GTM Strategy

What is a GTM strategy?

GTM Strategy (go-to-market strategy, in German Markteintrittsstrategie) is the plan by which a company sells a specific offer to a clearly defined customer group, the target segment. It combines five decisions that must be aligned with one another: target segment, offer and value proposition, pricing and contract model, sales channel, and the metrics by which success is measured.

A GTM strategy is drawn up for the first market entry, and equally for a new product, a new customer segment or an additional country. There is no separate contract document for it. The strategy appears in the business plan, in the investor presentation (pitch deck) and in the assumptions of the financial model. In funding rounds it explains how the capital raised is translated into revenue. In commercial due diligence, the review of market, customers and sales by investors or buyers, it is tested against the actual sales figures.

Building blocks of a GTM strategy

Target segment

The target segment defines which companies are approached and which people there decide on the purchase. The company level is described by the Ideal Customer Profile (ICP), the individual level by the buyer persona. The segment determines the number of reachable customers and therefore the upper limit of what a sales channel can achieve in this market.

Offer and value proposition

The offer describes which problem is solved and by what measure the customer judges the benefit, for example working time saved, lower error rates or additional revenue. A viable value proposition is one that can be supported with figures from existing customers. This presupposes demonstrated product-market fit in the target segment, that is, evidence that customers there buy, use and keep the product. Without it, a GTM strategy mainly multiplies the cost of acquiring customers.

Pricing and contract model

Price, term and billing method determine the annual contract value per customer (Annual Contract Value, ACV). It limits the sales effort that a single deal can bear. Contracts that can be cancelled monthly at low prices do not support personal selling; multi-year contracts with a high contract value justify it.

Sales channel

Three basic models are common and are often combined:

• Self-service: Customers register, test and buy without a sales conversation. This product-driven model (Product-Led Growth, PLG) requires a product whose value is clear without guidance.
• Selling from the office (inside sales): Conversations and product demonstrations by video, few meetings per deal, contract values in the mid range.
• Field work (field sales): Meetings on site, several participants on the customer side, long sales cycles and individually negotiated contracts.

Indirect routes are added through commercial agents, resellers, integration partners or marketplaces. They reduce the company's own sales costs but give up part of the margin and of customer contact. They must be structured separately in legal terms. Commercial agents, that is, self-employed intermediaries who continuously broker transactions for the supplier or conclude them in its name, are governed by Sections 84 et seq. of the German Commercial Code (Handelsgesetzbuch, HGB). When the contract ends, they may be entitled to a compensation claim under Section 89b HGB. Under competition law, the supplier may not prescribe fixed or minimum prices to resellers, who sell in their own name and for their own account.

Metrics

The strategy is measured per channel and segment using a few figures. Customer acquisition cost (CAC) covers all marketing and sales costs per customer won. To this are added the sales cycle, that is, the time from first contact to signature, the close rate and the payback period of the acquisition costs (CAC payback period). The ratio of customer value to acquisition costs (LTV/CAC ratio) shows how many times the gross profit over the entire customer relationship covers the acquisition costs. For the efficiency of sales as a whole, the Magic Number is added, the increase in annual recurring revenue per EUR 1 of sales and marketing costs in the previous quarter.

Aligning price, sales channel and segment

The building blocks cannot be optimised individually. The price determines which sales channel is affordable. The sales channel determines how many companies in the segment are reached and in what time, and from this follows the realistic ceiling of revenue. A strategy is coherent if this chain works in both directions.

The most common design flaw is a low contract value combined with costly personal selling. The acquisition costs then flow back only after years, and every additional unit of growth increases the capital requirement. Conversely, self-service fails with products that need explanation and whose introduction must be approved by several departments of the customer.

In terms of timing, a fixed sequence applies. First it is demonstrated in the target segment that a channel wins customers repeatably; only then is it expanded with staff and budget. If both happen at the same time, a weak result cannot be attributed to the channel, to the offer or to the onboarding of new sales staff.

What investors examine in a GTM strategy

In growth rounds from Series A onwards, the first larger funding round with professional investors, a large part of the capital often flows into sales and marketing. Investors therefore expect evidence that at least one channel works repeatably in the target segment, and a plan that expands this channel on comprehensible assumptions. What matters are the sales cycle, close rate and acquisition costs of the last quarters, broken down by channel.

Commercial due diligence checks whether the new customers of the last twelve months actually come from the segment and channel described. It also checks whether the planned sales hires can support the planned deals. In a company sale, strategic buyers additionally ask whether the offer can be sold through their own sales channels, because part of the expected synergies rests on this.

Worked example

A software provider for maintenance planning in manufacturing companies sells at an annual contract value of EUR 6,000, that is, EUR 500 per month. The gross margin, the share of revenue that remains after the direct costs of operating and supporting the software, is 80%. From pilot phases, the following acquisition costs per new customer are available for three sales channels: self-service EUR 1,600, inside sales EUR 6,000, field sales EUR 18,000. The question is after how many months a customer's gross profit has earned back its acquisition costs (payback).

• Gross profit per customer per month: EUR 500 × 80% = EUR 400
• Payback with self-service: EUR 1,600 divided by EUR 400 = 4 months
• Payback with inside sales: EUR 6,000 divided by EUR 400 = 15 months
• Payback with field sales: EUR 18,000 divided by EUR 400 = 45 months
• Contract value at which inside sales pays back in twelve months: EUR 6,000 divided by 12 = EUR 500 gross profit per month; EUR 500 divided by 80% = EUR 625 revenue per month; EUR 625 × 12 = EUR 7,500 per year
• Contract value at which field sales pays back in twelve months: EUR 18,000 divided by 12 = EUR 1,500; EUR 1,500 divided by 80% = EUR 1,875; EUR 1,875 × 12 = EUR 22,500 per year

At the existing price, only self-service pays back within a year. Inside sales becomes viable if the contract value rises by a quarter to EUR 7,500, for example through a package for several locations, or if the acquisition costs fall to EUR 4,800. Field sales requires 3.75 times today's contract value and is ruled out for this segment. A combination of self-service for individual operations and inside sales for customers with several locations is coherent here.

Distinction from related terms

• Ideal Customer Profile and buyer persona: describe the target segment at company level and at individual level. The GTM strategy builds on them and adds offer, price, sales channel and metrics.
• Marketing strategy: governs positioning, messages and communication channels. The GTM strategy is broader and includes price, sales organisation and the economics of customer acquisition.
• Product-led growth: a particular sales channel within a GTM strategy, not the strategy itself.

Common mistakes

• Too many channels at once. If advertising, trade fairs, partners and direct outreach are launched in parallel, no result can be attributed to any channel. A test of a few channels with a fixed budget and a fixed period is more informative.
• Channel before segment. The choice of channel follows from the information behaviour of the target customers, not from the habits of the founding team.
• Price calculated without sales costs. A price that does not earn back the acquisition costs of the chosen sales channel within a reasonable time makes every increment of growth a liquidity risk.
• Sales cycle too short in the plan. In business with companies, several months often pass between first contact and signature. A plan that counts in weeks books revenue too early and underestimates the capital requirement.
• Onboarding not planned for. New sales staff reach their full revenue target only after a ramp-up period. If it is missing from the plan, the planned sales performance of the first months is too high.

Frequently asked questions

When should a GTM strategy be in place?

Before the first larger investment in sales and marketing. At the latest before a funding round whose proceeds are mainly meant to flow into building up sales, it must be supported with the company's own figures, because investors measure the use of proceeds against it.

How often is a GTM strategy adjusted?

The target segment rarely, the channels regularly. Channels become more expensive once competitors also use them, and new products or price tiers may require a different sales channel. An annual review of the metrics per channel is sensible, plus an additional one whenever price or product changes.

Does a new country need its own GTM strategy?

As a rule, yes. Buying behaviour, competition, price levels and the legal limits on approaching customers differ from country to country. What works in the home market is initially only an assumption in the new market, to be supported with its own metrics.

Can a company run several sales channels in parallel?

Yes, if the segments are clearly separated. A common combination is self-service for small customers and personal selling for large ones. Conflicts arise when both routes compete for the same customers or when different prices apply to the same offer.

The Roemer Capital view

Where a funding round is mainly meant to finance building up sales, we check before the process starts whether price, sales channel and acquisition costs fit together. Our benchmarks are a payback of acquisition costs of under twelve months and a ratio of customer value to acquisition costs of at least 3 to 1. Both apply to the segment into which the capital is to flow.

In the financial model we represent the strategy through sales capacity, ramp-up times and measured rates, not through a flat growth rate, and we calculate a base case, a cautious case and an optimistic case. This allows every revenue assumption to be traced back to a sales assumption in due diligence.