Avoiding The SaaS GTM Death Spiral

Things might be going alright. You're acquiring new users, maybe even paying customers. PMF appears solid, and your GTM team seems strong.

You are ready to grow—right now, faster. The pressure is mounting.

You place your bets, investing heavily in marketing and sales. More people, bigger budgets. But the ROI isn’t there. Should you push harder or cut budgets? Replace staff or lay them off? Try something else? You experiment frantically.

GTM flops. Funding dries up. The company fails.

It sounds dramatic, right? That’s what we call the SaaS GTM Death Spiral, and it’s a very real trap that many companies, perhaps unknowingly, step right into. 

GTM Death Spiral is a cycle where the lack of strategy and flawed tactics snowball into bigger problems, eventually sinking the business.

SaaS founders, in an effort to cut costs, often make short-sighted decisions:

• Software? Go with a free version.
• Content? Get an intern to generate 20 articles with ChatGPT.
• Design? Use AI for that, too.

Most importantly, many (seed to Series A) SaaS companies lack a properly documented and granular GTM strategy and focus on irrelevant tactics instead.

Vlad Shvets

Empact Partners Founder & CEO

All successful SaaS businesses start with two things: a great product and a great distribution/GTM vision. If you have one without the other, your company is doomed to fail. Now, when we say “GTM strategy,” we mean a real, granular, and documented game plan for how the company plans to grow its market share. Simply saying “SEO” or “social media” might be enough to impress (some) VCs, but it ain’t enough when the time comes to execute on what was planned and promised.

Common GTM Strategy Missteps

Few founders & CMOs take the time to document their GTM strategy. Instead, they fall into a few common and frankly destructive patterns. If you're making these mistakes, you're setting yourself up for the GTM Death Spiral.

1. Not Documenting The Strategy

Without a documented strategy, team members might not fully understand the overall goals or their specific roles. It’s also difficult to track what strategies and tactics have been tried and their outcomes. 

We recommend using Notion to capture every detail.

Start with the strategic vision and reasoning, outlining long-term goals, target audiences, and key performance indicators (KPIs). This sets a clear direction for your team.

Next, break down the strategy into granular tactics. Document each step, including timelines, responsible team members, and expected outcomes. This ensures everyone understands their role and the path forward. 

2. Blindly Copying Competitors

Imitating what your well-known competitors are doing might seem like a fast track to success. But here’s the catch:

If you’re stuck copying competitors, you’re not innovating. This leads to adopting cross-niche approaches that often fail.

3. Adopting Cross-Niche Approaches

Grabbing strategies from different SaaS niches and applying them to your own? Rarely effective.  Different niches have unique customer needs and dynamics.

A one-size-fits-all approach usually misses the mark. When these strategies fail, companies often resort to unstructured experimentation in a desperate attempt to find something that works.

4. Experimentation

A lack of a coherent GTM strategy often gets excused as "running experiments." But let's be real:

Sharné McDonald

Senior SaaS Media Consultant

One of the B2B partners I worked with was just beginning to establish themselves in their niche market. They made a bold move to completely rebrand with bright colors and off-beat designs. But the result was too far from their target market's appeal and seemed to deter rather than attract more users. They quickly toned down the branding to fit their target market while still highlighting their USPs to stand out from their competitors. It was a nice save!

The Hiring Conundrum

Bad hires can truly sink your business. It’s not that companies hire badly on purpose; they just aren’t clear on the skills they need and why. Hiring the wrong people is the next step in the spiral, and the direct consequence is not having a clear GTM strategy in place.  

Hiring From Competitors

This seems like a no-brainer, right? Wrong.

Without a clear strategy, they end up making misguided budget allocations to try and solve the problems bad hires can’t fix.

Hiring Junior Employees

Hiring less experienced individuals might seem like a cost-effective strategy, but it often backfires.

Imagine hiring an intern to handle your GTM strategy. Sure, they might bring fresh ideas, but without experience, they're likely to miss the nuances of strategic execution.

Hiring From Corporate Environments

Individuals from corporate environments don’t always work in smaller, more agile companies. Corporate employees are used to lots of resources and processes, which can slow them down in a fast-paced, hands-on role. 

Years ago, one of our partners hired a CMO from a large corporation who spent the first 3 months creating beautifully formatted, but ultimately useless Word documents.

They were eventually fired for failing to deliver tangible results.

Misguided Budget Allocation

Without a clear GTM strategy and with the wrong people aboard, budget allocation often goes astray. This means investing in low-ROI initiatives.

VC-backed companies face unique challenges with sudden resource infusions and external pressures to grow quickly. This could lead to them:

1. Pouring money into high-cost branding efforts without a clear target market or measurable outcomes.
2. Developing new features that don't align with customer needs or the company's core value proposition.
3. Entering new markets or launching new products prematurely without adequate research or preparation.

Bootstrapped companies often underinvest in GTM, focusing instead on product development or dividends. This underinvestment can stifle sustainable growth. There is no clear path to reaching new customers, entering new markets, or expanding the product line.

Without a robust GTM strategy, even the best products remain unnoticed.

Bad budget decisions quickly lead to bad tactics, creating a perfect storm for GTM flops.

The Impact Of Bad Tactics

Combine a lack of strategy, bad hires, and poor budget decisions, and you get bad tactics:

• Ineffective Campaigns
  • Without thorough research and understanding of the target audience, campaigns may miss the mark, using messages and channels that don’t appeal to potential customers.
  • Campaigns that use broad, generic messages rather than tailored, specific content often fail to connect with the audience emotionally or intellectually.
  • Investing in marketing channels that are not frequented by the target audience can lead to minimal impact, regardless of the campaign's quality.
• Mediocre Execution
  • Bad hires may lack the necessary expertise in content creation, ad management, or analytics, leading to ineffective campaigns.
  • Inadequate planning and coordination can result in campaigns that are rushed, lack cohesion, and fail to follow best practices.
  • Without consistent monitoring and optimization, campaigns can stagnate, with initial investments failing to yield ongoing benefits.
• Wasted Resources
  • Following industry trends without assessing their relevance to the business’s specific needs can result in wasted efforts on ineffective marketing fads.
  • Investing in advanced marketing tools and technologies without the necessary skills or strategy to use them effectively can result in underperformance and financial loss.

The result of all this? GTM flops. 

Wasting resources on ineffective campaigns, poor execution, and low-impact initiatives forces companies to scramble for more money. With a track record of bad hires, wasted funds, and few GTM successes, it becomes nearly impossible to secure additional funding.

Investors are reluctant to back companies with a history of failures, leaving them struggling to sustain operations and grow.

The Funding Dilemma

Facing GTM flops, VC-backed companies often scramble for more funds, leading to:

1. Cost-Cutting Measures (Layoffs) 

Layoffs, can be counter-productive. With fewer employees, productivity drops, and there's no one left to do the actual work. SaaS companies usually get one chance to get their GTM right, including hiring, strategy, and tactics. Missteps can be costly and hard to recover from.

2. Firing The Wrong People

While any layoffs are extremely counter-productive, letting go of the wrong people on the GTM team is even worse. This not only disrupts operations but also removes those actually doing the day-to-day work essential for driving growth.

Bootstrapped companies often resort to severe cost-cutting that impedes growth. Being more risk-averse, they hire slowly to avoid costly mistakes but tend to overreact when things go wrong.

Both VC-funded and bootstrapped companies need to remember that sometimes you have to ride out the storm. This is why having a solid, documented GTM strategy is crucial—it helps guide decisions and maintain focus during tough times.

The Final Downfall: Company Failure

Ultimately, these compounded issues lead to company failure, whether through acquisition, acqui-hire, or simply shutting down. If this post resonated with you, know that exiting the GTM death spiral is challenging but entirely possible with the right steps. 

No Strategy? Start by defining and documenting your GTM strategy. Identify your target market, set clear goals, and outline the tactics needed to achieve them.

No Strategy and Bad Hires? Address both issues simultaneously. Develop and document your GTM strategy as described above. Then, prioritize hiring skilled people who align with your company’s vision and culture.

No Strategy, Bad Hires, and Wasted Resources? Tackle all problems comprehensively. Document your GTM strategy to set a clear path. Replace underperforming team members with capable individuals. Focus on achieving short-term wins that align with your strategy to generate quick results and rebuild momentum.

You can turn things around, maintain focus, and achieve sustainable growth.

Need help developing or improving your SaaS GTM strategy? Let's chat!