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Evolution of Sales Organizations

Jacco van der Kooij

Written by Jacco van der Kooij

Founder, Winning by Design

9 MINUTE READ

Sales organizations keep evolving. Whenever I work with a client, I determine where they are in their evolution as a sales organization, vs. where their business is at, and where their business is going. Why? As a “sales designer” my first task is to model each unique organization’s infrastructure so it’s not just ready for where they are going, but also ensure it can do the job today.

 

SaaS Sales Design – Turning a Car Into an Airplane

Helping SaaS sales teams to evolve is like working on the roof of a car driving 65 MPH, headed for a cliff. As I am trying to weld wings onto the frame. I yell at the driver to crank it up to 120 MPH. The driver (VP of Sales) looks in my eyes dazed and confused … “but Jacco the cliff” … to which I say “trust me … this will work”. Ahhh the power of evolution. By the time we get there, things will have evolved.

Below I provide some simple steps in the evolution of the sales organization. By no means is this complete, nor 100% accurate, as each organization has its own unique attributes. My goal with this post is to allow you to do a self diagnose, where is your sales organization at, and where are you going. I hope it helps you set the right sales strategy for your company.

The Drivers Behind the Evolution

A few drivers behind SaaS, good to keep front of mind are:

  • SaaS has less margins, thus the need to sub-optimize. This requires a look at specialization and automation of sales functions.
  • SaaS makes a profit in the future but it has hard cost today, thus we need to use less costly, and more scalable ways to manage these costs – for example sales tools that provide scale in client acquisition can help tremendously.
  • SaaS is a VOLUME game vs. BIG deal game. A traditional enterprise sales organization where 5-10% of A-level performers is able to “keep the lights on” will not work in SaaS.
  • Customers are evolving as “buyers”. Today every customer expects a consultative sales approach. This high touch approach previously was only reserved for the biggest deals.

With that said… let’s get started.

I. Mom and Pop: Customer is King

As a kid I grew up in my Mom and Dad’s shop, and we were spoon fed with customer first. The warranty period?: As long as my kids live. The service model?: Knock on the front door at 11pm on a Saturday night. If customers didn’t like something, do not just apologize, but to make it right, not tomorrow, but right then and there. They could afford to, they had eight children, Mary, Betsy, Dick, Wilma, Corie, Eddy, Rene and I.

Nothing, and I mean nothing would stand in the way of making our customers happy. But my mom and dad were never able to scale beyond that one shop. Why? Because they needed employees that understood and committed to that customer first mentality. And it is hard, really hard, to find salaried employees willing to commit to that.

So they tried it in their own way… kind of… 4 daughters and 4 sons. Still none of us cared for the business the same way they did. Scaling a Mom and Pop shop and achieving happy customers is not easy! It actually is really, REALLY, hard!

II. Hunter-Farmer Model: Close!

An evolution was needed, and the hunter-farmer model was born (see #1). In the Hunter-Farmer model, corporations realize they cannot scale on a few passionate people to cover the entire process. So they split it up, they specialized: Hunters to close, and Farmers to farm.

In this model Hunters quickly became the heroes of the company. The best of them earned the nickname: Rainmaker. I was lucky to be have several Rainmakers on my team. These Rainmaker were bringing in large deals such as DISH, Disney, and Safeway. In this model it is all about closing, sales people were not supposed to really care about delivering product. My CEO at that time kept reinforcing this message, saying “Jacco, do not mistake installing with selling”.

It was a world where everything was focused on close, close, close (see #1). What happened after the deal was not relevant.

III. SaaS Model 1.0: Leads!

The rainmaker phase started to slow down, early 2000 with the loud pop of a bursting bubble. Amidst the ruins SaaS was born. In the early years SaaS optimized itself in the Very Small Business (VSB), and Small to Medium Business (SMB) market. Companies with fewer than 20 employees. A few years later, fueled by the collapse of the financial market, SaaS exploded onto the scene. Large enterprises were forced to cut their IT spending, while the need for innovative solutions was bigger than ever before. SaaS provided the solution.

High Volume of Deals Requires Lots of Leads

SaaS businesses started to grow based on doing lots of smaller deals in high volume vs. the lumpy big deals. But to do SaaS right you can’t live off a few hundred customers, you need thousands of customers, and thus the need for leads, and with it for Lead Management vs. Sales Management (see #2).

Lead management itself became an area of sub-optimization, as inbound leads who only needed minor qualification could pass through quickly, whereas outbound leads – where the real “hunting” occurred – needed the best of the best sales professionals (see 3).

With this evolution came the rise of new jobs in SaaS companies, with titles such as SDRs, MDRs, ADRs, and BDRs. The DR stands for Development Rep. Today most companies I consult for, find themselves in some version of this stage.

Customers in this stage of evolution are extremely focused on leads; having the right amount of leads, developing the right kind of leads, creating number of leads by market, by region, and so on and so forth.

Whereas in the Hunter/Farmer world it is all about “closing”, in the SaaS 1.0 world It is all about “leads”.

Overwhelmed By Nurturing Campaigns

The thought is valid though. As long as you have the right amount of leads your sales team will convert those leads into business. And boy did the market respond! Tools were developed (MAS), and marketing careers flourished. Today any person armed with a $49/month nurturing service can, from their local Starbucks, launch an “enterprise grade” marketing campaign. This is not a good thing.

IV. Customer Success: Avoid Churn!

Yeeehawwww!!! Another deal closed. Hit the gong. Ring the bell. High fives for everyone. Now let’s go play ping-pong…

But guess what, some of these clients were not properly qualified, others were rushed into the decision, and so a percentage of clients never really launched, the service. Instead they unsubscribed. Oh well, who cares, you can’t make ’em all happy… right?

Oh how foolish of us. In those days we did not care… churn!?.

This was a remnant from our upbringing, as sales professionals we were raised on the Hunter/Farmer model where we used to sell clients door stoppers, e.g. a piece of heavy hardware they don’t need, or shelfware which was a disc of expensive software disc sitting on the shelf of an IT director. The saying “Can sell ice to eskimos” says it all. Early on people even put it on their LinkedIn profile!

Anyway, unhappy clients in SaaS, as we all know, they unsubscribe. We call this very real and impactful phenomenon as churn, or to be more accurate logo churn.

Companies realized that “sales” had done its job but that clients required a little bit of more work was needed to before getting a renewal notice. This renewal was DESPERATELY NEEDED because in those early days it took 18-36 months to recoup the investment. E.g. every client churned = a lot of losses. We would say: “the more you win, the bigger the losses, the more funding you get, you bigger the IPO”. HUH.. WHAT!?!?… yes exactly.

So clearly there was a need for someone who cared just enough about a client to get them launched properly. Alas, the early rise of the Customer Success Management role. Trailblazers in the market, quickly established leadership positions, as their brands became known as “customer-focused”. The Customer Success Managers at these companies would focus on integration, API matching, and launching a client… even training them on the basic use (see 4).

This model is recognized with leadership that has shifted its maniacal focus from lead generation to churn prevention. Why? Because they start to understand the compound impact it has, and for good reason!!!

Required reading for anyone in SaaS sales is David Skok’s phenomenal work on churn (and a lot more!).

V. The Need For Speed, and a bit of DIY

At the same time, another push occurred from a different angle. And I don’t know if I put it exactly in the right order, I’ll let you be the judge of that.

FIRST: Small companies offering SaaS services, cannot afford the salaries of a sales force, so they are forced to leverage a “self-sell” model. It leverages everything the internet provides. Sales organizations instead focus on minimizing cost by doing as much DIY as possible. This meets the needs of VSB and Small SMB clients. Today this is well supported with a 1-30 day online trial (see 5)

NEXT: Buyers across all segments are utterly fatigued by the lead driven attitude, and growing lack of depth in the sales process. They buyers realize that most of the information they need is readily available on the internet + social media. Add an online trial and they are “good to go”.

AND LASTLY: Buyers at larger SMBs/SMEs and even Enterprises use this “self serve” model – including trial – to test out the service. Important to note that a bad online DIY experience continues to cost many companies more business, across VSB, SMB and Enterprise than they realize, or care to admit to.

VI. Enterprise Deals – Ohh That Shiny Object

Today Enterprises big and small leverage SaaS services. This is where a scaling problem becomes painful. The kick-ass high velocity SaaS sales team, is designed to sell to a 20-50 person company, with a standard service from a simple price list.

They are NOT skilled/tooled in dealing with the complexities of a multi-department, extended executive sell, that often include some form of customer development. However many SaaS CEOs want to win these marquis deals, these shiny objects, as a feather in their cap. In the old days we called this Elephant hunting. Funny how that was a cool term in those days, and now complete misses the mark.

Anyway winning big enterprise deals require organizations to bring in an Enterprise sales professional, in some SaaS companies referred to as Field Account Executive (FAE). These are the cream of the crop sales professional, who establish a specialized process for Enterprise deals. The moment they arrive on the scene your sales efforts are split into three tiers (see 6).

Simplified:

  • VSB: Self-service sales – sold with as much internet/web sales assistance as possible, keep the cost low!
  • SMB: Sold by an inside sales team, that excels in online selling, goal is to achieve high velocity.
  • Enterprise (SME): Senior sales execs skilled in selling to multiple stakeholders, maneuver through formalities, and navigate through an organization. Goal, win prominent logo’s.

VII. Data: Trust the Data!?

Today frontline SaaS sales organizations are following the trend set by marketing, and become data driven (See 7).

Marketing too became data driven. Marketing too had lots of new kinds of jobs. And Marketing flourished immensely. So it is no surprise more and more sales statistic terminology is now entering the lexicon of sales leadership.

We need it! Far too long has sales been considered a “black art” while most of its disciplines had nothing to do with “art”. We can benefit from data!

The trap we face with this evolution is that we are pushing our noses too deeply into the data, and risk forgetting what this is all about – helping us scale to achieve customer success or customer satisfaction.

VIII. The Future? Customer Happiness

So this leads me to a strong believe that we are entering the golden age of sales. Why? Because it is clear to me that the next step in evolution is Customer Happiness (See 8).

I deeply care about this. Don’t ask me why. I don’t know exactly why. But I do know this, a short e-mail from a client who shares with me how I helped them makes me feel warm inside, a relationship developed with a client who becomes a friend is something I nurture for decades, a lot longer than the excitement of a paycheck.

Hang on, hold-up, don’t misunderstand me — I am not saying that closing deals, generating leads, avoiding churn, and being data driven is not important. On the contrary, they all are extremely important. They were needed to get us here, and are appreciated to help us earn a keep!

What I am saying is that as a sales professional, I strongly believe that we are responsible for making a customer happy by solving/preventing their problems. If we make the customer happy, they do not churn, they will generate MRR, they will talk about our superb service, they will become an advocate, as they move to another company – they will call us. That is the new Rainmaker of today!

Make How You Sell As Important As What You Sell and You Will Become The Unique Selling Point – Jacco

This is the evolution I have been looking for, ever since I saw my parents struggle with this. The future of sales is bright, and it is to achieve customer satisfaction. I can’t wait, I was born for this, and I know many of you feel the same.

Learn more?

These are the lessons gained working with over 50 SaaS sales organizations in the past 24 months.  More lessons on how to build scalable SaaS organizations can be found in a book we recently launched “Blueprints for a SaaS Sales Organization”, available on Amazon.  In this book we share best practices on how to design, implement and launch scalable SaaS Sales organizations.

NOTE : I skipped several key roles that I know some of you deeply care about. Here are a few specialized roles/evolution steps:

  • SE: Sales Engineers / Web Developers are key roles in a more technical sale, they are the grease on the skids, and an extremely credible resource for both the client and the sales professional.
  • X2 – CSM/AM: In the above example CSMs onboard a client and get them to first use, but then who is responsible for getting them to recurring use?:
    • If there is lots of upsell/cross sell potential, a more sales driven CSM is required, similar to the Enterprise deals this is more of an Account Manager. For example, this occurs if the first deal is 10 seats, but with the potential for a total of 500 seats.
    • If there is little upsell/cross sell potential, e.g. it is all about getting the client to use the service at maximum performance, and the focus is simply to make sure they renew – you may want to stick with the CSM who onboard them. This is the case with a client who buys an $60,000 annual enterprise-wide license. The upsell/cross sell potential is limited to a renewal.
  • WS: Web sales for some SaaS businesses is an entire world by itself. With its own online chat team, community Q&A etc. I will address this in a future post.
  • BDR: A new role that mirrors the Business Development Manager who often strikes channel agreements. Unlike a channel manager, who is focused at establishing a sales channel to create a footprint to sell, BDRs are entirely focused on creating a steady stream of sales qualified leads from partnerships. Think of a BDR as someone who calls on the sales teams of Salesforce and/or Marketo, coaching them, training them, or rather enabling them.
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