Funnels and unit economics · Go-to-market motion

PLG or sales-led for a $3,000 ACV product

Choose between two account executives, self-serve and a hybrid for a $3,000-a-year plan, with each motion's CAC set against first-year margin.

casehardExercise · 3 min · 20 of 60

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A board member wants a sales team for a new plan, and the lifetime ratio supports them. The first-year arithmetic, and the number of accounts there are to call, do not.

The situation

The invoicing app is launching a Firm plan for accounting practices: $3,000 a year, billed annually, at 80% gross margin; assume 85% of contracts renew. A board member wants two account executives at $150,000 a year loaded each, each closing 30 deals a year, with $1,000 of media behind every deal. Their argument: "Lifetime margin of $16,000 against a $6,000 CAC is 2.7. Every serious firm-software company sells."

A three-month soft launch gives the self-serve numbers: 40 Firm trials a month, $900 of media per paying firm, and 10% of trials buying on their own. 30% of trials invite five or more staff; those buy at 25% unprompted and, across 20 calls the founder made, at 50% when called. A rep's time costs about $250 per account called. The payback target, as in PLG versus sales-led, is that first-year margin covers CAC.

The question

Decide between the two account executives, self-serve only and a hybrid, setting each motion's CAC against first-year margin, and say what would reverse your choice.

A strong answer · Rubric · Where answers go wrong

Write your answer first, then open

A strong answer

First-year margin is 0.8 × $3,000 = $2,400.

Sales-led: $150,000 ÷ 30 + $1,000 = $6,000 a deal. Year one covers 40% of it; with 85% renewal, 2,400 + 2,040 + 1,734 = $6,174, so payback comes in year 3. The 2.7 is right and hides those three years. Two executives cost $360,000 a year for 60 deals and $144,000 of first-year margin.

Self-serve: $900 against $2,400, repaid inside the year, but only 4 firms a month.

Hybrid: 30% of 40 trials is 12 signalled trials a month. Calling them lifts 25% to 50%, so 3 more firms a month, 36 a year. The calls cost 144 × $250 = $36,000, or $1,000 per added firm; even with a self-serve firm's $900 of media added, $1,900 is inside the year.

Decision: no executives. Run the hybrid, with the calls taken by the founder or a quarter of one person's time, not a hire, because 12 calls a month do not fill a rep's year. A full rep pays inside the year once the firms they add cover their cost, $150,000 ÷ $2,400 ≈ 63 a year. At a quarter of a firm added per call that is 250 calls, about 21 signalled trials a month, or 70 trials. Hire then.

What would reverse it: if practices will not buy without a security review or a procurement call, self-serve closes nobody and the sale needs a person anyway. Sales-led then meets the target only at $6,000 ÷ 0.8 = $7,500 a year, so sell to larger firms at that price or stay out. And the 50% rests on 20 calls; measure it on the first 60.

Rubric

Computes the sales-led CAC ($6,000) and its payback year with renewal, not only the lifetime ratio
Prices the hybrid on the firms it adds (3 a month), not on every signalled trial that buys
Checks whether 12 signalled trials a month can fill a rep, and names the volume at which a hire pays
Chooses one motion and sizes the commitment in people and dollars
Names the procurement condition that would force a sales motion, and the $7,500 price that would make it meet the target
Flags the 20-call close rate as the weakest input and says how to firm it up

Where answers go wrong

"Lifetime margin of $16,000 against $6,000 is 2.7: hire both executives." The ratio is right and payback is in year 3. Two executives put 60 × ($6,000 − $2,400) = $216,000 into the first year beyond what their deals return.

"Hybrid, so hire one rep for the signalled trials." Twelve a month yield 36 added firms a year, so a $150,000 rep costs about $4,170 per added firm, well above $2,400. The motion is right and the hire is a year early.

"Self-serve only: it has the lowest CAC." It leaves 36 firms a year, $86,400 of first-year margin, uncollected to save $36,000 of calls.