Yesterday I had lunch with a successful entrepreneur in town to talk about our inside sales model. His business has raised a fair amount of institutional capital, been growing nicely, and realized it has a customer acquisition problem. His SaaS product sells in the mid five figures with a handful of six figure deals and he has an enterprise sales team resulting in a cost of customer acquisition that is twice the first year’s revenue.
For SaaS companies, a good rule of thumb is that the fully loaded cost of customer acquisition (sales salaries, commissions, marketing salaries, and advertising) should be less than than the first year’s new client revenue of all new clients combined. The thinking was to move to an inside sales model with a lower average deal size and a significantly lower cost of customer acquisition.
Here are some thoughts on migrating from an enterprise sales model to an inside sales model:
- The type of sales management for an inside sales team needs to be more activity focused (calls, demo, and pipeline opportunities) and less relationship focused due to the shorter sales cycles
- Enterprise sales reps are typically $70-90k base while inside sales reps are typically $30-$45k base resulting in the need to hire a new team
- More focus needs to be on marketing and lead generation to build a steady flow of qualified prospects for the sales team (lead generation drives SaaS)
Moving from an enterprise sales model to an inside sales model will be a difficult transition but appears to be the right move based on market dynamics and pricing.
What else? What other thoughts do you have on migrating from enterprise sales to inside sales?