The 1% of Companies: 3 Crucial Phases for Reaching $10M in Revenue & Becoming Cash Flow Positive
How we do it:
Go-to-market strategy
Customer acquisition marketing
Transformative business development
1. Go-to-Market Strategy - Dominate a Niche
“The thing that doesn’t get talked about enough is go-to-market, both on the consumer and the enterprise side.” -Bill Gurley
“Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets. Amazon shows how it can be done. Jeff Bezos’s founding vision was to dominate all of online retail, but he very deliberately started with books.” -Peter Thiel
Diagrammed above, this step is about identifying and empowering your "Innovators."
To improve go-to-market strategy, a great approach is Amazon’s “Working Backwards,” which I started using while serving as the EIR for a global foodtech accelerator. At Amazon, before new products go into development, all relevant team members write a press release together. Even Amazon Web Services (AWS) began this way (now doing $80B in revenue), so it’s tough to argue with its results. This proven process aligns the team on dominating a single niche market and obsessing over which customer it's going to serve. Furthermore, it forces the team to ultimately garner a real customer’s quote, which only stems from proper customer discovery.
While this all may sound simple, it’s actually a brutal, painstaking process. There is usually exhaustive debate over which customers to pursue. There can even be infighting over verbiage and grammar. However, it forces you to think about the business from the outside in, not only focusing on the customer but requiring one to go on record for your company.
It also provokes important questions, like how many of these customers exist (e.g. market size)? Is their problem one you’re passionate about solving? And, does this niche help you reach your ultimate goal, as referenced above with Jeff Bezos deliberately starting with books?
2. Customer Acquisition Communications - Accelerate Customer Word-of-Mouth
“In Silicon Valley, nerds are skeptical of advertising, marketing, and sales because they seem superficial and irrational. But advertising matters because it works. It works on nerds, and it works on you…What nerds miss is that it takes hard work to make sales look easy.” -Peter Thiel
“Even if you have an incredibly fantastic product, you still have to get it out to people. The engineering bias blinds people to this simple fact. The conventional thinking is that great products sell themselves; if you have a great product, it will inevitably reach consumers. But nothing is further from the truth." -Peter Thiel
Diagrammed above, this step is about starting to sell to and accelerating word of mouth among your "Early Adopters."
Building from the press release, your company will next become positioned as a thought-leader in its niche market. You’ll garner other press from trades, blogs, podcasts, and conferences. You’ll grow your social media presence and publish content that accelerates “word-of-mouth” among your target customers. Over time, your company will evolve into its own media outlet, largely dedicated to making your customers look great and highlighting how your company helps them succeed.
The key here is to convert your earliest customers into evangelists and to build out the infrastructure for their “social proof” to be noticed by other prospective customers. I first had to learn this the hard way as a cofounder. Our company had won awards and attracted notable investors, but we weren’t adept in showing customers why we were credible. So, I first published an op-ed for HuffPost, which soon led to writing a recurring column for Entrepreneur and later Inc. Each article would be tweeted out to millions of followers. This led to TV interviews with CBS and FOX, then speaking at SXSW. All of this helped create a buzz among our earliest customers and made them proud to talk about how they’d had the vision to start working with us; we then shifted the narrative to highlight our customers, further accelerating word-of-mouth. I’ve replicated this process multiple times as a chief marketing officer, with one company going on to be acquired and another going public on Nasdaq. Early customers become your sales force, which is further detailed in my book, Marketing Architecture: How to Attract Customers, Hires, and Investors for Any Company Under 50 Employees.
Just keep in mind that there’s a lot of noise out there and building thought-leadership takes time, usually at least six months to a year. You also have to factor in seasonality, annual events, and budgetary cycles. But, you should stay focused on this phase until you have determined your customer profile and know how to acquire them.
3. Transformative Business Development - go "whale hunting"
“Premature scaling is the immediate cause of the Death Spiral.” -Steve Blank
“Sequencing markets correctly is underrated, and it takes discipline to expand gradually. The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets—a part of their founding narrative.” - Peter Thiel
Diagrammed above, this step is about acquiring the majority of your "Early Market" before attempting to "cross the chasm" and tackle the mainstream market.
With a strong foothold in your niche and the customer acquisition process defined, you'll next go “whale hunting” and secure the most transformative strategic partnerships and/or land marquee customer(s). This is the most fun phase, but companies can often rush into it. For the more traction you achieve in the previous phases, the more leverage you’ll gain with prospective partners and customers.
