with replacing people;
- They do ramp eventually (probably slower than hoped), but cause chaos further down the line by doing things their own way, which usually shows up the metrics as a rising CAC (lack of process and definition causes more expensive acquisition) or increasing churn (the wrong clients are being onboarded because your ICP and persona haven’t been locked down)
Issue #2 – The GTM is actually Untested (but you didn’t realise it)
This is another common one…the founding team (and maybe even their first couple of GTM hires) wrestled the business to $1m in ARR through sheer bloody mindedness, hard work and creativity.
Despite all of that effort, likely 75% of that $1m comes from high trust sources i.e. their direct network, 2nd degree network referrals, VC intros etc. and the other 25% are what you’d characterise as ‘innovators’ or ‘tech enthusiasts’.
The problem is that 1st and 2nd degree introductions are finite, and so are innovators, who typically make up just 2.5% of a market.
Which means whatever approach and playbook you do have documented, simply isn’t going to translate when you start to expand the scope of your GTM ambitions.
This is the topic of the classic book ‘Crossing the Chasm’ which documents why so many highly promising startups lose billions of dollars of investors money and never make it to wider adoption and market leadership…primarily because they only ever learned to sell to high trust sources and couldn’t figure out the transition to lower trust prospects.
You’ll start to see the signs if your new hires aren’t ramping (again) but also if your previously successful reps/early hires start to see a decrease in qualified pipeline, slowing sales cycles and tanking close-won rates as they try to sell beyond the initial base you’ve built up.
Issue #3 – Your GTM Strategy is past its sell-by-date
This is a variation on the #2, but kicks in at a later stage. If you’ve overcome the first two problems and successfully built ARR to $3-5m+, there’s still a good chance you’ll run into this trap.
That is not continuously testing, and potentially refining your strategy. In an attempt to instil best practice and avoid chaos (hats off to you!), you enforce the GTM playbook rigorously across the team and all new hires, but in doing so you shut yourself off from feedback and a changing landscape.
However 6–24 months on from codifying an effective strategy, your product has evolved significantly, so has your competitive set, and potentially even your ICP and buyer personas. Perhaps your price point has successfully been pushed up from one that favours high velocity sales to a more consultative approach. Or your brand reputation has seen an influx of new potential customers that you’re unable to sell to.
The point is that go-to-market is dynamic…and so whilst it’s very important to document and operationalise it, you have to build mechanisms for tracking its efficacy over time, or you may find your revenue engine starting to stall.
Issue #4 – It’s Under-utilised
Another very common challenge I see across companies, which is super frustrating because they actually have taken the time to document their GTM strategy…but they might as well not have bothered.
This is usually what happens when a diligent founder builds out a really detailed Notion space…but then asks new hires to onboard themselves using it, and fails to verify how much of the strategy they digested or understood.
I’ve been an advocate for quizzes and onboarding certifications for years now as they give both leadership and employees a level of confidence and clarity that they really do understand the strategy they’re being asked to execute. There’s no guessing or ambiguity. But I probably see less than 5% of startups actually implement this.
And that’s really just the tip of the iceberg…it’s important that critical aspects of your GTM, such as ICP, persona and qualification frameworks are consistently reinforced in meetings and reporting e.g. what % of new pipeline added was ICP or target persona? And are you methodically testing your qualification criteria and exit gates in each pipeline and forecasting meeting?
The solution to these issues is to have a clearly structured, well documented GTM strategy; systematically test its relevance based on your team’s feedback as they implement it in the market; and verify everyone’s knowledge through an academy.
Now let’s look at the second major cause of revenue growth tapering off: the exec team are not intentional enough about the Operating Rhythm.
Reason Two: Your Operating Rhythm Breaks
There are actually 6 sub-sections of the scaling operating rhythm that you need to understand, define and manage, and they are:
- Disciplined Execution
- High Performance Culture
- Technical Enablement
- Knowledge Enablement
- Communications Cadence
- People Process
All of these areas need to be updated and upgraded with greater intent as you look to scale, but the first two are typically the areas that are particularly important – and absent – at the start of the scaling journey, which results in lacklustre performance.
(If you’d like to dig into the others, shoot me an email [mark@gtmworks.com] to ask for the full Revenue Diagnostic tool I’ve built out, or book a free consultation with me to learn more).
Disciplined Execution
Leading a team that is great at disciplined execution requires the following:
- Ruthless Prioritisation: If you want your team to be disciplined, then you need to lead by example and get really good at making clear choices about where you want to focus your organisation’s precious resources. Thinking your resources are more abundant than they are is a deadly mistake, but one that’s easy to make just after you raise any round of financing.
If your priorities look like a laundry list, you’re getting it wrong. Any more than 3 and you’re highly likely to not achieve any of them as effectively as you’d like.
My suggestion is to make one priority a revenue milestone, your second priority to focus on improving your operational efficiency (measured by CAC:Payback or Profit per Head), and the third one a strategic initiative such as entering a new market, or launching a new product.
- Goal Setting: Organisations that routinely smash their goals know how to set SMART goals that align with their priorities, and do it quickly so people aren’t still waiting for some Kafkaesque bureaucracy to tell them what their goals are weeks into a new quarter (when the individuals already know what they should be 98% of the time).
My suggestion is to ditch OKRs, bask in the relief of your entire team for a minute, then take a bottoms up approach to save over $150k in planning costs every year.
- Key Activities: Knowing which inputs move the needle on your goals is a next level skill that great leaders and their teams are very deliberate about…but 90% of people don’t have the discipline (or time) to actually do.
Smart goals, without a game plan beneath them, still wind up being closer to a plausible-sounding wish list than genuine paths to success.
- Quality & Impact. Measuring and improving the quality and impact of your key activities is the only way to genuinely understand what materially impacts your goals – and overarching priorities – but again it takes real discipline and consistency to build this habit within a GTM organisation.
This is partly down to the fact there are no tools designed to make it easy for individuals to track this (until GTM Works) and partly because the key inputs and activities are rarely actually defined, making it impossible to get a detailed view under the hood that can be benchmarked across individuals.
- Execution Velocity. Last but certainly not least, measuring and improving the number and % of key activities completed across the organisation is an absolute shot in the arm for driving up productivity levels and achievements.
If quality and impact are all about doing the right things, and doing them better…this isn’t an excuse to do them at a leisurely pace. If you want to dominate your market and defy the odds, you’ve got to attack things with speed as well!
High Performance Culture
There are many characteristics of high performing teams, and one of those often cited is trust. I believe this to be true, but it’s also an outcome of focussing on the following 6 drivers:
- Clarity. Do you know what’s happening across the organisation to drive sustainable success? Are you just 1 or 2 clicks away in a shared, transparent dashboard to see what everyone is working on, how impactful their efforts are, progress to goals etc?
I know from founders that they never have enough clarity…which then either leaves them feeling stressed and out of control of their business as it grows; or it drives them towards more micro-manager tendencies or buries everyone in reporting hell.
You need to find the balance, which is to focus on measuring what matters (no, not OKRs!), ensure those metrics are displayed intuitively and simply, and avoid getting lost in the weeds.
- Alignment. Are your team’s behaviours in-line with the playbooks & strategy you’ve defined? How are you measuring and validating this? Do you know how alignment is tracking over time?
‘Ignorance is bliss’ isn’t the best policy when it comes to understanding the internal dynamics of your teams and their approach to supporting your priorities. As a top leader, you’re often one of the last to hear about mis-alignment issues, and by then it’s only because things have gotten so bad that it’s had to be escalated to your desk.
Install early warning systems and nip things in the bud before they affect morale – and performance.
- Feedback. Do you have a systemic way to collect, store and action feedback from the team? How confident are they in executing the strategy and playbooks you’ve (hopefully) defined for them? Is the market shifting, and what worked last year is less effective now?
Without a clear, transparent and fair system for gathering feedback there can be a feeling that ‘the squeaky wheel gets the grease’ which causes (often unfounded) resentment. And if it’s not absolutely obvious that feedback is being reviewed, considered and actioned (even if that action is to respectfully disagree with the feedback), you’ll create a culture of silence or venting in the pub versus one that channels direct, honest and useful feedback.
This can quickly lead back to the first major challenge we covered – out of date strategy that is out of sync with the market – and poor revenue performance is the lagging indicator that will tell you 3-6 months too late.
- Focus. Can you keep your team consistently focussed on the most important tasks? Do they set up their week to achieve their top 3 key activities, only to finish the week having achieved just 1 or 2 of them because they had to reprioritise some other work?
Tracking this and seeing just how reactive, versus proactive, your teams are will give you a great sense for how good the organisation is at planning, executing and remaining focussed.
- Innovation. Do you have a systematic way to approach learning and experimentation? Are lessons well documented and shared? Is the innovation random or intentional and aligned to achieving the most important goals?
There’s a fine line between chaos and innovation, but it’s one that great companies master whilst others feel busy but don’t achieve a great deal.
- Accountability. Is there a culture of ownership across the teams, even if you’re not in the room? Do people get done what they said they would? Are actions tied to impact so you’re not breeding managers who obsess over activity KPIs regardless of their efficacy? Do you encourage and reward honest self-assessments for how people can grow and get better?
These are the questions that attract A-players and winners, because they’re not afraid of the answers. B-players may be concerned by the spotlight, but inspired to step-up and join those upper ranks. Everyone else will complain, deliver excuses or leave. Remember every team regresses to the mean…don’t let that group set the standard.
Why is building this operating rhythm so bloody hard?
Well it’s because there’s no dedicated solution built to support it, which is why I’m building GTM Works!
(If you’d like to be an early-access beta tester, you can join the waitlist here!)
And now let’s finish off by looking at the third major area of weakness I see across so many scaling teams which holds them back from reaching their revenue potential (in the timeframes they want).
Reason Three: Your Execution Capabilities Break
As your ambitions grow and targets become stretchier, with the absolute numbers compounding to be larger and larger…often the complexity ratchets up too.
The strategies and tactics that once worked to will yourself to a single digit millions ARR number stop being as effective.
A lot of the updates you’ll need to focus on sit within the operational side of things – better planning, coordination and alignment, feedback loops and systematic innovation etc.
However some of it sits with individuals in how they execute against the roles…and how the competencies attached to their roles need to be reviewed too.
Here are 5 specific areas to review:
#1 General v Specialist
In the earlier stages of a startup, you’ll be bringing in smart generalists and throwing a load of shit at them which they need to figure out. It’s likely their day job is all over the place and out of necessity they won’t become deep specialists in any one area.
However as you grow the team and the targets get harder and bigger, you’ll need to have specialists that really understand their specific domain in order to achieve the results you’re looking for.
#2 Scrappy v intentional
Early employees will throw lots of stuff at the wall to see what sticks, because very often they’re relatively early in their careers so it’s hard for them to have the pattern matching and heuristics to be selective in their approach.
As you grow, this approach becomes wasteful and time consuming. You’ll need to be a lot more intentional with how goals are going to be achieved.
#3 Learn by doing v best practice
Similar to the above point, your earlier team will focus on learning by doing, rather than bringing in a set of best practices they’ve seen work in similar situations.
This leads to them reinventing the wheel a lot, which slows things down and acts as a drag on your growth velocity. That said…beware of the ‘expert’ who always has one answer to everything i.e. we did it like this at ‘big co’ where the context is very different to yours.
#4 Outcomes v first principles
You’ll very likely manage your early GTM team based entirely on outcomes, without necessarily diving deeply into how they achieved them. And indeed, that’s often because they’re trying so many different things, it’s hard to tease out any causality in their approach.
However to build a repeatable, predictable and scalable revenue engine you have to be able to break down efforts into first principles and understand the levers that drive outcomes.
#5 Hammer v toolbox
Without having a greater diversity of external talent, the only pattern matching available to your earlier employees is that if something worked in the past, it should continue to work.
Much like the proverbial person with only a hammer, everything looks like a nail. To move them out of this way of thinking (and acting) you now need to give them a toolbox.
This often comes in the form of an external advisor, fractional executive or coach…or perhaps hiring above them.
Levelling up execution capabilities
In summary, it’s important to put in place the right support structures, coaching and systems to level up the execution capabilities of your team as they move from generalist hustlers to specialist experts.
The metrics that signal you’re not successfully managing this transition include:
- unwanted levels of headcount churn (where you start losing a lot of market knowledge),
- very uneven rates of goal attainment (what was working stops being as effective),
- higher levels of sickness (to combat the increased ambitions, staff work harder versus smarter and hit burnout),
- and a drop in your employer NPS as people generally feel dissatisfied or worried about their abilities to scale with the business.
Conclusion
There’s a good reason that less than 10% of companies who reach the $1m ARR milestone make it to $10m (that’s just 0.4% of all startups), and an even smaller number again make it to $50m…it’s damned hard!
However it’s even harder if you can’t clearly identify the key breaking points and then manage the risks associated with them.
This is why I’ve founded GTM Works…to give founders and their teams the infrastructure to systematically measure and improve their strategy and playbooks, operating rhythm and execution capabilities right down to the individual contributor level.
It is the world’s first GTM Operating System that links up every critical aspect of your scaling journey.
If you’d like to be one of the first to trial it…you can join the waitlist, or I’d love to chat with you about your scaling challenges!