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In this episode we talk about the unicorn path. You’ll need to find your way to the first $1M ARR.
Whatever path you take, you need to make sure it’s repeatable. We’ve got a suggestion, consider two things: 1) The playing field - what are your options to reach your audience, and 2) the ceiling - how much scale is there, how repeatable is it?
If you search for a direction, we discuss the common issues that’ll hold you back: Bias, measurability and mindset.
PS: You’ll need to be patient and persistent.
Creators and Guests
What is The Revenue Formula?
This podcast is about scaling tech startups.
Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.
With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.
If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.
[00:00:14] Mikkel: You did a, LinkedIn post recently, there was a really good discussion in there. It really dealt with. The fact that we're inundated with things we can do to grow mm-hmm right. There's growth hacking SEO. Now there's product led growth. There's all these wonderful things, that a company can do in order to grow.
And I think we got maybe stuck in the details of what those things are and what should be on the list. the point I got away from it was, well, you really should find one thing. Right? Um, so you can scale
Why, why is this conversation so important?
[00:01:02] Toni: Yeah, the reason why it's important is, and this is predominantly for, I feel organizations that are below 10 million AR euros AR. And the reason is that. You know, and every organization is a little bit different, but there's a process leading up to prior market fit. And you could say that is a million Euro ARR
And then there's a process that goes from product market fit to go to market fit, which is from one to 10 million. And then obviously come with the scale continues and there's some other pieces to it.
The reason why it's important is you will kind of figure out your way to get to the million. If you have a product that has enough market and so forth. Founder led sales, you will get to a million somehow,
Or you have something on your website and there's some organic inbound, and that gets you to a million, but really what those VCs want after that. It's um, triple, triple, triple, double, double.
So that really is something that, I think some VCs defined as the unicorn path and maybe this is now a couple of years ago, and I think it started all with triple triple and then three times double and then they flipped around. But really what it means is, uh, okay, now you hit 1 million.
And from now on, you need to triple at least twice and then double three times. Or in what I said before, you need to triple three times and then double twice. So, you know, tripling one, you go from one to three, then you go from three to nine, then you go from nine to 27, then you go from 27 to 50 ish and then you go from 50 ish 100. Unicorn.
[00:02:55] Toni: So what all of these investors are gonna be looking for is once you hit the million, mark is okay. How can you grow according to that path? Yeah, that will be their question. And the problem that, that poses for you is that whatever you use to get, , into the 1 million, it will probably not scale to get you to three and nine in, in those next two.
[00:03:19] Yeah, so you really need to find something else that you can scale a channel that you can scale. And, , this go to market fit area is, you know, usually kind of a squiggly line because it, it is a bit difficult. You will try things, you will face it with some things. , but the, the problem is, , and this is my belief. You will need to find one freaking channel that works for you. If you don't find that it will be close to impossible to get to the 10 million in this case. Right. I think my post was talking about the four predominant ones that I'm seeing and that got some flak because Hey, you know, there's those five others and blah, blah, blah.
But to your point, that's not really what this is about. It's about find one. I don't care which one, but you need to find one that you can scale.
[00:04:09] Mikkel: So the question is how, how do you actually do that? Right. I think quite often, what can happen is you get stuck in this mode where you need to be able to almost predict when, uh, and how are you then gonna scale a certain channel just to even justify doing it or getting the budget necessary.
Right, so that's, that's like one axis of the problem. How do you go about just starting to test things out? Yeah.
[00:04:33] Toni: So first of all, at that point, It's not really a, how do I get the budget conversation? Because it's really the founding team and a couple of senior folks that are trying to figure this out and budget is limitless, as long as you have money in the bank account.
Right. It's really not the typical, , VP marketing to CEO conversation. Hey, kind of budget for something. Right. So kind of point number one. I think the, the other thing then is really, and there's some really cool. Frameworks out there that you can use. , and I'm not talking about the incrementality and figuring it out and that's not my thing, but, uh, uh, Brian , uh, previously I think it was it HubSpot, has a, basically put out a couple of frameworks and some of those built on other people's frameworks.
And I don't know all of those names, but one of the things that he's , talking about is the, , CAC to ACV balance. So, what does that mean? Customer acquisition costs to average contract value, , balance, right? And he basically plotted out on a, on a scale. He says, if your ACV, so average contract value is small or zero, , that limits you in the kinds of channels you can activate in order to scale that thing.
If it's zero, you probably are completely living off organic and virality and some of these things how to create that. I don't know, but tho those are the only challenges available , in contrast you can't use an enterprise salesperson to sell something completely free, and now someone will say, wow, wait a minute.
There's gonna be, you know, but generally speaking, that's the idea, right? And as you progress on that scale, you can use more and more expensive. channels to, to achieve that. And let's just say, we only talk about the B2B SaaS north of 6,000 Euro a year average contract values here. Right.
Kind of zeroing in on this. So what does that mean? It means you can use, online advertisement. So ads, , through your, , normal channels of Google search, Facebook and , what have you, if you go a little bit further up nine to 10, depending on where you live and where honestly, your SDR sit. You can, uh, now I said it, you can use an outbound strategy. You can use sales development reps to do kind of outbound calling and so forth. and if we can go further up, and this is then really the enterprise scale north of 50,000 euros, uh, average contract value, then you suddenly have, uh, very expensive enterprise reps.
With probably, a pre and post sales engineering team, you know, that are flying to customers and so forth. Right. Suddenly you can use all of those things. And what's really important is to scale something. And this is not only about the sustainability of it, but this is kind of your playing field now.
Yeah. and, uh, then you can choose what is in that playing field below you, but it's really difficult to choose something that is above you. There are like ways to stretch it a little bit if you're like on four 5k and you wanna use outbound that can work. But you won't be doing enterprise sales.
So this kind of, I feel, you know, one of the first limitations really to overcome what are, what are actually my options here. Right? And then it's a, what do I believe works best with the buyers I have and the, the buyer journey I have. Right. And, and it's really difficult from an outside perspective to say, , you know, check those three things and then you can do that.
It's really difficult. , but the key here is one of things you need to get to a point where you can do them repeatedly. In other words where you can scale them.
[00:08:05] Toni: and on the example of outbound, that's why so many people are using it because it's so, it's so repeatable. It's so scalable.
There's no ceiling, there's no limit. In, in many cases, really you have, you know, a person that does outbound calls to someone create an opportunity. now what happened here? That's someone that, that person called? maybe they didn't even know you, so no, no brand awareness. Maybe they didn't even know that they're
No, no problem awareness. And obviously, because they didn't know the problem, there was also no solution awareness, you know, solution awareness also not there. And that outbound call took that prospect all the way from complete, like, I don't have any clue about any of that stuff down on the front of, oh, maybe, maybe I need something.
And doesn't happen in one call, but that just tells you that the pool of people, someone can call is massive.
And, then how do you scale it? You have more outbound folks. It goes from one to 10 to a hundred really, really quickly. And it's, you know, depending on your TAM. So you total address the mark, it's almost infinite,
That is for example, one channel that. Can be scaled and you can rely on it now you can potentially rely on it later. And then what are challenges with the ceiling just to kind of, you know, compare those two.
And again, probably some Google ads, experts gonna disagree with me now, but Google ads, Google search, generally speaking is a channel with a ceiling. Yeah. What does that mean? on a given day, on a given month, in your niche, in B2B SaaS, And there will only be so many people that wake up one day and be like, oh geez.
I think I need a solution for this yeah, let me Google it. Right.
There's only gonna be so many people time that, you know, wake up and, and, and gonna do that. And, let's just say that amount is fixed. Right. then what are they gonna do? They're gonna go to Google. They're gonna see your logo and a couple of others.
And you will basically split those people that wake up , on a, on a continuous basis. And the tricky thing here is that in the beginning, it looks awesome. You're at 1 million, you are, you know, in an established market, you create an, uh, a Google, a. Someone clicks it and requests a demo and they say, they're ready to buy.
And they're like, wow, more of that, please dear CMO. And you do more of that. And, uh, you know, for the first or two years or something like that, it will look like really significant until you realize that basically that channel in itself, isn't growing, it's not growing. And what looked like a lot when you jump from one to 3 million, doesn't look like a lot.
When you jump from three to 9 million. Especially if your CFO, if your CFO just took the same ratios from last year, pulls it forward and then says, well, , you know, let's just, let's just get more of that without the understanding that wait a minute in the market that we are operating, there are not more people waking up suddenly, and, you know, ask for more or. Competitors are disappearing, it's probably the opposite.
They kind of more and more. So really all of that stuff is pointing the complete other direction than what you see of in last yeah. Last year's numbers, right? Yeah. So this is an example for a, a channel with a ceiling.
[00:11:32] Mikkel: it, and I think I've been in those situation, and I think once you realize this channel has a ceiling. The job becomes scaling it until you reach it. Yeah. And then you really need to start communicating because otherwise this spreadsheet magic with, you know, it's a marginal cost for a lead is gonna really kill a lot of teams
[00:11:53] Toni: I think you as a VP , marketing should probably communicate before you hit that ceiling. So I was, I was once joking, someone asked me, when do you, so I call it the Google wall. I don't know if this is still a cool name for that, but, , , someone asked me, when do you know that you hit that hit, that wall, hit that ceiling? Uh, and I said , the first time you're gonna fire you ahead of
That's that's gonna be the moment. And, and, uh, uh, because, you know, they had a marketing, didn't see it coming potentially can't communicate upwards that this is going to happen , said yes to some targets that he or she maybe haven't even understood that they can't achieve them.
And then basically, anxiety sets in. Nervousness hair falls out , where are those leads. And suddenly you create a webinar in order to create leads somehow.
[00:12:41] Mikkel: The thing is also doing this takes time. And we've become wired with some of these channels. You can use to think. That you just put money on the table mm-hmm and then it returns immediately. And that is a huge fallacy and can also really cause a lot of trouble for
[00:12:59] Toni: a thousand percent. And I think the. The only true way to approach a scalable channel is, by thinking about how to get to people that are not yet solution or problem or brand aware or anything like that. That is really the big question you need to ask yourself, how do I reach those folks?
[00:13:22] Toni: so again, we are in B2B SaaS. Really we in a niche period , if you, if you have hired, and this is sometimes also the reason I hope I'm not getting too much off track, you know, but if you have hired a, uh, B2C CMO, that sold shoes before , he or she will basically laugh at you, when you say Google has a ceiling.
Because for those shoes, it doesn't have a ceiling. Right. You have 6 billion people or seven. I don't know where we're at right now. They, uh, they know the concept of a shoe. And you know, when they're running out of one ha running out of
[00:13:57] Mikkel: you can always have more shoes.
[00:13:58] Toni: No, but you, you, you, you know that you need another shoe.
This whole solution problem, all of that stuff, awareness, it's all completely there. So it's basically, in infinite pool to fish in, on your current.
B2B our solution that you have. I don't think that everyone knows all of that stuff. Right. So really you need to figure out how do you talk to the 99% that don't know you or the problem or the solution in a repeatable manner.
Right? And again, don't wanna have too much on it, but, you know, in SD outreach can help with that. But also, and those were some of my other examples I think was, uh, the Facebook network. Everyone keeps saying, well, Facebook doesn't work for me in B2B. And my reply to this, you know, in the beginning I was one of those by the way.
But my reply by now is like, well, you just actually need to figure it out. You know, just saying it doesn't work for me, just isn't enough.
And again, Facebook or meta or whatever, it's not just, you know, Facebook, it's also, you know, Instagram and a couple of others. Everyone obviously knows this.
And why does that work? well, uh, you have a bunch of people on those assets, on those channels, on, you know, on the Facebook app or the Instagram app. Um, I would probably think also your buyers are sitting there and they're going there to be entertained, right? They're not going there to search something specific or request a demo or something like that.
They just going there. They're on there right now. You have an opportunity to get in front of those folks and you need to show them something that educates. and this kind of, we're getting into the tactics here a little bit, but really at the end of the day, uh, the people that you will head up there, they are part of the group of the ones that aren't yet aware of who you are, what you're solving, what your problem is and so forth.
So this is one way to tap into that, right? You can do the same on LinkedIn, obviously the same YouTube and so forth, but you need to find places to them, that. Are not, Hey, , I'm now gonna go into Google because I know I have a problem and so forth because that, that number's gonna be limited.
And, some folks might now bring up this whole attribution thing, but it's really, you know, once you really think about that, where, where, where are my buyers sitting, when they aren't aware of me yet, suddenly out of home comes into focus. So out of home is, you know, basically billboards and stuff like that.
Print comes into focus again. Right? Do they read newspaper and magazines? Yeah. Should we advertise there? Yeah. when I was working at, plan a and we were selling to hospitality, right? Hotels and restaurants, and so forth, where all of those owners sitting, maybe, actually not even on Instagram, maybe not even on Facebook.
Maybe they listen to the radio, maybe they watch TV. Right. And all of us, you know, digital first folks, we kind of think about all of those channels as laughable and, and maybe they are, , but maybe they aren't for some of you and, and then you should just make a conscious decision. Okay. You know, if, if this is where they are at , then I need to do something.
They are not to get to them. And if you then can, and you know, going back to the scalability. If you can start proving the cycle of, we show something here. Over time. Uh, these people now are educated and they wake up and you basically create demand. You know, it might look like more search searches happening, and might also look like that.
More people go to you directly and so forth. So it's a bit of this demand gen topic, right? then you basically have a scalable process that you can , try and pump in more money. And, and obviously all of those channels at some point probably will also reach a ceiling. Um, especially if you go for local radio stuff, for example.
And again, that's why Instagram, Facebook is so popular because you can basically just say, Hey today let's do France instead of Denmark or Germany. Right. And that makes it so much easier and scalable, right?
[00:18:05] Mikkel: Yeah. There's a lot of bias. Anyone carries when choosing these potential channels.
So you kind of said it, some will go, well, print, why even bother we can't measure anything. But if the audience is there, you know, you can test it out and try it. The point is really that you should look at. The playing field and the ceiling within that playing field.
[00:18:28] Toni: And, and just to repeat it one more time, it's not just that your audience is there. It needs to be the audience that doesn't know about the problem, the solution. And you yet,
If you define that, if you don't define that, then you will always end up with Google ads by the way. So it really needs to be people that don't know the problem or the solution yet.
[00:18:47] Mikkel: Yeah. And so the, the thing. Some are gonna sit and think now, well, we've tried these things. Mm-hmm right. And, and certainly I've been at the point where you've tested out things yourself and it fails mm-hmm and you moved on how persistent do you need to be? Because just because you do one billboard. And it fails doesn't mean it's necessarily a bad thing to continue.
[00:19:12] Toni: This is potentially the difficult part. I'm not sure where I'm pulling this number from. I think winning by design is kind of talking about some of these things, but you should be thinking of nine to 12 months for some of these motions to be proven if you will. I think you can see early signs that it's working or not working, before that, But giving up before that and just moving on to the next thing, I think that might lead you as tray.
And also by the way, there are not so many other options either. I, you can't just hop from one option to the next and, you know, see what works you need to really. Really make sure out of the limited set of maybe five or six different channels that you can choose really for, for your business. That makes sense for your buyer and the ACV that you're asking for.
And all of that stuff, it's probably only gonna be five to six options. You will need to make really sure that one of them isn't working before you move on to the next one. and that usually takes, yeah, takes probably, uh, the better part of a year.
[00:20:15] Mikkel: And then of course the issue is gonna be, we always want the results yesterday. Mm-hmm right. And it's, that's, that's where it gets really difficult to navigate.
But in reality, most of the things, just from a marketing perspective to build a podcast or blog that will take almost a year because you need to figure out. How do I, if you know nothing about it, by the way you need to learn copywriting, then you need to learn SEO. Then you need the block set up, figure out how to get that work, the, the distribution, and, and even figure out the content you're producing.
Is it relevant to the audience? And it does take time. And the saddest part that can happen for you is you invest time in actually learning and then you abandoned it and then you can use those learnings again, because you said, well, you know what? We're not gonna do Facebook ads because it's not working.
We did one ad for a week and, um, you know, we didn't get anything out of it. but that's where you need to continuously iterate and, and kind of learn. and I think it's the same with an SDR. Probably the, the, if you don't have any SDR today and you bring the first hire in to make the first few calls and you yourself have no clue, by the way, you might not be successful, but others are doing it for reason, a thousand percent.
[00:21:25] Toni: So the. That doesn't change between, let's say marketing and sales. It's the same, the same thing at the end of the day. this SDR thing, it will take you nine to 12 months before that really is humming along and before you are not ashamed of the CAC payback that you're producing there, you know, it will, it will take some time.
[00:21:43] Mikkel: And, and it's also hard because you're gonna have all these emotions, a part of you right back to the bias. A lot of people are gonna hear outbound and they're gonna go, why are we still doing it? Right. So I don't like being called out cold outbound, but does it mean it doesn't work? No, it does not mean it doesn't work.
And I think that's where, you know, letting go of those emotions in order to pick that channel and actually test it out, that's gonna be really, really important.
[00:22:13] Toni: I think as a leader, the difficulty sometimes comes with sticking with it and having a good answer that doesn't affect your mental state.
Whenever someone is asking, , where are we on this? Yeah. You know, have we, have you seen any revenue yet, are you sure it's working? Because the answer is no, I'm not sure it's working. I think it should be working, but abandoning and now also. You know, would be the wrong thing to do. Right. And, and depending on where you are, actually, no, it doesn't matter.
Everyone always has a boss. Right. You might be the VP marketing, VP sales, and maybe it's your C level, but even as a CEO, you have the board. Right. And they will ask the same question.