Why would you fire your Sales team?
We’re adding a little something to this month’s sales contest. As you all know, first prize is a Cadillac Eldorado. Anybody want to see second prize? Second prize is a set of steak knives. Third prize is you’re fired.
Welcome to Redbooth. We’re on a journey to help teams get more done with task management and collaboration SaaS. I’m the Chief Operating Officer and Head of Product, here to drive our growth and deliver our plan.
Like every other startup, we always want to grow faster. And, from experience, there’s something in the marketing mix holding your growth back. Does your product fit your market? Is your price too high? How’s your ‘go-to-market’ — marketing and sales — performing?
Looking back, we had been experimenting with Product, Price and Promotion. And, we saw a big opportunity — What if the product sold itself? Would we be able to grow faster? We decided to analyze different sales channels.
Why would we do this — Unit Economics
Channel choice is a classic trade-off — higher touch means higher cost. And, the complexity of your product and sales cycle drive the need for higher levels of touch. To state the obvious, complex products and big, hairy deals need more sales touch.
David Skok shared a nice visualization of this trade-off. Stepping up from one level increases your cost of acquisition (CAC) by ten times. To hit your unit economic benchmarks, your customer lifetime value (LTV) needs to be at least 3–5 times as much. We analyzed the LTV of our fastest growing customer segments. And, the cost of Freemium and No Touch could help us maintain our unit economics while helping us grow.
If you want to learn more about balancing Unit Economics, check out David’s post here:
Why would we do this — Cash is King
Our analysis didn’t stop there. Acquiring profitable customers (with LTV >> CAC) is the foundation of operating a SaaS business. We took our analysis to the next level, in the way Mark Suster describes.
As a startup, the cash in the business limits our growth. We had to be sure our channel choices would enable us to grow and sustain our growth. We modeled our net cash burn to understand the implications.
Stepping on the gas with an empty tank is gonna get you nowhere
Tom Tunguz recently analyzed annual contract value and sales complexity. His analysis amplifies the importance of cash. He also models the quotas and number of deals you’ll need to support a sales team. It’s a nice litmus test for your plans. And, his analysis aligns well with our experience growing Redbooth.
Why we would do this — It fits our business
Last, we considered our marketing mix and looked for analogs. We wanted to find similar businesses who had scaled with No Touch. And, we wanted to learn from their market experience.
We strive to continously improve Redbooth’s adoption, learning curve, and ease of use. It’s one of the key things that sets us apart in the collaboration market. We’ve tested the product, analyzed our trial funnel and integrated customer feedback. Our customers and price point looked like they aligned with No Touch sales. But, could the product sell itself?
We had some Freemium experience, but the market and our own marketing mix had evolved. We wanted recent examples of No Touch free trial solutions that had grown and scaled. In the SaaS space, we found Atlassian’s results both relevant and inspiring.
In 2013, Atlassian was selling more than $100 million in SaaS with a finely-tuned No Touch engine. They depended on enabling customers to buy without traditional salespeople. And, they scaled with a constant focus reducing frictions in the marketing funnel. Their results are impressive, scaling to a $4.4 billion IPO in December 2015. No Touch was integral to their success-delivering predictable linear growth and minimizing capital needs.
Our business and our marketing funnel were very similar to Atlassian’s. It lead us to believe that we too could increase profitability and scale without sales touch.
We also found a wide array of inspiring examples as diverse as consumer products. For example, Tuft & Needle is disrupting the mattress market with No Touch. Traditional manufacturers add friction to the buying process with independent dealers. T&N questioned whether customers even needed a store to evaluate the product. Their model is driving explosive growth without VC money. If a consumer can buy a mattress sight unseen, why can’t a business consumer buy task management SaaS on their own?
Putting it to the test
We had analyzed the impacts to our unit economics, cash burn and found reference models of scale. And, No Touch aligned with our target customer. We were ready to test our hypothesis.
Would the product sell itself? Or, did we need more sales touch?
We devised two tests that would help us answer the question.
- Enable a self-service No Touch funnel
- Force more sales touch through a sales-driven model
Tune in to our next article where I’ll explain how we configured our tests, how we measured results and what we learned.
Jon Sonnenschein has been an Operating Partner for Bregal Sagemount, a mid-market Private Equity firm, since 2017. Prior to Sagemount, Jon achieved six successful exits in Silicon Valley, including one as CEO. Jon earned an MBA in Marketing and Management Strategy from The Kellogg School of Management and a BA with Distinction in Economics from The University of Michigan.
