David Cummings on Startups

Category: Sales and Marketing

  • 35 SaaS Marketing Products @ 1 Startup

    Yesterday I was talking to the head of marketing at a fast-growing, <100 person SaaS startup. We were talking about the modern marketing stack and he mentioned that they pay for 35 different SaaS products. Yes, 35 different marketing apps at one small business. Some of the app categories included marketing automation, social media management, A/B testing, SEO analytics, etc.

    Here are a few questions that come to mind:

    • Is there an upper limit to how many marketing apps a small business will use?
    • When does app fatigue set in?
    • How many are apps require daily work vs ones that are set it and forget it?
    • How is reporting done across so many apps?

    SaaS is unique in that once the business has $500,000 in recurring revenue, it’s hard to kill. Thus, there’s a huge cottage industry of SaaS marketing apps that provide value. It’ll be interesting to watch the industry over time and see how it plays out. My prediction: there’s no upper limit of marketing apps and we’ll keep seeing more and more.

    What else? What are some more thoughts on the idea that there are 35 SaaS marketing products at one small business?

  • 4 Reasons to Add an SDR Team

    Earlier today I was talking with a couple of sales leaders about Sales Development Reps (SDRs). One leader was a big proponent of SDRs and the other didn’t have any experience with them. From the discussion, I took away four reasons to add an SDR team:

    1. SDRs help make the more expensive, and more experienced, account executives more productive
    2. SDRs, with their focus on appointment setting, are more efficient than full-stack sales reps, which are spread thin across a variety of functions (setting appointments, doing discovery calls, facilitating meetings, delivering proposals, and closing deals)
    3. SDRs are effectively a training ground for future account executives thereby acting as a talent development pipeline
    4. SDRs are also a training ground for non-sales roles like support and customer success

    Startups should evaluate these four reasons to add an SDR team, and once a positive decision is made, review these 7 Quick SDR Tips for Startups.

    What else? What are some more reasons to add an SDR team?

  • 7 Quick SDR Tips for Startups

    As more startups hire sales development reps (SDRs) to set appointments and schedule demos, it’s important to learn best practices and increase the chance of success. Building an SDR team, like any job function, takes time to figure out what does, and doesn’t work. Thankfully, there are a number of great resources online. Here are seven quick SDR tips:

    1. Start by reading the Predictable Revenue book
    2. Build a sales playbook
    3. Hire sales reps ahead of plan
    4. Always hire reps in pairs
    5. Make sure inside sales makes sense
    6. Require a written assessment in the hiring process
    7. Map out the sales process

    Use these seven SDR tips and build a great team. The SDR function is the most important sales process innovation in the last 10 years.

    What else? What are some more SDR tips for startups?

  • Build a Sales Playbook

    One of the first things a new sales leader (or entrepreneur running sales) should do is build a sales playbook. A sales playbook, put simply, is a central resource for tracking everything from the basics, like the elevator pitch, to the more advanced items, like differentiating from specific competitors. With more knowledge and training, sales reps speak more confidently and intelligently, helping win more deals.

    To start, make a Google Doc sales playbook and include these items:

    • Corporate information
    • Sales pitch
    • Elevator pitch
    • Market space
    • Recent trends
    • Target customer
    • Types of buyers
    • Features and benefits
    • List of references
    • Sales process
    • CRM process
    • Competitors and differentiators
    • Objection handling
    • Glossary

    Revisit the playbook on a weekly basis and ensure that the team contributes to it. With sales, the more you know, the more you sell.

    What else? What are some more thoughts on building a sales playbook?

  • 8 Sales Lessons for Entrepreneurs

    Last week I was talking to an entrepreneur that’s in the process of scaling out his sales team. Scaling a sales team is much harder than it sounds. Sales people, as you’d expect, are great at selling themselves, but not always great at selling to prospects. Then, sales reps often want to be sales managers, and managing people is a very different skill than selling to people. Here are seven sales lessons for entrepreneurs:

    1. Learn modern BANT qualifications
    2. Do the match to ensure inside sales makes sense
    3. Align special incentives with desired outcomes
    4. Plan out the first 30 days for a new sales rep
    5. Develop a sales playbook
    6. Model the time it takes to ramp up sales reps
    7. Hire reps ahead of plan at scale
    8. Implement a sales development process

    Bonus: Every entrepreneur should read these four sales books.

    Entrepreneurs need to understand sales even if they aren’t a “salesy” person. Start with these eight sales lessons and read the four books to build a solid foundation.

    What else? What are some more sales lessons for entrepreneurs?

  • Leads, Leads, Leads

    Whenever I’m talking to entrepreneurs, especially seed stage entrepreneurs, the number one challenge is customer acquisition. Drilling in, more specifically, every entrepreneur wants more leads (who wouldn’t?). In fact, Jason Lemkin argues that lead velocity rate is the most important metric in SaaS. Since leads are so important, it follows that entrepreneurs need to build internal lead generation capabilities.

    Here are a few thoughts on lead generation:

    • Use a marketing automation system as the core of the lead generation efforts
    • Pick a sales development cloud to execute outbound campaigns
    • Run the standard B2B marketing playbook (SEO, SEM, email campaigns, webinars, ebooks, etc.)
    • Ensure the marketing team has a quantitive mindset (think analytics and data — Google Analytics is your friend)
    • Establish a definition of marketing qualified lead and sales qualified lead
    • Require clear objectives and key results from the team
    • Build a repeatable process and constantly iterate

    Lead generation is significantly harder than it looks. Entrepreneurs need to build a customer acquisition machine post product/market fit, and lead generation is one of the top priorities.

    What else? What are some more thoughts on leads being so critical in building a successful startup?

  • Sales and Marketing as a Percentage of Sales, for Public SaaS Companies

    Bloomberg Businessweek has a chart with the sales and marketing costs as a percentage of revenue in the last 12 months for several notable public SaaS companies:

    • Workday – 37%
    • Salesforce.com – 49%
    • ServiceNow – 50%
    • NetSuite – 52%
    • Marketo – 60%
    • Box – 80%

    https://twitter.com/guan/status/734536100027478017

    A few thoughts:

    • These companies clearly believe there is tremendous growth in the market, and investors are backing them up
    • While it isn’t this simple, imagine cutting sales and marketing costs by 80% and many of these companies would be very profitable (another reason why it’s reasonable to value SaaS companies at 4 – 6x revenue)
    • If these public SaaS companies with scale are spending 50%+ of their revenue on sales and marketing, imagine what the unicorn SaaS companies are spending as a percentage of revenue (hint: well over 100%)

    Knowing this, it’s easy to see why Sales-Oriented Startup CEOs are preferred. The most successful SaaS companies are incredibly focused on sales.

    What else? What are some more thoughts on sales and marketing as a percentage of revenue for SaaS companies?

  • Micro Apps for Lead Generation

    One of the lead generation strategies that works well, but takes time and engineering efforts to do right, is micro apps. Micro apps are super simple web applications that do one thing in exchange for providing an email address. Just like people are often willing to give their email address to download an ebook, people are also willing to give their email address for use of a simple micro app that provides value. Here are some popular examples:

    The key is for the micro app to be meaningful yet self contained with little friction to get value. Often, the value is a tiny piece of what the main product provides such that it’s the same audience and a lead generation opportunity.

    The next time you’re thinking about lead generation ideas, consider a micro app.

    What else? What are some more thoughts on micro apps for lead generation?

  • Special Sales Rep Incentive Ideas

    Generally, I like to err on the side of keeping things as simple as possible, and sales rep compensation is no different. Compensation plans like commission based on 50% of the first four months revenue are easy to understand and manage. Sometimes the desire arises to implement special sales rep incentives to help get a new product launched or get initial traction in a new market.

    Here are a few special sales rep incentive ideas:

    • Double Commission on the First 10 Deals – Paying out extra commission is a great way to incentivize reps when there’s a new, unproven opportunity that’s potentially strategic to the company.
    • Add Extra Commission for Certain Customer Segment – If the push is to move up market or sell bigger deals, add addition commission for that type of new customer for a specific time period (always have a time period limit to special incentives).
    • Comp on Logos – Some markets are a race to build marketshare and get out in front of the competition. One approach here is to compensate sales reps based on the number of logos (customers) they sign that fit a profile (e.g. Fortune 1000 companies) instead of based on the size of the deal knowing that market share or land and expand will pay off in the long run.

    Keep sales rep compensation plans simple and straightforward. Selectively use special incentives when needed to better align the rep and the company.

    What else? What are some more special sales rep incentive ideas?

  • Two Common SaaS Sales Compensation Plans

    Continuing with Mark Roberge’s book The Sales Acceleration Formula and the recent post on HubSpot Growth: $300,000 to $3,000,000 in Six Months, there’s another really important topic to discuss: SaaS sales compensation plans.

    In the early years of Pardot everything was sold month-to-month with no annual contract. We quickly learned that if a customer stayed with us past month four, they’d stay with us indefinitely (we had a monthly customer churn of 1.4% with no contracts). So, naturally, we set our sales compensation plan based on this learning about the critical nature of the first four months. Sales reps were paid commission of 50% of the monthly revenue for the first four months (e.g. the equivalent of 2x the monthly recurring revenue). We wanted the reps to sell good fit customers, and if the customer churned after the first month or two, the sales rep would get a substantially reduced commission.

    Unbeknownst to us at Pardot, HubSpot arrived at the exact same formula: their reps were paid 50% of the first four months of revenue.

    Overtime, HubSpot evolved to a different formula that did a better job of promoting good fit customers. Sales reps were paid a commission on monthly recurring revenue as follows:

    • 50% of the first two months
    • 50% of month six
    • 50% of month 12

    By paying half the commission in the first two months and then spreading the commission out over two key junctions – the six and twelve month milestones – HubSpot was able to align the sales team with the company goal of signing customers that were great fits.

    Entrepreneurs would do well to consider the company goals and organize the sales compensation plans accordingly in a way that balances the short-term and long-term.

    What else? What are some more thoughts on these two SaaS sales compensation plans?