Most startup founders create companies to grow them. While all organizations are different, one core truth remains — Everything changes. This is true in life and business.
If you don’t want your company defeated by change, you need to adapt your Go-To-Market strategy at every stage of growth. Managing Partner of CIPIO Partners, Rolan Dennert, shares how companies need to readjust and rethink GTM fit — and even product market fit — from time to time.
CIPIO Partners is a pan-European growth equity firm and early growth investor, primarily in software and software-enabled models.
Choose Your Weapons Wisely
If you’re hunting for swordfish, you’ll need a different weapon than if you’re hunting for a bear. Thankfully, the SaaS world doesn’t require spears and bows, but it does require a careful approach.
You’ll want to choose your Go-To-Market tools based on what you’re after.
Are you seeking lots of small deals? You’ll probably have a smaller lifetime customer value and customer budget for acquisition. Smaller deals often mean approaching people one-to-many vs. one-to-one.
Or you may have a business targeting larger deals, resulting in a higher LTV. You’ll be able to spend more because the lifetime customer value could be in the millions. You’ll also likely need a dedicated team to carry these deals through to the finish line.
Find The Balance Between CAC And LTV
The achievable lifetime value defines your customer acquisition cost target. And your CAC target defines your GTM strategy.
Every company is different and will have varying solutions, customer acquisition costs, and lifetime value. But the key is to ensure your CAC isn’t higher than the LTV. If it is, you’re in trouble.
If you can find a balance though, ensuring your CAC stays below your lifetime customer value, you have room to keep growing.
How CAC targets drive GTM strategies:
- If Your CAC Target Is Low
You’ll likely focus on small-to-medium businesses and use tools like inbound sales and low-touch or no-touch self-service. Virality and content marketing will be essential to create traffic and win new customers.
The sales cycle at this stage may be very short.
- If You Have A Medium CAC Target
You’ll likely focus on lower enterprise and have an inside sales organization like a VP of Sales and SDRs. Find a blend of low-touch and no-touch self-service mixed with higher-touch sales to land bigger deals.
The sales cycle will be slightly longer at this stage.
- If You Have A Larger CAC Target
If you have a larger CAC target, you’re likely focusing on large enterprises. This involves high-touch sales with an experienced and large sales department. Your approach here will be more one-to-one versus one-to-many.
This will likely have the longest sales cycle.
When It’s Time To Readjust Your GTM Strategy
You know you have a GTM fit when there is a clear sales model and a repeatable Go-To-Market playbook.
But over time, things change. It’s inevitable.
To adapt, you’ll need to grow new ARR and find more customers to maintain your current growth rate. Otherwise, things will slow down.
Hopefully, your company is becoming more mature and the solutions more powerful. This means you can raise prices, add modules, and expand, increasing the average revenue per customer account (ARPA).
If churn doesn’t grow, your lifetime customer value is at its peak.
What does that mean for your organization?
It means you should take advantage of this higher ARPA and try something new. Can you add new sales tools or approaches to quickly win larger customers?
It’s important to revisit your CAC target occasionally to see what’s changed and what you want to change.
New Ways To Win Bigger Customers
Dennert shares two situations from CIPIO Partner’s portfolio to show organizations how to adapt their GTM strategy at every stage.
One successful high-growth company relied purely on inbound. Their new ARR was stable, but since they were only doing inbound, there was no way to “accelerate” and bring in more leads and convert more. Growth was slowing.
So what did they do?
They made a move, adding a higher value “enterprise plan,” enabling the company to add an outbound sales team. Not surprisingly, growth picked up again. Not only did they bring in and convert more leads, but they also moved part of the customer base upmarket, increasing LTV and revenue.
A Strategic Move Upmarket
Another company CIPIO Partners invested in needed to make a strategic move. They had SMB positioning with an unfavorable LTV to CAC ratio. How did they solve the issue?
By clarifying the Ideal Customer Profile and cutting off smaller customers. They learned there was no point going after them because they churned too quickly.
This company moved upmarket and satisfied the demand of larger customers by strategically investing in product features those customers needed. They were able to put more money behind customer acquisition in a profitable way, leading to faster growth.
Running a successful company means finding the right GTM strategy that provides an acceptable CAC to achieve your long-term goals and LTV.
Over time, the goal is to proactively grow ARR and increase ARPA and LTV. By achieving this goal, organizations can increase CAC for higher-value customers and find new GTM fit as needed.
One thing is for certain. You’ll need to iterate this process repeatedly, adjusting as you grow.
Published on April 4, 2023