(Re)Build Your Revenue Engine in 2023

Meet Host, Mary Grothe

Mary Grothe is a former #1 MidMarket B2B Sales Rep who after selling millions and breaking multiple records, formed House of Revenue®, a Denver-based firm of fractional Revenue Leaders who currently lead the marketing, sales, customer success, and RevOps departments for 10 companies nationwide. In the past year, they've helped multiple 2nd stage growth companies between $5M - $20M, on average, double their MRR within 10 months, resulting in an average ROI of 1,454% and an average annual revenue growth eclipsing $3.2 million.

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Hey, Revenue Radio®. I’m excited to launch this new season. We have a loaded, loaded lineup for you. I cannot wait for you to hear week over week what we are bringing to you. I’m Mary Grothe. Today, our focus is to talk about refreshing your go-to-market strategy and why this year, 2023, we are claiming, is the year for fractional executives. Especially for what we refer to as second-stage scale companies, those who have made it through startup scale, meaning from 0 to 1, 2, 3, 4, or 5 million.

It’s that scale where it’s very entrepreneurial, scrappy, and chaotic. You’re testing your product and service. You have a lot of highs and lows. You bootstrap, and you may get investors, but that startup scale is not what we are talking about today. We are talking about the year of the fractional executive as well as talking about go-to-market refresh and building that revenue scaling plan for companies that are in the second-stage scale category.

These are companies that are between 5 to 20 million in revenue. Let’s break down what this looks like, and hopefully, you can take some of these tools, tactics, and strategies back into your organization today, or you’re welcome to reach out to us for a conversation. First and foremost, when we look at what is a fractional executive, I just want to explain some of the challenges that happen at the CRO and CMO levels.

CROs and CMOs have a very high failure rate. It's unfortunate, but the tenure is 18 months or less on average. They're also very expensive. So when a company gets past startup scale and they're doing a few million in annual revenue, oftentimes that CEO and the leadership team say, we are ready to hire a CRO, or we're ready to hire a CMO.

I just want to give you some baseline here. I had the opportunity to speak with CEOs for the past five years of my life on a weekly basis and help them diagnose their revenue problems. I speak from a place of experience, data, and trends because opinions are valuable, but data is priceless.

I cannot tell you how many times the CEOs in our opening meet and greet, and conversation says the following things. We tried hiring a VP of Sales or CRO, but they didn't work out. They were expensive and, after 6 to 12 months, didn't really accomplish anything. So, unfortunately, we had to let them go, or we brought in a sales trainer. We thought we had a sales problem, our sales had plateaued, and so we brought in a sales trainer.

We adopted a new sales methodology. Turns out it hadn't had an impact on performance or one I've heard over and over and over again. We hired a marketing agency, we spent thousands and thousands of dollars, and we never saw a return. Whether you had one or all of those challenges or something similar, those are the most common ones that I hear.

There's also confusion and challenge and struggling to understand what kind of role you need because when you get to that 3, 4, or 5 million and you're plateaued, it's difficult to understand how to solve the problem. Just recently, I got to work with a company, and they invited me in and said, We have a sales problem. I said, Are you okay if I challenge that? Let me do some digging. It might be more than a sales problem, and that is something it's critical to the conversation. Don't assume because sales are low that, it is just a sales problem. So you need a VP of sales or a sales trainer or you need to hire a CRO.

Additionally, if you're believing that you have a top-of-funnel problem, for example, our sales team is great.
Once we have leads in the pipeline, they can close. We just need more leads. That may not be the issue either, so you might go higher. One of those demand generation agencies or lead generation agencies, and they're producing means. But gosh, it's not the right kind of customer. They're not converting. Well, sales don't feel that that was a good spend, or they overpromised and found out that reaching your buyer is actually very difficult and so they produced a goose egg or something close to it.

Understanding what is causing your revenue plateau is critical. Step number one, a CEO and CMO should be able to help you identify that, but most of them are not set up for success. Hiring a CEO and a CMO as a full-time position is extremely expensive for you as a CEO when you are in the second-stage of scale time in your journey.

Let me explain why. Great CRO and CMO come with a price tag. Also, depending on where they earned their experience and at what level and stage they are, their career is going to determine how scrappy and entrepreneurial they're going to be for you. The second-stage scale of 5 to 20 million is not 50 million. It's not 100 million, and it certainly is not a $1,000,000,000 company.

But if you're attracting CROs and CMOs who have worked in later stage, more mature companies, big brand names, maybe you've hired an executive recruiter to go find a really great escrow and CMO, and they've worked for a big brand name billion-dollar company. They're probably going to fail. Working for your second-stage scale company. It's a completely different set of problems.

It's a completely different strategy. It's a completely different size of the department and access to resources, and they most likely won't be set up for success. That's on the CMO side, most predominantly on the CRO side. The biggest challenge we have with the CRO title is that it's new or it's only been around for a handful of years, and most CROs, who market themselves as a CROs, they're just a glorified sales leader.

You can follow some big names in this space, some influencers on LinkedIn in the revenue community who have taken this topic, and they have done a brilliant job articulating and explain earning what escrow is and what escrow is not. If you need a VP of sales, please just hire a VP of sales, but don't hire a glorified sales leader as a CRO and put them in a CRO position and then set them up for failure.

We have a plethora of resources. How is revenue? Scott, Let's talk about what a CEO is and what they're not. I've had the privilege of explaining these on episodes of Revenue Radio® and writing blogs myself, and being interviewed on the topic. It's so critical to understand what is CRO is once you know and once you realize how hard good ones are to find who can work in your market segment, in your industry, and your size of the company, and take on the specific set of challenges that you have, You'll realize that going fractional probably makes more sense.

So, what is fractional well to us is House of Revenue fractional for our teams is 50% in our latest season of recruiting and attracting talent to the House of Revenue team, we have brought on three former CEOs who scaled their companies, exited and now sit in a CRO seat. They are brilliant. They understand go to market. They also were scrappy startup founders.

They've walked in your shoes. They can empathize and communicate with our CEOs at a level that I haven't seen before. I'm so proud of them and what they bring to the table. Not only can they bring forth a very compelling and competitive go-to-market strategy that is based on primary and secondary market research, but they are partnering with a CMO, a tried and true marketing leader who, on their own, also has experience in scaling companies.

Many of our CMOs have also been a part of a team that has worked to an exit or an IPO or a great milestone inside of a company. They have the opportunity, through the right lens, to understand both from a brand standpoint and also a marketing standpoint, how they are going to help you differentiate, tell the right story to the right person at the right time, and be very good stewards of your budget and your money.

They are used to working with small marketing budgets and growing them over time, financing the growth of the business through perks performance. They know how to start small and grow it and scale it and be very good stewards of the limited resources that you may have when you're embarking, I guess, on that initial second-stage scale. So CROs and CMOs, when they're fractional, typically you are able to access tried and true brilliant talent at a fraction of the cost.

Now one of the biggest objections that I hear is, but we need a full-time person, or you may not need a full-time person in your stage of growth, especially if you're on the lower end of that 5 to 20 million range. Typically what we see is on the lower end of that range. You are actually perfectly positioned to work with a fractional executive, especially because our fractional CROs and CMOs split their time between two clients.

Many other fractional executives actually have 5, 6, 7, 8, 9, or 10 clients. They're more consultants or advisors when that client list is that big. Ours sit fully in the seat. They assume the position. They assume the title inside of your company. They attend your leadership meetings, and they speak to your board and investors. If you have those, they manage your employees, and they communicate daily.

They are on-site with you. If that logistically makes sense and is preferred. Our CEOs and CMOs are deeply integrated into your company. They are leading, they are strategic, but they are also scrappy and entrepreneurial, and they know how to do the work. But step number one, after you determine that you want to have that fractional CRO and CMO, is determining if you're ready to scale or not.

So, let's talk about that. One of the biggest points of failure for new executives in the CRO and CMO seats is that there are unrealistic expectations given to them. We need to double revenue. We need to triple revenue this year. We need to grow the headcount by X, We need to fill in the blank. I'd ask you just to back up.

Don't lay that plane down on your new executive without doing an audit and research. It's critical to some of the components that we cover in our first 40 days of audit and research, which let me give you a little background here. We follow a methodology that goes like this audit research, build, test, optimize, and scale, and you'll hear me refer to that a couple of more times in our audit and research as good stewards of your company and you and your mission in your why, we need to understand if your product or service is even scalable.

So, what do we do? Well, we first benchmark your product or service against the competition and what else is available in the market. If you've been in business for a while, there's a hot chance that a competitor has snuck up. You might actually not be pricing your product and service well anymore. You may have innovators in the space that have done a leapfrog against you, and you don't know yet.

When was the last time you surveyed your customers and spoke to them, and engaged them in a roundtable conversation to solicit feedback and learn where you're performing well and where your areas of improvement are.

When was the last time you did a highly in-depth competitive analysis, including secret shopping? Whether it's someone on your team or hiring a third party to go in as a buyer and document and record every step of the process with your competition to be able to create a matrix and show exactly how others in your market are going to market, how they've operated themselves, how they communicate, who they've identified as their target market, an ideal buyer, where their brand is present, what type of sales structure they have, Do they have full cycle salespeople? Do they encourage conversion and purchase online and more of an e-commerce format? Do they appear to have a land and expand strategy of freemium, free trials? Do they require very extensive sales processes with sales engineers and long demos, and key stakeholders being present? What is the process?

How have they structured their brand marketing and sales departments in order to serve that first part of the funnel, being your attraction to the funnel, then the consideration, and then going into the decision step, where is the buyer in that awareness stage? When they first get attracted to the funnel, what do they do in the consideration stage? How are they making their decision?

Then, going into that purchase point, you will be able to, as a secret shopper, identify all of those. It's actually quite brilliant to have that data presented because then you are understanding what your buyers are experiencing in the open market when choosing to spend money and invest in a product or service like yours. By doing this research, we're able to identify how your product or service even stacks up before we build.

Some go to market strategy and revenue scaling plans. How is the revenue that we believe in at the CRO and CMO should provide a comprehensive analysis? So there are no surprises, no highs, and no gotchas. Do you know how frustrating it is when you bring on a CRO and CMO full time and one month into the job, they're asking for all this headcount and budget, and you're like, But I hired you, and you're expensive, and aren't you supposed to do the job?

What do you mean we need to have this budget? What do you mean? Do I need to hire these people? That's not a fun feeling. I get it. I'm an executive, too. I wouldn't feel very good if I brought on an employee. And then they said they couldn't do the job I hired them to do without all sorts of additional investments and resources.

I get it. We don't believe in that either. In fact, within the 40 days and our audit and research period, we built a fully comprehensive go-to-market tool kit, which shows you, based on all of our research and findings and interviews with your key stakeholders, your team members, your clients, competitors, you name it, we're going to present to you the actual step by step process from your brand marketing sales and customer success strategy, all supported by revenue operations.

We believe in the bow tie funnel. I already explain the first half of the funnel to the purchase point. The second half is once they become a customer, we have implementation stuff, getting them into adoption, and then we have retention, we have expansion, and advocacy. So when you look at a full go-to-market, how much you can leverage your customers to grow the client base, increase retention and turn them into advocates greatly helps going back into the top of funnel, and with your brand reputation and our go-to-market tool kit, you will not have anything left out of this plan.

You'll see it in a truly holistic fashion. Going back to the original comment, is it a sales problem? Is it a marketing problem I shared with you? I recently was invited into that same conversation with the company ready for their second-stage scale. They thought it was a sales problem. Well, guess what? It was an everything problem.

I developed a comprehensive, multi-page plan that showed how they had holes and gaps across everything, and branding, marketing, sales, customer success, and revenue operations in this plan that was delivered back were so holistic they couldn't even believe how interrelated the components were and how together we were going to solve revenue problems and challenges that have been a problem and a challenge within that company for years.

The next delivery that we have is a revenue scaling plan in the form of a revenue economics format. So, it's the financial component coupled with a new org chart so that you can see the current state versus the future state. Wouldn't it be nice before you engaged with someone to understand how much it was going to cost and what investments you need to make in additional resources, technology, and headcount roles?

You have to do that potentially you don't have the right person in the right seat, or maybe you do, but we're looking at growth roles. Wouldn't it be great to understand if you want to grow from this amount to this amount exactly what it takes? Well, that's we believe in transparency. No surprises here. We develop that full revenue economics model and present it to you and allow you to say, yes, we can invest in this, or no, we can't.

Then sometimes, we get feedback and communication where we're able to alter the plan and change it to where it is a little bit more palatable and agreeable before we embark on a journey with you. Wouldn't that be nice to be able to do that? If you go hire a full-time CRO and CMO, you're not going to find out these things until they're maybe 30 to 90 days into their role.

I would hate for you to be surprised and then their success is hindered because they don't have the runway, they don't the ability to make capital investments for growth, or approval for a new headcount. So, the CRO and CMO on a second-stage scale may feel that their hands are tied and, therefore, they can't be successful.

They're going to get burned out, they're going to be discouraged, and they're set up for failure, which is one of the reasons why they have an average of an 18-month of tenure. I know how much grace grows in CMAs cost. We employ an army of them at the House of Revenue®, and they deserve every dollar that they are paid.

We don't cut corners. If you're looking at tapping into that top talent, going fractional could absolutely be a great strategy for you. But once the agreement is made specifically with House of Revenue® that yes, we want to work together, we embark on a 12-month journey that Ciara, and CMO step fully into their seat with you, they dive in with your team, your passion becomes their passion.

They're data-driven, they're technical, their results specialists in addition to their title in the CRO and CMO seat. And they get to leverage additional resources here like our brand team and web development team, and technical team. And then the first 90 days, we have done some magical work with our clients. The first 90 days, we're talking full brand refreshes, and we get it.

Brands have to convert. When you're in the second-stage scale, this is not the time for you to go hire a $50,000 brand agency that then is going to recommend you go spend 100 grand on some custom dev website that isn't set up for conversion. You're not there yet. You don't need that. You need a brand that works for today that's going to create an emotional connection with your buyer, with the right message, the right aesthetic, the right UI and UX, and performance that encourages conversion.

We believe in growth-driven design. We launched Lean and Mean websites, typically a standard 12 core page, sometimes larger out of the gate, and we launched an MVP Launchpad website with your beautifully refreshed brand. Sometimes we would change the needs of our client's companies. Those are such fun exercises to go through together. We take them out to market. We build out all their marketing channels, beautiful campaign architecture, and omnichannel that's across every intentional and relevant marketing channel that's going to help drive top of funnel for you that leads to conversion.

Additionally, we're building out your sales team, we're building out the customer success team, an account management function. We're building out your HubSpot, we're building out other applicable technologies that you need inside of your revenue engine to give you the right experience internally and externally for the customers and for your internal team members. We break down the walls between revenue departments.

We bring forth holistic revenue leadership. We drive you forward in this path of scale. And in the first 90 days, we focus on building and testing. We have no business optimizing the revenue plan or setting you for scale in the first 90 days we have to build and test. It would be irresponsible for us to ask you for big marketing budgets and a whole bunch of head count out of the gate.

We have to build and test. We have to build and test. That test has to prove that the hypothesis from the audit and research phase can convert. And when the test proves that it can convert, guess what we don't get all excited and then throw a bunch of fuel on the fire. We have to go through the step of optimization to prove that in a grander scale we can still get the same or better results.

Before we set you completely for scale, what do we do? We have 18 contract recruiters that we work with. We've worked with them for years. You should see the way that they source talent, great talent. Quickly, our recruiters mean business and we offer that service to you below market rates in a contingent format and we guarantee the hires no routine search, no upfront fees.

We are not so accessible in the States unless we bring in the right talent. And if we bring in the wrong talent, which people are people. Trust me, we've all been in that seats don't disagree with me. You've hired somebody who was a very different person in the interview process than when they showed up, which then there will replace that person very quickly and professionally if that's the case.

But we want to build out your revenue team so we can recruit entry-level executives, and we're building it out. We have a plethora of resources and freelancers, and contractors that understand scaling companies and building revenue engines. We are going to set you up for success. We're going to get the right people in the right seats, and you're going to watch your CRO and CMO step out of some of that heavy building, technical hands-on in-weeds work and elevate into that strategic leadership position.

And they're running your team, and they're running this revenue engine and we get your optimization, and the data is coming back. What we have seen as it takes about 6 to 8 months to get the engine built. In fact, sometimes there isn't even a lot of revenue growth during that time, which can make the second-stage scale company a little bit nervous.

So, we want to be upfront about that in the beginning. But my goodness, we have the data to show that for our clients that have been passionately committed and collaborating and working with us for that entire year, countless, countless examples, in months 10 to 12, we're starting to see monthly recurring revenue or monthly booked revenue double. And in fact, we've even hung on with some companies 18 months, or 24 months on their scaling journey to help take them to an exit or a really exciting milestone we've seen tripling, quadrupling what it takes time to do it the right way.

As I come to a close, I want to encourage you that this is the year of tapping into fractional executives, and we are prime position, ready to serve you. On the revenue side. We have five years of lessons, learnings, experiences, challenges, wins, and celebrations. The last six months were challenging for everyone. At the close of 2022, we were able to meet with executives and learn in here and gosh, it's like a record scratch happened and everything's stopped.

In Q3 of 2022, plans were just thrown out the window. People pivoted quickly, people were laid off, corporations were restructuring, and we're still seeing it today. But that doesn't mean you should just stop, pause or panic If you have the means to invest. Trust me. Your competition might not be right now. This could be a great time to get ahead.

But don't put your chances on hiring somebody full-time. They're expensive. You're not going to know what their revenue plan's going to be before you hire them because they actually need time sitting in the seat, working in the role of meeting with stakeholders, doing the competitive analysis, doing the secret shopping, understanding the components and why would you bring someone on full time and then learn after the fact what they really think you're going to need to scale?

You should be able to see that upfront and make that decision. As I come to a close, I want to leave you with some words of encouragement. In 2020, when the pandemic hit, many companies retreated into a safe zone. They reserved cash, and they became very conservative. We were around then, too.

But we had nine clients in 2020 that didn’t leave our service. They said, “Hey, House of Revenue®. We need you to double down. Figure this out.” Now is the time our customers are backing off. They're pulling out. The market is flooded with brilliant talent. We know that we can capture market share, but we need the right team now. It's actually the first year, in 2020, the first year that we have this model, the CRO, and CMO working together.

That year we scaled nine companies. On average, they started about 4 million in revenue, and by month ten on average, we saw that monthly revenue doubling. Then, by the end of the year, we had added on average $3 million. That's a lot of revenue in a pandemic year. That's exciting. One of our clients has gone on to now be to run rate of over $40 million on a path to hit a $50 million mark, and they're not the only success story.

In fact, every 1 of the 9 has gone on to grow, scale, be profitable, and do remarkable things. We welcome the conversation. If you're curious how to get through your revenue plateau and to learn if fractional revenue leadership is right for you.

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