4 Key Elements of a Go To Market Strategy
Please Tell Me You Haven’ t Pinned Your Growth on Hopes
I was talking to a friend the other day and he admitted that his company’s plan lacked some key elements of a go to market strategy. He explained to me how the company was targeting approximately 25% growth this year and continue on at that clip over the next five (their fiscal year is just underway). That growth was going to be about 70% organic and 30% from targeted acquisitions. His company delivers enterprise software applications in a software as a service (saas) model, or if you prefer ‘in the cloud’. The space isn’t exactly hot, but not really commoditized. The current pricing schedule is not aggressive and is showing its age a bit. 18 months ago they tried to adjust certain elements of the price that would have required a certain segment of customers to increase their monthly fee by 35%. It didn’t go horribly but it didn’t go swimmingly either. So basically the company and its offerings are doing just ok, their best year in the previous five was 18% annual revenue growth. Needless to say my friend was suspect over his organization’s ability to pull this off without having key elements of a go to market strategy in place. Especially considering their track record on acquisition is nonexistent.
Admittedly I have no insight into this company’s plan to get this consistent dramatic growth on which they are hanging their hats upon. But were they to be a public company I don’t think I’d be quick to add their stock to my portfolio.
The slow and steady growth they have shown has been admirable, but to suddenly expect that this trend will drastically change into year over year growth in the 25% plus neighborhood would at least require a very well thought out strategy that could be well executed. This is the crux of why a go to market strategy (GTMS) must be developed every fiscal year, and the importance of continuously measuring against the stated objectives of the GTMS and properly course correcting.
Not having a GTMS reminds me of a scene in A Few Good Men where Jack Nicholson’s character assumes that Tom Cruise’s character has no plan.
Analyze Current Revenue Mix: When looking for significant growth opportunity it helps if, during the GTMS process, there is a detailed analysis conducted over exactly where revenue is coming from today. Some factors to consider:
- What percentage of customers is responsible for the greatest percentage of revenue.
- Of that group what is the ratio of new customers to recurring customers.
- If there are multiple products or services what percentage of total revenue does each represent.
- Determine whether or not sales volume is different by region or industry.
- If applicable evaluate the operational cost of supporting customers on older platforms.
Armed with this information the GTMS process will help to evaluate the story behind each element of analysis that was performed. By diving into the fact, for instance, that 60% of all revenue is connected to 10% of the largest clients can tell the story of why that is the case, if that fact represents unnecessary risk, and whether or not there is expansion opportunity in this group or by graduating customers into this group. The idea is to begin to map out a path that will begin to identify how revenue objectives can be realized.
Identify Focus The GTMS is ultimately an exercise in focus. It cannot be a laundry list of wishful achievements, rather it should be a list of no more than five very specific statements of strategic focus that will move the organization along the aforementioned revenue realization map. These statements of strategy can’t be mired in detail, instead should be macro level and directional in nature.
For example if the revenue analysis identified that repeat customers are almost always organizations that have at least three offices, an employee count over 1000 people, operate competitively in the telecommunication and technology space, and have shown steady growth over the last five years the GTMS statement might read “Prioritize positive growth firms serving telecommunications and technology and have revenue over $500 million annually and are current customers” The purpose for the statement is focus. It says that this is where the hunting grounds are and we will not wonder off of them for any reason. This also dictates the remainder of the GTMS objectives. If this is the focus the other GTMS objectives should be ordered around how this will happen.
Set Objectives and Measurements: The GTMS should set objectives that can be measured while stating in those objectives credible sales volumes that can be used to attain the goal. For instance using the aforementioned macro focus on current customers the metric to measure progress might be something like this, “Increase recurring monthly subscription revenue for targeted customers by at least 10% quarterly”. This gives you the math to work backwards by easily calculating the number of transactions by customer that are needed to achieve the performance metric. The ability to easily measure allows for the consistent evaluation of GTMS and opportunity to course correct when necessary.
Present the Secret Weapon: Maybe the most important element of the GTMS this becomes a statement of the creative nature of how the revenue objectives will be achieved. For example, if the targeted market all depends upon a certain piece of equipment or software in their natural business processes then the secret weapon might be “Acquire Widgets Inc. by end of 2nd quarter and package the product together with increased tiers of existing offerings”. The idea is to clearly state a strategic action that will set things in motion and also act as a guidepost as the execution is taking place.
These are just four elements of developing the GTMS, there are certainly more that should be included and the resulting plan impacts everything from product development to day to day operational realities. Failure to do so puts the revenue objectives in the ‘wishful thinking
