The missing piece of software sales
Almost every aspect of building and running a Software business has been studied, measured, and systematised over the years, none more so than building and running a commercial organisation.
If we were to compare the sales team of a contemporary, subscription-based SaaS start-up to a perpetually licensed on-premises software business from 25 years ago we would (somewhat surprisingly) find very little difference in how both teams are structured, measured and incentivised.
Despite there being a quarter of a century gap between them we would likely see a familiar “production line” of inbound and outbound sales activities such as lead generation, qualification, pilots, negotiation and (all being well) contract signatures.
All this despite a profound shift in the intervening decades in how we build, distribute, license and consume software.
The contemporary challenge
Whereas in the past it was commonplace for software entrepreneurs to have come up through the ranks of sales and marketing, today we are just as likely to find founders with a product, technical or engineering background.
This usually results in them having to lean heavily on their ecosystem of advisors, investors, and peers in order to learn how to build commercial teams.
The challenge for contemporary founders however is that the sales function they are inculcated to build today was designed for an era when purchasing software was a capital expenditure, with software licenses being paid for up front and granted in perpetuity.
As customers were far less likely to switch to an alternative solution because of the “sunk costs” in servers, back-up solutions and operating systems they had to make in order to use the software, the job of the Sales team was (rightly) considered to be complete at contract signature.
Fast forward to today, and founders find themselves in an era where purchasing software is an operating expenditure, with licenses being “rented” monthly or annually and the ability for customers to switch to alternative solutions becoming ever easier.
Yet, despite this, the sales orthodoxy continues to reinforce the mindset that the job of sales is considered complete when the contract is signed.
One major difference between our two software companies is that our contemporary SaaS start-up would almost certainly have an additional function that did not exist 25 years ago — Customer Success.
The proliferation of Customer Success teams can in no small part be attributed to one of the pioneers of Software as a Service — Salesforce, with its approach to “customers for life” providing the blueprint for many contemporary start-ups.
What is less discussed is that Salesforce’s significant investments in Customer Success were a defensive reaction to revenue churn that was rapidly approaching double digits (and which if left unchecked would have ultimately sunk the company).
Salesforce’s continued business success has (unintentionally) left a template for contemporary start-ups whereby sales at its core is still operating in much the same orthodox way, but the challenges SaaS creates of easier churn and monthly “rent” collection are assumed to have been solved by the addition of Customer Success.
The reality in a contemporary start-up however is that even the best functioning Customer Success teams are still largely focused on solving the problems of a legacy perpetual license sales motion, and instead of being able to proactively create the conditions for new revenue growth they find themselves stuck in a defensive revenue retention posture.
For contemporary founders, this leaves their start-up with a potentially fatal commercial gap.
The missing piece
In a subscription business, contract signature no longer represents the conclusion of the sale — it is merely the beginning of an ongoing cycle of selling.
The reason why the sales orthodoxy still reinforces the idea of the sale being complete at contract signature is because it only concerns itself with two types of sales — inbound and outbound.
The reality of the subscription era is that sustainable new revenue requires a start-up to master a third and vitally important type of sales that is not meaningfully accounted (or incentivised) for in the sales orthodoxy — “continuous sales”.
In a “continuous sales” motion, customers need to be continually sold on the value of their initial software purchase and to see its value realised in the shortest amount of time with the least amount of effort on their part.
Making this a reality should be the primary goal of every Customer Success team as it is only when this initial value has been realised that a start-up will earn the right to talk to its customers about new revenue opportunities.
Most importantly, an effective “continuous sales” motion requires a mirroring of the roles and incentives that owned the initial sale. Specifically, the commercial skills of an Account Executive and the product skills of a Sales Engineer need to have their counterparts after the initial sale has occurred.
Customer Success Managers mirror Sales Engineers by bringing their product, use case, technical and opportunity identification skills to the fore, but unless they are aligned with a suitably incentivised commercial counterpart, defensive revenue protection is what they are (at best) likely to achieve.
Continuous sales checklist
Contemporary founders wishing to avoid the shortcomings of the sales orthodoxy and assess whether their start-up is set up for healthy, sustainable new revenue from continuous sales should ask themselves the following –
- Who has commercial ownership of a customer after the initial sale has concluded? If the answer to this question is “Customer Success” then you have not properly mirrored the commercial skills needed for continuous sales. Or to put it another way, if it takes two sets of skills to close the initial sale, why does it then only take one set of skills to close all subsequent sales?
- If you have mirrored the commercial and product owners (with either the original Account Executive or an Account Manager working with a Customer Success Manager), are they both suitably incentivised to make driving new revenue from existing customers worth their while? If not, then you will very likely end up reinforcing the orthodox mindset that the job of sales is complete at first contract signature.
- If you have successfully mirrored both owner roles and incentivised them correctly, are they aligned on a common book of business? If not, your continuous sales motion will lack efficiency because of misaligned prioritisation and resourcing on new revenue growth opportunities which in turn will hinder your ability to scale.
- In deal reviews are you mandating before a deal can be “closed /won” that there is a plan in place to set customers up for long term product success and future new revenue? If not, you will likely find the necessary discovery, engagement and mindset required for continuous sales will not be taking place.
And finally, the key question all contemporary founders should ask themselves is —
- “Who owns the Net Revenue Retention number?”
This is the key metric to ensuring the long-term viability of any SaaS start-up and is an ideal one for the mirrored roles to own, however if the answer to this question is “nobody” then a potentially fatal commercial gap exists in the business that needs to be urgently addressed, especially if a founder has aspirations for their start-up to become an industry bellwether.