The problem with a sales-first strategy
Outside of product and engineering positions, your first hire should be a customer success manager (CSM)—and they must be able to wear many hats. Think of the CSM as your customer retainer. They are trained in the art of keeping paying customers happy and engaged, which—in turn—keeps them from churning.
Your CSM is also your sales team's best friend. They are the ones who know which product features are resonating with customers and why they decided to buy in the first place. This feedback is crucial for the sales team when it comes to understanding what objections prospects might have during the buying process.
Does this feel counterintuitive? That's because there is a very strong default assumption among startups that more salespeople equals more customers.
Founders trip over themselves to hire sales reps as their first employees in an attempt to increase their customer base, but these companies experience the highest churn rates, lowest customer satisfaction scores, and shortest customer lifetime value. In other words, the sales-first strategy is a risky proposition.
A few common fallacies
Every early-stage company struggles with its pipeline. VCs expect that you close every revenue milestone on time and with room to spare, and hitting that first $1M ARR puts immense pressure on a young company.
The sales-first strategy is a flawed one, though, and it feeds off of a few common fallacies.
"I've got a ton of inbound. I don't need marketing."
First of all, acknowledge that it only takes one quality sales rep to plow through those leads. And they can do so in the space of a month or less.
You need backups upon backups; you need to be looking beyond inbound and thinking about ways to increase web traffic, brand awareness, and customer engagement. Don't let things grow stagnant due to a false sense of security.
"We're a freemium product."
Never assume that your product's freemium status is enough to win conversions. In reality, freemiums average a less than 3% conversion rate – so without marketing, you're looking at a very small customer base and a nearly impossible to hit first $1M.
"Our brand speaks for itself."
Your brand makes a statement. But so does your main competitor, your thousands of other competitors, and the hundreds of thousands of 'statements' competing for attention online every single day.
You're going to need more than a statement to compete. Marketing isn't just about publicity, either. It's about forming buyer personas so you can understand what motivates your target market, and it's about understanding how to craft a message that speaks to them on an emotional level.
"My account execs will generate more than enough leads."
This is unfortunately a pipe dream. AEs don't want to be hired to generate leads—they want to be hired to close business.
A quality head of marketing will be focused on generating and nurturing leads so that your sales reps can step in at the right time to close the deal.
We've covered the basic hypothesis, but let's talk figures for a moment. Most founders use a simple multiplication to figure out how much pipeline they need. For example: if you want to hit $1M ARR, and your close rate is 10%, then you need $10M in pipeline.
Others will go even simpler and multiply their revenue target by three to five times. A $1M target will need a $3M pipeline at minimum, a $5M target will need a $15-$25M pipeline, and so on and so forth.
This doesn't necessarily account for the added friction that comes with shooting for $10M+ targets, though. If your first $1M is a rough-terrain marathon, your next $10M is an uphill sprint, and the same multiplication doesn't always apply.
So, what happens? Your targets certainly won't be met. You'll have burned through so much money that your runway will be shot, and in extreme cases, you might lose investor trust along with your ability to make hires and spend money on marketing efforts.
In other words: you need marketing, and you need it now—not six months down the line when you're in a panic because your pipeline is looking dry.
Marketing should be one of your very first hires, if not your very first hire because you need to feed the beast: your sales team.
The perfect first hire
While it’s great to think you’re going to hire a marketing leader who will stick with your startup for the entire journey, it’s more likely that you will need a leader with different expertise as you scale. When hiring, you don’t want to settle for someone who will only work for 12–18 months, but also we don’t suggest you fixate on someone who will last for a full four years. Focus on someone who can get you to the next tier, or 24 months of growth.
Marketing is a very complex and difficult domain to master because it comprises many different functions. The reality is you’re likely not going to find a marketing leader in the early days that is a master at all of these functions. This is why it’s important that you clearly identify what you need. Here's an overview of what each function under marketing focuses on:
- Product Marketing — delivers messaging, positioning, competitive intel, pricing & packaging, sales assets, etc.
- Demand Generation — pipeline / cost per click / cost per lead
- Growth Marketing — conversion metrics and closed won deals. One way to think about the difference is Demand Gen = Getting people to the store, whereas Growth Marketing is all about getting people in the store to buy something.
- Digital Marketing — paid search, SEO
- AR / PR (Analyst Relations / Public Relations) — Analyst positioning (Forrester / Gartner + others) and public relations = focus on getting press.
- Content Marketing — content assets / materials
- Brand Marketing — company positioning / messaging, social
- Marketing Operations — tools/data workflow
- Customer marketing — post-sale marketing focuses on customer events/users groups/reference selling, etc
This is a breakdown of what we’ve seen and recommend you look for in a marketing leader at each stage.
We believe the skills you need at each stage of growth change and expand. In the early stage ($0-$10M) in revenue you’ll want a head of marketing with a product marketing superpower. Why? You need to focus your marketing efforts on building the company and product narratives and materials.
If you have a lot of inbound interest, it’s tempting to want to hire someone with a demand gen superpower but we suggest you take a minute to think about it. Pipeline will come once you have a clear and easily understood mission, purpose, and value proposition. In addition you need to be very clear with regards to your target market and your buyer personas. You'll also want to evaluate your pricing models and how you compare (and are better than) your competition.
Only then should you start thinking about the campaigns you might run to generate more awareness and interest. The pipeline train never stops – and it certainly waits for no one. If you want to hit your targets and keep your investors happy, make marketing your very first hire.
If you have any questions about pipeline or making your first marketing hire, reach out to me: email@example.com.
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