- Dana Oshiro
Sauce Labs, Twilio, Heroku, New Relic and RackSpace — Geva Perry has advised each of these companies in developing their business models and go-to-market strategies. Part of his magic as an advisor is his understanding of an optimized sales model. The Thinking Out Cloud blogger and veteran advisor has helped shape some of today’s leading SaaS companies and Heavybit members had a chance to hear some of his insights.
FOCUS ON DEVELOPER ADOPTION: DEATH OF SALES?
In a presentation at the Heavybit clubhouse, Perry went through the history of enterprise sales explaining that 15 years ago, the sales cycle required a 9-12 month lead and was incredibly high-touch. In fact, companies rarely listed product prices on their sites and the only way to access the product, was via a phone call or in-person meeting.
Nevertheless, in the early 2000’s companies like WebLogic began offering software for download and the emergence of open source allowed developers to try a product before dealing with budgetary constraints. By the late 2000’s, marketing automation, freemium and pay-as-you-go products made it even easier to ease buyers into a sale. And finally, by 2010, developer adoption became even more frictionless as on demand Infrastructure-as-a-Service and Platform-as-a-Service emerged as affordable options. All of this contributed to a bottom-up model that simply wasn’t possible in the context of the 90’s and traditional enterprise sales.
This low-touch style of sales proved incredibly efficient and inexpensive. It got to a point in 2011 where a number of companies went so far as to proclaim the “death of the salesman”.
But since then, companies have changed their tune. While a frictionless sales model is certainly still a component of most SaaS company strategies, it can’t be the sole strategy. Perry estimates that 70 of New Relic’s 270 employees sit on the sales side of the organization. It’s a number he believes has helped contribute to the company’s tremendous revenue growth in the past few years.
RETURN TO SALES
Here’s where Perry reveals his model for growth. He believes there are two phases of a company:
- Customer Development and Low-Touch Sales: This is that period for two years after a core product’s general availability (GA). It includes a time where companies build their inbound marketing, marketing automation and metrics. Customers become part of an automated onboarding process and in general, few or no human interactions need to occur in order for a customer to make a purchase.
- Triaged Sales: After about two years, there’s a period of transition. Some indicators of when this transition should take place include when the company has $50-100K in monthly recurring revenue (MRR) and when customers begin calling to negotiate larger deals. This is where the company builds an inside and field sales team, coupled with all of the sales processes. The act of triaging is very important here. It’s where the company categorizes its customers often as zero-touch (completely online buyers), low-touch (buys in 2 or fewer phone calls) or high-touch customers.
HOW TO PREPARE FOR TRANSITION
The reason Perry cautions companies to avoid hiring a sales team too early is because few early companies have their value proposition ready to be plugged into a sales process.
Says Perry, “Salespeople take you towards the biggest deal. They hunt for elephants… This isn’t necessarily always the place you want the company to go.”
He explains that when a large deal is placed in front of an early team, there may be the temptation to chase the money, but that there are always tradeoffs. Most large deals require customization and a product team is then pulled away from building a frictionless on-boarding experience in favor of building for the client. In this way, there’s opportunity cost when a salesperson is left to influence the product and positioning.
Perry suggests that companies have the following building blocks in place before bringing in an inside and outside sales team:
- Positioning: Companies shouldn’t just define their audience as “developers”, they should know what types of companies they are selling to, their use cases, their motivation to buy, and the customer company’s budget owner. Positioning is also about defining the product and how it’s serving a need. This value proposition is something sales people will return to over and over again.
- Pricing / Usage Metrics: Companies should have the patterns and metrics to produce a decent pricing strategy and ensure revenue growth. Considering tiered pricing and the cost benefit analysis associated with a new sales team is critical.
- Triaging: Companies should already have some indication of what their high and low touch customers look like and which ones should be served by an incoming sales team.
Says Perry on the product of transitioning to a high-touch sales environment, “Above all else, your customers will tell you when they’re ready.” He explains that even when there’s no sales team, high-touch customers will often call to inquire about multi-seat negotiations, group discounts and purchase orders. When the volume of these inquiries gets too high, a sales team can help triage and extend these relationships.
For a complete look at his talk visit the Heavybit library.