revenue planning

Good morning Predictable Revenue community,

If this email feels like I’ve skipped ahead in the timeline or that I haven’t written in a while it’s because I screwed up an automation in Beehiiv and a bunch of you got stuck. Thanks to Eugen for catching it and reaching out. If you want to catch up, you can see all the past posts here.

It must be planning time of year for startups because I’ve had more founders reach out to talk about building sales development teams in the last last week than any other week of the year. In all of my conversations, I think I’ve successfully talked them out of it… for now. It’s not that sales development is dead or a bad investment for them, it’s just the wrong investment for them right now.

Here’s the situation:

• The founder has early signs of product market fit (customers & referrals) and has raised some money

• They are also looking at the middle of next year and thinking about the numbers they want to see in order to raise their next round

• They don’t see the pipeline they want so they’re thinking about ways of changing that.

I love that they’re being proactive about the situation but building a sales development team won’t help them. To figure out why, let’s take a look at some benchmark timelines for the types of deals they were selling (all in the $30k - $80k ARR range):

• An average deal takes 2 months to close, a little longer with outbound

• An SDR takes 3 months to ramp to full productivity and I always forecast them to produce 0 pipeline in those months*

• It takes an SDR 1 month to move a prospect from cold to meeting held

*I have different expectations for the SDRs (usually 2, 4, & 6 meetings respectively depending on the vertical) but I always forecast their contributions conservatively.

That's a 6 month revenue lag assuming you hit benchmarks and ignore the fact that new teams almost always take longer than you expect to get off the ground. This is normal. SDR teams are an investment that take time to produce a return. Here’s the sales math worksheet I’ve shared before if you want to check my numbers.

When I walked the founders through the timelines, they all agreed that building an SDR team wasn’t going to help them achieve their 6 month goal. It will help greatly at the 18 month mark but that won’t matter if you aren’t able to raise that next round.

So, in spite of being proactive, are they still f’d? Not necessarily. While each of these founders had some customers, they were still in search of their first $1m in revenue. Which means they still have a lot to learn and can leverage their customer development process to build pipeline. The primary reason I recommend this path is that it produces both learning and dollars.

When you're under $1m in revenue, it's actually easier to get meetings by asking for help than trying to sell. People are naturally inclined to help founders, especially if you're transparent about building something new. I've found that "can I pick your brain about X?" converts about 3x better than "want to see a demo of our solution to X?"

But here's the real magic - you don't have to choose between learning and selling. I've developed a four-step process that helps you gracefully transition from customer development to sales without making it weird. I call it "laddering up."

If you already have paying customers, the process looks like this:

1. Start with focused interviews about your specific problem space

2. Share mockups/screenshots and ask for their opinion on what’s missing

3. Invite them to try your MVP and give you feedback

Each interview step builds on the last, and crucially, ends with an ask for the next conversation. The key is having a clear purpose for each interaction and being upfront about it. For example, "I'd love to show you what we've built based on our last conversation and get your feedback - would you be open to that?" The first two interviews are strictly for learning/feedback and the last one’s purpose is to invite them into a sales process, assuming you can help them. This is a variation of my customer development process outlined in a previous newsletter.

Here's why this works better than jumping straight to sales:

• You build trust by showing you actually care about solving their problem

• You get invaluable feedback to improve your product

• Your prospects feel invested in your solution because they helped shape it

• The transition to sales feels natural because they've seen the evolution

Plus, as the founder, you're the perfect person to run these conversations. You understand the problem space better than anyone else (you've probably done 50+ interviews by now), and you can make product decisions on the spot.

Look, I get it. When you're staring down aggressive growth targets, it's tempting to jump straight to building a sales team. But if you're pre-$1m, you'll get better results by leveraging your unique advantage as a founder - the ability to learn and sell simultaneously.

Until next week,

Collin

PS1

Thanks for making it this far, now that I filtered out all the people that don’t read the whole thing, I’d like your opinion on something, domains. I bought a few and can’t decide which one to use, hit reply and let me know your preference:

• terrifyingart.com (it’s a dot com and fairly civilized)

• terrifying.af (it’s funny/true but a little crude)

PS2

One last thing about outbound that most people get wrong - it's not that outbound deals take longer to close, it's that outbound is a long-term investment that requires patience. When you're prospecting, you're reaching people in all stages of their buying journey. Some will be ready now (congrats, you got lucky!), but most won't be. That's not a problem with outbound - it's actually the opportunity. The deals themselves close at the same speed as any other deal, but it takes longer to build up a reliable, predictable pipeline.

I've had three fascinating conversations in the last month with companies who previously had outbound teams. Each had shut down their programs (either deliberately or after losing a key hire) only to restart them 1-3 years later. Why? Because when they analyzed their deals 12+ months after their outbound efforts, they realized outbound was actually a massive contributor to revenue. They just hadn't given it enough time to show results.

This is why so few companies succeed with outbound - they treat it like a sprint when it's really a marathon. The companies that win at outbound are the ones who commit to playing the long game. They build systems to nurture prospects who aren't ready today but will be in 6-12 months. When you do this right, outbound can be incredibly profitable - you just need to operate on the right timescale.