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GTM, Sales

Going Upstream

Jacco van der Kooij

Written by Jacco van der Kooij

Founder, Winning by Design


TL;DR. You want to sell into bigger accounts. If you do so because you are failing in other market segments — you need to reconsider. If you are going upstream as a logical extension of your current business, you need to prepare. This article provides you with insights why, how and what to do.

are you ready to go upstream

What is going upstream?

Business can be divided into sizes; Pro-user, VSB, SMB, Mid Market, Enterprise, and Fortune 500 to name a few. Over the past years it has been popular to do business with Pro-users using the Freemium model (early DropBox) and SMB customers developed by Inside Sales organizations (early Hubspot).

going upstream

To keep an attractive revenue growth trajectory most companies eventually need to start winning deals measured in hundred of thousands to millions of dollars in Annual Recurring Revenue (ARR). These deals take place in Enterprise. Going upstream refers to selling your service to an enterprise.

Why do companies want to go upstream?

Many companies want to go upstream because;

  • They wish to achieve a bigger revenue stream
  • They won one by accident and now they want more
  • The SMB/MidMarket program can no longer carry the growth (see picture)
  • They hired a new VP of sales with an Enterprise background
  • Because everyone else is doing it (FOMO)
growth trajectory

These are all indicative of a long learning cycle sprinkled with failure, bodies of sales people along the way, and a series of Proof Of Concepts that only deliver a fraction of the business that was once promised.

Go upstream because you have a solution for the Enterprise, and you have a service organization that caters to the Enterprise.

Seven Characteristics of an Enterprise deal

Regardless of your intentions there are a few things to keep in mind as you go Upstream to the Enterprise.

I. Impact of revenue

To level set let’s compare the impact of the revenue between the two models.

SMB: ACV $10k, 4:1 win ratio, sales cycle of 30 days — Per SMB AE you can work 10 opportunities, for 2–3 wins per month = 30 wins per year = ~$300,000/AE. LTV is a lot shorter anywhere from 1–2 years. $300–600k. For two AEs in SMB you need one SDR. Total comp for 1 SDR and 2 AEs ~$350k. But you will need sustainable volume of leads!

Impact of revenue

ENTERPRISE: ACV $100k, 4:1 win ratio, sales cycle of 270 days — Per AE you can work 5–8 Enterprise deals per year for two wins. Two AEs bring in four deals over 12 months for a total of $400,000 per year. LTV of an enterprise deal is about 3–5 years so that is a cool $1.2–2M. Note: The Enterprise rep benefits more from a Sales Engineer (SE) who can do demos. Total comp $750k for 2 AEs + SE. But you will need sustainable high quality of accounts!

Working on (and finding) a volume of SMB deals can be as challenging as identifying quality ENT deals. Both are very different models with different lead development models, revenue & cost models, upside and involvement from the company. Conclusion, no right or wrong just that each needs to be treated very differently. Let me elaborate on how different…

II. The impact of the sales cycle

The short SMB sales cycle allows for rapid iteration, in which a new sales rep quickly learns how (not) to do it due to the short sales cycle creating an instant feedback loop.

30 days sales cycle

When we promote the SMB AE into an Enterprise AE role, without training they will follow the very same approach not knowing any different. This causes a much longer feedback loop. However with fewer deals the impact is far greater.

180-360 days sales cycle

What needs to happen is to create a shorter loop in which you learn what is going wrong so you can immediately apply a solution.

sales cycle

Case-in point: At one of my clients an AE ran into a PII issue during the demo. Unaware of the consequences he assumed it would be okay to address later on. Six months later during the Proposal the PII issue came up again. Since the AE had not informed the engineering department, it could not deliver a solution on-time causing the company to lose the deal to an inferior competitor. The company lost nine months of investment. Most enterprise deals have tens of these critical moments that an AE needs to recognize and take action on.

III. Impact of services revenue

Below you see an example of a successful SaaS SMB deal. In year 2 you notice a 8% net positive growth from product, but a net negative growth as the “one-off” installation services are not required in year two. To cover for this, most SaaS companies extract the services revenue from the report so the Y-o-Y growth is presented as an 8% upsell.

successful SMB deal

Compare this against a successful Enterprise deal.

successful enterprise deal

Successful Enterprise deals often see an incredible growth in services that helped with an even bigger growth in product sales. In an Enterprise deal to the user the services are as valuable as the product itself. Therefor it is of the utmost importance to stop discounting these services, as they are funding the growth of the professional services organization.

IV. Internal selling vs. External selling

In a SMB deal the SDR develops the lead, and the AE works with a few people on the SMB customer side. The SMB sales process feels like a soccer team, where midfielders (Red SDRs) are passing the ball forward to the striker (AEs). The interaction is primarily between the AE with the client.

Internal selling vs. External selling

Selling to an Enterprise requires not only selling to a broader group of decision makers at the customer — often across the company, divisions, even regions. But more importantly requires the AE to direct a large group of people at the company (yellow). In this case the ENT sales process is more like that of an orchestra with the AE orchestrating everyone’s activities.

*Note: In Enterprise sales the role of a solutions expert (SE) is critical

V. Feature Selling vs. Solution Selling

Many SMBs have a very similar infrastructure for example in SaaS we commonly run into SFDC and Marketo/Hubspot. It is not uncommon to find 10+ companies seemingly offering the exact same product on that infrastructure. This leads to feature by feature competition to differentiate over price.

Feature Selling vs. Solution Selling

In an Enterprise deal however, features are less important but an end-to-end solution is significantly more important. Solution selling requires a very different skill set.

VI. Trial vs. Proof of Concept

Selling to enterprises means you have to integrate your service within an existing and often outdated infrastructure. A seasoned buyer wants to see a demonstration if your solution works. In case this is core to their business they most likely want to perform the much dreaded Proof Of Concept (PoC).

Trial vs. Proof of Concept

In a SMB trial the client is primarily interested in understanding the service and the benefits it can bring to them. In an Enterprise PoC you will run into a lot of people who are involved to reason WHY NOT to use your service. In the example above you will notice that in the enterprise PoC you have someone before & after you in the workflow, someone responsible for the integration, someone responsible for the data model, someone for the overall solution and ofcourse someone who looks at the trial itself.

As an Enterprise AE need to address all of their needs as a single no-go will lead to weeks to months of delay. Compared to the SMB Trial where automated processes and tools can keep the customer on track with the trial.

VII. Hiring vs. Recruiting

You will be hiring SMB AEs but you will have to recruit ENTERPRISE AEs. Why? Below I try to depict one of the most important differences between a volume driven SMB AE who cannot do too much research, vs. an ENTERPRISE AE who cannot do enough research on the customer and the market.

You hire the SMB AE based on their ability to sell as you teach them the product. On the other hand you are recruiting an Enterprise AE simply because you have no time to educate the person on the market and the customer. This means that you have to convince a person to leave their existing assignment and join your company.

Hiring vs. Recruiting

These are only some of the differences between SMB and ENTERPRISE sales. There are many more and it should give you an idea that just going upstream requires a bit more then just asking your top SMB AE to go “whale hunting”. Next I hope to provide a few steps to set you up correctly.

Seven Steps to Become Successful in the Enterprise

#1 Get every department involved early on — Organize an internal kick-off and get every department involved. What needs to happen for every department.

#2 Build an enterprise organization — don’t just hire an enterprise sales rep but build “enterprise” into every part of the company, in the product, in legal, in finance, in marketing, in sales, in customer success, even in your front desk.

#3 Design the right process — As outlined in the Authentic GTM article your Enterprise customer goes through six distinct experiences. Make each of these experiences great. So get to the whiteboard, let it rip and design the absolute best enterprise customer experience ever. Below a template we use at Winning by Design.

Design the right process

Note: Please contact me if you want a printable copy

#4 Start by writing the value proposal — Create the outline of the proposal with all the value for your customer in it well before you ever won your first deal. Then use it to direct your team to deliver on the promise.

#5 Hire experienced people — Someone who has proven to have done it before. As the CxO/SVP call a few executives at prospective clients and ask them for a few names of people that made a huge difference. Then hire these people.

#6 Measure what works — Shorten the feedback loop, don’t wait for the end result. As you progress through the journey, compare it against your design. Stop doing what doesn’t work, and do more of what does work.

#7 Get Executives involved — Get top line executives involved in the Enterprise deals early on. And I don’t mean writing an occasional invite to a webinar, I mean that they need to get in the weeds together with the AE.

Your Take on Three Use-Cases

These days I see a lot of IQ tests on LinkedIn (please no more). Instead of asking you to solve a puzzle, I like to present you with three use-cases of different start-ups all in the $1–5M ARR range:

Use-case #1: Company sells IT product to Enterprises. ACV $150k, sales cycle of 205 days. They have lots of Proof Of Concepts going. Some for as long as 3 months. They have hired a few industry insiders to help sell.

Use-case #2: Company sells products to SMBs at $12k with a sales cycle of 38 days. They want to move upstream. They just recruited a former VP of Enterprise Sales at Salesforce to set it up.

Use-case #3: Company sells $10–20k deals to Enterprises with average sales cycles of 48 days. They are securing one logo after the next and claiming to do this with zero sales people and no spend on marketing.

My question to you: Which one will be the most successful and why?

Storm CxO Stanford Breakfast on Enterprise Sales

On September 8, Storm will be hosting a CEO Breakfast session at Stanford where we will discussing in detail about the challenges to becoming successful in Enterprise Sales. If you are a CEO with an ACV of $5–50M and are preparing to, or are challenged going upstream — please contact Frances Luu to see if there is still space available.