As a tougher funding climate starts to bite, it’s time to ditch the past decade’s “growth-at-all-costs” mantra. Telling investors about your viral user growth is no longer enough — they want to know how it translates to revenue, resilience and runway.
The ongoing market uncertainty is a particularly loud wake-up call for founders pursuing product-led growth. The go-to-market motion pioneered by the likes of Slack and Dropbox revolutionized how teams adopt and purchase software. However, even the best PLG products don’t propel their own viral popularity forever, and all companies eventually face a similar challenge: To keep growing, sales teams must be hired and a pipeline must be built.
As VC funding dries up, a particularly perilous path lies ahead for PLG startups. Those on the path to revenue growth have no margin for error, and founders face a series of tough calls: which teams to layer in, when to do so and how to set them up for success. These decisions will dictate whether a PLG-driven startup will sink or swim.
I’ve spent more than two decades building, scaling and advising teams tasked with bringing software products to market. While it’s true that every business is different, there are a few commonalities in every go-to-market journey I’ve been a part of.
Don’t fear the demand plateau — plan for it.
Here’s a roadmap founders can use to build on their PLG strategy and plot a route from product-led popularity to sustainable profitability.
Size up the piece of the pie you can win now
The serviceable addressable market (SAM) is where the go-to-market journey really begins. The little sibling of the total addressable market (TAM), a figure often thrown about during fundraising, the SAM is the piece of that pie you can win right now. It’s vital to understand which market segments your product can address and your go-to-market team can tackle.
To gain that understanding, here are a few questions you should be asking:
- Which qualities do our existing customers share?
- What problems do they currently face?
- How do they approach adopting and buying software?
Invest the time to establish the criteria that define your ideal customer profile. Searching for your SAM is a continuous process, especially as the capabilities of your team and product expand, but arriving at a clear understanding of your initial SAM is milestone No. 1 in your go-to-market journey.
Qualify your best leads
Your search for the SAM should have given you a sense of the sign-ups you’re trying to drive, and with any luck, you’ve won some active users. With your acquisition channels up and running, the next milestone in your go-to-market journey is defining a product-qualified lead (PQL).
- To do this, you first need to understand your active users’ pre-sign-up touch points, and how they’re interacting with your website. Web analytics tools like Google Analytics and Mixpanel will help you map top-of-funnel journeys.
- You’ll also want to map the behavior patterns of active users and the features or capabilities they’re using. Product telemetry data should reveal this via tools like Amplitude.
- Finally, third-party firmographic data from vendors like Crunchbase will help you build accurate profiles of your users. Company size, sector, geography and department data is worth its weight in gold.
Taken together, these data sources can be used to define what I consider the gold standard of a PQL. These leads have the highest adoption and expansion potential, and the best chance of converting to revenue-driving customers.
At this stage of your go-to-market journey, learning to identify and reach PQLs should be your team’s top priority. Because they’re already signed up, these users represent a live “proof of concept” and provide an effective conduit for targeting their teammates with relevant messaging and compelling incentives. The chances of converting these leads to a committed contract deal are very high.
Optimize your messaging for relevance, apply the right tooling to build automated, signal-based sequences that deliver the right messaging, and you’ll have the ideal system in place to make it to the next stage of growth.
Beat the demand plateau
Starting with PLG as your initial sales motion brings a host of benefits when executed correctly. It makes the experience immediately “sticky” and reduces the time-to-value for users. The product drives self-serve engagement, and through the effects of viral growth loops, it drives expansion, too. This should produce a highly efficient pipeline for your sales teams.
But even the best PLG motions eventually hit a demand plateau and your pipeline will need a boost to keep producing PQLs. My advice is: Don’t fear the demand plateau — plan for it.
When you can no longer rely on word-of-mouth and SEO, your mission is to find the right blend of demand-generation tactics. Paid marketing, gated content and events all have distinct advantages and disadvantages that vary by market. The key is a structured approach to experimentation that helps you dial in the right mix for generating leads.
When you’ve found the sweet spot, you’ll beat your demand plateau.
Conquer market complexity with systematic outbound
Now that you’ve opened up demand for your product, it’s time to capture it. At this stage, the most frequent mistake I see leaders make is treating all leads the same way — applying the same sales methods and expecting the same conversion rates.
At this point, you’re in the middle of crossing the chasm. Back when your product launched, your early adopters likely didn’t belong to the same market segment, but they all shared a desire to try out cutting-edge tools. Now, demand-generation is opening up your sales funnel to a broader range of potential customers.
As you reach a wider market, you’ll be acquiring leads that want more proof of your credibility and credentials in their sector. Before they seriously consider buying your product, they’ll want to see which of their industry peers already use it and to hear how you’re meeting their pain points.
On this side of the chasm, winning market share requires a systematic approach. Parse your market opportunity into segments (typically either regions or industry verticals), prioritize them by size and your ability to capture them, and align your sales, marketing and support teams toward winning them systematically and sequentially, not all at once.
That’s the real way to make headway into markets where your product and promise alone aren’t enough but your customers’ names are.
Take global marketing local
Even the best digital marketing engine augmented by marketing and sales working in perfect tandem won’t capture your total addressable market on its own. Get ready to invest in regional marketing expertise to find more pockets of growth through localization and in-time zone presence.
Cultural differences can’t be learned remotely; they need to be lived. To sell effectively, you need to know who you’re selling to and where to sell, meaning there is no substitute for local marketing expertise. If you’re serious about global expansion, this is a critical step.
During my time leading EMEA for CircleCI, I built a team that understood the region’s fabric of local business cultures instead of just copying our U.S. model. Together, we were able to adapt what had worked in the U.S. and evolve it to meet the needs of our EMEA-based customers, growing the region to account for 25% of company revenue. Getting this step right can propel you to global scale.
A powerful, predictable productivity model
The ultimate endpoint of any SaaS go-to-market journey can’t be measured in dollars, headcount or market share. You’ve only truly arrived when you’ve built a powerful, predictable and repeatable productivity-based model.
Here’s what that destination looks like:
- Repeatability and predictability: You can generate leads and pipeline consistently with your target customers.
- Closing the deal: You have a clear template for getting deals done. The more you do, the easier it gets as you learn to maneuver around the obstacles to signing the customer.
- Scaling productivity: You’re clear about the productivity drivers in your model and how they help your growth journey.
- Accurate forecasting: You can invest with confidence by reliably predicting revenue outputs. More runway, more heads, more role types and more top-of-funnel demand generation activity. Achieve this, and you are well on your way to building the solid growth model a sustainable and profitable business depends on.
These are the foundations of a business that’s built for the long run. From there, it’s a matter of reinvesting the revenue you’re generating toward customer value, brand loyalty, and finally, profitability.