product vs revenue

Good morning Predictable Revenue community,

You cannot separate product market fit from revenue, especially when you think of it through the lens of a customer. They have some unmet needs, they meet you and share how painful they are. You decide to build something and then what? Most founders I talk to don’t go back to everyone they did customer development meetings with and ask if they want to try it out. Why? Because they believe “that’s sales’ job”. It really isn’t. I’d argue that until you’ve closed $1m in revenue there is still valuable information that you’re learning from every customer and prospect interaction that’s making the product better. It’s rare that you get it 100% completely right on the first try so you need to collect feedback, see what people love, and what they do(n’t) want to buy. Adding someone, like a salesperson, in between you and the end customer is like buying expensive audiophile headphones and then putting a piece of wood between them and your ears. You can still hear but it’s not quite as clear as if you were listening yourself. I mean no shade against salespeople, I still think of myself as one, it’s just that every layer of people between you and the source reduces the fidelity of the information. At the early stage of finding product market fit, you cannot afford to miss a thing, you must be Aerosmith: 

*I don’t recommend calling your customer’s babe, it’s just the song that got stuck in my head while I was writing this part. 

I’ve started thinking of this “stage” in the startup journey as the Product Motion, the goal is to find unmet needs, build a way of solving them, and see if what you built is good enough for people to part with some money for it. A startup graduates from a Product Motion when they’ve closed $1m in revenue and moves to the Go To Market Motion. This is the point where most can clearly articulate your three hypotheses: targeting, messaging, and need. If you want a handy way of mapping out all your different hypotheses, feel free to borrow our MarketFit Matrix (google sheet link). It’s also the point where you are likely to have good metrics on your current funnel. Companies with strong product market fit will have funnels where you put 1 customer in and 1.2 customers come out (because everyone sticks and 20% of customers produce a referral). 

Many founders feel like they can offload sales, or even outsource it, before they hit the $1m mark because they have better things to do or believe a professional salesperson will be able to outperform them. First, there is nothing more important at this stage than getting as much market feedback as you possibly can. How do you know which features to build without feedback from actual customers and prospects? Second, as the founder responsible for finding the unmet needs, you are an expert on the problem space. Chances are, most people that are experiencing the problem are doing so for the first time. If you’ve done say 50 customer development interviews, you’ve seen 50 different instances of how people are struggling with and solving the problem before your solution existed. There is nobody else in your company that can understand and empathize with customers better than you. You don’t need to know sales to be good at sales if you understand the problem space well. The value that being a professional salesperson will bring is reducing the number of deals you’ll lose because you didn’t follow a perfect process. 

Everything in an early startup is about tradeoffs. Hiring a salesperson will free up your time and reduce the deals you’ll lose because you forgot to follow the process. The tradeoff is a reduction in the fidelity of information you’re getting from your customers. Imagine a race where you don’t know where you’re going. What’s more important, speed or information about where the finish line is? Hanging onto the sales role will give you more information while offloading it will improve your speed. There is no right or wrong answer, it’s all about timing. Is now the right time to trade off information for speed? That’s a question only you can answer. I made the trade around the $1m mark and it felt about right. We were able to hire a sales rep, train them on a somewhat repeatable process, and let her run with things. I offer numbers to help you understand what worked for me and what I’ve seen but please don’t take them as carved in stone. They’re meant to be helpful guideposts, you might have a good reason for making the tradeoff earlier or later. Startups are messy and no journey is the same. 

What revenue milestone did you hand off revenue to someone else? Who was your first hire? 

Collin 

PS - My first hire was an AE because we had a very strong top of funnel (~40-60 meetings a month). If I didn’t have that luxury, I would have started with someone in marketing or sales development to help build up demand so I could keep closing. I was having this conversation with a mentor of mine, Lars Nilsson, and he strongly recommended starting with a content marketing hire, then 2 BDRs, an AE, and then a CS rep. In that order. You can read more about Lars’ approach here (link to SaaStr blog).