Scaling up – What does it mean?
To begin with, what does a question- “When you want to Scale up your sales” really mean? Scaling up sales means to achieve Predictable Revenue with targeted ARR/MRR numbers. Sales and Marketing work efficiently to generate sustained demand and Customer Success is able to manage such demand consistently within the expected churn rate. Customer Acquisition Cost (CAC) gets reduced with sales scale up as teams will save money on marketing and sales operations.
As per Tomasz Tunguz, there are no absolute signals, neither qualitative nor quantitative which implies that you need to scale up. Still, one of the signals is when your pipeline to quota exceed 6x. Secondly, you start observing a shorter sales cycle.
What type of Sales professionals to hire for Scaling up
The topmost area of concern for founders is whether to hire a sales professional from Multinational Companies (MNCs). The crucial point in favor of this move was that an MNC guy would know how to work in bigger teams and drive higher revenues. But, the cons weighed higher- sales professionals from MNCs are more of closers who essentially take up matured deals and might not sell from the first stage in the sales cycle themselves. They are reluctant to do the groundwork in startups and hence essentially fail in their job. Based on my personal experience, when we hired a person with experience in MNC, he failed to do the job in a startup environment. The other question is whether one should hire a senior salesperson to handle sales in SaaS company during the scaling stage. The evangelist sales professionals are recommended for an ideal entry-level sales team. The support guys who have learned to support customers and know extensively about the product, can prove to be sales evangelists if given proper sales training.
Delineate Sales Roles when Scaling up
As your sales grow you would want Sales Specialists rather than Generalists. Having Sales Generalists would be a good option in the initial stage of a startup when you want a Sales Guy to handle Data Research, Prospecting, Lead Generation, Appointment Booking, and Closure. However, once you start to scale up you would need Specialists. Say, for instance, you have started getting an essential volume of Inbound Leads and decided to have a dedicated inbound sales development team to handle it efficiently rather than a single team to handle both, inbound as well as outbound leads. This pays off well as dedicated people do their jobs aptly and bring efficiency. Some of the parameters to consider while delineating roles are- SDR to generate leads and/or close deals? Same or different SDRs to handle inbound and outbound leads? SDRs/AEs to handle leads based on customer segments/deal size?
Single team playing both the roles -lead generation and closure tends to lose efficiency in having to take care of the whole sales process.
One of the biggest challenges various teams, essentially large tech companies having big-size sales teams, face is Handoff. The reason for among companies to not have a separate team is handoff which is essentially due to loose or no tech integration.
Which Sales Channels to tap?
B2B SaaS products seem to generate less interest from Channel Partners in case you are selling to SMBs as ticket size is low. However, if you are targeting enterprises with high ticket size, there is still an opportunity to present a solid business case to channel partners to collaborate. An intriguing question then would be at what price you would sell your product to resellers. For White-labeled products, the transfer price point can be fixed and an additional margin which a reseller makes goes to him directly. For company labeled products, the margin commission may vary between 10%-50% (tapered off in 2 years).
Another critical point to consider for Channel Partners is that if your product is readymade SaaS or customizable/service-oriented SaaS they would still consider an opportunity to generate revenue from services (like consulting, customization, implementation, maintenance) if not from direct sales.
Co-Marketing for Sales Scale-up
SaaS companies who are trying to partner with other tech providers need to completely understand the interest of all the stakeholders. You may partner with a big party in case adding a logo on your website is your good enough goal (if that maybe). However, you should make your expectation clear to yourself before you start to invest your time and money in the effort. Say, co-marketing can be with Amazon Web Services across the vertical you want to tap, in any given geography.
You should identify other supporting tools and services that your customers ask for when evaluating your product. If you neither have those peripheral features lined up on your product road map nor you offer the services which customers expect from you along with your product, you should think about creating a co-marketing cloud with those tech/ service providers (through integrations or otherwise) such that you garner each other’s market space making it a win-win for all.
Sales Ops – An underutilized sales function
Sales Ops is the smart side of Sales. Sales Ops guy might be typically from analytics, commerce, management, or strategy background who love to play with numbers. They define Sales KPIs, set Sales Quotas, help establish and manage sales CRMs, enable sales with training/tools, set compensation/bonus, and track sales health. This is the most underutilized function and needs to be built if you are looking for scaling. One Sales Ops person per 10 Sales Guys is preferred but it may depend on business to business.
Sales Compensation as what factor of Quota
Few SaaS Founders fix monthly Sales Quota based on the monthly salary of the Sales professionals. Annual Quota is fixed generally 10 times the annual compensation including fixed+variable component. At least a 50% quota needs to be hit for sustaining the job. While you need to assess the performance needs to be measured for a fixed period (monthly/quarterly), a sales guy should be given the flexibility to carry forward the previous month/quarter’s unmet quota. This would give the sales guy a fair chance to prove himself.
Compensation may create or break SaaS company. Indian SaaS usually underplay the power of compensation by keeping it essentially a linear function. Making Sales a nonlinear function of quota achieved by sales reps can be a powerful strategy to boost sales. This gives them the opportunity to outperform sales. You may refer to this blog by David Skok on designing the right compensation plan.
The compensation allocation should be made highly transparent with no discretion on the calculation and disbursement of the quota. This would help you build a high performing Sales team to grow your SaaS revenue multifold from 1m USD to 10m USD.
Are you struggling with growth challenges as a SaaS start-up? Would love to hear from you.