It’s time to set your first market milestone! Don’t just pull numbers out of a hat. This exercise is the summation of our work so far in the #gxmxp Series. You now have all of the inputs to carefully calculate a market milestone that you can confidently communicate.
Startups are sensitive to small changes; regularly failing to meet the expectations that you set can demotivate yourself and others. In our experience with founders, this is often an entirely avoidable circumstance. This post walks you through how to do that.
We’re going to reverse-engineer your funnel starting with the market milestone you hope to hit and then work our way methodically up the funnel, calculating at each stage whether your “market development budget” can support the level of effort required to deliver whatever is necessary at that stage.
Let’s start by defining “market milestone.”
A market milestone should be a defined, measurable outcome that you can achieve based on your hypothesis of who your ICP is, how to acquire your ICP with the resources you have and within the time that your runway will allow.
The founder’s journey is not defined by a few large decisions; rather, a collection of 100s if not 1000s of micro-judgement calls.
Accomplishing your lofty goals requires that you first achieve a series of smaller goals that increase in complexity over time. Failing to set and reach these initial, smaller milestones creates frustration, misaligned expectations and burnout.
You might be wondering why we don’t set your Market Milestone at the beginning of the Market Acceleration Program (MXP). The reason is that your market development budget, ideal customer profile, customer acquisition strategy, and business pricing model all impact your market milestone.
Creating a market milestone without understanding the context of your business is like throwing a dart while wearing a blindfold.
The whole purpose of the MXP is to create a capital-efficient way to go to market so that you can stay in the field longer. That’s why we gather all the relevant details and build your hypothesis first to create a market milestone that’s achievable, not simply lofty and aspirational.
Your market milestone needs to be tangible, achievable and stage relevant. For example, if your initial thought of a milestone is $1MM in annual revenue and you have no customers then you need to continue to break down all the steps to reach that goal. Instead of focusing on revenue, the first step could be a series of ICP conversations. That could lead to a series of pilots and, eventually, customers.
Your market milestone is not your end goal; it’s your next step to getting to your end goal.
Along with setting milestones that are tangible and achievable you also need to identify the “so what” of each milestone. What would getting to break even or $1MM achieve for you and your business? A better valuation? The ability to scale resources? Interest or investment from investors?
Once you’ve identified your market milestone, we’re going to reverse engineer how you reach it. Start from the goal and work backwards to figure out what steps you need to take to get there.
We do this exercise to help show you what it’ll take to achieve a milestone and validate that you’ve picked the right milestone.
Scroll over (or down on mobile) and grab the Market Milestones document from the Resources/Downloads section and then we can get started.
Our worksheet starts with wins. In this section you need to define what a win is and then figure out how many wins get you to your market milestone. For example, let’s say your market milestone is to get five paying customers. One win would be each paying customer.
Another example would be if your market milestone was to reach breakeven. Project out what your average contract value might be and identify how many contracts at that average value would get you to break even.
What if you’re still trying to validate an ICP? In this case your market milestone could be one paid or even one unpaid customer. If you’re just starting your business your market milestone could be as simple as 10 interviews with individuals who fit within your ICP, with “win” defined as each interview.
Now that you have a win identified, you now need to define a timeframe for achieving the win that aligns with your market discovery hypothesis and runway.
What timeline do you have the resources for? Is your goal reasonable given the average contract value and potential length of sales cycles? Do you currently have the resources to deliver on this many wins should you achieve it? Etc.
An opportunity is someone who recognizes they have a business problem, demonstrates the need to solve that problem and knows what your company does to solve it. An opportunity is more than a high level conversation about what your company could do.
An opportunity is an intentional and focused discussion with a buyer who has budget, authority, need and a timeline to get this problem solved. Now, going back to your goal of five customers/wins, we’re going to assume a conservative 20% conversion rate from opportunities to wins. This means that if you’re going for five wins, you need 20 opportunities.
As you think about opportunities, you should also identify what a qualified opportunity looks like as well as what it doesn’t look like. Simply getting a company to the opportunity stage of your pipeline won’t get you to your market milestone. As a resource strapped team, you need to demonstrate the discipline to disqualify distractions (i.e., opportunities that are not a good fit for your product of fall outside of your ICP).
As you do the conversion math, you should also be asking yourself if you have the resources to manage this number of opportunities. If you need 20 opportunities for five wins, do you have the resources to support that number? If not, what do you need or should you adjust your market milestone?
This is a great way to reality check the viability of the milestone you created.
Now we’ll move up the funnel from wins and opportunities to qualified conversations and repeat the process. A qualified conversation is somebody within your ICP who you have spoken with about your product or solution and who understands how you can help.
You know their company is the right type of business for you and it’s in the right industry. However, unlike an opportunity they might not have an immediate need or budget. In other words, there’s high, pre-qualified potential for a fit.
Assuming a 20% conversion rate from qualifying conversations to opportunities, if you needed 20 opportunities, you’ll need to have 100 qualified conversations. And just like in the last section, you also need to know if you have the resources to support this or not.
Finally, calculate the conversion rate from companies to qualified conversations. We’re going to assume a 10% conversion rate here. This means that you’ll need to start with 1,000 companies to meet your goal of five wins. You won’t ask what a qualified company looks like in this section because you already know the answer to that. It’s your ICP! You’ll still need to consider your resources and if you have enough of them to do outreach to 1,000 companies.
Take notice! In our example, 5 wins requires 1,000 companies! F = E – R.
It’s okay to feel intimidated by these numbers when you finish the exercise. These conversion rates might seem harsh, but they accurately demonstrate the sheer volume of contacts and qualified opportunities you need to communicate with to get business rolling. It should also make you aware of the time commitment required to pour into market development.
While the numbers might look high, there are always ways to hack around them. Something to keep in mind with this exercise is that this funnel building activity assumes a pure cold outbound approach with no network or referral base to build off of. If you need 100 qualified conversations, that doesn’t mean you have to cold call 1000 people.
A great way to accelerate learning and a path to revenue is to attend or exhibit at a few conferences where you can quickly pitch and iterate while also building a pipeline.
Another way to hack around these conversion rates is to acquire customers from within your network as we described in Customer Acquisition Strategy.
If you don’t have to work as hard to get the first qualified conversation then your initial conversion rates will improve significantly. Conversations, opportunities and revenue are each just as qualified and valuable whether the result of a cold lead or a close connection.
The last hack is to start small and focus more activities on the highest qualified contacts and accounts instead of fewer activities across a larger audience. The better the pre-qualified fit the significantly higher conversion rates you will see.
One of the most important parts of setting any market milestone is communication. Whatever milestone you set needs to be communicated regularly. Post it on a board so everyone has to look at it. You have to constantly acknowledge if you’re getting there or if you aren’t.
The companies we’ve seen that regularly achieve their market milestones are the companies that communicate milestones regularly.
Market Discovery is all about trying to go slow to learn if/how to go fast. Nothing in the Market Discovery phase is set in stone. As you collect feedback, your ICP(s) may change. The key to Market Discovery is to being hypothesis-driven and data-informed.
With your market milestone exercise completed, you’ll be ready to move on to the next phase of the MXP: Market Discovery.
You’ll learn how to resonate with people and how to effectively communicate everything you did in Market Discovery. We’ll show you how to have high-quality conversations quickly and not waste time talking about what you do, but rather learning if there’s a fit with the people you’re hoping to work with by sharing what you do for them.
That’s next in our #gxmxp Series!