From Start-Up to Scale-Up:
Strategies and Tips for Seed and Series-A Founded CEOs
According to Ton Dobbe, founder of Value Inspiration, 75% of all SaaS scale-ups fail.
That’s a sobering statistic and is evidence that the leap from start-up to scale-up is even harder than most CEOs think. Before we explore why, let’s take a moment to define what we mean by start-up and scale-up.
Start-ups are focused on getting the fundamental elements of their business model in place. They may have a handful of customers or users, but those early adopters are often not paying or are on heavily discounted pricing. This involves:
- Establishing their product-market fit
- Experimenting with customer segmentation
- Defining their pricing and GTM strategy
They’re typically at a pre-seed or seed round when it comes to funding.
Scale-ups should have all of these elements in place as well as a few successful, paying clients. Their focus is on expansion. They have secured more substantial investment to fund this expansion and have typically completed a Series A if they are raising venture capital (VC).
These definitions raise a number of questions:
❓ Where do the majority of scale-ups go wrong?
❓ Why do they struggle to expand when they have established a product-market fit and secured successful customer accounts?
❓ Which proven go-to-market strategies can help them avoid this fate?
Not every SaaS company is destined to become the next Slack or Salesforce. Some will experience limited growth, while others will naturally fail along the way. But there are some actions you can take to give your business the best chance it can to reach its potential.
This article will provide you with some actionable tips to accelerate your company’s growth.
Three Common Start-Up Challenges
Every company is different, but there are some common go-to-market strategies that are particularly relevant to scale-ups.
This section explains:
🔎What those challenges are
🔎The warning signs that your scale-up may be experiencing them
🔎Possible solutions to avoid them
Challenge one: Communicating Your Value Proposition across Multiple Channels and Teams
No one knows a solution’s value proposition like the company’s founders. They came up with the initial idea, led development on the product-market fit and won and supported the first few customers.
They do a great job of selling their solution to different customers with different needs. That’s because they know how their value proposition fits each customer’s unique requirements and can adapt their sales efforts accordingly.
Scale-up founders need to be able to effectively replicate this sales process across new hires and new channels. But imparting the deep product and customer knowledge gained through years of experience in the field is extremely challenging. It doesn’t simply happen through training or ride-alongs with the founder. And you can’t expect to scale if you have to hire unicorns with years of experience in your unique industry.
As a result, new hires often struggle to develop a holistic understanding of the customers’ unique needs and pain points. Therefore, they don’t always ask the right questions and efforts to scale the communication of the value proposition are diluted at best and ineffective at worst. New sales hires who haven’t been able to internalise the value proposition may only achieve a fraction of the founder’s sales, meaning new revenues grow slower than expected.
Additionally, even if you’re able to communicate enough value to customers to convince them to engage, they aren’t fully confident in how your solution will deliver value. To mitigate that risk, they may ask to start with a pilot to test out your solution.
Warning signs:
⚠️ Struggling to make new sales team members effective — your founders are responsible for +80% of all sales and have to be brought in on every deal to move it to close.
⚠️ No common understanding of the value you offer customers between your product, marketing, and salespeople. Everyone is focused on a different aspect of value and therefore the customer experiences inconsistent messaging.
⚠️ High rate of pilot programmes – customers aren’t fully convinced of the results you’ll be able to deliver to their business and are looking to mitigate risk by starting small.
⚠️ Positioning your proposition based on features and functions because value and outcomes are too hard to teach to new hires.
Solutions
Companies need to scale the communication of their value proposition across channels and beyond their founders if they want to grow revenue.
This can be done by codifying your value proposition using a platform like Cuvama’s. This ensures everyone at your company has a common understanding of customer value and allows a consistent message to be used across all inbound and outbound go-to-market channels. You are essentially providing your team with a map to guiding outcomes-centric conversations with customers.
As a start-up, your value proposition will change regularly as it evolves. Codifying it using a platform like Cuvama, therefore, saves you time and money on training and developing sales enablement resources.
Takeaways:
✔️ Codify your value proposition
✔️ Sell on the customer value you offer and the outcomes you can achieve
Challenge Two: Differentiating from the Competition
It’s essential for start-ups to stand out in established markets—there are two reasons for this.
First, many buyers think that buying from a start-up is risky and might therefore prefer to buy from a more established competitor.
Second, most start-ups have direct or indirect competitors that provide solutions with similar features and functions. When faced with several similar solutions, customers will often focus on price.
To effectively differentiate their offering, start-ups need to sell on customer outcomes—not just features and functions. A recent Gartner study found that 92% of line-of-business buyers are expected to create a business case to justify a new technology purchase. With innovative SaaS platforms, many areas of potential value are not yet understood and quantified by the customer.
Helping them to do so separates your offering from competitive solutions and demonstrates your focus on delivering business value, rather than just selling products. However, training a new sales team to sell on features is much easier than training them to sell on outcomes.
Warning signs:
⚠️ Giving large discounts because your customers don’t understand your solution’s value compared to your competitors’. This could also be because you are targeting the wrong customer.
⚠️Customers asking for ROI calculations or disputing the ROI numbers you’ve provided them with. Customers may ask for ROI calculations and then dispute those numbers because they don’t reflect an informed understanding of their unique business, developed through a consultative sales process.
⚠️Failing to define and measure customer value. If you and your competitors all sell on features and functions, it’s hard for customers to differentiate solutions. This leads to commoditization and price cutting.
⚠️ Non-decisions or delays by the customer during the sales cycle. Buyers would rather do nothing than risk a failed project. As a result, almost half of all purchases are abandoned.
Solutions
As your product and target segment evolves, your sales strategy needs to evolve too. A start-up’s first few customers are typically early adopters, who buy a product and are active participants in helping to figure out the problems it solves.
To scale, start-ups must expand to early majority buyers, who require clear communication about what problems a solution solves for them and the value it will deliver to their business.
Doing this helps differentiate your business from the status quo and from competitors.
Takeaways:
✔️Clearly understand the challenges your customer wants to solve and what success looks like for them
✔️Clearly define the bespoke value you will bring to each customer
✔️ Engage the customer in defining how they envision your solution impacting their business. Empower their stakeholders to collaborate on success outcomes based on their unique business.
Challenge Three: Wasting Time on Unqualified Leads
As a scale-up grows it aims to get more high-quality prospects by ramping up its focus on lead generation.
But increased lead generation often leads to more quantity and lower quality. This means that marketing and sales spend a lot of time engaging and nurturing leads that are a poor fit and don’t go anywhere. Even worse, if the qualification process is poor, sales team members may sink time and resources into pursuing leads that aren’t a good fit for the business, impacting win rates in the near term and customer retention in the long term.
Scale-ups have limited resources, so it’s critical to create a lead generation process that provides a high percentage of quality opportunities.
Sales also need a process to qualify out dead-end leads early in the sales funnel, so they only focus on the best opportunities.
Warning signs:
⚠️ Low conversion rates across the funnel, whether it’s from marketing to business development, or your business development reps to your sales team. Value messages are not effectively being communicated across your GTM channels to drive generation of leads that meet your ideal customer profile.
⚠️ Decreasing win rate due to wasting time and money on the wrong opportunities thanks to a lack of good lead qualification.
⚠️Inability to accurately predict revenue because sales and marketing funnels are unpredictable.
Solutions
Scale-ups need to ensure value messaging resonates with their ideal customers. They need to make sure that these value messages are used consistently across lead generation channels to drive engagement with qualified leads.
They should qualify out poor-fit opportunities fast and focus their time on the prospects that best meet their ideal customer profile.
Takeaways:
✔️ Generate high-quality leads
✔️ Qualify out fast in the sales process
✔️ Focus on qualified prospects
The Root Cause: Poor Discovery
What do all three of these challenges have in common? A failure to enable value discovery and selling value and outcomes at scale.
In the start-up phase, the CEO or hero sellers do deep discovery. They know their solution, their market and their industry—often because they’ve previously lived the pain themselves.
Crucially, they also know the right questions to ask customers. This allows them to quickly qualify leads, understand customer business goals and connect their solution’s benefits with KPIs that will fulfil those goals.
The customer is sold on both the value of the solution and the CEO/salesperson’s skilled approach to discovery. In other words, they use the discovery process itself as a competitive advantage.
The problem is that most start-ups fail to scale this process of value discovery and value selling as they grow.
This means their discovery process declines in quality. And that decline doesn’t just result in fewer sales—it also costs their business money.
Accelerate Your Start-Up’s Growth by Scaling the Discovery and Communication of Value beyond the Founders
Scaling discovery selling beyond the founders helps a scale-up achieve success. It allows them to continue using discovery as a competitive advantage.
Good discovery allows scale-ups to align on business value outcomes with their customers.
When they do this, the customer begins to see them less as a supplier and more as a trusted partner. This change in perception is critical for a start-up because it reduces the risk many buyers associate with new companies.
And overcoming this association means the start-up will have a higher win rate and increase the initial deal size, allowing it to scale up more easily.
To get you started
Ebook with actionable frameworks
Ready-to-use frameworks and templates to start defining your customer outcomes-centric culture, value proposition framework and your strategy for selling on customer outcomes. Download now.
Cuvama’s Growth Programme
Find out how Cuvama works with Seed and Series-A companies helping them to scale. Access to an expert value coach and get a ready-to-use digital platform to drive collaborative, outcomes-centric engagements with your customers. Apply now.
Three steps to scaling your discovery:
- Codify your value proposition. By using a platform like Cuvama’s, you can create a structured, repeatable discovery process. This helps any salesperson to ask the right questions and connect customer goals with your solution.
- Scale it across go-to-market channels. This repeatable process can be used to consistently guide discovery across all go-to-market channels.
- Collaborate with customers. Empower the customer to uncover the business outcomes they want to achieve. Your salespeople should never define value for the customer—the customer should define value themselves.
Implement a Customer Outcomes-Centric Process at Your Scale-Up Today
Scale-ups that collaborate on value with customers will identify measurable success outcomes and consistently engage customers in defining value from the very first interaction onwards.
This outcomes-focused approach is not just a sales methodology or tool, it’s a way of doing business. It’s a cultural shift that applies to your entire organisation. Today, the best SaaS companies recognise that having a better product is only half the battle. They know that helping the customer define what value that solution will bring and then delivering those expected outcomes is essential for success.
Customers need help understanding how a potential solution will make their business better. The vendors who can help organisations define and realise that value will be the winners.
This allows them to drive better results for customers and sets them apart from competitors. In turn, this enables them to achieve fast growth and scale exponentially—even with limited resources.
If your B2B SaaS is in the start-up phase, check out Cuvama’s Growth Programme to find out how we can help accelerate your company’s growth.