This is the second post in a series of tips for SaaS sales executives. The first post addressed the challenge of designing an effective SaaS sales organization. This post is concerned with creating and managing an effective, efficient sales process. The last two posts will provide tips for accelerating revenue growth and scaling the sales operation profitably in a high growth environment.
In the first post in this series, I claimed that the essence of the SaaS sales operation is volume and speed, and that depending on average deal size each sales rep may need to close on the order of 100 opportunities to make quota. As such, a close ratio of 10% vs. 70% means the difference between having to manage 1000 opportunities vs. 150. The efficiency with which the sales process is orchestrated impacts the business from top to bottom. Strategically, it determines the sales expense contribution to acquisition cost, while its practical impact is personally felt on a daily basis by the sales team with a direct correlation to rep motivation, burnout and turnover. These tips address the challenge of getting the SaaS sales process under control, so that you can set proper expectations for your management and your team, increase sales performance through continuous improvement, and lay the foundation for accelerated, profitable growth.
SaaS Sales Tip #4 – Set Clear, Objective Sales Goals
Setting clear goals is good practice for any sales organization, but software-as-a-service sales managers don’t have it quite as easy as their software counterparts, because of the subscription model. The value of a deal is more difficult to measure. It depends on time, renewal rates, and future events beyond the initial salesperson’s control making it difficult to define exactly the dollar value of the salesperson’s contribution. However, this murkiness makes it all the more important to clarify sales goals and remove uncertainty around compensation by having objective, clear measures of goal achievement. Having a simple, objective formula that defines the value of a deal based on recurring revenue is the easiest approach. But, you should also have a solid model of lifetime customer value and the contribution of sales to total acquisition costs, so that you can design goals and commission plans that will scale profitably.
SaaS Sales Tip #5 – Measure, Measure, Measure
The old maxim that you can’t manage what you can’t measure is especially true in software-as-a-service sales. Once you achieve traction in your market your sales pipeline and database will quickly swell to an unmanageable number of opportunities and prospects with a wide range of revenue potential, qualification, and complexity. While each deal requires individual handling, you must divide and conquer to allocate your organization’s time and money to the highest value opportunities with the greatest likelihood of closing. This requires a macro view of the sales process, objective qualification criteria for every sales cycle stage, and fact-based heuristic models of pipeline movement and bookings forecasting. But before you can reach this level of sophisticated modeling and decision making, you have to put the appropriate measures and reporting in place.
SaaS Sales Tip #6 – Qualify Ruthlessly, Convert Proficiently
With a solid sales process model and objective measures in place, your focus can shift to increasing sales effectiveness through continuous improvement, Kaizen. Each stage in the purchase process from click to close offers opportunity for improvement. All else being equal, an increase in the conversion rate at any stage goes straight to top line revenue. Improving conversion ratios requires both ad hoc sales rep feedback and numerical measures at each sales cycle stage about the prospect’s level of commitment, the qualification of the opportunity, and the sales activities that you apply to the deal. Sound complicated? It isn’t. These are the same idea viewed through three different lenses: the prospects’s, the sales process, and the sales rep’s.
prospect commitment = opportunity qualification = sales investment
When you have balanced this equation, you have efficiently allocated your sales team and maximized your sales investment at a deal-by-deal level. Spending too much time on deals that won’t close or missing out on deals that should close can ruin your acquisition cost, team morale, and overall business profitability. In a high volume sales operation, there is no time to waste on window shoppers, unique complex custom requirements, or losing competitive scenarios. For each investment of a salesperson’s time that is made to help a prospect take the next step toward purchase, the sales rep should look for signs of equal commitment from the prospect. Developing objective criteria to qualify customers that fit your business, qualify out customers that don’t, and providing sales tools and training to move qualified prospects rapidly through to purchase is the name of the game.