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- Great SaaS businesses are built on this one thing, it's the idea of a flywheel. We talk about building a go-to-market strategy, we talk about an ICP, a manifesto or a broadway show all the time on this channel. As I've worked with over 250 SaaS companies to help drive their growth, the idea of the flywheel has come up over and over. In my last 15 years of experience as a SaaS founder, I've been obsessed with the idea of the flywheel. So you might be asking, "Hey, I'm here to learn about growing a SaaS business. I'm looking for a go-to-market strategy. I'm looking to revamp our growth. Why are we talking about flywheels?" Well, let me explain. A flywheel is essentially a construct when it comes to a business. It illustrates key elements of a company that work together to drive growth. And when that flywheel and all the components in it are working together to drive that growth, you essentially get self-sustaining momentum of money, of revenues, of growth. So while we talk about a lot of the individual pieces that go into growing SaaS companies, and I'm sure you've seen a bunch of videos about that, in this episode, I'm gonna walk you through the core idea of a SaaS business flywheel. I'm gonna walk you through the exact key principles, the three key principles you absolutely need to know on how to understand this construct of a flywheel and that's gonna allow you to grow your SaaS business with a differentiated go-to-market strategy. Intro! (upbeat music) What's up, everybody? Welcome to Unstoppable. I'm TK and on this channel, I help SaaS founders and SaaS leaders like you grow your SaaS businesses faster with an unstoppable strategy. Now, if you're new to this channel, welcome. I drop an episode every single Sunday with actionable strategies and tactics from the trenches on how to grow your SaaS business faster. So be sure to hit that subscribe button and that bell icon. That way, you'll get notified every single time I drop an episode with the TK energy. Now, if you're already part of this channel, if you're part of my SaaS Go-To-Market Coaching programs, my people, welcome back. It's really awesome to see you over here. So I remember when I was batch number one at 500 Startups. 500 Startups was an accelerator that I joined when I started my last SASS company, ToutApp. And in that program, it was run by my mentor, Dave McClure. This is Dave McClure. And he taught me this thing that completely changed how I started looking at businesses and specifically, SaaS businesses. He didn't quite call it the flywheel, but he called it his pirate metrics. And when I saw the pirate metrics and he placed it on top of a flywheel, it completely opened my eyes on how to grow companies. I applied that to my company, ToutApp. We grew it to over 100,000 users. We were back by Andreessen Horowitz. We sold it to a company called Marketo. And then at Marketo, it was nearly a 450 million a year business. I applied the same principles of the flywheel as part of the executive team there and we figured out how to kickstart growth and then we sold it to Adobe two years later for $4.75 billion. This idea of a flywheel applies to SaaS companies of any size. And when you apply it, you're gonna learn how to actually leverage it to drive unstoppable growth for your SaaS business. And I'm not just saying that in some weird branded way. Literally the definition of a flywheel is that you identify the key components in it, you remove the choke points and when you start to drive growth through it, it goes faster and faster and faster, creating self-sustaining momentum of success which is essentially you are unstoppable. So if you're excited digging into principle number one on how you can think about your SaaS business and your go-to-market strategy in terms of a flywheel, go to smash our like button for the YouTube algorithm and let's dive right into it. So principle number one is let's actually define what are the key components of a flywheel for your SaaS business. So at the center of it is you have your ideal customer profile. This is the target people that you're going after. And this is where the flywheel essentially comes in. There are key parts to the flywheel that drive success for your SaaS business. So the first part of this flywheel is how many people out of your target market are you acquiring? So this is acquisition and this is something that I learned when I was going through batch one with Dave McClure. It's an incredible model that still applies today for any business that I look at. Acquisition is essentially making your target market aware of what you guys do and them becoming a lead, a trial user, visiting your website, that kind of thing. Now, the second part of the flywheel is that part of that market that's discovering you actually takes action. That's called activation. That's the second part of the flywheel. Once they are actually taking action, this could be starting a trial, this could be talking to sales, this could be digging deeper into your content depending on how you define it. The next part essentially becomes the most important part. This is essentially revenue, meaning they actually convert to becoming a customer and they pay you money. Now, because we are operating SaaS businesses, there's one more part that's just as important in this process beyond just paying you revenue, it's retention. That's what makes for a recurring revenue business and that's why SaaS businesses are so powerful. And so, the next part is actually retention, which means that they keep paying you money, whether it's monthly or yearly, whatever your pricing model is. And then the last piece and this is often forgotten to the flywheel, it's referral. And referrals are super important because if you are acquiring them and you're activating them and then they're converting to revenue and you're keeping them and you're retaining them and they start telling more people in the market, your target market, then essentially they're driving more acquisition. And this is the part where the flywheel, that self-sustaining momentum gets built and it goes faster and faster and faster because the more people that you acquire, the more people that activate, the more people that convert to revenue, the more people you retain, the more people they drive referrals and it goes faster and faster and faster. This is the core idea behind the flywheel. And once you start looking at any business, whether it's a SaaS business or an e-commerce business, but I obviously just focus on SaaS businesses because that's where my 15 years of experience is in, when you look at any SaaS business through this lens of the flywheel, everything changes because you start to look at the business and the health of the business through a scientific basis of, hey, what's working and what's not. Principle number one for you is to just know what the flywheel is. And instead of just looking at specific parts of a business, you actually think of it as the flywheel and you actually look at the key elements of a company that actually work together to drive that growth. That's essentially the definition of a flywheel. So principle number one is know what the flywheel is. Principle number two is where it gets really interesting, where this simple diagram becomes a lot more actionable. Principle number two is to understand where the choke points are in your flywheel. Every single one of these points could be a choke point in your business. So for example, over here, you're essentially looking at the number of leads that you're actually driving from your market to your actual funnel through your customer journey, whatever you want to call it. Some gurus say the funnel is dead. The funnel's still a thing, they're just trying to sell you something, but whatever, whatever you wanna call it. Essentially, you're trying to understand how many people in the market are you are actually acquiring into your customer journey and that could be the number of leads or your conversion rate on your landing page, whatever you want to actually measure. That's one of the first choke points that you wanna look at. The second choke point that could happen is how many people are becoming a lead, but actually not doing anything? Do they just leave? Do they read the lead magnet? How many people start a trial, but then don't really use the product and never come back? So over here, you wanna look at your activation percentage. Out of the people that are becoming leads or entering a customer journey, how many people are actually activating, taking meaningful action? The third choke point that could exist in your flywheel is essentially your win rate. You could also think of this as your conversion rate to revenue. This is essentially out of the people that are discovering you, how many of them are actually converting to real revenue? And then over here, you're starting to get the hang of this. This becomes your churn rate and this becomes your referral rate. These are your choke points. So instead of just thinking about the flywheel and like, oh, that's a pretty picture, I want to go really fast and be self-sustaining. I love it, sign me up. You want to think about, hey, where is my flywheel broken? When you start to look at these key metrics in your SaaS business, you can start to understand where is the choke point? Because here's the thing. If you are not acquiring enough leads and they're not activating, then referrals don't matter. If you are not activating enough people that are coming into your customer journey, then the win rate doesn't matter. So you want to think about what is the number one thing I want to deal with? What is the number two thing? And you basically go through these choke points. Now, for example, let's just say you're really great at acquiring leads, you're really great at converting them to revenue, but your churn rate is absolutely terrible. Well, before you invest in getting more people into this process, you should probably fix your churn rate first and then go back to solving for this. Now, this is where it gets a little nuanced because maybe your turn rate is bad because you're going after the wrong type of customer. So you need to change what you're doing up here so that better quality customers come over here. And this is where the art and the science of a go-to-market strategy really comes in. But more importantly, because you're looking at it in the form of a flywheel and these key metrics, you can actually have a constructive conversation on what do we do about our go-to-market strategy? What do we actually need to tweak? What's working and what's not? Now, there's a third principle here that really brings all of this together. Before I go into that, let me just pause here for a second. And it's not referrals, don't worry. I know I keep talking about referrals mainly 'cause I love referrals, but in this case, it's actually a different principle. But before I go into this, let me just pause here for a second. Are you starting to see the power in this? Are you starting to see why I'm obsessed with flywheels? Are you starting to see where, if you actually visualize your SaaS business in the form of this flywheel and you start to identify these core pieces and you start to say, let's fix this and then fix this and then fix this and then fix this, and then fix this, you can actually create unstoppable momentum for your SaaS business. If you're starting to see the power in this, can I just get a yes in the comments below? And also smash that light button for the YouTube algorithm. It really loves it when you do that. Also, if you're in this stage where you're operating a SaaS business and you need to figure out, hey, how do we actually instrument this? How do we think about this data? How do we actually solve some of these choke points so we can get our flywheel going? This is exactly why I create my SaaS Go-To-Market Coaching Program. Inside of this program, I've worked with over 250 companies to help them figure out their flywheel and drive growth for their SaaS business. So be sure to check out the link below. You don't have to go anywhere right now and I'll tell you more about it at the end of this episode. Let's go to principle number three. So to recap, principle number one was this is the flywheel. Principle number two is you want to figure out what are the choke points? And when you start to look at your number of leads, your activation rate, your win rate, your churn rate, your referral rate, you can start to understand where the choke point is and start to say, hey, how do we revamp our go to market strategy to actually fix this and get this flywheel going, that self-sustaining momentum that we're all talking about? This is where principle number three comes in because this is where your go-to-market strategy really comes in. There's essentially three key pieces that you want to look at to solve for these metrics. The first piece that you actually want to look at, I'm gonna break this down into these three boxes right here. The first piece that you actually want to look at is your ideal customer profile. A lot of times when I work with companies, they don't have an ideal customer profile or at least they think they do. We go through a 29 point process to figure out what your ideal customer profile really is. If you're seeing cases where you're getting a lot of traffic, but they're just not converting or they are getting through all of this, but they're not winning them or you're winning them and they're not sticking around, chances are you're getting the wrong kind of people into your customer journey. So doing an ideal customer profile helps you really figure out, okay, who specifically do we want to go after? And also in a way, who do we wanna repel? Who do we not want in this process because they're just not good customers? So that's kind of the first piece you wanna figure out as you start to revamp your go-to-market strategy to get this flywheel going. Now, second piece you wanna figure out is your manifesto. This is essentially your positioning, this is your messaging this is your story, your strategic narrative. This explains to the market and positions you in a way where there is no other alternative, where they must do this now. This is super important. And so, if you're not really getting the attention of your ideal customer profiles and you know you have it right and they're not activating, they're kind of looking at your stuff and they're like, "Ah, this is cool," and they move on, they never come back or they're booking meetings and they're not showing up or you're just not winning your deals, chances are your manifesto is all wrong. But if you fix your messaging, when you do a manifesto exercise, this changes what is the headline in your website, it changes what your ads say, it changes how you attract these people, it changes what your sales deck looks like. All these pieces essentially gets revamped so that you can actually position yourself in the market and differentiate yourself. And so that's the second piece you can revamp to get this flywheel going. The third piece you can do is your broadway show. And the broadway show is essentially a consistent set of sales and marketing activities that you do to consistently bring your target market, your ideal customers into your customer journey. So they can actually activate and turn into revenue and they can retain and then you can drive the referrals and you can get that flywheel going. If you don't do a consistent set of sales and marketing activities to attract your ideal customers into your customer journey, then none of this flywheel will work. And the way this works is when you know who you're targeting, that's your ICP, and you have a differentiated message. You run a consistent set of sales and marketing activities to bring that manifesto to your ICP on a consistent basis and that gets more and more people to discover you and drives them through this customer journey, this unstoppable sales funnel to actually drive growth for your SaaS business. So now you know why I'm obsessed with the flywheel and why it's so important and critical to driving growth for your B2B SaaS business. Let me recap what the three principles were. Number one, you actually have this core flywheel. Don't just think about one random thing in the giant machine. Think about the whole machine. Each component of the flywheel work together to drive that momentum, that momentum we really want of unstoppable growth. The key components are acquisition, activation, revenue, retention, referral. Principle number two is there are metrics for each of these and you wanna make sure where the choke points are in your flywheel. As soon as you have a choke point, there's something wrong and you need to fix it. Otherwise, the rest don't matter as much. And principle number three is to fix these metrics. Here are the three components you need to work on in your go-to-market strategy, your ideal customer profile, your manifesto and your broadway show. When you revamp these three pieces, you have a go-to-market strategy and your flywheel starts to accelerate. You can track the right metrics and you can figure out what you need to tweak in each of these components to continue to drive that growth. Now you know why I'm so obsessed with the flywheel. What you may not know is, hey, TK, how do I instrument this? What are the metrics and how do I revamp my go-to-market strategy? I thought I had an ICP, but it's not quite resonating. I thought I had messaging, but no one cares. If that's you and you really wanna revamp your go-to-market strategy, I encourage you to check out my SaaS Go-To-Market Coaching Program. Inside of this coaching program, I work with you one-on-one to actually help you revamp the ideal customer profile, build your manifesto, run a consistent broadway show so you can bring your manifesto to your ICP on a consistent basis and drive growth for your SaaS business. And the way we do that is we obsess over this flywheel and these metrics and tweak these pieces to ensure that you're set up for success. It's an incredible program. This point, I've worked with over 250 companies across my go-to-market programs. It's an incredible program. There has been so many success stories we've shared inside of this channel. To learn more about the go-to-market program, just go to tkkader.com/gtm. tkkader.com/gtm. You'll get all the details about the program in there and if it sounds like it's a fit for you, just fill out the little form so we can get on a call and figure out how we can help. If it sounds like it's a fit, the greater the fit, the greater the results, we'll be off to the races right away. Just go to tkkader.com/gtm or follow the link below. If you got value from this video, please smash our like button for the YouTube algorithm. It just loves it when you do that and so do we. We put a lot of love into these episodes. There's a lot that goes into actually making sure that you get so much value packed in these little episodes. Also, if you're part of a Slack group or a WhatsApp group, if you have a fellow founder or team member or fellow SaaS leader that would get value from this video, please share it with them. We just wanna help as many SaaS founders as possible in growing their SaaS businesses. Also, I drop an episode every single Sunday with actionable strategies and tactics from the trenches on how to grow your SaaS business faster. So be sure to hit that subscribe button and that bell icon where you'll get notified every single time I drop an episode. And lastly, remember, everyone needs a strategy for their life and their business. When you are with us, yours is gonna be unstoppable. I'm TK and I'll see you the next episode or inside SaaS Go-To-Market Coaching Program. Take care everybody. (bright music) The first piece... This marker is dead, let's switch. I don't know if you caught that, let me pause. Sorry, that was really fast. I'll pause, pausing, pausing, pausing. Okay, also, if you got values from the... I gotta redo this whole thing, sorry. I gotta do the like button first. Woo, and I'm hungry.