Selling SaaS products is no different than selling any other product.
The sales industry is the same everywhere, right?
Dosucceed in selling SaaS, you need a dedicated and competent team that understands the SaaS sales cycle and can create value around your brand. But it is much easier said than done. In the SaaS landscape, you must not only encourage your team to succeed, but also create a winning sales strategy to anticipate success or failure.
If you're trying to assemble the best SaaS team possible and don't know where to start, you're in the right place. This article explains how selling SaaS differs from other sales verticals, the SaaS cycle, and how to plan and sell SaaS effectively.
What are SaaS sales?
SaaS sales is the process of selling software as a service (SaaS) in a subscription-based model. SaaS is a cloud-based software delivery model in which applications are hosted on a third-party server and accessed over the Internet.
The SaaS sales process is heavily focused on acquiring new customers. With proactive customer acquisition and advertising, you're constantly adding new users to your pipeline. But SaaS is not a service that customers buy just once.
industry works onsubscription pricing modelmaking retention and additional sales critical to continued success. You want to sell annual plans whenever possible and make sure your customers sign up again at the end of the commitment period.
Unlike traditional software, SaaS solutions are often expensive. Price isn't your advantage with SaaS, but the value of your product is. The better the offer, the better the chances of attracting and retaining SaaS customers.
How is SaaS selling different from traditional selling?
Customers use SaaS solutions on the agreed terms. Because these products are developed by third-party companies, customer support is often available and proactive.
If you buy a traditional product and something goes wrong, you will have to fix it yourself. But since SaaS products are available online, skilled technicians keep the service running smoothly and stay up to date with the latest technology and security. This eliminates the need for late technical maintenance.
Another important difference between SaaS and traditional sales is the price. Purchasing a SaaS requires time and careful consideration, resulting in a longer than average sales cycle and high acquisition costs.
In SaaS sales, sales qualified leads (SQL) are not necessarily ready to convert or even demo. these clientsrequire more carethan other industries, adding additional touch points to the sales cycle.
The SaaS sales process is based on the capabilities of a particular software and how well you present it. Selling SaaS requires greater alignment and coordination between sales, marketing, and engineering, taking into account the technical details involved.
Only engineers and other experts can answer key technical questions about the software. Working closely with engineering, sales, and marketing helps keep customers informed. When customers get the right support, they stay with you. This increases customer loyalty and promotes long-term business success.
What is the SaaS sales cycle like?
The SaaS sales cycle varies depending on the complexity of the SaaS product, the target audience, and pricing.
SaaS sales cycles can vary depending on the type of product, the target audience, and the complexity of the sales process. The more expensive the product, the longer it lasts.sales cycle. Let's take an example.
With task management software prices starting at $5 per user per month, many freelancers and small businesses can use this tool to keep track of their daily to-do lists. Your prices and type of customer base accelerate the sales cycle.
Now compare it to a more expensive product. If an SEO content optimization tool costs up to $12,000 a year, it attracts a corporate audience that takes multiple steps to add tools to their tech stack. Such a product inevitably has a longer sales cycle.However, a typical SaaS sales cycle usually consists of several general steps.
- Leading generation:Search for potential customers throughpredictive lead scoring, marketing campaigns, advertisements and other information strategies.
- Lead Qualification:Evaluate whether a potential customer is a good fit for the product based on budget, business needs, and decision-making powers.
- rehearsal:Show qualified prospects features and benefits to help them get an idea of how the product works and if it fits their business needs.
- Negotiation:Develop sales details, including discussions of pricing, contract terms, and other key factors.
- Fence:Lead the customer to sign a contract for the use of the product.
- Nursing:Provide post-sales support and nurture relationships to ensure long-term success.
Typically, SaaS companies withAnnual Contract Value (ACV) under $5,000They have an average sales cycle of 40 days. All one-year contracts over $100,000 typically last up to 170 days. However, the average SaaS sales cycle length is almost 84 days.
The SaaS sales cycle depends on the following factors:
- Software complexity:How long does it take to learn and adapt?
- Size of the company:If a company has more than 1,000 employees, even a low-cost solution can have a longer sales cycle.
- Market saturation:How many competitors are you dealing with? If your target audience has to compare your product with many others, it may take them longer to make a purchase decision.
- Trial periods:The trial period takes into account your sales cycle. If someone has 30 days to try your system, 30 days will be added to their cycle.
How to sell SaaS effectively
Selling SaaS can be lucrative, but it requires a unique approach compared to traditional software sales: a deep understanding of the product, the target market, and sales techniques.
To successfully sell SaaS, consider these key strategies and best practices.
A demo is a small sample of your product that demonstrates its value. This is a unique experience, often done under supervision.
Demos help customers better understand what they are paying for. The best practice when making a presentation is not to overwhelm prospects with too much information.
If you rush to implement all features at once, customers may get confused and pass on the product. Instead, use your time wisely and show them the specific qualities that will alleviate their biggest problems.
Offer a trial period
Offer trial periods to attract new customers and build trust. A trial period gives prospective customers partial or full access to your solution for a set period of time, typically a few days to weeks. This is the perfect time for potential customers to test your offer and see if it meets their needs.
From the company's point of view, it is an opportunity to acquire new customers, identify pain points, and overcome objections. By monitoring usage patterns and collecting feedback, you can see how potential customers are using your products and where they are encountering problems or roadblocks. This information will help you improve your product, improve your sales proposition, and optimize your customer service.
Advice:A long trial period extends the sales cycle and takes sales forecasts into account. Before offering a trial period, consider your sales cycle.
Look for upsell and cross-sell opportunities
Find offers foradditional sales or cross salesto current customers. At lower subscription levels, see if customers can take advantage of more features and accessibility. This is the perfect time to propose an update.
To successfully upsell or cross-sell, identify opportunities with existing customers. For example, a customer who has used a SaaS product with a lower subscription level may be ready for more features or accessibility. This is the perfect time to propose an upgrade and highlight the benefits of a higher tier subscription and how it fits the customer's needs.
You can also sell complementary products or services. For example, a company that offers project management software might sell a time tracking tool to its current customers. This generates additional revenue and improves customer relationships. Customers see it as a one stop shop for all their software needs.
Upselling and cross-selling require a better understanding of customer needs and preferences. With these sales techniques, you can increase your revenue, improve customer satisfaction, and strengthen your position in the marketplace.
How to create a SaaS sales strategy
Developing the right sales strategy is the key to selling SaaS. So how to start?
- Start with demographic research.Find out about your customers, where they come from, what their problems are, what their position in the company is, etc. and create a buyer persona with the key characteristics of your ideal customers. You can then tailor your message to your target audience. A company can have many buyers. So be sure to segment each audience and personalize your sales pitch.
- Set realistic and achievable goals.Define your end result and minimum goals. Give them out to the rest of the team so everyone is on the same page.
- Develop templates and sales scripts.Give your sales reps a consistent voice and optimal support from sales managers, engineers, technicians, and other experts so they can sell from where they know while maintaining your brand tone and message.
- Track your progress and adjust tactics as needed.Identify when something doesn't resonate with your audience and be flexible enough to change your plans.
Determining SaaS Sales Success
Customer success is no easy task. you need a lawmetricFollow the results and optimize your sales strategy.
Let's take a look at some of these key metrics.
- Customer output:Churn refers to the number of customers you lose over a certain period of time. If youdropout rateis too high, it may not meet expectations. Notice what turns customers away. Then you can improve and reduce your abandon rate.
- Net Promoter Score (NPS):NPS is a survey that asks customers to rate their experience on a scale of 1-10. Low NPS scores indicate an underlying problem.
- Qualified Leads:Low-quality leads indicate misdirected marketing efforts. Re-familiarize yourself with shopper personalities, segment your audience, and personalize themSaaS content marketingthey are the key to generating high-quality leads.
- Acquisition cost:If you get more customers but lose money, you are paying too many marketing costs to get them. Optimize your marketing efforts and pricing strategy to correct undersourcing.
- Closing Price:Of all the sales deals you make, how many do you actually close? If this number is low, find the most commonobjections to the saleand beat them to improve your close rate.
What salary can someone earn in SaaS sales?
We talk about the SaaS sales cycle, strategy, and metrics, but what about the people who actually work in the industry?
SaaS is a lucrative field for the right person. Base salary and commission rates are typically higher than the national average. As a SaaS sales representative, you need to understand the intricacies of selling software, which requires extensive specialized training. The length of the sales cycle also determines how much a sales rep will earn.
According to Glassdoor, the median base salary for a SaaS provider is $70,456 per year. Also, they typically see commissions of around $37,876 per year. This brings the average total gross salary for a SaaS marketer to $108,332 per year.
Other sales industries offer an average base salary of57 975 $with commissions of approximately $30,421 for a total salary of $88,396. Compensation is an important factor for SaaS providers. With almost40% of employeesthe main problem is keeping salaries below inflation, a competitive and fair salary is a key factor.
You'll want to offer competitive salaries that meet industry standards to attract top talent. Some companies try to usedoorsencourage higher commissions. Gates says there are no incentives to exceed sales targets unless key metrics such as first call resolution, support andCustomer Satisfaction Index (CSAT).
What experience does a SaaS sales representative need?
In a specialized field like SaaS, reps may or may not need prior specialized experience or high-level training. The average SaaS provider starts with no experience at all. On-the-job training teaches them about different products and services and the SaaS sales cycle.
This is completely different from many other industries. For example, a life insurance company often hires salespeople with prior experience selling insurance. Similarly, in medical technology, you may need someone with experience in the medical field, either from a sales perspective, or someone who has worked in the industry and is looking for a career change.
This is not the case for basic SaaS sales positions. Most SaaS companies prefer to train their sales team from scratch, and many don't require any sales experience at all. Teaching someone a preferred method is much easier than unlearning it.
However, that doesn't mean SaaS sales teams don't need training. In fact, they undergo rigorous sales training that introduces them to the SaaS sales cycle and software training to answer customer-specific and technical questions.
- Beginning SaaS Providertypically has zero to two years of experience. Most employers prefer representatives to have a bachelor's degree. Once they get past the entry level, experience comes into play.
- Mid-level reps require up to five years of experience.These skilled professionals work as sales leaders, coaching and coaching other SaaS sales professionals.
- Senior Sales Specialiststhey usually have five to seven years of experience. Since these are high-level positions, most employers want to see a highly successful sales record for large clients.
Selling SaaS is tempting but challenging
Selling SaaS is complex but potentially lucrative. Sales reps live a comfortable life, learn on the job, and make a profit for their company.
All it takes is the right gear to stay resilient and take your business to the next level.
Stay up to date and get the latest informationSaaS is fashionableto help you get an edge in the competitive world of SaaS.
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- Prospect for leads. ...
- Contact potential customers. ...
- Qualify the customers. ...
- Present your product. ...
- Overcome customer objections. ...
- Close the sale. ...
- Generate referrals.
- Standard SaaS commission: 10%
- Standard OTE: 50/50 base/variable pay, or 2x base pay.
- Quota: 10x base pay.
- Quota Capacity: typically 70% attained.
- Manager's Quota: 80% of the quota capacity.
- Pay attention to software discovery platforms.
- Use SEO to bring potential new users.
- Create lead magnets and interactive tools.
- Use case studies to show tangible results.
- Build authority with data-driven content.
- Ask for referrals.
- Build your network on LinkedIn.
The SaaS sales cycle takes 84 days on average but can be shorter (around the 40-day mark) if your product is priced below $5,000. Creating a user persona will help you target the right prospects and later use the same data to segment your in-app marketing.What is the next step after generating leads? ›
The first stage following generation is lead nurturing, where the trust and relationship needed for conversion is built. Following this comes qualification, where they are evaluated to determine where they are in the decision cycle.What is the 7 step sales process? ›
Let's break down the seven main stages of the sales cycle: prospecting, making contact, qualifying your lead, nurturing your lead, presenting your offer, overcoming objections, and closing the sale.How much does a VP of sales make in SaaS? ›
The salaries of Vice President, Software Sales in the US range from $168,000 to $252,000 , with a median salary of $210,000 .How to negotiate price for SaaS? ›
Vendors will throw out pricing during negotiations. If they don't meet your budget, you can guide the vendor to lower target prices or potential discounts so they can make the sale. You can also leverage lower prices by providing references and case studies to the SaaS company that they can use to draw in new business.What is the average commission for SaaS? ›
The standard commission rate for SaaS sales is 10%. If that's all you came for, thanks for checking out my blog! If you want a bit more context, here you go. There's a reason that commission calculators generally start at 10% commission rate for salespeople.What are 3 ways of getting sales leads? ›
Strategies for how to generate sales leads include asking for referrals, conducting customer care calls, and nurturing leads. Being a trusted source of information on the internet and social media, as well as through online networking, are also lead generation strategies.
- 9 Tips to Convert Leads into Customers. By Michiel Prikken. ...
- Identify Their Problem. You need to identify the problem that the lead is experiencing. ...
- Make it a Conversation. ...
- Keep them warm. ...
- Ask for the sale. ...
- Follow-up. ...
- Don't make them wait. ...
- Gain their trust.
- Create Compelling Content. ...
- Use SEO to Boost Your Visibility. ...
- Leverage Social Media. ...
- Run Paid Advertising Campaigns. ...
- Host Webinars or Live Events. ...
- Use Lead Magnets. ...
- Implement a Referral Program. ...
- Collaborate with Other Businesses.
In recent years, the 40% rule has gained widespread usage as a popularized measure of growth by SaaS investors. The Rule of 40 states that if a company's revenue growth rate were to be added to its profit margin, the total should exceed 40%.What is the rule of 72 SaaS? ›
72 ÷ interest rate = Years required to double investment
Assuming your rate of return is 12% year over year, your number would be 72 divided by 12, which equals 6 years.
The rule of 40 metric simply adds your growth percentage plus your margin percentage. If that sums to 40% or greater, congratulations, you've got a healthy SaaS company. Again, I use recurring revenue growth and EBITDA margins over a representative time period.What is the hardest part of sales process? ›
But hands down, prospecting has been chosen as creating the most difficulty for reps. In fact, “more than 40% of salespeople say this is the most challenging part of the sales process, followed by closing (35%) and qualifying (22%),” HubSpot explains.What is the #1 step in the sales process? ›
The first step in the sales process is prospecting. In this stage, you find potential customers and determine whether they have a need for your product or service—and whether they can afford what you offer.
|Annual Salary||Monthly Pay|
This includes base salary as well as any potential stock compensation and bonuses. The median yearly total compensation reported at Salesforce for the Sales role is $160,000.What is the average salary for a SaaS CEO? ›
|Industry||Salary 2018, thousands $||Salary 2019, thousands $|
This means that you need to make sure that the value your product delivers is at least a 10x compared to what you are charging. If the value for the customers is below 10x, they are not convinced.What is SaaS pricing strategy? ›
A SaaS pricing strategy is a revenue generation model involving software that exists on the cloud. Instead of buying software outright and hosting it on-premises, companies lease the solutions via subscription or via a pay-per-use agreement. SaaS companies can monetize their product in several ways.What is a good referral fee for SaaS? ›
SaaS referral fees can range from 5-50%, depending on the size of your business, your target customer, and whether you want to offer the commission in tiers (i.e., 10% for every lead, 20% for every sale).Is 40% commission a lot? ›
The average in sales, though, is usually between 20-30%. What is a good commission rate for sales? Some companies offer as much as 40-50% commission. However, these are typically sales reps that require more technical skills and knowledge, plus have a compensation structure that relies more heavily on commission.Is 15% commission a lot? ›
What is a typical commission? The typical commission depends on what is being sold. For manufactured goods, the commission rate tends to be around 7-15% of the sale value. The commission on services tends to be much higher, being between 20 - 50%.What is a typical SaaS sales quota? ›
Depending on who you ask, the industry-standard ranges from 3x OTE to 8x OTE for an annualized quota. And of course, OTE depends on the industry, experience level, location, etc.What percentage of leads turn into sales? ›
How many leads turn into sales? This is highly dependent on your strategy, number of leads, and sales funnel. Some studies say 10-15% of leads can turn into sales, but the best way to get an accurate number for this is to use the formula to calculate your LCR over time.How many leads before a sale? ›
According to experts, the optimal amount of leads a B2C business should generate per day is 150.Why are leads not converting to sales? ›
“When leads are not converting, it usually means there is a disconnect between the marketing and sales teams as to what the true definition is of a marketing-qualified lead,” says Michael Bird, CEO of NetProspex.What is a lead conversion strategy? ›
Lead conversion is the marketing process of turning leads into paying customers. It entails all the marketing practices that stimulate a desire to buy a product or service and push a lead towards a purchasing decision.
What is Lead-to-Customer Conversion Rate? The lead-to-customer conversion rate, also known as sales conversion rate or lead conversion rate, is the proportion of qualified leads of a company that result in actual sales. The metric is critical to evaluating the performance of a company's sales funnel.What is a qualified lead in SaaS? ›
In the simplest terms, a product qualified lead is the lead that has experienced the value of your SaaS product usually through a free trial or freemium model. A PQL would have already tried your SaaS product in some way, knows what it does and how it can help them.How to use CRM for leads? ›
- Build a Sales Pipeline. Use the sales pipeline feature of CRM to manage your leads. ...
- Make Use of Automation Tools. ...
- Store Data for Future. ...
- Improve Marketing. ...
- Integrate Social Media Channels. ...
- Follow-up on Time.
In SaaS businesses, the Rule of 78 is used to plan how much revenue is needed each month to achieve a certain target. The target number is divided by 78 to determine how much revenue needs to be generated each month.What is the 80 20 rule SaaS? ›
The idea that 20% of what you do drives 80% of your business results.What is the SaaS magic number? ›
What Is SaaS Magic Number? The SaaS magic number is a common sales efficiency metric for software subscription businesses. At the most basic level, the metric asks: “For every dollar spent on acquiring new customers with sales and marketing, how many dollars' worth of revenue do we create for the company?”What is the rule of 80 SaaS companies? ›
The founder of “The SaaS CFO” Ben Murray said that it's wiser to use total revenue if your subscription revenue makes up for less than 80% of your total one.What is rule of 70 SaaS? ›
The Rule of 70 is a calculation that determines how many years it takes for an investment to double in value based on a constant rate of return. Investors use this metric to evaluate various investments, including mutual fund returns and the growth rate for a retirement portfolio.Is doubling revenue good? ›
The obvious fact is that doubling your revenue means you need to double your sales, decrease costs and find more clients. Each of these, of course, can be easily measured with the right KPIs (key performance indicators) set in place. Actually reaching these metrics takes a lot more than writing them down.What is a healthy margin for SaaS? ›
Based on our experience, a good benchmark gross margin for a SaaS company is over 75%. Typically, most privately held SaaS businesses we work with have gross margins in the range of 70% to 85%. Anything below 70% begins to raise a red flag for us and prompts us to do a deeper dive into several other metrics.
A good SaaS gross margin is anywhere from 70% to 85%. However, one thing to keep in mind is that gross margins are typically lower in a company's early stages than in its later stages. The following chart shows different SaaS metrics by Annual Recurring Revenue (ARR), including gross margins (highlighted in red).What is the rule of thumb for SaaS valuation? ›
The general rule of thumb is that an LTV/CAC ratio of 3 is ideal for most SaaS businesses. This will allow for enough cushion to account for a dip in the LTV or an increase in the CAC and still be able to generate a healthy gross profit margin.What are the steps in closing a deal? ›
- Find the decision maker. ...
- Recognize the buying window. ...
- When do they plan on pulling the trigger? ...
- Create a sense of urgency. ...
- Share useful information or news. ...
- Getting them to say “Yes” or “Yes” ...
- Other examples include: ...
- Ask one more time.
- Research Your Target Market. ...
- Create Engaging Content. ...
- Promote Content Across Your Business Channels. ...
- Nurture Existing Leads. ...
- Score Leads. ...
- Pass Leads to Your Sales Team. ...
- Evaluate Your Lead Generation Process.
There are typically seven B2B sales pipeline stages: prospecting, lead qualification, initial contact, scheduling a meeting or demo, needs analysis, close, and follow-up.What is the 5 step sales process? ›
5 step sales process recap
Qualification – Use qualifying questions to prioritize your leads. Nurture – Track all nurture activities to get the most out of your efforts. Final pitch – Personalize your pitch to your potential buyer and prepare to overcome any objections.
Key point: The six closing techniques described are: the takeaway sales technique, the assumptive close, the tie-down or yes close, the either/or close, the trial or puppy dog close, and the charity close.What are the 3 most important things that are required to close a sale? ›
- Identify and Solve a Real Problem. The first thing to remember is you are trying to identify and solve a real problem. ...
- Work with the Right People. ...
- Communicate Appropriately. ...
- Closing Techniques. ...
- Bonus Tip: Salesvue.
A list of things to be done and items to be delivered before a transaction can be closed. Responsibility for each item is typically allocated among the parties on the checklist. The status of each item is updated periodically and circulated to the parties in preparation for closing.What are the four laws of lead generation? ›
- Build a database.
- Feed your database.
- Communicate with your database.
- Service all your leads and referrals.
So, there we go, the three best lead generation methods: search engines, content marketing, and of course, social media.What are the 4 pillars of sales process? ›
THE 4 PILLAR PROCESS. Kieren's 4 pillar process is simple but effective. The pillars are as follows: structure, touchpoint process, follow-up, and follow-back. This step is about organization, and breaking down your day so you can use your time to its optimum value.What are the four A's of sales in order? ›
The "four A's" of sales letters are attention, appeal, application, and action.What are the 4 leadership styles in sales? ›
The four sales management styles are directing, selling, participating, and delegating.What is the rule of 5 in sales? ›
When I was selling enterprise software to the Fortune 500, I used to follow the “five touch” rule. The idea was that when prospecting for new customers, I would reach out to a customer five times over a two-week period.What is the ideal sequence of a sales process? ›
A sales sequence refers to a planned and deliberate series of steps taken by a salesperson to guide a prospect through the sales process and convert them into a customer. This may include sending an initial message, following up with a call, scheduling a meeting or demo, addressing objections, and closing the deal.