Benchmarks for enterprise sales in the current economic climate

The start of the year saw a gloomy economic outlook — founder conversations highlighted consistent concerns and snowballing challenges on enterprise sales. In March, we convened an event focused on bringing these conversations on enterprise sales to the forefront with our portfolio companies and partners. We were very fortunate to be joined by an incredible roster of speakers:

• Sandra Friss, Vice President of Sales at Adyen
• Brooke Nayden, CHRO at Adyen
• Matt Althauser, former Head of Sales at Optimizely and CRO at Amplitude
• Toby Willcocks, CEO of Loxo
• Lisa Gutu, VP of Sales at Yapily
• Tugce Bulut, CEO of Streetbees
• Paul Roiter, CEO of Xelix

Our speakers shared transparent and personal, first-hand insights on their experience navigating the changes in today’s economic environment. Ahead of the event, we asked our portfolio companies to complete a survey to assess the impact on their sales operations. This produced some valuable benchmarks.

We surveyed 18 companies, from seed stage to growth stage. The average contract value and who they sell to are highlighted below:

Figure 1: Profiling survey participants (18 companies)

The survey results:

1. The average time from SQL to signed contract is 17 weeks

Figure 2: A sales qualified lead (SQL) is a prospective customer that is ready to talk to a sales team. Typically, this lead has expressed enough interest in your product or service that they’re ready to move into your sales process. Usually, they’ve been researched and vetted by your marketing department (MQL) and then handed off to your sales team.

2. Nearly 50% have seen sales cycles lengthen

Figure 3: The change in sales cycles for companies from Q42021 to Q42022

3. The average conversion rate from SQL to signed contract is 27%

Figure 4: Conversion rate (%) from sales qualified lead to signed contract

4. Conversion rates have worsened but not materially

Figure 5: Change in conversion rates from Q42021 to Q42022

5. Companies selling to tech companies have seen more of an impact on sale cycle times

Figure 6: Primary customer bases

Across our portfolio, we’ve seen attention given to all aspects of sales, from target setting, the structure of sales organisations, value proposition communications, pricing, distribution and incentive schemes.

Whilst the survey shows a mixed set of experiences, unsurprisingly, we see lengthening sales cycles and worsening conversion rates with the greatest impact on companies selling to other tech companies.

Given the changes within the environment, how are companies coping? Here are some key takeaways from our event:

• Champion Enablement — Those purchasing within organisations are finding it harder to convince other stakeholders of the value that new products can provide. The ‘internal champion’ may even be caught off-guard from having to present a more rigorous business case than before and convince additional stakeholders. A great way to manage this is to ensure sales teams minimise resistance in their internal process by knowing who the stakeholders are — and exactly what would make the sale more attractive to them. More important than ever is to make the internal champion a ‘hero’ — this requires more supporting work by the account executive and a deeper understanding of what the champion needs to get a sale over the line.
• Selling to centralised teams — Many organisations have moved from having purchasing decisions distributed to teams to one main budget under a central function. This collective buy-in can prove to be difficult, particularly if the buyer is not a direct user of the product. For the sales team, this requires articulating the centralised/holistic benefits to wider organisations rather than focusing on the benefits to the end-users only.
• Qualify leads earlier in the process — Sales teams shouldn’t be afraid to be direct in the first conversation with a buyer when looking to understand the likelihood of a sale. Although it can be tempting to keep a pilot and avoid uncomfortable direct questions in a first call on areas such as budget and timeframe for deployment, the sooner those conversations are had, the less time will be wasted. Face-to-face meetings can often be more engaging and create a better forum for those uncomfortable direct conversations.
• Changing KPIs and commission structures for sales teams — Some of our portfolio companies have taken interesting approaches to completely restructuring their sales teams’ KPIs and commission structures. In one such example, the sales team measured disqualification rates to ensure deals that were clearly not going to materialise were disqualified earlier in the process to manage resources more effectively. Another example shared was awarding commission based on when new clients paid their first invoice. This incentivised sales teams to reduce the lead times from the sale to full implementation.
• Additive vs new — Companies have found value in positioning products as additive products within an existing category instead of new innovative solutions in tough environments. Buyers are more risk averse, so being deliberate in the language and positioning of the product to minimise anxiety around “unproven” technologies is key.

Sales organisations that are agile, innovative and proactive in identifying changes needed in their go-to-market can power through during an economic downturn. Much of the changes some of our portfolio companies implemented have paid off and led to more efficient sales processes. Not only is this allowing them to maintain or even improve key metrics like cycle times and conversion rates, but it is also putting them in a prime position to accelerate as the economic environment improves.