What Is SaaS Sales and How To Manage It on The Jedi Master Level
Before your SaaS product is ready for launch, any founder should understand what SaaS sales are.
The reason is obvious – without sales, you won’t earn money.
That’s why let’s get deep into what is SaaS sales process. In this article, you will find a description of existing sales models. I will also explain what to expect from a SaaS sales rep and what SaaS sales metrics are important to track.
Here is everything you need to know to manage the SaaS sales cycle on the Jedi Master level.
What Is SaaS Sales
SaaS sales is a complex step-by-step process of selling your cloud product. Basically, it’s about acquiring new customers and upselling to the current ones.
Why is this process so complex? Software-as-a-Service products provide the customer with a complex value to solve the core pain. And that is where the trick lies in.
There is the only way to convert a lead into a ready-to-buy customer. First of all, you should build the customer journey, or at least a visual timeline in Google Slides of your customer’s journey before they sign up for your product. A potential client should understand that he or she has such pain. Then, a lead should understand the benefits of your solution.
And only after that, a SaaS salesperson should get in the game.
Such a SaaS sales cycle requires a lot of touchpoints through all the sales funnels. As a founder or sales rep, you need to clearly understand what is SaaS sales experience.
To sell cloud products you need to establish cooperation between the SaaS sales and marketing teams.
The marketing team is responsible for the result of the process of growing customer’s awareness of the problem and the need to solve it. At this stage, the potential customer has a status of Marketing Qualified Lead – MQL.
The marketing activities end as soon as a potential customer is ready to use a demo, not even to pay. At that stage, the potential client changes the status to Sales Qualified Lead – SQL. The goal of the sales representative is to push this interest to the purchase stage.
To maximize willingness to pay, the salesperson has to be a true expert both in the business domain and in the solution he or she represents.
Sometimes, a SaaS product is so complex, that a technical expert is needed to help to describe how some features work.
All of these factors make SaaS sales a time-consuming and lengthy process that requires a thorough study of the buyer.
Based on the results of the customer study, the team will be able to build a sales strategy, select the best communication channels and build a SaaS sales process.
The SaaS Sales Process
The SaaS sales process has to be always based on the research of customers’ needs. This data is a key to generating marketing and sales.
Yet, it’s important to know that in 2019 SaaS sales methodology is almost always based on how relevant the target audience is to reach out. Since when the customers are looking for a solution to their problem, sometimes they can misclassify it.
That’s one of the main reasons why people do 12 searches (on average) before understanding what they actually need to find the pain/solution match.
Customer-centered data makes a difference between one SaaS startup that builds an effective sales process from those 9 that fail.
There are 5 steps on how to sell SaaS to make the whole process successful, repeatable and scalable.
Define the Ideal Buyer Persona. The definition of your ideal customer is a basic step in successful sales. You know where to reach the audience, what pain you can help to solve, and why exactly your product is better than others. Here are some useful details:
- Short bio
- Defining personality traits
Set up the sales pipeline. The sales pipeline is a visual representation of every marketing and sales stage your customer comes through. It is highly important to understand where the customers are and to choose the proper option to push them to the next stage.
Nowadays, a pipeline is a basic feature of any CRM. Here are the main reasons you need it:
- To track win/loss sales statistics and identify the weak stages, that can be improved
- To receive non-stop reminders to follow-up leads in the right time
- To increase chances to close the sale deal
Start filling the pipeline. It sounds easy to do, but it isn’t. There are a lot of approaches to implement SaaS lead generation strategies.
I would like to recommend you to combine the inbound marketing efforts and reaching out to leads via social networks. Here are some tips you can use:
- Start own blog. The relevant and high-quality content is the key to build trust and confidence. The trick is to create SEO optimized content so that Google sees and understands what you and your blog are talking about. It’s a proven way to increase organic traffic, especially if you are going to use this content for social media activities.
- Distribute relevant content via social networks. Use your buyer persona research to find which communities in social media are popular among your target audience. It gives you the possibility to attract customers via social media.
- Set up a newsletter. As soon as you start generating traffic, you’d need the data. A lot of data. A good option to collect the information about your target audience is to add the newsletter subscription. You can collect all the data you need using a signup form.
- Share free additional materials. Another good approach to collect user data is to exchange personal data for some valuable content. it could be ebooks, infographics or pre-made templates.
Create qualification criteria. At first glance the difference between MQL and SQL is clear, but for clarity, I will give an example.
Let’s imagine that you have a new site visitor, who has subscribed to your site. You study his or her social networks and suggest that he or she falls under your target audience.
But after checking the subscriber’s site, you realize that his or her industry doesn’t fit in with the problems you are solving.
To avoid such small, but annoying miscalculations, you can select key criteria and create a lead qualification framework.
Test new hypotheses. As soon as you find the fruitful workflow, start researching the options to improve it. To do that you can use additional communication channels, change the content strategy or use automation software.
Your goal is to upgrade the customer experience as much as possible. One of the simplest options to start from is collecting customer feedback. Try to build a solution that makes customers’ lives better and they would gladly share their thoughts.
Such a SaaS sales process can lead to a significant increase in the number of leads. It also helps to boost up your SaaS product and skills of a personal sales rep.
Saas Sales Cycle
The length of the SaaS sales cycle is based on two factors: the price of the product and the number of decision-makers involved in the selling.
The correlation is easy. The higher the price, the longer the sales cycle. That’s why important to configure the effective strategy to choose among perfect fit SaaS pricing models.
Yet, there are a few common, but not obvious factors, that influence the amount of time needed to close the deal or upsell.
The first of them is building the sales in the new market. This factor is exclusive for the blue ocean strategy. The challenge lies in spending additional time on teaching and convincing a buyer, before you can actually sell him or her a new product.
Another reason for long-cycle sales is related to enterprise-level contracts. The challenges lie in specific requirements for a product and a complex decision-making structure.
Also, complex software delays your sales. The reason is obvious. The more time a customer needs to understand all the benefits, the longer the process of sales would be. That’s why it is so important to have the right prospects in the room while demoing.
The free trial period also makes your SaaS sales cycle lengthen. In case you offer a 14-day trial, be ready that you will start selling only after that term.
The SaaS Sales Model To Choose
The more expensive the solution, sales tools, the more expensive the sales model. There are 3 SaaS commercial models you can pick up proceeding from the most suitable strategy for your project:
- a cheap SaaS model – self-service model,
- an expensive solution – enterprise sales,
- a middle option – transactional sales model.
While the big SaaS companies can combine all of them, a new player at the SaaS market has to start with mastering one particular model first. What is the difference between these SaaS selling models?
The first model is the customer self-service sales. This one stands for a high level of customers’ motivation to use your product themselves. While the solutions themselves provide clear values and are easy to use. You may have heard of Zoho. It’s a good example of self-service cloud software.
To use such a model for your own SaaS, you should at first make sure that your target audience clearly understands the value you provide to buy and use your product.
Usually, such a solution doesn’t require a dedicated sales team. Marketing activity promotes this type of solution clearly enough. Thus, the sales pipeline happens without sales communication.
The second type of SaaS sales model is transactional sales. Since the price for a solution gets higher, customers expect a more personalized approach, guarantees, and support.
That’s why this model is something like a combination of self-service SaaS, automated lead generation software and a little sales team.
Zendesk is a good example of this SaaS sales model.
The Enterprise SaaS Sales
The enterprise software sales cycle has its own key characteristics, which make a significant difference in comparison with the previous models.
First of all, it’s a price. When it comes to selling SaaS to enterprise, the numbers are off the charts.
The second key difference is a challenge to identify the right people. Enterprise-level sales are always built as stakeholder-focused sales with the engagement of a lot of decision-makers.
The third thing is an entire complex of the B2B SaaS sales at that level. It includes:
- The custom registration process. Since self-registration is not available, the customer should register with the help of an account manager
- The custom list of features and user workflow
- The on-promise version of the cloud solution
As a result, the main challenge of selling SaaS at the enterprise-level is to make sure you’ll be able to guarantee the implementation of every aspect of the tailor-made SaaS for such a giant customer.
“Typically when you’re selling SaaS to an Enterprise, many teams need to be involved in the decision and implementation process. Just when you thought you’ve sold the decision-maker, then another team gets wind of it and blocks the deal.
In order to get ahead of this challenge, it’s important to ask to get any stakeholders involved early in the sales process so the deal can be tailored to each team involved early-on before it falls apart.”
Kean Graham, CEO of MonetizeMore.
SaaS Sales Salary (On Average)
The startup founders must sell their products by themselves. But a product scaling is impossible without sales delegation. That’s why it is important to take into account levels of SaaS sales salary.
The most popular job portals have made research on average SaaS sales salaries. The cost includes both hard and soft skills.
Indeed calculated the salary of almost 210 000 salespersons over the past 36 months. The average salary of a SaaS sales rep is $60 208 per year. Meanwhile, the salary of account representatives is on average $50 400 per year.
Another job portal Glassdoor estimated that an average salary of a SaaS salesperson is $48 328 per year.
According to the recruiting portal Ziprecruiter an average salary of a SaaS salesperson is $77 986 per year.
However, as an owner, you need to add to these rates a number of sales target bonuses. Rainmakers did excellent research on all available sales ranks using Glassdoor data.
SaaS Sales Commission Rates
Like in any other industry, SaaS sales reps have SaaS commission rates as an award for successfully achieving the business objectives. This compensation is usually based on Monthly Recurring Revenue – MRR. Another option is the Annual Contract Value – ACV.
Sales compensation plans are usually correlated with Key Performance Indicators and SaaS primary business goals. As a salesperson, you have two options to increase sales – attract new customers or handle customer retention.
Thus, sales revenues are usually considered earned when a sales have performed the tasks the way they fall under acceptance criteria of a business growth strategy:
- Increase a recurring revenue as much as possible
- Collect as much financials as possible in upfront
- Sign a long-term contract
- Drive the customer success rate in a limited period of time and so on
But to keep the sales process and commission plans systematic you need to follow some framework. Personally, I recommend taking a look at these 3 models:
- Base salary + commission. This approach is a good option to plan your startup expenses in a stable way. Moreover, your sales will feel more confident. At the same time, the higher the salary – the lower the motivation to sell more.
- Profit-based commission. It is one of the best options for any company. Exclude all costs and pay the award from the net revenue. Yet, the profit from every particular deal will be considerably lower.
- Tiered commission. It’s a fixed commission option that allows sales to get an award for overexceeding the quota of a plan. This model is a good way to reward the most efficient sales to make them sell even more. But make sure that after all payments, your SaaS startup still can earn cash.
Another option is to reward your sales team with a non-financial “President’s Club” vacation. It can be a good motivator both for a person and for a team.
You can also consider awards for the group. It makes a good fit for a team-focused sales.
SaaS Sales Metrics
SaaS sales metrics are important to track. Because the single-sale is just a start point of the customer journey from the sales point of view. Why is it important to understand?
Because this factor makes a difference. In contrast to only generating new sales, a salesperson must generate recurring revenue – attract new users and make them use an app for a long time.
Talking about the most important SaaS and cloud sales metrics, there are 6 main indicators to focus on:
- Customer Acquisition Cost or CAC. This specific metric shows how much it costs to attract a new user. This metric shows the correlation between marketing costs and a number of new users. An average CAC for SaaS shows the scalability of your current strategy and entire product.
- Lead Velocity Rate or LVR. It shows the growth of your Sales Qualified Leads month over month. That’s an important metric since it verifies the market need in your solution. LVR calculates the growth of your business in the number of leads.
- The customer’s lifetime value or LTV stands for an overall amount of money spent by the user for your SaaS. This is the number of revenue per account per usage time. LTV also shows the viability of your business model. If this indicator is higher than CAC, your business will grow. If it is not, it is a signal to change the strategy, or perhaps its time to focus on customer success, as well as customer support.
- Win rate indicates how good your sales team is at closing contracts. It can be calculated by dividing the successful cases by the total number of sales cases. But be careful using this metric. Instead of testing business hypotheses at the new market segments, your sales may close the most accessible deals.
- Monthly Recurring Revenue or MRR. This is a complex metric. It includes the revenue from just-joined users, upselling and users’ churn. I recommend you to use an MRR calculator to find out the current state of your business. However, a lot of startups and companies prefer to use Annual Recurring Revenue instead.
- Churn rate shows how many customers leave your service during a limited period of time. This is a crucial indicator, that shows the disappointment of users after using of your app. Sixteenvetures noticed, that a 5% annual churn rate actually is okay for SaaS products. If the percentage is higher, it’s time to analyze the reasons.
Metrics are an important part of the fundraising process. It’s vital for a founder to show the growth of the particular metrics at the market. Thus, an investor ensures that the product has enough value and capacity for disruptive growth.
“The three most important metrics for SaaS sales rep would be brand awareness, brand consideration, and brand loyalty. Effective selling is all about knowing exactly what you’re offering and how your end consumer benefits of it.
This is where the three above come in – having a very clear insight of how your customer perceives your brand, which channels they associate it with, the overall image of all those small metrics that create a big part of actual awareness, which also largely contributes to how you nurture your leads and make loyal customers. These are all crucial to creating a USP as a base foundation to how we expose our business and ultimately sell.
MarTech has become a very competitive place and the only concrete way to keep up and make a stand out in the crowd is to track the right metrics that actually convert.”
Steve Habazin, content management specialist at Latana.com
So What Is SaaS Sales?
The sales process of your SaaS product is key to the success of a founder and his or her startup.
If you are able to manage the sales, you’ll manage the major part of business development. Of course, sales skills don’t replace high-quality development or lower the customers’ expectations.
But it is important to understand what is SaaS sales. Taking control over the SaaS sales cycle you can build the next giant as Dropbox. Are you in?