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.
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!
For any business listening to customers and learning how to deliver value is vital. In a startup with a limited legacy of market knowledge this is doubly important. Every face to face contact with customers can be a source of understanding. Even when a customer objects there is something to learn.
In B2B SaaS sales and customer success talk to your customers daily. These teams need to generate revenues. But each conversation should also work two ways. Its a bit like making sure your golf grip is right. Your hands are the only part of your body in direct contact with the golf club. So the grip is the best opportunity to get it right from the start. Any discussion with a customer is an opportunity to listen and learn.
So when a sales person meets customer that does not want to buy there are two options. Overcome those objections and drive the sale. Or listen, probe deeper and learn valuable lessons. This is your prime direct connection with your customers. I prefer to see it as a two way conversation.
Steli Efti published 10 Objection Handling Techniques last week. In the post he articulates great strategies to surmount B2B sales obstacles - the overcome approach. I thought it would be fun to take the other tack. What can you learn from listening to those same 10 customer barriers:
1. Your product/ service is too expensive
Steli is quite right that you need to find out more. The simple explanation is that your customer does not see the value in your product. He may also be telling you that your competition are cheaper or better value. Or they may not have enough in the budget to pay your price. Bear in mind that customer budgets don’t just need to cover your SaaS subscription. Implementation and change costs need to come out of the same pot.
2. We'll buy if you add these features
This is both the most informative and the most dangerous feedback you can receive. The buyer is telling you what needs to change to convince them of the value on offer. This could be the exact thing you need to hit the product/ market fit sweet spot. Or it might be an expensive customisation that is only relevant to one customer. It is also possible that the features may not add anything. Some bells and whistles could just be what your contact needs to win the argument inside his own organisation.
The key is to find out why those features are important. What value will they add for this customer? Does this sound as if it applies to a wider market?
3. Your solution isn't a priority right now
First and foremost you have to show respect for this objection. You are talking to someone who has other problems. Maybe they don’t see all the benefits your solution offers. More likely those other challenges really matter more. Try to find out what is the top priority. Could be you product will help. Or at least you will have a clear idea whether this customer is worth pursuing further down the line.
4. You've got a great product but we're going to go with the [industry] standard
Go away, you have lost out on this deal. Frustrating for a startup because you need to find people who will take a risk on your business. But the customer has communicated a clear decision here. It won’t change unless you find something new.
It is almost certain you will meet this challenge again so how can you tackle it? Find out where the customer sees the risk. Often the established competitor will cover a wider spectrum. So your SaaS may be a brilliant but partial fix. The alternative is that your company doesn’t meet the resilience test for this customer. In either of these situations, finding partners may be the solution. Systems implementers and consulting firms can provide both the strength and breadth you require.
5. Just e-mail me more information and I'll get back to you
I have to disagree with Steli on this one. When you hear this, you are being told there is no interest. Don’t hang up yet? If you are talking to me, every second you stay on the phone is making me angry. You are wasting my time and worse you are not listening to me. No matter what happens in future, I am not going to want to buy. And I am also not willing to help you by sharing the reasons for my lack of interest.
Thank the customer politely. And send that follow up e-mail. It costs nothing and shows you are professional. You can even mention in it that you would like some feedback. But write this one off. There is no sale to be made and nothing to learn.
6. I don't have time to talk right now
Check if you can schedule a better time and get out of there. It does not matter how little time you take up. Your contact does not want to talk and you need to respect that. If they offer a convenient time, chances are you will be able to have a constructive follow up conversation. Push too hard and the door will be slammed shut. Remember you are building a relationship in B2B sales.
Be professional and you will also have a learning opportunity. When you do have that sales discussion, find out why the previous time was not convenient. You could uncover other business issues or problems that fit with your solution.
7. I can't make a commitment until I meet with [other decision-makers]
Bite back your disappointment. this could be gold dust. Your contact is about to reveal some invaluable information about the organisation. With a little sensible dialogue you can answer all sorts of questions. How decisions are made? Who they consult with and respect? Who are the blockers or the people most affected by change? Even where to go for the next sale if land and expand is your strategy. Pin your ears back and listen.
I am with Steli that getting an invite to these conversation is great. Again, even a refusal tells you something about how the organisation operates. So well worth asking.
The big downside here is time. Every big corporate customer takes their own time. If your cash reserves are not going to hold out that long then you have a problem. The ideal option is to survive through. And remember you have to stick it out until they pay. Not just until they place an order. But if you have no option, now can be a good time to approach a larger partner. At least you have something of value to offer in negotiation.
8. We'll buy soon
Hard to interpret. Could be a variant of 3. That is, they have more important things to worry about. Or a version of 7 where there are other interested parties. Might just be a pure admin hold up - process takes time.
It can also be a polite and absolute no. Finding out more is important but be gentle. The customer is not holding the door open. They are hoping the commitment will get you off their back. So you can’t assume they want to talk. Try to tease out the reasons but beware of the pushy sales impression here.
9. The gatekeeper
Gatekeepers are one of the great myths of the corporate world. I have met only one person in 30 years who was a genuine gatekeeper. In every other case you are dealing with someone who is resistant to the change. Your customer has to change to realise the benefits of your product. This means there are losers as well as winners. Most often the gatekeeper is one of the losers. Or they have a solution which deals with the same problem but suits their agenda better.
The point is so-called gatekeepers are blocking you. Only you. They are not just professional naysayers sent to beat up sales people. Here is where great interviewing skills come into play. Because this conversation can also be a mine of valuable insight. Why do they object? Who are the losers and why? How does your SaaS impact the wider customer? All this can be helpful. But not easy to dig out the answers. Get back to The Mom Test and think through your approach.
10. No, No and No
At any stage of the cycle this means No until proven otherwise. Assuming it is just a temporary setback is wrong. You may be able to change the customer’s mind if this is an early stage discussion. But you will not succeed if you don’t hear the negative.
Feedback that backs up a no can be useful in all sorts of directions. The more blunt the refusal, the greater the chance to open up an immediate channel. A route to finding out the reasons. If you have a way of combatting the objections this can be an opening. if not, again you will have learned some lessons. Don’t take no for an answer will not help your reputation or your brand.
B2B SaaS - Learning or selling?
You can learn a lot from the ideas in Steli’s article. Judging when to step back and listen versus the right time to push through objections is a skill in itself. One the best sales people have mastered.
Just remember that B2B SaaS is about a long term relationship. Where you add value to customers over time - that’s why they call it lifetime value. Every contact is an element of that relationship. From the first marketing message, though sales to service and customer success. And quality, sustainable trusted relationships take time to build. Look to make sure your sales conversations contribute to that process every time.
You may not sell as much the short term. But the quality and sustainability of customers will be better. And the value of your product will keep growing in the long term.
I need to admit something. I have a problem with pure sales people. I have met some real nice ones. But the model just doesn’t sit with me. I worked all my life in professional services. Built on the principle that you must do AND sell. No separation. It is true that my former firm did hire the occasional pure “sales” person. It never worked. Those people did not add value. And our professionals did not value them.
I like to think of services in the words of a good friend of mine “We are all selling a little bit.” Hairdressers, plumbers, accountants, bankers. All services where the sale depends on people as well as the service delivered.
I have also had the experience of building global partnerships. Alliances between professional services and clients/ partners with strong and successful direct sales models. This mix never worked in the real world.
Sales people are great at selling a product but not at delivering a service. For me this creates an inherent conflict in SaaS.
One consequence is a negative reaction to the wall of advice out there on how to more, organise and reward SaaS sales teams. I specifically hate the word quota. With a vengeance. All this material seems to be driven by an inherent assumption. That the the model for direct sales in traditional software companies is not broken. The advice and recommendations and even the basic language have this imprint. They bear an uncanny resemblance to the words you will hear inside Oracle or HP or whoever.
This led me to work on a post called something like “Why you will never need sales in SaaS.” I have had versions of this kicking around for a while. But I realise that nothing in any of them is helpful or constructive.
So let me try a different approach. Some SaaS companies will end up with a product which is best for large enterprises, government organisations and the like. The buying process in these customers is complex. The culture is unique and often challenging. Such sales need real people to spend time with the customer. Logic says that hiring people to engage with these customers will be necessary. For some SaaS companies at least.
In my career I have worked with some of the best services sales people in the world. As leader I have been in charge of teams of professionals across the world. Generating billions of dollars of revenue. What have I learned? Below are a handful of truths. Things that work. Or at least reduce the risk of failure. This is not a system of success. But I hope it will be helpful if you are trying to build a SaaS sales capability.
It is not just a numbers game
The funnel analogy is common in sales. Feed enough leads into the top and revenue will flow from the other end. Inevitable. Hire more sales people and generate more leads. Growth will follow. If this doesn’t work for any reason tweak it. Improve conversion. Fire your team and find better sellers. Market to a bigger audience. Build more product features. Until you have the economics working.
Is this a real philosophy? Crunch enough data and you will have the answer to life, the universe and everything? Of course not.
Metrics are a great way of figuring out what works and what doesn’t. But real revenues only arise form quality relationships with real customers. In an enterprise environment those relationships are complex. They are also few in number (at least until you are SAP).
If you are SaaS is for large companies you need a clear plan for each relationship. Who do you need to meet? How will the target make its decision? What is the purchasing process? And much more. It is a long slog. You will have to listen to every nuance in each meeting. Understand and respond to different problems and agendas. Find features and benefits that work for the whole audience.
Pumping numbers through is not the answer. Quality not quantity will win.
Who will be the real sales person for your SaaS?
Get a clear idea who will truly sell your product. In the early days it is always the founder(s). By definition the team selling are also doing. Why then jump straight to a “pure” sales person? What you need is someone who can persuade your customer to buy your SaaS. Not just someone who says they can sell anything.
The best professional services sales people I worked with had the right combination of three things. Skills and track record that were credible with the client. The right personal and cultural fit for the client’s way of working. Enough knowledge and patience to navigate the buying process. Remember what counts is not your sales process. It is your customers way of purchasing.
In an established business I had to find these people and allocate them to accounts. It was a combination of personal experience from working with them and instinct. Not always right. In a startup you don’t have this. Instead apply a principle from the other side of the equation. Build up a persona for your ideal sales person. Then go out and find people who match.
Hiring is a real jungle
Sales are built on relationships. You need the right people. No matter how big your company gets. No matter how tough the economy is. Finding the right people is always tough. Get over it. And be patient. I said it in a different context last week. Maybe means NO. You will still make mistakes. But only hire when your gut tells you it is right. This applies to sales as much as any other role.
My firm went through a big hiring exercise a few years ago. We needed senior people. Partners who would generate real revenue. Headhunters told us to expect an attrition rate of 20%. We achieved 6% over 5 years. There was no process. All we did was have people in the team meet candidates. If anyone who met them was unsure we said No. We kept going until we were sure. Every time.
Don't be afraid to promote from within
Your best option may already be on the payroll. I can already see this happening with a couple of the SaaS startups I work with. Youngsters who have started as interns are growing before the founders eyes. Take a chance on someone you know. Who fits into the team culture. And has worked for it. This is much lower risk than insisting on someone who has a CV that ticks every single box.
Seeing people grow and succeed. In roles they would never have imagined a year or two earlier. This is one of the most rewarding experiences you will ever have as a leader.
The fallacy of reward
Sales theory is often based on a pure, individual financial incentives. You pay on personal performance. You match or exceed the going rate. You hold individuals accountable and fire them if they fail. This is great for getting hard driving mercenaries. And high staff turnover. It is bulls**t for your business and your customers.
The more complex your SaaS and your customer’s business, the wronger it becomes. Selling products or services to large enterprises requires a team effort. Everyone from the PA who makes the appointments to the CEO who seals the deal has a role to play.
Startups are small teams by definition. Everyone and everything depends on everyone and everything else. The last thing you need in your culture is a high paid outsider. Motivated only for him or her self.
Ditch those individual quotas. Get everyone working as a team in development and in sales. Reward team success. You will be more effective and have more fun.
The myth of CRM
CRM must be the wrongest named software category in history. It implies that the system is about managing customer relations. In reality CRM is about building and tracking sales funnels and pipelines. Nothing wrong with that but call it what it is.
The wrongness doesn’t stop there. CRM is a crowded space with hundreds of companies - most SaaS based - offering solutions. The basic proposition is the same. A system and the metrics it drives will transform your SaaS growth. The trouble is sales is tough. And overcoming the challenge is not just about process and numbers. It needs thought, analysis, effort and a bit of luck.
In the early days your success is not about being more organised. Or a more precise measure of progress. It will be about working out and guessing the right path. Through the messy world of the right corporate customer. There will be a tiny number of real quality leads. You will not win by trying to impose a pattern on these. Rather you must treat them as individuals until you see something that repeats. This will take a long time in the enterprise.
The right choice at the right time
In enterprise SaaS sales the biggest decision is right at the start. Are we selling to the right customer? Most times this is followed by the other key choice. Are we selling the right thing to this customer? These things are true in every business. They matter more in enterprise sales. Because the time and cost of investing in a sales relationship with the wrong customer is so high. It can be enough to kill and early stage SaaS company.
The second choice (what to sell) is not about changing your product. It is about focus on the benefits that will make the biggest difference.
Do not allow CRM or logo blindness to distract you from this fundamental. Dig deep to find out if you can add real value to your target customer. Listen to every contact. Direct or indirect. Even if your product is what they need, are they ready to adopt it and realise the benefits.
Every culture is different
The sales model I have disparaged throughout this post does work in some places. National cultures vary. Industry cultures vary. Every large organisation has a culture all its own. You will build your own culture for your own organisation. Whether you like it or not. Once your SaaS is established it will have a culture.
You should respect and grow that culture. But you must understand and adapt to the culture of your customer. In enterprise sales buying is a reflection of culture and process. You will need to navigate both.
I had a period where I looked after relationships with the Europe, Middle East and Africa (EMEA) business of two Fortune 50 clients of my firm. We were trying to sell the same portfolio of services to these clients. Their total procurement spend was similar - $14Bn per annum for one and $12Bn per annum for the other. As far as we could see the spend on professional services was also close.
Yet the experience was different. There were many reasons. The first signal lay in procurement itself. One client had 180 people for its entire global spend. The other had 1,100 just for EMEA. At the same time, the buyers in the first client were happier to spend time with us than for the second. Despite having one tenth the resources.
If you must hire sales people....
There are a series of process mistakes that are common in sales. Quotas too high. Measuring and rewarding the wrong behaviour. Hiring the wrong people. And so on. In enterprise SaaS you need to think deeper and more strategic. Fixing the wrong system is not the answer.
If your SaaS needs a sales force it is because your customer wants and need personal relationships before they buy. This is true for most large organisations. And it may be true for some things in the SMB sector as well. Professional advice is a great example.
This is a great opportunity to learn about your customers and deliver real value. Instead of “How do I create the right sales process?’ Ask yourself “How can I best learn about my customer’s business and help them improve?” Build your sales team on that answer.
Being in front of customers talking about their problems is fun. The rest is bull.
The model for sales in a Start Up
We now have a great model for the building and growing the sales, marketing and business development of start ups. Focus on finding and validating customers and the whole cycle of testing, learning, iterating and necessary executing a pivot. When we combine the thinking of Steve Blank and Eric Ries with the lifecycle model proposed by Geoffrey Moore in Crossing the Chasm we also have a method for taking the next step and creating a large company.
Like software, hardware and user experience, business thinking has experienced great innovation in recent years. Like the technology many start ups use, these thinkers also believe that the start up movement will eventually disrupt and transform virtually every business sector. This change will also rewrite the rules for business organisation, business processes and business strategy.
B2B Sales are Ripe for Disruption
One specific area which is ripe for disruption is the B2B sales process. The key to unlocking a new approach to sales is the advent of everything as a service, most especially software as a service. Many B2B enterprises including the large established technology players have grown on a product based sales model. Shifting to selling services is more than just relabelling. It requires a whole new approach to generating value from customer relationships
Living in a Virtual World
Selling services to businesses is a complex world and often appears slow moving and obstructive. To understand why, you first need to grasp that services are not sold to businesses (or companies or corporations or whatever). Never. Services are bought by people. Not sold, bought. Not by organisations, by people. Those people are real, normal people with normal motivation and behaviours. However, they live in a virtual, unmapped world called a company. This world has its own customs and laws. if we don’t know these its occupants may appear irrational and unpredictable but they are not.
Making it easy to buy
The key to success in these virtual worlds is making it easy for your customers to buy. The traditional product model is based on creating features and benefits which make the product easy to sell. Services don’t work like this. The differences can be quite subtle but they are fundamental.
Let me illustrate by looking at some of the elements of the sales funnel:
My thanks to my good friend Carl Erickson from Beacon Worldwide for the thinking behind this model which has been proven in thousands of service sales.
A different customer experience
Some of these differences may seem quite subtle but the results are a very different experience for both seller and buyer. Notice that this affects everything right through to contracting and accounting. Start ups that are aiming to sell to the enterprise need to understand the model on the right and adopt a different business model as a result
Top 3 things to do differently
There are three clear steps to the right model:
1. Hire different people. Traditional product sales people often struggle to sell services. Look for a background in consulting, systems integration or IT services.
2. Build different incentives. This is one of the most common mistakes even in large services companies. Sales targets that are based on the signed contract value positively encourage the wrong behavior and bad business practice.
3. Rethink your CRM. Most CRM systems are actually product sales funnel based. You will need something that genuinely manages customer relationships.
Following these steps will help but it will not be enough. SaaS for the enterprise needs to resolve the conflict between simple, standard software and customer expectations of service.
The Anatomy of a Conflict
The economic model of SaaS is designed to scale by low cost, online delivery of high quality easy to use software. Enterprises are used to buying software which is highly configured, complex to install and delivered by large teams of systems integrators and consultants. The latter model is expensive and painful but it is a service tailored to business needs just as described in the right hand side of the table.
How to rock Enterprise Sales
Great SaaS brings huge benefits but these will only be realized if the business which buys changes to take advantage of the opportunity. This is the final key to successful enterprise sales. The SaaS start up must help its customer deliver business change. This means wrapping the product in an ecosystem of training, support, change management and benefits realisation – what Geoffrey Moore describes in Crossing the Chasm as “the whole product” philosophy.
Start ups don’t necessarily need to deliver these services themselves. Partners, alliances and third party software providers may well be better placed. A strategy to build a place in an ecosystem which can deliver end to end business change is essential.
Winning enterprise business needs a different approach to sales for SaaS start ups. This implies making different choices about your business model. To learn more about the tools and techniques needed to implement these choices effectively come and talk to me.
Remember you are selling a service....
Many of the companies I meet have a business to business sales model. It has become a cliche of the Startup world that large corporations are a slow and difficult sale. It goes double for major government departments like health or education. Having spent thirty years working in this environment delivering and selling professional services to some of the biggest companies in the world, I guess I should have some ideas to help manage this process.
Back to basics first. Almost without exception B2B Startups have adopted a SaaS model. This is absolutely correct but remember what that last S stands for. You are selling a service not a product.
This is really important because there are a lot sales methods and sales people out there which are built on product sales. The devotees of Huthwaite's SPIN selling and Miller- Heimann Strategic Selling spring to mind. Do not be tempted by these or similar approaches. SaaS is not just window dressing. Your customers will expect a service so make sure that is what you sell them and what you give them.
In B2B, know your competition....
Selling services start with one key secret - Whichever industry you target, whatever your software does, regardless of the country or business function you target, your top two competitors are always the same. SAP, IBM, Salesforce.com and Amazon also face the very same top two competitors. They are:
Do nothing; and
Do it yourself.
In that order.
Companies do not buy software (or anything else)
This may seem a radical departure from the traditional view of competitive markets but it is very important. If you do not beat Do Nothing and Do it Yourself, your large business customer will not buy. No amount of features and benefits and cost savings which are not offered by other software providers will help you.
The reason is simple. Businesses do not buy software. People buy software. In a large company a whole range of different people with different agendas and variable levels of influence are involved in the decision to buy. Do not make the mistake of believing these people are some amorphous corporate buyer. Treat them just like consumers. Identify their real world problems and find a way to help fix them.
Look at your two competitors in this light. Busy managers in big companies will always have the temptation to do nothing. Busy managers tend to be driven and successful people so they are also capable of getting a things done without any help that is doing things themselves. Your offering needs to get at something which is strong enough and urgent enough to overcome both of these.
Know your market....
The right time to address Do Nothing and Do it Yourself is in the product development phase. I get frustrated when I hear Startup pitches which say things like “According to IDC 75% of companies have problem X.” I would much rather hear about research which concerns managers and leaders i.e. real people. If you do this then your software will go at least part of the way to addressing one or more actual problems.
If you start with a well designed product then half the battle is won. The second part is in the sales process. This will be time consuming. The important thing is to keep reading the signals and steering the conversation in the right direction. You can’t avoid spending the time but you can avoid wasting it. Just getting the next meeting is not progress in itself. Often in fact it is a method of Do Nothing. I have passed you onto the next person so I have now avoided doing any work - success!
Learn to read the signals...
Reading and reacting to these signals is a big subject but there two big positive signs that you can watch out for. Number one is access to power. If the person you are meeting is prepared to take you to a major decision maker this is a great signal. This is not necessarily their boss so be careful. Not all big job titles carry real power or if they do it may not be the power you need to access. Do some research before jumping for joy at meeting the next guy.
The second sign works the other way. If someone in power sends you to their subordinates to plan for execution this is awesome. Again caution. You need to be sure you have actually been talking to power. You also need to be clear they have delegated action. Delegation for further review and investigation is just another Do Nothing.
I am conscious this all sounds pretty scary. Its not. Its an appeal to use the instincts and intelligence you already have. Talk to people, find out their problems, fix them. Don’t forget this because you are selling to a large company and don’t assume you are making progress just because they keep talking to you. Measure your progress and invest your time wisely. The process will not become short but it is much more likely to be successful.
How Should Startups Approach Corporations?
Canon has just announced the $150 million acquisition of Milestone Systems, a Danish software company specialising in video surveillance. In the same week, HP used its annual Discover event to trumpet Helion, a portfolio of Cloud products and services aimed at taking on Amazon’s market leading cloud offerings. Another story which caught the eye was an analysis of IBM’s network of support for Startups in Africa which now encompasses Smartcamps in four cities. All of these stories have a common denominator. The tech industry faces immense disruption and established players are trying desperately to find ways to adapt.
Startups have a vital role to play in this process. Of course, they are the prime source of disruption but they are also at the centre of change within the tech industry. Acquisitions, acqui-hires, partnerships and incubators are all strategies adopted in response to the threat of the mobile and digital revolution. This means the big, slow moving giants of the industry are not just easy targets for Startup founders. They are also a source of funding, market access and a potentially lucrative exit route for investors and founders.
How can Startups take advantage of these opportunities? Begin at the end. Acquisition by an established player - a trade sale in the jargon - is by far the most likely way to a lucrative exit for Startup investors. Once you have a clear idea of your value proposition, it will often be quite straightforward to identify a small number of companies which are likely buyers even though the exit may be five years or more away. These need not be restricted to the tech industry. Mobile and digital technologies are disrupting business models across the board. Although in many industries, the market leaders are less aware of the threat and much slower to adapt. Nonetheless, retail, advertising, health, financial services and many others may be a good source of possible buyers.
Look into the areas of investment and development that companies are pursuing. Often this will be publicly announced. Even if not, a quick glance at the type of investments made in recent years should give plenty of clues. I spoke to a couple of senior executives from large corporates recently and security, networks, cloud, analytics and big data all came up as areas of focus.
If there is a clear exit strategy, the next question is how to start building a relationship with the target acquirer. Incubators or similar schemes to help Startups are a great place to look. I know of at least three Startups that have been through an initial bootcamp funded by Microsoft in Scotland or Germany and all continue to receive help and attention from the company. Even if the incubator option is not available, keep an eye on the partner programmes that large corporations run. These can be a great route to market and therefore a great growth accelerator. They are also one of the prime sources of acquisition. Many corporates rely on recommendations from product teams to identify partners that would make suitable acquisition targets.
Even if none of these routes is available, just enquiring and meeting with executives from potential future buyers will help build valuable relationships. The Startup ecosystem is diverse and being noticed is a key part of success. How can Startups best take advantage of the disruption they are causing? I would love to hear your thoughts in the comment section below.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.