Few industries in history have grown as rapidly as the SaaS (software as a service) space. Launched in 1999 with the founding of Salesforce.com (or Concur, though it didn’t start as a SaaS firm), it’s worth over $170 billion today, and has grown 500% in just the past seven years.
For Millennials and members of Gen Z, SaaS is just what software is. Most have little experience, at least in their adult professional working lives, using packaged software or client-server applications (from which SaaS evolved).
Throughout the 1980s and 90s, most B2B software vendors relied primarily on big-ticket software sales, with a smaller revenue stream from services and annual maintenance contracts. Dependence on these large deals, often in the hundreds of thousand or even millions of dollars, caused revenue streams to be “lumpy” for software vendors. Closing or losing a single large deal could often make or break a quarter.
Those big sales were also difficult to close, as they represented a huge commitment on part of the customer, not just for the purchase price but also the time-consuming, disruptive effort of a major on-premises software implementation. Switching costs were high, as were the risks of making the wrong decision.
In the SaaS business model, vendors offer digital products or content to subscribers, typically on a monthly basis. For users, this means more predicable costs with no huge up-front investment, easier and far less costly implementation, and reduced risk from making a bad choice.
The primary benefit of the SaaS model for vendors is the steady stream of revenue it generates. However, as a SaaS provider, you need to keep generating new clients faster than you lose them. Whether you want to grow the business to profit from it for a long time or you just want to grow your SaaS valuation, knowing how to boost your SaaS company’s sales velocity can help you attain your goal.
Two Common Questions
If you’re just launching your first SaaS company and growing revenue, you might have two different questions. First, what exactly is the SaaS model? Second, what is sales velocity?
A SaaS structure uses the subscription business model, and SaaS businesses typically offer software solutions via a cloud service provider that users pay for as they go. Basic examples can include email and various office tools or apps that users can access so long as they keep paying for them. This is a very different business model from selling one-time purchases to customers, as noted above.
The concept of sales velocity measures how fast a prospect gets through a pipeline and starts generating revenue. It’s a reflection of how productive and functional a sales team is, but it also might illustrate areas of potential improvement. Sales velocity is the sum of four components:
• Your number of potential sales
• The average deal value
• Your average win rate
• Your sales cycle length
SaaS companies closely monitor churn rate, making sure they have more new customers coming in than existing customers they might be losing during the same period. This is a savvy business move, while boosting your sales velocity means your new clients start producing revenue faster than before. A combination of the two helps your business more than anything.
Removing SaaS Sales Obstacles
You have two avenues to pursue for boosting your sales velocity. One is trying to grow it; the other is simply removing current impediments that might be holding you back. The latter is a better place to start, so you eliminate these obstacles before shifting your focus to growth techniques.
If your company isn’t embracing automation whenever possible, you’re missing opportunities to save time, save money, and remove obstacles to growth. Automated data entry, AI-powered forecasting, and e-signatures are all examples of employing technology to increase efficiency. You’ll save your sales team precious time and simultaneously make it more likely that leads will say yes to your company.
Deal with customers’ objections. Do you have leads flat out telling you that they aren’t in a position to become subscribers? Listen carefully when a hesitant sales prospect indicates concerns. Go deeper to ascertain what it is they really want. When you know what that is, you might be able to deliver it.
Other common obstacles you should avoid include putting too much space between contacts and decision-makers, providing your sales team with insufficient resources that wind up stalling deals, and ignoring industry developments. While your product roadmap should be driven primarily by the needs of your current and prospective customers, the SaaS space moves fast, and it’s crucial to understand and respond strategically to competitive changes.
Accelerating Your SaaS Sales Velocity
Removing sales velocity impediments can result in tangible improvements to your results. It will also pave the way to developing more effective growth techniques. The best approach is to experiment with different tactics to see which work best for your company.
Start with just generating more leads. Refine the lead qualification process you already have in place. You’ll want to start reducing how many low-value leads you have while putting more emphasis on high-caliber opportunities.
Be sure your sales team is adding value to every single deal. This can happen through up-selling, cross-selling, offering customers longer contracts, or simply targeting larger clients. Bigger deals might need some extra nurturing and take longer to close, but they can also pay off in the long run.
Get better at closing deals. Just before a deal gets over the finish line, it has the highest chance of falling apart. Improving the closing techniques your sales team uses can increase your win rate.
Consider how you contact your leads. If there is a serious discrepancy between how many leads you have and actual opportunities, early contact efforts might be lacking. Look into closing your gap follow-up by testing your company messaging, doing more follow-ups, working on phone calls to follow emails, and optimizing your email subject lines and messages for better delivery and open rates.
Optimize your conversion rate. Many SaaS companies have a bottleneck between generating leads and turning them into opportunities. Sales teams might be too focused on prospecting and not spending enough time nurturing opportunities and actually closing deals.
Gather more data about potential buyers. If your sales team is selling generically rather than customizing their approach to each prospect, they may be sharing irrelevant information that turns off buyers. You need to understand each prospect’s specific pains, concerns, and needs so you can speak to them effectively.
Increase your pricing. This is a very simple solution, but many companies are afraid to try it. Market research can tell you if your SaaS offering still provides consumer value at a higher price point as well as what the market might accept.
Shorten your sales cycle. Longer deal closures mean lower sales velocity. Certain deals, particularly large sale, will take more time than others. However, sales intelligence and data discovery may show you ways to expedite the sales cycle of certain transactions, perhaps even most of them.
Final Thoughts About Accelerating SaaS Sales Velocity
If you’re looking for a successful SaaS story to inspire you (though not a company you might think of as a SaaS vendor), there might be no better example than Netflix. That company maintained a high sales velocity by being the first major source of streaming content, growing their collection of original content, and focusing on international growth.
By using these types of creative techniques to boost your own SaaS company’s sales velocity, you’ll give your sales team the competitive edge they need to refine their sales strategies and rapidly grow your revenue.