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. Read more »

The essence of the software-as-a-service sales model is volume and speed. It is a reflection of the larger SaaS business model that assumes large economies-of-scale and low subscription-based pricing. The result is that the SaaS sales operation needs to be managed as a tightly integrated service delivery system, like an airline or a luxury hotel, with each functional group working in tandem to deliver a coherent customer experience. It requires a motivated sales team on the front line that is backed by a strong process infrastructure and a service-oriented culture, as contrasted with the lone-wolf road-warrior approach of traditional enterprise software.

This is the first post in a series of 10 Tips for the SaaS Sales Executive tasked with growing revenue and building the sales capabilities at an ambitious software-as-a-service startup. This post will discuss key aspects of sales organization strategy. Future posts will provide additional tips for accelerating revenue growth, improving sales process efficiency, and finally scaling the sales operation profitably in a high growth environment.

SaaS Sales Tip #1 – Instill Customer Service Excellence
Customer focus is not a new idea, but the difference between theory and practice can be striking from one business to another. Achieving customer service excellence begins with values and culture, but in a high-volume business it must also be ingrained in process. The best values in the world will not help if your salesperson fails to satisfy your customer due to faulty systems or information. In fact, over time faulty service processes will erode even the strongest cultural values, because everyone will lose faith as they see the hypocrisy between what you promise and what you can actually deliver. Moreover, if your business is going after the SMB market or some other under-served segment, then service can be a critical differentiator. It is more likely than not that your high-end enterprise software competitor qualifies out and ignores your sweet spot prospects, because it cannot service them profitably. This creates frustration that you can turn to your advantage by outperforming the competition in good old fashioned customer service. However, this advantage will be forfeited if you fail to establish a strong service culture and back it up with the right sales support systems, including your web site, communications infrastructure, sales automation, selling tools, training and interdepartmental cooperation, so that your sales team can deliver the goods.

SaaS Sales Tip #2 – Build the Right Team for the Job and Keep it Motivated
Sales is a tough job in any industry, but it is particularly so in SaaS. The skills required to bring in a $1M quota when the average deal value is $10K are distinctively different from those required when the average deal value is $1M. That’s 100 deals vs. 1 deal, and that can easily translate into 100 times the activity level and 100 times the frustration if sales staff are not supported by the right management, process and culture. SaaS sales reps are a unique breed and must possess a personality with an extremely high level of energy and enthusiasm that thrives on human interaction and constant activity. Read more »

Here is a picture I find myself drawing often. It is closely related my last B2B SaaS post regarding old enterprise habits, but it is actually much more general. Most Web application / Software-as-a-Service companies will find themselves spending up to 50% of revenue on sales and marketing. But, how much should you spend on sales vs. marketing. And, how tightly integrated do these two functions need to be? Of course it is common wisdom that sales and marketing need to work together, but this need is acute for most Software-as-a-Service companies. In enterprise software, where the price point is $100-500K per transaction, the marketing organization is only loosely coupled to revenue through lead generation, messaging /collateral / website, and generating awareness through events and PR. Contrast this with a consumer application, where the tables are turned completely and what sales does exist typically takes the form of partnering and business development—which may be revenue generating, but is not aimed at closing revenue directly, i.e., getting more users.

Most B2B SaaS offerings and B2B2C Web applications (e.g., email marketing, Gadget platforms, online survey research, customer and channel support, etc.) tend to fall right in the middle of this graph. One reason for this is subscription/transaction- based pricing (as opposed to a three year, 1000 user enterprise agreement), as well as the general expectation of a Web or SaaS application to cost significantly less than software. The result is that SaaS companies must continually strive for reduced selling costs, increased marketing efficiency and tighter sales-marketing integration to create a revenue-generating machine—often by leveraging technology to automate as much of the sales cycle as possible from awareness to trial to acquisition and even through to support and add-on selling.

For the last five years or so, the conventional wisdom has held that software as a service holds great promise for enterprise business applications. There has been a spectrum of observers from zealots to skeptics, but no one has been able to deny the successes of salesforce.com and WebEx. In addition, a number of other vendors, such as Taleo, NetSuite, and SuccessFactors appear to be hitting their stride. Nonetheless, most SaaS vendors are still struggling to acquire customers and reach profitability. Why?

Clearly, the requisite larger investment in a vertically integrated hardware/software SaaS infrastructure combined with lower up-front subscription revenue entails an inherently longer ramp up to profitability than traditional enterprise software. But, my belief is that profitability issues run deeper than simple break-even timing, because vendors do not always recognize and rigorously adhere to the fundamental commodity, mass market economics of the space. In plain English, old enterprise habits die hard and it is easy to overspend on customer acquisition and product differentiation by targeting undersized market segments, chasing unprofitable customers, ignoring inefficient sales, marketing and engineering processes, and investing in functionality over quality, reliability, scalability and security.

This post is the first in a series under the heading “B2B SaaS Applications – Flies in the Ointment” that will analyze some of the common day-to-day issues encountered by these vendors, and whenever possible offer potential solutions to their ills. Some of the issues addressed in this series include the following:

• I don’t have enough leads
• My customers want to customize my application
• Getting new customers up and running is too long and hard
• My prospects aren’t Internet savvy
• My sales cycle is too slow and takes too much effort
• My prospects always seems to want that one thing we don’t have
• My prospects don’t have enough time or interest to talk to my sales staff

Also, any suggestions of interest are welcome.