We’ve talked about Toast a bit here on SaaStr – most recently we wrote up the 5 Interesting Learnings from Toast at $1.1B in ARR! Stunning.
Toast is the latest SaaS leader to get much more efficient in the past 12-18 months, along with monday.com, HubSpot, MongoDB, and many others. They’re still cruising — growing a stunning 45% YOY – which led us to the question:
We’ll share the answers in today’s brand new episode of CRO Confidential, where our host Sam Blond, partner at Founders Fund, sits down with Toast CRO, Jonathan Vassil to talk about their proven customer acquisition strategies that led to its record-breaking growth.
Jonathan joined Toast as the SVP of Sales in 2017. Just six years later, he’s the CRO of the company. It’s not only rare(r) to see such explosive growth by a SaaS company, but to also watch Jonathan’s exciting career growth at the more senior levels within a hyper-growth company. So, let’s dive into what it looks like to be a company like Toast and how fellow CRO’s can steal from Jonathan’s experience and playbook.
A Glance at Toast’s Hypergrowth Journey
When Jonathan joined Toast as the SVP of Sales, the company was Series B with $20M in ARR. Jonathan saw them through IPO in 2021 with the highest software multiple IPO ever.
Toast is a vertical software embedded payments solution for restaurants in the U.S. and across the globe. Some interesting facts about the company include:
- They’ve been at it for 15-16 years.
- It’s the fastest-growing software business of all time.
- Toast has 80k-85k customers, and it is still in the early days.
- They’ve passed a billion in ARR and are growing north of 50% year-over-year.
Toast is a unique business because of its TAM. They’re servicing one of the largest vertical TAMs in the world. In the U.S. alone, there are roughly one million restaurants, and they only have 80k of them. That means they still have 85% of the market left to tackle.
Toast’s Go To Market Structure
Toast has seen unprecedented growth on the revenue side, so let’s look at the customer acquisition strategy. Before talking about customer acquisition, it’s worth noting the greatest strength of Toast’s GTM motion — The partnership between their sales and marketing organizations. They are in lockstep and work well with one another to drive growth. They understand their TAM, the composition of the restaurant vertical, what’s important to them, and how they make decisions.
So, how do they get customers?
Due to the non-desk worker nature of restaurants, Toast has two models for acquiring customers:
- Selling in the field
- A remote inside sales team
Why the two models?
Because of restaurant density. Let’s call it a million restaurants in the U.S. There isn’t any vertical with that many rooftops. Any city block in Miami or San Francisco may have a pet store, a drug store, or a salon, and then you’ll have four restaurants. It is the only vertical where density is compact, and Toast leverages that to its advantage.
What is one of the biggest considerations restaurants take before making a purchase?
Social proof. Social proof is incredibly important for SMBs, and even more so for the restaurant vertical because of the density. Jonathan says around 75-80% of their sales team are field-based sales reps. They own a geography and are trusted advisors to the restaurant space in their “patch.” There’s a balance, though. Some areas don’t have the density needed to make hiring a field-based sales rep worthwhile, which is where the inside reps come in. Inside reps have the same quotas and expectations. Their TAMs are just different.
The Advantages of Selling In-Person vs. Remote
In the early days at Brex, they measured conversion rates of whether a client received an on-site visit or not. The ones they met in person closed at a 3x rate.
Is it the same for Toast?
The conversion rates are higher, no doubt. There’s a reason they’ve split field vs. inside reps 80/20. The Toast team has spent a lot of time thinking about how restaurants and owners make decisions, and a lot of it comes down to the local ecosystem they live within. When you can penetrate the local ecosystem, it’s powerful. You have food purveyors, knife sharpeners, and people who work together in person.
So, when your rep shows up in the community in person, too, they see an impact on conversion rates and win rates and also top-of-funnel.
Boots-on-the-ground reps find more opportunities that others may not know about because they’re hearing it firsthand.
More Territory Per Rep Doesn’t Mean More Sales
Was Toast methodical in the way they segmented or rolled out nationwide? The folks on the sales and marketing teams helped think through the rollout process, from resourcing to territory planning. While launching Seattle for the first time, for example, they knew that the territory size you give to a rep dictates the growth rate.
You could give one rep the entire city, but that would be counter-productive. Sales reps may not want to hear this, but going back to density, it’s better to have a smaller territory so they can work it deeper. A mile deep is better than a mile wide, especially when social proof matters. When reps reach a certain density level within a market, win rates and top-of-funnel increase.
Toast did this almost by accident in the beginning. They didn’t have a rep in California for many years because it was better to put them in Boston. There was already a strong partnership there. And when they paired reps with partner reps, productivity accelerated. So, instead of putting that next sales rep in SF or LA, they sent them where the reps were to build the rep coverage needed to build a city.
How you design territories and where you put people is incredibly important.
The Product Dictates The Segments and Incentives Drive Behavior
Toast has a world-class product that dictates the segments it pursues. They came out with Toast Go, a legendary handheld device that allows servers to take orders and payments and drive revenue for restaurants. That product naturally gravitated reps toward full-serve restaurants.
So, almost unintentionally, Toast reps gravitated towards segments based on the product. The same was true for Brex, except they intentionally went after a sub-vertical within a larger vertical. They created the first corporate card specifically for startups.
This isn’t a strategy for everyone, but the concept of being deliberate about who you’re going after and where often provides conversion rate tailwinds you don’t get if you’re everywhere for everyone.
Another influential piece of Toast’s go-to-market structure is incentives. The inventive structure is the biggest lever a sales leader has to drive behavior across the business. It’s infinitely complex and is an iterative process. You’ll likely learn every year what your team needs and how incentives need to be structured to satisfy those needs.
One Out of Five Deals Is A Referral From Another Customer
While marketing is a huge part of the funnel at Toast, it’s not always the easiest way to talk to customers. A question they often pose to reps is: Would you rather pull open a door and walk into a restaurant cold or ask someone to walk you in with them? It’s not entirely different from selling software to a marketing VP. The same behavior of leaning on social proof is critical. Most companies underinvest in leveraging existing customers to acquire new ones.
What’s the easiest way to get a referral?
Most people don’t do the bare minimum. Toast has a very robust partnership program in the ecosystem, so they teach their reps to not only ask current customers for a referral to someone else who might be looking for the same product…But to also leverage channel partners. Like Brex, Toast’s TAM is unique because every year, new restaurants open and call them up. So, instead of just leaning on channel partners and customers to get you referrals, you can also provide as much value to the other side as possible. It’s a two-way street.
- At a bare minimum, ask for the referral.
- Referral programs aren’t one-size-fits-all. Take time to figure out what works for your buyer and what you’re selling.
- Reinforce positive behavior. If someone makes a referral or posts something nice on social media, send them a handwritten note or a gift.
How to Grow Your Career Within A Company
Jonathan has a really unique experience at Toast, progressing from a senior-level position to a C-level position. For those looking to advance in their careers, what should you focus on to move up?
“You have to be in the right opportunity,” says Jonathan.
His time at Toast has been remarkable because of what they’ve accomplished as a team and what the business has given them to grow. The environment at Toast is designed to support one’s ability to grow within the company. Not all companies are like that.
Jonathan attributes two strategies to his success:
- The innate skills of the individual — ability, skills, work ethic, etc.
- Never thinking about the next job or next role within the company.
While many people think that’s crazy, his focus was always on two things:
- Exceeding expectations and overdelivering every time.
- Doing that the right way.
That means being thoughtful about how the inputs impact the outcome. You scale the inputs, not the outcomes, so folks solely focused on outcomes (quotas) don’t create value. Focus on inputs. To grow in your career, you must also be curious and constantly learning. If you’re a manager, coach your team. Don’t be a deal chaser. It’s a simple focus on what you produce and how you perform against expectations, but not just to hit quota.
How did you deliver those numbers? The answer to that is what you will scale.
Key Takeaways from Toast’s Hypergrowth Journey:
- Rapid Growth: Jonathan joined Toast at $20M ARR, and led it through an IPO in 2021, marking it as the highest software multiple IPO to date.
- Toast’s Market: A leading payment solution for restaurants, Toast has over 80k customers with only a small fraction of the U.S. market tapped, signaling massive growth potential.
- Go-To-Market Strategy: Toast’s success is partly due to the strong partnership between sales and marketing, understanding the restaurant industry intimately, and leveraging the density of restaurants to their advantage.
- Customer Acquisition: Toast uses a dual approach—field sales for high-density areas and inside sales for lower-density areas, with social proof as a critical element in restaurant owners’ purchase decisions.
- In-Person Advantage: In-person engagement significantly boosts conversion rates as local presence and relationships in the restaurant business are key.
- Territory Planning: Methodical territory segmentation ensures that sales reps can focus deeply on specific areas, optimizing growth and market penetration.
- Product-Led Segmentation: The product itself, like the Toast Go handheld device, guides the focus towards certain segments, with incentives structured to encourage desired sales behaviors.
- Customer Referrals: A staggering 20% of deals come from referrals, highlighting the importance of leveraging existing customer relationships and the wider industry ecosystem for new leads.
- Career Growth at Toast: Jonathan attributes his advancement to focusing on exceeding expectations and delivering results the right way, emphasizing the importance of input over outcome.