- When it comes to building and scaling your SaaS business,
there are two critical skills required
to ensure we can actually grow.
The first is sales and marketing skills.
And the second is math skills.
I know weird, right?
We spend so much time talking about the principles,
the strategy,
the tactics of sales and marketing of go-to-market.
But we don't talk as much about the hard math behind a SaaS
business model and the success that it can bring,
if you actually get that math, right?
Now I'm not talking about just your LTV to CAC,
which VCs obsess over I'm talking like brass tacks,
the math that drives the principles behind a successful and
scalable go-to-market machine for your SaaS business.
In fact, this math is so compelling.
If you and I were talking,
I would ask you about certain metrics in your SaaS business.
And I could pretty accurately predict if you stand a chance
of hitting your number this quarter or this year.
In fact with that math,
I can actually identify exactly where the choke point is in
your go-to-market machine for your SaaS business,
the piece that's actually holding you back from hitting your
number and actually driving that growth.
That's the power of the actual math
behind a SaaS business model.
So in this episode,
I'm going to walk you through the three key principles you
absolutely need to know to forecast and track your SaaS
business model.
And you can use that math to actually drive growth and
accelerate growth for your SaaS business.
Intro.
(Intense Music Playing)
What's up everybody welcome to unstoppable I'm TK.
And on this channel, I help SaaS founders.
Like you grow your SaaS businesses faster with,
an unstoppable strategy. Now,
if you are new to this channel, welcome,
I drop an episode every single Sunday with actionable
strategies and how to grow your SaaS business faster.
So be sure to hit the subscribe button and that bell icon
that way you'll get notified every single time,
I drop an episode with the TK energy. Now,
if you're already part of this community,
if you're already part of my coaching programs,
my people welcome back.
It's really awesome to see you over here.
So as I was scaling my last SaaS business,
particularly in the early stages, I used to obsess over my
last app was, was ToutApp.
It was a sales engagement platform it was backed ,
Andreessen Horowitz,
and then we sold it to Marketo that's the backstory,
but I used to obsess over the marketing copy.
I used to obsess over the webinar content.
I used to obsess about the angle on the ads.
I used to obsess about what's on our homepage.
I used to obsess over all the creative aspects of sales and
marketing.
I used to obsess about what our sales deck looks like
and what our strategic narrative is,
but it wasn't until I started working and started learning
from some really experienced go-to-market leaders that they
taught me. They said, look,
that creative stuff is important,
but the math is just as important.
And if you get your math right,
then the creative stuff actually elevates.
But if you just do the creative stuff and you don't know
your math, your actual go-to-market math,
your SaaS business model math,
then none of this will matter because you'll just be hitting
a wall.
And it was really eye-opening for me because I was like, no,
I, I'm pretty good at sales and marketing,
I read a lot of books and did a lot of stuff and look at
where we are.
We built a mini brand and it was eyeopening for me.
And so in this episode,
I'm going to walk you through the exact math that you need
to know to accurately track and forecast your SaaS business
model. So you can use that to actually accelerate growth.
So If you're excited to dig into principle, number one,
go to smash that like button for the YouTube algorithm and
let's dig right into it.
So the first thing you want to understand is I'll give you
an overview of the three principles and we'll go into each
of these.
There's essentially three key components to marketing math.
When it comes to the SaaS business model,
the first one is your new business number. This is,
let's just say for this quarter or for this year,
how much new business you actually want to generate.
And for all practical purposes, let's just say,
we want to generate a million dollars of new business this
year, right?
Like that's just like, keep it simple.
The second thing that you want to understand,
the second principle,
and we'll go into the details of each of these is you want
to understand how much pipeline you need to generate
a pipeline is essentially the number of opportunities that
you're creating for your SaaS business.
So the number of actual deals that are in play now,
if you're sales driven,
there would be opportunities and sales people would be
involved. If you are product driven,
then think of this as a trial.
This is a true trial user that activates in the product.
And then you stand a chance of turning it into new business,
which is they convert and swipe their credit card.
Same principle.
It doesn't matter whether you're sales driven or product
driven, you'll need a pipeline of trial users or actual
opportunities or deals that you'll need to close.
And then the third piece is you'll need actual leads,
leads whether they're inbound or outbound are actual people
that are like, Hey, I might be interested in this.
Like, they're actually interested.
Not that like, oh, that's an ideal person.
We should go after them. But like they literally say, yeah,
no, I'm, I'm, I'm interested,
like send me some information and then I'll figure out if I
wanna get in a call or actually trial the products.
So Those are leads.
So the three things that you absolutely need to understand
is to break down your SaaS business into these three key
things.
Now I have it in this way,
because you start with this number. It's like, look,
we have to hit a certain revenue number.
It could be because you have to raise that next round of
funding.
It could be that you have to hit a certain EBITDA number.
It could be because you just need to be profitable because
you're bootstrapped either way.
You need to have an actual number on like, Hey,
what's our new business goal going to be for this quarter or
for this year. That's where you start.
So that's kind of principle. Number one,
you want to understand what is our new business number.
Once you understand that you need to then figure out,
here's where the math starts to really come in.
You need understand like, Hey, in order to hit this number,
how much pipeline, how much,
how many trial users or opportunities do we need? Notice,
this is not about your marketing copy, your channels,
your ICP, your strategic narrative.
This is pure math.
So what you're trying to understand is based on historical
data, what is our win rate?
Okay.
And what you're trying to understand is
if you're sales driven
what is your win rate out of every hundred opportunities?
How many do you win? If it's, if this is product led,
you're trying to understand out of every trial that starts
and activates,
what percentage of those actually convert to swiping their
credit card? That is your win rate.
Now industry average is let's just, you know,
use sales driven for this one,
but you can apply to a product. Product led as well.
Industry average is about 20%.
Sales is like the only profession where a 20% win rate is
considered. Good.
It's pretty good. And so it's not the best I've seen better.
I've seen 50% win rates for inbound leads.
Like I seen that too, but 20% on average,
is that considered pretty good in SaaS ? Like,
that's just what it is.
So what that means is that out of the pipeline,
you generate,
you will win 20% of those deals and then end up with a
million dollar of new business.
So the math is, the question of principle Number two is,
how much pipeline do I need?
The most successful SaaS leaders,
the most successful revenue leaders,
sales leaders,
marketing leaders, are not thinking about here's how many
leads I generated because no one cares,
what they're really caring about,
including marketing people.
They're really great marketing people are
really caring about how much pipeline have I generated.
And the way the math works is like, look,
if I want to close a million dollars of new business and I
have a 20% win rate,
well you divide basically a million divided by 20%.
And you essentially end up with 5 million of pipeline.
This means that on average,
like if you generate $5 million dollars of pipeline,
then you will close 20% of that and end up with a million
dollars of new business. Now, before I go to principle,
number three, let me just pause here for a second.
I know this,
like I remember the first time someone sat me down,
baby TK sat me down and kind of talk me through it.
I was like, oh, interesting.
There's real math here, and you can totally predict.
This is not a hope and a dream.
It was eye opening for me as baby TK. Cause I was like,
the math is right there. We didn't do the math.
We're just hoping that we do enough activities.
And our messaging is super awesome that we generate a
certain amount of business. But in this scenario,
the math is pretty clear.
I knew what my win rate was on average.
I knew that I had to hit a certain new revenue goal.
So I was like, oh, okay, got it.
So 5 million off pipeline I need to generate.
And I was like, well, what does that mean?
Like, how do I generate?
Like what, how does that break down?
So then the experts that I was working with and they were
incredible, they were like, well, what's your ACV.
This is your average contract value for every new user that
converts what's on average. What is that?
So let's just say for simplicity sake,
it's a 100K right?
It's a 100K meaning every single deal that I closed,
it's a 100K deal.
And so that means that in order to get to a million,
I need 10 deals,
but it also means that in order to get to a million of new
business at an average of a 100K, I essentially need 50
opportunities,
right?
At a 100K each, you need 50 of those.
Hopefully I'm doing the math, right?
No, by the way, let me also be very clear.
I'm not great at math. My freshman year roommate,
Pete curly. He was also my previous co-founder at a company.
We started called My Pimp,
which we brought into hip Cal
and the book got bought by Plaxo
long story. He would tell you, I failed calculus like twice.
I failed calculus my freshman year.
And then I was taking some more advanced course in like
senior year. And I failed that.
And like it was, and then I had to like, we, like,
we sold our company. So we moved to California.
And in order to get my second diploma,
I had to like go to Foothill college in mountain view to get
that last credit. It was crazy.
I'm not that great at math,
but I can actually put a spreadsheet together and start to
do these things.
So you don't have to be a math genius to do this.
It's basic arithmetic that you need to figure out,
but it will open your eyes on literally what's involved from
each of your, each of your teams to actually drive growth.
So let me just ask you this. Like,
if you're starting to see the power in this,
I know I'm liked zoomed in for a little bit longer,
but if you start to see the power in this.
Can I just get a YES!, In the comments below,
if you're starting to see the power of the math
behind this, also smash that like button for the YouTube
algorithm. Now, if you're starting to wonder already like,
well, I know my new business number.
I think I know my win rate. I know my ACV,
how do I generate this much pipeline? Like,
how do I actually go after this pipeline?
This is exactly why I created my SaaS go to market coaching
program in this program.
I teach you exactly how to build a go-to-market machine
instrument, and then scale it.
I'll tell you more about it at the end of this video.
I'll also link to it below,
but let's go to principle number three, which is leads.
So here's the thing. If you were just thinking like, okay,
I just need to generate $5 million of pipeline.
It's not enough to go on. Like,
you can go to your marketing leader or you can like sit down
if you're super early stage and you're the marketing leader,
like what does that mean?
Well, it means that I need 50 opportunities. Now,
the piece that we want to think about is like,
not every opportunity is created equal,
not everyone's truly interested.
So it's always good to first measure,
like someone that's a hand raiser.
It's like, Hey, they're in our ICP.
They're kind of interested.
They want to learn more, but that's not an opportunity.
That's simply someone that's like kind of interested.
That's totally different from like an opportunity,
which is like, Hey, we talked to them,
there is a real deal to be had here.
There's an urgent problem. They have budget.
Let's talk about it, right.
That's a real opportunity.
So that's why the third principle is you don't want to just
think in terms of pipeline generate,
not everything is a true opportunity.
You want to think in terms of leads,
leads are people that are kind of interested,
but not fully committed yet.
If you're on the product led side of things,
this is kind of the difference between someone that like a
lead is someone that maybe signs up for your product.
And an opportunity is someone that actually activates in
your product.
If they just sign up and hit the back button and never come
back again, that's not a real opportunity.
They like,
they're never going to convert because they haven't even
tried your product. So in a product led world,
a lead is kind of a signup,
an opportunity as someone that's actively like activated in
the product, but in the sales driven world,
lead is maybe someone that downloads your manifesto,
a lead magnet,
and then they go through the process and then they're like,
oh, you know what?
Like I want to learn more and they get on a call.
So that's how you want to think about it.
So with that scenario,
what you're really looking at is the stat of the,
the lead to opportunity
percentage,
meaning there's a question of,
what percentage of leads that you acquire end up saying,
Hey, I'm interested in a demo.
I'm interested in a discovery call.
I'm actually going to use the product and try it out.
I'm going to activate in the product. And again,
it varies from SaaS business to SaaS business market,
to market, but pretty good benchmark is 10%.
Like at least 10% of your leads should be converting to a
real opportunity.
At least 10% of your leads at some point should be
activating within, within getting into the product.
If not, then you have to fix that.
And this is important because it gives marketing,
the marketing people, something tangible,
like you've got to generate leads,
but you got to convert them to opportunities and create this
much pipeline. So they can think about it holistically.
It also gives salespeople some onus on like, okay,
are these quality opportunities?
Is this truly an opportunity versus thinking everything is
an opportunity and that's the power of this in this third
principle.
What that means is that if you need 50 opportunities and
only 10% of leads convert to a real opportunity,
then what you need to be thinking about is how do we
generate 500 leads,
right?
And that's a math like, look, well,
now I can run Facebook ads or I can go on LinkedIn or I can
do outbound.
I need to somehow generate 500 leads in my ideal customer
profile with the right messaging and 10% of those,
I need to nurture them and convert them to a real
opportunity. And out of those,
we need to run our sales process,
have our sales deck and convert that at a 20% win rate.
And if we convert those,
then we get a million dollars of new business.
It all comes down to the math.
It all comes down to what is our win rate and our ACV,
what is our lead to opportunity rate? And that way,
what you can do is you can sit down and say, cool,
how much new business do we want to book given our win rate
and our lead to opportunity conversion rate.
And based on that, how much pipeline do we need?
And based on that, how many leads do we need?
And it's really, I know this sounds like, oh,
that sounds simple enough. I know it's simple,
but simple is hard. How do you actually do this?
That's the question.
And so if you just sit down and just do this simple math,
remember I failed calculus twice. And if I can do this math,
you can do this math.
It's really not that complicated but it is,
eye-opening what it'll lead you to understand is, is there a
choke point in the business?
Meaning if your win rate is lower than 20%,
that means you have, you may have a sales deck problem.
You may have a sales person problem.
You may have a sales process problem.
If your win rate is fine,
but your lead to opportunity is super low,
then maybe you're just paying for garbage leads.
They're not really leads if your, if your win rate is low,
but your ACV is,
is very, very high.
Maybe that's okay.
So you can start to look at the numbers and
start to get a feeling of,
okay, what's working and what's not.
And where is the choke point?
And the best way to do it is to work backwards.
Look at the win rate first, and then look at the quality.
Sometimes the win rate might be bad because
of the sales process,
Sometimes it could be bad because the sales messaging,
sometimes it can be bad because
it wasn't a real opportunity.
So you can start to work your way back on exactly where the
choke point is, and then start to think about, well,
what do we need to do to generate this many leads and at
this conversion rate,
and it means it will generate this much pipeline.
And with this pipeline and this win rate,
it will generate this much new business.
And that's how you know how to track and forecast your SaaS
business model and ensure that you actually hit your number.
And also the power in this is you can start to say,
you know what? Let's just say,
we really don't like the number of leads we're getting,
you know, you get, you get together with your team.
And you're like,
I have no idea how we're going to generate 500 leads this
quarter. Like I have no idea.
And that look well that's okay now, you know,
now you at least know how much you need to generate and you
can look at well,
how much have we historically generated and how much new
business will we get out of that? And what's the gap.
So you can start to figure out what to focus on.
If you sit down and you can say, you know what,
there's just no way we can, we can maintain our ACV.
Well, let's think about our pricing strategy.
What can we tweak?
These are all the different levers that you can turn just by
doing this simple math in this simple diagram and start to
understand exactly where the choke points are,
what your conversion rates are and how to do the math behind
you go-to-market machine and your SaaS business model.
That's the power in this. Now.
Now you know how to accurately forecast and track your SaaS
business model and start to understand, well,
how do we scale and how do we go faster?
How do we make decisions around where to spend money and who
to hire and all those things.
What you may not know is exactly how to impact these
numbers. You may not know how to get more leads.
You may not know how to actually improve your pricing model
to improve your ACV.
You may not know what your sales deck should look like.
You may not know what your strategic messaging should be.
You may not know how to nurture these leads to turn them
into opportunities or activate them in the product.
You may not know these things and that's perfectly normal as
an early stage founder.
So this is exactly why I created my SaaS go-to-market
coaching program. Inside of this coaching program,
we actually help you build and scale your go-to-market
strategy and your machine. And we, we actually guide you.
I work with you to guide you in creating this proper
go-to-market machine instrumented, the right way,
lay out the strategy, flush out the right pieces.
So you can actually scale your SaaS business.
The go-to-market program is application based,
meaning we want to make sure we bring on the right people
and we can actually help you. We're super boutique.
There are other coaching programs where, you know,
they want to get thousands of people. And like,
you don't even know who you're going to be coached by,
mine is super boutique.
I work with you and that's why we're super selective about,
we want to bring on the right people and that we can
actually help. So to learn more, just go to
TKKader.com/gtm.
over there,
you'll get all the details around the program.
And at the bottom, there'll be a little application link.
You just put in your information, plug in information,
and then you'll get on a call with my team.
When you get on a call with my team, they'll ask you
a few questions to kind of diagnose where you are and
figure if we can help you. If we can help you,
they'll tell you all the details around the program and then
we're off to the races. Now here's the big difference.
This coaching program is one where you work with me.
And the reason I have a team to meet with you when you apply
is so that I can spend 99% of my time,
with the people inside of the program.
And that's what I focus on. That's where all my time goes.
I don't have another job. I don't have another venture firm.
This is all I do.
And so I encourage you to go to TKKader.com/gtm.
Check out all the details about my go to-market-program,
fill out the info, get in a call.
And if there,
if we can help you we would love to have you in it,
it's an incredible program.
The founders in it are incredible.
It's been an honor serving the people that are in it.
We've had three plus companies, raise series A's,
We've had four plus companies rated C plus rounds.
Bootstrapped companies have kick-started growth.
It's incredible.
And so just go to that link and you can learn more. Now,
also, if you got value from this video,
please smash that like button for the YouTube algorithm it
means the world to us. Also, when we see that, also,
if you have a fellow founder,
a fellow team member that could get value from this video,
they need to embrace SaaS math. Also, just like I did.
And just like you probably did,
then please share this video with them and
it will mean the world to us. Also,
I drop a video like this every single Sunday with actionable
strategies on how to grow your SaaS business faster.
So if you haven't already be sure hit the subscribe button
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time I drop an episode like this. And lastly,
remember everyone needs a strategy for their life and their
business. When you are with us,
yours is going to be unstoppable. I'm TK.
I'll see you in the next episode.