Building a GTM Framework at Early-Stage Companies
So you can quickly and efficiently grow your business
You’ve got some customers… now what?
Early stage founders typically come from a product or engineering background so they have very little GTM experience. They hustled their way to some good customers with positive signs that they’re on to something. To show more traction, they need to continue growing revenue and the customer count, but what’s the best way to do that?
Founders are trying to find GTM Fit
They know where they want to get to, but they don’t have the experience or expertise to get there. They might not even know where to start. In short, they need a framework to help them GTM Fit.
What is GTM Fit?
Go-to-market-fit is acquiring and retaining customers consistently and scalably.
- Stage 2 Capital - When and how fast to scale your business
GTM Fit is intertwined with Product Market Fit
Product Market Fit has elements of GTM Fit in it. The following table is from a great article First Round Capital put out about the Levels of PMF. The green highlights are mine, representing components of GTM Fit.
You need a framework to Pursue GTM Fit
These numbers are the gold standard when it comes to analyzing GTM. Each of them can be broken down into operational metrics that you can use to track how you are doing.
LTV/CAC
The Lifetime Value of a customer should be more than the cost to acquire that customer.
LTV = ACV * % Gross Margin % / Churn Rate
CAC = Demand Gen CAC + Sales CAC
Demand Gen CAC = [Cost Per Meeting] / [Meeting to Customer %]
Sales CAC = [Salesperson Monthly Cost] / [Customers Acquired per Month per Salesperson]
Customers Acquired per Month per Salesperson = [First Meetings per Salesperson per Month] * [Meeting to Customer %]
Payback Period
The cost of acquiring a customers divided by the monthly recurring revenue of those customers.
Monthly ARR = ACV / 12
CAC = Demand Gen CAC + Sales CAC
Demand Gen CAC = [Cost Per Meeting] / [Meeting to Customer %]
Sales CAC = [Salesperson Monthly Cost] / [Customers Acquired per Month per Salesperson]
Customers Acquired per Month per Salesperson = [First Meetings per Salesperson per Month] * [Meeting to Customer %]
Magic Number
The increase in recurring revenue over a quarter by the sales and marketing expenses of the previous quarter.
ARR Increase = New Customer ARR + Expansion ARR - Churn ARR
Sales & Marketing Costs (Previous Quarter) = Sales Costs + Marketing Costs
New Customers ARR = New Customer ACV * Customers Acquired per Month
Expansion ARR = Expansion ACV * Expanding Customers per Month
But we’re an early stage start-up
.. we don’t really have enough data that we can use to make decisions
Like most things that early stage companies finding GTM fit requires a lot of experimentation and you need a framework to understand if you’re going in the right direction and to measure what’s working versus not working.
Get a GTM assessment
Answer a few questions on this form to get started on understanding where you are in your pursuit of GTM Fit. T