As the economy teeters on the brink of a recession, venture firms and the companies they fund are entering a hangover phase following several years of highly overpriced deals that burned through capital faster than they should have. To adapt, companies need to prioritize high-yield, low-investment go-to-market (GTM) strategies. But thriving, and even surviving, in this climate demands more than just that. It requires the synchronization of every aspect of marketing and sales—objectives, culture, budget, processes, and operations—behind a single, sales-centric target. This is essential not only to weather the economic storm but also to succeed and grow within it.
Why Uncertainty Shapes Economic Downturns
Venture firms are increasingly concerned that we are on the brink of a recession. Over the last few years, there was a massive bubble in terms of valuations, and it’s challenging to navigate through those on the downslope. While new investments will still occur, there will be fewer of them, and investors will be more inclined to back companies started in this market environment than undergo the challenging process of doing down rounds on other VC’s companies. Concurrently, we are witnessing a significant shift back to responsible growth and away from the “grow at all costs” mantra companies often adopt when there is substantial capital available. The scrutiny of how dollars are being spent by a company has increased significantly and will be a more critical factor for investors evaluating new deals and follow-on investments. Hard times are on the horizon, with this reality being much more acute for companies that raised capital at highly inflated valuations and quickly started burning through the new capital. There will be a meaningful number of dead unicorns before this downturn ends.
Selling in a downturn is harder, as anyone who has worked in sales through a downcycle knows. In addition to reduced budgets, sales cycles get extended, with companies focusing on cutting spending and delaying new spending commitments. Some large enterprises are adding people and processes to procurement that intentionally slow the procurement process and, in some cases, payment cycles. Actions like these and others are the headwinds of uncertainty, making sales into enterprises more difficult.
When markets turn south and sales are harder to come by, marketing is often on the front lines of budget cuts because it is viewed as a soft area of spend. If you are a marketer, proving your value has never been more important.
Enterprises that are putting the brakes on their own spending still want their revenue to grow and are looking for proven solutions to help achieve that. Downturns mean that opportunities don’t come easy, not that they are absent altogether. For sales and marketing teams operating in this environment, it may seem like there is not much they can do but sell harder. While selling harder may have some merit in troubled times, taking a fresh look at how you market and sell can make all the difference in uncovering and closing the opportunities that exist.
“Sales-Driven” Is the Ethos During Economic Contraction
If you’re a marketing executive in this environment, the easiest way to be successful is by demonstrating that you’re contributing to the company’s revenue growth. No matter what your focus is, whether it’s branding, product marketing, or positioning, you need to show how your work drives the business forward. When choosing marketing tools, make sure they support trackable relationship-building, such as moving from conventional advertising expenses to approaches like person-based advertising. Aim to collaborate more closely with sales by focusing on analytics, enabling you to showcase your impact on the bottom line.
If you’re a sales leader today, you should be working with the marketing team—letting them know what you need and which customers you are targeting. While it is true that marketing executives and sales executives think differently and are often incented differently, you shouldn’t operate separately. You need to communicate and work together towards aligned goals.
Of course, there will be tough conversations along the way when the objectives are different, but if you are willing to work through the challenges and have those conversations, you’ll come out with a stronger team. Everything flows from that. If you’re off course either from a marketing or a sales perspective, and you can talk it through together, those problems get fixed easily. But when you have silos and people are frustrated, and don’t bring up those frustrations, that’s when the revenue generation machine breaks down.
As a marketing leader, it’s important to take a close look at all the programs and determine if they are providing enough value. A marketing program that worked well in better economic times might not make as much sense in leaner times. To determine if a program is worthwhile, ask yourself some tough questions, such as:
● Do we need this marketing program today?
● What value does this program add?
● How many consulting firms do we really need?
● Do we need the analyst program, and if so, is it the right one?
● Which vendors can we renegotiate terms with or move to a pay-for-value model?
Don’t be shy about telling your vendors that you want to keep working together but need to work differently. In most cases, these businesses would rather keep you as a customer than lose you.
In short, simplify your marketing strategy and focus your spending on programs that work. You can re-allocate those dollars to aligned revenue opportunities that deliver the proof-point analytics you need to grow revenue and demonstrate your value.
How Marketing Leaders Can Align with the Board
It’s a warning sign for a board member if the marketing team says they’re way ahead of all targets but the sales team is falling short. That’s a huge disconnect. You should never tell your board that marketing is doing a great job when the team delivering revenue isn’t. Sure, sales can have their problems, but we’ve never seen a company that’s 50% ahead on their marketing qualified leads (MQLs) but well behind on sales targets where marketing didn’t need to reset and demonstrate the value they’re adding. Simply put, marketing qualified leads are irrelevant if sales can’t close them.
When you attend a board meeting and see the marketing and sales leaders sitting next to each other, clearly in regular communication, and in sync on what they are presenting, it indicates that the go-to-market teams are intentionally working together to be aligned. Even better as a board member? Hearing sales executives give marketing executives credit for sales success. When the sales organization understands and respects the value they’re getting from the marketing organization, and there is clear collaboration, this is a good indicator of success.
The bottom line is that during a downturn, you’re looking for near-term revenue results, but it doesn’t mean you shouldn’t support key long-term initiatives. Continuously evaluate these initiatives to determine their relevance, supported by data. You must be able to explain the value and why the investment is worth it. In up markets where there’s plenty of cash to go around, it’s easier to make that case, but during economic hardships, those efforts may not make as much sense. When you make your case to the board, demonstrate how these initiatives will make revenue growth easier over time.
A lot of the programs will get cut in the short term if times are lean. If you’re an earlier stage company trying to become an established authority and leader in a space, spend some time on long-term programs such as awareness, but don’t get too far over your skis. The best way to establish authority and awareness in a sector is to grow your business and have a large base of customers who are vocal about their success using your products.
Evaluating Marketing Efforts’ Success
When you’re confident about your marketing program’s spending and your sales team is flourishing, it’s a positive sign. It’s even better to hear praise from sales leaders and team members or to witness sales executives attributing their success to marketing during board meetings because it shows that things are working well. Although there are various metrics to evaluate, the essential aspect is the harmony between sales and marketing teams, where both sides recognize and value each other’s contributions. If you’re doing the wrong thing from a sales perspective, or you’re not spending money in the right places in marketing, but you have that dialogue going, those problems get fixed very easily.
Focusing on alignment and fostering strong bonds between sales and marketing teams is crucial. Once these connections are solidified, the financial metrics and analytical data will naturally fall into line, and you will emerge from this downturn in a position to thrive when the economy is strong again.
By Charles Beeler, General Partner of Rally Ventures (https://www.rallyventures.com/) and Dmitri Lisitski, CEO of Influ2 (https://www.influ2.com/)
