How to Reach $10M ARR on a Shoestring Budget
Matt Epstein, CMO @ Rippling
Sales & Marketing Stage
Ascent Conference 2020
[00:00:01] All right, so hi, everyone. My name’s Matt. I am the CMO of a company called Richling, which tell you about a second. And today I am going to tell you how and I have back to back and been able to go from zero to 10 million dollars, plus an error on a typical shoestring startup budget. And and that really consists of three things. So first is finding the killer message the thing that cuts through the noise. The second is growing on the cheap. And because most most startups don’t raise one hundred million dollars and they’re still around. And then third is building that initial core team that you need to execute. And so before I get started, I just want to quickly kind of tell you about myself. So you hopefully have a little trust in why the things I’m sharing, or at least some of them can help you on your journey. Ten million in error. And so before replying, which just because I’m a CMO, I have to tell you guys about rippling as the first way for businesses to manage and automate everything that touches the employee. So it allows a business to manage at everything from employees payroll and benefits to their computers and apps and a single system. And so that’s where I’m currently at as CMO. But before that I was actually that literally the first employee at a company called Benefits and. Where we grew quite fast, I’ll get to that in a second, but, you know, I joined as the first employee, literally worked with Parker, the founder, in his kitchen and didn’t get paid for months and months and months. I literally lived off Papillote a burrito’s, which is a production in San Francisco.
[00:02:00] And eventually we we raised a seed round and moved into what was essentially a closet, which you can see on the right, had no windows, very hot.
[00:02:11] And and, you know, over the course of the year, I was able to go from zero to 10. That millionaire are on a million dollar well, less less than a million dollar marketing budget with effectively a two person marketing team and me and one other person. And there is you know, there was things like stars and and things like that.
[00:02:36] And at riffling again, very similar story, I joined as one of the first few employees, and while I can’t share the details, we are obviously a very similar trajectory and using the same framework again, which I’m going to share with you all. So the first step is how do you find that killer message, the thing that cuts through the noise? And so there’s actually a sort of scientific data driven way to figure out the central idea that resonates with people. And that and that is essentially AB testing through AdWords to s.m display ads, school network and Facebook.
[00:03:21] And and I’ll show you what that process looks like. But this is not only an affordable way to figure out the message that works, but it’s a scientific way to actually figure out without with actual certainty what works.
[00:03:35] So I’m going to use this sort of fictitious example here. This isn’t exactly what we did, but I’ll give you a rough idea. So think about your own product, your own company, and all the ways you can skin the cat that you can sort of at the highest level explain this thing. So in this example, let’s just say we have two ideas. What what what sort of hooks people more resonates more this idea of all in one and IT software. The first the first way to manage all the recharging at one place or this idea of employee management platform that allows you to manage everything that touches the customer, their payroll benefits and so on. And and so what you do from that point is you take those two messages and your first step is just to buy PPC ads. So you sort of angle one on one HRT software angle to want to point out as a platform. And then you just a test, a test baby test until you find the ad that has the highest clickthrough rate.
[00:04:38] And you’ll definitely notice that there is just one or at least you’ll notice when you eventually find the thing that works, that there is one thing that just works head and shoulders above the rest from a collective perspective.
[00:04:51] And you go through that exact same exercise but with display ads.
[00:04:56] So, again, I literally just hopped into Photoshop, created some. These are actually real ads.
[00:05:03] I created some ugly ads and and they’ve tested all in one it versus that second concept. And again, you’re looking for what has the highest clickthrough rate, because they’re they’re like digital billboards. You have five or six words to capture people’s attention. What stands out to them the most? And so with these three things and AdWords and display and Facebook, and you should be able to narrow down on that sort of five or six word message that just hooks people. And then the next part is to basically figure out your elevator pitch and and so how do you figure out your elevator pitch? And so the way that I’ve done it sort of both times is once once I have that idea, that high level message, there are sort of three things that have consistently led to marketing success. The first is sales calls. So this is especially important at a startup. I think my personal belief is that your first your first marketer or whoever you’re hiring to initially lead marketing, they should be just as good as your best sales rep. So both it benefits and it rippling. I literally hopped on demos and literally closed customers. And that was probably one of the most transformational ways that I was able to sort of wrap my brain around the product, the market and how to explain this, how to explain it in a way that convinces people to sign a contract. And so the message there is actually sell actually demo and close customers. The second thing is to call your grandma and close your grandma. And what I mean by that is, you know, that you’ve really come up with a great a great pitch when your grandma you know, when you when you picture or, you know, when you picture, she nods her head and gets it. And that is when you’ve reached a level of sort of simplicity that I think is required to sort of cut through the noise. And then lastly is called email. And and so this is, again, the scientific way to find out what pitch works versus just sort of debating it internally and coming up with what you think is the right pitch. So let’s you know, in this case, let’s say. That H.R. and it won. What you want to do is you want to draft. You want to start drafting emails around this sort of or different variations of that message. So I’ll give you guys just maybe 30 seconds to read this so you can see what I need your.
[00:08:23] So hopefully you made it through most of the way to these emails, but as you can see, it’s the same sort of core idea just expressed differently and what you want to basically look for in the end. So and once you do all that stuff that I just I just kind of told you, you ultimately want to look for two things on the display side. You really want to look for the thing that has a two x click through rate. I can’t give you a specific one because it’s just so different from industry to industry. But what you’ll notice is that the message that really works when you find it, you just can’t it does two X better and you can’t beat it. You can’t overcome it. Everything is a distant second. Then on the email side, the pitch, you know, if you’re getting a one percent plus email to demonstrate, basically you email someone and they agree to give you forty five minutes of their time. That’s when you know you’re really on to something. And so if it’s less than that, your pitch is probably it’s not communicating the product in the right way. It’s not building the pain enough. There’s something wrong. And and so once you have this, you know, now you’re now you’re ready to go. And without this, everything is is just 10x harder because it’s going to you know, you’re going to have to send more email. You’re going to have to spend more money. And without the killer message, everything else just becomes a slog. So then the question is, is, OK, well, how do I start rolling on the cheap? And so for those of you who are in the startup stage, you have investors, you will this will probably resonate with you that at the end of the day, because their main message is grow more, burn less, which is, of course, you know, very hard to do at a small stage when you’re trying to achieve hypergrowth without burning too much money.
[00:10:24] And unless you’re slack and have just like innate natural morality, you have to you have to spend some money to to acquire customers. So the first thing, the framework that I have always used, or at least for the last three companies, is to assume your marketing budget is 20 percent of your estimated. And if you’re a end of year IRR. So start there and then stack rank.
[00:10:52] Thank you. All of the things you can do to generate growth and stack rank them by your top in stack, rank those by a few things, their growth potential.
[00:11:05] So what has the highest likelihood to 10x the time required to execute? Is this thing going to take a month to get out the door, three years out the door, the cost. So how much is it cost going to do this and the scalability of it? And, you know, what is the likelihood that that, you know, with the information on the left will be able to sort of hit our goal? And so as an example, what I typically recommend. And is e-mail because it’s obviously it’s high volume, it’s very inexpensive, it’s very fast, you know, if we’re using this rubric and email usually goes to the top and then the rest could be all types of things. Right. Facebook might be a great channel for you if you’re a to see company or maybe not or partners. And it’s really unique to your business. But you should be you should be taking a step back, thinking about everything under the sun and stack ranking, you know, weighted by by this. And if it’s something has huge growth potential but is going to take three years to execute, obviously an on option. And so, you know, the hard thing about being at a startup is about deciding where to place your bets because you could only do so much and with both in terms of time and in terms of money. And so typically, what you want to avoid, although this, of course, is is really dependent. But what I what I typically see in the B2B space that is not good for early stage is s.m because the unit economics are incredibly hard to make work. It’s really the house always wins the house being Google. The way the marketplace works and events, while effective, are take a lot of time, a lot of money content, same thing. It takes a lot of time to produce it and it’s very long tail. And your goal as a startup is to achieve hyper growth. And LinkedIn can be expensive. And partnerships between startups very often bank on partnerships and oftentimes never achieve sort of the growth rate they want because partnerships just take so long to form and you’re ultimately reliant on another company. So my advice to everyone on the call is, you know, really the way to think about marketing at a startup is through this lens where if everyone is fishing in the same pond, then you need to find a way to fish in it to find a completely new way to fish in it. If you don’t do that, if you’re just someone slapping up ads on s.m, slapping up ads on Facebook, if you’re not doing something fundamentally new, then you’re not going to achieve a 3x growth because that kind of growth only comes from, you know, the things that are hard to do, hard to accomplish or that no one has thought of yet. So, like, if you take a simple example of direct mail, you know, this is, of course, what every direct mail piece looks like or most direct mail piece. If you send direct mail like this, you’re not going to stand out. You’re not going to achieve 3x growth. And so here’s an example of one thing we did. It didn’t work. But just to give you guys an example, we sent out a thousand basically pre shipped pizza boxes with a note that when you open and read, it says, hey, John, yes, I know this pizza box is empty, but it’s full of potential. And then we go on to pitch the product and offer a demo. You know, this is an example of direct mail. If you do it, the normal way isn’t going to work. If you fish in that pond in a different way, it could work. Or if everyone is fishing in the same pond, then you your other option is to find a completely new pond deficient. So don’t even don’t even visit play in spaces that your competitors are not playing. And so one thing we did was no one in our space, really, at least until recently, was was using outdoor advertising. So we went really big on outdoor advertising. And one of the the ads we did was targeted at at a company called Gusto. And yes, we were finding that a lot of our customers were were coming from Busto, who loved Gusto but was outgrowing the functionality and was coming to our system for their more robust functionality. And so we put up a very innocent, innocuous billboard that said Outgrowing Gusto, Presto Chango. And and we ended up getting a cease and desist letter from them. And we replied to their cease and desist letter and with a poem in iambic pentameter. So this is our legal response. I won’t read the whole thing. But just to give you an idea, dear Gusto, our billboard stuck and struck a nerve, it seems. And so you phoned your legal teams who started shouting cease to exist and other threats to long the list. And so. From there, we went on to explain why you can outgrow gusto, and we ended up getting a bunch of press for it. And in fact, now if you if you gusto, if you Google gusto and replying, this is literally the first thing that pops up and this sort of take away from what this section is, that more often than not, the only things that end up sort of getting you that hypergrowth that that zero to 10 million kind of growth are that are usually the things that either require a lot of grit, they’re hard to do and or, you know, doing things in a way that no one has done them yet before. So basically creative marketing. And if you’re not thinking that way, it’s not that you can’t do well. It’s just that you won’t have that kind of growth because, you know, you’re fishing in the same pond as everyone else. And that’s an expensive thing to do. And it’s a it’s hard to stand out in that world. So last, I’ll quickly tell you about the teams I built at the last few companies, and again, this is when we had essentially little to no budget and I was the only one there. So the first person you want to hire is basically a senior marketer. So think of this man or woman as your Swiss Army knife. They’re going to help with everything from brand and design to product marketing to campaign management agency management. They they are just a smart, creative hustler who you can throw things at and they could take it on. And that’s the first so this has essentially been me at the last two companies, but I’m sure there’s people much better and smarter than me and the second person and I cannot stress this enough. This is probably one of the biggest mistakes I see startup marketing teams make, is they invest in marketing ops far too late. So my first hire all the time and for the rest of time will always be a marketing ops person. I think of them as the brains of the operation. So they’re the ones who basically administer Marquito. So all of your email, for instance, your email automation, your reporting, and if you’re lucky and hire the right person, they can also act as your sales force or CRM administrator in the early days, because those two systems are very connected to help with the email automation. Actually executing the digital campaigns are all the attribution reporting and managing your lead database modern marketing at this point? A lot of growth. It really comes down to how well can you target people and how how effectively can you sort of execute your campaigns? Like, do you have the operational prowess, prowess? And then do you have the report from a reporting and attribution reporting perspective, a really strong grasp on where your leads are coming from, how much they’re costing you? And and so at both companies, we essentially reached our goals literally just with this hire and this higher and nothing else. Now, of course, there’s more to be done. So my advice to startups is to really, for everything else, lean on agencies and freelancers as much as possible and of course, negotiate the rates really well. And but for me, that this sort of default is an esteemed paid social agency to do things like Facebook and e-mail, that kind of stuff, a PR agency. And when I say agency, I it’s almost always better to get a freelancer. PR firms are incredibly expensive, and when you hire a PR firm as a startup, they’ll give you a whole dog and pony show. But they’re going to put the junior kid right out of college on your account and charge you an arm and a leg for that. So for PR, I almost always recommend a freelancer design again, almost always better to get that through an agency or freelancer, just from a budget perspective. And then again, front end development. You can go a really long time without these things and for context, replace three hundred people. We just hired our first front end developer on the marketing team. We just brought paid in-house and the design team is literally one leader managing a team of contractors. So even now we’re still running quite lean. And so as a startup, you can get really far with very little in-house headcount. Now, once you start growing, typically the next two hires from there are a growth lead. So someone to keep testing channels, scaling channels that work and a PM. And depending on your company, it’s hard to like give the exact ordering. But this is almost always the next two hires. So you want that that senior marketer, first and foremost, that marketing ops person next. And then both of these, in whatever order that you see fit with those four people, you can get a really, really, really long way. And so I know we’re coming up on time. So just a few other pieces of advice for you guys again. And my goal here is to just sort of hopefully give you a framework and change the way you think about gross growth when you have a limited a very limited amount of time to demonstrate 3x growth and very little money and headcount to do it. So the first I’ve made these mistakes and I’ve seen other companies make these mistakes. The first is to launch fast and to fail faster. It is human nature, whether you’re the CEO, the CMO, anyone, no one likes putting out stuff that they’re not crazy about. But the truth is, is especially when you’re a small company or a startup, the worst thing you could do is to make is to it is to spend a bunch of time putting out stuff you love.
[00:23:21] And in fact, I go as far to say that. If for the first year or two you are putting out stuff you’re happy with, you’re moving too slow because the downside of moving too slow is that oftentimes the thing that works is not even the thing that you liked and almost everything across every channel. It’s very rare, at least in my experience, that the first iteration of something is the thing that works.
[00:23:51] It it takes lots and lots of testing. And the only way to sort of get there is through is just through putting stuff out there, getting a signal and seeing what works. So really, it’s important as a startup, especially on the marketing team at the market team wants growth to build a culture of failure in the sense that failure is actually a good thing and not a bad thing. And it’s ultimately what’s going to lead to your success as long as you are willing to do it fast. The alternative is you spend six months pontificating internally, releasing it only to find that it’s a dud anyway. The second is to hire people with great creativity and raw horsepower and early stage startup, it’s oftentimes not about even experience, it’s about sort of the grit, the creativity and the hustle. And the easiest way to vet for that is to just gauge is to see the types of questions that people ask you in the interview process. Are they really sharp questions? Are they really you can tell from the questions people ask if they are in that kind of Swiss Army knife where if you throw something at them, even if they’re junior, they will just be able to get it done. And then lastly, this is probably the most important lesson that I learned from a growth perspective, and that is to always start.
[00:25:30] On the growth side with the question of what would I do if I had unlimited resources so it benefits back in the early days? Am I early on when we were we had very aggressive growth goals. It was saying, you know, there’s no way this can be done, not enough time, not enough resources, all this kind of stuff. And this was in a conversation with from the CEO.
[00:25:58] Just can’t can’t be done. And, you know, I was thinking through this this lens of sort of my resource limitations versus if I could do anything in the world, what would I do? And so literally, Parker said, look, forget forget how much money, forget the people, forget all that. If you could if you had unlimited resources, how would you get this to work? And it was actually kind of a hilarious experience because then I go, oh, well, look, I mean, if I had unlimited resources, I do X, Y, Z and and and and like without even realizing it, I had literally come up with the solution. And then the question was, OK, well, how do you do that unscalable. And that was a much easier problem to solve then than how do I come up with a solution within my resource constraints.
[00:26:54] And that was like for me, the biggest eye opener, because I think most people like like I was until Parker had asked me that question, they they they constantly limit their ideas to their resource constraints versus just coming up with the thing that is going to work and then figuring out how to do it on scalability so that you can get far along enough to raise money to then do it scalable. And so that is all I had for you guys. I hope that was helpful and at the very least gave you one or two things to think about as you’re as you’re building the team out and and trying to hit that 10 million mark.
[00:27:46] And and I don’t believe there’s Cuneyt. So thank you guys for your time and for you. Feel free to reach out to me on LinkedIn if if you have any questions on any of us.
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