Every product or company goes through a similar set of steps on the path to success. In previous posts, we’ve looked at different aspects of going to market — from launching to building and measuring a funnel to pricing — with some ideas about how to measure things and know when you’re off track. In this post, we’ll take a step back and walk through all the stages of GTM that you’ll typically experience.
Programming notes: this post is n in a series of indeterminate length on GTM topics mainly for startup people, mainly leadership, mainly coming from non-GTM backgrounds. There’s a list at the end.
Going To Market
What did you make? Who is it for? How does it make their life better? How do you find them? How do they find you? What will get them to try or buy? How much do they have to spend on you? How will you sell it? How many deals do you need to close or users do you need to acquire in a month, a quarter, a year? What is your (real and desired) sales motion? < — All your answers to these questions are only put to the test and can ultimately (for a while) only be arrived at by going to market.
Going to market is the sense mechanism of your business. It’s how you know whether you even have a business and provides the only relevant* input to developing that business.
- Everyone thinks it’s great, but no one wants to pay for it? That’s not a business.
- A niche of users in the 100s loves it and will pay a small amount for it, but no one else cares? That’s not a business.
- A niche of users in the 100s loves it and will pay a very big number for it. That might be a business.
- Millions use the free version and 10s of 1000s pay for premium features such that revenues are growing faster than costs? That might be a business.
* Raising money from VCs is not a substitute for going to market.
Someone’s, even an expert’s, opinion of whether you might have a business is not a substitute for the market reacting to your proposed business by giving you money (or growth) or rejecting you.
Stages of Going To Market
What follows is from a B2B angle. B2C is analogous, but the mechanics can be wildly different depending on whether you’re growth and indirect revenue (like from advertising) predicated or direct revenue (user = customer) predicated. There are many models, but this one is mine. 🙂
There’s something out there that’s broken, someone who’s needs are poorly or not served, or just something that could be so much better if someone just built ___. This is where it all starts. And it’s usually personal. You have the issue yourself or someone you know does.
Ask some people if it’s true. Talk to experts and specialists and the people who would be the users, influencers, and buyers. Maybe do some research, see if anyone else is already solving the problem and how. Find out how big the market might be, how many users on earth or just in your country might exist.
Or not. Just solve a problem that you have on the presumption that you represent a set of users or customers big enough to sustain a business through revenue or data or users to sell to advertisers, eventually.
Build the thing.*
*Once you start, you never get to stop.
Product Market Fit [Price Discovery]
See if the people you built it for like it! If it does the thing you expected. If they want it. If they’ll overcome some friction — signing up, changing something they do, paying some money — to get it and keep it.
At base, this is Product Market Fit*. A core function of PMF in products that are supposed to make money is discovering what price your market will bear, or is competitive, for the value you provide.
*Depending on who you talk to, PMF requires GTM Fit [see below].
Sell it to people you know, people your staff knows, people your investors know. 1–2 degrees away with warm intros. Some companies only ever do this and build solid businesses this way. Growth in the hockey stick sense does not happen this way.*
*A lot of sales and biz dev hiring in ye olden days — and more often today than anyone would admit — is simply buying access to a person’s network and the positive disposition of that network towards them. This is not materially different from an advertiser buying eyeballs. You’re paying for at-bats.
Novel Customer Acquisition
Novel, because it’s not based on your existing rolodex. Now you’re doing lead gen work that exposes new people to your product and costs real money, either in hard currency or in paying for staff/contractors.
This includes: sponsoring events, speaking at events, running ads on podcasts, SEM, buying contact lists and emailing them, hiring SDRs to contact people, running meetups, investing in content marketing for inbound search driven traffic, etc.
Natural Market Limit Discovery
There is a point early in your company at which you will fall off a cliff of diminishing returns on making sales or acquiring users. This will manifest as lead gen effectiveness failing or increased effort to convince prospects who fit a given profile to give your product a shot or poor conversions rates at the middle and bottom of the funnel regardless of what’s happening at the top or any general stalling of growth that seems impervious to the marketing and sales you’ve tried to date. You are discovering the bounds of your Natural Market*.
Natural Markets consist of:
- Have the problem and know they have it, or so close that if you point at it they know they have it
- Want to solve it
- Will pay to solve it
- Have the authority and responsibility needed to spend their own or their team’s or their company’s money to solve it or the influence over such a party to cause it to happen
- Who you can reach
If this does not happen, you are on a rocket ship — right product right market right team. In which case, your biggest (only?) risk is success.
Usually you don’t know you’ve hit your Natural Market bounds. It will just seem like you’re experiencing the normal diminishing returns of a particular marketing tactic(s) or marketing strategy or playbook or GTM strategy. Most teams will start with the assumption of a fading marketing tactic and try others.
Whether you layer on more tactics, like adding display advertising on top of search ads, or out more resources on an existing tactic, like going from one big event sponsorship every six months to one big one every quarter — this inevitably results in more $$$ per customer acquisition.*
A kind of flowering of marketing and sales tactics, including potentially larger GTM bets like sales partnerships, takes place in response to the challenge of rising CACs.
In the B2C world, if you’re experiencing outstanding user growth, there’s an infinite appetite on the part of investors to fund that growth. Even with rising CAC.
Usually in parallel, you will start questioning your marketing and sales strategies. Maybe the entire GTM model, including core things like who your customer is and is this even the right product.
Example: If you thought you had an inbound, inside sales business, you might start playing around with field marketing and outside sales.
GTM Fit Exploration
Do you have a GTM model that can be executed and scaled sufficiently to get you from where you are right now to your next stage of growth? Then you have GTM Fit.
The hallmark of GTM Fit is having predictability in terms of resources in, like marketing dollars or AE headcount — and results out, like users or logos or dollars.
When you’ve locked into a GTM that works, you’ll pour resources into it to achieve maximal user or rev growth.
Diminishing Returns [Again]
Just like running into the limits of your Natural Market, you’ll eventually find the a peak in yield from a playbook. This will tend to look more like a slow decline than falling off a cliff.*
The market will saturate, at least for you, as you hit max possible penetration and fight harder for smaller gains. Sales and marketing tactics will become less effective. Etc.
*If you’re pouring millions+ of dollars and hundreds+ of people on the fire of a working playbook.. it’s more likely that you’re going to fall off a cliff.
If you have great GTM Fit, you’re scaling incredibly fast and just trying to stay one step ahead of your own success. In this situation, everything you’re doing in marketing and sales is massively inefficient and your funnel is leaking everywhere. It just doesn’t matter because growth is so rapid.
When you start to hit post GTM Fit speed bumps, all of a sudden people will start caring about operations, analytics, process, and discipline. This is severely normal.
- Bloomberg didn’t have a formal marketing function until it was 1B+ in rev.
- New Relic didn’t have an enterprise sales team until many years after it was a tech household name.
- Most CFOs, CROs, and CMOs of startups in spitting distance of an IPO could not tell you what their sales efficiency is or what the conversion rates are for their funnel stages with even the slightest bit of confidence or accuracy (ask them!)*.
*If you don’t have great GTM Fit, if you’re way early with a product the market is not ready for yet, or if it’s just a grind in the way that enterprise businesses are — then you’ll often end up with a great grasp of what to measure and optimize for and the resultant operational discipline much earlier, because you had to in order to survive.
You have gotten all you can get out of a particular GTM, so it’s time to expand who you sell to, what you sell, or both.*
- New channels, such as distribution deals with a partner or being bundled with another product or being sold by consulting companies into accounts/geographies you don’t have access to or leverage in.
- New segments, such as going after enterprise where you had only been selling to SMB.
- New verticals, such as selling into Financial Services where you and only been selling to CPG.
- New products you build or buy that can be sold into your existing markets and/or give you access to new markets.
- Companies that you buy, get bought by, or merge with to give you access to new markets, or new products that you can sell to your existing markets or new markets, or that you effectively buy revenue streams or users or eyeballs that you can add to your own.
Exit or GTFO
Eventually, most people want to Exit.* Your early investors want liquidity. Your employees want liquidity. You want liquidity. You might just be tired and ready to dissociate from the thing you’ve spent years and years building.
Exiting is a GTM stage because, regardless of how you exit, you will have to hit specific GTM measures around costs, revenues, and growth to do it.
*If you don’t want an Exit, you might have a lifestyle business. Or something bootstrapped you want to do forever. Or you’re going to buy out your investors. Or you’re going to take on some private equity (not necessarily PE) investors who get dividends. Or etc. More power to you.
The road is winding and often non-linear.
Posts in this series (and templates)
Reading List and Resources
Image credits [in order]