In the early stages of most SaaS startups life, it is often the CEO or Founder who acts as the initial Head of Sales. While this makes sense given the likely resource constraints, and the value to be gained in getting in front of customers from Day 1, a lack of formal sales training and an absence of a sales process can seriously undermine the initial sales efforts. In this short post, I outline how these SaaS founders need to modify their approach and to implement a simple sales methodology to increase their odds of success.
“The CEO/founder should close at least the first 10 (or 20 or whatever) customers. That way, she knows. She knows the process, what works, what doesn’t. It’s OK if you are “terrible” at it. What matters is that somehow, someway, you still get those 10 >paying< customers closed”. Jason Lemkin
The Early Days
In the early days, startups are encouraged to do things that ‘do not scale’, and are advised to ‘get out of the building’ so they can engage with real prospects (regardless of the cost of customer acquisition).
“One of the most common types of advice we give at Y Combinator is to do things that don’t scale.” Paul Graham
Acquisition costs incurred are likely to exceed the lifetime value (LTV) at this juncture. After all, startups are not mini versions of large companies as Steve Blank reminds us, but rather, are research projects designed to validate assumptions and to gain first-hand insights from the market.
“A startup is an organization formed to search for a repeatable and scalable business model.” Steve Blank
Once product-market fit has been obtained, however, it is important to ensure that the costs incurred in selling are commensurate with the likely return (lifetime value) and that sales methodologies are amended to reflect the change in reality.
The SaaS Sales Landscape
Firstly, it is worth understanding the sales landscape for B2B SaaS startups. When the product feature set matures, and you start versioning your application, sales will typically evolve into hybrid models where entry level solutions are low touch, and enterprise offerings are more high touch. However, at the start, your application will be anchored at a particular price point / or range.
At the bottom end, you have entry-level SaaS applications priced at circa $10/month, up to enterprise solutions at circa $10,000+/ month with many other price points along the way. Depending on where you sit on this pricing continuum, your primary approach to sales will vary greatly.
Entry Level Application
If your average order value is < $5,000 / year, your application ideally needs to be a ‘self-service’ model i.e. one where the user signs up themselves with ‘zero touch’ from the company. Hence, at this level, your customer acquisition strategy needs to primarily be an organic one, based on inbound marketing i.e. creating quality content that educates the market and attracts prospects to your site. Once on your site you need to have a clear strategy on how to capture these visitors as leads. Pawel Grabowski does a great job describing the main techniques in his post : 9 Calls to Action that Convert Blog Readers into Trial Users
At this level, you need to ensure you keep your cost of customer acquisition (CAC) down so face-to-face sales meetings need to be avoided once you have achieved product-market fit.
Once on the site, the main call to action for visitors needs to be a ‘register’, ‘sign up’ or ‘get started’ one, which enables the prospect to sign up easily, to onboard successfully, and to gain utility from the application straight away, without the need for much in the way of human intervention.
“The best products reward users as quickly as possible after installation and account creation. But it’s easy to forget about this and as a result, watch conversion rates from download/install-to-active fall.” Tom Tunguz
The Middle Ground
Price points between $5,000 and $100,000 per annum are often referred to as the ‘valley of death’, and need to be treated with caution. Many SaaS businesses occupy this zone, and a key danger here is that the cost of acquisition can easily exceed the lifetime value, and thus the business model may not be viable in the long run. Hence, if you need face-to-face meetings to sell, have long sales cycles, and have limited upselling opportunities, you need to keep a very close eye on finances. Over time as the product matures you will want to reduce product complexity so that you reduce the human touch points, and move prospects towards the self-service end of the spectrum.
For those applications priced at over $100,000 a year, you are in ‘field sales’ territory, where ‘high touch sales’ are often needed, long sales cycles are the norm, and a customer success manager is needed to ensure the product is adopted and value obtained. Ideally, a hybrid model is put in place where the initial engagement is a mix of inbound marketing, and email/ phone based activity in advance of a meeting. At least at this level, margins can be high enough to ensure that any face-to-face sales efforts are justified (and given the price point remote sales are unlikely).
The Art of Selling
Many early stage founders acting as sales people lack the necessary training and are undermining their ability to convert these initial prospects. However, by following a simple sales methodology they can increase their odds of a positive engagement dramatically.
A Simple Sales Methodology
The following represents a simple sales methodology that can be used as a basis to create one that works specifically for your SaaS startup.
- Research Some Basic Sales Methodologies
Historically our relationship with sales training has been pretty poor. One rarely encounters entrepreneurs with sales qualifications or sees sales training listed on university curricula. Nonetheless, some basic training can ensure that you are equipped to engage with prospects in confidence. At the very least, it is worth reading up on SPIN selling and the Sandler sales system, as these are popular sales methodologies among software companies and will help you structure your approach.
2. Create a Marketing Persona
Secondly, you should create some marketing personas to represent the characteristics of the *ideal prospect*.
“A marketing persona is a composite sketch of a key segment of your audience. For content marketing purposes, you need personas to help you deliver content that will be most relevant and useful to your audience.” Ardath Albee
When thinking about personas it is useful to think about elements like:
- Industry Sector
- Demographics (Sex/ Age Range)
Once you have clarity as to some basic personas it can help ensure that your initial engagements are aligned with those you perceive as being representative buyers rather than the public at large (as shaped by your network). This will help ensure that any face to face meetings are focused on those most likely to have a need that the solution addresses. It will also help ensure that any initial marketing budget can be focused in areas where your target personas are likely to be represented.
3. Meet Some Friendlies
At the very start, you are essentially seeking to validate assumptions you’ve made about the market appetite for your solution. If your application truly meets the needs of the persona group you are already on the sales path but that should not be the key purpose of these initial meetings. Right at the start, many introductions are warm ones, as entrepreneurs rightly leverage their immediate contacts as a means to get in front of people. It is important that these friendlies represent the target persona market you have outlined, as otherwise, the feedback loop is likely to be weak, and these contacts are not likely to offer constructive criticism given they may not even relate to the pain you are seeking to address. Worse still, they may be keen not to hurt your feelings so the feedback you get contains inherent biases.
4. Iterate the Application
It is important to use these initial interactions as a means to gain insights that can be fed back to product development to improve your solution. While some of these initial conversations may translate into genuine sales prospects, you will be better served in the long run if these are viewed more as collaborators. Offering free access to some of these early contacts in return for social proof (case studies/ testimonials/ logos) is a useful way to get people using the application so future development decisions can be based on observed data rather than hypotheses.
5. Put a Basic Sales Process in Place
The cost of CRM systems have collapsed and there is now a host of entry level systems you can use to manage your pipeline. Choose one, ensuring it can easily connect to any data sources you have (be that lead generation forms, or existing data sets) and also ensure that it can integrate with any outbound marketing tools you may have like MailChimp. Once in place, you need to then embark on a lead generation initiative to fill the pipeline. It is also important to define a basic sales process i.e. what the various stages in your pipeline are, and how to move a prospect along the pipeline.
6. Create Content to Generate Leads
For many B2B SaaS companies, inbound marketing represents a corner stone of all marketing activity. Inbound marketing is when you create compelling content that educates and informs your target personas, and they obtain value from it. As your audience engages with the content, it builds both familiarity and trust, ensuring that your solution is ‘front of mind’ when a pain arises that your application addresses. A common approach is to gate the most valuable content behind a form where prospects provide data about themselves in return for access to the content.
One often over looked area is the importance of amplifying the content created by promoting it on a regular basis through a mix of channels from email to social media updates. The act of promoting the content needs much more emphasis than it’s mere creation.
You can read more about how to generate leads via inbound marketing in my Definitive Guide to B2B SaaS Marketing
7. Qualify the Prospect
Once you have generated leads you need to qualify them. The amount of data captured can vary from a simple email address to a detailed assessment of their needs (See FlexPort form capture below).
Again some of this pre-qualification can take place in advance of a face to face via step up forms, or email exchanges with inside sales teams. For example, I use a simple Typeform questionnaire to qualify prospects I get through my personal site. This extra layer helps to filter out those that are less committed. As the startup matures marketing automation software can be used, but in the early days some manual processes will be needed.
8. Managing the Meeting
Once the prospect has been qualified and a face to face meeting has been arranged it is important to set the meeting agenda. Instead of defaulting to presentation mode where you ‘run through’ a PowerPoint, or better still, you take them through a high-level overview of the application, it is best to focus on a conversation where you seek to understand their needs a little better, as well as to gain an understanding as to how they buy solutions like yours.
The following are the sorts of questions you should have the answers to by the end of your conversation.
1/ What is the job that they do (related to your solution) and what business pains do they have?
2/ How significant is the pain?
3/ Is the pain pressing? What if they do nothing?
4/ How do they buy solutions like yours i.e. do they need to go via procurement or can they buy direct? If they buy direct do they have to have a shortlist of vendors to chose from?
5/ Has the person you are talking to got decision-making and/or purchase authority?
6/ Have they budget?
7/ What other stakeholders are likely to be involved in the decision?
8/ What does the internal decision-making process like?
9/ What are their timelines? Do they have a compelling reason to act now? Is this something that needs to be resolved urgently?
10/ What alternatives exist in terms of solving their need? (Inertia — or doing nothing is usually the main competitor enterprise sales people have)
11) Where do they look for solutions like this (can help inform the marketing team as to where they should be concentrating their marketing budgets)
Without a checklist like this, it is all to easy to default to presentation mode when instead you need to view the interaction as an information exchange where you are looking to surface their needs so you can align your solution with these (or not if the case maybe).
9. Manage the Close
Once you have surfaced these answers (to the best of your ability) you are then in a better position to sell on features against these needs. In the words of Stephen Covey ‘seek first to understand and then to be understood’.
Assuming your solution addresses their needs, it is now time to showcase the power of your application before asking for the business. Only now it is time to demo!
In summary, selling B2B software can be challenging, particularly in the early days, when it can be difficult to generate leads as resources are tight, and sales experience is thin on the ground. By following the simple sales methodology outlined above (or a derivative of it) early stage SaaS businesses can ensure that their efforts are rewarded.
Alan Gleeson is a B2B Marketing Consultant based in London with a passion for helping SaaS businesses to grow.