What every SaaS company needs to know about sales
Susan Englehutt is a B2B sales and marketing expert, the creator of The Way Buyers Buy program, and the sales process mentor at L-SPARK. Today she gives us her perspective on the question, “Is SaaS sales the same as other sales? Or is it completely different?”
Some people like change and look for the NEW.
Some people don’t like change and look for what is the SAME.
When I started working on sales with SaaS companies, I was afraid — what if I don’t have the answers??? Is this a COMPLETELY different kind of sale? Or NOT? There was certainly all kinds of new lingo, like freemium, free trial, ARR, MRR, Customer Success, et cetera.
But what has REALLY CHANGED?
Now, 2+ years and 40+ SaaS clients later, I have SOME of the answers … and I’ll try to shoot from the hip here and give you my thoughts.
First, a few facts about SaaS.
A lot of the companies I work with get tripped up on this.
SaaS is NOT a new sales model.
Nor is it a new BUYING model.
SaaS is a new DELIVERY model.
By changing the way we DELIVER SaaS software — in the cloud — we have made one BIG change in the way we DELIVER SaaS products and also one BIG change in the way buyers BUY SaaS products.
What is the one BIG change we have made in the way we DELIVER SaaS software?
We’ve decided to charge a subscription fee (most of the time, anyway). That creates some upside and some downside for us. The UPSIDE is that we get revenue over the long-long-long-term, and that recurring revenue model can be very lucrative for us and very saliva-producing for our investors. The DOWNSIDE is that because of the relatively tiny monthly or yearly investment and level of commitment, our clients can walk away easily, whenever they want, which means that we have to work harder EVERY DAY to keep them happy and to keep them renewing.
NOTE: I am generalizing here. There are as many different flavours of SaaS business models as there are types of snow to the Inuits in Canada’s North. I’m trying to choose a middle-of-the-road SaaS model example that applies to the majority of enterprise SaaS companies I have worked with. There are exceptions.
Back to what we were talking about.
What is the one BIG change we have made in the way our buyers BUY SaaS software?
We have mega BIG-TIME reduced the perceived risk they feel when they make a decision to buy our SaaS software. They don’t have to involve IT. They don’t have to own and manage the infrastructure and backups. They don’t have to turn themselves inside out to co-design custom software.
They don’t have to worry about rolling out upgrades to the masses. (One of my colleagues showed me a slide this week that Salesforce.com has been using for years. Used to be in the old world that license costs were just the tip of the iceberg, less than 10% of the total costs. And that 90% of costs were customization, implementation, hardware, IT, training, and on and on. Life was hard.)
There is a TRADE-OFF for the reduced risk, of course, but this all makes buyers gently sigh in relief toward the end of their buying process. To think, lower up-front price, lower ongoing costs. Fewer people to involve. Less risk. SaaS life is goooooooooood.
So, the next question. What difference does all that make in the way we SELL SaaS software?
Is SaaS sales the same? Or different? What’s true and what’s a myth?
Before I wrote this blog, I had to make sure I wasn’t completely OUT TO LUNCH. So I had someone on my team go out and gather what other SaaS experts are saying about SaaS sales. I totally AGREE with a lot of what was said. Can easily nod my head to what they wrote and I’d like to meet them some day. We could have fun.
But I was also BLOWN AWAY by what some of the “experts” said about SaaS sales. Wow. Not the way I see it as I work with SaaS companies every day.
TRUE OR FALSE? “SaaS products sell themselves.”
Ohmygoodness. No product is that good and that easy right out of the gate. And even if it were, it’s not going to get you the enterprise deals, upsells, and cross-sells that are crucial for market share. I met with a CEO a few years ago who had a list of 300 contacts and thought her product would sell itself when it launched at the end of the month. I told her if that were the case, she didn’t really need me. Her investor, a seasoned executive in one of Canada’s most noteworthy VC firms, stood up and said, “No, no, no. Just a minute. Can I speak?” And I’ve been engaged with them on their sales process for 2 years. The product didn’t sell itself.
I love this article by Mark Cranney at Andreeson Horowitz. Smart, classic stuff. He says, “Whether SaaS entrepreneurs like to admit it or not, the new enterprise customer is a lot like the old enterprise customer.” Amen!
TRUE OR FALSE? “The buying process is already underway.” — Ryan Law, CoBloom
But not just because of SaaS! The buying process got underway when we started to use the Internet to tell people more and more about our products.
And we have taken this to a whole NEW level with the SaaS delivery model. Yes, on-demand demos and freemiums and free trials move people even FURTHER along in the buying process. But the point of it is, who cares? Why does this matter to our SaaS sales process?
It matters because when a prospect comes to US, the opportunity is almost ALWAYS already competitive. We can tell by the title of the person who gets in contact with us, the questions they ask, and the language they speak. We have less than 20% chance of winning those opportunities. (I’m being generous as I write this before breakfast this morning — truth is most companies win less than 5% of the inbound leads.) Buyers are out looking at multiple vendors. They have already compared solutions by the time they reach you. And it means that in order to WIN, your sales process, automated or humanated (new word!), needs to better than ever. More on that later.
TRUE OR FALSE? “People don’t want to be sold to anymore.” — Alec Baldwin in Glengarry Glen Ross 2: Always Be Automating
People NEVER wanted to be sold to. And the most successful salespeople NEVER SOLD people. They genuinely helped them BUY. This is NOT new.
TRUE OR FALSE? “People want to self-service.” — Jess Landorio, Drift
Are you speaking for yourself? For your investors? Or on behalf of your buyer?
I find that Millennials want self-service and they believe that everyone else does, too. One of my clients, a company with a Millennial co-founder and Millennial salespeople, insisted that their customers wanted to self-serve. Two years later, they have almost 0 sales from their self-serve trial-and-buy model. 98% of their revenue is generated with a direct model. And they took down the free trial option last week.
If a self-serve or automated sales model is right for you, then by all means go for it. Here are 2 guidelines that I would use for starters to determine whether self-serve is “it” for a company …
If we’re talking about a low-cost tactical solution that requires no significant change in organization, with a mid- to low-level buyer, then yes, the buyer probably wants self-service. Example: an app for improving targeting for Twitter ads.
If we are talking about an enterprise adopting something that will significantly change their business, that requires multiple stakeholders to be bought-in, and may even require services or onboarding, I’d say no. They don’t want to do it all themselves. Example: SaaS software for managing association membership, marketing, and sales.
TRUE OR FALSE? “B2B sales teams are disappearing.” — Chicken Little
Couldn’t wait to get to this one. We hear about companies like Yammer and Atlassian and Dropbox and Slack that grow without sales teams.
But these are the exceptions. Either that or their viral growth slows and they end up adding sales teams after all.
Harvard Business Review says that the overall number of sales jobs will continue to grow, especially in B2B SaaS startups, which are “furiously adding salespeople.” So I suggest ignoring the Chicken Littles.
TRUE OR FALSE? “You need to be a better salesperson than ever.” — Your boss & the sales trainer he hired
Why do SaaS salespeople need to be better than ever?
They have a lower value upfront sale. Big win is in long-term revenue and retention. So they need to be smarter. They need to qualify faster. They need to qualify OUT as much as they qualify IN. They need to be both product expert and business expert. They have to be able to give a good demo AND have a good business conversation. They have to do it in 15 minutes or 30 minutes sometimes. Not 18 months.
They need to be extra diligent not to focus on the CLOSE and much more diligent about focusing on the FRONT END of the sales process. That is a big statement and the short reason for why I say that is because people don’t like to be sold (we just talked about that) but they LOVE a salesperson who understands and can talk about their business problem.
TRUE OR FALSE? “We can’t afford to have a direct sales force. It doesn’t scale.” — A lot of SaaS companies
If a direct sales force makes sales for your business, then you can’t afford NOT to do it. You may not be able to afford it for a $199/month subscription. But could you afford an efficient, well-oiled direct sales machine, if needed, for a $199/month subscription x 5 years = $14,328 sale? And could you afford it for an enterprise sale of $199/month subscription x 100 subscribers x 5 years = $1,194,000??
(I know. You would probably discount it. But still.)
TRUE OR FALSE? “SaaS salespeople need to be rewarded differently. ” — Mark Roberge, HubSpot
The change in SaaS delivery model changes the value in a sales deal. Customer retention becomes more important than customer acquisition, so compensation should account for that.
Not my bailiwick. But read this article by Erik Charles at Xactly. He says that “instead of just measuring the value of the initial sale, the entire customer relationship needs to be measured, tracked, and incentivized. Sales teams are now selling multiple types of business—new, existing, renewals, and upsells. They sell on multiple measures like recurring revenue stream (measured in ARR or MRR) and Total Contract Value (TCV).” And he says a lot more. I’d read his article.
So what should your SaaS sales process look like?
Some things in SaaS sales are the same.
Some things are different.
And not all SaaS companies are created equal.
“You need to plot your own best course for driving sales.” — Daniel Saks, AppDirect
Yes, go nuts and read everything you can find. Look at what other companies are doing and what the sales hackers and growth hackers are saying. But then make some grounded decisions about YOUR sales process based on what works best for YOUR very specific type of BUYER and your very specific SAAS product right NOW.
Here are 7 tips to consider to get set up for sales success in your SaaS company:
1. Figure out your sales process FIRST, then SCALE.
I have to say this because your investors might be pushing you to SCALE. And might be pushing you to adopt a sales process that scales before you are ready. I know a company that has a fully automated sales process but not a single customer. They needed to figure out their SALES PROCESS first. And then figure out a way to scale it. The rest of these 6 tips are about doing that …
When one of my good colleagues read the draft of this article, he said to drive home the need to constantly measure how your pricing model and sales process complement one another so that when you DO move to the scale phase … your business model is PROFITABLE. I’d trust him. He is a respected CEO with at least one successful exit that I know about.
2. Choose the SALES PROCESS that is right for your BUYER.
This is where you need to stop looking at your neighbours and all the success stories like Salesforce.com and Slack and others and just take a good long look at your buyer and how they buy.
I like to use three broad guidelines — is your buyer a B2B, B2b, or B2bc buyer? See the difference? The enterprise that is used to direct sales will expect to deal with a salesperson. The SMB business can go either way — the more complex your solution, the more likely they will want to talk with a person. The more simple your solution, the more likely they may lean toward an automated sales process. The individual buyer within a business, like a marketing person in the marketing department of a small or large business, buying a tactical tool for a low price point, will lean toward an automated sales process.
So there are really 4 variables: a) sales process they have been used to; b) number of stakeholders that need to be involved; c) complexity of your solution; and d) level of the buyer.
3. Make a call on whether FREEMIUM and FREE TRIAL are right for your company or NOT.
There are people out there who make their living on discussing topics like Freemium vs. Free Trial, and I’m not one of them. I understand that Steli Efti and someone else duked it out on a podcast and that nobody won.
I have worked with only one SaaS company that had a freemium product. And they say that it worked for them ONLY when it provided value and showcased the ENTIRE feature set of their product, not just a portion of their value. I like the CEO, I trust her judgement, and it is working for her.
On the other hand, TO FREE TRIAL OR NOT TO FREE TRIAL comes up all the time. I have a bias. In the early stages when you are still trying to figure out your sales process, I will always default to a demo instead of a free trial. I know that the more often we can get a good salesperson in front of a prospect to have a good conversation, the more we learn for perfecting and scaling our sales process, and the higher the chances of winning. What I often see with free trials is that the product isn’t ready, isn’t easy enough, isn’t connected with something like Intercom, doesn’t have a Customer Success person hovering to help. And the free trials fall flat. When and if your product is truly easy to use and provides value right out of the box, free trial it.
4. Decide whether you need onboarding and need to charge for ONBOARDING or not.
Another thing your investors won’t want to hear is that your product requires onboarding services. (That’s why Aaron Ross wrote a post called Learn to Love Services.) Don’t take the onboarding thing personally. Either you need to do it to make your customers successful or not. Customer success is critical in a subscription model. Just do it. Then, you will figure out how to scale it. If what you are doing is heavy lifting and if the problem you are solving for your customer is high value, charge for it. I don’t like giving things away for free.
5. Start with DIRECT SALES, add INBOUND, then AUTOMATE.
Of all the SaaS companies I have worked with, only 2 of them started out with a truly automated sales process — that “build it and it will be so easy that it will sell itself and we won’t need salespeople” utopia. In one case it is failing horribly. In the other case it is slow but successful and investable only because of the tenacity and beliefs of the CEO. When you read Salesforce.com’s book, Behind the Cloud, you’ll see that they started with direct sales. Aaron Ross and Predictable Revenue is all about direct sales.
My reason for starting with direct sales is that you probably don’t have everything figured out yet. You will figure it out faster by having live conversations with prospects. Do your first 25+ sales direct, then progressively add inbound and automate whatever makes sense for your company.
6. Beware of the DISCOVERY-DEMO-CLOSE Sales Process Formula.
There is a “lingo” in the SaaS community around a 3-step sales process: Discovery, Demo & Close. On the surface, it is awesome. But be careful. Here are the gotchas: 1) I see companies put their least skilled employees on the Discovery call, when in reality that is the most important step in your sales process; and 2) just because you did the three steps (the discovery call, the demo, etc.) doesn’t mean your buyer is buyin’ it. There is more to this than I can possibly say here, but a good SaaS sales process will ensure that you are helping your buyer buy, not executing on a 3-step formula that looks good on paper. If you want to know more about what I think about that, check out my blog here.
7. Cultivate good SALES SKILLS.
I have heard one of the CEOs I worked with from his first day at L-SPARK say to his team: “Susan’s sales process is slower. But it will create more happy customers in the long term.” That was Steve at The Better Software Company. I guess that is where I stand on all of this. Slow down a little. Figure out your sales process. Don’t try to create the machine until you know what the machine should look like. Have great conversations. Have truly engaged customers that use and love your product and who will renew. Then automate like crazy.
So, are you feeling demystified about SaaS sales? GOOD.
Susan Englehutt is the founder and creator of The Way Buyers Buy, a 90-day program that builds repeatable sales and marketing processes and gets buyers faster. Susan is also a sales process guru for some of Canada’s leading accelerator and incubator programs, including L-SPARK. She has consulted for huge Fortune 50 companies like Verizon, IBM, Microsoft, and Dell and for small and medium-sized companies too.
Visit SusanEnglehutt.com to read more from Susan, subscribe to her blog articles, and get access to high-value tools. You can follow her on Twitter at @SusanEnglehutt.