The number of roles within the marketing, sales, and customer success teams at SaaS companies has become quite confusing in the last several years as organizations have embraced new org models of role specialization, and put their own spin on them.

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It’s further complicated by the fact that these roles are still being reinvented as SaaS orgs evolve along with the new technology they are using to power their teams.

Let’s review how to make sense of these roles: we’ll go through how we should think about these stages, and how to define roles and responsibilities across each stage. Teams may have slight variations depending on your business model, but these principles should apply across the board as you are defining your go to market organization.

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STEP 1. NORMALIZE STAGES

In 1898, Elias St. Elmo Lewis developed a model that mapped a theoretical customer journey from the moment a brand or product attracted consumer attention to the point of action or purchase. He created a four-stage process: Awareness, Interest, Desire, and Action (AIDA). This term was made popular when it was famously enacted by Alec Baldwin in the cult classic film Glengarry Glen Ross. In the AIDA model, revenue and profits are realized shortly after the client signs a contract. Many sales and marketing organizations still are based on a version of AIDA, which today is referred to as “the funnel”.

Figure 1. The Marketing & Sales Funnel, evolved from AIDA

With the advent of recurring revenue models, the conventional layered funnel depicted above became outdated – because it was designed from the seller’s perspective, not the buyer’s. To further complicate things, it created a siloed approach in which individual teams focused on their own narrow performance metrics at the expense of others in order to hit their targets.

Figure 2. Bowtie model with stages based on customer experiences

We visualize this new model as a ‘bowtie.’ The bowtie must cover two critical gaps: 1) the impact stage where sellers must ensure that customers achieve their expected impact; and 2) the critical activity of growing the business together with your customer. These two additional stages create a compound growth loop. In comparison, a funnel model was designed to achieve linear growth without a growth loop.

 

STEP 2. DEFINE RESPONSIBILITIES BY STAGE

As described in the book The SaaS Sales Method: Sales as a Science, a high-velocity business must operate as a system. This means that departments must operate with each other flawlessly, and not as siloes.

What this means is that every team has a role in each stage of the sales funnel; the amount of involvement of course varies in each stage. For example, Marketing must be involved throughout the entire sales process – not only in the awareness stage. And Customer Success should be involved before the customer commits, if you want to have a successful handoff from sales to CS and a great experience for the customer.

The exact levels of involvement will vary from business to business; you should determine how each department needs to be involved at each stage, and with what kind of action.

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STEP 3. ASSIGN ROLES ACROSS STAGES

The degree of specialization that you should have in your organization is generally a function of the Annual Contract Value (ACV). For example, at a lower ACV of $2,500/year, you would likely have a full inbound funnel with an online credit card transaction. Compare this to higher ACVs, say $50,000, may involve a response to a request for a proposal, discovery calls, and even a proof of concept.

This specialization is in response to what the customer values. At a lower ACV, customers value a seamless working product operating in a standard workspace (think of a Google Chrome plug-in). At higher ACVs, they value a high-touch service that helps with deep integration into the customized environment (think of a sales automation platform).

When well executed, job specialization can increase sales velocity and improve effectiveness. Organizations need to ensure that specialization is paired with a well-defined, cross-functional process and job training for each role, with proper handoffs.

Figure 4. Assign roles to match your GTM model, for each market segment. Shown in brackets is the number of accounts called on by role such as (100 accounts) or (less than 40 accounts).

 

STEP 4. DEFINE EACH ROLE

Having determined the roles, we can now provide some insights as to what each role does and how the roles differ from one another.

Group 1. Sales Development Roles

MDR – Market Development Rep. This role generates a sales qualified lead (SQL) primarily by having a conversation with an inbound marketing qualified lead (e.g., following up on demo requests or form fills to speak with sales). Other areas of responsibility include confirmation of attendance to events such as webinars and trade shows. This role is often most meaningful in inbound businesses, since the role reports to marketing.

SDR – Sales Development Rep. This role focuses on a region or vertical in which they develop sales qualified leads from scratch. This means they have to start a conversation and provoke a decision maker into action, handle objections, and close on a call-to-action such as meeting with an account executive (AE) or attending an event. Due to the sales-like skills required, this role should generally report to sales.

ADR – Account Development Rep. This is a highly specialized SDR role. While the SDR focuses on going after a single role in thousands of accounts, the ADR is responsible for implementing account based prospecting and targeting multiple people inside the same account, across a few dozen accounts. The ADR is the most senior of the sales development roles. They often have to target executives using provocative sales techniques, and to be successful, they must have a deep understanding of use cases based on the impact achieved by clients. This role can report into the account manager (AM).

BDR – Business Development Rep (not depicted). This role generates sales qualified leads in volume from a partner such as Salesforce and the AppExchange. The role of the BDR is to provide lots of support to the partner, organize events, provide content, create a template quote, etc. It should be no surprise that originally this role reported to the business development executive, but today, it is more common to see this role reporting to the channel manager. In the past years, this title has sometimes been used to apply to the SDR role, to minimize the bad mojo from the “sales” part of the title.

 

Group 2. Sales (signer) Roles

SM- Sales Manager. This role is responsible for all business within a territory or vertical market. This role might cover a wide geographic region, and in that case, would be an inside role rather than a field role (not traveling to visit customers). Instead, they organize local events such as meet-ups to network with clients and mix them with existing customers.

ISR- Inside Sales Rep. This role combines the MDR (inbound) and SM (closing) roles. This role is commonly found in high-velocity sales, where the client can demo the product on their own online through an automatic free trial, and then approach the ISR with the intent to buy. As such, the ISR can manage up to a hundred clients a day (10-20 per hour). The primary role of the ISR is to field an inbound call, address a client’s concern, provide accurate pricing, and obtain commitment.

AE – Account Executive. This role generally will get a vetted list of 20 to 100 named accounts to focus on. They use both provocative and solution sales techniques to start a conversation, and they develop a deeper understanding of the client’s needs through extensive research and discovery calls. They develop multiple touchpoints in the client’s organization over a period of three weeks to nine months. Each quarter, a number of (disqualified) accounts are replaced with a series of new accounts. Whereas the sales manager calls on a territory or vertical market, the AE is calling on a distinct list of named accounts.

SE – Sales Engineer. This role is one of the key functions in platform sales, where the product has a higher level of complexity. The SE is responsible for the sales support before the client commits, and for the integration of the software within the existing tool stack after the client commits. A highly skilled SE can modify the product to ensure it works within the client’s environment. They are often the most qualified resource on the call, and both the seller and buyer often put a lot of trust in the SE. The SE’s role may expand beyond the commit, meaning that they are responsible for overseeing the implementation of what they recommended.

SA – Solution Architect. Although similar in nature to the SE, the SA is more focused on customizing the product to the client’s needs, and less on integration within their existing infrastructure. For example, the SA will setup the client’s dashboard to their specific needs, whereas the SE ensures the proper usage of APIs. Similar to the sales development roles, title inflation has sometimes faded the lines between SE and SA.

 

Group 3. Customer Success Roles

ONB – Onboarding Managers. These are specialists who drive initial deployment. Like a sales engineer, they support the initial setup of the customer’s account and support the enablement of key moments at the beginning of the customer journey. This role is critical to ensure the customer sees value early in the partnership, serving to drive adoption and net retention. Typically, a key milestone that the ONB is focused on is when the customer has gone live with their product.

CSM – Customer Success Managers. CSMs proactively drive adoption and net retention. Depending on the company’s maturity, the CSM may be initially responsible for onboarding, quarterly business reviews, support, training, and renewals. Over time as a company grows, a CSM’s role shifts to focus on strategic customer conversations. They typically are not responsible for technical work or support; rather, they build relationships with the customers and ensure the services they need are provided to receive maximum impact.

AM – Account Managers. AMs are typically introduced at the beginning of a customer relationship after the customer has committed to a partnership with your company. They are responsible for the commercial aspects of the relationship and work across customer success teams to identify expansion and other contract opportunities. Companies typically create AM teams to focus on customer expansion, so that sales roles can focus on new acquiring new logos.

Figure 5. Several areas of growth exist for the account manager (from the book The SaaS Sales Method – Sales as a Science)

 

TAM – Technical Account Managers. A TAM focuses on providing services to the customer such as custom integrations and migrations. They typically have a technical background and/or experience, as well as customer management skills. An increasing number of companies with complex product implementations are recognizing the need for a TAM across customer success teams, while others are hiring TAMs instead of CSMs.

Emerging Roles in Customer Success (not depicted)
There are a variety of new roles emerging in the customer success arena. These roles are not depicted in the above figure, but you may run into them in the field.

CSR – Customer Support Representatives are typically responsible for reactive support. They help customers who identify a software problem or don’t know how to use a particular aspect of the platform. They typically work through a support portal via phone, chat and/or email, and are responsible (often in joint efforts with the training team) to manage the knowledge base. CSRs serve as a liaison between the customer and the product and engineering team to ensure any defect is fixed.

CET – Customer Education & Training is used as a company matures to teach its customers how to use their product, as well as to educate their own team internally. Real-time guidance and learning management systems are typically used for this function.

CX – Customer Experience performs activities to measure and improve a customer’s overall experience. This may include the voice of the customer, health scoring, and managing focused programs such as the Net Promoter Score program.

CEM – Customer Engagement Marketer is an extension of Marketing, but purely focused on driving engagement within existing (rather than new) customers.

 

STEP 5. GO TO MARKET IN STAGES

GTM models will evolve with their level of role specialization over time, as the company goes through each stage of growth.

GTM Stage 1. Founder sales (getting your first 20-30 paying customers)

Figure 6. Founders (F1 and F2) split the responsibility (from the book How to Get to $10M in ARR)

At the start, the founder(s) is doing sales (F1) and customer success (F2) for the first 20-30 deals. As sales grow to about $10-50K in MRR, one of the first hires is often an AE who immediately manages the inbound and starts planning the outbound. The AE will need in-depth training and hands-on coaching by the founder on existing use cases, the market, and the product, in order to effectively sell.

GTM Stage 2. Getting to $1-2M in ARR

Figure 7. Splitting responsibilities into separate Sales and Customer Success teams.

The organization starts to specialize with roles around $100K in MRR. The AE is now focused only on closing, and you hire an SDR to generate pipeline by qualifying inbound leads and going outbound. You hire a CSM to cover existing customers – primarily to manage issues, but soon your board or advisors are asking for retention and growth metrics, which means the CSM will need to focus more on growth.

GTM Stage 3. Growing the Pipeline

Figure 8. Separation of inbound and outbound can increase velocity

The organization is ramping to an overall $3-4M in ARR, and it now starts to specialize with inbound versus outbound as it begins to run out of leads. SDRs need to develop and work on their own customer outreach, in tandem with marketing campaigns. On the other side of the customer journey, Customer Success starts to become overwhelmed by onboarding requests and isn’t spending enough time helping customers get the most value from the product.

GTM Stage 4. Scaling Growth Through Expansion Sales
Revenue is growing beyond $5-8M in ARR, and the organization starts to specialize by creating separate roles for Onboarding versus Customer Success. The Success team is helping customers use the product and is renewing monthly/annual contracts. But upsell activity is likely lagging – in particular from the big accounts that you had high hopes for – and your net revenue increase barely covers the churn.

 

Figure 9. The separation of Customer Success roles creates scalability

 

GTM Stage 5. Diversifying Across Markets & Verticals
You are now growing beyond $5-10M in ARR, and the organization has developed specialized go-to-market strategies based on deal size or vertical markets. We’re using the educational market as an example here: selling to individual schools versus school districts.

Figure 10. The $10M Organization with two go-to-market (GTM) models

 

GTM Stage 6. Grown-Up with Full Specialization

Figure 11. Specialized organization matching the GTM model to the business model

As you can see in Figure 11, we now have a highly specialized and scalable organization across three different market segments – for example, Enterprise (high ACV), Mid Market (medium ACV) and SMB (low ACV).

 

STEP 6. KEEP GOING!

We hope this helps you navigate the alphabet soup that the market has created of these roles, and that it provides you with a staged approach on how you can look at your organization. If you would like to keep going, we have a number of resources available for you:

Resource 1: Series of books on a more scientific approach to sales

• Book #1 The SaaS Sales Method – Sales as a Science. Provides the methodology behind SaaS sales and the growth model that fuels it.
• Book #2 Blueprints for a SaaS Sales Organization. Provides insights into a process driven approach to sales.
• Book #3 How To Get To $10M in ARR and Beyond.A scalable growth model is the result of proper design and architecture. This book provides the blueprints for each phase, with best practices from industry experts.

The specialized roles described above each have a textbook aimed at delivering value to the customer. By having your team work on each textbook, they use the same lingo and customer-centric methodology aimed at providing a client with impact, not just usage.

• Textbook Fundamentals – How to Have Customer Conversations
• Textbook Prospecting – How to Prospect for Customers
• Textbook Sales – How to Win Customers
• Textbook Customer Success – How to Grow Customers

Resource 2: A YouTube channel with 100 videos

Those wishing to start right away can find a series of explanatory videos, example role plays, and skill training on our YouTube channel.

Resource 3: Detailed LucidChart templates

There are many common processes that go along with each of these roles. We’ve defined these processes and made them available through LucidChart.

For the past several decades, most companies have used a traditional model typically referred to as the “sales and marketing funnel.” According to this funnel, the marketing function is responsible for generating a certain volume of leads at the top of the funnel, sales development is responsible for qualifying those leads into opportunities, and sales is responsible for converting those opportunities into becoming paying customers. Leads go into the top of the funnel, emerge as paying customers from the bottom of the funnel. This model does apply, but only for companies that earn most of their revenue when the customer makes that initial purchase, such as a one-time hardware purchase.

Why the funnel doesn’t work for a recurring revenue business

But there is a fundamental problem with this model: Recurring Revenue takes place outside the purview of this conventional funnel. Why? Because the funnel ends at the point when the deal converts to a paying customer…which means that the funnel does not show the recurring revenue that takes place in the months and years during which that customer uses the product they purchased, when they renew their contract, and when they expand their usage. In a recurring revenue model, 72 to 93% of the lifetime value that we get from a customer happens after the initial deal.

If you use a recurring revenue model, the funnel only leads us to the halfway point.

And further still, it often leads us to the wrong conclusion, which is the idea that “in order to grow, we need to win more deals…and to win more deals, we need to have more leads.” Many companies then decide to rely on a volume-based strategy as a result: just get more (leads) into the funnel, and more (deals) will come out.

What recurring revenue businesses need instead is a model that covers the entirety of the customer journey. This model needs to account for the actual growth loops that take place in recurring revenue, and account for them in the right place along the customer journey.

For this, companies need to apply The Recurring Revenue Bowtie. The Bowtie is already being used by hundreds of high-growth SaaS and recurring revenue companies. Instead of stopping at the halfway point, it accounts for what happens after the initial deal is made: onboarding, getting to first impact, renewal, and expansion.

Figure 1. The Recurring Revenue Bowtie. The Bowtie and associated frameworks from the Recurring Revenue Operating Model are all available open source, at www.thescienceofrevenue.com

Because of this recurring revenue model, we have to think about the customer buying process much differently than we did in the past.

Figure 2. Figure 2. Visualization of the types of sales methodologies.

Traditional Sales Methodologies

In traditional sales models, the funnel always looked the same but involved a range of different types of sales methodologies: solution selling, consultative selling, and strategic selling.

Solution Selling. The original methodology was called solution selling. A customer comes to your sales team already aware of the problem and the probable solution. The sales rep only has to assist the customer with selecting the right product. This is the shortest of the methodologies, as it involves only the first part of the funnel.

Consultative Selling. This methodology is used when a customer knows that they have a problem, but they need help understanding potential solutions. In this method, the sales rep has to educate the customer on the options as well as help them select the right product. Consultative selling typically focuses on identifying and influencing the company’s key decision maker.

Strategic Selling. The above methodologies worked well until about 2003, when the dot-com bubble burst. Cash-strapped customers suddenly weren’t interested in buying new technology. Sales teams had to get more creative, pushing innovative solutions even if a customer hadn’t identified a specific problem. One of the classic indicators of strategic selling — also known as provocative selling — is an on-site workshop for leaders of a company looking to optimize or overhaul their business. This methodology often requires executives from the seller to reach out to executives from the buyer.

The SaaS Sales Method

The SaaS Sales Method is a modern sales approach, developed to serve the unique needs of the SaaS business model. With a SaaS methodology, profit generation shifts from soon after closing the deal, to months or even years in the future, at the point when the solution provider delivers the impact that the customer was promised. In many cases, persistent use of the service and growth of the account are needed for the SaaS company to achieve profitability on that account.

The SaaS Sales Method involves all customer-facing employees (Marketing, Sales, Customer Success). It emphasizes the importance of discovering, communicating, and delivering business impact consistently across the entire customer journey. In addition to the traditional steps along the funnel — awareness, education, and selection — the SaaS Sales Method adds onboarding, use, and expansion. It looks ahead to the lifetime value of a customer, rather than only what happens before the initial contract is signed.

Marketing and sales have traditionally operated in silos, which resulted in hand-off points where qualification criteria were used. For the SaaS Sales Method to be successful, we have to transition from qualification-driven sales (usually limited to a one-time event) to impact-driven sales (happening anywhere during the relationship with the customer).

Figure 3. The difference in qualification criteria based on budget (one-time) vs. priority (anytime).

Of note here is that the SaaS Sales Method doesn’t replace all the other methodologies; instead it combines and leverages all the previous methodologies. Teams may use a provocative technique for prospecting, a consultative technique for qualification, and a solution-oriented technique for selling. That essentially is what happens today with many high velocity sales organizations.

The Seven Key Moments that Matter

There are a few specific moments in sales that require special attention. If you and your team perform well during these moments, they will work in concert to generate success. We’ve identified seven key moments that are crucial during the SaaS sales cycle.

Business results, not fit. In the SaaS Sales Method, the concept of fit is reframed as impact. For example, the sales team at a car dealership must understand that they are not just selling a car — they are selling the ability for their customers to get to work and to provide for their family. Uber realized that impact could be unbundled from the car itself. Now Uber now sells pure impact (the ability to get around) to its customers, eliminating the need to actually own or even rent a car.

Conversation, not qualification. Instead of determining whether a prospect is “qualified” for your solution, focus on the fundamental skill of conversation. Conversation is a more natural, human activity. It helps you connect with the prospect on an emotional level and uncover real, pressing pain points. Have a clear idea of whether, when, and how your solution can have an impact on the customer’s business.

Figure 4. The difference in qualification criteria based on budget (one-time) vs. priority (anytime).

Diagnosing, not pitching. Keep this in mind: “Prescription before diagnosis is malpractice.” A salesperson must first understand the customer’s pain and what they want to achieve, before recommending a solution that will benefit the customer’s business.

Trading, not negotiating. This single change in wording and emphasis can have one of the greatest effects on your cumulative sales. When two parties negotiate, typically both parties come away with having given up things that they want; both parties walk away with something they were hoping to get, but compromising on other things so that a deal could be struck. That’s not a win-win scenario. Instead of negotiating, think about what you’re doing as trading. For instance, if you’re asking for something of value from the other party, what are you going to offer to them that is of equal value. This mentality forces the seller to think from the customer’s point of view, not just their own.

Orchestrating, not onboarding. Rather than just onboarding the customer to get them to start using the product, consider this to be an opportunity to orchestrate the entire business relationship going forward. Guide how the relationship will develop, set milestones for success, and ensure the relationship is set up to provide real impact to their business.

Results, not usage. Product usage isn’t a proxy for success. You should be looking at the success of the product itself. A more impact-focused approach would be to explore whether the customer is getting the results they need from the product.

Growing, not upselling. “Land and expand” implies that the customer is like a territory that should be mapped, flanked, and conquered. Instead, expansion teams should be thinking about growing the customer relationship. It’s the impact that matters most to the customer.

Every company needs a documented sales process and sales playbook that will evolve as the business grows. There are several basic steps to consider as well as pitfalls to avoid when designing and implementing a process.

Simple Sales Process Design

Different sales teams may use different words to describe the steps in their sales processes, but the generic process shown in Figure 1 below outlines the vast majority of all sales processes that companies might use. This simple design is considered customer-friendly because it describes sales activities from the point of view of a salesperson trying to produce value for the customer rather than a salesperson trying to meet quota.

Figure 1. Standard customer-centric SaaS sales process

In this simple sales process, there are three basic areas of sales activities that you can see:

• Prospecting. Prospecting here includes three sources of opportunities or leads: Outbound, Inbound, and Targeted Accounts. Each of these sources may or may not result in a Sales Qualified Lead (SQL), which is handed off to a sales rep to become a Sales Accepted Lead (SAL), or alternatively, a No Show.
• Sales Process. The sales process labeled above includes the traditional steps of the salesperson’s conversation with the prospective customer – Diagnose, Prescribe, Assist, Recommend, Trade, and Commit – all customer-centric activities which will either result in a Referral, Go Dark, Preboard, or Win.
• Customer Success Process. The beginning of the Customer Success Process is shown here in the Preboard and Onboard steps.

Not every Go-To-Market model will require the same sales process. Depending on your company’s market segment or customer type, there will be slight differences and adjustments that need to be made.

In Table A, you can see how the sales activities vary depending on the target customer involved.

Table A. Applying the sales activities

How to Create a Sales Process and Playbook

A clearly defined sales process and sales playbook is essential no matter what stage of growth a company is in. Success in SaaS sales requires measurement, and that requires the company to be methodical.
Documenting your company’s sales method has three major benefits: First, it provides consistent guidance to sales reps about how to progress through each deal. Second, it conforms company sales activities to a process that you can easily measure. Third, it allows you to understand what is working well and what needs to be adjusted.

To create a sales process and sales playbook for any size company, follow these three basic steps:

Step 1. Determine Which Sales Process: Using Table A, decide which methodology and sales process is best suited for your business and make modifications as needed.
Step 2. Map Out the Stages. Using Table B as a guide, map out the different stages of your sales playbook.
Step 3. Define the Stages. For each stage of your sales process, define the following:

• Goal: A description of what needs to happen during that stage
• Actions: The actions that the sales reps should take at that stage to gain clear insight into the prospect/customer and the situation
• Enable: The enablement tools available to assist the sales process at that stage (documents, references, team members to bring in, etc.)
• Outcome: The single outcome that should result from the actions taken at that stage (often a confirmed meeting with the prospect/customer)

There are different considerations to focus on at each stage of the sales process. The relevant goals, actions, enablement tools, and outcomes for each stage are displayed in Table B below

Table B. A snapshot of a generic SaaS Sales process

The Sales Process and Growth Phases

A sales process should reflect where your business is in terms of growth and maturity. Keep in mind that your process will likely evolve depending on which phase of growth that your business falls into – Start Up, Grow Up, or Scale Up, as defined below.
Use these different phases to help you determine how complex and well-developed your sales process and CRM system should be.

Figure 2. A simple “solution” sales process used as a baseline in the Start Up phase

Phase 1: Start Up

At the Start Up phase, companies are likely to be storing sales activities on a spreadsheet rather than using a CRM. If your company is in this phase, you should start creating your sales process and playbook after closing your first 10 deals. That process and playbook should be updated and refined as you learn more information by navigating and closing more deals – revisit them after 20 deals, 30 deals, 40 deals, and 50 deals. After that, the process and playbook should be stable up to 100 deals.
During this phase, your sales process should have no more than 10 stages. Overengineering it will waste the sales team’s time. Use Figure 2 as a baseline template; it is based on the learnings of hundreds of companies.

Common Pitfalls at the Start Up Stage

Pitfall #1: No sales process. These early-stage companies are usually in Founder Sales mode, so every deal closes differently. While it may be clear to the founder how the process works, others on the team may be uncertain.
Solution: Search company emails and calendars for the customer’s name so that you can review a history of the relationship, how it started, and the meetings you had. Try to glean common themes and language from each deal that the company closes so you can document it.

Pitfall #2: Self-centered sales process. Your sales process feels sales-y (e.g. “Qualify, Demo, Negotiate, etc.). Sales reps that receive this type of guidance will build a company and process that takes more from the customer than it gives, which ultimately results in unhappy customers.
Solution: Look at the key actions in each step of your sales process and ensure they provide value to the customer. For example, the term “Qualifying” is typically more focused on determining the customer’s situation rather than learning about the customer’s true underlying issues or pains. Replace “Qualify” with “Diagnose” and teach your sales team how to diagnose the customer’s pain by asking the right kind of diagnostic questions. Do the same with each step in your sales process to make it more customer-centric.

Pitfall #3: Overly detailed sales process. Over-designing a sales process will kill deals. Not every step and criterion needs to be identified. This will translate into dozens of fields to complete in a CRM. Sales reps will end up spending too much time entering data rather than talking to customers.
Solution: Keep your sales process simple at first. Use the baseline template in Figure 2 and make changes only when you find it necessary.

Figure 3. Scaling up the sales process to become more customer-centric and focused on outbound opportunities

Phase 2: Grow Up

Businesses in the Grow Up phase are usually outgrowing spreadsheets so they will need to implement their first CRM to help with the sales process.

At this point, your CRM can be something simple and relatively inexpensive, like HubSpot, which is free, or ProsperWorks, which is G Suite-based. A more expensive and complex CRM like Salesforce is not typically worth the commitment yet as it requires a significant amount of time and resources (including the help of a Salesforce consulting partner) to get it up and running.

Additionally, the sales process of a Grow Up-phase company is not completely set yet. As you build up your sales team, you will continue to learn more and make changes, so you need flexible, simple tools that are easy to manage. Salesforce is simply too involved at this phase.

These companies should also avoid exporting data from their chosen CRM to a spreadsheet or slide for reporting uses. For both internal meetings with the team and board meetings, simply use your CRM’s reporting functions. While it may take more time to get accustomed to, it lessens last-minute frustrations and errors because the numbers come directly from the source.

The Grow Up phase is the time to start holding your team accountable for executing the sales process, but you still need to be flexible and allow room for change. Review and update your sales process every quarter to make sure it still meets your company’s needs. Use recordings (or calls, demos, etc.) to streamline the process as much as possible.

Common Pitfalls at the Grow Up Stage:

Pitfall #1: Failure to analyze deals against a process. Your company keeps winning deals, but the sales reps do not review the deal to learn why the customer purchased your solution and how to improve the customer experience.
Solution: After a sales rep closes a deal, ensure that they look back over the process at each step to understand what happened, why, how to replicate it, and where there is room for improvement.

Pitfall #2: Expecting a new sales rep to establish your sales process. Your first sales hire will have experience in sales, but he or she may not know how to build a sales process from scratch.
Solution: The founder should understand these limitations and meet with the sales rep to build the process together (using Google Slides, Docs, Sheets, etc.). Because the founder has knowledge of the target customer and the sales rep has knowledge of efficient sales, their two areas of expertise combined will contribute to the creation of a better sales process.

Pitfall #3: Selling to several different types of customers. When your business sells to all types of customers – from individuals to global companies – you run the risk of spreading your resources too thin and doing a mediocre job of serving every customer.
Solution: At this stage, it is important to focus intently on the types of customers that you want to serve. Be purposeful and consistent in determining your target users. This way, you can know and serve a more focused customer segment well.

Pitfall #4: Closing deals but failing to provide post-sale support. Your company is closing deals but it has no way to handle customer needs, issues, or complaints that arise after the sale.
Solution: Customer success post-sale is just as important as the sale itself, if not more so. If the company does not yet have any dedicated Customer Success team members, create a plan with your product/engineering team for how you will address any customer issues that arise after the sale.

Figure 4. Fit and Pain are reversed on inbound vs. outbound processes, resulting in the wrong action

Pitfall #5: Using the wrong sales process. There is a flaw in your process that leads your sales reps to approach prospects in the wrong manner. For example, when a prospect reaches out via your company website, a sales rep immediately responds with a series of actions – call, voicemail, email, etc. (Because time is of the essence, some companies aim to do all of these actions within minutes.) As a result, the prospect feels intimidated by the aggressive follow-up, and the sale becomes more difficult. A map of these actions is displayed in Figure 4.
Solution: Sales reps should learn that all inbound leads (MQLs) are not created equal. This time-sensitive approach is being used in the wrong situation. For instance, if a prospect downloads a detailed research paper from your company website and provides an email address in an online form, the lead may be wrongly categorized as an inbound marketing qualified lead (MQL). When a sales rep immediately and repeatedly contacts that lead, they are acting as if the prospect has already expressed a pain, which is not the case. In this type of situation, this MQL should have been sent into the outbound sales process where research should be done to determine if the prospect actually has a pain that the company can solve. See the differences between true inbound leads and quasi inbound leads in Table C.

Table C. The difference between “true inbound” and “quasi-inbound” leads

Figure 5. This process adds targeted account outreach, which is often associated with provocative selling. In this phase, the sales process now extends to customer success for a full customer-centric relationship with each account.

Phase 3: Scale Up

Once in the Scale Up phase, a company will need to secure its sales process and CRM. This is the time to invest in correctly building out the platform that will be used to scale the business. Metrics should be decided upon and dashboards should be finalized.

You should consider spending between $5,000 and $10,000 to set up the CRM and create dashboards. Before making the purchase, however, discuss with peers in your specific industry or niche market to determine which CRM is best for your business. Upon installation, a CRM consultant will need to understand your sales process, so by this time you should have your sales playbook ready to assist them.

Your business may now be addressing new segments of the market as well. For example, you may have moved from selling only to SMBs to targeting mid-market customers. Each of these new markets should go through the same sales process development steps discussed above, with updates every 10 deals, 20 deals, 30 deals, and so on. Adjust the stages, timing, and tactics at each step so that your company continues to add value for customers throughout its new process.

Common Pitfalls at the Scale Up Stage:

Pitfall #1: Retaining the same sales process. Your company has expanded into different markets, segments, or verticals, but it has kept the same sales process for all of its customers.
Solution: New segments of the market behave differently. If your company used one sales method (such as Consultative) to sell to SMBs, you will likely need to change your process. For example, selling to mid-market customers is different because your sales will now require more people to approve the process, a longer sales cycle, and a more structured purchasing process. To remain customer-centric and continue bringing value, your company must create a sales process that fits each segment of the market that it targets.

Pitfall #2: Setting up the CRM yourself. While you might be capable of setting up a CRM yourself, the margin for error here is great, as are the frustrations of having to redo it later if you make a mistake. This can lead to a lot of wasted time and resources.
Solution: Use a professional CRM consultant. For instance, if you are setting up Salesforce, you should bring in a proven Salesforce consultant to ensure that everything is installed correctly the first time.

Pitfall #3: Using a niche CRM. You attempt to use a lesser known CRM to attain certain benefits like unique customizations, cost savings, etc.
Solution: At this stage, your company should commit to a standardized CRM that provides the best infrastructure for your business. The benefits you receive from installing an easy-to-use CRM that is familiar to sales reps and sales operations teams far outweigh any customizations you might get from a niche CRM.

Jacco J. van der Kooij, Founder Winning by Design, Palo Alto, California

Traditional B2B marketing and sales frameworks such as the sales funnel, lead qualification and sales methodologies do not achieve the desired results in SaaS businesses.

Definition of the Frameworks

A sales methodology describes the process of how to acquire revenue, and a qualification methodology describes what you are going to measure. When you combine lead generation, lead qualification, and customer acquisition processes you get a system. In marketing and sales, this system historically has been referred to as the funnel. Recurring revenue models such as SaaS leverage a client’s success to create compound growth and need their own framework.

SaaS Sales Has Outgrown the Funnel

In 1898, Elias St. Elmo Lewis developed a model that mapped a theoretical customer journey from the moment a brand or product attracted consumer attention to the point of action or purchase. He created a four-stage process Awareness, Interest, Desire, and Action, or AIDA [Ref. 3.]. This term was popularized when enacted in a scene by Alec Baldwin in the movie Glengarry Glen Ross [Ref. 9.]. In the AIDA model, revenue and profits are realized shortly after the client signs on the line which is dotted.

Many sales and marketing organizations still use a derived version of AIDA today: Namely, the marketing and sales funnel. The lines between marketing and sales have blurred over the years, but the funnel and its shape remain the way how we describe and visualize the process. Around 2008, a new business model became popular, in which the upfront purchase and profits were exchanged in return for a recurring revenue stream.

Up to this point, software was sold using three to five-year contracts, measured in hundred thousand to millions of dollars, and often paid upfront.

The recurring counterpart of this model, which we now know as SaaS (Software as a Service), offered the exact same impact at a fraction of the price by replacing the perpetual revenue with a usage, monthly, quarterly or annual revenue. In the years that followed, a refined version of the opportunity stages became the basis of the sales funnel [Ref. 7].

Historically, there has always been a gap between the strategy and sales implementation [Ref. 4], but never more so than with a recurring revenue model. As you can see in Table 1, with the perpetual B2B model, 60% of the total revenue on a deal is secured on the win and the remaining 40%, from automatic upgrade and support renewals in future years. What is more telling is what happens in the recurring B2B model, where only 18% of the revenue is secured on the win.

Table 1. Distribution of revenue across five years of a perpetual sales model

Perpetual		Year 1	Year 2	Year 3	Year 4	Year 5	Total
Purchase price	$120,000	$120,000
Upgrade & Support	20%	$24,000	$24,000	$24,000	$24,000	$24,000
Annual Revenue		$144,000	$24,000	$24,000	$24,000	$24,000	$240,000
% of total revenue		60%	10%	10%	10%	10%

 

Table 2 shows that with a recurring model, 82% of the total revenue of a single deal comes from future revenues. The lion’s share of profit in this recurring B2B model has shifted beyond the original win [Ref. 10]. As a result, recurring sales have outgrown the traditional sales funnel. Businesses that are based on a recurring revenue stream require a new model. This model is referred to as the bowtie model.

Table 2. Distribution of revenue across five years of a recurring sales model

Recurring		Year 1	Year 2	Year 3	Year 4	Year 5	Total
Annual Price	$24,000	$24,000	$25,200	$26,460	$27,783	$29,172
Annual Expansion*	5%	$1,200	$1,260	$1,323	$1,389	$1,459
Annual Revenue		$25,200	$26,460	$27,783	$29,172	$30,631	$139,246
% of total revenue		18%	19%	20%	21%	22%

*The different models provide a very different growth model. The perpetual model is for low volume/big deals, whereas recurring models grow at an accelerated rate due to its lower price and shorter-term contract.

 

The Bowtie Model

The origins of the bowtie model lie in the travel industry, where it has been used since its inception in 2009 [Ref. 20.]. In the bowtie model, the knot of the tie is the point at which a ticket purchase is made. To get to this point, the traveler has narrowed down the destination, date and price options, and made a purchase.

What follows is growth from ancillary revenue streams such as seat upgrades, baggage, rental car, and hotel but also credit card fees. Before 2009, there was no model for this, and thus no process to capture the ancillary revenues. Today ancillary revenues from credit card fees alone have become a billion-dollar business, and for many airlines, an important profit center [Ref. 5.].

A similar situation occurs in SaaS subscription businesses. In SaaS, the majority of the profits often occur 12 to 18 months following the original commitment [Ref. 1.]. Similarly, the traditional sales funnel does not model how to capture this future revenue.

If you apply the bowtie model to SaaS, it must cover three critical stages beyond the original commit: The installation stage aimed to achieve first impact; the impact stage where customers achieve the desired impact and the recurrence of the impact; and the activity of growing the business together with your client to expand the impact beyond its original scope.

The last two stages create a loop resulting in a compound growth engine. In comparison, a funnel was designed to achieve linear growth. To achieve compound growth, we differentiate between two different methodologies that are often confused with each other:

• A sales methodology – How to acquire the revenue
• A qualification methodology – What to measure and identify qualified opportunities

Let’s start with explaining what a sales methodology is.

 

Sales Methodologies Governing B2B Sales

There are a number of B2B sales methodologies that govern B2B sales focusing on acquiring revenue. Mapping each of these methodologies against the bowtie model provides insights into how they differ.

Transactional Sales (TRX): A price/shipment-based sales methodology where the client prefers to have as little human involvement (preferably none) as possible. Think of buying something on Amazon. Price, simplicity, and speed of purchase are key decision factors.

Solution Sales [Ref. 14]: The client understands the problem very well and identified two to three options. The client is looking for a seller to answer a few pointed questions, one of which can be the decisive differences over competitors. When a company invested in a unique feature, feature selling is a must!

Consultative Sales [Ref. 15]: The client realizes they have a problem but does not understand the full impact the problem has on the business. Through a series of diagnostic questions, the seller establishes value across the organization and develops a sense of urgency to free up more budget and/or prioritize the budget.

Strategic Sales [Ref. 16]: Client does not realize they have a problem, and a seller – a true expert in this field – provokes a senior executive by reframing the problem or highlighting an immediate opportunity. The key is to get an executive buy-in early on, and to work with the client to identify the impact it can have on their business.

Account Based Marketing [Ref. 2]: When selling a commonly known solution to a commonly known problem (think of a CRM, ERP or MAS), the seller targets a number of decision-makers, influencers and advocates at hand-picked companies with personalized messages and content through marketing and advertising campaigns. It is key is to be relevant to each individual person.

It is important to realize that none of the aforementioned B2B sales methodologies actually address the compound growth engine which is critical to the growth of recurring revenue businesses. Instead, many revenue leaders maintain a maniacal focus on winning more deals, which ironically prevent them from growing the business at a fast rate.

Over recent years, there is one specific methodology that has actually leveraged the growth engine with great success and benefited from the compound impact it creates:

Product Led Growth [Ref. 12]: This is a B2C like methodology that can be used with a high-quality product and/or service experience in B2B. It encourages customers to contribute to marketing the product by using their own social networks to share and amplify the product. A basic example of this is giving a free month of service to an existing user if two of their friends sign up as well. The Product Led Growth (“PLG”) methodology applies to a business that is based on a high amount of deals per month with a low contract value. Key to this methodology is to have a high-quality product, and it further helps to have a very unique feature. Products such as Slack, Zoom, and recently Superhuman, are experiencing the benefits of this methodology. The downside is that this requires the momentum of 100,000s of users which doesn’t apply to most B2B applications and platforms.

Combining the above best practices, a new methodology can be designed for companies that sell B2B applications and platforms, at a much higher contract value, and are based on a recurring revenue business model.

SaaS Methodology: This methodology applies to B2B applications and platforms where a large percentage of the customer lifetime value is realized after the initial sale [Ref. 10]. This methodology modernizes and extends prior marketing and sales methodologies but does not replace them. It does so by adapting these methodologies to higher velocity sales cycles. The methodology includes the processes for demand generation and prospecting as well as post-sales processes such as customer success and account management. A hallmark of the SaaS methodology is to not only make a customer aware of an innovative way to solve the challenge they are experiencing, but to show the impact of the solution in a way that is coordinated and ongoing.

In recurring business, by definition, if a client churns before a profit is established, a loss is made. This makes calling on the right client extremely important. The process of calling on the right client historically is referred to as qualifying. Next, several qualification methodologies are described and how they differ compared to sales methodologies.

Qualification Methodologies That Govern B2B Sales

Think of a marketing and sales methodology as a treatment prescribed by a doctor. When you have an allergic reaction to poison oak, a doctor may prescribe you with a treatment to take two pills per day, right after a meal, for the next five days. In this example, the qualification methodology would be to establish if a) the treatment will have the desired impact, and b) if your body is able to deal with such a treatment.

The actions taken to qualify will likely include measurement of blood pressure, but also a response to a previous treatment. Today, qualification in the marketing and sales funnel happens mostly in two particular situations: lead qualification, and opportunity qualification.

BANT is one of the most frequently heard qualifications methodologies [Ref. 6]. It was originally developed by sales teams at IBM during the 60s. They used BANT to recognize buyers for their mainframe computers versus those who only wanted to see a demo of these enormous machines. BANT is an acronym for Budget, Authority, Need, and Timeline of the decision. Historically, BANT and other qualification methodologies such as ANUM, which stands for: authority, need, urgency, and money, match up well with the solution sales methodology [Ref 14].

CHAMP and FAINT [Ref. 8] are qualification methodologies that add qualifiers around the ability to identify challenges a client experiences and make it line-up well with the consultative sales methodology [Ref 15].

MEDDIC is perhaps the qualification methodology that is found the most common in recurring revenue businesses is MEDDIC [Ref. 11]. And for good reason, created by Dick Dunkel and Jack Napoli during the 90s, MEDDIC differs in that it adds a qualifier in identifying if an impact can be made on a client’s business.

There is no qualification method that is better or worse; what determines the success of any given qualification methodology is how it is applied. For example, using BANT to qualify a CEO in a provocative first-call is doomed for failure. In a similar vein, peppering a client with a series of questions while they are ready to buy is not going to yield the desired result either. What is missing is a qualification methodology that matches up with the subscription business. In particular:

#1. Does the client have an opportunity that can positively be impacted by the seller?

#2. Can the seller help the client achieve the impact in the timeframe the client needs it?

#3. With reasonable certainty, will the impact for the client result in a profit for the seller?

#4. What’s the growth potential beyond the original impact?

It’s clear to see what ties these four questions together: impact. Impact is the standardized qualifier that matches up with the SaaS methodology. Where recurring revenue is the result of recurring impact for the client.

The Impact Framework

There are two ways that impact is perceived: 1) Rational Impact, which is measurable using facts and figures, and 2) Emotional Impact, which is mostly about feelings and experiences. Research shows that people tend to make an emotional decision then validate that decision with facts and figures [Ref. 18].

Emotional impact benefits an individual first, whereas rational impact benefits a corporation first. For example, if a decision results in one-million-dollar savings per year for a company, it is unlikely that the savings are going to find its way into the pocket of the decision-maker.

However, an automated dashboard will directly reduce headaches for the person manually creating reports every weekend. This means that sellers must not only identify their ideal customer profile, but also the type of impact that is most important to each person they are working with, and customer success must ensure this impact is achieved over time.

Organizations have to extrapolate the impact across all parts of the business using an Impact Framework that acts as a qualification framework across all stages.

 

Findings

Finding 1. The traditional B2B marketing and sales funnel and its qualification methodologies were built for a perpetual business and do not address the needs of a recurring business model (SaaS).

Finding 2. In SaaS, growth comes from recurring revenue. Recurring revenue is the result of recurring impact the customer experiences and is not the same as recurring usage as commonly measured by sellers.

Finding 3. To help customers accomplish a recurring impact, additional stages must be added to the process. Recommended stages to add are: Achieve Recurring Impact and Growth of Impact. This is depicted with a bowtie.

Finding 4. All customer-facing roles must work of the same uniform methodology across all roles and departments, not one that is dictated by one department or is based on the use of a specific software tool.

Finding 5. Qualification is not something that should happen once but throughout the entire process. The qualification methodology must match the sales methodology. For businesses dependent on recurring revenue, an impact-based framework is recommended.

Suggested Actions

Here are a few suggested steps:

Action 1. Bring together a team of representatives from all customer-facing roles to help identify the Rational and Emotional Impacts

Action 2. For each department, create a plan to qualify based on the impact and what action to take.

Action 3. Create a hand-off process between departments based on Impact

Action 4. Codify the agreed actions for each department into your tool stack.

Action 5. Measure and report the number of new leads generated by existing clients.

References

Ref. 1. 2018 Expansion SaaS Benchmark (slide 30) – By K. Poyar and S. Fanning of Openview Advisors

Ref. 2. Account Based Marketing by Wikipedia

Ref. 3. AIDA Definition by Wikipedia

Ref. 4. Aligning Strategy and Sales: The Choices, Systems and Behaviors that Drive Effective Selling by Frank V. Cespedes via Amazon

Ref. 5. Airlines Make More Money Selling Miles Than Seats, by J. Bachman, June 2017, via Bloomberg

Ref. 6. BANT Opportunity Identification Criteria by IBM

Ref. 7. What is a Sales Funnel? (And How is it Changing?) via The 360 Blog, salesforce.com 

Ref. 8. FAINT – The New Definition of a Qualified Prospect by Mike Schultzs, via RAIN Group blog

Ref. 9. Glengarry Glen Ross, An examination of the machinations behind the scenes at a real estate office. Released Oct. 2, 1992 by Newline Cinema

Ref. 10. How Adobe, GoPro, Microsoft, and Gillette Saved Their Businesses Through Subscription Revenue by PriceIntelligently via blogpost

Ref. 11. MEDDIC Definition by SalesMeddic via their website www.salesmeddic.com

Ref. 12. Leading with your product is the most effective GoToMarket Strategy by M. Alon via Slideshare

Ref. 13. Seven Sales Qualification Methodologies by Jeremy Donovan via Slideshare

Ref. 14. Solution Selling Definition and Research by Nadia Landman via blogpost on web-site

Ref. 15. SPIN Selling by Neil Rackham via Amazon

Ref. 16. The Strategic Sales: Taking Control of the Customer Conversation by Matthew Dixon and Brent Adamson via Amazon

Ref. 17. The Power of Habit: Why We Do What We Do In Life and Business by Charles Duhigg via Amazon

Ref. 18. The Power of Persuasion: How We’re Bought and Sold by R. Levine published in 2003 via Amazon

Ref. 19. The SaaS Sales Method: Sales as a Science, by Jacco J. van der Kooij, via Amazon

Ref. 20. Updated Bow Tie and Lead Time Numbers by Martin Collings via Shearwater Blog May 14, 2009

Ref. 21. Why CHAMP is the new BANT. – By InsightSquared, via Blogpost.

Presentation Problems – The Demo Trap

Your customers ask for a demo because they believe that seeing the product will help them make a decision faster than talking to a sales person.

We salespeople like to run demos because obviously our solution is awesome, and the customer will find it irresistible as soon as we show them the good stuff.

But here’s the trap: if I show a generic demo, they may lose interest. But if I start by asking questions to learn what’s relevant, they may feel like I’m withholding something valuable.

Catch 22.

 

The Best SaaS Sales Technique – Diagnose before prescribing

We all want is to get to yes or no as quickly as possible, but the customer vs. sales approach seem to be polar opposites.

When you’re selling B2B SaaS solutions leveraging a Solution, Consultative, Strategic or a SaaS Sales Methodology, you must align your solution to your customer’s desired business outcome.

If you don’t, customers will churn, and that is expensive.

This is a legacy issue caused from the misuse of sales decks regardless of what they uncovered during the Perfect Discovery Call.

Demos need to be more than a well choreographed pitch. Elon’s Tesla and Steve’s iPhone can get away with it because they are selling direct to consumer through a transactional sales process.

Most sales demos suck because they are treated as a monologue – and it’s the same for every potential customer. The best salespeople use a demo to continue to diagnose through the discovery phase.

 

The problem: Engagement Gap

We love talking about ourselves – and as Dale Carnegie described in 1936 – the best way to get someone to like you is to ask them about themselves, listen and be responsive to what they say.

As counter-intuitive as it seems – stop talking so much about yourself during a demo. Instead, paint the picture of your solution in your customer’s context based on what they are trying to solve.

When it comes to the demo – salespeople tend to go on autopilot. We become enthusiastic and tend to speak faster because we’ve done this part of the call a thousand times. It’s showtime!

Your customers are engaged when you first pull up a screen or begin to show something. They lean in, they listen and their curiosity is piqued.

Then something happens. Maybe you said something that didn’t resonate, maybe a text/email/slack popped up on their phone. Their attention wanes. That’s natural.

But plowing through your demo showing page after page is not the solution.

 

 

Distractions are normal in a technology driven workplace. One example on why we are prone to checking our email during a monologue is that the average speaker communicates 110-150 words per minute – but we can read 200-300 WPM. That means we can comprehend at almost double the rate – so we get bored. Unfortunately, the answer is not to just speak faster. 

The best way to increase someone’s engagement is by asking an open-question. When your customer answers a question they need to spend 100% of their brain power – or they will sound distracted.

• Pro-tip – use video. We’re visual beings, and it’s much easier to not get distracted if we have someone to look at!

The solution: We hate being sold to – but we love to buy

Start by summarizing your diagnosis of your customer. Help prioritize the pain they are trying to solve. Then only show them how you can help solve their top priorities.

Your demo can’t sound like a generic pitch. Share a story about someone just like them instead of telling them you can solve their problems.

To influence someone, don’t tell them what to do. Share how someone just like them had the same problem, and how they solved it. 

Here is an easy framework on how to give a sales presentation that your customers will love.

Here’s how to structure a memorable demo to drive urgency in the deal.

Step 1: Summarize your diagnosis and prioritize their pain

Most old-school sales tactics started off with setting the stage about ourselves. But customers don’t care about that anymore – the internet is rich with enough information they need to learn about you. 

They care about how you can help solve their problems.

Instead of showing the 50 slides of your sales deck starting with your company history and the logo-salad of all your best customers, focus only on the 3 most relevant parts of your solution that will help provide the biggest impact.

Step 2: Set the Stage

Pull up your screen. Make sure it’s clean – no random tabs/notifications or things that could distract your customer. Orient them to what they are seeing – give them a quick lay of the land. If you don’t, they will be trying to absorb everything and will be distracted.

Focus on the key part of the screen you want them to look at.

• Don’t move the cursor all around – you’ll make them feel like a cat watching a red laser

Step 3: Show Your Solution in Your Customer’s Context

When you demo a feature – speak slowly, try to use their language

Before changing the screen, ask a question

• Ask if there is anything they see on the screen they want to click on.

Demos are great for diving deeper – we’re always trying to understand the impact.

• Do you see how what I showed you solve the pain
• What impact would that have on your business
• Can you see yourself (or your team) using this
  • Realtors – come home and smell the cookies, drink a glass of wine with the sun setting

Conclusion

Customers won’t remember all the specifics of your solution, but they will remember how you made them feel like you solved their problem, and showed them how.

Help them make the connection that you understand their pain and desired outcome. Your demo is a tool to progress the conversation and go deeper into your diagnosis. After all, the outcome of a demo when executed well should result in the desire of the customer to receive a proposal.

You have helped other customers like them solve that exact same issue. You are an expert.

 

Why we need it. How to structure it. What actions to take.

Scaling sales does not just happen by hiring more sales people. Over the past years I have seen that to scale a sales organization you need a scalable sales design.  In this post I will share insights how to setup a scalable sales design.

 

The Foundation: A Customer Centric Methodology

First of all, any modern sales organization must be founded on a customer centric methodology. What is that? In short this is an organization where marketing, sales AND customer success work together to help their customers solve their problem, to assist them in the selection, guide them with best practices during purchasing, provide swift onboarding, and share use-cases of other clients to establish ongoing use.  Only based on a solid customer centric foundation can a modern sales organization scale.

Elements of a Scalable Sales Organization:

• Process: Build the right process (a series of best practices gained from working with clients, strung together in the right order)
• Tools: Use tools to optimize the process and that act as a force multiplier (efficiency, effectiveness, UI/UX etc.)
• Content: Enable the client with insights such as use-cases, metrics, and so on that can be distributed online
• Skills: Train the team on excelling in online sales skills.  The training must be frequently, persistent, and include expert and peer based training
• Organization: Build a modern and agile organization that can scale

And one more key element:

• Data: Develop a data enabled organization, and make metrics driven decisions that use A/B testing.

Why do we need it?

Conventional sales organization design growth around the number of Account Executives needed per month, multiplied by their production in WINs, at a sustainable MRR/WIN to hit the growth target.

MRR per month = Number of AEs x WINs/AE per Month x MRR/WIN

Many sales leaders create spreadsheets that look something like the image below, in which they stack Account Executives (AEs) over twelve months until the growth goal has been met.

 

Why does AE stacking not work in SaaS sales?

Most subscription sales operates at a much higher velocity vs. conventional B2B sales —say 30 to 90 day sales cycles, and with a much lower annual pricing — usually between $6,000 — $60,000. To grow such a business requires a sustained volume of deals ranging between 10–100s of deals/month.

Compare this to a conventional account executive that wins 1–2 deals per month but at a much higher annual price often ranging between $100k-$1M.  In the conventional model production of the AE is the primary contributor to success and thus the above headcount spreadsheet determines the number of AE’s needed. Over time many SaaS B2B organizations adopted this conventional growth model to scale their business as this is how they were taught to scale sales during the era of IT/IS sales.

The challenge with this model is that in subscription sales to generate sales, you need to win deals or rather MRR in volume.  And this requires other critical functions— especially in a high velocity environment where AEs are winning deals in 30 days or less.

As many of you know, today we need SDRs to develop 3–4 x the amount of pipeline (SQLs), a marketing team is needed to generate 10–50x the amount of inbound leads (MQLs) for SDRs to convert in pipeline, and Customer Success Manager are needed to onboard the clients and achieve the first value milestone so that customers do not churn before they generate MRR.

As you can see from the distress picture we are running into a scalability problem as the flow is disturbed. To scale the business a design is needed for high velocity/high volume/lower ACV.  This design must scale other key functions in relationship to growing the MRR.  This is where a sales POD comes in.

To Scale Sales a Scalable Sales Organization is Needed

What is a sales POD

A sales POD combines individuals in different sales functions that are directly dependent on each other but group them together as a team.

This group or POD is focused on making the customer successful from Lead to First Value, and they are often focused on a vertical market/region etc. to be most relevant for their customers.  This way the SDRs, AEs and CSMs only need to learn about a subset of use-cases but they get to know these use-cases in a lot more depth. For example selling to MedTech, or EdTech or FinTech.

PODs are metrics driven

The picture below depicts an example of the metrics of a Sales POD structure.

The arrows depict the dependency of the various roles and the flow of the business. In this example: every AE needs ½ a SDR and ½ a CSM so that the POD generates $1.44M in new ARR per year based on the ACV of $120k.  Not taking into account churn or up/cross sales.

If I add up the cost of this POD = 2x SDR ($80k*) + 1x AE ($120k*) + 1x CSM ($100k*), I get an idea of the RoI this POD is operating at. In this case:

• ARR (@80%**): 0.8 x 12 months x $10k/month x for the next 12 months = $1.152M
• COST: $80k + 2 x $120k + $100k = $420k
• COST/ARR = 36%

*Bay Area Salaries as of January 2016, **PODs are designed for a 100% but should only operate at 80% capacity 

Based on specific business companies may need to add other key functions to this POD such as:

• Web developer/Sales Engineer: Someone who helps with the technical sales, although this is more common in larger SaaS deals
• Demo jockey: A person who does nothing but excel at giving online demonstrations to prospective customers

Scaling Revenue by Scaling PODs

In this case to grow to $30k in MRR you need to have 3 fully ramped PODs.

The above model also depict how to scale the business from an Organizational perspective. As new PODs are launched, top performers from POD 1 will be (promoted) tasked to setup POD #2 and #3.  This is a scalable model that allows for rapid scaling. We will address in future episodes how to leverage a POD infrastructure.

A couple of pointers:

• Per @Talha Husayn’s (see comment section), early stage companies can use this model to kick-start. As outlined in the visual below they’d kick-start with 2 SDRs and use 1 AE.  As marketing comes on and inbound grows on of the SDR positions promotes (with applicable training please) into an AE position. E.g. the 2:1:1 becomes 1:2:1.  From this model you can then grow to a 1:1:1 (Phase 3a) which is more common for larger ACV platform sales that need more depth and involvement from the CSM vs. the 2:3:1 (Phase 3b) which is more applicable for a simpler product such as a chrome extension that has little need for a CSM (may even go 1:3:1).

 

• Make sure you know how long it takes to ramp a POD to achieve 80% (in days)
• POD structures can differ e.g. operating at a lower cost 2 SDRs/3 AEs / 1 CSM (2:3:1) or higher cost 1 SDR / 1 AE / 1 CSM (1:1:1)
• Use capable leaders to start a new POD regardless of their role.  E.g. Not just AEs need to be the POD leader, CSMs and SDRs can also be used to start a new POD as long as they have leadership potential/experience
• Involve POD members in the hiring of new team members and firing of non performing members
• Don’t just assign PODs to dedicated zip codes for an entire year. Instead follow your business – assign PODs to vertical markets month by month as the business dictates.

Learn more

Harvard Business Review recently did an article on a related topic, indicating the importance of the sales process over hiring star sales people.  You can read more about it by following the link below: Hiring Star Sales People Isn’t The Best Way To Grow Sales.

 

Next steps

If you want to get involved we frequently offer Sales Design workshops at Storm Ventures where these and many other best practices of building a scalable sales organization are shared. Since these events are local we have captured the key concepts in videos -you can find them at the Storm Sales Mentorship portal