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Practical Go-to-Market guidance specifically for B2B software and service companies between $5MM-$50MM in revenue.
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#43: Enhancing GTM Efficiency With Buyer Zones
Ready to transform your Go-To-Market strategy and drive sustainable growth? We discuss actionable insights for boosting GTM efficiency and securing customer retention for B2B software and service companies under $50 million in revenue. We'll break down David Spitz's critical observations on the decline in sales and marketing productivity and provide you with incremental steps to enhance your buyer's journey. You'll learn the significance of clearly articulating your value and of starting small with solutions tailored to various stages of customer engagement. We’ll discuss the complexities of managing customer acquisition through partnerships, the potential conflicts this brings, and the strategic decisions around growth versus retention. From understanding the pressures of demonstrating growth for future funding rounds to the pitfalls of high churn rates, this episode equips revenue leaders with the knowledge to sustainable business growth.
Welcome to the GTM Pro Podcast, your essential audio resource for mastering go-to-market discussions in the boardroom. Here we share insights for revenue leaders at B2B software and services companies, especially those with less than $50 million in revenue. Why? Because the challenges faced by companies of this size are unique. They are too big to be small and too small to be big. This dynamic pushes revenue leaders into executive leadership without a lot of help or support. We are here to provide that support. Your journey to boardroom excellence starts now. Welcome back, gtm Pro. Here we go.
Gary:I did not plan that, oh goodness gracious, you can tell we've had too much coffee this morning. No, we're excited here, so we're actually going to be chatting before we hit the record button about what's well, it's all about 2025 planning. Right now, as we sit at the end of September, the end the home stretch of the third quarter, as we look at the fourth quarter, it's hard not to turn your attention to. The year ahead is many people looking back and what happened this year and what we can expect next year, and a lot of chatter on the interwebs about GTM efficiency. Specifically referencing a really good post by David Spitz. Just, first of all, love what he's doing here and he has pulled together a lot of statistics on public companies which I think, more than anything, provide just some easy to feel like you're out there on an island and it's frankly hard to get comps, to know what other people are feeling, unless you're really working and talking to some other founders. And one of the things that he's highlighted is the decline in what he called GTM efficiency, which is sales and marketing expenditures over net new revenue. And so that mashes everything together it is retention, it is expansion, it is contraction, it is a new logo revenue.
Gary:And the idea is, you know, in an ideal world you spend a dollar to get a dollar in that particular period, because now we get into lifetime value, ideally the dollars start to compound. But if you're in growth mode, spending $2 to get $1 of revenue growth in that particular year and I guess this is when you really start to unpack it I'm like well, do we have to continue to spend those dollars to get those dollars? Ie retention and what have you? One would argue, yes, it's not like you spend it in year one and you get multiple years, so there's a lot to unpack there. But generally it says it's gotten worse. Right, we can put the link to the post in there. But the challenge is what do you do with that right? What do I do? It's a lag, it's a compound metric, it's a lagging indicator, and everybody desires to have a more efficient GTM. But what does that really mean? And so we're going to unpack that a little bit today.
Andy:So, andy, before we dive into some examples, anything to add to that former direct response marketer, I know what my previous knee-jerk reaction would be to scenarios like that. And that's trying to cover more ground, trying to go to a broader world and appeal to more people and do hacky type things, but we're obviously not going to advocate for that.
Gary:So yeah, yep.
Gary:Well so and this, excuse me, falls into what we had, what we focused on last week as it relates to going through the buyer zones and thinking about how all these pieces fit together from a compound perspective.
Gary:Like small improvements across where the buyer intersects, our process can really drive compound to drive meaningful growth.
Gary:What we didn't talk about, however, is, in so doing, how that actually leads to the potential high propensity to positively impact retention numbers. Because in order to provide the confidence that leads to these compound improvements upon the acquisition path, we have to answer and provide additional visibility on how they get to that moment of value in a way that provides them confidence that they can actually do it, which probably means that we need to do some work to actually create templates and guides and frameworks and all the things that help get them there. And there is not just an improvement and probably what we've done is actually understate the business impact, because we only looked at new business from a compound perspective is the downstream effect it has from a retention perspective, and that, ultimately, is the holy grail of efficiency is that when you acquire a customer, they stay. They stay with you for a very long time and, even better, yet they expand with you over time, and so that, as we think about GTM, efficiency is a big one.
Andy:I think those things are hand in hand, Gary, and Gary is the idea is being ultra clear to our target audience about the value we provide to them, and that sounds so trite but it actually is really profound and it has many, many forms and many manifestations. But I think the key there is not being afraid to start small, not being afraid to make it simple for them and that might be not selling the biggest deal, the biggest package, the most features that you could possibly to someone and starting small and getting them to that value and doing it with a very tight solution, something that they can implement. And it all boils down to what you just said, which is how do we then articulate that? How do we make that very clear to our audience? How do we make it so clear that they know that that's what they're looking for and not something else in the vast sea of solution alternatives?
Gary:Yeah Well, there is definitely almost like layers of the onion, and this is what we refer to as doors right. Is that people? What we refer to as doors right Is that people. We can't fully know where someone is in their journey and we describe that as either being well, first of all, there's a whole group of people that are like just go away, I don't want to hear from you Probably half the market, and that is what it is. But then there's another half that is open to learn, and then of that open to learn group, there's a much smaller percentage that are open to change, and that is that they're feeling enough pain and have actually probably done some work to articulate the problem that if they were prompted to move that they would actually move to yeah, okay, now we're willing to change, which would then quickly move them to open to buy which.
Gary:Those are the folks that are actively in market looking to solve this problem. It doesn't mean they will take action on it and actually solve it. It means that they're in market evaluating those options. But then we need to combine that also with that level of experience, so that, to your point, andy, is that we are providing that information and then providing them pathways to say, if you're here, and this is part of that, and you've, we've, we've, we have done the work to help reveal the conditions that drive the problem, and you're like, yeah, yeah, that's me, I see that and okay, great, so how did you solve that problem?
Gary:And it can't be step one buy our solution right, there's more to it than that and and we provide them that next pathway down, then we're actually not. Not only are we helping them build confidence that they're thinking about it the right way and that they're asking the right questions and that they're involving the right people, but we're also beginning to set them up for success when they begin to implement the solution, because we're trying to meet them where they are in terms of their level of experience and complexity inside the organization and ideas on how to get quick wins out of whatever it is we're implementing. And the more you know, everybody talks about a platform or a mission critical system or things like that. Like, we all want to be in that space because, in theory, over time, they tend to be much stickier, they're harder to rip and replace, but at the same time, they're also way harder to implement, and so there's a lot of decision. Inertia that goes into that process.
Andy:Ease of use equals use, Use equals retention, and that is not typically trying to plug something massive into an organization that might not. You know, we've run into it. That lack of implementation inevitably leads to we're not using it. We either want to downsell to the simple thing that I should have been sold in the first place, or we're done with it altogether.
Gary:And I would take it a step further actually with it all together, and I would take it a step further actually following our friends at Winning by Design, in that ease of use equals use, use equals retention. But retention, actually use equals, ideally, impact and impact equals retention. And I think that's where people have fallen down in turn from an efficiency standpoint is we tend to look at only that the company is using it and they may be actually heavy users of it. But if we haven't tied at the very beginning the use to some form of business impact and then helped our champion communicate that business impact and, by the way, saving time doesn't count- as business impact then we don't have retention.
Gary:That's a false positive, I think. Just looking at usage, yeah, so, actually. So back to the GTM efficiency component there. So that compound macro metric charted over time, there probably is some value in doing that. It certainly is helpful to see if nothing else, it's helpful to have validation that even large public companies with tons of resources are seeing the same thing that you're feeling, which is this whole growth game has gotten way harder and way more expensive, like misery loves company. That's established, very clearly established, but the what you do about it, that metric doesn't help really at all. But that's why we come down to the input metrics and really thinking about those components. But even then there will be very real strategic trade-offs here. So let me give you an example In a recent podcast, top Line, actually AJ Bruno, I don't know that he intended to be so transparent.
Gary:He kind of got pulled into this, but it was fun to listen to it and so you know I try to summarize it quickly, but so for those that don't know, aj Bruno is the CEO of Quotapath. Quotapath has created a software to help companies calculate and make transparent the calculation of commissions for sales reps. So, and I think, one of their real value props is that it, it. I think they intended it to be more of a product led motion and there is some component to that, but it actually is very sales led, which is the decision is made by uh, the uh rev ops team typically, or sales ops or whomever whomever's running the commission structure Sometimes it's in the finance function but they have made it so that a version of that tool can be available to the sales reps so that they can do some scenario analysis on their own commissions. Like, okay, I've got my pipeline here. If I am able to close this deal at this rate and these three other deals come together, what will my commission check be at the end of the month? Or what will it be at the end of the quarter? And really be able to do that. So there's real value there, because a lot of times there's. The other side of that too is that there's a greater degree of accuracy and also transparency, so that you don't have the back and forth the inevitable back and forth at the end of the quarter it's like, well, you missed that deal and I didn't get this deal, and what about this kicker? And what about that SPF? And all the stuff comes in that and they've established that their ICP is a you know, call it a medium-sized enterprise that has some of these core capabilities already. They've got a CRM, they've got some form of a sales ops commissions process and this is a tool that really adds value and becomes very sticky, and they've got a certain number of reps and like that, that's a good customer for them.
Gary:And those that don't have that maybe they're a little bit earlier in their maturation as a company, aren't as good of a fit. They don't. They don't retain quite as well, but they also have made the strategic decision because of a well, for a variety of reasons, but one of their competitors was acquired by Salesforce and as a response probably, they created a partnership with HubSpot and it's a very good partnership and it's growing. But what they found is that HubSpot has a ton of agencies as actually the customer. So customers and users will hire these agencies who are HubSpot experts to help them run HubSpot and therefore they have a lot in the SMB space, b space and Quotapath has seen a ton of growth from non-traditional we'll call them customers which has contributed wonderfully to growth, but there's concern that it's going to come back to bite them on the retention side.
Gary:And so now they're in this situation, as they think about an efficiency approach that says, okay, now what do we do?
Gary:We have this really well-established, solid ICP that we can really lean into, but we also have this great partner who could be a great strategic partner going forward, and we know that our product has some deficiencies to support that particular type of customer. So now, what do we do? Right, this whole idea about, oh, just do these things to be efficient is not so easy. And then, andy you were talking about this earlier which is to really dig in and understand your customer, as we are providing them confidence In that situation. We know that some of that confidence is actually bestowed upon Quotapath by virtue of the agency knowing HubSpot and being trusted as their HubSpot advisor, and probably their recommendation to use this tool, which I don't know this to be certain, but might be influenced by. There's probably some revenue share arrangement in there, right, probably, and so. But now we're able to gain these customers very quickly, but they don't have some of the things that we just established are required in order to have success and retain. So it's a dilemma, it's a great problem to have.
Gary:It is a great, it's a first class problem, that's for sure.
Andy:It's a dilemma around, do I? And you said there's a strategic consideration, all this Absolutely, and I'm, you know, in no position to pontificate on that for them. But you know, do you let that run run its course, and you know retention be what it is or do you throttle that by being as utterly clear about the problem you solve in its most simple form? So you may appeal and solve a great problem for a portion of them that you would look at and they're like, well, they're maybe small but their trajectory is right, they get where they need to go and they're skating to the puck, if you will.
Andy:So, there may be a piece in there that's great. But there may be a piece that's like if you're very clear about that entry-level solution that you can provide them and they say we're not quite ready for that, that's an okay outcome as well, especially given the nature of that customer acquisition channel. If it's RevShare let's assume it is it's no real loss. And especially if there's a retention component to the RevShare, hubspot theoretically would be on board with that as well to say we don't want people to be churning out. It reflects poorly on them as well just from a business perspective.
Andy:So I think that's always going to be the answer. I think, and I think the other side of the coin is what if I have to go out and find new business? What if I have to go generate new logos? It's the same answer, but for a different reason. I don't know if we want to get into that right this second, Well, the other side of it too.
Gary:This is just the practical reality. Sometimes we talk in theoretical concepts about capital efficiency and cash on cash returns and things like that. If you took the prototypical definition of a CEO and, functionally, a steward of the capital they have been provided in the company, it is all about resource allocation and cash on cash returns. That's how you generate value, right. You deliver returns on the capital that you've deployed that are in excess of the cost of the capital that you've deployed, and you continue to do it smartly and you compound on it, right. But sometimes we have seasons that create artificial incentives to do things that are actually counter to that core concept. A great example is we want to raise another round in 24 months, right, and so all of this growth that comes from these customers that we know are probably not going to be great could very well be the horse that we're going to ride for now so that we can show that growth and we'll deal with the fallout later.
Andy:Now, if you know that, going in right.
Gary:I think that's where a lot of companies get trapped is that they go into all this growth and they're all excited about it and they don't consider this future stickiness of those customers and they get wrapped into basically raising too much capital at an inflated valuation right, some false positives in there, and then the chickens come home to roost, right, and you start all that. Then you start to see 20% churn on that particular customer base, and now the expectation, however, is that you keep up the same growth rate. And so now, not only do you have to get the 20% plus growth you had before, but you got to replace the 20% growth on that particular customer base you're using, you're pulling rabbits out of hats, totally.
Andy:I mean you're really readjusting your go-to-market engine, like you're pointing that somewhere else, literally. I think an interesting extreme example of what you just described is pure startup mode shooting at everything that moves, doing things that don't scale. That's kind of acceptable to. If you fall into a pool like that, you're like, hey, these customers want this. You're not going to turn business away at that point. But as you mature and especially as you raise capital, it becomes a little bit of a different scenario. So I think where you're at definitely dictates how much of that you want to jump into uh, jump into um, especially as it as it pertains to raising capital. But I think pure startup bootstrap, like angel you're, you're gonna, you're, you're gonna take all comers and that's fair but I think a mature business.
Andy:That's different.
Gary:Yeah, well, and I think that's the uh, that's always the challenging thing about you know, comparing ourselves as private companies, particularly if we're bootstrapped, or you know, growth equity backed, private equity backed, probably more so, where there is a degree of like, you actually, as a founder, have a lot of choice over the throttle of efficiency, ie cash flow generation and growth. Right, that is a balancing act on how you do that and I think in many cases and you referenced this article from Clearbit the other day when you ride the VC train, you basically have turned the keys over to a playbook that you don't have any control over. And we know companies, very good companies these are great companies that did that have fallen off of the growth train and the VCs name brand, like top 10 VCs, have walked away from these companies because they're not going to return the fund. And these are 10, 15, $20 million revenue companies that deliver real solutions, deliver real value, but because they're not T2D3, triple, triple, double, double, double. That they're crap, they're done.
Andy:Oh and talk about and so it's like look you just?
Gary:I mean, and maybe you're prepped, that's another podcast.
Andy:Yeah, we could get into the whole investment thing, because that same Clearbit scenario he talked about signals a lot too. And if Safeguard Scientific is in your corner or if they're not, like that's like you're going to, you know, as a, let's just say, a second tier VC, if you hear they're investing, you know, get on board.
Andy:If they walk from something talk about a signal, and you kind of alluded to that. Like you know, get on board If they walk from something. Talk about a signal, and you kind of alluded to that. Like you know, it's over.
Gary:Yeah, yeah, so anyway, but so with all of that, well, but but largely that's the audience to whom we speak is is those that have this. They have a choice between profitability or profitability, or it's a forced choice. Sometimes it says we want you to grow and we want you to be profitable right, and we want to see some evidence that you can do that before we're willing to deploy some more capital. And so that's when we come back to, okay, gtm efficiency. What do we do with that? And that's why we advocate for looking at and honestly it is the bow tie model.
Gary:The challenge with the bow tie model is that it's very metrics driven and I think our personal opinions doesn't take enough of the realities of the buyer into the equation, which create the efficiency in the first place.
Gary:So it's really molding those two things together, which is, if we really want to deliver confidence to our buyer, then we have to really understand our buyer at a very deep level and work through the things that they need answer on the basis of their experience and conditions and all those things, and we bring those into the acquisition side of the revenue engine.
Gary:That the very fact that we've done that is actually the left side of the bow tie.
Gary:If you're a winning by design person, we'll have a profound impact on the right side of the bow tie because we're thinking holistically about getting to moments of value and that is the ultimate GTM efficiency play is thinking about both sides of that.
Gary:That may mean and this is admittedly a very hard decision that may mean that you actually throttle new business growth until you can validate which is something that stage two actually says as well what their leading indicators of retention. Until you can validate which is something that stage two actually says as well what their leading indicators of retention. Until you can validate that the business that you're bringing in is on a path to be able to be retained, just because, if you think about the damage that if you bring on a cohort and 20% of that cohort leaves after a year, the damage that does to the business is pretty profound. And oftentimes what happens is, if we don't look at those leading indicators of retention, is that it's not just one cohort that comes in, it's six or seven or eight, and it starts to snowball on itself. And then what happens is you start to chase activities to try to prevent that churn when it could very well be inherent, and so now you're deploying capital to something that you aren't going to fix.
Andy:It's a very slippery slope. It's a vicious capital cycle at that point.
Andy:And I think that's very true. So you can shortcut that process and it sounds very simple and it is easier said than done by being more clear on the front end about the value that shows up at the end of the bow tie. And again, it sounds super simple. But the more precise you can be about that, and I'm going to allude to Keith Whiteman, who's our VP of sales at Bullhorn and he posted something where he went through a lot of things that we subscribe to vis-a-vis the jolt effect. But his fourth bullet was introduce competitors, and he actually talked about doing this in the sales process and I would advocate for possibly even upstream of that, but at least in so many words, introducing that concept to say we fit here, we don't fit there, and that's what he's saying here is don't fit, try to fit a square peg in a round hole.
Andy:And if you do that, well, first of all you're talking about decision, confidence and trust, right, Like that's almost the side effect of it. What you're really doing is you're saying you're not a fit. And I would argue that if you're doing that upstream of there with your marketing in so many words, you may not name competitors by name, but you're talking about your differences specifically to what you offer in that moment of value versus somebody else. That drives capital efficiency, because that creates. You have to be more disciplined. You have to be more disciplined. Just one example there is you're talking to that and you're not resonating somewhere. Nobody's clicking an app whatever it may be probably an email.
Andy:Whatever it is, it's not all those compounding effects of that downstream of there you think about it, including retention being a huge one.
Gary:Right, well, and the whole idea of naming your competitors falls into the idea of delivering confidence to the buyer because you have helped them parse the solution landscape, like, have I seen everything? Am I making a choice? And then somebody's going to say, oh, you should have looked at this or that or the other. Right, we can't be exhaustive, and so we need to find a way to figure out, based on where I am and what I'm trying to accomplish, which of these 50 solutions actually makes sense.
Andy:And we know from some relevant recent experience that some customers and here's the curse of knowledge thing. So that's the other thing that really resonated with me recently in a LinkedIn post is our friend Emma Stratton talking about the curse of knowledge right? So you know this competitor doesn't make any sense relative to yourself, but why wouldn't you say that? And we know from our recent experience that some people come to a demo call with a comparative set of solutions your competitors that make no sense to compare to yours. It's completely out of whack. You should explain why that is Right, not only on that call, like not be demeaning or belittling about it, like you should have known this. It's the curse of knowledge. You know that they don't know that, right, nor should they necessarily, but you explain that. And guess what, explaining that upstream of there makes a whole lot of sense too.
Gary:Well, and explaining it in a way that makes sense for the buyer, not? Well, our feature does this and their feature does not, and this feature does this. I'm like, do I care? Does?
Andy:that matter, Emma did a great job. You know really kind of saying don't be techie, we love the. Explain it like you're at a barbecue.
Gary:Yeah, it's such a good aspect to that. Go back and listen to the podcast with Emma Stratton If you haven't check it out on Spotify or Apple or whatever Google's using now I guess YouTube Music wherever you listen to podcasts.
Andy:And she's got a new book out. We'll call that out too.
Gary:Make it punchy.
Andy:She's worth, worth worth reading, mm-hmm.
Gary:Mm-hmm, yeah, it is. It is admittedly hard, right, because, um, sometimes you do have buyers that that they have an idea of what they want, and then let's say that you're the first and you fit on those and they just, frankly, don't have the stamina to do a big search and they're perfectly happy to do that, but I think those are pretty rare. I would suggest that there's potentially well more downside to at least not providing various approaches to how the problem is solved and giving some examples, because you run the risk of your buyer inadvertently comparing apples to oranges and holding you and expecting you to have a certain set of things that don't make sense for you to have. Meanwhile they haven't properly prioritized the capabilities that they came for in the first place and they hear the window dressing at the other person and you don't have the ability to point out, like that's not going to get you where you need to be. The context is wrong. Yeah, if you don't control the ability to point out.
Andy:that's not going to get you where you need to be. The context is wrong. Yeah, If you don't control the narrative, your competitors will.
Gary:Yeah.
Andy:Or at least they'll muddy the water.
Gary:Yep, so that's a good call out. Okay, so this GTM efficiency train well, frankly, we'll be on it forever because it's part of what we espouse, but it's particularly important in this fourth quarter season, with 2025 planning around the corner. Um, so we'll continue to chat about that. Um, we'll be putting this together in our GTM shorts, which you can subscribe and receive in your inbox at gtmproco, and we'll follow up also with some stuff on LinkedIn. So if you're not following Gary or Andy or Tiana or GTM Pro on LinkedIn, please stop by and give us a follow.
Gary:And also DM. We read every DM. We respond to them. We love to connect and learn. Frankly, it's the best way to learn about what's going on out there and what you're thinking about. So do that. Until next week. Have a good one. Bye. Thank you for tuning in to GTM Pro, where you become the pro. We're here to foster your growth as a revenue leader, offering the insights you need to thrive. For further guidance, visit gtmproco and continue your path to becoming board ready with us. Share this journey, subscribe, engage and elevate your go-to-market skills. Until next time, go be a pro.