Can channel unlock growth? 💡 HubSpot 3X (tripled) LTV in just a year in the early days. Here is how they improved LTV:CAC ratios and transformed their sales efficiency.
In HubSpot's early days, they discovered that selling through the #channelpartners led to
LTV:CAC ratio of 📍 5.0 - substantially higher than
LTV:CAC ratio of 1.5 while selling directly.
By restructuring their sales team, they unlocked impressive growth.
Brad Coffey, frm. Chief Strategy Officer at HubSpot:
"At HubSpot, we began seeing significant improvements in unit economics by segmenting our business and calculating the LTV to CAC ratio for each persona and go-to-market strategy...
In the SMB market...
we had an opportunity to improve LTV by improving the product to lower churn and increasing our average price in the segment.
🎯 In the Very Small Business (VSB) segment
by contrast, there wasn’t as much upside left on the LTV (VSB customers have less money and naturally higher churn) so we focused on lowering CAC by removing friction from our sales process and moving more of our sales to the channel.”
🏆 HubSpot's sales team transformation
Initially: 12 reps selling directly, 4 reps via Value Added Resellers (VARs)
After 12 months: 2 reps selling direct, 📍 25 reps through the channel
“When we started this analysis, we had 12 reps selling directly into the VSB market and 4 reps selling through Value Added Resellers (VARs).
When we looked at the math we realized we had a LTV:CAC ratio of 1.5 selling direct, and a LTV:CAC ratio of 5 selling through the channel.
The solution was obvious. Twelve months later we had flipped our approach – keeping just 2 reps selling direct and 25 reps selling through the channel. This dramatically improved our overall economics in the segment and allowed us to continue growing.
We ended making similar investments in other high LTV:CAC segments. We went so far as to incentivize our sales managers to grow their teams – but then would only place new sales hires into the segments with the best economics. This ensured we continued to invest in the best segments and aligned incentives throughout the company on our LTV:CAC goals.”
This strategic shift dramatically improved their overall economics, fueling #growth and enabling investments in high LTV:CAC segments.