S3E5 – How to implement the Growth Hacking mindset in your B2B SaaS? With Sean Ellis

What is growth hacking? and why is it important to implement your growth hacking mindset for your B2B SaaS? Well, In this episode on the Grow Your B2B SaaS Podcast, show host Joran Hofman interviews Sean Ellis, an expert in growth hacking and author of the book Hacking Growth. They discuss the concept of growth hacking and its application in startups and businesses. Sean shares his unique perspective gained from working with billion-dollar companies and emphasizes the importance of understanding the cause and effect of results in the growth process.

Why you should listen to Sean Ellis

Sean highlights the unique perspective he has gained from working with billion-dollar companies from the ground floor, allowing him to gain valuable insight into the cause and effect of results. He emphasizes the importance of focusing on the early growth trajectory and building the initial growth flywheel, drawing from his extensive experience in successful companies.

Sean emphasizes the importance of focusing on the early growth trajectory, which presents a unique challenge. He shares his experience in building growth engines after reaching product-market fit and discusses the significance of this stage in the growth process, offering valuable insights for startups.

Sean discusses his hands-on approach to growth, sharing that he prefers to work on a one-to-one interim basis with startups to guide them in building their initial growth flywheel after achieving product-market fit. He also shares his passion for teaching and staying involved in the execution of growth to keep his skills fresh.

What is Growth Hacking?

Growth hacking is a revolutionary approach to driving business growth through rapid experimentation and data-driven decision-making. Sean Ellis emphasizes the importance of a cross-functional process, where teams collaborate to identify growth opportunities and develop strategies to capitalize on them. Businesses can gain valuable insights to drive sustainable growth by prioritizing experimentation and continuous learning.

Common Growth Hacking Implementation Mistakes

Sean discusses common mistakes companies make when implementing growth hacking, such as implementing it one function at a time and neglecting the cross-functional nature of the process. He also emphasizes the importance of having the right growth leader, who possesses the right balance of diplomacy and assertiveness. Sean outlines the process of implementing growth hacking within a company, emphasizing the importance of aligning the team around the customer journey and key growth metrics. He also discusses the need for a dedicated growth team and the challenges of integrating growth into established functional ownership structures.

How to Grow to 10K Monthly Recurring Revenue

For startups aiming to reach the milestone of 10K monthly recurring revenue, Sean Ellis advises a balanced approach. He emphasizes the importance of alternating focus between new customer activation and new channel discovery. By maintaining a steady velocity of experiments and closely monitoring product-market fit indicators, businesses can progress towards sustained revenue growth.

How to Grow to 10 Million in ARR

As businesses scale towards 10 million in annual recurring revenue (ARR), the focus shifts toward operationalizing growth and maximizing existing successes. Sean Ellis emphasizes the significance of understanding what works and identifying avenues for scaling those successes. By building a full-fledged growth team and operationalizing growth strategies, businesses can effectively forecast, execute, and scale their revenue targets.

Growth Advice for B2B SaaS Founders

Sean Ellis shares an essential piece of advice for B2B SaaS founders – recognizing the difficulty of achieving product-market fit. He stresses the importance of thoroughly understanding the customer’s needs and creating a product that surpasses existing alternatives. By acknowledging the challenges of achieving product-market fit, founders can orient their efforts toward maximizing value creation and customer satisfaction.

In conclusion, Sean Ellis provides valuable insights into growth hacking and offers advice for B2B SaaS founders, emphasizing the importance of understanding and achieving product-market fit. He invites listeners to connect with him on LinkedIn and visit his website for more information about his workshops and resources on growth hacking.

Key Timecodes

• (0:40) Show and guest intro
• (1:45) Why you should listen to Sean Ellis
• (5:13) What is Growth hacking?
• (6:51)  Why is Sean so passionate about growth hacking?
• (8:11) The most common mistakes companies make while trying to implement growth hacking.
• (11:33) The ideal processes or strategies recommended to set up a growth hacking process
• (16:14)  Sean’s tested and proven framework
• (19:34) The common metrics to focus on
• (23:28)The best practices for achieving success in growth hacking
• (29:30) The most common challenges associated with growth hacking
• (33:13) How to grow towards 10K MRR
• (35:44) How to grow towards 10 million ARR
• (38:36) Sean’s crucial advice to B2B SaaS founders 
• (35:46) What Sean wishes he knew 10 years ago

Transcription

[00:00:00.350] – Intro

Welcome back to the Grow Your B2B SaaS Podcast. In this podcast, we cover all topics related to growing a B2B SaaS, no matter in which stage you’re in. I’m Joran Hofman, the host of the show and the founder of Reditus, which is a B2B SaaS that helps other B2B SaaS companies to set up, manage and grow an affiliate program. Being a founder myself means that I’m going through the exact same journey as you are, experiencing the same issues and having the same questions. And this is the reason why I started a podcast, getting advice from industry experts on a specific topic. If you like this content, make sure to follow, subscribe, review the show so we can help as much founders as possible. Let’s dive in.

[00:00:40.420] – Joran

In today’s episode, we’re going to talk about growth hacking. My guest today is Sean Ellis. Most people would probably know Sean from the book Hacking Growth, which is available in 16 languages, and he’s on track on 1 million books sold. He helped multiple companies with their initial growth engines, setting up the process from inception to an IPO, and from 2008, he started focusing on the more early phases of a startup to set up their growth engine.

[00:01:06.500] – Joran

He did this for Dropbox, Eventbride, and Lookout, which all received multibillion dollar valuations. He helps startups are now on a one-to-one interim basis on how to build your initial growth flywheel after you reach product-market fit. When he’s not a growing startup, he teaches growth at business schools such as Harvard, UC Berkeley, Imperial College, BC in London, INSEAD in France, and Trudigo Practice, Immersives Simulator Program. Sean is also co-host on the Breakout Growth podcast where they interview business and growth leaders to understand all facets on their breakthrough growth engine. I have no idea where he finds the time to come on, but it’s a real pleasure to have you on the show, Sean.

[00:01:44.710] – Sean

Yeah, thank you for having me on.

[00:01:45.910] – Joran

If people are not convinced after this introduction, why should people listen to you today?

[00:01:50.630] – Sean

I think one of the really unique perspectives that I have is that I’ve been on the ground floor of a lot of billion-dollar companies. What do you see differently on the ground floor? You get a lot more insight into the cause and effect of results. Personally, I can’t imagine if I went into, say, Heineken and was trying to move bottles of Heineken, how do I know which of the promotions that I’m doing that really move it like that, getting the cause and effect relationship on all the things you’re doing for a big brand like that would be really tough. But when I started with Dropbox and would log me in, and some of the companies that went on to these multibillion dollar valuations, we start with customer one, customer two, customer three, and you get a lot more signal of what works and what doesn’t work. Then more importantly, it gave me an opportunity to really focus on a stage where I think very few people have a lot of cycles, which is like building that early growth trajectory. I learned it after my second company, where I know I’m maybe jumping ahead to some questions you might want to ask about, but after the second company where I’d basically been on board for full five-year stints on the first two companies.

[00:03:03.720] – Sean

I learned that the most important contribution I made was in the early growth phase. Once we had a product that really resonated with the market, how do we figure out how to get the right people to try that product and ultimately to keep using that product, to buy that product, to get others to use that product? I think starting from blank slate is a lot different than, let’s say, you’re hired in three years into the business and you basically are coming in and understanding an engine and scaling and it becomes more about forecasting and where is that new growth going to come from. But that early growth where you’re going from the zero to one is, I think, a really unique challenge and one that I probably have more cycles and experience on successful companies than just about anyone else.

[00:03:46.930] – Joran

Out there. Yeah, I love it. And I also love that you’re now doing it on a one-to-one, interim basis. So you’re not just doing consultancy and just doing it from the sideline. You actually want to go in and help companies on the ground floor, as you mentioned.

[00:03:58.560] – Sean

Yeah, I really do love teaching and doing workshops and doing keynotes and speaking at universities, but it’s easy to become an academic if you do that for too long and theory starts to take over, and it must work this way. I’m going to start explaining it this way. But when you jump back in the trenches and you’re executing growth, you quickly realize that some of the things that start to sound good don’t actually work. It keeps my skills fresh, and obviously AI and things are changing. We didn’t have to think about AI when I was at Dropbox, and now it’s become a tool that’s pretty helpful for a lot of companies and will become more so going forward. And if I don’t stay fresh on my experiences, I’m going to probably be… There’s still some evergreen things that I think my book covers a lot of evergreen things that aren’t going to change. Growth process is really based on the scientific process, and that’s been around since ancient Greek times. There’s a lot of things that actually don’t change over time, but there are new tools and channels and opportunities that emerge. Being able to tap into those, you want to have good practice, fresh practice doing that.

[00:05:05.670] – Joran

Yeah, nice. It’s one thing to read a book or I have no idea, but to write a book, but actually keep doing it and keep educating yourself. If we just go zoom out for one second. The book is called Hacking Growth, right? People refer to term growth hacking. What does it mean to you? As in if you really look at it from an outside perspective?

[00:05:24.200] – Sean

It’s like boiling it down. I think it’s good to contrast it against what was the approach before the book and before the term came out, which is basically marketing as it’s taught in a textbook. What I saw is a lot of companies were just developing a strategy, and you had a marketing team executing that strategy, and then you had a product team who’s doing some other things, and hopefully it all fits together. Growth hacking to me is about experimentation. As I said, based on the scientific process, scientific method of you analyze the situation, you look for new opportunities for growth, you come up with ideas of how to capitalize on those opportunities. You need a system for prioritizing which ideas you want to test. You run the test, you analyze the results. Each time you repeat that, you get smarter about how you drive growth in the business. Just to differentiate a bit, someone listening to that who works in marketing might say, Yeah, that’s pretty much how you do marketing right these days. You’re testing advertisements, you’re testing channels. I think what’s different with growth hacking is that we’re doing it not just in the channels, but we’re doing it within the product too.

[00:06:30.060] – Sean

How do you get someone to a great first-time experience in the product? How do you keep them coming back and using it more often? How do you monetize better, drive up sales? All of these are growth levers that you want to be executing that growth process on.

[00:06:43.580] – Joran

Yeah, we’re going to dive into the process a little bit in a sec. You can already hear it, right? You’re really passionate about this topic. I’m just, first of all, question like, why are you so passionate about.

[00:06:52.880] – Sean

Growth hacking? I think it’s just cool. I’ve always felt if you’re going to do anything, do it the best you can, try to be great at whatever you’re going to do, and if you’re going to go in and half asset, then don’t bother doing it. To me, if you’re responsible for growing a business, you got to figure out the very best way you can grow that business. A process of continuous improvement and learning is really fun. Personally, I think it’s fun, and a lot of times it’s about identifying who needs the product, why they need it, how do I connect them to the great experiences that product has to deliver, and ultimately drive impact on the market that has a need. That’s something I do get really excited about, and I think founders get excited about it too. That’s why they go out and build companies. I’ve also been a founder. I launched and sold a couple of companies. To have the guts to launch a company, you have to be really passionate about a need that you feel like is underserved, and often you’re wrong and you have to make some adjustments along the way.

[00:07:52.420] – Sean

But then once you start to make progress against solving that need, the better and faster and deeper progress you can make that that’s really exciting. That means that you’re doing something important and you’re doing it well.

[00:08:04.960] – Joran

Yeah, and almost selling one million books is not nothing. I really love the journey already. When we dive into more into the topic, I always like to start with mistakes, and then we go into more best practices. What are the most common mistakes companies make while trying to implement.

[00:08:18.750] – Sean

Growth hacking? What’s most challenging about growth hacking is that it is a cross-functional process. And so the most common mistake then is they try to implement it one function at a time, and it just doesn’t really work very well to do it that way. I think it’s better to think holistically about the entire customer journey and what are the opportunities across that entire customer journey, and how do we capitalize on those opportunities? That would be one thing. And then the other thing that I’ve seen more recently, and I’m surprised I didn’t see it before, but maybe I just was blind to it, is there’s management theory. I think it’s a good idea and management theory to think in terms of ownership. You own this number, you own this part of the business, you own this part of the business. As you break up the business by different owners of, and again, that’s the functional side of things, the functions that each lead owns, then people try to find a box to put growth into. Growth becomes a function, and it just doesn’t work that way. Growth hacking, growth, head of growth, whatever you want to call it, is not a role of ownership.

[00:09:30.870] – Sean

It’s much more a role of influence. It’s better to have a growth leader who looks holistically across the entire business and is able to collaborate well with the owners of each of those individual areas. If you identify that, man, we could really grow this business better if we could just do a better job retaining our customers. We think retention is falling down either on activation or we just don’t have a good engagement loop in this product. You narrow focus on that opportunity, and usually there’s a team that would own that opportunity, but then to have a growth team come in and say, Hey, we’re going to help you really contextualize this, pull the data out, understand everything we can about it, run some customer research, some user interviews, some surveys, user testing, whatever we can do to really contextualize it, come up with a bunch of ideas and start testing those ideas, and we’ll provide you with some additional design, data, and engineering resources there. That’s a model where hopefully those teams get really excited about that, as opposed to getting territorial and saying, Yeah, stay out of my business. This is my area. That’s a behavior change that I think is hard to make.

[00:10:43.680] – Sean

That’s why I spend a lot of time thinking about these days trying to tackle that challenge.

[00:10:47.050] – Joran

I think that’s definitely going to be the biggest one where people think that this is my game. We know what we’re doing. We have our own metrics. Keep focusing on your own department and try not to bother us, basically.

[00:10:57.060] – Sean

Yeah. And then that really means that the growth team gets marginalized down to… Really common in Europe, you see them get essentially, they call it growth marketing. They essentially just get pushed atop a funnel. And it’s really even a growth hacking agency in Europe is often just a really creative, clever marketing agency. It’s missing the point. It’s not about just coming up with a real creative way to get people’s attention. It’s thinking, how do you test through that entire customer experience to get more of the right people, having the right experiences that lead to long-term valuable customers.

[00:11:31.590] – Joran

Yeah, makes a lot of sense. But if you come into a company, I can imagine it’s not going to be easy, right? You have to change the mindset. You have to go cross-functional from the beginning probably. What would be your process if you would go into a company? How would you set the foundation?

[00:11:45.840] – Sean

Yeah. The very first thing I do is I go and do some primary research myself so that I really go and ask the customers, which customers? How would you feel if you could no longer use this product? That’s become a question that a lot of people are asking. I came up with that question when I was at Dropbox 10 or 12 years ago. When I ask a question, I’m giving them the choice, very disappointed, somewhat disappointed, not disappointed. If I can find which customers say I would be very disappointed without this product, then find out what is the key benefit they get from the product and really drill into, okay, this is the key benefit, how you recommended it, how would you describe it to other people when you recommend it? What were you using before this product? If this product weren’t available, what would you use instead? Really just getting the landscape of how the product fits into the customer needs and customer choice set. I do that research usually in the first couple of days. I can do it really fast. Then I kick off with an alignment workshop with a broader team, where we’re initially starting in that deep customer research and coming up with, Okay, this is the primary benefit that we’re delivering to customers.

[00:12:55.660] – Sean

How do we quantify that? Coming up with a metric that everyone can say this is the most important metric. The metric that they may own in their functional department always needs to map up to that main metric. The lead conversion rate to a sale is not the most important metric. It’s the number of maybe active customers or active users is even better than active customers. People who are actually using the product on a regular basis, then they can say, Okay, my local metric that I’m responsible for, this is how that feeds that broader metric. I basically spend a full day with the team just getting that alignment around how growth works, getting the input of everyone, and then just deciding, Okay, who’s going to be involved in the week-to-week growth testing process? And usually it’s a combination of dedicated people and some people who may ad-hoc serve on that. So maybe a head of engineering sits in on that meeting, but wouldn’t necessarily be considered on the growth team, but there may be a dedicated growth engineer, though, that is on the growth team, but then dotted line reports into the head of engineering. And same thing on the data side, same thing on the design side.

[00:14:07.530] – Sean

Ultimately, that team becomes the team that really keeps the company focused on what are the biggest growth opportunities that if we can get a doubling in activation rate, that’s going to drive 5X growth in the business. If we can improve a doubling of retention, that’s going to get whatever X improvement in the business. And so really shining the spotlight both on where is the leverage for driving improvement, but also where is it most broken right now or the most opportunity for improvement?

[00:14:37.340] – Joran

Yeah, makes a lot of sense. And is it going to be like a separate team from the beginning or is it more people are in the team and you create like a squad or.

[00:14:45.110] – Sean

A-yeah, I don’t think there’s a one size fits all required way to do that. I recently went in and did this with Bounce, a company out of Portugal, where I was the interim VP of growth, was there for six months. And I very specifically said, I don’t want any direct reports. And so being the head of growth without any direct reports, it just meant that the growth engineer directly reported into the engineering team, the growth designer directly reported into the design team, but everyone knew that 100 % of their cycles were on the growth team. I think it’s going to depend on a super early stage company. Pre-product-market fit, you’re probably not even going to have a growth team. You don’t want to focus on growth. You want to focus on getting the product right. But once you have product-market fit, then initially what I say is focus on experiment throughput. Don’t try to build the team and then experiment. Start experimenting and figure out where the bottlenecks are that are preventing you from experimenting. I would generally start with an ad-hoc team that forms from existing teams. Then if I’m constantly fighting, the thing that stops us from experimenting is we never have design resources available, then okay, let’s get a dedicated designer, growth designer or engineering or whatever it might be, whatever that bottleneck is that’s preventing a high velocity of testing, hiring dedicated to solve that bottleneck.

[00:16:14.300] – Joran

I think in your book you also talk about a framework, right? Can you tell a little bit more about that?

[00:16:18.980] – Sean

I’ve referred to the growth engine a few times. To me, that’s essentially all of the levers of growth. And so AA, R-R-R is acquisition, activation, retention, referral, and revenue. An improvement in any of those levers is going to improve the growth rate in the business. It’s a good way of looking at the business. I originally came from Dave McClure, founder of 500 Startups, and it’s been become pretty widely used in marketing and growth for a lot of years since then. It was probably like, I want to say around maybe 2005 that he came up with that. I think it’s just a good way of bucketing. Increasingly what you’re seeing is when people think about that not so much as an R-Funnel, but a funnel that has some loops built into it too. Referral would be really a loop, and even engagement retention would be a loop, and then revenue potentially is a loop that feeds your paid marketing engine if you have paid marketing as part of it. So it’s not just this linear funnel, but it’s a bit more complex and it’s going to be different for every business. A two-sided marketplace is going to have both sides there.

[00:17:31.680] – Sean

For Uber, you’re going to have a driver and a rider part of the engine. But what I find is, again, this is right upfront when I’m working with a team. One of the first things that I’m doing is really trying to get the viewpoints of each functional lead to combine those perspectives to create the richest view of what we think that growth engine looks like.

[00:18:00.030] – Joran

Yeah, and I think like that the framework indicates as well. You need people within the different departments, otherwise it’s not going to work if you’re going to go all the way to the R funnel.

[00:18:09.590] – Sean

Yeah, and usually the hardest one to break into, in my experience, is product. One way around that you see a lot of times product will actually own growth. It’s easier for product people to influence marketing than for marketing to influence product, even though they teach us in the books that there’s the four P’s of marketing and one of those P’s is product. But in the reality of the world, it doesn’t always work that way. I do think growth as a function that sits outside all of the departments probably makes the most sense. But if I had to slot it into any one department, I would say product makes the most sense because if you’re trying to impose it from the outside, product tends to be the most territorial because I get it. They don’t want someone junking up the product experience, but the person who’s leading growth hopefully realizes that junking up the product experience is the opposite of growth. That it’s about the fastest way to growth is figuring out what are the barriers to a great experience for a customer and how do you remove those barriers and build momentum and desire toward experiencing the product in the right way.

[00:19:10.540] – Joran

This podcast episode is sponsored by Redit. Redit helps B2B SaaS companies to set up, manage, and grow an affiliate program. In short, it means you’re asking other people, affiliates, to promote your SaaS. You would only pay the affiliates a kickback fee when they deliver you paid clients, making it a very cost effective and scalable way to grow your MRR. See more at getreadytis. Com. You talked about a little bit already metrics, as in when we look at B2B SaaS companies, are there any common metrics you always focus on? Can you explain a little bit about that?

[00:19:44.610] – Sean

Yeah. I think obviously B2B SaaS, MRR, ARR is going to be an important metric for most B2B SaaS. I think that’s a great improvement over the traditional licensed software model where a lot of stuff ended up being just shelfware. You make the initial sale and that’s what the sales team has really incentivized on and nobody really cares if the company is successful with it. Once it went to subscription, then at least you have a big incentive to make sure they’re getting enough value to renew those subscriptions. But where I think ideally on a North Star metric, let’s say you sell a bunch of annual subscriptions, you can be blind to the fact that people aren’t getting value if you’re just focused on MRR or ARR there. Because if it’s an annual, you’re not going to see the churn for 12 months. And so if you can narrow down to how does someone get value from the product on a day-to-day basis, if they’re getting value every day, the likelihood that they churn from the product is going to be really low. And that’s why, like Slack, for example, they look at daily active users. And so knowing that the more daily active users they have on the Slack platform, the more likely that customers are going to continue to pay for it over time.

[00:21:00.160] – Sean

I’ll give some B2C examples, just because most people know the B2C companies more. The Uber, I think, is a great one where they’re looking at the weekly rides. There’s a bit of a cyclical pattern of usage. Maybe Friday and Saturday nights you’re going to get more Uber usage, or in some places, maybe it’s more workday transportation, so you’re going to be more Monday through Friday. They look at it in weekly increments, and they’re looking at weekly rides is the goal that the Uber team is trying to drive, try to increase over time. And weekly rides is going to be a function of how many drivers are in the network, how many riders, and how frequently drivers are delivering rides, and how frequently riders are asking for rides. You can grow that by adding new riders. You can grow that by increasing the number of rides per rider. But all of that maps up to increasing the weekly rides. They know that if they have 10 % more weekly rides this month than they had last month that they’re creating more value for people and that growth is likely to sustain over time versus let’s say if they were just tracking app downloads, a lot of people download apps that they never use.

[00:22:11.010] – Sean

It’s important to actually focus on what is the primary benefit people get from the product and how do I measure how much of that benefit is being delivered in any given time period?

[00:22:19.760] – Joran

Yeah, I think we need to sound really simple, right? Find the value drive, put your North Star metric against it. In practice, it’s often a bit more tricky. For us as an example, we put the monthly recurring revenue generated for our clients as the North Star metric, but we also even put our pricing against it. So if they don’t have success, we’re not going to charge them anymore as well. So we even went all in on that one.

[00:22:42.760] – Sean

That’s awesome. Good for you. You said it can be more complicated, but I also think I’ve seen teams literally debate it for three months, and I don’t think they come up with any better North Star metric than a team that talks about it for 30 minutes and just decides. I would just be careful not to overthink it also and just reserving the right. I mean, the one thing is you don’t want to change your North Star metric every month. It may take you a couple of iterations to hone in on the right one, and that’s okay. You’re better off having a metric that you use, say, for a month or two and then say, It would be even better if we actually switched it to this and then that’s fine. But yeah, I think sometimes people make the mistake then of feeling like, Okay, well, it’s going to be this quarter’s North Star metric, and that’s not what you want to do.

[00:23:24.190] – Joran

Nice. That’s a common mistake, maybe also a best practice to stick to it. Can you maybe share some best practices regarding companies who implemented growth hacking really well? What did they do? Why did it went so well for them?

[00:23:36.510] – Sean

I like to try to really simplify things down as much as possible. One of the things that I think really important, we’ve covered already, North Star metric. If everyone on the team knows the North Star metric and it’s reported very publicly where everyone sees progress of that North Star metric, whether it’s every day or weekly changes in it, but that’s beamed up on big screens in your office or if you’re a remote team, that first screen that people see when they log in, they see that North Star metric, that should be the thing everybody’s focused on because that’s units of value delivered to customers. But that’s a result metric, and then what is it that you do that moves that result? I would go the other end of the extreme on that, and that’s really a function of you don’t drive improvement until you try new stuff. And trying new stuff is also called testing. And so quantifying the amount of testing that you’re running in any given time period, I think a lot of people spend so much time trying to figure out the best test to run that they may run one test in three months or one test in three weeks, where if they can have a much more consistent release of tests, which is going to then directly lead to a more consistent units of learning, and units of learning is what feeds your ability to improve your growth rate.

[00:24:56.070] – Sean

And so quantify how many tests you’re running, set goals around the number of tests, and stick with them. And if you’re not hitting that test velocity, test smaller. Figure out smaller things to test. Take a big test that may be weighing you down and figure out how do we break that into three separate, smaller tests, and then we get three units of learning instead of just one unit where we may not be able to isolate what it was that actually caused the benefit. So that would be on a big level of best practice. Then the next level down from there would be not just random testing, but testing based on understanding. It’s really hard to improve something that you don’t understand, so really taking the time to understand. If I have a big drop-off, I’ll give you an example from Logme In, we had a channel that sent 200,000 new people per day to the website, and it was really cheap, like two cents a visit. We got really excited about this channel, 10% sign-up rate from that channel. So 20 cents sign-ups, which were way below what our allowable cost per sign-up was. But at the next step in the funnel, we had a 90 % drop-off at the download step.

[00:26:03.020] – Sean

We were really confused why. We basically thought, Okay, maybe they just don’t believe it’s secure. Then we went and got security magazines put their symbol on there and quotes on why it’s really secure and that didn’t really help. Maybe they didn’t see the download button. Let’s make it bigger and red, all these areas. Let’s make sure that they know that it’s free to download. Let’s put the word free big on there. We did all these things. I think we ran at least 10 experiments. None of them improved the download rate. We’re ready to pull the plug on the channel. Then we finally said, We have 20,000 people a day that are actually signing up through this channel. We have their emails. Let’s just ask them, Why did they sign up and not download the software? It would be a little creepy to ask it that way. We just made it look like it was coming from customer support and said, I noticed you didn’t get a chance to use it yet. Can you help me understand why? Anything I can help you with? In one day, we got a bunch of people coming back saying, I don’t believe this is free.

[00:27:03.930] – Sean

And so it was the early days of freemium software. And so now that we understood what we were solving for, we weren’t solving for how to get a higher download rate. We were solving for how to have people feel comfortable that it really is free. Our next experiment gave us a 300 % improvement in the download rate. And it was basically we gave them a choice, download the free version or download a trial of the paid version. We put a big graphical checkmark on the free version. But when they saw that we had a paid version also, it gave credibility that the free version was real and that made that channel work. But it just shows that, yes, a lot of testing, there’s no improvement without testing. You and I talked about that before. It’s like in the soccer analogy or football for Europeans that shots on goal is going to… Every shot you don’t take is a shot that’s missed for sure. And so every test you don’t run is a test that did not improve your results. And so you do need to run the test. But if you can be smarter about really being clear about the problem you’re solving and contextualizing that problem, the likelihood of big winning tests is going to go up.

[00:28:12.300] – Joran

Nice. Really random question. What was behind the buttons? Were the buttons doing the exact same thing? Were they downloading the exact same software?

[00:28:19.340] – Sean

That was a different test that we learned was before it used to be you would download the same piece of software, but the software would basically display the free version or display the premium version. But then one of the experiments we ran was instead of thinking of it as, okay, first we got to get them on the free, and then we got to convince them to do the trial of the paid, let’s combine those funnels. And so they clicked on the download for free, and then it said, Congratulations for the first 30 days. We’re giving you full premium functionality, and it will automatically turn off after 30 days. So you won’t lose anything and you’ll still have remote access to your computer. But then we had come up to us and say, Hey, that’s a bait and switch. We had to add one little piece of text in there that basically said, If you don’t want premium functionality, just go to settings and you can turn it off. When we added that, that doubled our conversion rate to premium.

[00:29:13.420] – Joran

That’s really interesting. I love it. Maybe final question before we dive into the final four questions. You’ve been implementing, and I asked it a little bit already, you’ve been implementing growth hacking mindset within lots of companies, right? I can imagine it doesn’t go as smooth as always you would think or you would like to. What are the most common challenges you ran into and how did you overcome those?

[00:29:35.400] – Sean

I think there’s two extremes. On one extreme is the company that’s too small that they don’t have product-market fit yet and they can’t growth hack their way out of that. They need to patiently iterate on core product to dial in product-market fit. That’s on one extreme. But the other extreme is you get a really big company that 10,000 employees. It’s a cultural change when you start to work cross-functionally around a shared metric with a unified view on the customer experience. These are things that are really hard to change in companies that have been around for 50 years or 20 years and thousands of employees. It’s part of the reason why startups often disrupt larger companies is that they can be more agile and make the changes. But you are seeing some very large companies that have had success in adopting this. Microsoft has definitely been successful in adopting growth hacking. They were actually one of the first workshops that I ran, but IBM as well. You’re seeing big tech companies that have adopted this, and it has to be very top-down support, but at the same time, very organic where everyone across the company buys in, and that’s why a workshop tends to work really well.

[00:30:51.420] – Sean

Works well for companies of all sizes, but particularly for the really big companies that need to go through some major cultural changes. I would say that I’ve underestimated the importance of the right growth lead. I think the right growth lead, what I’m finding increasingly that they need a mix of both essentially diplomacy, but aggressiveness. There’s almost sound like two opposites, but aggressiveness to insist that just because we have a new product release coming out, we’re not going to temporarily take the engineers away from the growth team to help that, or the designers for a new homepage release that we’re trying to do. They have to have those dedicated resources. They have to be able to push against some of those forces where I said, Okay, we’re moving to a system of ownership, and so the growth team is getting pushed into a little corner. They need to have the spine to push back on some of those things and say, This is what we need to be effective and here’s why growth really matters. We were all in the workshop together and being able to keep referencing back, but doing it in a way where they’re diplomatic enough that they don’t create that resentment and permanent pushback from people who are going to be needed to be successful with it.

[00:32:07.310] – Sean

I think that’s one of the biggest challenges in the Right Growth Leader is finding that balance of diplomacy, but also aggressiveness in making sure that the key elements are in place and stay in place that are needed for success.

[00:32:24.890] – Joran

Nice. You mentioned workshops quite a bit. I think we have some good news for people listening because you are doing a world tour starting from January 2024, right? Right, exactly. Basically helping companies with workshops all around the world.

[00:32:37.010] – Sean

Yeah. So I’ll do my first leg will be South America, then traveling Turkey, Middle East, India, up and down Asia, Australia, and then a couple of months later, I go home, visit my family for a while, and then a couple of months later, I’ll go to Europe and do several countries in Europe as well. I just got back from Egypt, so I did just touch the African continent.

[00:33:02.020] – Joran

Nice. It sounds also really fun as in really trying to kick it off and then you can go back and you can actually start implementing it. We’re going to come to the four final questions. So when we talk about growth hacking, what advice would you give somebody who is just starting out and grow to 10K monthly recurring revenue?

[00:33:21.190] – Sean

To get to 10K monthly recurring revenue? The biggest thing there is you’re going to need to experiment with channels a lot because people need to discover the product. But channels only work if activation works well. I would basically, in the early sub 10K MRR, be going back and forth between new customer activation and new channel discovery. A month on one, a month on the other. A month on one, a month on the other. You might have some people who are constantly owning that, but having a growth team bouncing back and forth between those. The only caveat there that I would say is when you’re sub 10,000 MRR, there is a very good chance that you have a false indicator of product-market fit. I would make sure that you’re going back and monitoring the metrics that relate to product-market fit. One of those being retention. Am I actually able to retain usage from the people who are coming in and buying the product, or if I have a free version that are coming in and signing up for the product? The leading indicator of that is the one that I mentioned, just asking users, How would you feel if you could no longer use this product?

[00:34:32.220] – Sean

Generally, when I see around 40% or more of the users saying that they’d be very disappointed without it, those are companies that I tend to see grow over time. That’s a quicker wave. You don’t have really good retention tracking in place to at least get some indication if you have that product-market fit. But those would be the three focus areas, making sure you got product-market fit and then making sure that you are sending enough new people in, but that you are also doing enough cycles to make sure they have a great experience with the product.

[00:35:04.190] – Joran

Yeah, because in this phase it’s really easy to put on some money on ads or start running cold email outreach and you start growing the MR. You look like fake product-market fit but in the end you need to really focus on retention because otherwise you’re going to fill a leaking bucket at the end, basically.

[00:35:19.390] – Sean

Absolutely. I think a lot of people underestimate how important first user experience is to long-term retention. The activation work is going to benefit you in being able to drive retention as well. But if you don’t have product-market fit, even if you’re really good at activating and getting them to the right first experience, that first experience isn’t good enough to retain the users long term, then you probably don’t have product-market fit.

[00:35:43.120] – Joran

Yeah, makes sense. If we go past that point, let’s say we reached 10K monthly recurring revenue, and I’m going to make a big jump, what advice would you give somebody who’s growing towards 10 million in ARR?

[00:35:54.660] – Sean

Yeah, at that point, I like to spend a lot of time understanding what’s working, monitoring where all users coming from. If one of those channels drops off, I can find out why. Sometimes it could be as simple as just a broken link that happened or a budget ran out somewhere. Then which customers are we able to retain best? Just making sure that we’re going out and targeting more of those types of customers, but really learning from the data of your success and just doubling down on the things that are working, and then building out more of a full experience growth team that is constantly looking for that next great opportunity to drive improvement. Sometimes it may seem like you have a great opportunity to drive improvement. You spend a full month, say, working on improving your frequency of usage or your engagement loop, and you’re not able to make any progress. Maybe you were more optimized there than you thought you were, and so that’s okay, then you focus on a different area. That’s why I don’t like to do real long term, a six-month campaign on one area, because if you’re wrong, then you end up burning a lot of resources.

[00:37:01.050] – Sean

I’ll do max 45-day focus area, and then after that 45 days, I may say, Oh, let’s do another 45 days or another 30 days if we made a lot of progress, but it’s just easier to switch off to something else if the opportunity wasn’t as good as you thought it might be.

[00:37:17.180] – Joran

Yeah, makes sense. Come back to what you were already saying. Velocity of the experiments, make sure you keep running them, but also keep them short so you can see the results in quickly.

[00:37:25.860] – Sean

Yeah, but a lot of it’s just operationalizing the growth. Once you get beyond that 10,000, when you’re setting your targets, revenue targets, being able to say, How am I going to get to those revenue targets? What are the things that we’re doing right now? If we just take the trend lines on those, will those get us to the targets? If not, where’s that extra 20 percentisn’t going to come from? And being able to have a hypothesis around it’s going to be from one of these three channels, and here’s how much money we’re investing into those channels, and so you just get better on being able to do that forecasting because increasingly as the business grows, forecasting does become important. Personally, I like the figuring out stage up front. I don’t like as much personally the operationalizing the growth stage because it is a lot of managing existing things. But within a company, I have found that some people really like to be those explorers to figure out new channels, and others like to be the ones that manage. They like the certainty and predictability a lot more, and they want to manage the existing ones, figuring out which people on your team prefer one or the other and letting them sit in the zone they feel more comfortable in.

[00:38:34.380] – Joran

Makes sense. If we zoom out, is there any advice, more general advice that you want to give towards B2B SaaS founders who are on their journey no matter the stage they’re in right now?

[00:38:45.100] – Sean

I would say in my own experience with two B2B SaaS startups that by far the hardest is getting the product-market fit. And if you’re past product-market fit, congratulations. If you have product-market fit, congratulations. Then it all comes down to execution. And hopefully some of the tips I’ve given today will help you with that execution. But you have created value that is better than anything else out there that your customers know about. And so it’s all about how do I get it in the hands of more people who need it and get them using it in the right way. And yeah, it’s move fast and capture those markets. But my main thing is recognizing that the hardest part is getting to product market fit. And that’s where I think before I was a SaaS founder, I underestimated how hard that part would be. And so if you have it, then you definitely want to maximize it.

[00:39:35.630] – Joran

Yeah. What I learned within SaaS, everything takes longer than you wanted it to take, that’s for sure.

[00:39:42.070] – Sean

Yeah, and it’s really tempting to try to jump into growth prematurely, and that’s the fast way to kill a business.

[00:39:48.070] – Joran

Final question. What is one thing you wish you knew 10.

[00:39:51.360] – Sean

Years ago? I think it would be exactly what I just said, that creating product-market fit is a lot harder than I think I recognized. I spent 10 years chasing product-market fit when I had developed and still feel like I have a unique skill set around executing on product-market fit to maximize the value of a company. You start getting greedy and you’re like, Gosh, instead of 0.5%, I could have 100% of something that I’m the founder of, and then even by the time I dole out the rest of the equity to other people, I’ve still got 50%. But 50% of a grape is not as good as 10 % of a watermelon, I guess you say.

[00:40:32.090] – Joran

Yeah, nice. If people want to get in contact with you, Sean, how can they.

[00:40:36.000] – Sean

Do that? I’m most active on LinkedIn these days. So yeah, just Sean, LinkedIn slash, I-N slash, Sean Ellis. But also, II have a website that lays out some of the things I’m doing on shonellis. Me. Those might be the two best ways.

[00:40:53.000] – Joran

Cool. We’re going to link them to your site. We’re going to link to your LinkedIn profile. I think one thing for people that take the key takeaway, like definitely put your North Star metrics somewhere where people see that the first login. That’s one thing I’m going to ask my developers to do tomorrow. Sean is doing his workshops in his world tool starting 2024, so definitely check that out as well. We’re going to link towards it and then also check out his book Hacking Growth. He’s on his way to 1 million copies sold. So really well done and hopefully we’re going to sell some after this show as well. Perfect. Nice. Thanks for making time, Sean, and coming on to the show.

[00:41:26.800] – Sean

Of course. Thanks for having me on.

[00:41:28.410] – Joran

Thanks again for listening to the Grow Your B2B SaaS Podcast. If you found value in today’s episode, please leave us a review, follow us, thumbs up. You know what to do. If you want to sponsor the show to reach a SaaS founder, just ping us on LinkedIn. And if you’re experiencing any specific challenges right now, let us know as well. We’re always looking for topics to cover in our show. For now, have a great day and keep growing your B2B SaaS.