You are working through a complex never ending sales process for a big enterprise opportunity. Its the most important thing for your B2B SaaS right now. Ever find that your CRM system just doesn’t reflect reality? (Or ever wonder why a sales pipeline tool is called customer relationship management for that matter?)
Sorry I digress. This is not a process problem. Leads and various other clear and specific data are all recorded neat and precise in CRM. Yet all the things that matter seem to be missing. Or hidden in notes and free text fields.
There is a simple reason. CRM systems are designed for selling standard repeatable solutions. To customers with similar needs and predictable buying processes.
SaaS: You are selling a service not software
Unfortunately none of these things exist in the world of B2B SaaS. You are selling a service not software. (Check out this excellent article from Darmesh Shah for more). Customers will frame their needs in a different ways. Cultural factors will warp the style and method of adoption for your SaaS.
Layer on top of this the spaghetti medusa that is enterprise procurement and buying processes. There are a thousand different ways to SaaS. (Another small sidebar: Do yourself a favour and ignore any book/ article/ advice that offers a standard model for business procurement. These things are peppered with terms like influencers, decision makers and hierarchies. Its all rubbish. Every large organisation is different. Most don’t even know their own process very well.)
So your standard pipeline definitions are of no more than marginal relevance. You need to think about your enterprise sales pipeline a different way. Let me offer you a simple and flexible model which will help.
I claim no credit for this. I learned it from a lovely man and good friend, Carl Erickson the CEO of Beacon Worldwide. I have been using it for 10 years and it has never failed me. It unites people with 100% opposite approaches to sales. It drives intense debate about all the right things. And as a business leader it kept me informed and in touch with future growth prospect like nothing else.
A brief explanation of each step. And more important the simple test for moving an opportunity from one stage to the next.
0 - Development
Here you have the basics of your marketing plan. Which segments are you targeting? What is your value proposition? How do you reach the right audience? Nothing is specific at this stage. Its a way of capturing your market strategy.
Move after: A lead moves from 0 to 1 when you have direct contact with a named organisation.
1 - Identify
Inbound or outbound this is where you capture live leads. At this stage you only need to be able to name the organisation. If you can identify the key individuals or at least the department so much the better.
The key question: Is this the right type of customer? Deciding whether it is worth investing in the pursuit is the next stage. For now, you only need to know if this organisation would benefit from your SaaS. And figure out if they are the right fit for your company.
Move after: You have had a direct person to person communication. You have identified the customer business issues. You have confirmed the date of the next meeting/ discussion. (Note: you need to meet all of these criteria.)
2 - Qualify
This is where the toughest decision lies. Now that you are taking to someone, how much time and effort should you invest in the opportunity. The key to answering this question has nothing to do with business value. Instead you must answer three questions:
Note: For an established company with time to wait, question 3 is part of the evaluation stage. A startup can’t afford this time so answer it early.
Move after: You know you have access to power. No exceptions.
3 - Evaluation
Now you are in the traditional phase of enterprise sales. Responding to requests for information, completing bid documents, checking out the competition, agreeing budgets and so on.
This is expensive. And it feels exciting and important. But observe that the most critical decisions have already been taken. Your SaaS is a good fit for the customer’s business need. You know who makes the decisions and you are talking to those people (almost never one person). You also know that this is the right time for the customer.
I hope its clear why you should have this stuff sorted before you start heavy investment in an opportunity.
Move after: You have verbal confirmation that you are the chosen supplier.
4 - Selection
Read that last sentence again. When the call or email comes through to tell you you have won, the sale is not made. So don’t hold the party. Don’t pay commission. Don’t bank the money. Don’t count your chickens.
There is a whole load of contractual stuff to resolve. Most times, there may also be a bunch of interested parties inside your customer’s business who get involved for the first time. You know people who might use your product, that sort of thing. It can be a painful journey.
Contractual questions tend to dominate. But never lose sight of the need to deliver value to your customer organisation. A beautifully framed contract has an ARR of Zero.
Move after: The contract is signed AND you have a clear plan to install your SaaS with the customer.
5 - Win: Now Celebrate!
Keep the customer name on the column for a little while to remind yourself of success. But don’t think its over. Now is when real customer relationship management starts. Procurement's job is to sign contracts. The buyers are the users, managers and leaders who see the value your SaaS delivers every day.
Its become fashionable to call this Upsell. In reality its plain good business. Selling more to your existing customers rather than spending money acquiring new ones. A fundamental since forever.
The Chairman's View
For many B2B SaaS enterprise sales are the key to growth and success. There is a tremendous quantity of bad advice available in this areas. And the whole process is often built on the worst named IT category ever - CRM.
Despite the apparent complexity and the repeated insistence on structure, process and experience, its quite simple: Listen to the customer; Learn how your SaaS can add value; Remember you are always dealing with people not companies.
Africa gets in your blood they used to say. I have been infected for more than a quarter of a century. So this is a bit of an emotional column for me. 6th March 2017 is the tenth anniversary of the launch of M Pesa. The original mobile money system improves the lives of millions every day. And has been the catalyst for the leading innovation ecosystem in Africa.
You may notice that this year is also the tenth anniversary of the launch of the iPhone. Over that decade, smartphones have been the defining technology in the developing world. Yet mobile money is more innovative and helps tackle a much bigger, tougher problem.
We seem to have lost sight of this idea in the tech industry. UBI (universal basic income), taxing robots and so on are the ideas du jour. Many of our leaders seem to believe the priority should be advising Governments on how to solve the problems they expect the technology industry to create in the future.
Where did that come from?
How did renaming and retreading the failed social and economic planning experiments of the 20th Century become a thing?
Why do we want to risk the consequences if (sorry when) these plans fail? The pain and suffering that will be inflicted on billions of the world’s poorest.
How have otherwise smart people convinced themselves that the future can be foreseen, designed and planned for on a grand scale?
“Now all my lies are proved untrue
And I must face the men I slew.”
Let’s take a step back. AI, robots and the rest will transform the way many jobs are performed. Its hard to predict what will emerge from such a transformation. One things is certain.
The outcome will be to unleash a huge wave of human potential.
Over the next 20 years technology will be automating manual work, replacing routine clerical tasks and maybe rendering lawyers and tax accountants obsolete. No-one should shed any tears. Least of all the those who live by innovation and entrepreneurship.
Nor should we indulge in scaremongering and exaggeration. The machines are not about to take over the world. The brilliant philosopher Daniel Dennett summed it up in this week's Lunch with the FT.
"All we are going to see in our lifetimes are intelligent tools. Superintelligence is logically possible but it is a pernicious fantasy that is distracting us from far more pressing technological problems."
Tech has an opportunity and a responsibility.
Technology does not solve real world problems on its own. Coupled with innovation, it can. And we need to get on with it.
Nothing illustrates this better than the PR storm which surrounded the relaunch of Nokia’s iconic 3310 handset at MWC last week. This is retro chic in the West. Meanwhile in Africa, M Pesa and its imitators are still creating new value from the original technology.
We are on the verge of a further revolution in information technology. There will be losers. People and communities will suffer when such a fundamental shift takes place. Governments should focus on dealing with that transition.
The Chairman's View
The tech industry needs to remember how Vodafone, the UK Department for International Development (DFID), Safaricom CEOMichael Joseph and his team started out. They sought out the most disadvantaged and excluded in Kenya. And used the technology they had available to create a product that would make a real difference. They worked as a team. They observed how their customers used the initial product. And they were not afraid to think big when the opportunity emerged.
Yes, the leverage provided by M Pesa helped Safaricom build and maintain a dominant position in the mobile market. But the openness of the platform and the sheer utility and simplicity of the concept were the inspiration for so much more.
A decade on, lets draw inspiration from that example.
To learn more about M Pesa and the mobile money story:
Watch this brilliant 6 minute video featuring Michael Joseph The M Pesa Story
Be a scholar for an hour and read The Long Run Poverty and Gender Impacts of Mobile Money
Keep learning and being inspired by the story at GSMA Mobile for Development
Or get out to Africa and see for yourself....
This post is a bit late because I am a big NFL fan. I spent Sunday night/ Monday morning enthralled by Super Bowl LI. The Patriots snatching the prize from the Falcons in one of the great comebacks in sporting history.
In business we love a sporting analogy. So no doubt the latest NFL Championship will offer rich pickings. The trouble with these comparisons is that they forget one thing. On Sunday the Patriots won and the Falcons lost. One up, one down, a classic zero sum sporting contest. Business is competitive but it is never a zero sum game.
Looking at the faces and body language of the Falcons and their fans brought back bad memories. One special tough experience came to mind. Around 10 years ago  my old firm was pitching for a huge opportunity with my most important client. At the same time I was struggling to get along with a new leader in my business unit. The whole situation was filled with stress, lack of trust and politics. Nasty for everyone.
Perhaps no surprise then that we lost the pitch to one of our major rivals. The situation within the firm became critical. Each individual saw this as a zero sum game in which we were the loser. Blame, recriminations and attempts to get one over abounded. All in a poisonous atmosphere of broken personal and professional trust.
I found this all pretty hard to take. So I ran away and hid in the only place available - with my client contacts. The pitch involved an audience of 22 senior people only 3 of whom we had met before. I followed up with most of the rest. Over the next two years, 5 people in that group provided business for my firm. Two of those because close friends. They remain amongst my strongest business relationships today.
In my experience, this experience is representative of the business world. Much more typical than the simple sporting narrative of winners and losers. There are no zero sum games for three main reasons:
Always adding value
Everyone and every business is trying to create value. This is not some new idea developed for startups. Others may be stumbling, fumbling and even failing. But that does not change the basic aim. On both sides of every deal, and among all those who miss out, there is a common motive. We call this the economy.
Dynamic but no equilibrium
This economy thing is great but it is a complex, dynamic system. It never stops, has no pauses and cannot be in equilibrium. Business sits within this environment and so cannot be stable either. Thus an even balance (or summing to zero) just can’t happen. On the rare occasions where things are not being added, they are being subtracted. Cancelling each other out is not possible.
Its the people stupid
Its all about people. People are built to look to the future. Time is the one thing we cannot control or change or relive. Couple this with an unstable system and an overwhelming desire to add value. There can only be one outcome. We go forward and we grow as we do it.
The Chairman's View
Business is not a zero sum game. The whole concept appeals to me. Its a simple way of conveying the right attitude of mind. The passion to generate value in everything your SaaS does. And the resilience to find the positive in every experience.
It cuts against a lot of insidious behaviour. Cut-throat sales tactics. Excessive pricing and aggressive terms. Exploitation of people and resources. Nothing built on the misfortune or weakness of others works with the no zero mindset.
I don’t believe anyone starts a SaaS business without aiming to create value. Keep that positive purpose in the front of your mind and you will not go far wrong.
Am I alone in finding something a bit weird about the rise of equity markets since Brexit/ the election of Trump? Its true there are financial dynamics at work. Increased spending on infrastructure and the fall in the pound have some immediate benefits for some large companies.
But this window dressing obscures a fundamental underlying message. A big part of the populism that is driving today’s political agenda is rage against multi nationals. In the US the talk is of trade barriers that will disrupt low cost global supply chains. In the UK and Europe Governments and citizens demand “fairer” tax contributions. Extracted from the profits generated by global companies. Used to prop up public spending.
In every country and all sides of the political debate, inequality is seen as the defining economic and social challenge. And nothing represents that inequality more vividly than the pay of Fortune 500 CEOs and their ilk.
2017 will be the year when some of this anger translates into real challenges. Corporate giants are right in the cross hairs. The US President’s remarks about the pharmaceutical industry are a straw in the wind. The actions of the new US administration and the fallout from the UK leaving the EU will have consequences for big companies.
Hitting the enterprise where it hurts
In a sense these are symptoms of a wider trend. Anger and frustration at the profits of global corporations is widespread. Business practices and networks are also in the spotlight. This is an issue which appeals to all politicians. One of the few areas of common ground between left and right, populist and technocrat, democrat and dictator.
Expect meaningful action in areas like:
The SaaS opportunity
Your view on the politics and economics of this is not important. Enterprises large and small are entering a period of unprecedented disruption. At a time when there is also severe pressure on profits. For a B2B SaaS company this is a once in a generation opportunity. Global corporations need to change. Improved adoption of digital technology must be part of that change. This broad theme was reinforced by McKinsey this month in Measuring B2B’s Digital Gap.
The enterprise software landscape is also shifting on the ground. I was fascinated by Tom Tunguz’s $100m ARR Deal. The headline number is eye catching. His analysis of the implications for Workday is interesting in its own right. But for me the big message is that this was a straight fight between the SaaS alternative ERP company and SAP. No better sign that SaaS will be a big part of the solution for enterprise companies.
The Chairman's view
These trends are important for setting the scene. Yet the big picture offers no direct link to revenue growth. Generalisation can help you identify targets. Winning deals depends on specifics. Enterprise sales depend on three things:
Success with enterprise customers is not about a high volume of leads and conversion rates. Nor is a brilliant sales team the key factor. Focus on qualifying which opportunities to go for. Analysis and insight followed by patient pursuit is the winning formula for enterprise SaaS.
I am not a big fan of setting goals or targets at the best of times. They create two fundamental problems:
The New Year disease
So what to do at this time of resolutions and annual budgets? You could join the crowd and make a full blown plan. If you must, this short article from Fred Wilson on Planning for Next Year is a good guide to the principles.
And as Fred points out, if you want to develop a proper annual plan you would start in September. In other words planning is a complex process not just a way of capturing your post holiday guilt trip. The great military leaders have always understood this:
"No plan survives contact with the enemy."
Helmuth von Moltke the Elder
"In preparing for battle, I have always found that plans are useless but planning is indispensable.”
In other words, if you want to make plan establish a process. Set aside proper time for thinking, analysis and discussion. Develop a set of goals that are support by data and argument as well as passion.
This is not something that can be accomplished over a couple of days New Year holiday. So don't start 2017 with a blast of goal setting. I would like to offer a different approach. Think about this one question:
What would you like to change?
Its not an original question. I first started thinking about back in 2007. That year the firm I worked for used it as the centrepiece of a marketing campaign. The beautiful challenge lay in the infinite variety of responses. Take two simple examples from that campaign:
At the time, we commissioned a series of essays in the FT on the topic. Then Deputy Editor Martin Dickson wrote a piece. In it he expressed a wish for the press to behave better and to be better regarded. He headed it with this quote:
“You cannot hope to bribe or twist, Thanks God! The British journalist. But seeing what the man will do unbribed, there’s ’s no occasion to.”
By contrast, each of us had to stick a poster on our office door stating our own answer to the simple question. Mine read:
“I would like the people of Scotland to go out into the world with confidence and ambition once again.”
Either of these responses would stand up well as an aspiration today. Yet both are also personal and just a little bit odd. Answering this question is a good time for your inner geek to show.
So these answers may not fit your circumstances or way of thinking about the world. No matter. The question is designed just to make you think. How could your business or life be different? And also how could you make a difference to others?
Your answer may already be the guiding light for your life. Or a small change that requires only a bit of active willpower to deliver. Or a way of capturing the vision for your business and the difference it can make in the world.
The Chairman's view
The purpose of this post is simple. Instead of setting goals or making resolutions, start the year with a little reflection. Think about hope, ambition and direction. That could lead to changes and plans. Or just help you draw you new energy and focus for the challenge ahead.
We all have it in our hands to make a difference in 2017. How will you use that power?
The value of the biggest B2B SaaS companies has been growing. But not at the epic rates experienced by B2C software. At the same time, the number of B2B SaaS startups also keeps rising. Is there enough potential revenue in the market to justify the level of SaaS investment?
Jason Lemkin wrote a fascinating piece on SaaStr a couple of weeks ago about the SaaS Decacorns we need by 2021. His conclusions were optimistic. He believes both that the market as a whole is big enough. And that there are companies there with the potential to become the mega leaders of the future.
I am not going to comment on the latter. But I share his optimism about the overall market. We are only scratching the surface of the opportunity for B2B SaaS. Reaching this potential demands great products which solve real business problems. SaaS companies must also help customers execute change to realise the benefits. All in the face of strong resistance from multiple vested interests.
It will not be enough just to wait for the market to come to you. B2B SaaS companies need to take the lead in finding strategies to overcome these challenges.
The scale of the opportunity
The simple fact is that traditional on premise, licence based revenues still account for the bulk of the enterprise software market. You can fill your boots with various projections and analyses of this topic. For starters check out this Forbes collection.
However you look at the numbers this makes no sense. SaaS is an ideal platform for innovation and increases the speed of change. It offers much greater flexibility and agility. Integration allows for rapid adoption of best in class. And its cheaper.
The question is not whether the market opportunity exists. What bugs me is why progress is so slow.
The one word answer is change.
SaaS does not bring any of the benefits listed above to business. It provides a tool or a platform to improve a business. To realise the gains, the business must change. Businesses of any size find it hard to execute change. An established business is different from a startup in two major ways:
Your customers internal opponents are not the only losers. Growing SaaS by a factor more than 20x will do damage to the traditional software business.
The big enterprise vendors are the tip of a large iceberg. They are the visible part of an ecosystem that includes consultants, systems integrators, lawyers, training providers, independent software vendors, project managers, change leaders, corporate IT careerists and a raft of other specialists who have carved out a niche that is built on SAP, Oracle and the rest.
The strident voices of direct competitors are easy to deal with. Corridor whispers by trusted advisors and “independent” experts are much more insidious. So be careful. Resistance is everywhere.
The Chairman's View
I share Jason’s optimism about the scale of the SaaS opportunity. That’s one of the reasons I love working with B2B SaaS companies. The winners will have great products and fantastic teams led by brilliant leaders. They will also have an effective strategy to overcome the barriers to change.
Each market opportunity and in some cases each deal will need different specifics. The outlines of any successful approach will include:
And do it all with confidence. The market is moving toward B2B SaaS. Let's help it along.
I seem to have spent most of the last week in various stages of finding suppliers. From formal pitches to writing an initial brief and several points in between. In all cases the companies I was working with were looking for professional services. Or buying in skills and expertise in some similar form.
Finding trusted suppliers is another on the long list of hard choices a startup leader has to make. In the early stages you might use external suppliers for anything. From building your product to traditional services like legal and accounting. The wrong choice can cause extensive damage. Getting it right is about looking beyond price to find the right talent. Someone with the skills you need and the courage to tell you what you don’t want to hear.
Its Never just price
Let’s start with the biggest bugbear. Price is a terrible way to choose a supplier of anything. And for services there is no worse measure of value. At least with commodity style goods you can compare like with like. When a service is delivered by a skilled team, this is impossible.
Even when a service is described as a commodity (basic accounting or legal for example), the comparison is not so simple. Professional advice is like an insurance policy. When everything goes well it doesn’t matter who you choose. But when a problem (or a claim) arises, the pain caused by having the wrong advisor will be terrible.
So price is never the only factor. If you can’t see any other difference between suppliers, you need to look harder.
The Kakocracy Trap
Noun: kakocracy - Rule or government by the worst of the people
The first step in finding the right supplier is making a list that includes the best options. There are two regular ways of doing this:
Both techniques are useful. But someone also needs to do a bit of research. Scan the internet. Think about whether your job is one that needs a local supplier. Don’t be afraid to go global for some things. The test is the skills you need and the quality of communication.
Talk to people you know. Especially those who don’t come forward with recommendations. This is an area where the startup ecosystem adds a lot of value. And silence is not golden but red for danger.
By all means speak to advisors as well. Only remember there is a lot of back scratching in these networks. Advisors and mentors can be helpful but they are also the prime source of the trap.
There is a cost in time to making a good list of suppliers. It will be outweighed by the benefits of making the right choice more often.
The jobs to be done mirror
The absolute foundation for buying any type of service is to be clear about the expertise you are buying. Its the precise reflection of the jobs to be done framework for evaluating a startup idea. Before you spend any money, understand the job you need done and the skills it requires. Choose a supplier based on those critical areas of expertise.
In some ways its like hiring. You want to find the right talent. The big difference is that you only need this talent for the short term. This means you select a supplier for experience and track record. Whereas you should always hire for potential and fit.
However, track record is not the same as finding someone who has done the same project 10 times before. No two projects are the same. When you look at supplier experience focus on the core skills needed for your project. Take up references. And ask about expertise not just the results.
Take market research as an illustration. Don’t bother about someone having researched the same market you want to look at. What matters is the ability to reach the right audience. Skills in asking the right questions and probing for the real answers. And an intelligent evaluation of the responses.
Be clear about the things your advisor does that you cannot. And agree a scope of work that is defined by those key areas of skills.
An outcome not a result
You are buying an outcome but not a result. A good professional supplier gives you and honest and independent assessment. Often this is not the result you wanted. Get over it. And understand this in advance. Choose a supplier who will give you a great outcome. Don’t try to buy confirmation of your own opinion.
The same principle applies to skills outside the traditional professional arena. There is no point in outsourcing software development because you can't code. And then restricting the developer by your own limited knowledge of the subject.
When you are choosing a supplier, the best test of this is how they set expectations. Look for someone who questions your project objectives. Not just blind agreement. And choose a supplier where communication of changes and new ideas is embedded in their approach.
A word about incentives
Once you get people involved, the psychology of incentives is an inevitable part of success or failure. (I sometimes think Alan Turing over complicated matters. The test of true artificial intelligence will be when a machine offers an emotional reaction to an incentive.)
A key area of incentive when choosing suppliers will be the pricing mechanism. There is no right answer but think about these three things:
The Chairman's View
Finding and buying services from suppliers is a bit of monster. Big corporations devote entire departments to getting it right. And still make mistakes every day. Its an important job for a startup leader. Yet its not critical. For me I want to see a CEO who contains the risk. I don’t expect you to get it right every time.
So think about:
I am going to continue my current theme of selling to the enterprise. (See my posts on SaaS Sales and SaaS for the Enterprise). By definition this is a subject for B2B SaaS companies. And this makes it important because SaaS has the potential to disrupt big business for the better.
This disruption comes in two forms. Replacing the traditional business software model with a cheaper, better and more flexible approach. Or driving change by enabling more efficient and effective business. In both cases, many B2B SaaS companies offer a proposition based on cost reduction.
It is straightforward to make the business case for such cost reduction. Yet the proposition suffers from a simple structural disadvantage. Cost reduction is a tough sell. Always.
There are two reasons for this. Cost reduction is an uncomfortable and challenging subject for any business leader. And radical cost reduction strategies carry genuine risks. Your chances B2B SaaS success will be better if you are aware of this backdrop. And address these concerns by designing a patient and more subtle sales culture.
The elephant in the room
At various times in my career I have found myself sitting opposite a leader from a business in genuine trouble. Perhaps in a struggle for survival. Or enmeshed in the legal process of administration or insolvency. In these circumstances, eliminating costs is an absolute imperative. Yet there is still resistance.
There is some obvious psychology at work here. Costs are not a fun or sexy subject. Growth and making money have far more appeal. Remember this in any sales conversation. You may be excited about the opportunity. But you are talking to someone who is facing a bill. Not the same mindset.
That mindset runs a bit deeper. Suppose you present clear evidence that your SaaS will save money at a rate 10X the purchase price. (Please don't with the “no brainer’ cliche.) In the mind of your customer you are laying down three other challenges. Sending these messages to your potential customer:
Beyond psychology, the real business risk
Any buyer is likely to be in defensive mode. Framed by the list above, their arguments may seem unreasonable. And a good sales pitch will set out to counter. Presenting rational analysis of real benefits.
You need this in your armoury. But don’t allow the emotional to disguise the true business risk your customer faces. Adopting any B2B SaaS requires business change. When the objectives involve cost reduction, there will be losers from business change.
It could be your competitor products. Or it might be people of power and influence within the customer organisation. At the lower end of the scale, an innovative SaaS might eliminate information barriers. The type that protect silos within large businesses. Scale up the impact and budgets, departments and jobs come under threat.
The result is that change is harder for business to implement. And it brings downside risks of negative disruption or reputation damage. A responsible customer will want to weigh these risks before buying your SaaS. You need to respect that view and help. Not just challenge it hard.
The Chairman's view
None of this means cost reduction is not a great value proposition. An essential function of innovation is to improve the efficiency of existing businesses. And the Fortune 500 is full of stagnating companies. Struggling to make good returns in a world of flat revenues. Entrepreneurs will build some great B2B SaaS businesses on the back of this opportunity.
But you need to understand that this is a difficult and sensitive sales process. At the extreme end you will be offering your customer a live grenade to blow up their existing business processes. This requires more subtle culture and content for your sales proposition:
Enterprise sales are a long process. When the main customer benefit is cost reduction, the path is both longer and tougher. You can fight this. Or you can understand the psychology and the business risk. And build a sales process that leads to long term success.
In my last post I talked about selling your SaaS product to big companies. It included some of the key challenges for boards and CEOs. And No 1 on that list is building the right team.
In my subsequent discussions with companies and other NEDs, one problem in this area has dominated. At least in Scotland, finding sales people is proving difficult. Many SaaS companies feel hamstring by a failure to identify suitable recruits.
A group of NEDs and advisors are gathering in a few weeks to share ideas. In advance, I wanted to do a bit of thinking aloud.
My basic idea is simple. Why buy an expensive sales team with long track records? And offer further rewards with hard to define commission structures. Instead try to find young people with potential and ability to learn. Let them grow into the role like everyone else.
When I talk to entrepreneurs about this subject, the discussion centres on three things. Finding a candidate with the right experience and track record. Designing an appropriate (and expensive) salary and commission package. Confusion and uncertainty about the exact needs of the business.
At one level the last point is not surprising. For a SaaS company at the start of the scale up journey many things are unclear. Seeking larger customers is fine. But which are the best fit for your product? You know that selling to the enterprise is a longer and tougher road. Yet the steps along it and the path to success are unknown. Revenue depends on both new logo accounts and upsell. What is the right balance of resources between them?
SaaS Scale up - You don't know what you don't know
The reality is that hiring a sales person is not going to resolve these issues. At this stage of growing a SaaS business you are still exploring and experimenting. You must find the answers to a whole series of fundamental questions, including:
This is a job for the CEO and the whole team. A sales person may have the right skills and experience to help. But there is not a defined and measurable role waiting to be filled. Sales, account management, customer support and product development all need to combine to get to the right answer.
Ability to learn not ability to sell
So the reason you are unsure about the exact needs of your business is that you don’t know. And the critical task is to find out the answers. Not to sell an established product to a well understood target customer base. That comes later (if you are lucky).
In this light, the two earlier questions (track record and package) need quite different answers.
Take skills and experience first. The critical qualities needed to succeed in this role are:
It may well be that you can find a sales person who fits this description. But you will need to look well beyond their pure selling skills.
Hire for potential
Reading the list above again, does it remind you of anything? These are the talents that everyone in a startup needs. Every other senior appointment tends to be someone with little or no experience in the role. The CEO and founder may be a first time entrepreneur. The CTO will be a great software engineer but have they led a development team in the past?
Each company will have its own mix. The guiding principle is the same. A typical team is a group of ambitious, talented individuals doing something new. And taking on different and stretching roles as they do it.
As a founder you understand this. You look to hire people with potential to grow and achieve great things. Why would you approach sales any differently?
Most often, the CEO is the best person to “sell” your SaaS in the early days. Of course as you grow, you don’t have time to make every sale. But you can coach others. This article by Steli Efti on coaching junior reps offers a basic framework.
Reward for growth
Yet the reality is different time and again. I look at business plans and the most expensive planned hire is the sales lead. Often paid more than the CEO. The job spec includes 10 years experience. The objective is to find the finished article. One person who can rewrite the growth curve single handed.
On top of the big salary, sales reps are also looking for commission. If your SaaS is at the start of the enterprise journey you don’t know who you will sell to. What exactly you are selling. Or how much your customers will pay for it. How do you design the right reward systems?
Commissions and other sales rewards are systems of incentives. They work well in a world where the role of sales is defined in detail. The product options and margins are established. And the target market is clear. Then you can motivate the right behaviours. And set stretch goals.
Where these things are not well understood, incentives are fraught with danger. Without any ill will on either side, it is easy to encourage the wrong things. Sell at the wrong price. Sign up the wrong customers. Push for revenues too early. And a hundred other ways to damage your business.
So is a high paid VP of Sales the answer. Is a commission structure that no-one fully understands the best way to spend money?
The Chairman's view
Experienced sales people are difficult to find. Bringing them into a startup is high risk and high cost. It may still be the right strategy. But it is worth considering an alternative approach.
Look for people who are young, ambitious and talented. The type who fit well with the nascent culture of your organisation. Maybe someone who is in a sales training scheme. Or doing a sales support job and getting frustrated perhaps.
Offer them a fair base salary and some options. You can always add a commission scheme later. Work with them. Help them learn and grow into the best sales team on the planet. And they will help you find the right market and business model to build your SaaS….or is this all crazy?
I love to talk to people about their businesses. Thinking through strategy. Tackling challenges and opportunities. Helping leaders take tough decisions. That has been my working life and there is nothing I would rather do.
Every so often, I facilitate a group of SaaS entrepreneurs based here in Scotland. This means I get to talk business with a dozen or more startups at the same time. Heaven.
The focus of the group is to share common challenges in SaaS. When we met on 4 October the discussion topic was selling to enterprise customers. This is a great sign. A number of companies in the group are now mature enough to be targeting deals with larger customers. (We also had some new joiners so the community is growing nicely.)
Our discussion picked up some great ideas that would help anyone dealing with large companies. The main things in my mind are: Team/ hiring; target markets; patience and process; land and expand.
Build the right team
Enterprise revenues are like every other aspect of your business. The biggest determinant of success if the quality of your team.
You need to find a way to sell your product to large and complex customers. A good SaaS pricing page and clever inbound marketing are not going to cut it. You will need to build a team. That means some combination of hiring and developing/ promoting your existing talent.
People are the biggest decisions you make as CEO. So think through the type of person you want. Get a second pair of eyes and ears involved in the interview process. For example, an advisor, mentor or NED might be able to help. Design the right package for the best talent.
And remember, at the end of a recruitment interview, maybe means No.
Target the right customer
Making a sale to an enterprise customer is often a long process. Growing that initial deal into substantial revenue requires even more time. And there is no guarantee of success when you start. How can a startup or scale up with limited resources handle the demands?
Focus on the right target.
It can be tempting to respond to every corporate enquiry. When a household name approaches your little SaaS it is flattering and exciting. There is nothing wrong with having an initial discussion. Use that time a bit of research to find out if this company is a genuine opportunity for your product.
Patience, Patience, Patience
Completing an enterprise sale takes a long time because the process is complex and slow moving. Large companies have whole departments just to buy stuff. Called procurement, purchasing, supply chain or whatever. These teams have systems, processes and standards that take time and effort to navigate. Often it feels like you are up against the deal prevention team.
And procurement is not the only challenge. You must convince and reconvince the business of the value in your product. You may also have to prove you are better than the competition.
No wonder one of the companies in the SaaS group had planned for 9 months to complete its first enterprise sale. And is running behind schedule!
Tactics and specifics for managing these matters is a big subject. The biggest risk is impatience. Push too hard. Appear desperate for a deal. Or just let your frustration show. And the prize will slip through your fingers.
Hunt for thrills, farm to live
Winning deals with enterprise customers is worthless. The goal is revenues. Actual cash in the bank. Sustainable and underpinned by rapid growth.
For a SaaS company that means the long and painful sales effort is only the tip of the iceberg. The value is only delivered after the contract is signed. Persuading and supporting individuals, departments and divisions to adopt and use your product. All the moving parts inside your new minted enterprise customer.
A bit of new language has grown up around this. Customer success, upsell, negative churn etc. These are all terms for an old fashioned business fundamental. Account relationship management.
You should plan for your SaaS to have account management people, systems and resources. Think about the organisation you want after you win the deal. Develop budgets to reflect a realistic view of the way enterprise customer revenues develop.
The Chairman's view
Moving from an SMB focus toward enterprises is not an easy road. From a board/ investor point of view I want to help the leaders of SaaS companies focus on the key decisions. Give entrepreneurs the best chance to realise the opportunity and manage the main risks. You should for an experienced head to help you with:
All are interdependent. Nothing happens in a neat sequence. You never have all the information you want. Welcome to leadership!