Running and I have, let's just say, an odd relationship, mainly because we just don’t have a good relationship. I’m built like a fluffy battering ram and battering rams aren’t known for their agility or endurance, they’re known for their brute force.
And as I’ve worked to drop, what I’m calling the Founder 75, I found that my approach to running was too elementary. Most of us think running is just starting to move quickly in a particular direction and go until you stop, and that's, ta-da—running.
But in reality when you talk to the top marathoners or sprinters in the world, you learn it’s all about pacing and breaking down the run into incremental stages and doing what needs to be done in each of those stages.
Sprinters spend years developing, literally, the first two seconds of a race coming off of the blocks. And marathoners learn the exact number of steps needed in the first two miles so they don’t push too quickly and burn fuel that they're going to need in mile 21. Every stage has a purpose and intention.
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In the land of SaaS we also have these stages. We think it’s just about growth and getting more revenue, but each stage has a clear purpose. We initially start with getting to product market fit, and once you’ve reached that—well, actually what happens in Stage 2? How do you scale the thing you’ve gotten traction on? How quickly should you push revenue before you’re at risk of going way too fast and falling off the rails, or maybe you're actually moving too slowly?
These are the types of questions perfect for today’s guest—Mark Roberge, the founder of Stage 2 Capital. As a member of the founding team at HubSpot, Mark was instrumental in designing what is now considered the vital sales playbook for scaling in Stage 2 and beyond. After leaving HubSpot as a Chief Revenue Officer, he became a senior lecturer at Harvard Business School and now serves as the Managing Director for Stage 2 Capital, which helps develop SaaS companies in the stage where most of them are going too fast or too slow, and burn up all their energy. He’s going to help us set the pace for our own scaling.
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Here we summarize the main takeaways for you to implement or hand off to your team for implementation.
What is the science of scaling?
The science of scaling is a framework to help guide entrepreneurs through the scaling process. It helps answer two crucial questions: When should we scale sales and how fast? And it does so with a scientific data-driven approach.
The ebook, The Science of Scaling written by Mark Roberge himself, “defines each stage of scale, establishes a quantifiable measure for each stage, structures the sequence and signals of when to move from one stage to the next, and explores the optimal go-to-market design of each stage.”
Why is it important?
Too often, non-data-driven information is used to determine scaling strategies, which leads to false outcomes, and ultimately, failure. The Science of Scaling framework provides entrepreneurs with a solid, scientific, data-driven approach to help make informed decisions about their business in order to successfully scale.
Utilize the framework to determine the accurate answers—for your business—to the two, key questions: When should we scale sales and how fast? Do this before any decisions are made for the next quarter.
We’ve included a sneak preview to get you started straight from the ebook.
The framework consists of three stages: product-market fit, go-to-market fit, and growth and moat.
Product-Market Fit, defined as generating customer success consistently
Go-to-Market Fit, defined as generating customer success consistently and scalably
Growth and Moat, which provides a scientific approach to the pace and defensibility of scale
The ebook is organized by the three stages of the framework, elaborating on the definition, measurement, and optimal execution required in each. Remember, the overarching mission is not slower growth, but healthier growth. The goal is not a short term “triple, triple, double, double” but a long-term “home run.”
Phase 1: Product-Market-Fit Section Summary
➢ We use “product-market-fit” to make critical decisions such as when to scale. However, we lack a scientific, data-driven definition of the term.
➢ Customer retention is the best statistical representation of product-market-fit. However, customer retention is a lagging indicator.
➢ Assuming long-term customer retention is the best statistical representation of product-market-fit then:
➢ Organizing our customers into acquisition cohorts and measuring their progress toward the customer retention early indicator enables early identification of product-market-fit.
Phase 2: Go-to-Market Fit Section Summary
➢ Go-to-market-fit is acquiring and retaining customers consistently and scalably.
➢ Strong unit economics is the best measure of scalability and, in turn, go-to-market fit. However, like customer retention, unit economics are lagging indicators.
➢ Therefore, we need to extract the long term unit economics target into short term go-to-market activity goals
Phase 3: Growth and Moat Section Summary
➢ We are ready to scale when we have product-market-fit and go-to-market fit
➢ Scale is a pace, not a single lump sum event
➢ We should scale as fast as possible without losing product-market and go-to-market fit.
➢ Use the speedometer to determine the moment we lose product-market or go-to-market-fit
Get the complete ebook, The Science of Scaling for the complete and thorough framework that is being taught at Stanford, Harvard and MIT, now, for the path to long-term success.
What to do within the next year:
After going through the framework you should have the answers to the two key questions that are key to scaling successfully. Utilize the data and output to make informed decisions and changes/updates to your strategy moving forward. Continuously evaluate your output and results as things are constantly evolving.
Who should own this?
Executives and leaders directly involved in the sales or revenue process, as well as your sales teams.
Watch the full episode
Coming up next week?
Next week, we've got Jeetu Patel, who talks to us about how to choose the right problems to solve.
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This is a ProfitWell Recur production—the first media network dedicated entirely to the SaaS and subscription space.
By Patrick Campbell
Founder & CEO of ProfitWell, the software for helping subscription companies with their monetization and retention strategies, as well as providing free turnkey subscription financial metrics for over 20,000 companies. Prior to ProfitWell Patrick led Strategic Initiatives for Boston-based Gemvara and was an Economist at Google and the US Intelligence community.