One thing I've learned is that the sales process is a continuum. Things that work well in multi-million dollar deals are totally inappropriate in sub 5k deals. The trick is getting the right amount of "touch" for the right types of deals. One way to do this is to segment the salesforce. From there, you can attack different sized opportunities with different levels of engagement and investigation.
Freemium represents this process taken to one logical extreme where you have zero-touch and rely on marketing from the web site and pure virality. Next up might be limited email marketing/sales. Then phone, then phone and outside sales.
At the very high end, you are talking about regional field sales as well as face-to-face visits with your companies leadership up to an including the CEO.
There are billions of individuals and millions of small businesses that can be reached without a sales team. If you don't want to do sales, then don't target enterprise customers. I make my living with SaaS products, and have never made a cold call or sent an unsolicited mail about it.
Two things have to be taken into account here. Firstly the original post is from the point of a VC, and from the point of view of a VC, not hiring a sales team to actively pursue high value enterprise sales and partnerships in a market amenable to them represents the great evil of limiting traction and leaving money on the table. From the point of view of a micropreneur or small business not trying to win the entire market or go bust trying, it might be taking a massive business risk on something with far less predictable return than ramping up existing marketing spend.
The second is that there are millions of small businesses which aren't searching Google for software solutions to certain problems and yet are willing to part with cash if somebody shoves the solution in their face.
I run a low-budget (<$1000/mo) PPC and retargeting ad campaign which is where most of the first customers came from. Today, at least 80% of new signups are either referrals (word-of-mouth, or articles/blogs/tweets written by current and past customers) or from organic search. The #1 keyword in my paid PPC campaign is just the brand name.
Good stuff. Assume Improvely is your Saas. You do realize that marketers/agencies are very active in social media, blogging, etc. I can think of over 100 blogs that would write about you: conversionxl.com, okdork.com, quicksprout.com, kissmetrics.com, etc, etc.
I'm sure if you created a SaaS for X, where X = farmers, or or home funeral owners, or home contractors, you would not have that luxury. So it definitely depends on the space, and for most people, your strategy simply would not suffice... not even close.
I've seen this work too, but it depends. As with all things in this domain... it depends. There are no absolute laws in this space. If most of your (monetary, capturable) value is in enterprise, you need sales. Otherwise maybe you don't.
>Your biggest competition isn’t just other startups, perpetually licensed on-premise packages, homegrown solutions, or incumbent vendors. It’s inertia...the target company’s urge to do nothing.
So how do you make enterprises care enough to act?
I've found that as "obvious" as saving money should be as a change agent, in many organizations that doesn't move the needle.
Products that increase revenue usually gets far more attention than money saving products. Competitive leapfrogging / strategic value even more, but that goes to Mark's about understanding and identifying their initiatives.
Would also add: identify their incentives. Make heroes the organization rewards.
Totally agree. If you look at your company, where are your "rockstars"? I don't mean rockstar developers; I mean the most ambitious, most well-connected (and highest compensated) people in your company. It's a trick question: they're almost always in sales, marketing or product because these are the parts of the organization that drive profit.
This is true of almost every company. It's not a secret why Salesforce was the first real SaaS success story: companies are a lot more inclined to spend money to make money than to spend money to save money. Growth is the name of the game; cost cutting is usually only a focus once growth is no longer an option.
That's why I groan whenever I see something like yet another IT operations management platform. Would the company be better off buying a software package to manage their IT, or firing all their IT staff and hiring a managed services provider to fill the gap? Operational cost cutting has a lot of different modalities that are often mutually exclusive, while you can more easily chase down multiple paths for revenue generation.
Does ServiceNow count as "yet another IT operations management platform"? Do they make you groan because their IT applications business is doing so well? Or because you think they're overhyped and will crash and sputter?
Yes, they do. And I groan because it's an idea I've probably heard a thousand times. Companies will have success, but there will likely be another company in 5 years that overtakes them, and another 5 years after that. It's basically a zero sum market where the entrenched vendor's scale is too big to adapt to the new use cases that pop up every 5 years or so, so a new vendor pops up, becomes the entrenched leader, and the cycle repeats.
ServiceNow will likely just get acquired by someone (HP? SAP? Oracle?) and integrated as a module in a massive ERP system. I definitely don't agree with their valuation; they're trading at like a 300 forward PE which is just ridiculous for an enterprise technology vendor in a space as crowded as theirs. They're likely only trading at that level because the analysts are anticipating an acquisition and subsequent bidding war. That doesn't validate the value of their services; just that big enterprise tech vendors are willing to pay a premium to displace their competitors.
It's more nuanced than that and can relate to the broader macro environment. You have to think of the organization you're targeting and what's going on at the senior leadership level. What do they believe is happening to their market and their company within that market. During good economic times "saving" money isn't that appealing. Times are good and customers are opening their wallet so the company focuses on topline growth. So your "incremental revenue" is the best story. If an economy is slowing and new sales in general are impacted then cost cutting and savings becomes much more important because the best tool in the world isn't going to make tight customer's open their wallet. Lastly, if you're selling to big old enterprises that in general have sloow growth then cost cutting can be just as appealing as new revenue because they're managing to a bottom line.
The problem with big businesses is that even if the organisation needs and wants to cut costs, its smaller organizational units often have little incentive to do so. So the push for a new cheaper solution has to come from above, which means you have to sell the product to "higher ups" and not to the people who will be using the product. Of course that means the sales people and cheapness of product are then more important than the actual quality of product, which I guess is why there are so many crappy products in the big enterprises in the first place.
This is a decent article on enterprise/SaaS sales, but no knowledgeable person has ever claimed that a SaaS product can reach its customers without sales.
Not only to enable sales, but to also show the business problem you are fixing is important. I've been in enterprise deals where if the price tag is too low, the executive doesn't think it's important enough for him/her to fix. It can sound crazy, but once you've tried to fix big problems at that level it makes some sense.
The lower your price, the more your product and sales process needs to be self-service, because you can't afford to send a salesperson out for a $1000/yr contract (airfare + hotel + rental car + their time, annnd you're over any possible return, even before including R&D and support costs)
With SaaS, LTV is a more important metric than ACV since you need to take into account average retention, up/cross-selling opportunities, and more. If you take into account CAC even better.
Armando Mann over at RelateIQ uses Cohort Growth to measure LTV for each customer within a cohort to ensure the business is growing taking into account the bottom line.
This is a non-obvious point that took me a long time to grok: the way you sell your product is a function of its price, not the other way around. The more you charge, the more high-touch you can get when selling (i.e. with an outside sales force).
There exists a continuum of SaaS sales strategies. One end of the spectrum is high-touch sales, which is Oracle's "We send you a sales guy, a supporting engineer, a bunch of Powerpoints, and enough steak and wine to feed a European wedding reception, and afterwards you pay us several million dollars" model. The other end of the spectrum is low-touch sales, where the website/email/product/onboarding tour does the heavy lifting and contact between the customer and the company is, to a greater or lesser degree, seen as a bug to be fixed in a later version.
An entire constellation of decisions about one's company/customers/product/pricing/business model/etc gets determined instantly when you pick your point on this continuum. (Or, equivalently, you get placed on the continuum basically instantly when you make most consequential decisions about a SaaS company/product/etc.)
The reason this article is on this blog is that there is a playbook for high-touch SaaS businesses which is amenable to venture funding and that is not exactly true for low-touch businesses. (There exist a handful of exceptions, but people consider B2B high-touch sales to be a solved problem.) Additionally, and more directly responsive to your question, there exists at least one popular and widely listened to corporate voice who quite literally wrote a bestselling book which might as well be subtitled Low-Touch Sales Mean You Don't Have To Take Dirty VC Money.
(Cards on table: My business is mostly on the low-touch end of the spectrum but I work with people all over it. There exists a shedload of money to be made in software and a variety of ways to make it effectively at the traditional points on the spectrum and at emerging points besides.)
Interesting how you described the big enterprisey sales experience there.
I have been leading a large-impact project internally where we need a solution that has potential vendors at different places in this spectrum.
Inevitably, the largest and most "enterprisey" companies had what I would consider by far and away the worst sales experiences. Very clearly sales people who are used to dealing with business customers who probably won't have anything to do with the actual product in the day-to-day.
I was given vague salesy answers that clearly intended to skirt around the issues I presented, and they had no issue trying to exert pressure come monthly/quarterly sales quotas. Exploding offers for a large purchase of this nature are simply not appropriate (and certainly not appreciated).
Perhaps my biggest gripe has been with the lack of transparent pricing for any sort of B2B SaaS where you are on the highest tiers, and thus need "custom pricing." I understand some things are variable and need to be custom scoped, but in this case that was only true for some add-on services vs. the core product with volume-based pricing. As a prospective customer, I absolutely loathe these sorts of pricing negotiations. The time wasted on the back-and-forth is also a giant PITA and doesn't win the companies any points. It is always very obvious that their initial price is a high-ball offer, and they expect you to negotiate, which means that they in part are structured/incentivized to make some margin/sales commission by not giving the customer the fairest price they could. This in and of itself starts the relationship off on the wrong foot.
In general, I wish there was a way to choose the type of sales experience I want before beginning the process. If I'm a key decision maker and care more about the actual functionality, UI, integration, etc., I want someone knowledgeable of the technical aspects of the product. Someone who will be upfront on the product's shortcomings (to avoid surprises that result in a pissed-off customer down the road and make the buyer look like an idiot). I also want someone who can communicate with zero sales fluff, and give me fair and transparent pricing. Is that really too much to ask? Apparently so when it comes to enterprise B2B sales. Over the years I've often had the distinct impression that many of the salespeople I've dealt with exist simply to funnel communication between a sales engineer. I get their value if they are out hunting and bringing in their own prospects, but these have all been for inbound leads where I've contacted them.
Also, do all those fluffy buzzword-filled sell sheets and cheesy marketing videos devoid of any meaningful, tangible content actually add value for anyone? I had one sales guy send over an (often unrelated) white paper or marketing video link with every. single. email. I ultimately had to tell him to stop because it wasn't adding any value and was doing more harm than good.
Guess this turned into more of a rant...but if anyone has good solutions for dealing with the above I'm all ears. I've negotiated these kinds of contracts for years, know how the game is played, and play it reasonably well (IMHO). Doesn't make it any less frustrating.
the vast majority of potential customers (leads) are a waste of time, for a million different reasons. they want you to invest in the process because that's the only way to signal you are serious.
try doing all of the above, for 12-18 months, and then learning that the customer never intended to go with your solution, but was rather just leading you on to get a price foil for a competitor that he already decided he was going with. you'll be a different kind of angry. a real kind of angry - because there are real consequences and costs, in dollars, and time, to that kind of fuckup. this is very different from a real evaluation, and the only way to avoid that kind of scenario is to get investment from the buyer. a sales organization that runs into that kind of situation with any kind of regularity is dead in the water because they're spending all their time on people who don't want to give them any money.
having said that, what you want in a sales process does exist, it's just that it's usually the smaller, younger, hungrier, less "proven" companies that are willing to withstand the abuse to provide it. it'll all sound great, until it's time to sign the contract, then all of a sudden any of a million reasons to not move forward are produced from thin air, and instead, a larger more established competitor that practices universally disliked sales techniques gets the $ and the validation.
in short, be the change in the world you want to see. next time, buy from a smaller company that puts your career at risk. it's hard to do when you have large budgets because the purchasing process is basically just a giant a cover-your-ass operation.
I appreciate your point. But all of those consequences you listed in your example stemmed from the customer trying to get a price out of you for pricing leverage with a competitor.
If the company being used in this regard simply had transparent pricing, they wouldn't have to waste those sales resources in the first place.
I also think in this day and age of anonymous online review sites, Quora, Reddit, etc. that a lot of this pricing information gets out there anyway, NDA's be damned. So it almost seems like a futile battle.
I agree though with your statement on types of companies, and ultimately decided not to continue considering the large established enterprise players and focus more on the smaller, younger companies. There was still pricing negotiation and other sales process challenges, but overall the process was much less painful (still not anywhere approaching enjoyable though).
getting to a price is about 1% of the sales process, but it's the only thing the customer thinks he wants, so it's used as a gatekeeper.
also, the companies who don't publish pricing do not want people who are interested in just the price. they're usually selling something that has a lot of intangibles like a custom crafted solutions or quality of service. by reducing their entire sales pitch down to a single number, they're devaluing themselves before they even get a chance to pitch their solution. by not even being willing to communicate with a sales person the details of what you want, you immediately disqualify yourself.
in my opinion it should take about 30 minutes to an hour of your time to be able to get a price out of an enterprise product or service (this includes requirements gathering, specifications, etc on the part of the sales person). anything less, and you're not dealing with a serious buyer. usually this is just one phone call and a follow-up email with specs. in our business that's enough to generate a proposal with a $ amount on it.
I think the % of the process that is spent on pricing is highly dependent on the situation and players. In this particular case, I've had some where it was very quick and clear cut, and some where it was very clear they were trying to jerk me around on it to see how much they could get out of me and it took waaay too much time to get to the bottom of that.
I likewise will also agree that there are valid reasons for not publishing the price as a way of better qualifying leads before first sales contact.
That said, that still doesn't justify why pricing can't be transparent and clear cut once the lead is qualified and they are in the sales process. Simply knowing that the initial pricing presented is not final and needs to be negotiated is a giant PITA and still a waste of time. If you claim pricing is such a small piece of it, why then do companies bother with the negotiation piece if the actual amounts might be trivial compared to whether or not they close the deal? Does the psychological benefit of conceding to a lower price (from an already padded initial price) really make that big a difference in close rates?
I agree pricing discussions should not take longer than 30 minutes, but unfortunately, many sales people I've dealt with prefer to play car salesman style games.
Do you have any suggestions on how to approach such conversations to get the best/fair price with a minimum of back-and-forth headaches that can cut through some of what I've described? I've tried a few different approaches with varying success and am always open to others to test out.
yeah. tell the sales guy what your budget is, and have him suggest some solutions that will maximize that value for you. you don't have to tell the exact truth here. a good sales person will use that as a starting point and craft a series of further questions and/or discussions for you to hone your needs into a specification that can be delivered.
too many people who usually don't buy things try to play amateur negotiator and refuse to name a number. it's really transparent and frustrating. generally these deals don't go through because the person doing the buying doesn't know what the hell he's doing and he assumes a combative relationship instead of one that tries to solve a problem.
especially when you spend hours crafting a proposal and getting input from sales engineering and executive management and accounting and client delivery, and the first thing that comes out of the customer is sticker shock because the customer refused to state his budget and requirements because he read it in a self help book somewhere.
again, most of these sales 'techniques' really are just designed to not waste anyone's valuable time. buyers will waste their own time and not even realize it because it feels like you're "getting one over" on them when in reality you're just being a moron.
"The true purpose of sales is to create new value for customers."
Yes. If you're just parroting talking points, you can be replaced by a website. Plus, it's more fun to really help people.
"your biggest competition isn’t just other startups, perpetually licensed on-premise packages, homegrown solutions, or incumbent vendors. It’s inertia. Enterprise/SaaS salespeople find themselves in a constant battle against the target company’s urge to do nothing."
Yes, again. This isn't just a sales problem-- this is a human nature problem. It's just that selling to big companies involves lots of humans, almost all of whom are deeply resistant to change.
"Do nothing" understates the challenge here. Every change introduces risk and costs. The process today might be less than optimal but changing it will require hard and soft investment costs and take time and comes at an opportunity cost of doing something else. 1 in 4 projects runs terribly over budget/time etc. So the urge to do nothing is actually "The barrier to implementing change is much higher than simply "hey once implemented this will save you x per year or generate Y per year" How tangible and achievable and risky are those goals.
A good rule of thumb is that as a sales person you want to feel like there is a 4x minimum change vs the cost of your solution. So if your solution is $250,000 a year as a SaaS offering you want the company to believe it will save or generate $1 million a year. Anything under 3x and they'll probably punt because of the risks and opportunity cost of all things change.
These are good points. The game theory in enterprise sales is pretty perverse. Buyers want to guard against risk (including lying sales people), so they create more hoops for the vendors to jump through, which increases the cost of sales and makes the project more expensive, which drives the creation of more hoops... I've seen RFP processes from both sides where buyers asked hundreds of questions, vendors responded "optimistically", because that was the only way to get into the next round, and most of the energy on both sides was spent dealing with the buying process instead of the actual problem.
This reads really interestingly to me. Things like:
Then I’d show the sales reps a long list of initiatives they needed to look for in companies
Once the sales and marketing teams have uncovered these initiatives (as well as the critical capabilities that need to be in place for the initiative to be successful), they can begin to define the unique value proposition.
This data is almost never public, so it couldn't be found by just doing your standard research on a company from the outside. The only way you get this kind of stuff is with an access agent.
What this article basically says, without saying it, is that your sales team needs to be Human Intelligence officers out there recruiting individuals from large organizations to be champions for your product.
Nothing new here[1][2]certainly as this is a fantastically useful way to do business, but you had better know how to do it right or you look like an idiot. It also means you really need to hire top notch sales people.
In my experience the reality of enterprise purchasing is far more depressing.
If you are a new company with a new product, hoping to sell into the large enterprise market, you're competing with large, well-funded sales teams who's most compelling pitch is that "we're the safe choice." It may not be (and usually isn't) the best or most cost-effective choice. Yet at the end of the day, divisions or agencies making 7+ figure purchases want to feel confident in their purchase. "SAP is a good purchase because Ford/AT&T/Apple (I'm making these up) purchased them and they must know what they're doing."
Enterprise sales is a very tough business. If I were launching a product, I'd probably target small teams first with a lower price-point to bypass the politics and get almost instant purchase approval. There the stakes are lower. Sure, you won't close a $500,000 sale in one fell swoop, but once you establish yourself across a number of teams, you can always change your product lineup and create an enterprise package that has a much higher cost. Obviously a large number of SaaS companies already do this and I have to believe it's the most effective route.
Because the products only sell themselves once they are in front of the right decision makers at the right time. Sometimes arranging that takes much foresight, skill & determination (and not a small measure of bull too, if I may be more cynical for a moment!).
Also, SaaS offerings are not new and therefore rare & exciting any more so you are unlikely to be alone in the market - you need your sales+marketing people to compete with everyone else's.
What's interesting is when sales people think they can get a leg up on closing the deal by going over your head because they don't think you are a key decision maker or influential enough in the process to worry about.
A couple years ago I had a sales guy at a large ad tech company that shall go unnamed try to go over my head to executive team members. Of course the first thing that happened after that initial contact was that executive coming over and saying "so and so reached out to me...what do you think about them?"
At that point I explained that not only did I not think they offered a great solution, but that it spoke volumes of how they do business if they go behind people's backs like that.
The icing on the cake was when that executive sent an email back to the sales rep, CCed me, and said that he would defer to my expert knowledge of our needs.
Note to any sales reps reading this...just because someone doesn't have an executive-level title, don't for one second think that you might be able to close the deal without their buy-off.
Flattered by the shoutout. Atlassian's model is most definitely focused on empowering customer self-service (and probably a strong counterpoint to the a16z piece). We do believe software can sell itself, and I think there are dozens of examples of other companies that do as well, from Basecamp to Expensify. But we also enter and expand via teams. If we were dependent on selling initially to the whole enterprise, our model probably wouldn't work.
man I just read the article...I'm perplexed as to how I can take this to sell my SaaS product to enterprise customers. It looks very complex and intimidating. Even landing an enterprise customer alone is tough enough.
When you wear your sales hat, you almost don't care if what you are selling is useful so long as the prospect satisfies your single condition: 1) has enough money.
Sometimes I wished we eliminated salespeople entirely. I would prefer to have "honest" marketing, and strong customer service.
What I mean by honest marketing is to continually share content with the prospective client, and try to win them over without playing gimmicky mind games and tricks. To do this, you must understand that your client may need to time to understand your product, move away from current solution, etc..
A strong customer service agent would help answer all of customers' concerns once the marketing has gotten them interested.
Freemium represents this process taken to one logical extreme where you have zero-touch and rely on marketing from the web site and pure virality. Next up might be limited email marketing/sales. Then phone, then phone and outside sales.
At the very high end, you are talking about regional field sales as well as face-to-face visits with your companies leadership up to an including the CEO.