Building Sales & Marketing

By far, the leading reason companies raise capital is to invest in sales and marketing. Once product-market fit is established, companies should be focused on building a great sales and marketing process.

In our experience, this requires companies to leverage the most relevant marketing channels and marketing technology in order to scale.  Whether this is executed via outsourcing or by building teams and processes internally is company specific – both approaches work, though we prefer outsourcing.

  • Companies should be building a company-specific sales process supported by strong software platforms that make closing sales, onboarding salespeople and scaling much easier
  • Companies should be building a company-specific marketing process that is measurable, scalable, and focuses on the most important channels and sources of customers
  • Companies should have a very clear idea of their various customer journeys and build a marketing plan that addresses every step of that journey

 

Frequently Asked Questions

Most of the companies we speak to spend far too little on sales and marketing (between 0 and 5%).

Your spend will depend on the opportunity – larger markets with good opportunities and low competition demand a budget of 20% or more of revenue for sales and marketing.

The rule of thumb for established and/or smaller companies ($5mm or less in revenue) is 5-10% of revenue should be allocated to sales and marketing efforts.

For faster growing companies (30% or more YOY growth), it is not uncommon to see budgets of 30-50% of revenue.

  • SaaS companies often spend anywhere from 80 to 120 percent of their revenue on sales and marketing. It then plateaus around 50 percent from year five on.
  • High-growth technology businesses spend 25 to 45 percent of revenues on sales.
  • A new product launch can boost sales and marketing costs to 30 percent for a small business, while the steady state spend is 10 to 20 percent of revenues.
  • High revenue/low margin companies can plot their spend goals against cashflow.

We are major proponents of outsourcing sales & marketing for  most of our portfolio companies. The complexity in a go-to-market effort for a company in today’s market is more complex than ever, and the requisite talent to execute is simply too hard to find.

Even for larger companies with substantial revenue, we have pushed out the horizon on bringing sales and marketing in house. 

For marketing to be effective, it needs to be innovative and engaging, so relying on your own staff will only get you so far. Outsourcing connects you with marketing agencies who specialize in keeping on-top of new technology and trends.

In a perfect world, a company would have a clear idea of how they would allocate the capital we might provide.  The level of detail in your plan will vary by industry, but here are our general views:

  • You should have a plan for which positions you will seek to fill over the investment cycle, how you will hire them, what those people are expected to deliver, how you will measure their success, etc.
  • Your website should be ready to serve as an assistive platform for your go-to-market efforts and facilitate a robust and rapid customer journey
  • You should have some experience with the basic elements of the sales tech stack and martech stack that are relevant to your go-to-market efforts.
  • You should have a firm grasp of your key metrics – CLV, CAC, Churn Rate, etc.
  • You should know which marketing channels you plan to invest in, based on direct experience.
  • You should have a game plan for investing in a content strategy based on experience and/or reasonable predictions
  • You should be able to discern between your top-of-funnel and bottom-of-funnel marketing efforts and attendant budget need.
  • You should have a proven sales process that enables/accelerates the purchase cycle

In 2020, after countless interviews with external agencies, we decided to create a joint venture with a leading database company and a leading paid media company to deliver services to our portfolio clients. 

We now have substantially more control over the fate of our investments and can deliver best-in-class services to our companies. The specialists working with our clients have decades of marketing experience.

This joint venture is focused on delivering value in the core tasks and marketing channels as we see them – SEO & content marketing, web redesign, email marketing, paid search and social media marketing.