the only thing(s) that matter

Good morning Predictable Revenue community,

I handed in the shitty first draft of the manuscript this week! It topped out at 56k words and I know there are more to be added but I’m really happy with the progress of the core ideas. What happens now is called the substantive edit where they focus on the big-picture elements of the book, such as structure, content, flow, style, and organization.

In preparation for submitting the draft I was reviewing and rereading some of my early chapters and realized that something was missing from the intro or first chapter. The core idea of the book is that there are two things that matter, finding strong product market fit and then building a scalable sales engine to capture the unmet demand you found. What was missing was the emphasis on the sales engine so I’ve added a few stories to reinforce that point.

How do these two stories support the point? Let me know if they resonate or could use something else.

Here’s the tl;dr:

• It’s necessary to rely on the founder for everything for your first $1m

• At some point you’re going to need to work on the business instead of in it 

• Finding a way to profitably scale your customer acquisition engine is the best way to free up your time

Here’s the piece I’m adding to the Intro:

In the summer of 2013, after 18 months and 1 customer, I made a promise to my co-founders. I wouldn’t ask them to write another line of code until we had 5 paying customers. I had noticed that sales leaders with SDRs seemed to have the biggest pain and I wanted to validate it. I worked out a way to test it manually but I needed a break so I booked a surf trip with my future wife to Costa Rica. I figured that I could take a few months to interview people, run a few tests, and then take some time to recover on a beach while my co-founders, Preston and Francesco, built an MVP. Unfortunately for my future wife and surf skills, it didn’t work out quite that way. 

I was amazed by what I could see when I finally pulled my head out of my ass and started listening to people. The people I interviewed loved the insight but they hated my solution to their problem. My interviews were with sales leaders and Sales Development Reps (SDRs) and they all were struggling with translating their playbooks into something that Salesforce could help them execute in 2013. This was the exact problem we had been trying to solve for the past 18 months but had missed a couple pieces of critical information. Instead of a CRM, we needed to work alongside Salesforce. Instead of solving the problem for every CRM user, we needed to focus on solving it for SDRs. I had been so close to a breakthrough for so long but I couldn’t see it until I started really listening. I was directionally correct but off by just enough to still be wrong.

I worked out how to test the idea with a wizard of oz style beta by cobbling together a bunch of Google Sheets scripts I copy and pasted from Stackoverflow. A wizard of oz beta is when you can get to the rough outcome that the future software will accomplish with off the shelf tools and a bunch of elbow grease. You also get to shout “pay no attention to the man behind the curtain!” daily which is the fun part. Everything was so manual that, when I did the math, I figured I could only handle 5 customers. My goal was to find 5 people that would give me $500 for me to act as an email only SDR for a month. I wanted to prove that people would pay for this type of automation and that we could generate serious results using the methodology. After 5 meetings I walked away with 7 customers. Two of the sales leaders were so adamant that we had to help their friend's company too and I couldn’t resist saying yes. When you’ve been pushing a big rock up a hill for 18 months getting a response like this was intoxicating. I didn’t realize this rock would start picking up speed as it rolled down the hill. 

The manual beta was chaotic but it worked. It worked really well. After we finished, one of our early customers, James Clift, asked for the same but 10x bigger. James was the guy who recommended I read Predictable Revenue in the first place so I didn’t want to let him down. I also didn’t want to take his money and not deliver on so I managed to talk him down to 5x. 

The beta was a turning point for us. Instead of hearing “that’s a smart idea” we were hearing “ohhhh, you need to talk to Michelle about this”. I managed to pull off 50 interviews in a very short period, mostly powered by unprompted referrals. What this experience taught me was that while sales skills are important, they aren’t the first thing that’s important. We ended up canceling our Costa Rica trip because I didn’t want to lose the momentum. We were finally working on something that people cared about and that was more exciting than a beach. 

My sales skills hadn’t improved but suddenly my close rate had shot up. The thing that had changed was our idea. It was the same insight but we had narrowed our focus and changed how we were going to solve it to align with what the market wanted. 

This experience taught me what should have been obvious, if you’re trying to sell something that people don’t want, it doesn’t matter how good of a salesperson you are. The inverse is also true. When you’re trying to solve a problem that everyone cares about, it doesn’t matter how good of a salesperson you are. The only thing that matters is finding and solving an unmet need that people place a high value on solving. 

When we pivoted from voltageCRM to Carb.io we finally found product market fit. But what was the precise moment when we “found” it? Was it when we decided to change our focus? When a customer paid for the janky beta? When we finally built an MVP? 

It was when money changed hands. A financial transaction is what converted our hypothetical research project into something real. If there’s no money changing hands, there is no difference between your customer development process and a college research project. Both are just collecting information. We didn’t charge a crazy amount to start but it wasn’t anywhere close to free. Early beta users were paying in the neighborhood of $500 a month. If all I ever did was interview sales leaders and never asked any of them for money I wouldn’t have known exactly how much demand there was for what we were doing. By having an offer, even a janky one, we were able to learn that people really wanted to solve the problem we were working on. 

Ok, There Are Really Two Things That Matter

Carb.io scaled from $0 - $1m in a few months but plateaued because we couldn’t outrun our churn. Customers initially loved us but when an email prospecting tool takes a week from clicking Send to the actual email getting sent, you’re going to have problems. Interestingly, at the same time as Carb was plateauing, our services business was growing rapidly. We were helping people run cold email campaigns where customers only cared about results. When you don’t have to worry about timing or UI, Carb did a good enough job to help us deliver on that promise extremely well. 

Our services revenue quickly outgrew our SaaS revenue and we nearly doubled over the next year. When we were striving for the mythical $83333 monthly recurring revenue ($1m annually) I remember thinking that once we hit that number, everything would be gravy. I’d have more time to focus on building the company and we’d have more resources to invest in hiring folks. A funny thing happened when we reached that milestone… absolutely nothing. The only difference was the number. 

I hung onto the sales role until we hit around $1m ARR but I was still actively involved in our sales and marketing team. What didn’t make sense to me was that we hired a great salesperson (more experience, great closer, nicer person) but things started to fall apart. Her close rate was better than mine but there were all these things that she didn’t know and I didn’t teach her that were impacting everything from onboarding to retention. It wasn’t her fault nobody told her to pull the blue lever in the corner after every new customer signed because there was no process and no training that showed her how and when to pull the lever. All these things added up to me having less time instead of more. We chased down $2m in annual recurring revenue in this weird limbo of scaling but not scaling. I remember realizing, stupidly, that if I wanted things to change then I would have to do something differently. 

Hiring someone doesn’t equal scaling. It simply adds more work, leading to a temporary drop in productivity. It wasn’t until our new rep could stand on her own, close her own deals, and hand them off to the account strategy team that I was able to recoup some time back on my calendar. She wasn’t able to do that until I had documented all of the little things that I had done during and after the sales process that made things go smoothly. She needed a process to follow and some training on how to run them. 

While adding process and training certainly helped reclaim my time, I was still consumed by communicating with folks about the deals that were closing and the leads we were generating. When I, the CEO, was running the sales process I was communicating with all the people that needed to know about new customers during my regular course of business. When I stepped out of the process and started focusing on other priorities, communications about new customers started breaking down and my calendar took a hit again. We had a good person and a strong process but we didn’t have great technology to enable the process. We found a tool that helped us with our communication gaps and amended our process. The technology to enable the process was the icing on the cake. It was the smallest piece of the puzzle by far but got a lot of the credit because it enabled us to repeat the process over and over again. 

I wasn’t able to fully pull myself out of the process until we had the right person, a process to enable them, and technology to enable the process. This was the start of our repeatable sales engine. I wish I could tell you I ran through this loop once and figured it out immediately. I ran into the same issues when building our marketing, sales development, and account management teams. After reflecting on my struggles, I realized there were four key processes that all contributed to growth and I’ll talk about them in the next chapter. What’s important to understand now is in order to build a repeatable sales engine, you’ll need people, a process, and technology. In that order. 

If we were never able to make that first rep productive there would be a theoretical revenue cap on the business. There’s only so much company building one can do when you work on it in the evenings and weekends. There’s nothing wrong with burning the midnight oil every now and then but I certainly wouldn’t have survived 12 years of it and I don’t think the company would have either. 

When you are trying to get your startup off the ground, there are two “only things that matter”:

1. Find an unmet market need 

2. Build a repeatable sales model 

For the worst results, tackle them in whichever order you feel like. For best results, start with product market fit and work down the list. I recognize these three steps might remind you of the meme advice, “step 1 - interview a bunch of people, step 2 - be the child of a hedge fund manager…”. It’s hard to overstate how hard each of each of these steps was to figure out the first time. But it’s possible. I got a C in Math 11 both times and somehow managed to bootstrap our way through it. If I can do it, so can you. 

Thanks for reading - if you made it this far, let me know what you think. All feedback is helpful.

Collin