The Right Way to Set Goals for Growth: How Sales Complexity Impacts Your Startup's Viability

The Right Way to Set Goals for Growth: How Sales Complexity Impacts Your Startup's Viability

Setting goals for growth is an essential part of any business strategy. However, it is crucial to approach goal-setting in the right way to ensure success. One of the best approaches to setting goals for growth is to focus on absolute numbers, such as the number of active users and the decrease in churned users. These metrics are what truly matter in driving growth, as they directly impact the success of a business.

Teams should take credit for what they do, not for what happens naturally. For example, if a company focuses on growing traffic to a lower converting country like Germany instead of a higher converting country like the U.S., they may hit traffic goals but not sign-up goals. It is important to prioritize metrics that have a direct impact on growth.

When it comes to measuring growth, the activation rate is a key metric to consider. The activation rate is calculated by dividing the number of activated users by the total number of users. There are two ways to move this metric in either direction: change the number of activated users or change the total number of users. By focusing on increasing the number of activated users or decreasing the total number of users, businesses can effectively drive growth.

Another factor that greatly impacts a startup's viability is the complexity of its sales process. Entrepreneurs must spend significant time thinking about the complexity of their sales process and the cost of customer acquisition, as these factors play a crucial role in a company's ability to make money and attract investors.

The lifetime value (LTV) of a customer should be greater than the cost of customer acquisition (CAC) for a business to be successful. This means that businesses need to find a way to charge their customers more money for their product or service to remain profitable as sales complexity and CAC increase.

To get customers to pay for a higher priced product, three driving forces need to be in place: value, pain, and urgency. Customers need to perceive that they are getting good value for the money they are paying. They also need to be experiencing significant pain that they want to see resolved, and there needs to be a sense of urgency to get the problem resolved. These three factors are crucial in convincing customers to pay a higher price for a product or service.

Sales complexity and CAC are closely related, with CAC increasing exponentially as sales complexity increases. By changing the sales model and reducing sales complexity, businesses can significantly reduce their CAC. For example, moving from inside sales to a no-touch direct field sales model can result in a significant reduction in CAC.

Strategic partnerships with established companies can also help reduce sales complexity and move a startup into a more profitable zone. By signing up strategic partners to resell their products, startups can leverage the partner's existing customer base and establish their own customer relationships.

Different sales models, such as freemium, channel sales, and inside sales, have varying levels of complexity and CAC. Startups need to carefully evaluate their sales model and consider ways to minimize the amount of human touch involved in the sales process. Leveraging the power of the internet, using techniques like inbound marketing, lead nurturing, and marketing automation, can greatly reduce sales complexity and drive growth.

In conclusion, setting goals for growth should focus on absolute numbers that directly impact a business's success. Sales complexity and CAC play a crucial role in a startup's viability, and businesses must find ways to charge customers more money for their product or service to remain profitable. By carefully evaluating the sales model and leveraging the power of the internet, startups can minimize sales complexity and drive growth.

Actionable advice:

1. Focus on absolute goals that directly impact growth, such as the number of active users and the decrease in churned users.
2. Consider ways to reduce sales complexity and CAC, such as changing the sales model or leveraging strategic partnerships.
3. Leverage the power of the internet and techniques like inbound marketing, lead nurturing, and marketing automation to minimize sales complexity and drive growth.