Episode 2. Prepare Your B2B SaaS Company for Its Next Stage of Revenue Growth: John Stopper

by | Jan 17, 2019 | Podcast

SaaS companies grow in stages, like children… or frogs or butterflies. The same elements that enable them to thrive at one stage of growth can stifle them in other. 

It’s important for leaders of SaaS companies to understand the stages of growth. They must be ready to transition when the time is right. 

Timing is everything. If companies wrong, their revenue growth can stall. And bad things happen when revenue stalls. Owners can lose a company. 

Here John Stopper explains the stage of growth and how to be ready for them when they occur.   

 

Prepare Your B2B SaaS Company for Its Next Stage of Revenue Growth

by John Stopper | Hosted by Dave Vranicar

Show notes, highlights, and resources

About the guest

John Stopper is chief revenue officer of ZynBit, Inc., a growth-stage SaaS company that helps improve the performance of sales teams.

John is also founder and CEO of NorthStar8, a consultancy that helps B2B SaaS companies prepare for their next stage of growth.

John has decades of experience in the B2B software industry. He’s worked as an account executive, sales manager, global sales executive, and CEO.

His experience has been in companies ranging from startups to mature companies.

Highlights

“The most common mistake I see is skipping the stage where you develop your brand strategy—making sure you have tight messaging, that your segmentation strategy is tight—and going right to scale mode.”

———

You have to look at all the various domains of the business as gears.

And they have to interlock and align. Any business leader will tell you, it’s all about alignment within the organization.

...My first gear is always market research.

It’s like your scout. You need to know what’s going on in the market… where’s your target market, what’s going on out there.

Then you look at your product strategy.

Is my product aligned with what’s going on in the market?

The third gear would be your corporate strategy. Am I able to fund and manage that product growth and development to map that market research?

And behind that is your market strategy gear.

Is my investment in marketing appropriate?

Then the next is your sales gear.

If you hire salespeople ahead of good marketing, you’re not getting leads…  your brand isn’t tight, and your messaging is poor.

“Another mistake is, we sometimes hire sales or develop it ahead of proper development and marketing.” 

Key takeaways

C-level executives, board members, and investors can benefit from understanding the five stages of growth for SaaS companies.

If leaders understand what their company will need to thrive in its next stage of growth, they can move through the transition points more smoothly and with less risk of stalling. 

The five stages of growth are:

  1. Traction
  2. Emerging Growth
  3. High Growth
  4. Industry Leading
  5. Maturity

Links and resources

Website for ZynBit, Inc.: www.zynbit.com

Email address for John Stopper: john.stopper@zynbit.com.

Transcript

Introduction

Dave Vranicar:

Software companies grow in clearly defined stages.

What a software company needs to thrive at one stage is different from what it needs at its next.

To grow your company effectively, you must manage it in the appropriate way for each stage of its growth.

Anyone who has raised a child from infancyor even a petknows how this works.

I’m Dave Vranicar.

My guest today is John Stopper, chief revenue officer at ZynBit.

ZynBit is a growth-stage SaaS company. It provides software that improves sales productivity.

John’s here to talk about the stages of revenue growth in SaaS companies.

He also shares insights on how to manage sales and marketing during those stages.

John has decades of experience in the software industry.

He’s worked in jobs ranging from account executive to global sales executive to CEO.

And he’s worked in companies at every stage of maturity.

Until recently, John focused his energy on Northstar8, a consultancy he founded.

Northstar8 advises SaaS executives on managing for their current and next stage of growth.

The tough and risky part of managing growth, John says, is the

The key is to be ready for it when it arrives. If you get the timing wrong, you may face big setbacks. Your revenue growth can stall.

You can even lose your company.

John acknowledges his ideas about the stages of growth aren’t unique.

He’s learned from Steve Blank, Eric Ries, Ash Maurya, David Skok, and many others.

John builds on their work and carries it further. He does so by addressing all stages of a SaaS company’s growthnot just the early ones.

Well, thanks so much for being here. I’m thrilled to have you among the early guests for the show.

As I said, you have a way of looking at revenue growth in companies that I hadn’t come across before.

Would you please tell us about what you do and the value that you think it may provide to our listeners?

John’s background and experience

John Stopper:

Sure. What I do and my focus today is to help the next generation of B2B sales leaders, sales professionals and their companies be successful.

And what I’ve done over the years is develop a series of methodologies and systems so that we could take a quantitative and qualitative approach to helping them achieve their revenue objectives.

Dave Vranicar:

John, how did you come to be doing this?

John Stopper:

If you look at my career, and it’s scary to say, hey, I spent 40 years doing anything. Maybe when I was 15.

But I’ve been in the technology industry for 40 years. I started off in grad school writing code, went to Wall Street.

I wrote code for five years for Wall Street firms. I was terrible at it. And somebody said, you should go into sales.

I started selling into very large enterprises. It was just my territory.

Banks, brokerage houses, moved up through the ranks, sales, marketing management.

Had my first CEO job in my mid 40s. Have been acquired a number of times, done a number of acquisitions.

And then eight years ago, I started my own company to help B2B software companies achieve sales success by applying these methodologies and systems I had developed over the years to help them through those, especially the stages of growth, which is, I think my unique way of looking at things.

So I think it’s having that early systems, that development programming approach.

I’ve always taken a systematic view sales success.

I think that actually helped me become a better sales professional and business leader.

Dave Vranicar:

So John, let’s talk a little bit more about this idea of stages of growth and the effect that, well, I guess, the way that you think it should influence the thinking of the people who are listening here, keeping in mind that they’re …

John Stopper:

It’s been defined before, a lot of people have looked at it this way, but they haven’t applied it to the revenue-generation capability of a company.

So what I’ve done is defined distinct stages of growth.

You need to shift how your revenue generation strategies appropriate to that stage.

If you look at the business, for example, a startup, they’re taking a product from a...

Specific to SaaS software companies…

Stage 1: Traction

John Stopper:

The first stage is, your focus is on traction. And you’re taking a product from concept to reality.

And so you need to get your first referenceable customers. You win at any cost.

But your enemy is time because you have limited capital typically.

And the market driver, what your focus is   all that your product, that’s what you talk about.

And you have a single… your sales model, distribution model is a single channel.

And your profile that you’re focused on selling to is an innovator because you want someone who has a high tolerance for risk to be your early customers.

Dave Vranicar:

That sounds like the Geoffrey Moore thing about Crossing the Chasm. This is the first stage before you hit the chasm.

John Stopper:

Exactly. Now, what’s different from Moore’s Crossing the Chasm is that you’re always facing this.

It’s not as well defined. He had this very linear in your growth.

I would say instead, it’s almost like an M shape. It’s spiky.

Some of the basic concepts are there, but you need to look at it a little bit differently than he did.

But he revolutionized my thinking. And by modifying and adapting some of his concepts to the realities of today’s marketplace have helped me and my clients, companies I work with, tremendously.

Dave Vranicar:

Okay. I interrupted you, I’m sorry, I didn’t mean to take your emphasis off that. So we’re talking about this early stage of growth, the first stage where you’re trying to get traction.

Before we go on to talk about the next stage, in my experience, and certainly, from what I’ve read, it’s very common for the CEO to lead sales during that time before you hire a sales force.

Is that consistent with your experience?

John Stopper:

It depends on… some, yes.

Now, some founders and CEOs are very product orientated and really struggle around that.

So sometimes they’ll go out and hire their first salesperson to help them. But generally, they are heavily involved in the sales process.

Dave Vranicar:

Okay. And now when they hire that salesperson, a mistake I’ve sometimes seen is that they will hire the best salesperson they’ve seen or the highest-profile sales person they can get, without thinking about the unique characteristics that a sales person needs to have for this stage of growth.

John Stopper:

Yeah, that’s a great point, Dave.

Think about a sales person that works at a startup.

They like to work without structure because there is none.

They’re good without a net below them to catch them.

They have a high tolerance for risk.

They like being out and being the first to talk about things.

So the startup sales profile is very unique. And in my opinion, non- scalable.

Dave Vranicar:

And they have to be total hunters, right?

They have to be good at connecting with people, picking up the phone, talking about it, facing ambiguous situations, talking about a product that isn’t fully defined or anything of the kind, right?

John Stopper:

Yeah, I think if that, that they, you know, you’re calling to introduce people to a unique concept they haven’t heard before, typically.

And your marketing budget and investment is probably pretty thin.

There hasn’t been a lot of education done to educate your target market about what your offering is about.

So, yes, the salesperson has to be very comfortable with uncertainty and really enjoy introducing people to unique concepts and solutions.

Stage 2: Emerging Growth

Dave Vranicar:

Okay. Let’s go on to the next phase if you’re ready for that, what’s the next stage of growth?

John Stopper:

I call that the emerging growth stage. And the transition is from startup to emerging growth.

This is a very tricky stage because some companies, they get that initial success and go great, let’s scale.

That’s where companies really get into trouble because at this stage, you need to focus on your brands.

The enemy here is the lack of clarity or focus.

So think about this. You get your first 10, 20, 50 customers. And typically, your early customers who are innovators, hey, can you have the product, can you tweak it to do this or tweak it to do that?

Or I’ll give you a deal if you develop this capability of the product.

So all of a sudden, you’re all over the map.

And if you don’t then narrow down your focus, you can you get in real trouble.

Your market driver has shifted from your product. So in the startup, you’re talking about your product all the time.

It shifts to… the driver is the customer because you’re beginning just to get scale there.

So you need to then focus on their requirements.

And typically, your distribution model starts to fragment from a single channel.

It might go to a dual channel or a tri– channel, right?

You start doing more.

So what I mean by that is, you might have an inside sales approach, you might be selling also through partners.

You might have an enterprise teamyou know, a field or direct model.

So you start to move out in that direction, which is also a very tricky transition.

Your customer profile is shifting from the innovators, early adopters, into that more pragmatic mainstream buyer.

Dave Vranicar:

Okay. Sorry. A couple things I want to return to.

Something you said about brand a moment ago.

And also, before I forget it, the other topic is about what’s happened to your sales organization now.

You started out with a person who is very comfortable with ambiguity, maybe one person who was doing everything.

And now you’re transitioning to a point where you’ve got a different kind of sale and presumably a somewhat bigger sales team.

Can you talk about that?

John Stopper:

Sure. So your profile’s starting to shift.

So if you’re in today’s B2B SaaS software world, you’re probably starting, if you don’t already, you’ve bought Salesforce.

You’re putting together repeatable sales process, adopt a sales methodology.

So think about that startup salesperson who’s not used to structure, doesn’t like structure.

This is where, they were here first, I own all this market… and then all of a sudden, their territory is shrinking because you’re hiring more people.

And you’re saying, hey, you got to follow a sales process and keep Salesforce up to date.

You really have to look out for the stress of that and is it time to transition maybe then out.

Some people can shift and adapt to the new model.

But this is where I find a lot of difficulty in leading sales organization, making that change from the startup sales profile to the emerging growth profile.

Dave Vranicar:

John, what’s happening on the marketing side? Do we have marketing at this stage? You mentioned building a brand.

Let me first explain the reason behind my asking this question.

I was a sales leader in a small start up, very, very early startup. Had a handful of customers.

And they were probably more in the startup phase than they were in this emerging growth phase.

The big mistake I madethis was mid-career for methe big mistake I made was focusing too much on brand too early when I really needed to be focusing on revenue.

So how do you reconcile that issue?

John Stopper:

Well, let’s be clear about what I meant by brand.

Brand is, What’s your name?

What’s your mission statement?

What do you stand for?

What’s your target market?

Who’s your customer?

Who’s not your customer?

That’s what I mean by brand. It’s more than just your name, your logo, your colors.

It’s your messaging.

Before you can scale your business, you have to make sure that you’re rock solid on what your unique value prop is.

Probably the most important thing to establish as part of your brand strategy.

What is my unique value prop? How am I different? Why should you pay attention to me and consider my offer?

Dave Vranicar:

Okay. I’m glad for the clarification.

Because I think when a lot of people think brand, they thinkat least people who come from a marketing backgroundthey’re thinking corporate identity. The arts and crafts aspects of this.

What am I going to look like? What is my web page going to look like?

Which are all,,,

They’re important at later stages. They may even have been important at early stages.

But they’re not nearly as important as the fundamentals at this stage that you’re talking about.

Correct?

John Stopper:

That’s correct. I include those in brands because marketing and the executives have a big impact on what, say, your sales organization’s communicating to the marketplace.

So marketing’s doing market research to say, “Hey, here’s your segmentation strategy.”

You can’t go after everybody. So what segments of your total addressable market are you going to go after?

What’s the business problem?

And what’s your messaging and your unique value prop? That’s what I mean.

Dave Vranicar:

Okay. Are we ready to go on to the next stage?

Stage 3: High Growth

John Stopper:

Sure.

Dave Vranicar:

Where does that put us?

John Stopper:

That’s a high-growth company, right?

You’re transitioning, so your revenue growth is on track.

You have predictability in your forecast.

So in the earlier two stages, forecasting revenue is really tricky.

But here you’re starting to get enough volume that you can forecast at least two to three quarters out, with a 10% plus or minus degree of accuracy.

Dave Vranicar:

Wow.

John Stopper:

Your focus is on scaling the business, right?

Because your enemy at this point is running out of capacity.

So you’ve hit it, right? You’re really growing.

You have to make sure that you maintain enough revenue-generation capacity.

Do I have enough sales people?

Am I generating enough leads?

Am I helping implement my product if that’s an issue, right?

Is your support organization up to scale to handle all the new customers coming?

The market driver shifts.

So you’ve gone from startup, which you’re focused on your product to emerging growth, you’re focused on a customer.

Here, you’re focused on the market in general. You’re defining a market.

So if you look at some of the hot SaaS companies today, like a Jira or Slack or something like that, they’re market focused and beyond the individual customer.

And your customer profile’s now shifting. You’re firmly embedded in mainstream buyers.

Dave Vranicar:

Right, okay.

John Stopper:

So all these shifts change. Just to be consistent, your salesperson profile shifts, right?

So you’re hiring more junior people, you need to have better training program in place to get them up to speed because you can’t hire all senior people.

So, a lot of things as you move to this stage. You need to shift your investments into those type of items.

Dave Vranicar:

John, if we were to link these stages of growth that you mentioned so far to different stages of investment.

In other words, if we’re looking at it from a private equity or a VC perspective, sounds like this high growth would be linked to what series B, C, something like that round of investment capital?

John Stopper:

Yeah.

Typically what you’ll see… So just to walk you through that, you know…

The startup, it’s seed investment.

You’re getting high-net-worth individuals to pump money in. You could be doing it debt financing.

One of my customers just did. It was a SaaS financing, right?

So, with your predictable… If you have some three-year contracts, you can finance that.

Then when you get into B… You might be doing a series A, a small one.

They’re quite expensive. And there’s certain VCs that focus on that market.

As you get into this high growth where you’re scaling, this is where a lot of venture firms focus because they have predictability.

Dave Vranicar:

Right. Less risk, way less risk I would think.

John Stopper:

Yes. And raising the capital’s cheaper because you have predictability.

So here you’re doing your B, your C, D rounds.

So you’ll see companies stay in the SaaS space.

There’s some out there, Outreach for example, has raised I think it’s 135 million.

They’re in a high-growth stage. So everybody wants to pump money and because they got the engine going.

Dave Vranicar:

Right, right. Okay.

So have we said enough about high growth I wonder?

Is there anything you’d like to add to that before we move on to the next stages?

John Stopper:

I think that’s pretty clear.

Dave Vranicar:

Yeah, okay. So, next stage after this?

Stage 4: Industry leading

John Stopper:

I call this industry leading, right? So, think of Salesforce, right?

But here, your focus starts to shift. It starts to focus on “I need to stay innovative, I need to be flexible.”

Because your enemy is stagnation.

You own the market, and you can get really comfortable there.

Revenue’s pretty easy. It’s very predictable.

But the danger is you get stagnant.

Your market driver has shifted now from the product to the customer to the market to the industry.

Salesforce is a great example.

They define the CRM industry. They have multiple distribution models.

Their customer profile is all over, but now they’re starting to get into the laggards to keep going.

Some of the last people are the customers that only buy when it’s a completely sure bet are starting to get, to follow up on that example, you know, like insurance companies will be buying Salesforce now.

Dave Vranicar:

Right, right. I’m guessing one of the enemies of companies in this stage of growth is competition.

They’ve got a lot of little ankle biters nipping at their legs.

These are the guys that are maybe more agile or more disruptive or something of the kind.

So not only do the big guys have to think about how to perpetuate their growth, but they’ve also got to figure out how to protect themselves against an assault from a lot of other little guys that want a piece of their growth.

John Stopper:

It’s interesting, Dave.

I think I’ve spent my career been an ankle biter.

You know, the early software companies I worked for in the 80s, we were competing against IBM, DEC, HP, you know, because they have so much obligation to their existing customers. they can’t be as nimble.

We can commit to innovating our products, our offerings to meet the unique requirements of customers.

And there’s a lot of business you can pick up there.

So ankle biters, you know, like in the Salesforce ecosystem, to continue with that comparison, they‘re going to be a $20 billion company in two years.

The ankle-biter market is worth, it’s probably 25% of that. So you’re looking at $5 billion market for ankle biters. Which is pretty sweet.

Now, Salesforce has smartened up.

IBM tried to compete and block the ankle biters, to use that analogy, and ended up losing.

Salesforce is pretty shrewd.

They’ve created a partner ecosystem where they embrace the ankle biters.

They are letting them feed off the trailings they’re leaving behind, but they are keeping them in their ecosystem and they’re keeping them close, which is brilliant.

Dave Vranicar:

Yeah, sounds like the old Godfather strategy. “Keep your friends close, keep your enemies even closer.”

I think was how it went.

John Stopper:

Well said.

Dave Vranicar:

Another strategy that occurs to me as you’re talking about this, and Salesforce has certainly done this to some extent, is to perpetuate your growth, when you’re a market leader, you start acquiring ankle biters.

Or you start acquiring companies in other adjacent businesses or adjacent markets that can complement what you’re currently doing.

So very, very different mindset for where you’ve been in an earlier stage of growth.

John Stopper:

Yeah, you know, that’s where the innovation comes from, right?

You can’t develop it all in house.

So your acquisition strategy…

I mean, I’ve been acquired five times in my career by companies that are trying to stay innovative. Think back to IBM, Computer Associates, Oracle, Salesforce.

They get to that industry-leading stage of growth, and they become very acquisitive.

Dave Vranicar:

That’s a great strategy, it seems.

Certainly one that we’ve seen a lot for companies that are in the, even in the startup phase nowcertainly in the emerging-growth phase.

Rather than going public, they may just let it be known that they would love to be acquired by a company that’s a market leader.

John Stopper:

People always say, you know, like in my current company, “Do you want to be acquired?”

What I’ve learned is you never know who you’ll get acquired by, and when, and for how much.

You’ve got to focus on your knitting.

And if you focus on trying to get acquired, it seldom happensespecially at a good monetization.

Dave Vranicar:

So focus on doing your job. Yeah, doing a good job for your customers.

Getting your business metrics, your KPIs in good shape. Not so much with an idea to be acquired, but more with an idea to run a tight ship.

John Stopper:

You’ll get tapped on the shoulder. Companies will want to…

I mean, look, there’s a way of making yourself attractive without being overt.

Dave Vranicar:

Right.

John Stopper:

You want to be acquired and there’s a way to do that, making yourself visible to large acquisitive organizations.

But just to shift quickly, to be consistent…

Also, look at the sales profile.

I could never work in an industry-leading company.

I mean, it’s very rigid, right?

It’s great for young, I think, up-and-coming people.

Because you get good training. You get good mentorship and management. You work in a well-defined process.

The profile, the sales person, a lot more junior.

And then as they become more senior, very comfortable in a well-defined, regulated environment.

So, as you get to that size, you got to look at, “Hey, my profile of my sales professionals has shifted.”

Dave Vranicar:

Interesting, interesting.

So I’ve been in that situation before as a salesperson.

Your territory, of course, is smaller if you’ve got a larger sales force, and you tend to be thrown into territories that have less opportunity in them, often.

And so, again, in my experience, chances are, you‘re going to have a harder time hanging on to some of your more experienced sales people because they have enough credibility in the marketplace.

They have enough experience, and so on, that other companies are going to be looking to hire them away.

Is that consistent with what you’ve seen?

John Stopper:

Yes. What happens is, with your top players…

I’ll give you a specific example. A woman who worked for me through a five-year period. Every year, her territory shrunk in half.

I’d say, “Hey, your territory…”

In fact, the last year she worked for me, she had one account, and screamed, kicked, yelled, threatened. This and that.

But every year, her W2 doubled.

And that year when she had one accountwhich was a major global financial institutionshe made over a million dollars W2 in commission, not including…

People will kick and scream, but less is more. And what you do is you set your top players up, I mean, you give them challenging accounts, territories.

They can make some serious money. And that’s the other way you keep those top performers.

Dave Vranicar:

Right. I was just going to say, if they’re making that kind of money, they‘re probably going to stick around unless they’re just looking for more adventure.

John Stopper:

Without a doubt.

And that’s what you’ll see, I mean, if you look at, pick a top company today, Oracle is a great example.

Oracle reps, the top reps, I don’t know about this year, but you’re making three, five, seven, top people, there’s probably a couple million dollar W2s in the sales ranks.

Yeah, you can make great money.

You give up… You got to act a certain way. That’s how you keep that great sales talent.

Dave Vranicar:

Let’s move on to the next stage of growth.

We’re just talking about market leaders, companies that are maybe what you’d call the 800-pound gorillas, the guys that are sort of at the top of the heap.

What comes after that?

Stage 5: Mature company

John Stopper:

Yeah, the last stage is what I call the mature company. So think IBM, Computer Associates, even Oracle today.

Dave Vranicar:

SAP, certainly. Yeah.

John Stopper:

Yeah, right? Their focus just has to be on reinvention. What happens here is these are typically publicly traded companies.

And so, their focus is on their stock price. And that’s the danger because they have a declining valuation.

And what you’ll see in these companies, if it’s a tech company, the employees have stock options but they’re probably underwater or could be underwater.

Which creates a really negative work environment.

They’re afraid to leave because they have equity, but they’re pissed off because their options are underwater.

And that drives executive thinking.

Because the higher up you are, the more stock you have.

And that valuation thing is driving you out of your mind, which causes you, and that becomes the market driver.

You go from focused on your products to focusing on customer, to market, to industry.

Here, it’s valuation. And it drives everything that goes on in the boardroom. How do we increase that value.

And so, the way to do that is to reinvent yourselves.

You’ll see companies taking on new names, like Computer Associates went to CA.

They tried to hide their sins and rebrand themselves.

So they’ll try to acquire their way out of that. The key here is, you have to reinvent, you have to…

Like IBM reinvented, they moved away from a mainframe company to an AI Watson company, a consulting firm.

Dave Vranicar:

And increasingly from hardware to services, right?

So the way they sell Watson is primarily services, not hardware, right?

John Stopper:

That’s correct.

So, you know, there’s a classic example of a mature company declining valuation that they changed mainly to get their market value and the equity back into the black.

And their customer profile shifts, right?

They’re focused on very conservative mainstream buyers, and market laggards where, and it’s part of that reinvention, they almost want to be like a startup.

They got to go back and act like that.

Dave Vranicar:

Now.. Sorry…

I was going to say their challenge is, now, that they’ve gotten more staid and more circumspect and more cautious in what they’re doing and they’re preoccupied with valuation and so on.

Their big concern is when they acquire an innovative company, how do they not kill it?

John Stopper:

Great point, Dave.

And, you know, that goes again, to stay consistent the salesperson profile, right? You acquire this innovative company. How do you keep the sales talent that’s now working in a brand that’s known as old.

Can I make money here?

What’s exciting about this place?

How am I changing the world?

You need to be innovative to keep your sales engine up and running and to be able to hire those A players.

Dave Vranicar:

Another aspect of sale, I’m sorry, John, I didn’t mean to interrupt.

Another challenge of larger companies in acquiring or merging with other companies…

I was thinking about this as you were talking about how to manage the sales force, a lot of larger companies figure that they‘re going to achieve economies by merging their sales forces.

Could you comment on that?

Sometimes the merging of sales forces doesn’t go nearly as well as the acquiring company thinks it will.

What are the risks and dangers there?

John Stopper:

I’ve been through a number of acquisitions.

I was with a company… we did 16 mergers and acquisitions in five years.

And initially, our approach was “mergers of equals.” We were trying to be nice.

John Stopper:

And so, it was all about integrating both sales organizations.

It sort of worked.

But, we eventually got to the point where we have to be a little bit more ruthless.

We would go cherry pick out the good sales people by doing research, looking at the top performers, offering them a special package, and then just killing the rest.

John Stopper:

And the reason was all about speed and focus.

A merger of equals and integrating everybody and finding the right chair took way too long, costs way too much.

We became a little bit more ruthless after that.

Dave Vranicar:

John, is there another stage of growth beyond these large companies that are trying to reinvent themselves?

Growth stages are cyclical

John Stopper:

Well, it’s a big circle, right?

You don’t fall off the cliff at the end, if you just envision, you’re always going through the stages.

Even a company like Salesforce, I mean, they’re trying to incubate new businesses.

So they have to look at some part of their business as, like, take Einstein.

They’re trying to bring that out to market, that’s a startup.

So within large organizations, the trick is, you need to be able to segment that focus and have different business units and different, recognize you need to have a different approach to each of those different business segments.

Where do companies often go wrong in managing their growth by phases?

Dave Vranicar:

So you started off by saying that this idea of phases of revenue growth is certainly not new or unique.

But the focus on what you do differently to achieve revenue from phase to phase is what you feel you bring to the table.

Can you talk a little bit about where you’ve seen companies go wrong in not anticipating their next phase of revenue growth or in doing the wrong things for their current phase of revenue growth?

What happens?

John Stopper:

Well, it’s interesting. It’s actually very predictable.

If you look at the data closely, it is possible to forecast when those transition points occur.

So it’s like driving a five-speed manual transmission car, right?

So if you’re still in first gear that everybody’s working too hard. The engine’s revving high.

You’re not going as fast, but you seem to be working harder.

You’ve probably got to push the clutch in and shift.

Now what happens if you go from first to third gear? The car could stall out, right?

So companies that go from startup and they try to scale, say they raise some capital, great, I‘m going to go hire a bunch of marketing people and sales people and let’s rock the world.

You could stall out and burn through that cash really quick.

Dave Vranicar:

And I’ve been through that in companies I’ve worked for. That’s a really ugly situation when that happens.

Your cash flow is screwed up, you have a hard time borrowing.

You’re looking at possibly a fire sale of the company, you’re looking at maybe letting go of some of your key people that it took so much time and effort to assemble.

You’re cutting back on customer service to your clients. So you’re irritating your big customers.

You have the risk of damaging your brand, on and on and on. It’s a horrible thing when that goes wrong.

Have you seen that happen in companies?

John Stopper:

Oh, I have. I think the biggest danger, you know…

So, over the past eight years, I’ve worked with 25 plus companies.

I think the most common mistake is the one I just gave is shifting from…

Skipping that brand strategy, making sure you have tight messaging, that your segmentation strategy is tightand going right to scale mode is the biggest danger.

And there’s some companies that are doing pretty well right now that skipped that stage.

It is possible. But just be careful.

You could burn through capital really quick.

Differences in business processes and skills from one growth stage to the next

Dave Vranicar:

In discussions we’ve had in the past, you have mentioned that the tendency in some companies is that when they’re having trouble with revenue growth, they often blame individuals.

So they look to replace a sales rep, or they look to replace their sales VP or something of the kind.

When in fact, often the issue is that the company hasn’t taken the time or the effort it needs to develop better processes, systems, skills, and so on.

Can you elaborate on that, please?

What are the stages of your sales process, and are they appropriate to your market?

And your sales methodology, how you sell, is appropriate to your stage of growth in your marketplace.

The pressure on sales leaders and sales people to make the number… They get sloppy.

You’re pressured into making mistakes by ignoring that and just going out and grabbing deals.

So what happens is you try to pull deals forward… Maybe you give big discounts or something like that.

But then you’re robbing the future to pay the present and never really staying true to those.

So, I really, where I add value and have worked with customers is making sure they have those components in place.

Your sales model is well defined. It’s cost effective, right?

Hey, it’d be great to have a direct sales force.

But can you do it with inside sales.

Dave Vranicar:

Talking about looking and focusing on customer acquisition costs and keeping that in line with revenue.

John Stopper:

Well said, Dave.

Yes. And your sales process, is it meaningful?

The only reason you have sales process defined in the stages is to look for barriers and constraints into your revenue generation strategy.

The sales stages, the MQLs, the SQLs, the opportunities, all that is, boy, how long does it take to get from one stage to the next?

What’s my cost of sale to convert one to the next?

That’s why you have those in place. And then your sales profiles need to be aligned.

Dave Vranicar:

Now, when you talk about sales profile, you’re talking about the profile you use to describe the role and attributes of a sales person that you’re looking to hire. Is that right?

John Stopper:

Yes. And the sales leaders, right? Think about that. That’s an even more important profile to have correct.

Because you’ve finally handed over responsibility for sales growth to other people.

Your sales people are pretty far removed in these larger companies.

Mistake: Hiring a high-profile sales leader with experience in the wrong stages of growth

Dave Vranicar:

So that makes me think of another mistake that I’ve seen. I’m curious to hear if you have any thoughts about this.

And that is, sometimes a startup company will decide that they want to do the very best thing they can to ensure sales growth.

So they hire a sales leader from, let’s say, a much bigger company who has a lot of experience, maybe they hire a big gun from, I don’t know, IBM or SAP or something like that.

What are the risks of doing that?

John Stopper:

Yeah, it’s interesting because I’ve been in that position. Working with an early-stage company, emerging-growth company, and I’ve come from a large industry-leading company.

My hope is, I can’t wait to get this business scale back into my comfort zone because it’s really uncomfortable.

Say, you come from an industry-leading company and the company’s converting and transitioning from a start up to an emerging-growth company.

Your forecast isn’t predictable.

A lot of uncertainty still, and people are looking to you for answers and you’re like, holy shit, this is pretty tricky.

John Stopper:

Now, when it gets into to high growth, wow, I’m getting comfortable again, I know how to operate here.

So that’s the danger.

They can bring good structure, process and experience, but they don’t have stage-appropriate experience.

Dave Vranicar:

Well, the other thing that I’ve seen from time to time, John, is that people like that are also accustomed to     having a lot more infrastructure in place, a lot more capabilities, they’re able to delegate this.

They have staff for that. Maybe they have an administrative assistant.

Does anybody have administrative assistants in sales anymore?

John Stopper:

Well, they just call them by different names. You have your revenue operations team.

Dave Vranicar:

Good point.

John Stopper:

They’re still doing…

Dave Vranicar:

Good point.

So anyway, they’re accustomed to having all this infrastructure in place, and now they’re in a smaller company that has little or no infrastructure in place, and they find they’ve got to do everything themselves.

I’ve been in this situation myself, where I haven’t been able to provide the value I thought I would be able to bring to a smaller company.

The need to have other business functions in place, in addition to sales and marketing

Dave Vranicar:

John, just one more thought I’d like to return to.

A few minutes ago, you were talking about focusing on what sales capabilities, what sales people and infrastructure and processes, need to be in place to go to the next stage of growth.

What we haven’t talked about it that to ensure smooth revenue growth through these different phases, of course, you have to have more than sales in place.

There are many gears that make this machine work. One of the gears, of course, is marketing.

We talked a little bit about that.

Another one is prod  uct strategy or product management. There’s development, there’s finance.

There are all these different elements. There’s HR and recruiting.

What advice do you have for CEOs as they think about having all the other right gears in place, tuned to the right level of performance for their current and next stage of growth?

John Stopper:

Great question, Dave.

You have to look at all those different domains of the business as gears.

And they have to interlock and be aligned. Any business leader will tell you, you know, it’s all about alignment between the organization.

So the way I look at it is I always start, my first gear is market research.

It’s like your scout. You need to know what’s going on in market, where’s your target market, what’s going on out there.

Then you look at your your product strategy.

Is my product aligned with what’s going on in the market?

The third gear would be your corporate strategy. Am I able to fund and manage that product growth and development to map that market research?

And behind that is your market strategy gear.

Is my investment in marketing appropriate?

Then the next is your sales gear.

If you hire salespeople ahead of good marketing, you’re not getting leads.

Your brand isn’t tight, your messaging is poor.

So I think another mistake is, we sometimes hire sales or develop it ahead of proper development and marketing.

And then after that, you have your services.

With my offering, I sell it, am I supporting them?

Are they getting good customer service, is appropriate with my growth?

And then you have your talent gear.

Am I developing, you know—you call it HR—but am I developing and acquiring great talent?

And then your last one’s your operational gear.

Do I have the facilities, the technology in place, the systems in place to facilitate all those gears moving smoothly?

Dave Vranicar:

I guess, to return to the key point, it is that, you don’t have to have highly sophisticated gears, obviously, at every stage of growth.

It’s that you need to have the right level of sophistication and the right capabilities for your current and next stage of growth.

And to know what that is.

What is appropriate for your current stage and where you‘re going to need to be for your next stage.

That’s the key thing.

Importance of market research early in a company’s growth

John Stopper:

Yes. Yeah. And sort of the order.

So for example, my first hire in this current company I’m engaged with was a market-research analyst.

I need visibility. What’s going on in the market? I don’t want to start investing without visibility.

If you think about Gettysburg and [Robert E. Lee], Jeb Stuart ran off.

[Note: J.E.B. Stuart, known as “Jeb,” was the Confederate general at Gettysburg. His cavalry unit, known for its reconnaissance capability, came under attack by Union forces and became disconnected from Lee. Historians dispute whether Stuart was at fault.]

He [Lee] lost his ears and eyes.

And he had no concept of what was going on, except what was right in front of. And we know what happened there.

What I counsel my clients, the board members, the investors is, man, get your market-research type first.

Have good optics in what’s going on.

Dave Vranicar:

Interesting. Again, in my experience, that’s a step that a lot of companies overlook because they figure, I don’t know, we can’t afford market research.

Or maybe the founders are technically focused or financially focused people who don’t understand or have never experienced value of market research or the danger of not having it.

John Stopper:

Yeah.

Or you have your own reality distortion field, right? And you think that, you know, here’s the way the world and I‘m going to assume everybody‘s going to love my product. And we do what many of us innovators do.

We build a product that no one wants.

Dave Vranicar:

Or maybe like some innovators and founders, you think you‘re going to bend the rest of the world to your will to bring them around to your marvelous idea.

John Stopper:

That’s right. We’re not all Steve Jobs, right?

Dave Vranicar:

Well, John, is there anything that you feel I’ve neglected to answer you that you think would be worthwhile for you to add on this topic?

Final thoughts

John Stopper:

No. I think we’ve covered a lot, Dave.

It’s pretty simple. You know I don’t like the word “complex.”

Dave Vranicar:

I think you noticed I left it out.

John Stopper:

Yes.

Dave Vranicar:

I hope you noticed I left it out for your benefit.

John Stopper:

I don’t think things are complex. I think they’re uncertain.

You have to be comfortable with uncertainty and get the systems in place that will help reduce uncertainty.

So I think growing your business is really about having good research, having good analytics, looking at data, and making your decisions based on that.

Follow those processes and those steps, look at those stages of growth, because you can forecast them when you have to shift gears with good data and analytics.

John’s work with ZynBit

Dave Vranicar:

Right, right.

Well, John, I’m familiar with some of the other things that you’re doing now.

Would you care to talk about them, to share some of that?

John Stopper:

Sure. So, after eight years of my own consulting firm, working with technology companies and helping them through the stages of growth, I’ve joined a company by the name of ZynBit as  chief revenue officer.

So the CEO and I bonded over our vision for the future of sales.

So what we’re looking to do is build into a software tool the capability to pull information from sources like a CRM, Salesforce, LinkedIn, other data sources…

and present information to sales professionals that give them insight and foresight about what to do next.

If you think about it, a sales person today could be on 10 to 15 different systems.

They’re in CRM, they’re in LinkedIn, they’re in email, they’re calendar. But they’re not, they’re required today to just update the beast, give it data.

Because management needs the analytics out of these systems.

But it’s not giving back.

So our vision is to give back to sales professionals to give them actionable insight into what to do next in their sales process. And their deal strategy.

Dave Vranicar:

John, we’re coming to the end of our time here.

I’d like to thank you so much for sharing your insights with our listeners today.

If anyone wants to follow up with you, what would you suggest?

John Stopper:

You can find me on LinkedIn, John Stopper, or send me an email at ZynBit, John.Stopper@zynbit.com.

Those probably are the best ways.

Dave Vranicar:

And how do you spell ZynBit, John?

John Stopper:

Z-Y-N-B-I-T.

Zyn for simple, bit for technology.

Dave Vranicar:

Great. John, thanks so much. Take care.

John Stopper:

Dave, thank you.

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