To better understand the founders revenue journey, we surveyed founders to learn about their challenges around scaling revenue. Our 2023 survey of founders provided interesting insights into the challenges smaller, growing companies must overcome to scale their revenue. In addition, we found that companies of all sizes shared common challenges in making data-driven spending decisions to achieve revenue growth and return on investment goals. We are pleased to release our findings in the 2023 Founders Revenue Scaling Report and discuss key takeaways for founders below.
Our survey captured data from founders across multiple revenue ranges about where revenue comes from, who closes deals, and whether budgets are in place for sales or marketing spending. We also asked about their biggest challenges with budgeting for sales and marketing. If you have not received a copy of the 2023 Founders Revenue Scaling Report and would like one, please click here to download a copy.
What is Your Annual Revenue?
The respondents in our survey reported annual revenues in 3 categories: Under $1 million, $1 million to $5 million, and $5 million to $20 million plus. Small businesses under $1M were 43% of our responses, with 38% falling into the $1M to $5M range and 19% in the $5M to $20M+ range. With this mix of businesses participating in the survey, we identified key differences and similarities across companies that had scaled revenue and those that had not yet achieved it.
Who Closes Deals?
One of the common challenges founder-led businesses face in growing from founder revenue to scalable revenue is that the founder is often the only person closing sales. In our survey, 76% of all respondents indicated that the founder closes most deals. Only 22% said that a salesperson or sales team closes their deals, with 2% indicating Other. It was not surprising that the survey results confirmed that founders must scale past founder revenue if they want to grow their businesses.
Interestingly, the survey results reinforced the concept that as companies successfully grew revenue, the percentage of sales closed by the founder decreased. In the under $1M group, 94% of deals were closed by the founder, and only 6% were closed by sales. In the $1M-$5M group, the percentage shifted to 79% of deals being closed by the founder and then decreased again to only 20% in the $5M-$20M+ group. It’s clear that for founders to scale revenue, they must address the challenge of finding ways to have other resources close deals.
How Is Revenue Generated?
Another interesting insight from the survey was that across all revenue sizes, the founder network continues to play a significant role in where revenue comes from. 46% of all respondents said revenue was generated by the founder’s network, followed by customer referrals at 27% and channel partners at 16%. Sales at 8% and Marketing at 3% rounded out the revenue generation sources.
Although the founder network remains a crucial source of revenue generation at all company sizes, companies that scale develop broader sources of revenue generation. Survey participants in the under $1M group reported that 50% of revenue was generated by the founder, 32% through customer referrals, and 6% each by channel partners, sales, and marketing. At the $1M-$5M tier, founder-generated revenue was 42%, with customer referrals at 29% and channel partners at 29%. In companies from $5M-$20M+, 40% of revenue was generated by the founder, with 20% by customer referrals, 20% by the sales team, and 20% by the marketing team.
It was also interesting to note that the $5M-20M+ companies reported diverse yet balanced sources of revenue generation compared to smaller companies. This would suggest that to scale revenue successfully, founder-led companies should focus on developing revenue generation strategies outside the founder network and customer referrals to achieve long-term success.
Do You Have a Sales or Marketing Budget?
Across all respondents to the survey, 35% reported they had no budget, while 46% had both a sales and marketing budget, 14% had only a marketing budget, and 5% had only a sales budget. Overall, that means 65% had some form of budget, while 35% did not. A deeper analysis of these responses based on revenue level provided some additional insights.
It was not surprising that in young companies under $1M, 56% of respondents reported having no budget. Funding sales and marketing spend is difficult for companies at this level, so they generally don’t feel compelled to create a budget. In the $1M to $5M group, 86% reported there was a budget in place, and only 14% said they had no budget. At this level, companies realize the need to spend and allocate budget for sales and marketing. We often counsel young companies of all sizes to set aside dedicated funds to create a marketing budget, even if it’s only a small percentage. This creates a strong foundation for growth to get to the next level of revenue.
It was quite surprising to learn that companies in the $5M-$20M+ range reported a 60%/40% split between having a sales or marketing budget and not having one. At this level, it is possible that traditional sales and marketing budgeting is not helping leaders make decisions and has impacted adoption. There is often a disconnect between measuring revenue and the sales and marketing spend that actually generates the revenue. This is why we recommend developing a revenue generation forecast that captures Customer Acquisition Costs (CAC) for all size companies.
Challenges with Budgeting for Sales and Marketing
Based on answers to the survey question about the biggest challenges associated with budgeting for sales and marketing, companies of all sizes are challenged with budgeting for sales and marketing. All respondents, including companies with budgets in place, reported challenges with calculating return on investment, attributing revenue results with spending, and knowing where to invest their funds to maximize results.
Companies of every size can benefit from implementing a data-driven approach to making sales and marketing spending decisions. Attribution of revenue is possible to achieve with a dedicated focus on measurement and monitoring, but it requires a willingness to do the initial heavy lifting to get this in place. Maximizing the value of sales and marketing spending by allocating funds based on the results they achieve can be a game changer for companies of all sizes. Getting these metrics in place can definitely help founders overcome the challenge of moving from founder revenue to scalable revenue.
FounderScale’s core focus is helping founders increase their impact in the communities where they live and work by helping them successfully grow their businesses. Our Fractional CRO services can help you create a plan to grow revenue from where you are to where you want to be using a data-driven approach. Contact us today to learn more about how we can support your growth and success.