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How to Scale a Venture backed startup from £0.5m to £2m. Looking into the Sales Engine and Benchmark

Updated: Oct 25, 2023




How to Scale a Venture backed startup from £05m to £2m - Looking into the Sales Engine and Benchmarks for Success.


Speaking with a venture investor this week we were discussing the insight around how to grow at the early stages of a business, once you have traction and are bringing in revenue but need to evolve to the next stage of the businesses growth journey. We discussed the difference between playbooks and sales motions or engines from £0 - £20m focusing on the early stage including benchmarks. So here is a bit of that insight and more looking into how we scale venture backed businesses whilst keeping solid foundations and a strong culture.


In the world of business, growth is the name of the game. As a SaaS company, your annual recurring revenue (ARR) is a key indicator of your success. Whether you're at £0.5M or £2M ARR, understanding the differences in your sales engine is crucial for sustained growth.


In this blog post, we'll delve into the nuances that set these two levels apart and explore what it takes to move from a £0.5M ARR business to a £2M ARR business.


Lead Generation and Prospecting

  • £0.5M ARR Business: At this stage, lead generation may rely heavily on organic methods such as content marketing and social media. You might also do some outbound prospecting, but it's relatively modest in scale.

  • £2M ARR Business: With a larger ARR, your lead generation strategies are more diversified. In addition to content marketing and social media, you might invest in paid advertising, SEO, and more advanced outbound prospecting techniques. The budget for lead generation is significantly higher.

Sales Team and Structure

  • £0.5M ARR Business: A smaller sales team with a few sales reps who handle both inbound and outbound sales is common. The team may not be specialized, and sales processes may not be well-defined.

  • £2M ARR Business: As you scale, your sales team grows both in size and specialization. You may have separate teams for inbound and outbound sales, each with defined roles and responsibilities. The sales process becomes more structured.

Sales Technology

  • £0.5M ARR Business: Basic CRM tools and sales tracking software are sufficient. You may not have integrated sales and marketing technology.

  • £2M ARR Business: At the £2M ARR level, you need more advanced sales technology. Implementing marketing automation, AI-driven lead scoring, and more robust CRM systems becomes crucial for managing the larger volume of leads and customers.

Pricing and Packaging

  • £0.5M ARR Business: Simplicity often rules pricing and packaging. You might offer a limited number of plans or subscription tiers.

  • £2M ARR Business: At this level, you have room to experiment with more complex pricing strategies. You can introduce tiered pricing, add-ons, and enterprise-level plans to cater to a wider range of customers.

Customer Success

  • £0.5M ARR Business: Customer success may be handled by a small team or even by the same team responsible for sales. Personalized support is essential to retain customers.

  • £2M ARR Business: With a larger customer base, a dedicated customer success team is crucial. Implementing automation and sophisticated onboarding processes becomes necessary to ensure customer retention and expansion.

Scaling and Expansion

  • £0.5M ARR Business: Growth is a top priority, and expansion into new markets or customer segments may be in the early planning stages.

  • £2M ARR Business: You have more resources and data to support expansion efforts. This might involve entering new markets, targeting larger enterprises, or exploring international growth.


Looking at the 2 sides of the journey what are the benchmarks?


Benchmarks for Scaling from £0.5M to £2M ARR in a Venture-Backed Business

Now, let's dive into specific benchmarks critical for a venture-backed business to scale successfully:


Team Set-Up:

  • Sales Team Expansion: Double the size of your sales team, aiming for 6-8 sales representatives, including SDRs, account executives, and customer success managers.

  • Specialisation: Employ 2-3 SDRs, 3-4 account executives, and 1-2 customer success managers, each focusing on their respective roles.

  • Management: Appoint experienced sales managers to lead teams of 2-3 reps each. Our advice would always be to have a revenue leader not just a sales leader, the market is changing and the need for leaders to lead revenue focused teams with a focus on inbound, outbound, content creation and social selling is the next evolution of these roles.

A recent caveat here is that there are a lot of tools and Gen-AI solutions that can reduce the numbers above by automating tasks reducing the numbers in staff but increasing the productivity with technology.


Key Performance Indicators (KPIs):

  • MRR Growth: Target a monthly growth rate of 8-10%, reaching approximately £1.5M ARR by the end of the year.

  • Customer Acquisition Cost (CAC): Maintain a CAC that is no more than 30-40% of your average customer's first-year value.

  • Customer Lifetime Value (CLTV): Strive for a CLTV of £5,000-£7,000, with plans to increase it over time.

  • Conversion Rates: Aim for a lead-to-demo conversion rate of 15-20% and a demo-to-close ratio of 30-40%.

These metric's a super important for any Series A raise, know your numbers and collect, analyse and make data driven decisions on the direction of travel for your business.


Number of Demos:

  • Increase Volume: Conduct 120-150 demos per month to fuel growth.

  • Demo-to-Close Ratio: Improve the demo-to-close ratio to 35-40% for an efficient sales process. This may mean looking into what your demo is saying, in the early stages a demo is closer to a POC and you could be hurting your sales cycle by having a unnecessarily long demo and not delivering the value in the initial demo.


Incentives:

  • Variable Compensation: Implement a commission structure, with top-performing sales reps earning 15-20% commission on closed deals.

  • Team and Individual Recognition: Recognise and reward top performers with quarterly bonuses of 5-10% of their base salary. But don't look to foster a team of lone-wolves / rockstars that could ruin your culture, include team bonuses or rewards to incentivise like days out etc. ensuring the team are growing together.


Sales Enablement not Training:

  • Continuous Learning: Dedicate 10-15% of working hours to ongoing training and professional development for the sales team.

  • Onboarding: Establish a 3-4 week onboarding program for new hires, ensuring productivity within the first 60 days.

  • SkillSet Matrix and peer learning: Look to bring in best practise on a daily, weekly, monthly basis so post onboarding the team are continuing to grow together.


Customer Support/ Success:

  • Scalable Support Systems: Build a customer support team that can handle 500-600 tickets per month, with response times of under 24 hours.

  • Proactive Customer Success: Strive for a customer retention rate of 85% or higher, with upselling accounting for 20-25% of existing customer revenue.


Benchmarks for Venture-Backed Businesses:

  • Fundraising Milestones: Achieve quarterly growth rates of 15-20% to meet the expectations of your investors and secure continued support.

  • Financial Metrics: Consistently meet or exceed financial metrics, with annual revenue exceeding £2M ARR and a positive contribution margin by the end of the fiscal year.


In conclusion, scaling from £0.5M to £2M ARR involves a strategic transformation across various facets of your SaaS business. By meeting and exceeding these specific numerical benchmarks, you'll demonstrate the success needed to navigate this growth phase effectively, especially in the context of a venture-backed business.


If you’d like to know more about how Revnu helps companies scale to £2m and above, reach out to us here.

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