At some point in every enterprise sale you run into the person who loses their job when the company implements your SaaS. Customers buy the benefits of your SaaS. Benefits are realised through change. Change destroys jobs. If you're lucky it creates better jobs in exchange.
Customers buy the benefits of your SaaS. Xero and Quickbooks simplify the accounting process. This reduces the need for purchasing managers and debt collection specialists and wages clerks. Cost efficiency is often measured in headcount reductions.
Hold on I can hear you say. My SaaS is about enabling growth not a nasty old cost cutting tool. You are not alone. Sales and marketing tools are one of the busiest sectors in the whole SaaS landscape. But growth is only different because it kills your customer’s next job, rather than the one he or she has today.
Surely growth is different?
Think about a typical about a typical SaaS value proposition. A beautiful, easy to use tool that generates twice as many qualified sales leads for every dollar of marketing spend. (I made this up but it sounds real huh?)
For a sales rep this means more time talking to people who are likely to buy. That’s great. Except, any smart sales manager is going to turn that into more demanding targets. Better leads will lead to you needing a higher conversion rate to earn your commission.
The sales manager doesn’t have it easy either. His target will be stretching upward as well. His boss might think that at these conversion rates he can manage a bigger team. And who do you think needs to listen to the complaints of all those Willie Loman sales types struggling to handle the new reality.
At the top of the hierarchy, sits the sales director. This is a different animal. A typical C suite leader. Rational and ambitious. A lion in the sales jungle. All that extra growth and efficiency sounds fantastic.
This person may not even recognise the nagging doubt. Achieving this dream means either a smaller team or a bigger target. Or both. And the credit for soaring sales might go to an upstart SaaS tool rather than a brilliant sales leader. Not every forward thinking sales director sees this analysis as the ideal career stepping stone.
Hope and change loom larger than facts and figures
It all comes back to hope and change (remember those days?) A base case for new software might be as simple as eliminating existing roles. Often things are not so simple. The benefits of SaaS come through better growth, higher margins, great agility. These gains sound abstract but rational analysis shows they are real.
And there is a human reality too. Your SaaS will change jobs today or make the jobs of at least some people different tomorrow. This kind of change is necessary to deliver benefits. But everyone is a little scared of change.
Change the shape of a job in future holds a particular fear. These are the jobs the people you talk to today are hoping to get. The sales rep wants to be the manager. The manager aspires to be sales director. Once in the C suite the director fancies the CEO role.
These hopes matter more to your customers than the day job. Most people in big corporations enjoy what they do. They all hope their next role will be better than their current one. Taking away a known opportunity is a bigger threat than losing what you have.
Making the rational case for the new world is easy. Your new job will be better than you hoped. Easier, less admin, better results. Its still different. Getting there fast just multiplies the effect. Remember there’s a reason why breakneck speed is described that way.
The Chairman's View
When you sell to the enterprise you are not making an individual sale. You are making multiple sales to a variety of different people who all happen to have the same logo on their business card. Some of them are going to feel threatened by your SaaS.
So build the business case. Understand how the customer needs to change. And then help the people you meet deal with the emotional side. Understand the impact you have on their work today and their hopes for the future. That is what I call walking a mile in your customer’s shoes.
A time comes when a B2B SaaS company starts to think about sales to big companies. Becoming an enterprise SaaS in other words. It soon becomes obvious that getting enterprise sales is not easy. Then its a short step to the place where you decide its time to start hiring sales people.
There is a bit of consensus in Scotland right now. A lot of companies are on the cusp if they can just get the right sales team onboard. The problem is great sales people are hard to find. And expensive.
I sit in a lot of conversations about how much to offer sales people. For most SaaS founders it feels like a big risk. The salary alone can add 20 or 30% to the monthly burn rate. Then comes the vexed question of commission. How much should you offer for on target earnings? What is a reasonable target?
At this point I like to confuse the issue by offering my thoughts. I don’t think targets and commissions are a good model for rewarding sales in general. I believe they are terrible approach for a SaaS startup.
The four killer flaws
Commissions based on the achievement of targets (or quotas if you prefer) are popular for three reasons. First they are simple, clear and easy to measure. Second the targets can be tied in to your overall revenue goals. Finally, sales people generate real value. And this is the established way of rewarding them for it.
All these arguments sound attractive. Everything is a balance though. And there are four big reasons why this traditional thinking does not stand up:
There are bunch of conflicting incentives and messages inherent in traditional per head sales quotas. I love this article by Steli Efti, a true sales guru, pointing out the downside risks of getting this stuff wrong.
Luckily there is an alternative that avoids many of these pitfalls. And it grows naturally with your business.
How team targets work
Most of my career, I worked towards team based targets. In a startup this is dead simple. You need to have one goal. Everyone in the business has to have a laser focus on achieving that single goal. So everyone shares the same target. Hiten Shah explains the importance of this.
As you grow, different teams will emerge. Targets and objectives will grow more complex. But each person will be a member of one or more teams. They share objectives with everyone in the team. This leads to a natural process. Objectives grow and diverge with your business. They are not made up to fit with “iconic,” expensive, big name hires.
In a large business, most senior people are part of more than one team. The effect is that everyone has a different set of objectives. Each individual target is shared with the team but no two people have the same combination.
For example, in my last year I was leading two major account teams and part of an industry business unit team. I had shared objectives with each of these teams. Yet no other individual had the exact same combination of teams and objectives.
Be clear team targets do not mean splitting objectives up into separate portions. Each member of the team shares 100% of the same target.
The Chairman's View
How does this affect reward? First and foremost everyone gets rewarded better because the business performs better. Teams work towards the same goals. People support each other. Incentives are unify not divide.
Performance reward in this system has to be based on total contribution. Simple numbers matter but they don’t tell the whole story. Total contribution gives you the opportunity to look at everything. Close sales, build relationships, deliver great customer service, product innovation - whatever really matters.
You can take the chance to factor in the important cultural things that get left behind in a sales culture. Respect, diversity, honesty and personal growth all matter. So recognise them.
Its true that total contribution is much harder to measure. At the same time it is fairer.
Leadership earns more respect. The right behaviours are supported and encouraged. Well worth the effort.
“The purpose of business is to create and keep a customer.”
One of the challenges with selling SaaS to the enterprise is intrinsic in the nature of big companies. We talk about an enterprise customer as a single, unified entity. Even use the ultimate abstraction by describing wins as new logos.
This is not the real world.
Companies don’t buy stuff. People do.
Enterprises are just large collections of people. You don’t have to convince all those people to buy. But it might feel like it!
The conventional sales manual recognises this challenge. You will be advised to map the people in your target customer. Classify them as influencers, buyers, decision makers, blockers, coaches and so on.
Sophisticated techniques such a Miller Heiman will be even more precise. Making distinctions such as economic buyers versus technical buyers to refine the model.
The trouble is this just doesn’t work. Each large company is like a miniature country (or even a mid sized one in some cases). It has its own culture, practices and ways of doing things. There is no standard model.
Time to go to the fairground
I think of this like the old fairground favourite, the hall of mirrors. You walk past a series of mirrors which distort your reflection in various ways. Tall or short. Fat or thin. Squashed or twisted. On and on, laughing or crying.
As you pass through you will see images which flatter you, a couple of absolute horrors and a bunch of caricatures to keep you smiling. But everything you see is you. A merry melange of ways to see the exact same thing.
Turn the kaleidoscope onto your SaaS
Your customers are the same. They experience the world differently from you. The clear, simple problem your SaaS solves is fractured and contorted through different lenses.
Yet each individual in your enterprise customer is looking at the same thing. Your product, your company and your team. Selling into this environment is about understanding these perspectives and dealing with the response.
Put yourself in your customer's shoes
Every reflection is skewed by the change that your SaaS will make for the individual looking at your product. You may be dealing with managers, C Suite, users, procurement officials or just nosey finance people. Everyone is influenced by change.
So the best way to understand how your SaaS is reflected is to stand where you customer stands. Look at the product from their point of view.
A good example of this is procurement. Sellers tend to think of procurement as a department that buys things. Yet more often than not this is wrong. Procurement’s job is to do deals. This enables others in the business to do the actual buying.
So the way to make procurement feel good is to show them a great deal. Not to make it easy for them to buy.
Meet the cast
Of course not every procurement function works like this. Like I say, there are no standards. But in every enterprise there are a few familiar characters you may recognise.
They are best identified through their own words:
Your problem is my day job. Or in other words the cost reduction will be the salaries of some people influencing the decision.
Your problem is invisible. This is a variant of the old Henry Ford comment about people looking for a faster horse. Sometimes people are so familiar with their environment they can’t imagine a different world.
My IT guy tells me your solution is a high security risk. This person probably hasn’t talked to IT. Most people don’t understand technology risk but it makes them nervous.
I love your company and your solution but there’s a fire over here and I need to put it out. Your SaaS is the most important thing in your world. It may be very small potatoes for some customers.
Its not my job but I have the best interests of this company at heart and I’m not sure about you. You may be told straight up that you are too small. Or you may have found someone completely outside the loop sniffing out a risk.
How do I know you will deliver what you promise. Anyone who buys IT will have a long legacy of disappointment and broken promises. It will take more than a couple of customer case studies to convince them.
Can you guarantee this team will be available throughout. Often people feel they are buying S for service not for software. Services are delivered by people and customers buy people they know.
We don’t like to be on the bleeding edge. There are many variations on this theme. Some people simply don’t like change. Even if they know it will be for the better.
I don’t have the time and resources to implement this. The total cost of ownership is not only money. Change needs space and its not always there.
The Chairman's View
You could adopt the Bruce Lee approach and take the fight in every direction. As in the famous closing scene from Enter the Dragon. Or you can learn from the sales gurus and treat all of these statements as objections rather than real concerns.
I prefer a less adversarial approach. Where possible work with these people. Change their view of your SaaS and you will help them realise the benefits faster. That is the basis for a sustainable customer relationship.
You should also be sensitive and listen for problems that will not go away. If the fire is in the factory, turning up at head office with a hose will not work. When your customer is not ready to buy, don’t try and sell.
The original hall of mirrors is in the palace of Versailles. It was designed to reflect the glory of the Sun King. And it closed out the real world. We all know how that ended. Don’t let the enterprise version blind you to reality.
Business tools provide handy shortcuts and improve efficiency. Used for their intended purpose good business tools can lead to massive productivity improvements. Apply them the way they were designed and you will get results.
Enterprise SaaS companies are both builders and users of such tools. And one of the clear benefits of the SaaS model is making better, more innovative tools available to every business.
But SaaS does not overcome the biggest danger with any tool. Start using business tools for the wrong purpose and they can become an instrument of torture not a source of value.
CRM and its reporting arm sales pipelines are one of the most misused tools around today.
Your SaaS pipeline is for asking questions not making decisions
They provide an excellent snapshot of the future health of your business. Your SaaS can get a clear indicator of future revenue and with a bit of effort some good data on which sales processes or sales teams are driving growth.
However, many people take this one step too far. CRM and pipeline data becomes a tool to manage. A mechanism to make decisions. And therein lies the danger.
Good pipeline data is a great way to ask the right questions. Don’t let the data get polluted by a bias towards preset goals and targets. Good decisions flow from answering good questions not just from abstract, summarised data.
Enterprise SaaS sales - Dynamics not statics
This is most obvious for enterprise SaaS sales.
Each sale is the culmination of a long cycle with many twists and turns. Its not out of whack to spend six months building an enterprise relationship and another nine months to achieve the first sale.
And in enterprise SaaS you are also looking for upsell. Each sales opportunity is only part of a wider relationship picture.Ongoing revenue, new ideas, expansion sales, service challenges and the rest.
Your pipeline is just a snapshot at a point in time. Every stage is like an individual window that captures only those opportunities that are in a specific position at a given moment.
It doesn’t matter whether you use the categories I outlined a few weeks ago in Simple SaaS
Or adopt a more conventional structure. Your pipeline is a valuable yet static view.
An enterprise relationship is like a dynamic living organism.
Think of it like comparing your turnover to your growth rate. Turnover tells you how well you have done but its a static figure. In the past. Growth is dynamic. A much better indicator of where you are going.
Manage enterprise SaaS customer one by one
Relationships are dynamic and unique. Each relationship needs to be treated as a special case and managed as such. More accurately, for enterprise SaaS we are talking about the group of relationships that forms you customer contacts for each enterprise organisation.
Customer A and Customer Y may be in the same “pot” from a pipeline reporting point of view. But they will have arrived there by very different routes. The account team will be planning their own specific next steps. And value of the relationship will depend on how those plans are executed.
“Strategic” sales choices like: “lets push all of these to the next stage this quarter” or let’s make sure every customer is offered this special new feature” are counter productive. They distract from a focus on customer need and they risk upsetting the delicate balance of the relationship.
The Chairman's View
Sitting on Boards, pipeline is one of the first things I look at each month. It gives me a great pulse check on the business. And it help find the right questions to ask the management team.
But I also like to listen to the CEO or the Sales Director talk about the market. This gives me a much better feel for the dynamics than the report.
When I ask my questions, I am not looking for simple answers. I want to hear specifics. Plans to convert important relationships. Actions to address customer problems or concerns. Change to strategy in response to the customer’s business dynamic.
All about a unique approach for each enterprise SaaS customer. Designed to maximise the company’s chance of developing a strong relationship that generates value for both sides.
This has lots of implications regardless of the type of customer you are targetting. The gulf between product and service buying for an enterprise SaaS customer is especially wide.
I want to point out a couple of key things in this piece.
Enterprise ready is an entry fee not a sales pitch
Another excellent article which caught my eye was a product manager’s guide to moving up market from Tom Tunguz.
I can’t improve on the list of product features your SaaS product needs to be enterprise ready. If you ever enter into an enterprise procurement process, covering these bases will save you a lot of heartache. And likely prevent your bid falling at the first hurdle.
But don’t be deceived into thinking this is anything like enough. As the title says this is just for a product manager. Selling SaaS to the enterprise has multiple dimensions. Meeting certain technical standards and the preconditions set by procurement is only the entry ticket.
Your SaaS needs to convince buyers not just procurement
Last week someone asked me to share the basic proposal structure I used to use when selling complex professional services. Writing this down reminded me of a fundamental truth about selling services.
Every sale needs its own unique selling point.
Most entrepreneurs will be familiar with the idea of a USP. A clear and distinctive advantage that set your SaaS apart from the competition.
The implication is that there is a clear USP which will appeal to a range of potential customers. Services are not like that. Services are personal. So each customer likes to feel that the USP is designed from them and them alone.
Back in the day, we used to refer to this as the killer slide. Every proposal had to have one page that made the buying decision for the client.
Your SaaS needs to be beyond compare and score
Achieving this when you are selling to the enterprise needs a couple of things.
First, this will never appear on the procurement agenda. Procurement’s job is to get specific answers to a whole range of standard questions. This allows them to do like for like comparisons and score your SaaS against its competitors.
Winning this type of scoring is an art form in itself. But it does not touch on USP. By definition this defies comparison. To figure this out you need to talk to the real buyers. The people in the enterprise that will benefit from your SaaS.
Your USP for a specific customer needs to be couched in the benefits that key people within that enterprise will realise if they use your SaaS. (Note use it, not just buy it.)
The Chairman's View
The service mindset is the key to enterprise SaaS. Building a product with the right operations and support to deliver behind it is a core essential. You can take account of these needs from the outset of your startup.
Once you engage with customers, you have to get on the business benefits agenda.
Satisfy procurement and deliver the wow factor the business buyers. away. Or, click the Write button and compose something new.
The start not the end of a customer lifetime
All that aside, a different thought struck me as I was driving home. In my mind, these guys are already a customer. They are busy people with high pressure jobs that are literally life and death. And they gave up 3 hours of time between them to help me out.
Since I have gained value, I must owe them more value in return. Its an obligation plain and simple.
Retention first not acquisition first
That took me back to thinking about this article from Price Intelligently which argues for a retention first mindset rather than an acquisition first approach. The authors have approached this from a metrics standpoint. And they demonstrate clearly that reducing churn can be a straight path to rapid growth.
But metrics are outcomes not strategy. Churn and its relative LTV are good examples. They capture an important concept. Yet they result from measuring customer lifetime at the end not from the beginning. That can’t be right!
Nonetheless, I liked the principle when I first read the post. I was also a little bit doubtful to be honest. Retention first sounds very attractive to someone who prefers building relationships to cold sales. So was I just playing to my own preferences?
My customer meeting has put that niggling doubt to bed. Good business works on human relationships. Not just transactional benefits.
That’s why numbers and benchmarks are useful tools but no way to run a business.
B2B SaaS - relationships not pipeline
So for me, retention first is a simple principle. One that applies to any B2B SaaS from day one. And it works like this:
Until recently, I worked for one of the leading professional services firms in the world. The organisation had fantastic depth of human talent. And an unrivalled client base amongst the leading companies across the globe. We all made a ton of money.
Yet as leaders we could never escape the feeling that something was missing. Every client engagement was different. A team of smart people would think through a complex business problem and use their experience and a bit of innovation to develop a specific solution.
If only, we could capture the essentials and repeat the same solution over and over. What a business model that would make!
Alchemy - Turning service gold into product margin
For years we struggled to turn gold plated, world leading services into products. Every leader was adamant this was the way forward. I well remember one senior partner literally thumping the table in a 3 Michelin Star London restaurant. Barking “Repeatable solutions” at us in his most stentorian tone.
The SaaS struggle to dismantle every product
Contrast this with the startup world today. SaaS is the business model of choice for software.
By definition, it takes a product (software) and turns it into a service. And technology enables this mindset to spread far wider than just software. As one of the leading thinkers in the industry, Ben Thompson of Stratechery, put it recently, we are now in a world of “everything as a service.”
It looks like the leaders in services are desperate to become product businesses. While those who make a living from products are striving just as hard to turn those into services.
What is going on here? No doubt part of the answer is “grass is always greener” mentality. On a more positive angle, both attitudes show a bit of an innovation mindset which can only be a good thing for customers. But in the end, I don’t think we will see an outright exchange of business models. Services will win.
As customer we love to be treated to excellent service. Delivering services is more painful for most people. As technology overcomes that particular barrier, expect to see a service mentality take over (almost) everywhere.
If you are building a product or running a product company, remember selling and delivering services needs a different approach to success.
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.
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 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.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.