Program description

Unlike traditional software business models which are based on one-time license sales and lump-sum cash payments, the SaaS model is predicated upon building annuity-type revenue and cash streams. Over the long-term this business model is highly attractive, but especially for early-stage companies ramping SaaS revenues poses a unique set of challenges. MassTLC has gathered a panel of accomplished SaaS operating executives to share their insights on getting the initial revenue ‘flywheel’ turning and building sustainable SaaS enterprises.

The panel

Skip Bestoff, General Partner, at Castile Ventures did a great job of moderating the discussion–asking all the questions we hoped he’d ask.  Fred Mather, Global Head, M&A and AI Sales at IntraLinks and Richard Turcott, CMO at RatePoint drew on a wealth of experience to share best practices, lessons learned, and advice about how to get the revenue flywheel going.

Determining market positioning and value propositions

Skip asked, “How do you find the sweet spot for your business?”

Advice:

• Understand your market and follow through–too often people find their target market and then later ignore what they’ve learned.
• Meet with prospects to gather market insights.  Nothing beats seeing someone’s reactions as they talk about what’s important to them.
• Ensure that the opportunity you’re pursuing addresses a significant problem
• Tie your value proposition to cost and/or time savings.
• To ramp quickly, aim for those who already recognize they need a solution to the problem you’re addressing

Tips:

• Accelerate your learning by using pay-per-click ads to test various terms you’re considering using to market your solution
• Then, apply what you learn to other channels

Skip asked:  What’s the impact of the subscription model on the value proposition?

• SaaS enables you to target the economic buyer, since you don’t need to put anything in “on premise”
• The sale is more transactional.   When the entry point is just $/month, perceived time savings and ease of use often trump classical  ROI
• Customer centricity is more important than ever.  You need to deliver a great customer experience if you lead with a trial.

IT’s involvement in the sale

Comments:

• The IT budget is shrinking, so you need to attack the operating budget if you want to make a lot of money
• IT is still involved for enterprise sales, that require custom development such as integration with other applications the customer is using
• You need to tell IT what’s in it for them
• Although it’s all over the place, most IT departments today are economic buyers
• If IT approval is needed, there is one more step in the sales cycle, and the company tends to grow less quickly.

How much should you pay to acquire a customer?

Advice:

• Start by determining the lifetime value of a customer (LTV).  The calculation is (1/attrition rate)*Average sales price
• In the beginning, you may need to pay more than the LTV because you haven’t proven your value or developed a brand.
• In the long term, you need to pay less than LTV to achieve profitability

Best practices for acquiring customers

• Depend on prospect and customer anecdotes to get your messaging right.
• For small price point products, you’re conducting focus groups every day (as you watch online buying behavior)
• Leverage the community: start with those who wield the greatest influence with the target market
• Then, focus on getting customers that are willing to serve as spokespeople for your case study
• Work your network:  with the advent of social media, no one needs to make cold calls
• Set limits and success criteria to ensure that your trials encourage conversions:  give prospects just enough time and functionality to experience value
• Hone your process by analyzing the sales pipeline:  key metrics include visitors to trials, trials to conversions, time to progress through cycle, level of discounting

Customer support strategy is essential to success

• Having a well thought out support strategy is essential to success
• Business users are less technically savvy and require more handholding
• To scale, you need to make people comfortable with on-line support
• To maximize profitability, you need to bake support into the product over the longer term.
• Initially, however, it’s likely you’ll need to  provide personal support to compensate for gaps in the product and/or training materials

These are some of the insights I gained from the panel this morning.  What have you done to get the revenue flywheel turning for your SaaS business?

Looking for more ideas?  Download  5 actions you can take today to get more sales ready leads.

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To make matters worse, attracting—and ultimately closing new business–can take anywhere between several months and several years. In fact, sales people, at any organization that sell services, or products, that prospective buyers perceive as a major commitment, find themselves in much the same situation.

Several factors contribute to elongating the sales cycle. Most prospective clients will only buy from those that they know and trust–and winning trust takes time. Many already have satisfactory relationships with others. While some will give new firms a chance, most end up waiting until a major problem develops before they seriously consider switching providers. Even then, sales cycles often stretch out as decision-makers, and every one of the individuals they choose to involve in their buying process, perform due diligence to minimize risk.

The good news is that there are steps you can take to accelerate this process. Next week, we’ll discuss where to start.

Related posts:

1. Shortening the sales cycle starts with getting into buyers’ minds
2. SaaS: Building the revenue momentum you need to achieve profitability
3. Shorten the sales cycle: one marketing message at a time