Once you’ve established the product-market fit for your SaaS startup, you’ll be spending a lot of time thinking about the sales model that’s right for your business. This is something you need to get right at the point of going to market, and again as you decide how and when to scale.
Choose the right go-to market sales model for your SaaS startup
Your choice of sales model can be the critical difference between sustainable growth or becoming the next addition to the 90% of failed startups out there. At that point, your business is nothing more than another statistic, or at best, a cautionary tale for all future startups on what not to do.
The enterprise sales model should be looked at closely as a possible addition to your business. It’s a popular way to achieve a solid growth rate and increase recurring revenue – but there are a few important elements you’ll need to be aware of when considering an enterprise sales model for your business.
What is enterprise sales?
Enterprise sales, also known as complex sales, refers to the procurement of large contracts that typically involve long sales cycles, multiple decision makers, and a higher level of risk than traditional sales (also known as SMB, referring to sales to small- and medium-sized businesses).
In other words, enterprise sales are essentially sales that involve large-scale corporate solutions. It is worth noting that many startups initially focus on transactional sales in the early stages of their business, because they typically involve lower risk, have shorter sales cycles, and are driven by marketing and sales.
Is enterprise sales right for your startup?
Enterprise sales isn’t right for every startup, and is in fact more common in mature businesses that have already experienced significant growth (more on this later). As mentioned previously, the longer sales cycles and higher risk associated with enterprise sales makes it a less than ideal model for many startups in early stages of growth.
In some instances, though, enterprise sales is an ideal sales model for a startup. For instance, enterprise sales would make sense for your SaaS startup if you are creating a solution that might be considered critical to the success of large corporations, or where that solution directly impacts business operations on a strategic level.
For example, let’s say you are developing a revolutionary blockchain software for supply chain management that saves manufacturing companies hundreds of thousands of dollars, enterprise sales would likely be the most appropriate sales model for your business.
What is an enterprise sales model?
There are three main types of sales models in the SaaS industry:
This a popular model used by companies such as Zoho and Dropbox. It’s ideal for companies with low-cost products, and it has a similarly low customer acquisition cost. The customer goes through the majority of decision-making, signing up, and using the product by themselves at their own pace.
Combined with comprehensive website help documentation, the self-service model keeps the involvement of your customer support/sales team to a minimum, allowing them to focus on other aspects of growing the business.
SaaS providers like Zendesk and Marketo have found this to be a successful sales model. Falling somewhere between self-service and enterprise, transactional distribution offers a flexible solution for a range of customer types. Some of the purchases can be made directly through the company website, while others require dialogue with a member of the sales team.
Transactional sales volumes tend to be less than that of self-service, but with a higher price point. There are typically more people involved in a transaction, which translates into a longer sales cycle.
This model is ideally suited for mid-high level SaaS companies who have a more expensive product. The focus here is on the marketing team to drive qualified leads and the sales team to rapidly close on them with a view to sustainable, high-volume sales and an onboarding process that’s as efficient as possible.
The enterprise sales model is typically adopted by companies with high price points and a technical product that needs more training, integration, and customer support. Acquisition cost comes at a premium, and sales cycles can be lengthy.
A handful of SaaS companies have had success with this sales model from the outset. For the majority though, enterprise customers are only considered when the product, sales, support, and monthly revenue are able to sustain the intensive demands placed on them.
Before you start marketing to enterprise customers you’ll need to think about things like:
Onboarding – will it be a smooth process that won’t slow them down?
Security – will their company data be fully protected? Can data access be restricted between teams and individuals across the company?
Support – is there access to somebody 24/7 in case of an emergency?
Proof of return on investment – if your product starts to lose an enterprise company money…it’s going to be a lot of money!
Automation – will it save their teams time or make extra work for them?
Social proof – are similar companies using the product already with good results?
Enterprise sales require a lot more thought and hard work than the first two sales models. While self-service and transactional sales are primarily driven by good old fashioned marketing, enterprise sales is driven by building and maintaining strong long-term relationships. Closing the initial deal and nurturing the relationship into a long-term partnership involves playing the long game, but it’s one that can have the largest payoff.
Why is the enterprise sales model important for your business?
Enterprise sales are where the “real money” lies for your SaaS business. Contracts with enterprise customers can be huge, and although the customer acquisition cost is exponentially higher, the payoff in terms of your revenue and company valuation is too good to be ignored.
The enterprise sales model revolves around nurturing customer relationships, which means longer sales cycles and higher risk than other sales models. Your sales rep is the most important element when it comes to securing and retaining enterprise customers. They must give these top-tier companies personal attention and provide tailored solutions for each one.
Enterprise sales are high-pressure, high-ticket deals. The level of care from your sales team will be instrumental in closing these long-term corporate customers. It’s worth the time and cost investments, as these are the customers that can guarantee the most stability and revenue for your SaaS over the long term.
While a few companies choose an enterprise sales model from the beginning (typically those providing high value, complex products that justify their hefty price tag), most companies choose to adopt this model when they’ve tested the market and begin to scale up.
A quick word regarding adopting an enterprise sales model
For SaaS founders, adopting and enterprise sales model can lead to big opportunities. Many founders are able to bootstrap to gain early traction, however, doing so will only get you so far. At some point, putting off fundraising means limiting your growth. With Lighter Capital, entrepreneurs can receive up to $3 million in capital to help you get your startup to the next level, without giving up equity or control of your company.
Whether you’re looking to secure enterprise-level contracts and start scaling your business, or simply looking to secure funding that maintains a consistent state of growth, compare our flexible financing solutions first – if you like what you see, apply for funding today to connect with our investment team!
Hubspot is a prime example of a SaaS company that started out with a focus on small businesses. As they developed, they reached the point where they could start marketing their product to enterprise-level customers. The results speak for themselves.
Adding an enterprise layer to your business makes sound financial sense if you’re able to do so. As Jason Lemkin of SaaStr notes, adjusting your product offerings to appeal to a team can increase your revenue (or a portion of it) up to 20-30 times – a benefit which can’t be ignored.
Final thoughts on the importance of enterprise sales
Finding a way for your SaaS product to support enterprise customers can be a game-changer in terms of growth and revenue. Even if you’re currently running a self-service or transactional sales model, making the progression towards adding enterprise sales should be something you seriously take into consideration as soon as it’s a viable option.