Sales mistakes that can kill your saas business and how to avoid them

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  • Sales Mistakes that Can Kill Your SaaS Business

    and How to Avoid Them

    Mark Roberge

    Senior Lecturer, HBS

    Former CRO, HubSpot

    Michele Law

    Former CRO, Castlight Health

    Former COO, OpenDNS

  • Mistake #1

    Pre-mature focus on growth

  • Mistake #1: Going into Growth Mode Too Early

    Product Growth

    Sales Team

  • Understand Path to the Growth Phase

    Product Market/Fit

    Transition to Growth

    Growth

    Where you are in this process impacts these decisions:When to hit the gasWho to hire and whenWhen to use metrics and whyHow much money to raiseHow much to invest in scaling Sales and MarketingWhen and who to hire as your first VP Sales, VP Marketing, VP Customer Success

    Learn/Iterate

    Business Model/ Go To Market

    Ramp

  • Customer Success -> Unit Economics -> Growth

    #1: Customer Success[WAU, NPS, Churn]

    Learn/Iterate -------> Measure/Monitor

    #2: Unit Economics[Payback, LTV/CAC, Magic #]

    Learn/Iterate -------> Measure/Monitor

    #3: Growth[Revenue, Customer Count]

  • Mistake #2

    The first sales hire

  • Poll: Who should your first sales hire be?

    25 years experience in your industry

    Currently VP over $200 Million in sales

    #1 Sales Rep out of 500 reps

    In your industry

    5 years sales experience

    10 years sales

    experience

    Outside of your industry

    Recently promoted to

    Sales Manager

    Entrepreneur outside of

    your industry

    Sales background

  • Understand Who and When to Hire

    Product Market/Fit

    Transition to Growth

    Growth

    Founders/Product Focused CEO

    Sales Manager/Director + Customer Development

    VP Sales

    GeneralistGeneralist +

    SpecialistSpecialist

    CompanyPhase

    Who

    Profile

  • For early sales calls, market feedback is

    more valuable than revenue and customers

  • Mistake #3

    Ignoring Sales Impact on Customer Success

  • Churn was Rooted in the Sales Compensation Plan

    2007

    $500 per customer

    2x commission on revenue above quota

    4 month clawback

    * Data has been altered from actual HubSpot data for the purposes of this presentation

  • Customer Churn by Monthly Cohort

    12

    0.0%

    2.0%

    4.0%

    6.0%

    Cu

    mu

    lati

    ve C

    usto

    mer

    Ch

    urn

    %

    * Data has been altered from actual HubSpot data for the purposes of this presentation

  • Customer Lifetime Value by Salesperson

    * D

    ata

    ha

    s b

    ee

    n a

    lte

    red

    fro

    m a

    ctu

    al H

    ub

    Sp

    otd

    ata

    fo

    r th

    e p

    urp

    ose

    s o

    f th

    is p

    rese

    nta

    tion

    Month

    ly C

    usto

    mer

    LT

    V p

    er

    Sale

    spers

    on

    Individual Salespeople

  • 2007

    $500 per customer

    2x commission on revenue above quota

    4 month clawback

    2009

    1st LTV tier = $1000 per customer

    2nd LTV tier = $750 per customer

    3rd LTV tier = $500 per customer

    4th LTV tier = $250 per customer

    2012

    50% commission on 1st month payment

    25% commission on 6th month payment

    25% on 12th month payment

    Bonus on install base growth (New MRR + Upgrades Churn)

    6 month clawback

    * Data has been altered from actual HubSpot data for the purposes of this presentation

    Reducing Churn with the Sales Compensation Plan

  • The Sales Compensation Plan is a Powerful

    Vehicle to Drive Customer Success

  • https://hbr.org/2015/04/the-right-way-to-use-compensation-2

  • Mistake #4

    Aligning GTM by Function Rather than Buyer

  • Following Common Practice, We Organized by Function

    MARKETINGSALES SERVICES

    Generate inbound leads Convert leads to customers Make customers successful

    Campaigns focused on Mary

    and Erin

    Weekly Marketing status

    meetings

    Targeting company-wide

    lead goals

    Persona-specific sales

    processes

    Weekly sales status

    meetings

    Targeting person-specific

    revenue goals

    Product-specific services

    process

    Weekly services status

    meetings

    Targeting product-specific

    customer success goals

    Deliver Leads Deliver Customers

  • but Transformed to a Buyer-Persona Org Structure

    Owner Ollie Team(1-100 employees)

    Marketing Mary Team(100-2,000 employees)

    Enterprise Erin Team(2,000+ employees)

    Group Sales & On-Boarding 1-to-1 Sales & On-Boarding Multi-Level Sales & On Boarding

    Ollie

    Marketing

    Ollie

    Sales

    Ollie

    Services

    Mary

    Marketing

    Mary

    Sales

    Mary

    Services

    Erin

    Marketing

    Erin

    Sales

    Erin

    Services

    Replaced marketing, sales, and services meetings with buyer persona meetings

    Re-organized seating around cross-functional buyer persona teams

    Customized marketing SLA, sales effectiveness, and customer success metrics to persona

  • and held each buyer persona unit to our KPIs

    Metric Ollie Mary Erin

    LTV/CAC 5.2 11.5 19.0

    CAC $6,250 $15,500 $28,750

    MRR Churn 1.3% 0.7% 0.5%

    Avg MRR $425 $1250 $2725

    LTV $32,700 $179,000 $545,000

    Months to Payback 14.7 12.4 10.6

    MRR Growth (Q2Q) 18% 27% 34%

    MRR / Rep $4,750 $7,250 $10,500

    NPS 47 65 62

    Leads per Cust. 540 2,400 6,625

    * Data has been altered from actual HubSpot data for the purposes of this presentation

  • Maximize Customer Success by Organizing

    Around the Buyer rather than Function

  • Thanks!

    Mark Roberge

    Senior Lecturer, HBS

    Former CRO, HubSpot

    Michele Law

    Former CRO, Castlight Health

    Former COO, OpenDNS