All SaaS companies are seeking to grow MRR. Is this different from other types of selling? Can one apply Lean thinking in SaaS revenue growth?
Growing SaaS revenue with flow optimisation
SaaS companies focus on selling their Software-as-a-Service offerings. Finding potential customers, getting in touch with and getting them to sign-up for demos, trials and subscriptions should be a repeatable and standardised process that is executed focusing on flow optimisation (deal flow and MRR growth in this case).
And this is exactly what Lean Sales is all about.
One can and should use Lean Sales method to “Lean” your sales process.
Developing Lean sales funnel
Let’s assume you are working with quite typical sales funnel with some opportunities and your are trying to win all of them.
Typical B2B sales funnel. Some opportunities and sales people are working hard to win all of them.
Let’s say you wish to make a change for the better. You could look at identifying the cost savings opportunities, the waste, your sales process is currently creating.
Identifying waste and cost savings opportunities in your sales process.
Every B2B sales organisation is struggling with this. Which sales opportunities and customers are worth chasing and which are not. Making No Go decisions is difficult. You should look at the won opportunities and identify characteristics that define the best opportunities from the ones that are going to be lost anyway. Read more about opportunity qualification in an older blog post.
Your Sales Funnel should look like this assuming you have been able to eliminate waste and focus your efforts on the opportunities you are going to win. The shape of the funnel is critical. You should have lots of early leads and early opportunities to choose from. You should be in a position to make No Go decisions and focus only on the best opportunities.
Lean Funnel
Where to start?
Let’s assume you have identified a market and a need many companies share. Great! Let’s also assume you have a SaaS offering that meets that need to some extent. In the beginning it doesn’t have to be perfect and complete but it needs to be specific.
Creating value proposition and sales messaging
Before you should start to get in touch with potential customers in high volumes, you should be quite clear on what you are selling and delivering. Let’s assume you have a website with decent explanation of what types of problems your offerings solves and to whom it is intended for.
Messaging is difficult item to get right. It requires iteration and testing. You have your website, slide ware for meetings and condensed slogans and tag lines for ads and outreach messages (email, LinkedIn, Facebook, etc). You’ll need to test different versions to figure out which resonates with your target customers the best. Iteration is a process you’ll probably need to run on continuous basis.
Finding your target customers
Selecting companies should happen based on their size, industry, needs, geographical local and so on. Some of these characteristics are easy to find, some require talking with people at these companies.
Finding the right decision makers. What kind of titles your customers and especially the decision makers have. When selling B2B offerings you’ll probably need to talk and meet at least with three people at each company. Most likely at each company at least 5 people participate the decision making process. This means there are always people you have not met who influence the purchase decision. Who are these people?
Finding their contact details. There Tools such as LinkedIn, Rocket Reach, Apollo.io and Seamless.AIare of tremendous help when doing the research. Consider hiring a freelancer via Upwork or other similar platform to help with contact detail sourcing.
Ads and marketing campaigns. LinkedIn, Twitter, Google AdWords, Facebook and many others provide lots of advertising options. If you have sourced email addresses you could use those for creating target audiences. Test different approaches in 1 to 2 week cycles and figure out which platform, which ad copy and value proposition and what kind of target audience creation works best for you.
Regarding ad budget.Testing with couple of hundred Euros makes sense to see which ad copy creates conversions. More importantly, how valuable would be one interested customer to you? 100 €, 300 € or even more? Use this metric when deciding on your ad budget.
Getting in touch with your target customers
Now you have a list of target customers, their contact details and a message / value proposition you wish to deliver. Great!
Getting in touch with people is a challenge by itself. Lots of messages, emails, ads, competition and you need to cut through the noise effectively.
Email is still one of the best ways (best in terms of return on investment) to get in touch with people. Cost per lead / opportunity is low but you must have very clear and well thought out message or sequence of messages. If you are selling transformational offering, a product that requires customers to change their processes or mental model around part of their work chances are you’ll need to talk with people as part of the outreach.
Cadences are the tool for this. Cadence means a sequence of messages and touch points to start meaningful business development conversation. The purpose of cadence is to get in touch with a potential customer and to start a business related conversation with the person. The most simple cadence is pure email with personalisation and automation. As a cadence is focusing on one person, it makes sense to have the cadence running for two to three weeks. This should be long enough make sure the person understands and notices your attempts and also takes into account holidays, travels etc situations which make it more difficult for them to respond. Two or three weeks should also be the maximum length of the cadence before you start to come across too assertive. Give it two to three weeks and then pause for at least two to three months. Email cadence is easy to personalise and automate with tools like Growbots or Prospect.io.
Here is a sample of email cadence:
A sample email cadence
More effective (and resource intensive) cadences include emails, phone calls and social touches. The degree of automation goes down but on the other hand having multichannel approach is more effective. There are no tools that would fully automate this approach but tools like Prospect.io do pretty good job in this space.
Here is a sample of multichannel cadence:
A sample multichannel cadence.
Iterate and test. The best cadence is difficult to find and there are no right answers. Test and iterate based on your offering, your customer segments and with what your sales people feel comfortable with.
Repeatable sales process
Document your sales process. Map our the process both for you as well as for your customer. Try to understand what information the customer needs to move from one step to another. Find out what decisions they need to make to move from one step to the next. Who should participate those decisions.
Update your documentation. Continuously update your sales process as you learn more. There are most likely more activities and stuff to be done than you might think. Map out everything your customer has to do to commit to a purchase decision. Maybe they need to invite other people from other departments. Maybe they need to convince purchase or financial departments. Maybe they need to run a public tender process.
Standard workflow is key to predictable and sustainable revenue growth. You should work hard to define a standard sales process, standard workflow, that works with most customers. It is easier to make exceptions to the rule if you actually have a rule. Continuous improvement requires a standard workflow. Standard workflow is critical to scaling up your sales team. And as soon as you are ready to hire sales people a standard will make on-boarding and training easier and faster.
Matching opportunity flow with your sales capacity
How many sales opportunities should you have in the pipeline?
That’s a very good question. To get to an answer you should consider couple of things:
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Average sales cycle length (in days or months)
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Average effort per sales opportunity (in hours)
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Your current sales capacity
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Match realities with your targets (in your dreams, business plan or pitch deck to investors)
Average sales cycle length should be measure is calendar time, days, weeks or months. Look at your current deals and be realistic with your estimates. Look at only won deals first and find out what is the average. You should also look at the lost deals (your stuck deals are most likely lost too) and figure out how early in the sales process you started to see signals the deal might not go through.
Average effort per sales opportunity should be measured in hours. As you look at your current customers you should be through couple of them and look back to find out how much time did your spend to win them. Based on these two items you have a rough estimate of the size of your sales challenge.
Look at your current sales capacity. How many opportunities are you able to drive to closure during the next 12 months or within your current runway with the people you have in the organisation? How many hours per month you are able to allocate on selling right now?
Matching this with your business plan might be a bit painful exercise. Maybe the sales cycle is longer than you expected? Maybe the effort per sales opportunity is higher than you hoped for? Maybe it feels difficult to tell during the sales process which opportunities are likely to close and which are likely going to be lost. It’s better you find out this before someone else does!
Hiring sales people
You are a start-up and looking to grow quickly. You also probably think that hiring sales people will help you get there faster. You should refrain from hiring pure sales people (account managers, solution sales managers, sales managers or sales reps) before you have a repeatable and predictable (documented) sales process in place. The first deals must be closed by the founders. You also need to know the sales cycle length and sales effort per opportunity before hiring more people. Based on our experience the founder team should be selling until you get to this point.
Hiring sales director
One quite common question we get is when should we hire Sales Director.
The short answer is as soon as there is something to be managed. The typical answer is as soon as you have 3 to 5 sales people and they have a pipeline of opportunities to be managed.
Your first Sales Director should be an experienced person that is capable of working based on data, numbers and has experience in managing sales teams at a start-up. This is very different from managing sales teams at large companies. Start-ups are still in the process of figuring out how their offering works, how their sales process should be organised and you’ll need to quickly test different approaches and look at data to see which improvements actually deliver best results.
Our recommendation is to wait with Sales Director hiring until you can afford a solid performer into this role. Also, one of your first sales reps could grow into team leader role and give you more time until you’ll need an experienced and skilled Sales Director.
Hiring sales partners or third party sales
Could we find a partner, a third party, to sell on our behalf? Yes, but there is a big but to this. As intriguing as this is, you should tread carefully.
Scaling up sales results is difficult by adding more people in to your sales team. You can easily increase the cost but increasing results in proportion to headcount increase is difficult. Hiring Sales Director is even more difficult. Hiring a third party company to sell on your behalf add even more to the complexity.
You need to find a partner that has strategic fit, your offering somehow fits what they are doing. Not only financially but also strategically. Third party sales typically require a retainer which adds to your costs. And they typically have other offerings to sell and to promote along with yours which means they will not sell your offering as much as one could hope. Training them to sell your offering to your customer based also requires time and effort. So all in all it takes a lot of time for find potential partners, identify ones with a proper fit, identify people with integrity and track record of similar set-up, create an arrangement that is financially beneficial to both parties and to train them to sell. If you sum up all these hours and compare it with your average sales cycle length and effort per sales opportunity, it might still make sense to put your time and effort on direct sales.
Summary
Lean thinking is perfectly applicable to driving SaaS revenue growth. This through the process from customers perspective, make sure you have identified key metrics across the process and allocate resources and automation across the workflow.
Focus on making the process flow instead of focusing on making people busy!