The Six Signs of Go-to-Market Repeatability

These qualitative and quantitative signals show that an early stage company has achieved go-to-market repeatability and is ready to scale

As an investor at ScaIeVP, I speak to hundreds of entrepreneurs every year. One of the questions I am asked about as frequently as any is how I define go-to-market repeatability. This can be a difficult question to answer because there’s no universal clear-cut definition of the term. Simply put, different companies achieve repeatability in different ways.

From an investor’s perspective, go-to-market repeatability lends itself to a "you-know-it-when-you-see-it" type of diagnosis of whether a company has established a sales and marketing cadence that effectively drives continued momentum. In practice, that generally means the company has launched a product, has meaningful experience selling it, and knows what it takes to add and retain more customers.

At ScaleVP we’ve come to see an early stage company’s go-to-market repeatability as a factor that provides a step-function reduction in risk as compared to their less mature counterparts. Companies that get repeatability right have the go-to-market playbook it takes to successfully scale their business.

While there may be no clear-cut rules that define how a company achieves go-to-market repeatability, we can generalize from what has worked at successful startups and define six distinct milestones that serve as an informal checklist when assessing whether or not a business has achieved the kind of repeatability that supports rapid scaling.

Understanding the market and your buyer

One of the first requirements in finding go-to-market repeatability is successfully identifying the right target market for your product. At a minimum, this means having clear answers to these key questions:

  • Are you creating a new market? If not, are you replacing or adding to an existing market?
  • Are you selling into large enterprises, mid-market companies, SMBs, or all of the above?
  • Are you targeting a specific industry, sector, or sub-sector? Or is your solution broadly horizontal (valuable to many industries)?
  • Do you have a sense of the size of the market you are attacking?
  • Do you understand your target’s existing technology stack (if any) and where your product fits in?
  • Do you know your buyer, who they are, and where they live within the organization?
  • What level of priority does your buyer assign to the purchase of your product?

Figuring out these answers is challenging and, early on, requires a lot of trial and error but is one of the first steps in laying a foundation for repeatability.

Knowing how to qualify

How does your team qualify a prospect? A company that has achieved repeatability in their business will have a clear, succinct answer to this pivotal question. And this clarity does two things: first, it shows that the company knows where to direct its resources to find the right accounts; second, it indicates that the company can reliably identify warm opportunities and disqualify those that are not yet actionable.

The goal of establishing qualification parameters is to succinctly identify the smallest number of attributes that predict a high likelihood to buy. Or put another way, what are the specific questions that a rep can ask about a buyer's understanding of the product, where it fits in, and its level of importance to the organization? This process is separate from high level frameworks like BANT that help SDRs, BDRs, or ISRs identify whether or not they have identified the person that could realistically purchase their product.  

Reliably understanding the distinction between a prospect and a qualified lead is another early indication of go-to-market repeatability.

Predicting movement through the pipeline

Most early stage companies develop a pipeline of opportunities, but very few can predict, with any regularity, how deals will move through the funnel. This milestone is challenging to achieve, especially for companies with larger deals and longer sales cycles that will have worked fewer opportunities at an early stage to make this judgment. For high velocity sales teams, this may be a bit easier to do, but it can still take time to develop a consistent rhythm in their pipeline.

The most common (and often futile) method that sales leaders use to predict the progression of qualified leads through the pipeline is to assign each stage of the pipeline a fixed probability or weighting that reflects likelihood of closing. While this tactic is perhaps better than no weightings at all, it is misleading because it doesn’t address the fact that all deals have unique and often unpredictable dynamics. This is an unfortunate reality that has plagued countless sales leaders at end of quarter.

To be clear, this is not to say that weightings don’t work, but rather that a single weight or probability fails to provide meaningful predictive power. A more effective approach is one that assigns weightings tied to an opportunity’s chance of moving to the next stage of the pipeline. That is, what is the probability that Deal A moves from MQL --> SQL or from SQL --> Closed Won?

This approach provides the data a sales leader needs to start making reliable predictions. When 30% of MQLs become SQLs, and 30% of SQLs close, then every 100 MQLs should yield 9 closed deals. When predictions align with reality -- actual closed deals -- a company has achieved another pillar of go-to-market repeatability.

Locking in annual contracts rather than POCs

In early stages of development, it is common for entrepreneurs to invite "beta customers" to trial their product at little or no cost. At a slightly more advanced phase -- and this is especially common among companies that sell into large enterprises -- entrepreneurs will sign proof of concepts (POCs) that are essentially test runs of potential future deployments.

POCs come in several different varieties. Some are paid in full, some are paid for a pre-set amount of time, and some come at no cost at all to the customer. There are also structures with annual or multi-year contracts that include a clause with termination for convenience, often valid for a set number of months.

Contract terms aside, POCs can create precarious situations for entrepreneurs. There is no shortage of curious users that are willing to tinker around with a new technology, especially if it costs them nothing, and this setup can cause great disillusionment among sales leaders that misinterpret POCs as signed annual customer agreements when in fact they are not.

In contrast, annual or multi-year contracts indicate a customer's deeper commitment to the product in that they are more difficult to walk away from. In the context of repeatability, POCs count very little. A rolodex of customers signed onto long-term agreements is one of the best early signs of having found go-to-market repeatability.

Sustaining customer growth and momentum

A steady flow of long-term contracts is a strong signal that the sales team has found some semblance of repeatability. The next step is all about building momentum defined by adding more recurring revenue and customer logos in each successive period.

At ScaleVP, we focus on net new ARR or customer additions to get a better sense of near-term traction. My colleague, Jeremy Kaufmann, published an analysis of a metric that we use internally called the “iCAGR,” or Instantaneous Compound Annual Growth Rate. iCAGR measures a company's near-term explosiveness or "instantaneous" growth, calculated as [ 1 + (Net New ARR in Qx / Ending ARR of Qx) ] ^ 4 - 1.

Startups that have found go-to-market repeatability tend to add more net new ARR or revenue over several, distinct periods, and are experiencing near-term explosiveness, which the iCAGR helps quantify. To this point, we launched Scale Studio, a performance benchmarking tool that calculates your company’s iCAGR (in addition to other revenue, churn, efficiency, and operational measures) and how it compares to other companies at similar stages of growth. 

Of course, the common failure mode here occurs when a company experiences its best-ever quarter of growth for reasons unrelated to repeatability (often triggered by an unusually large contract or two) and then sees growth flatline. For this reason, we often look for several consecutive periods of increasing net new ARR or revenue to alleviate this concern.

Expanding and retaining

One of the final (and best) measurements of repeatability occurs during the renewal period when customers have their first opportunity to opt out of an annual contract.

Companies that have found repeatability will retain revenue from their existing customer base. Good retention also implies minimal churn and indicates that customers are seeing continued value in their original contract. An even stronger signal would be to see these same customers expand the breadth of their contract from their initial purchase (which we characterize as “upsell”).

We often run customer cohort analyses to monitor these trends, and examples of strong retention and / or growth become crystal clear from this type of work. There is perhaps no harder evidence that a company has found true repeatability than by demonstrating strong customer growth and expansion over extended periods of time.

The momentum to scale

In sum, go-to-market repeatability is hard to define precisely, but often incorporates many of the “pillars” we have discussed here. No one construct alone is a reliable indication that a company has reached this critical point of development, but checking all six of these boxes is a strong signal that a company has arrived at this key inflection point.

At ScaleVP, we spend a significant amount of time talking about this topic (both internally and with entrepreneurs) because our experience has indicated that finding true repeatability is one of the most effective measures of a company that is well-positioned to scale rapidly and become a big business.

 

Originally published April 9, 2019.