Surviving and thriving in tough sales conditions
I’ve been selling professionally since 2013, which is an eternity in “startup time.” However, it’s not an eternity in “macroeconomic cycle time.”
I’ve never sold through an extended recession or a downturn. It would be interesting to talk to people who sold at Salesforce in 2008 during the Great Recession, but the SaaS landscape has evolved dramatically since our last major bear market.
Back then vs. now
On a positive note, SaaS and “the cloud” have crossed the chasm. When I sold Dropbox in 2013, it was difficult to convince some CIOs that their data should not live on prem, and that our cloud storage platform had enterprise grade security. Now there has been mass acceptance that the future is cloud-based.
However, things are tougher in other aspects: there are far more SaaS companies, each category is more crowded as the number of startups that got funded exploded, and old sales tactics aren’t working as well due to increased levels of noise.
Buyers are inundated with mass blast outreach, and they are savvier at evaluating their own tools. It seems like no matter how hot a company is early on, you reach a moment where you go “holy moly, it’s going to be really hard –if not impossible – to 3x this year” because inbound never scales at the same rate as your sales headcount.
Even in normal market conditions, the odds of continuously achieving rocket ship growth are stacked against you due to gravity, so what happens if there is a massive negative shift in demand and budget for SaaS?
As someone who had a quota when COVID hit in 2020, I can tell you that massive injections of negative sentiment are neither pretty nor fun.
Cascading impact
I’ll tell you what my experience was like managing sellers in April 2020 when COVID hit:
First: every single buyer who was interested had massive leverage to protest against the pricing or walk away from a deal that we had verbally agreed to.
Second: when the macro landscape shifts dramatically, there are no rules or social contracts. You start to realize how much of sales is driven by relationship building and social contracts. How can I get mad at someone for not buying when their headcount got slashed, when budgets got frozen, or when they’re fearful for their job?
Third: overnight, pipeline dried up and we had no clue when deals might close. It was scary. You start to ask yourself, “how essential is our product to prospects? How essential is our product to existing customers?”
Luckily for sellers…
In 2020, the Fed printed trillions and essentially bailed “the market” out. Plummeting stocks started to recover, bounced back, and reached all time highs again.
The existential fear that started to permeate the companies we were trying to sell to subsided and companies shifted from survival mode to growth mode again.
But I realized that my entire professional life had essentially existed in “growth mode.” I had never even been a professional in a “survival mode” market, and we may not be out of the woods here. We could be facing a market bracing for a return to survival mode.
Implications for SaaS
I remain bullish as ever on SaaS, and especially bottom-up SaaS; I think it’s the best business model of all time. The ability to create code, scale that to millions of users through the internet, and empower them to drive ROI at work is insanely powerful.
However, the ability to sell has always rested on a foundation of psychology –specifically buyer psychology. At some level, a human being must make a decision to buy, and the way those decisions are made is an equation that must shift when economic times become more difficult.
In tougher times, that equation doesn’t focus entirely on buying upside or FOMO like it does in a bull market. In a bear market, that equation includes questions like:
- “If I ask for budget for this product, what will I not be able to buy as a result?”
- “What ROI do I expect from this product, compared to what I’d have to pay?”
- “Who will be mad at me for buying or not buying this product?”
- “What will break if I don’t buy this product?”
Heads up for product teams & exec teams
Your product has to become CORE infrastructure to your buyer. Your customers very likely use your product for core business processes in one of three categories:
1. SaaS to deliver their product
2. SaaS sell their product
3. SaaS to run their company
From my perspective, those are the big 3 categories. You can fit in any of those three, but you should be core to operations, deliver unquestioned ROI, and be the type of product that, if someone proposes churning or not buying when a decision is imminent, there would be a revolt.
Bottom-up SaaS in a recession
As a note, bottom-up SaaS has some natural advantages in a recession. Here are some aspects of bottom-up SaaS that serve to mitigate downside risk:
- organic (i.e. free) leads
- organic user love and adoption
- higher than average usage (DAU/WAU/MAU ratios)
- higher than average buy in from the userbase, which means easier to buy, harder to not buy, and harder to churn
- strong “what’s in it for me” for a larger user population
Heads up for sales & CS teams
It’s time to turn your paranoia meter to a 10. Assume that your best deals won’t close and that your best customers will at least consider churning. Assume that when a buyer proposes your product to their committee of decision makers, they will likely face heavy pushback.
It’s a matter of tuning out the noise, and returning to strong sales fundamentals. Try not to worry about anything other than running a strong sales process and controlling what you can control. If you’re a seller, hit your prospecting metric goals, run strong discovery calls focused on situation, pain, impact, and ROI, and try to deeply understand the reasons why this prospect will NOT buy from you and problem solve against those things.
Be more cautious in your forecasts, and grill your decision makers a little harder on all the steps that must be taken for a purchase to happen. Try to create a bulletproof case for why your prospects should buy and/or renew, try to tie that to ROI as much as possible, try to generate as much buy-in as possible, and try to attack [via problem solving & collaboration with your evaluators] areas that you think represent a risk to the deal getting done.
It’s very easy to recommend these things in a Substack article, and very hard to accomplish them in reality. But tough times are where great sellers will separate themselves from the lucky and it’s an opportunity to sharpen skills and evolve as a seller.
Regardless of market conditions…
If you’re building bottom-up or enterprise SaaS in key areas that employees can’t live without, I’d love to talk to you.
