Lead gen playbook for startups

Posted by kdow on Jan 16, 2017 11:30:51 AM

He appears to have it all figured out, but this is clearly boiler plate reporting!

Clickbait title aside, I wanted to write something that I’ve been plagued with for a long time now. On my travels I regularly end up chatting to startups. Some with a funding round in their past, seeking the next “big one,” or some readying their ship to get funding.

For me, most founders these days feel like they’re purely technical. That might be a gross overstatement. Which means slick product demos & roadmaps are being demonstrated to VC firms all around the land. Some, but certainly not all founders, technical or otherwise, also grasp the importance of having a good business plan backing up the idea. Unit economics, growth, the usual SaaS benchmarks (churn, cost of acquisition, all that jazz!) are often missing from a VC pitch deck.

But one thing is really important: a plan to gain traction. B2B or B2C, it doesn’t matter. Every company needs to grow their database, sell into it & retain enough of those folks in order to prove out a viable business. This is true of scaled up business as much as it is for startups still finding their feet (i.e. product market fit) & burning VC money.

So, here’s a quick & dirty guide to lead gen & sales for startups!

Set Goals

The first thing everyone needs to do is set some goals. I can’t remember what book I read that delivered this acronym to me, but S.M.A.R.T. is a good way to define what goals are good & what are bad. Or at least which goals should be prioritised. A smart goal follows this framework:

  • Specific: The goal has purpose and is easily defined.
  • Measurable: There’s a clear, numbers-driven metric behind the goal that can outline success or otherwise.
  • Ageeable: All of the key stakeholders (founders, devs, sales reps, directors) agree that the goal is worth pursuing.
  • Realistic: The goal for a small startup to build some software that changes the world is lovely, but not realistic (yet!). Define something that involves at least one outcome being that the goal is achieved.
  • Timed: All of the above are great to define a good goal, but if there’s no end time involved then it’s all for show. Make sure there’s a delivery date on the goal.

Okay, I’m aiming this at startups so the time piece probably comes into its own as most goals related to growth indicate the ability for the company to survive.

The point of setting good, solid goals is that you can build a model from it. Honestly, setting good goals & measuring them alone means you’re ahead of the pack. And having a nice slide deck outlining your prior goals & the deliverables that occurred after is as likely to get you that Series B round as getting 100 new users (again, I’m probably overstating that one).

Define your persona(s)

Everything I’m writing here could be a total waste of time if you’re casting too wide a net. Hiring a member of your team to handle growth and asking them to “just get leads” is incredibly naive and likely to sink a potentially great ship.

Most startup founders think their solution or product is god’s gift to the world. And maybe, just maybe, one day it will be. But right now, focus is key. Hone in on the one or two defined ideal customer types. Acquire those customers, then iterate. I could write about persona’s for hours, but instead of that I’ll just throw a link here to something HubSpot’s already done. Remember, these personas need to fill the funnel that you’ve created (more below)!

An example (again, a HubSpot-style one), is below. Excuse my awful art skills! I’ve focused on goals & challenges, but you could easily add the persona’s plans and timelines in here too. However, I think most startups will get by with just the goals & challenges of their prospective customers.

Marketing Mary persona example.

Once you have a persona to target, you can begin thinking about the plan around acquiring that type of lead into your database.

Create a funnel

I reckon every baby marketer is taught how to draw at an early age. And they get fascinated with one shape; the triangle. At some point they invert the triangle, call it a funnel and spend the rest of their lives obsessing with it.

A funnel is a marketing assessment of business health. A good funnel will define the business plan, perhaps even the product, and how you recruit people to handle the numbers within said funnel. A B2C or freemium company will have a huge top of the funnel, generating a huge number of contacts into their database who use the product, but perhaps never spend any cash. Standard B2B models will have more balance, but less of a top of the funnel “problem”.

A simple example of a funnel is below:

My example of a funnel. I am not an artist.

Let’s dig into each stage:

  • Website visits: These are visitors. Okay, you’ll need to do some Google analytics-fu to flush out the crap, but genuine visitors are people who ideally searched for a problem online & came to you. Your ideal flow is to get them to convert on some content (a free offer, trial experience or chat with a “consultant”) to become…
  • Leads: This is the person who converts after visiting. They’re now in your database. A good lead normally means someone with clean data. Typically clean data looks like a name, email address, phone number and maybe some data about their company. The relevance of their data depends on your business model & product. But for most B2B startups, all of what I mentioned is key. Once you’ve a lead, you can do some marketing to them. On a basic level that might mean newsletters & webinar invites, but on a more complex level that could be marketing automation based on persona, etc.
  • MQL’s: An MQL is a Marketing Qualified Lead, which means someone that, by some measure, is worth the time of day. This might simply be an automated list of “hot leads” that are warmed up for a sales rep, or in startups, a lead in the database that the marketer identifies as an ideal fit. MQL’s are the currency by which growth measures itself in most situations. Which is why I drew incredibly detailed stars and a party popper in there. Also there is a lot of extra room in that box.
  • SQL’s: Once the MQL has gone through some measurement (visited the site again, popped onto a pricing page, attended a webinar, etc.) they’re ready to move from the marketing world to the sales world where a rep will pick them up. I’ll go into this below, but sometimes the rep is actually some software in your product that does that work. Especially in earlier stages where the cost of a human rep is too high.
  • Opportunities: Opps are the currency that sales measures itself in most situations. An opportunity is a person that sales have spoken to and identified as a good fit customer (more below). Opportunities are the only people that get demos or tailored experiences from sales reps. Less relevant if the software itself is doing the sales work in a freemium model, but in a Series B or beyond company, even the software needs to identify the hot leads at this stage (i.e. the pre-buying stage).
  • Cash money: This is the end result of the above funnel. If you can shorten the funnel’s timeframe then you’ll lower the cost of acquiring a customer (more below). But this is the ultimate measure of whether the business is working.

Usually it’s hard to remove an entire step without losing efficiency in the funnel. The idea is to define a proper journey that your prospective customers can follow so that your company can control the flow of information, get some revenue from that persona. Removing a step might lead to quicker deal closes but that, in all likelihood will result in higher churn down the line.

To drill down a little into the analytical side of things, here’s an example table & chart that shows what kind of analysis you can do using your funnel in the real world (not everything is shaped like a funnel!). Note that the numbers are totally fake, but there is some intelligent design in there based on anecdotal evidence of the sliding window scale at which success can come in a really hot product/business.

Table of the funnel numbers over a 5 month period.

Visualisation showing the delta of a heavy top of the funnel and tight bottom of the funnel.

Define a budget

This one is always hard for startups. If a startup has even €20k to spare, they’d prefer to hire a dev or designer part-time or on a contract basis to pump out some product than spend it on marketing. But trust me, slow the product down a bit to let the market figure it out. And let the growth team figure out some of the product market fit. Caveat: if someone calls themselves a growth hacker, take them out back & shoot them.

Budget’s are all about the cost per lead. There’s a really simple formula for SaaS that can be somewhat applied to other business models, but I’m going to assume most startups (in Dublin, anyway) are pursuing SaaS model growth. It measures the cost of acquiring a customer (CAC) & benchmarks it against the lifetime value (LTV) of that customer.

The CAC can mean a bunch of things but usually comes down to the cost of sales + marketing. LTV refers to how much money that customer gets you. Ideally people have a reporting mechanism that allows them to break that down on an individual basis to get the unit economics of the funnel. i.e. For every €5 we put into our machine, we get €n back out.

Lets say it costs €50 to get a customer. There are no sales reps, and an organic marketing funnel that’s being fuelled by a human in growth who’s spending a bit on Facebook Ads. If your product costs €5 a month, then it’ll take 10 months to break even on that individual. Which means at month 11 you’ll be in the black for that user. That translates to your product, or if you’re later stage, your customer success team’s job being to retain customers for longer than 10 months.

The marketing budget, then, is important. Especially at an early stage. That said, hiring a growth person means the budget is simplified. You don’t normally have 3 sales reps with commission cheques to pay out, so it’s easier to measure LTV:CAC. The budget, then, goes into a few different potential things:

  • Events: Running your own events, or attending other people’s in order to spread the good word about your company. In Ireland this usually means paying the tab at a bar & giving everyone a sticker for their laptop.
  • Webinars: This is a surprisingly effective way to demo the product or use-case to folks. Instead of running 20 1-hour demos, you can run 1. But you need to get digital bums on seats, so you need to advertise & market it.
  • Sydnication: This can sometime simply mean ads, but there’s also just the idea of pumping content out there. That takes time, effort & often times that means spending cash!
  • Etc: I wanted to write this here to acknowledge that there are billions of ways to spend money on marketing. These are just the big guns I’ve head startups like — because they tend to fit into the S.M.A.R.T. framework.

To give some visual example, I fabricated a business with fluffy numbers (that don’t quite add up but show a really healthy business) below.

LTV:CAC ratio with some fluff in-between. Reach out if you want the raw calculations!

Purple is LTV:CAC ratio. Blue is MRR averages & red it churn. Business is good, but trends may be worrying!


Okay, your marketing side of growth has defined personas, set budget & filled the top of a beautiful funnel with lovely leads. Now you need some sales reps to do something with them.

In some cases, the software will do the dirty work; especially in a freemium model. However, if you’re relying on the app to do the “sales” work, then some dialogue between the dev(s) involved & the growth team is vital to success. Devs are not sales or marketing people, and they won’t necessarily understand the best way to move a free user down the imaginary funnel to being a paying user. Moreover, if the app is doing the sales work, benchmark the app as you would an actual human. If the app misses a monthly or quarterly target, it’s time to review what the app is actually doing!

A sales rep’s job sucks, and is hard. Actually, reps don’t get enough credit. They spend all day listening to rejection after rejection, but they get a thrill from that one person who says yes. The thrill of the hunt, if you will. But there are two big things a sales rep can find out to make their jobs easier on a connect call (in a better funded startup you might have some equivalent to “business development rep,” which means junior sales). One is having some top BANTs (sorry):

  • Budget: How much money does the prospect have? Is it even enough to afford our product?
  • Authority: Does the contact in our marketing funnel have the authority to buy?
  • Need: Can we define a need in the prospects’ business that we can solve for?
  • Time: The real word here should be ‘urgency,’ but BANU isn’t quite as pithy as BANT. The ask here is if the sales rep can create urgency around the solution to the problem in order to drive the sales cycle down (thus lowering CAC).

BANT helps a rep identify the core requirements of the prospect to identify & qualify them in/out of the sales funnel. No need for a rep to waste time on tyre-kickers.

Then there’s the Three C’s, which outline the value provided to the prospect, and if we even have any:

  • Concept: Does the prospect even have the capacity to conceptualise our product as solving their problem? For example, if we are selling a CRM, do they have the concept of a lead & a sales funnel?
  • Creation: You could prefix the word creation with anything here and get to the same place. If you’re selling a CMS, content creation would work, as an example. Does the prospect, in essence, have the ability to work with your product and create some value with it? No product just works without intervention from a user. And honestly, a lot of churn happens from being mis-sold by accident. People sometimes think they’re buying into software which will replace people or solve problems all on their own.
  • Commitment: Much like the above, will the prospect actually commit to this thing? Churn also happens because users get bored, tired or just quit trying to solve that problem.

The Three C approach is less about the sales person (or app!) solving for pre-sale qualification as much as it’s about prepping the process of the sale. Is it worth doing a deep dive demo, what value-add can we poke at, etc.

Both BANT & the Three C’s are great concepts. But once again, regardless of whether you have an actual human or software doing the sales, both of these frameworks are useful to benchmark whether success is happening or not. Also note that these are frameworks. They’re fairly common in bigger companies, but they’re really useful in startups too. Also really take heed in the fact that these are not tick-box exercises. Not every company has to adhere to each step in BANT/CCC. Some might not tick certain boxes; that doesn’t mean they’re not worth pursuing from a sales perspective. And this paragraph is proof positive that once you get to a certain level, it’s worth hiring a human sales rep in most instances!

This is basically the conversation I’ve had with a huge number of startups over the last few years. I may jazz this up a bit more as a PDF so startup founders and growth folks have something they can put on their desktops or even print on the wall of their cubicle in co-working hellspace.

I know a lot of questions will arise from this, like “how many leads should I get to return €n?” and beyond. Most questions arising from topics like this are relevant, but they’re hyper relevant. It’s difficult to write a generic enough answer to some queries because they rely so much on the business at hand. If you want more help just reach out!

If you want more guidance on this over coffee, hit me up on twitter or send me an email.