From Impossible to Inevitable: How SaaS and Other Hyper-Growth Companies Create Predictable Revenue

by Aaron Ross

We like to see 20% of those SALs close … so in baseline scenarios, assume a range of one or two new customers per month per Outbound SDR. Run both scenarios for low–high estimates. Use the same number even if your SDR is prospecting to new divisions of current customers.

SALs per month can be as low as one per month for large deals in challenging niches or complex enterprises, or up to 15-plus per month for highly transactional SMB sales.

Outbound deal sizes should be 3 to 10 times larger than the average inbound sale.

True: “Too many founders are penny wise and pound foolish. They'll spend $10M on product and salaries but less than $2,000 on sales enablement to get more out of that $10M.”—Joe Toste

How Long Will It Take? Year 1: “The Build Year.” You're building the program, funnel momentum and pipeline. The flywheel's begun turning. You should see revenue payback this year—if you execute well—but usually not until late: months 8–12 (we'll break down why).

Year 2: “The ROI Year.” All the pipeline you'd built prior begins to close, regularly. Now that the flywheel's turning, and you're starting off with pipeline, you should see a 3–10× jump in revenue this year from Year 1, depending on how fast you're growing the program.

Example: Salesforce.com closed an exceptional $1M in annual recurring revenue in Year 1 of the outbound program. It closed $7M in Y...

If you're new to outbound, you'll be sorely disappointed if you expect results (usually deals) in “a couple of months.” If you have a two-month sales cycle for inbound leads, expect four months ...

Let's break down common timeframes for building an Internal Team: Hire and onboard first SDR(s): 1–2 months … now they have their heads straight. Train them, book first 10 meetings: +2 months … but many meetings are poor. Up meeting quality and quantity: +1–2 months… now we see pipeline grow. Add typical outbound sales cycle: +4–6 more months … hallelujah!

Push for measurable progress, but be prepared for it to take several months longer than you wish to see revenue.

See Kemberton leaders discuss outbound project problems, time frames, details around building a team and more at www.FromImpossible.com/resources.

Predictable outbound prospecting is about The Dashboard. Without an accurate dashboard, whether you're building your internal team or using an outsourcing firm, you don't know what's working or not, or the “real” results.

Inbound SDR (lead response) and Outbound SDR roles, metrics, and dashboards have to be separated.

Everyone has some version of … Outbound Activity Metrics (Email, Phone, Social) Outbound Results Metrics (Conversations, Meetings/Demos) But … do you also measure: # Qualified, Audited Outbound Opportunities (or Sales Accepted Leads)—every outbound opportunity needs to be reviewed for consistency and integrity. Outbound Pipeline Creation Rate—the dollar value of qualified pipeline created each month, and is that trending up or down month over month). Win Rates of Outbound Deals—goal: 20%.

Get the “Build an Outbound Program Right Workbook” at www.FromImpossible.com/workbook

It's a wonderful problem to have a wealth of inbound leads coming in. But it can lead to sloppy practices in leadgen and sales when teams “get fat.”

Outbound prospecting metrics and dashboards are different (a huge error executives make all the time, lumping inbound and outbound metrics together in single “Sales Development” reports). “Lead conversion rate” means something in marketing. Not in prospecting. Prospectors are targeting Accounts or Prospects, not leads. If case studies are in a PDF document, “white paper” format, or videos longer than three minutes, they aren't “outbound ready.” Even worse: They're vague without any concrete details or tangible results.

Inbound leads need to be contacted within minutes or hours, which interrupts the large blocks of hours needed to prospect. Inbound leads take hours or days to qualify, while outbound appointments take two to four weeks to qualify. Inbound call metrics and ratios are different than outbound call metrics and ratios.

Buyers go through three phrases: Why change? Why now? Why you? Outbound prospects usually are at Phase 1 (“Why Change?”). Inbound leads are likely already at Phase 3 (“Why you?”), after already deciding that they need a change and when. They haven't decided on which solution yet. With outbound leads this differs because you're having to convince someone why they need to change from the status quo and why they need to take action now. Let's take a look at a typical buying process with outbound…

When you get so caught up in the day-to-day busy-ness of marketing, lead generation, and app configuration, it can be easy to miss the forest for the trees.

But there's a better metric, your Key Metric, which you should track and score yourself on—and hold your VP Marketing and VP Demand Generation team(s) to—is Pipeline Creation Rate (or PCR; also sometimes called Lead Velocity Rate). PCR measures your growth in qualified leads and pipeline, measured month-over-month, every month. PCR is real-time, not lagging, and it clearly predicts your future revenues and growth—and, even better—your growth trend.

Your Key Metric, which you should track and score yourself on, is Pipeline Creation Rate (PCR, also sometimes called Lead Velocity Rate).

If you created $1 million in new qualified pipeline this month, and created $1.1 million in new qualified pipeline the following month, you are growing PCR at 10% month-over-month. So, your sales should grow 10% as well after a period of an average sales cycle length.

One great thing about PCR is that while sales can vary a lot by month and quarter, there's no reason leads can't grow every single month like clockwork: Every … Single … Month. Follow other core business metrics of course—just understand that they aren't as good. Sales and pipeline lag. Monthly sales growth is important, but minor variations can lead to huge forecasting/modeling variances. Know you will grow.

As long as you're measuring some version of Qualified Leads—not raw or unqualified leads—with a consistent formula and process to qualify them, you can begin to See The Future. Hit your PCR goal every month and you're golden. And with practice, you'll see the future of your business 12 or more months out, clear as can be.

You don't get into true hypergrowth mode until you can get beyond your networks (Early Adopters, 15% of the market) and can sell to “regular people” (Mainstream Buyers, 85% of the market).

You don't get into true hypergrowth mode until you can get beyond your networks.

Mainstream Buyers won't buy on faith; they buy concrete “things.” They need to sell projects internally, to their VP or the CEO or CFO. To do that, Mainstream Buyers need everything spelled out: what they get, expected results, the time frame, cost, risks, and steps. It's a lot more work for you to figure out all the tools they need to sell and justify the purchase internally. Sales calls and discussions can be very repetitive, repeating the same things multiple times.

Figure out all the tools your prospect needs to sell and justify the purchase internally.

They want you to explain things to them with a demo over the phone. They can't or won't unilaterally push a new project through; they want more approval and support from more people. They're less risk-tolerant. They work at more complicated organizations. This isn't bad, just different. Don't fall into the ego trap of thinking that because they don't “get it” as quickly as you that they're dumber or lazier—they aren't. Stop bitching. Start learning.

By underestimating the value of a customer, you may underinvest overall in acquiring them.

Your all-in Customer Lifetime Value, including second-order revenues, could be double your current estimate.

But much of the operational pain, especially in recurring revenue SaaS companies, seems to go away around $10–$15 million in ARR. At that point: Your customer base is highly diverse, and not dependent on any whales. You have enough reference accounts. You want more—but don't need—more logos, as great as they are. Your sales and client success teams are working as a team, as an imperfect but effective engine, and not dependent on a single rock star or two. You have a brand, maybe a small brand at first, but a real one. This is a key inflection point in the getting-easier process. More leads come in, more easily. Customers still need to be sold, for sure, but at least you don't have to kill yourself to get into the discussion. You can't be killed by BigCo entering the space or the competition. Wounded, yes, but not killed. Your product may still suck in a lot of ways, but it's pretty rich with features. You have what many customers need. You know the market so well, it's pretty easy to see two years out, not only from a product side, but also from a scaling revenue and team side.

Growth won't eliminate all your worries. You'll get new ones.

You hire a sales rep to sell before you can prove you can do it yourself. You have to prove it's sellable first. And the CEO/founders need to do the initial sales themselves, so that they understand how to make sales work. You can't outsource this.

You hire a VP of Sales to sell before you prove you can do it yourself. You gotta prove the process is at least just barely repeatable before you hire someone to turn up the volume and spin the wheel faster. You gotta build two reps that can hit quota before you hire a real VP of Sales.

Any of your first two to three sales reps are folks you personally wouldn't buy from. Because then you'll never trust them with your precious handful of leads, and they will fail,...

You insist reps #4–400 are folks you personally would buy from....

You underpay. The best salespeople want to make money. If you pay undermarket, you get bottom of t...

Not (intentionally) going upmarket faster to Double Your Deal-size. Nothing is an anomaly: If you can get one enterprise customer—you can get 10. If you have one customer in an industry—you can get 10. The outliers aren't anomalies: They are The Future. Corol...

Not firing a bad VP Sales in one sales cycle. You should know subjectively in just a few months—just 50% of the way through your average sales cycle Numbers should increase in one sales cycle—with a keen focus on Revenue Per Lead First few hires should be clear upgrades—and should be made quickly and seemingly effortlessly

You ask your VP of Sales to carry a bag for too long. Her job is to recruit a great deal and hit the overall plan, not to sell herself, not mostly. Have her own the whole number, the ARR plan, not an individual quota, not for very long, at least.

You hire someone who last sold Nu Skin. This can work later, but not in your first reps. They need to understand how to sell vaguely similar products at vaguely similar price points.

You hire because she worked at Salesforce/Box/DropBox/ABC Famous Company. Don't hire them because they worked at a well-known or hot company. Hire them because they can and have closed at least vaguely similar products at somewhat similar price points. Not because they are one of 4,000 reps that sell a product at Salesforce.com, which has $10 billion-plus in revenues, a proven brand, and huge infrastructure behind it.

You allow any great reps to leave. You should strive for 0% voluntary attrition, not to fire the bottom one-third. That's for boiler rooms. Great sales teams stick together. Great sales teams inspire each other. Great sales teams attract higher and higher quality reps as time goes on.

Not doubling the plan. Once the EchoSign team was (finally) great, we exceeded the plan, every quarter of every year. Always. But … Jason should have challenged the team to do Even Better. He could have pushed harder by asking questions like “What would ...

The reality is that any hiring shortcut you take now means you are going to have to work 10 times more later to compensate for any shortfalls, such as running too many of your reps’ deals because they can't close them themselves, having to coach too much, having high sales team turnover, or missed goals.

We don't get CEOs or VPs of Sales who are cheap when it comes to paying their salespeople. It's incredibly hard to find great sales talent, much less hire and retain them. Pay them well. Trust me, they can go elsewhere, while the B and C players stay.

Don't take a job just for the title, investors, or company. Pick the wrong CEO to work with and you'll be miserable. Be honest about what works for you before you make a decision.

To-Do #1: Drive Deal Size Up as Quickly as Possible Small deals pay the bills, big deals drive growth. Small deals are a fantastic way to get started, get fast feedback, and build testimonials and word of mouth. But fast revenue growth usually occurs with bigger deals.