I had an interesting conversation with another entrepreneur awhile back. He is someone I respect highly and he has been very successful over the last few years as his company has grown quickly from a small operation to a company with eight figure revenues. The primary way they have achieved their growth has been almost entirely through inbound marketing, that is to say, by reaching new customers primarily through organic marketing: their blog, SEO, email marketing, seminars, etc.
We were talking about other companies in the SaaS / cloud applications industry and discussing how to grow as a SaaS company. He was rather adamant about continuing to grow only through inbound marketing efforts and not having any sales people.
HubSpot came up as one example of a company that has succeeded very much on the basis of their inbound marketing (hell, they invented the term) campaigns. But they also have a sales team. And this point became the crux of a really interesting conversation. My friend’s argument was that, yes, HubSpot was growing quickly but it couldn’t really be considered to be growth entirely on the basis of inbound marketing because they had an inside sales team. At the time, I accepted that has a valid ontology but I’ve since come to think about it differently.
Marketing is Separate from Sales
At arms length, HubSpot’s sales team appears to be mostly inside sales that follows up on leads that are generated by their inbound marketing campaigns. They may be doing outbound sales calls (AKA cold calls) but I haven’t heard of it so far. (I’d love to hear about it if I’m wrong, although the point would still stand regardless.) Similarly, other leaders in SaaS such as Salesforce.com and Marketo, follow a similar model. They create great content that generates new leads and have sales people call and follow up on them. This is still inbound marketing. It’s just getting people involved in closing deals.
If your product has any level of complexity that prevents it from being completely self-service, you’re probably going to have to build a sales operation. I talked more about this in a recent blog post about SaaS pricing. If you wait too long to do this, you’re probably hampering your own growth and that is dangerous in high growth markets. You could also be leaving a lot of money on the table if you rely entirely on self-service conversions when you could be upselling your customers to a more complete solution to their problems.
Inbound Sales vs. Outbound Sales
If you decide to build a sales operation, the next question you will have to answer is whether your sales team should be entirely focused on closing inbound leads or whether you should also have reps making outbound calls. This is also a separate discussion from your marketing strategy and you can also be really good at inbound marketing and have an outbound sales team.
There is a book making that has been making the rounds in startup circles over the last two years called Predictable Revenue. It is a short book and well worth reading. The author, Aaron Ross, was responsible for building Salesforce.com’s first outbound sales operations and was responsible for generating over $100 million in revenues. He argues, convincingly, that while inbound marketing or content marketing is a great way to build your brand and generate lots of inbound leads, the only way to grow predictably — that is have complete control over your distribution — is to build an outbound sales organization. He outlines in his book and through other materials on his website exactly the steps you can take in order to build a high-performing outbound sales team.
What is the Right Mix?
So the question for startups becomes how to figure out the right level of investment in inbound marketing vs. inside sales vs. outbound sales (not to mention ads, PR and other forms of of outbound outreach). There isn’t a single right answer for everybody. Many times the founders will develop an intuitive feel for the right formula by doing it themselves in the beginning. This can be dangerous, though, if founders don’t spend enough time benchmarking their approach with other companies similar to theirs.
One of the most useful resources I’ve found recently has been the website of The Bridge Group. They are a consulting firm that specialize in helping companies figure out their inside sales strategies. I’ve spoken with them once (although we are not yet a customer) and their team is sharp and willing to provide useful feedback as part of getting to know you.
They publish a lot of their own research and one of the more helpful reports I’ve read recently was their Lead Generation Metrics and Compensation report. I spoke with their President, Trish Bertuzzi about the companies they have researched and she said that roughly 60% of new leads were sourced by inbound marketing and the remaining 40% came from outbound sales efforts. Clearly the mix will be different for different companies but this at least helped me understand what a reasonable starting point might look like when we began building our sales / marketing operations earlier this year.
This is ultimately a discussion that may have obvious conclusions for many seasoned entrepreneurs but first-time entrepreneurs (such as myself) will undoubtedly spend quite a bit of time trying to figure out exactly this part of their distribution strategy. If it helps anyone save a little time going through that process along the way, then the industry as a whole benefits a little more.