Luigi MallardoThe last few months I’ve met with a number of European Founders and Board Members. Their companies operate in different contexts: Marketing & Sales, HR, Retail and Travel amongst others. Interestingly they share similar Enterprise SaaS GTM issues.
They all have a similar profile:
Table of Contents
- 7-12 years old
- Revenue between 5 and 15 million € in ARR
- Have a good product. Most of them with AI layers included
- Except one, they are either PE-backed or VC-backed
- They are experiencing low or no growth at all. In two cases the ARR slightly declined in the last two years.
- Except one, they are burning money although they are working on a path to break-even or profitability by (first of all) cutting expenses and people
- They are not attractive for VCs
- They are not attractive for a rewarding M&A yet
Consciousness – Reinvention – Restart
I wrote an article some time ago on how Institutional Investors (primarily VCs) invest always in potential “Cinderellas” but most of the times they realise to have invested in her “Stepsisters” instead.
What should be the plan then?
Many of these companies can be “regenerated” as far as the Board is willing to support an exercise of Consciousness – Reinvention – Restart bearing well in mind that “nine women cannot have a baby in a month”.
GTM Audit and needed Therapy for Enterprise SaaS GTM issues
In this article I want to explore what is “typically” in my experience the status quo of the GTM strategy and engine of companies with a profile as described above.
What has to be changed, in a context where devaluation, write-off or even worst (especially for the Investors) the survival without an exit can become the most likely events.
Let’s take a real example, one of the companies I’ve been speaking with recently. I’ll keep it anonymous.
It’s a VC-backed Enterprise SaaS. They raised 8-digits in a few rounds.
10 years old.
They are half way between 5 and 10 million € in ARR.
The last 24 months have been tough, having cut by 50% the headcount from three to two digits.
We went through a GTM audit process.
The outcome:
- they miss most of the 10 key GTM fundamentals for a healthy growth.
- In the last 5 years they have developed wrong “GTM postures”.
- The future mantra for regeneration should be “Rebuild going back to the basics and keep it simple”.
In my experience several B2B SaaS Founders and Board Members are experiencing similar Enterprise SaaS GTM issues.
So, let’s talk about what are this company GTM issues and what type of therapy would be appropriate.
Need to nail the GTM strategy and align the whole organisation
Switch resources from Product to Go-To-Market and get back to the basics
Less than 15% of the company yearly costs go into Sales and Marketing.
That’s low.
This includes headcount that represent the biggest cost for a B2B SaaS company.
On the contrary, Product and Tech absorb most of the costs/resources.
Like many startups in the VC-backed SaaS space, this company has developed a lot of “code”. Too much and unproductively.
Just to give an example, only in the last two-three years a couple of million € were literally thrown away to develop new modules that have produced zero revenue. Z E R O.
The reality is that after 10 years in business, more than 80% of the revenue still come from the original two-three use cases of the beginnings.
These “originals” produce tangible ROI for new and old customers.
That’s where this company should re-start from:
- Nailing the product offering and the go-to-market strategy to those basics.
- Redefining the value proposition to adjust to a changed scenario.
- Finding the way to recalibrate resources from product / tech to GTM (whose resources should be at least the double of what they are now).
ICP (Ideal Customer Profile) and IPP (Ideal Partner Profile) are not appropriate
In Direct Sales targeting only Big Whale Accounts is dangerous. We are not in 2016
In 10 years since the launch of the company, they got in total 30-40 customers. Six-digit ARR per customer on average.
The CRM of the company contains around 600-700 Accounts including existing Customers.
It means they have been targeting always the same Accounts. Even so, the CRM is missing insights and good reporting discipline about past engagements.
There is a risk that a portion of these Accounts are burned.
They have tried to penetrate huge accounts as a small tech company by persuading the pioneers and innovators that through the platform and the experience of the team they can help drive digital transformation in the client organisation.
Selling into Big Whales has become much more complex than it used to be.
Sophisticated buyers, big purchasing committees, they know what they want now ….
Putting all your eggs in the basket Big Enterprises is not recomendable as I would have done 7-10 years ago.
Partnership strategy has never been approached thoroughly
The leadership team spent a lot of energy and resources with consulting giants like McKinsey and Accenture, hoping to get introduced in their big transformation projects with Big Whale Accounts.
The ROI from these efforts never payed off in terms of scalability though.
When you aim to the Big 4 and you are a small startup you think you are using them but in reality it’s all the way around most of the times.
So what? What needs to change
First of all the targeting strategy and the way they segment.
No doubt the revenue of the next 2 years will need to come most likely from those 6-700 Accounts already present in the CRM.
The first thing to do is a work of segmenting and identifying the “XX” Accounts out of those 6-7 hundreds where it makes 100% sense to invest resources and build & execute a “professional” Strategic Account Development plan.
This is a rigorous process of cleaning up the historical account list and applying account development plan methodologies. This is a combination of discovery on the ground, strategic thinking, decisions and ongoing execution with the right people.
The way traditional agencies (marketing, consulting, advertising, etc) have done Strategic Account Development for the last 50+ years should be the North Star. I’ve been there and it was great to absorb like a sponge from those “masters”.
On top of those Strategic Accounts the company should build a new motion for going more mid-market, aiming to tickets of 50-150K ARR as opposed to the 300K-1,000K+ of the Big Whale approach.
Who are the 1,000 brand-new Mid-Market Accounts to go after for the next 3+ years?
This list should be made of mid-market players with a high level of likely affinity with the most powerful use cases of the company.
The company works in a niche where there are no more than 50-80 potential Accounts per country.
Geography is not really a factor here although it would be better to align on geographical clusters where the impact may be higher than in others.
As far as Partnerships is concerned, 7-10 years ago my view for a company below 15 million $ in ARR was: “No Way. You should just go with direct sales for the time being”.
In my opinion the scenarios has changed and become much more professionalized in the last 5+ years.
I like the conceptualisation below coming from Winning by Design to give the sense of how partnership approaches have become more tailored and sophisticated.
A company of 5-10M in ARR with strong and validated use cases should have deeper thoughts on their IPP (Ideal Partner Profile) and work on a plan on top of Direct Sales to build relevant partnerships.
This is a process that can take two years before seeing an impact on the top line.
However the topic should be in the agenda asap because the market is ready now with a wider variety of potential options.
The issue for the company we are talking about is that they have just pursued a few personal relations of the founders with partners of the Big4 instead of a more strategic and structured approach.
Move the qualification framework to another level
Sales people don’t generate demand.
Modern revenue generation in B2B SaaS is not about persuasion anymore.
For a healthy growth today it’s all about “Qualification”.
I discovered that the qualification framework used in this company was too basic for the current stage of the company AND for the level of maturity of the buyer personas nowadays.
They were considering a “qualified opportunity someone respecting the targeting criteria and showing an interest”.
This is a generic criteria with too much subjectivity. It was valid in 2016-2017 but not now anymore.
No doubt they need to move to the next level the way they qualify and develop their pipeline.
So what?
The company needs to rebuild from scratch the qualification framework. The filters and the triggers that would move the opportunity down the funnel must become stricter.
They need to define a customised version of the MEDDPIC framework that would reflect a few specificities of the business.
Most importantly, the framework must ensure that you don’t call it an opportunity (and should not appear in Pipeline) when a Prospect Account:
- is not searching for a solution like the one offered by the company or
- does not have at least an “anxiety codified internally” which means the issue has been discussed regularly in their internal agenda even if there has not been a plan to purchase a solution yet.
Rebuild the sales choreography. Stop the one-way pitch that sells feature
I discovered that the narrative of the sales team during the first couple of meetings with a Prospect is mainly focused on explaining the Modules and the generic benefits of each Module.
It’s mainly a one-way pitch that sells features.
Around the third meetings they start to focus on sharing business cases and try to move forward the agenda internally in the client organisation.
I would change that.
So what?
The engagement approach in the first steps of interactions with a Prospect should become a “teaching & qualifying choreography” that focuses on concrete use cases from the very beginning.
If the Prospect you are sitting with is not searching for a solution or does not have at least an “anxiety” internally in the organisation, you should not sit down with them more than once. They are not ready, be patient.
Stop about talking about your features and modules to persuade people.
Look for alignment on the issue and its urgency instead.
For those Prospects who qualify positively, help them build up a customised Simulator/Business Case as soon as possible.
The build up of an agenda of business case should become a main focus of the conversation to involve the right people internally.
You want the CFO of the prospect account or at least a senior finance person involved as soon as possible on that table.
playbook has lower case “p” although you go nowhere if don’t get it right
In its essence a GTM playbook is behaviour in execution, not a piece of paper. You can read more here.
Aristotle used t0 say that “we are what we repeatedly do. Excellence, therefore, is not an act, but a habit”.
I’ve seen many companies give too much importance to GTM processes and systems as if a sophisticated playbook would be the key driver for growth. It is not.
That’s why it’s better to talk about playbook with lower case “p”.
You must get it “right”, “simple” and “world-class” though: the right processes, systems, KPIs/GTM reporting and tech stack in place.
In the audit it came out that the company was missing the right basics in this perspective.
The funnel is misleading because it tracks the activities, not the outcomes.
The funnel is misleading because it is activity based. The sales people are moving opportunities from a stage to next one depending on the type of event they execute with the prospect:
- First discussion
- Discovery call
- Demo
- Business case.
- Negotiation
There are two key issues with activity-based funnels:
- They don’t tell you if there are “real” advancements as far as an opportunity is concerned.
- They are granular at the top of the funnel and miss profundity at the middle and the bottom of the funnel.
Tech stack is just a cheap CRM used as a depository of opportunity logs
Every time I speak to a Founder who moved from Salesforce to a cheaper CRM I hear the same story.
“It was the CRO, who is not working with us anymore, that wanted to implement Salesforce. It was too expensive. The team was not using it. We didn’t see the value”.
I always reply the same: “more than 80% of the revenue leaders in the Enterprise SaaS industry (me included) use Salesforce and there are several reasons for it”. It’s not for today to dig into these reasons though.
When I end up working with them and they follow me on the approach, 100% of the times they stick happily with it.
The issue is not having the right “behaviour in execution”. That does not depend on Salesforce.
After the right people, tech stack is the most strategic investment for GTM and it’s not only the CRM.
Advanced tracking and Revenue Ops – Not Available
The company does not have a proper reporting and dashboard system for a business with that level of MRR and company stage.
They do not have a Revenue Operation function neither, and this should be a key resource for any modern business.
So what?
Move to outcome-based funnel.
Earlier in this article we have seen why and how the company should move the qualification framework to another level.
At the same time the Funnel should move from being based on activities to being based on outcomes.
The triggers from one step to the other should be based on objective customer feedback to specific questions asked at the right time.
For an enterprise SaaS business like the one we are discussing, I would typically use 6 stages for an opportunity and 4 out of the 6 would be stages at the bottom of the funnel, in a few critical moments of negotiation and deal execution.
These are typically the steps where most opportunities get delayed or lost and you need to make sure that leadership has got visibility and the pipeline is as realistic as possible.
- Verbal OK (50%). Contact has EXPRESSLY communicated that they go ahead with the project and SIGN OFF TIMING IS KNOWN
- Procurement/Legal review (75%). Contact has EXPRESSLY communicated that Procurement/Purchasing/Legal is processing SOW /contract
- Waiting for signature (90%). No pending topics. Signed PO arrive no later than 2-4 weeks
- Closed won/lost (100%/0%)
Invest in a modern tech stack and advanced analytics
I want to write soon a new article to dig into the tech stack and analytics tools I tend to deploy in the SaaS organisations I’m involved with as a GTM leader / CRO.
I’m not talking only about Salesforce.
The set up of the basics is a combination of:
- Salesforce with a customized simple configuration.
- Gong or Juminny for call and video recording and analytics
- Copy AI for building AI-driven workflows across the various steps of the funnel. It’s the state of art of AI for GTM teams.
Modern revenue engines are becoming cyborgs and it’s exciting the possibilities that AI is providing to improve efficiency and efficacy even for an enterprise SaaS where the human component is still fundamental.
Rebuilding the GTM organisation is the biggest challenge
The Enterprise SaaS GTM issues we discussed so far are not too problematic:
- Redefining the GTM focus and starting to execute accordingly, with clear and reasonable milestones aligned with the Board.
- Moving the narrative, the choreographies and the qualification framework to the next level.
- Rebuilding with simplicity the GTM processes, systems, reporting and tech stack
No doubt it’s hard work but I wouldn’t worry too much about these issues.
It requires 3-6 months to set it up.
However in 3-4 months you could get quick wins and most importantly get concrete signs that things go in the right direction.
The really complex challenge instead is about People & Reorganisation .
Hiring Sales people from Corporations is dangerous.
The Sales team of this company is broken.
The last CRO was let go months ago. He had spent most of his career in a huge tech company.
The sales people came from the same type of background. Only one of them is still in the team. The rest have left or been phased out.
There is a big issue with this type of corporate profiles.
They tend to have issues to open doors and penetrate the market when they work in a small scaleup that does not have yet an established brand in the specific industry.
In my experience they don’t tend to be hands-on as required in the context of a small scaleup.
Customer Success is not “true” SaaS Customer Success
Customer Success (CS) people were hired from big brands in the Customer domain.
They are missing the experience in an Enterprise SaaS environment.
CS sits within Operation which is an anomaly in the B2B SaaS space.
Another anomaly is that CS does not have access to customer data. They just have access to the basic ones and must rely on the Data Ops department to get more added value insights.
Onboarding/implementation sits in another team under Operations.
Basically, customers get “handed over” between three silos: from Sales to Implementation to CS.
That’s not customer-centric. That’s not how modern Enterprise SaaS organisations typically work.
No Marketing and Revenue Operations structure
We already discussed about the lack of a Revenue Operation lead in this company.
As far as marketing is concerned they just have a Communication and Content person.
So what?
The business needs to rebuild the revenue engine from scratch.
The company needs to set the foundation of a modern GTM organisation where Sales, Customer Success and Marketing are part of One Revenue Team.
Marketing -Demand Capture
The marketing approach should be built from scratch focusing on “Demand Capture”, detecting and engaging primarily with buyer personas that are problem aware and solution seekers.
Prospects that are in the middle & bottom of the funnel.
Traditional Lead and Demand Generations strategies and tactics would not work for a company in this situation. I mean the ones focused on a long term, education focused strategy aimed at building brand awareness and prospect engagement.
Where I would focus:
- SEO and content roadmap focused on bottom of the funnel search.
- Product Marketing
- Selected events
- I would build a team of 2 maximum 3 people with outside senior support for design and demand capture.
- The key metrics to focus on would need to be lagging indicators like demo attended, business case aligned, proposal sent, average deal size, First Meeting to win%.
- Forget about the Marketing gurus on Linkedin and their automatisations, paid campaigns, brand awareness etc ..
Sales & Customer Success
In the first 6-9 months I would focus on building a first lab of Sales & Customer Success unified team.
Around 10 people with an organisational vision as pictured below.
Profiling
The profiling of the team for a “Rebuild & Regenerate” plan is a very interesting topic.
In relation to experience I would only go for people that have proven experience in B2B SaaS with similar ARPA levels, in this case between 70-100k and 500k ARR
From a soft skill and personal profiling point of view my vision is that the recruiting criteria should be different compared to a classic VC-backed company that is on the unicorn trajectory.
The company we are focusing on has had tough times in the last two years.
The resources will be limited from now on and a very successful scenarios would be to go for an M&A with an exit value below 100M in 4-5 years. Even 40-50M would be a good result within the circumstances.
You don’t need “high flyers” people that pursue unicorns and hyper-growth startups.
You need people that can be resilient, mature and experienced professional that went through the challenges of working for a tech startup and scaleups with limited availability of resources.
People that know by experience the good, the bad and the ugly.
Ideally they have already gone through some disappointments in their career and value the opportunity of a serious experienced leadership team and a project that makes sense.
Wrapping up.
The approach proposed in this article assumes that the Board is willing to support a plan of “Rebuild & Regeneration” and is conscious of its implications.
Given the status quo of the revenue engine as described above, doing an exercise of setting revenue targets and quotas for the next 6-12 months would be pointless.
The agenda of the sales team is empty. Pipeline generation in flat.
If a company doesn’t have revenue predictability, like in this case, the target should be first of all to build that predictability.
In line with the approach proposed here, the Board should align on specific and concrete milestones for the following 3-6-12 months and the topics shared in this article can be a good base to define those milestones.
With proper execution, in 9-12 months there will the right level of insights and validations that will allow the Board to answer much more questions, including what should be the foreseeable exit strategy and by when.
A lot will depend on how the business will react to the “therapy”, assuming that the company still has got a role to play in its sector and the product is still competitive. As it seems to be the case.
If you enjoyed this post, you will also like How to deal with the fear of devaluation, write-off or survival without exit
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