A Founder’s Playbook for Efficient Go-to-Market Scaling

There’s a saying that first time Founders focus on product and repeat Founders focus on distribution.

The lesson that’s been learned by repeat Founders is simple:

The top reason startups fail is due to an inability to scale efficiently.

So it’s not a surprise that repeat Founders focus on what matters most.

What follows is a primer on how to think about various go-to-market options:

Contribution Margin

Every marketing strategy should start with an understanding of the unit economics of the product/offering. The greater the contribution margin (in absolute dollars) the more options a startup has to scale.

If a product can only throw off a few dollars of contribution margin then the channels a startup should be testing will be very different than if the contribution margin were a few hundred or a few thousand dollars.

Even if the contribution margin isn’t understood with precision, it’s not difficult to estimate the “ZIP code” of the economics and back into what the acquisition costs will have to be for a new customer to pay back the marketing spend in a reasonable amount of time.

For instance, if the contribution margin is $5 a month and the required payback on marketing is 12 months then the marketing costs have to be less than $60. If the contribution margin is $250 a month, the marketing costs can be $3,000 to have a similar payback period.

To state the obvious, the channels that can produce customers for $60 are different than those that have $3,000 to work with which leads us to a series of questions:

Sales Organizations

If a startup is selling a product that needs to be explained by people, it has to produce enough contribution margin to make the go-to-market math work.

Sales costs are a major tax on a business because people cost between $0.50 and $2.00 a minute and sales calls can range in length from a 20-30 minutes to many hours. At the extreme, enterprise sales can take hundreds of hours and many in-person meetings so the costs can easily explode.

And if the economics don’t support people in the sales and onboarding processes, the product needs to be buyable in a self-serve fashion. Full stop.

Intercepting Signal

If a startup’s target audience has a distinct problem and the prospective customers are actively searching for solutions to that problem then it’s possible to find channels that can intercept this signal.

Pre-internet, the highest signal channel was the Yellow Pages. Today, high signal channels include Google and product specific comparison sites. In the future, product solutions are going to have to be discoverable by AI bots built on top of LLMs.

But intercepting signal isn’t always a smart strategy. The contribution margin and funnel efficiencies of a startup relative to those of other companies competing to intercept signal in a channel determine how viable the channel is.

The advantage to intercepting signal is that if a startup has a truly better solution to a problem that a customer is looking to solve then the “interception of signal to sales ratio” can be amazing.

But because there’s typically a lot of competition for any given signal, buying clicks can make “efficient scaling” challenging. Most incumbents can afford long payback periods which makes the math of intercepting signal challenging for startups.

Building Awareness

Other marketing channels are designed to build awareness (i.e. Social Media, TV and Billboards). In these channels, customers aren’t directly seeking out solutions to problems. Instead, the channels present a startup’s value proposition to prospects to pique their curiosity.

Building awareness can be expensive if there aren’t enough target customers in the engaged audience and if the target customers aren’t highly receptive to a company’s offering.

Cracking channels that build awareness can be tricky because it’s easy to generate low-signal top of funnel interest but difficult to generate high-signal top of funnel interest that converts to customers.

The truth is that funnel demand generation often appears cheap but the funnel inefficiencies routinely crush the economics. And it’s impossible to avoid paying to build awareness with customers who have no interest in your product.

The advantage to building awareness is that if a startup has a low friction sign-up process, a large target market and a compelling value proposition it’s possible to put loads of marketing dollars to work given how deep these channels are.

Partnerships

Borrowing brand and distribution through Partner channels is another form of building awareness and can be very efficient if the Partner has highly engaged customers who trust their endorsement.

But most partnerships fail because the Partner is typically much larger than the startup trying to access the Partner’s customers and this imbalance is difficult to navigate in terms of incentives and urgency.

This disconnect materializes frequently because most startups that sign a Partner overestimate their ability to generate substantive results even when the Partner has a huge user base.

Content Marketing

Intercepting signal with high quality content can work but it’s an investment that takes time to prove and requires unseating existing content owners. And with the Cambrian Explosion of new AI solutions, winning the content game is becoming even more difficult.

The “so what” is that it’s possible to assess in advance what the odds are of a startup cracking a given channel, especially if the odds are low. Eliminating channels is critical because you have to believe in the probability of cracking what’s left.

And always remember this gem: “The best place to hide a dead body is the second page of Google search.”