Sales professionals are some of the earliest adopters and most annoying users of social networking. The problem is that most sales reps treat LinkedIn like a prospecting database for cold calling. It’s just too enticing when all your target prospects are out there showing off their company names, titles, areas of expertise, blogs, and opinions. You can use LinkedIn as a prospecting database, but it is probably the weakest and most professionally irritating use of the technology. To succeed at social sales, you must have something to offer beyond your product. You must be someone your customers want to know.

This is the fourth post in a series on social business designed to help B2B sales and marketing professionals make better use of social media by thinking in terms of social networking. This installment provides ten social sales lead–ership tips that will turn social media into a lead generation machine for your business by following the B2B Social Business Bill of Rights.

Social Sales Lead–ership Tip #1 | Activate Your Social Sales Network

B2B businesses still have rather spotty usage of social networking. Most B2B sales reps are on LinkedIn, but far fewer have active Twitter accounts. Depending on the industry, B2B prospects and customers are even less likely to be active social networkers. Social Business Right #1 says you must expand your social sales network, Read more »

One of the most difficult SaaS challenges is choosing and evolving the right SaaS sales model for your business. While the most common SaaS sales model is characterized by a transactional inside sales organization, frequently split into new business focused sales reps and retention focused account managers, this is by no means the only SaaS sales model, and may NOT be the best SaaS sales model for your business. SaaS businesses come in many flavors from consumer-ish freemium services like Box.net and Cloudflare to high-end enterprise solutions like Workday and BazzarVoice. Choosing the right SaaS sales model is often a bet-the-company decision, as second chances are rare in the fast moving world of the Internet. Plus, as your SaaS product offering and customer base grows, you are likely to find yourself supporting several distinct and varied SaaS sales models. How to choose?

Click the image or link to download the complete SaaS Sales Model eBook

A compilation of some of the most popular articles at Chaotic Flow, this new eBook provides a a simple, powerful strategic framework for choosing the right SaaS sales model for your business and gaining wisdom beyond the conventional for matching the right the SaaS sales organization options to your specific operational challenges. Share and enjoy!

B2B sales has been transformed by the application of many B2C Internet marketing techniques, but there are limits to the Internet where I think B2C can learn something from B2B. For example, with so many cool, self -service real estate websites like Zillow, Trulia, and Redfin available online, why is it that the vast majority of people still prefer to use local real estate brokers to buy and sell their homes? Why not just do it yourself?

Buying a home is complicated. All real estate brokers are required to pass professional certifications, and good real estate brokers spend years honing their craft in the course of many transactions in their local markets. The Internet can serve up all the information you want, but it won’t make you an expert. Plus, buying a home is an emotional roller coaster ride. For the first time home buyer, it can be downright scary. You can get all the disclosures, appraisals, comps and inspections you desire online, but the Internet will not hold your hand and tell you everything will turn out OK in the end.

This is the third post in a series that discusses the new breed of B2B buyer that has evolved in adaptation to the Internet and explores new rules of engagement that mirror those behaviors to maximize B2B sales and marketing effectiveness. The first two posts in this series explored customer self-service and B2B marketing. In this third and final post we turn our attention to B2B sales.

The Self-Service Limit in B2B Sales

A customer’s desire for sales engagement increases in direct proportion to purchase complexity. Thus, purchase complexity is a key element in identifying the right B2B sales model for your business. Simple purchases can be consummated with 100% customer self service, whereas more complex purchases require greater sales engagement as depicted in the image below adapted from the post Three SaaS Sales Models.

Price and complexity define a strategic spectrum of B2B sales approaches
that gravitate strongly toward three distinct B2B sales models:
self-service, transactional and strategic.

Purchase complexity comes in two flavors: informational and emotional, both of which are clearly present in our earlier home buying example. Informational complexity arises when the buyer requires education to consummate the purchase. Emotional complexity arises when the purchase entails a personal risk to the buyer. When either or both of these purchase barriers becomes high enough, the buyer simply will not make the purchase without the aid of a salesperson. In response, successful B2B sales reps adopt sales behaviors that complement the buyer’s purchase behavior, offering expertise and trust in direct proportion to the respective amounts of uncertainty and fear felt by the buyer.

When a purchase requires extensive knowledge and risk,
the B2B buyer will look to the B2B sales rep to reduce the complexity.
Successful B2B sales reps adopt behaviors that complement the buyer’s behavior,
offering expertise and trust in direct proportion to the uncertainty and fear
arising from the the respective informational and emotional needs of the buyer.

The B2B Sales Arms Race – The New Informed B2B Buyer

The new breed of B2B buyer is online and impatient. When she engages with a B2B sales rep, she’s done her research, but is stuck and doesn’t want to waste the time figuring out how to get unstuck. She doesn’t get something about your website, your product, your pricing or your company, so she sends an email or makes a call to sales. She is well informed, but the purchase complexity has worn out her patience. The worst thing a B2B sales rep can do at this point is wear her patience even thinner.

The new B2B buyer and B2B sales rep are engaged in an information arms race. Read more »

Since my post entitled SaaS Sales Compensation Made Easy, I’ve received a number of inquires about how to adjust SaaS sales commission percentages for very short and very long term subscription contracts, e.g., renewal periods of 1 month vs. 2 years. Clearly a 2 year contract paid in advance is worth more than a monthly renewal and should pay a higher commission. But, how much more?

In the model, I propose as best practice that SaaS sales commissions should be paid 100% up-front in proportion to the lifetime value of the sale (LTV). But to keep things simple, recurring revenue (ARR, QRR, or MRR) is substituted as the everyday measure of LTV, because LTV is always directly proportionate to recurring revenue. Basically, pay on recurring revenue in SaaS just like you would pay on price for any other product. It’s that simple….provided: 1) contract terms don’t vary widely and 2) the churn rate is uniform across customers (no churn cohorts).

However, adjusting your SaaS sales commission plan for these two factors isn’t complicated. You can do the LTV math in the background to produce a simple table of adjustments to the baseline SaaS sales commission for each contract term and/or churn cohort. Then, include this simple table of adjustments in your SaaS sales commission plan. The spreadsheet below does exactly this. (you can “Click to Edit” and play with the numbers or download to Excel. Go ZOHO!).

This enhanced SaaS sales commission model incorporates the effect of payment terms
and churn on lifetime value. The top table adjusts for contract term only,
whereas the bottom table allows for churn cohorts as well.

From the previous SaaS sales commission model post, we know that the lifetime value of a SaaS sale comprised of recurring subscription payments made in advance is given by the following formula:

i = cost of capital; a = churn rate

It is evident from this formula that if either contract term (i) or churn (a) vary across a wide range, then the calculation of the SaaS sales commission based on LTV should be adjusted accordingly (see LTV notes in the spreadsheet for the impact of contract term on i ). Put simply, if your contract terms (renewal periods) vary from monthly to every 2 years, you should Read more »

I just have to say it. SaaS sales compensation is not nearly as complex and mysterious as it has been made out to be. I’ve read so many discussions on SaaS sales compensation that claim you should do this in one case and that in another case, such that by the time you finish you can’t see the forest for the trees. Since I’m in the middle of this series on SaaS metrics, it seems high time I got around to addressing this topic (which I’ve been avoiding simply because I did not want to plant yet another tree).
So, here is the scoop….

Wait! Relax. Although at first glance, lifetime value may appear to be an overly complex metric to use for sales compensation, it is always proportionate to recurring revenue. So, you simply have to replace “price” with MRR or QRR or ARR in your favorite sales compensation model and you are fine. That’s it! Now you can apply any of the various sales compensation models that you already know and love. Your particular choice should match the specific goals, products, pricing and culture of your specific business, as with any other sales compensation design challenge.

The primary principle of sales compensation is to pay the sales rep in proportion to the value of the deal, usually measured by the price of the product. The value of the deal in turn Read more »

The growth challenge of most SaaS vendors can be boiled down to the following simple formula:

revenue growth = price x volume = average MRR x new sales velocity

Delivering on the promise of low total cost of ownership, the price of SaaS is often an order of magnitude lower than the price of licensed enterprise software. This low price point creates enormous pressure on volume. Reaching profitability may require a new customer every week, every day or even every minute! Increasing sales velocity is the essence of the SaaS business challenge.

At each stage of the buying process, your SaaS prospect will encounter adoption costs and risks that reduce your sales velocity. I like to compare this to scaling a cliff where adoption costs are measured by the height of the cliff and adoption risks are measured by the difficulty of the climb.

How high are the adoption costs and risks that your SaaS prospects must surmount?

…Here are seven proven strategies for increasing SaaS sales velocity by reducing the adoption costs and risks more >>>

The preceding is an excerpt from a guest blog post by Chaotic Flow at Sandhill.com
Just click through for the complete post. Cheers! JY

If you read my SaaS Sales Management Tips series, then you may have noticed a glaring absence of detail with respect to specific SaaS sales organization strategies. The reason for this conscious omission is that there is no one right strategy. There are only the strategies that are right for your specific SaaS business at a specific point in time with your specific situation, i.e., customers, products, growth, maturity, etc. However, these strategic decisions can make or break the growth and profitability of the business, because more than any others they determine the balance between maximizing revenue and minimizing acquisition cost. They are some of the toughest choices a SaaS Sales VP or CEO has to make.

The SaaS Adoption Dilemma
The third post in the SaaS Sales Tips series discusses strategies for accelerating organic growth (SaaS Success Do #3) by making it possible for your customers to buy from you even if you don’t show up for work. But, what do you do when you need revenue today and your under-educated customers and your overly-complex SaaS product just can’t seem get it together on this approach? You’ve just encountered the SaaS Adoption Dilemma, a situation that arises when your adoption costs are way too high and you must choose a strategy for lowering them. Your very unpleasant short term choices are a) forego revenue until your online marketing and support reach maturity or b) cover up the problem with people and wreck your acquisition costs (SaaS Don’t #4). If you’re measured on revenue as opposed to margin and you earned your sales stripes in enterprise software, then you will probably choose option b) without a second thought. But, you may have just made your quarterly commission while sinking your company, your stock options and your job when the business runs out of cash.

The organizational strategies of option b) typically come in two flavors: pre-sale lead reps to find, educate and qualify prospects and pre/post-sale technical services reps to ensure successful on-boarding and ongoing use of the product. While the vision should be for these activities to be 100% automated, the reality is that they rarely are in the early days and that there is a limit at maturity to the achievable degree of automation set by the inherent complexity of your product and self-serviceability of your customer. These constraints imply a steady state organization at maturity–for example a ratio of 3 sales reps to one lead rep and one technical services rep–that you are sure to overstaff in the early stages before you have fully automated adoption through online marketing and support. The danger is that you lock into this bloated, early stage organization model and create excuses for not simplifying adoption through automation, thus killing your long term profitability. A great way to stay on top of this threat is to include all ancillary staff in your calculation of sales productivity: revenue per rep, where rep includes everyone required to acquire and keep a customer, not just the sale rep.

SaaS Sales Organization Options Arranged by the Strategic Dimensions They Address

Hunting, Farming, and Other Pastimes
Conventional wisdom holds that SaaS sales organizations should be split into separate sales and account management groups that are responsible for new business and recurring business, hunters and farmers respectfully. While this is a good rule of thumb, it is not always the case. Read more »

Revenue is the fuel that powers the engine of any business. It enables movement, acceleration and maneuverability. Without revenue, there is no profit and eventually you run out of gas. While venture funding may provide a startup with a temporary reprieve from this harsh reality, confusing revenue with cash will only result in failure and loss of what might be your lifelong dream. You can borrow cash, but you cannot borrow revenue.

So, it would seem like building a sales operation that generates sufficient revenue to cover costs and scale profitably would be axiomatic and there would be no need to include it in a list of tips for SaaS sales executives. Unfortunately, the characteristics of the software-as-a-service rental model–vertical integration requiring more up-front capital investment combined with low pay-as-you-go subscriptions–have conspired to obscure this unavoidable economic fact. The challenge of the SaaS sales executive is more subtle than that of the traditional enterprise counterpart. While large up-front enterprise license deals support an expenses-be-damned all out attack on revenue, the SaaS model requires a more measured approach that maintains a lock on acquisition expenses, high capital efficiency and a relentless drive toward profitability.

SaaS Sales Tip #10 – Match Supply to Demand
Selling enterprise software in 1995 was like expanding into a vacuum. Innovation was everywhere, business productivity leaps were huge, and new product categories were emerging everyday. If you sold well and could demonstrate immediate ROI, then you could close the deal. In many sectors, the sales rep could show up cold and single-handedly unleash latent demand. This is rarely the case today with SaaS. Most SaaS businesses are built on the premise of expanding to underserved market segments, e.g., SMBs out to the long tail, or replacing traditional enterprise systems for lower TCO. Either way, the sales hurdles are higher and they create scenarios where acquisition costs can overwhelm revenue potential. The secret to SaaS sales success is not selling harder, it is selling smarter.

Selling smarter entails distinguishing between where you can profitably create demand versus where you can only profitably service it. Then, matching that demand with the nominal sales investment required to close. For example, if you go to a trade show where there are too few prospects too early in the purchase process, then you may be pushing on a string. However, if your website brings in highly qualified prospects, then your sales investment should be well worth the return. Similarly, cold calling to a purchased list may return nothing, but calling to a targeted group of current customers or registered prospects with a specific offer might just work. Every SaaS business has a unique and complex mix of target prospects that vary by revenue potential, pain level, product understanding, reachability, etc. Knowing where to push and where to pull is not easy, but it is essential.

SaaS Sales Tip #11 – Consistently Increase Contribution
Assuming that you have mastered the art of knowing where to push and where to pull in your market, you still have the challenge of applying the exact amount of force required to close each individual deal. Read more »

This is the third post in a series of tips for SaaS sales executives. The first two posts focused on designing an effective SaaS sales organization and sales process efficiency, respectively. This post is concerned with accelerating revenue growth. The final post will discuss scaling the sales operation profitably in a high growth environment. Enjoy!

In its simplest mathematical form, revenue is equal to quantity of units sold times unit price.

revenue = volume x price

Strangely enough, this basic formula captures the essence of the SaaS sales challenge. Accelerating revenue growth amounts to increasing volume and increasing price. For most software-as-a-service businesses, volume equals the number of paying customers that are using the product and price equals the lifetime value of each customer’s subscription.

SaaS Sales Tip #7 – Lever-up through Marketing
In SaaS, particularly in a SaaS startup, it is very difficult and expensive to drive revenue by sales reps working alone. Outbound calling and offline meetings explode acquisition costs by applying too much sales investment where there is too little prospect commitment (see SaaS Sales Tip #6). The price point and complexity of the typical SaaS deal imply an extremely tight integration between sales and marketing. As a SaaS sales executive, you should never go it alone.

Marketing activities provide leverage to your sales investment, because they move customers through the purchase process many at a time, whereas sales moves them though one at a time. You should work closely with the marketing organziation to provide the feedback and direction necessary to create programs and content that bring in high quality leads, automatically nurture less committed prospects and accelerate active opportunities through to close.

SaaS Sales Tip #8 – Simplify, Standardize and Automate
In the Top Ten Dos and Don’ts of SaaS Success, I claim that you should accelerate organic growth by encouraging and enabling your customers to buy from you even if no one shows up for work. In this context, organic growth is defined as revenue aquired with zero marginal cost, now that is leverage! When you have achieved this level of marketing proficiency, then the SaaS sales executive can take a step back and apply precious sales resources to only the highest value activities for highly qualified prospects–those places where your prospects and your pipeline benefit the most from a personal touch to move a deal along or increase its value.
Read more »