Blueprints For a SaaS Sales Organization
The problem is that the way we sell in B2B has made little progress since the early 1900s. As outlined in the book B4B, there may have been several changes in activities from the days of solution selling, and many new tools, but no significant change in the approach and the methodology.
TSSM is based on applying fundamental skills across all the Moments That Matter (MTMs) to customers.
The old guard of the sales profession have a consultative skill set aimed at selling solutions. Many of these skills no longer apply to the SaaS paradigm in which volumes are up, transaction sizes are down, and revenue is earned long after the close.
Success in SaaS depends on having a carefully designed, customer-centric sales organization that balances skills, processes, and tools. Importantly, in the SaaS context, today’s sales organization needs to be low-cost. And it needs to deliver on rapid – growth scenarios that did not exist in the past.
We call this low cost/high accomplishment/high scalability organization a Self-Learning Organization.
Because of SaaS, the entire sales model needs to be reoriented to focus on customer impact, which is a big idea behind the TSSM. You need to create teams, systems, and processes to make customers happy over time, rather than just at the point of sale.
But the fact is that “as a service” is a model that is taking over more and more industries, far beyond software. As a Service means that sales organizations have to redeploy resources down and through the sales funnel, something that they are seldom comfortable doing.
In the online world, we as consumers all interact directly with the brands and products we love online. Today, sales is an activity for a new generation, one that excels in online. They are native to mobile use – often moving between 2-3 devices throughout the day, and they jump between 10-20 applications on their desktop.
A modern SaaS sales organization will be built on a foundation of Millennials.
Tier the Business
Your sales organization is your asset. Your target market is your neighborhood. Do you see where this is going? Figure out the details of your target market and then build a sales force suitable to it.
Few sales leaders do a good job of matching their teams’ experience and cost to the size and volume of deals in their chosen segment – the revenue side of the equation.
In the freemium model the service is provided free of charge, but the client is charged for premium features and/or increased usage.
Prosumers are individual users who behave as a business. In an online environment, you simply cannot ignore prosumers. They do not usually provide a significant amount of revenue. Yet they are a critical part of your ecosystem.
Earning the business of a SMB is the goal of a good inside sales team. The inside sales team uses a Marketing Development Representative (MDR) to qualify the inbound lead and direct it to the online Account Executive (AE) who can help the client.
Large opportunities are singled out and managed by the Field Sales Manager/Account Executive (FAE).
We commonly see that the companies who are successful in SaaS are successful in the SMB space, and it is these companies that also obtain high valuation.
The Customer Journey
The question to ask is not “how are we going to sell it?” but rather “how is the customer going to buy it?” Once you have figured that out, then you can plan against it.
Because in a SaaS world the sale is not the finish line. Recurring revenue, MRR, a happy customer, multi-year relationships. These are the new podium finishes, and you must structure not only your race plan, but your training and your mental game to fit that new reality.
A successful SaaS start-up is based on rapid growth measured against MRR: anywhere from 2x to 100x over a 12-month period.
- Awareness: What happens in each MTM Awareness: A prospect hears about “a problem”.
- Education: Once a client realizes there is a problem (or an opportunity in a solution), they become hungry for insights about it. Consultative sales professionals will attest that Education is the critical phase in the sales cycle because the client is still open-minded. Modern sales organizations need to excel at having a two-way conversation during the education phase, in an effort to develop Sales Qualified Leads (SQL). This two-way conversation is commonly called Social Selling.
- Selection: The client goes through the purchasing process and works with a partner to provide whatever further information they require.
- Commit: The customer first makes an emotional decision to go with your product, and then looks for rational information to back their decision up.
- Onboarding: The client integrates/installs/activates the service.
- Use/Expansion: The client is frequently using your service and experiencing the increasing value it offers. It is important to note that there are different expansion models. Model 1: Application Service. This model has the following characteristics: Easy to sell. Not critical to the business, and easy to migrate. Easy DIY integration, with expansion coming from peer-to-peer reference selling. The growth is virtually uncapped and can reach 10 – 100x. Strong focus by the vendor on upsell/cross sell. Model 2: Platform Service. This model has the following characteristics: Complex initial sale. Critical to the customer’s business and hard to migrate. Requires sophisticated integration, involvement of engineers in the sales process. The growth is capped to renewal plus a price increase based on new functionality (Premium packages). Strong focus by the vendor on churn prevention/renewal.
Scaling the SaaS Cost
The great benefit of the SaaS business model is that the MRR stream compounds over time when compared with a one-time sale.
Leaders should track the ratio of CRC to CAC and Annual Recurring Revenue (ARR) in order to determine which segment carries a higher ROI.
There are different ways to calculate Customer Acquisition Cost (CAC). For our purposes, CAC is all Marketing & Sales costs from the previous month divided by the number of deals committed during the month.
Key components of the Customer Acquisition Cost:
- PEOPLE (P): Salaries, commissions, expenses.
- CONTENT (C): White papers, videos, blogs, events, webinars, and much more.
- TOOLS (T): CRM, MAS, and a variety of SaaS sales tools.
Key components of the Customer Retention Cost:
- PEOPLE (P): Salaries of Customer Success Team, the Account Management Team, Professional Services, and Training.
- TOOLS (P): Customer Engagement and Adoption Systems.
- CONTENT (P): Customer Engagement, Adoption Programs, and Customer Marketing.
A common top-line metric used in SaaS in the past was Life Time Value (LTV).
Today LTV has lost most of its measurement value because most platforms are open and the cost of exchange has become a fraction of what it once was.
In B2B SaaS, businesses profits come from earning a recurring revenue stream that consistently exceeds the cost of establishing and maintaining it.
You must calculate the time to profitability – and this is important – separately per each tier of your business, and sometimes even per vertical.
Role of Online In Sales
No matter what an individual buyer does, they will always come back to your website if there is valuable information there for them. And, crucially, no matter what tier of customer is involved, all large SaaS deals begin online with a buyer checking out your offering via your website – way before a sales professional gets involved.
And this channel is one over which you and your sales organization have complete control. You can control the amount of information available, the type of information, and the pacing of its release.
Today’s sales has a different anatomy, requires a different skill set, and is tool-assisted.
Traditional sales teaches that we must establish a critical timeline, RoI, value prop etc. That works for a $ 80,000 deal, but at $ 500/month Jill’s company cannot afford to do this at any scale.
First understand your client’s online journey and then match your process, tools, content and skill set to it.
Evolution of Sales
Sales organizations have changed in recent years. That change has involved a persistent trend towards specialization in sales roles and an increased emphasis on process rather than individuals. Skills, tools, and content have developed in support of that specialization.
The SaaS revolution introduced the next period of change. In the early days of SaaS, there was a maniacal focus on leads which would convert into deals and generate compound revenue growth.
In order to process all these leads, sales teams created specialized functions based on Inbound/Outbound Lead Management. These functions provided Sales Qualified Leads for Sales Managers to close.
Today, the SaaS revolution continues with greater specialization.
- MDR: Inbound Lead Development and Qualification
- SDR: Outbound Lead Generation
- BDR: Partnerships and Strategic Relationships
- AE: SMB Sales/Online Sales
- FAE: Enterprise Sales/Field Sales
- CSM: Onboarding to get to first use
- CSM/AM: Achieve recurring use and earn upsell and cross sell
- INTERNET: The Self – Service Channel
Data Driven Sales
Big Data is here to stay and it is no time for you to relax. You need to make changes to your organization to take data into account.
There are two things that are going to happen to your sales organization. The first is that you are going to have to start measuring flows instead of snapshots. We’ll talk about what that means. The second thing is that you will need to hire specialists to analyze your data.
The monthly CRM update fire drill your salespeople hate is no longer enough. You HAVE to get the data into the system in real time, and there are only two ways to do it. One, start having public floggings of your salespeople if they do not enter every action taken in the CRM system, which is still not going to work. Or, two, use systems that automatically register the data associated with sales activity. We recommend the latter.
We have found it is necessary to measure, at the absolute minimum, the raw number of Suspects, MQLs, SQLs, Commits, Live accounts, and MRR.
SaaS Sales Processes
So what is it that sets apart your rocket science sales organization? Process. Documented process that results in controlled experimentation and deliberate learning which leads to success at scale.
Tools as a Force Multiplier
Here are some considerations that may help you pick the right tools for your team:
- Does it improve the customer interaction?
- Does it increase coverage from 8 hrs a day to 24/365?
- Does it lower response times from hours to minutes?
- Does it improve the quality of the responses?
- Does it provide accurate insights (data) to understand what works and the reasons and metrics behind its working?
- Does it improve work conditions for the staff?
The tools needed by an SDR are in many cases very different from those needed by an AE, a CSM, etc. By mapping these tools into a sales stack (see next page), we can make sure they function together, and avoid overlap and/or gaps.
When creating your map, it is important to distinguish between Platforms and Application Services.
Examples of Platforms are your CRM and MAS. Application services perform a very specific function and can be replaced if necessary. They feed data into your platforms.
Content as the Fuel
Because of the internet, no one cares where good content comes from.
This is happening in the B2B world as well. Customers expect to find great content at their fingertips. And they don’t want a ton of branding and promotion around it. For better or worse, this is the standard to which you are being held.
In this new world, the winner is not the traditional scrappy sales guy who is always closing, only to see the customer churn after the commission check has been cashed. Instead, the new rainmakers are sales professionals who are knowledgeable on their topic and share their valuable insights online to attract those in need.
In a world that is increasingly textual, a simple and sincere video stands out from the crowd. Videos are no longer difficult or expensive to produce.
Great content needs great distribution like ying needs yang. Today, content distribution is supported by billion-dollar distribution platforms like Google and LinkedIn.
Most firms allocate the bulk of their content budget to the awareness stage.
If today’s client is online and the new outbound call is content then it makes sense for your sales professional to be the new content creator. Importantly, they need tools, skill training, and a process for this.
We push our clients to hire and develop content creators. An SDR who provides insights in the form of content.
The SaaS Sales Model
We believe that SaaS selling is a lot like sailing. In sailing, the goal is speed in knots per hour, the input is wind, and everything between is a conversion point, including the sails and the sailors. In SaaS, the goal is MRR in dollars-per-month, the input is leads, and everything in between is a conversion point, including the tools and the salespeople.
The number 78 is [n] compounded over a 12-month cycle. For example, if you start in January and you acquire one new client [n] every month, and you never lose one, then at the end of December you will have gathered 78 months’ worth of revenue.
So, with your annual revenue goal and the number 78, you have determined the new MRR you need to secure each month to hit the annual recurring revenue target. Let’s now figure out how to staff against that target.
Starting with our MRR goal, we can work backwards based on a set of assumptions about conversion rates to figure out what our throughput should look like.
Types of revenue:
- Cross-sell: New decision makers get involved to buy more/new services.
- Upsell: The same decision makers buy more of the same service, for example more seats, or increase the service package at an increased price.
- Renewal: The same people buy the same service at the same or increased price when the contract expires; this can be either monthly, quarterly, or annually.
There are also several kinds of revenue loss scenarios we have to deal with:
Lose a customer: You lose the revenue, the seat count, and the logo.
Lose usage: You keep the same number of customers. This can be a client downgrading its package for all of its seats, resulting in a loss of revenue, yet you are NOT losing them as a customer, nor losing any seats.
Lose the seats: Fewer users inside your customer use your service. Some users may even increase usage. Logo churn is not impacted, revenue churn can even be positive, but your are now depending on fewer seats, thus your upsell/cross sell potential is threatened.
A CRM platform committed to $ 5,000 in MRR for a total ACV of $ 60,000 often has limited revenue upside, from 1-1.2x.
The traditional approach is a siloed model in which each silo carries separate responsibilities and scales to deliver against them. This worked for a model in which the firm’s goal was deal-driven.
That is the way it was done, and the way many SaaS companies still do it.
The new model requires staffing multiple customer-facing roles into a single team, also called a POD. What all PODs have in common is that they have a focus on a specific market with a group goal they are evaluated against. Most importantly, they share the same physical space.
One of the great benefits of the POD structure is the ability to scale to meet revenue demands. While we realize that in some rapid growth situations cost is not a top priority, that does not mean you should not be fiscally responsible, and PODs provide the flexibility to control costs.
Not every POD has to be exactly the same. The POD structure allows you to model against the needs of the market/region/vertical you are targeting.
- An Inbound POD is ideal to target a vertical market, or region, that already has great awareness and generates lots of inbound leads. By using an inbound POD, you lower your CAC as you are not taking on outbound efforts.
- An Outbound POD is structured in an early market that still requires lots of help and therefore has a very high CAC.
- An Enterprise POD is a way to target your Tier 1/SME/Enterprise Accounts. Most often the goal is to use a multi-tiered approach, from CxO down to the User. MDRs do account research, SDRs search out problem owners using provocative sales techniques. The BDR’s primary role is strategic alliances with other strategic providers inside the enterprise segment.
We have found that the most noticeable and sometimes misunderstood quality of Millennials is their expectations for increased responsibility.
The fact is that this generation wants to see immediate progress. And THAT is the key.
A second distinctly Millennial characteristic is the need for a mission, a bigger picture that drives personal fulfillment as much as, or more than, just a salary.
Millennials are often called impatient. Or distracted. The truth is rather more uncomfortable and harder to face: these young people have no patience for YOU. For your lecturing, for how long it takes you to get to the point, for your bullshit.
What this means is you have get very efficient at conveying information and get rid of hierarchy.
We designed a career path that reflects Millennials’ desire for rapid career advancement. The path envisions title changes every 3-6 months through a 24-month period, transitioning MDRs to SDRs to AEs and out beyond sales and into other functions inside the organization, taking with them valuable customer and product knowledge. As a side benefit, this develops a deep bench and allows superstars to be groomed from within – and at a far lower cost.
The key thing to realize is that the speed of change, rather than the magnitude of change, is what motivates today’s young sales professionals.
Many sales leaders make the mistake of assuming that all MDRs and SDRs want to become AEs.
Sales Operations Center
We assign accounts based on functional expertise that relates more closely to the business.
The best teams do not wait for the annual visit of the trainer. They learn on the spot from their peers. Today we coach teams to crowdsource the solutions to problems.