Should You Move From Self-Serve to a Hybrid Sales Model?
Many SaaS brands with a self-service model shun away launching an inside sales program and they might be right in doing so. Not every product needs a sales team. Many SaaS applications grow with users going through most of the buying process on their own.
But then, there are those companies that want to go beyond the self-serve model.
Perhaps they see an opportunity for a faster (or greater) growth in personally reaching out to their inbound leads. Or they simply plan to go up-market, and those clients expect them to do some selling.
If you already see an opportunity in Inside Sales for your SaaS business or maybe just want to explore the topic, this article is for you.
A quick note before we dive in …
This is the first article in a series of blog posts based on a conversation I had with Joe Wadcan. Joe is a fellow Earnest Capital mentor, a founder, and a lecturer in sales at UC Berkeley.
Personally, I have been looking into launching an inside sales team at my previous startup, Docparser. Some of the advice comes from my experiences back then. The majority of information below was however provided by Joe and I really appreciate that he is OK with me publishing it here. Thank you Joe! 🙂
All that being said, let’s start with the big question first …
Should You Transition From a Self-Serve Model to Having an Inside Sales Team?
For the following we just assume that you have some kind of product / market fit. In other words, you notice comfortable traction and growth. People sign up for your free trial or freemium plan and convert into paying customers at a nice rate.
Encouraged by those results, you probably began to wonder if you could ramp up the growth by hiring salespeople.
It’s only logical that you should do more selling, right?
The thinking is simple: Since you are getting such great results without doing any active selling, you should grow even faster with a more proactive approach.
Unfortunately, it’s not always the case.
For some SaaS businesses, going with a sales driven approach doesn’t make any sense. For those companies, hiring a sales team takes the attention away from channels that actually generate growth. Not to mention the cash needed to support a sales force they do not need.
But how do you know when it’s the right time, then?
In our conversation, Joe suggested a simple litmus test for when to hire SaaS sales.
Answer these three questions:
1/ Is Your LTV Large Enough?
Too low Lifetime Value (LTV) means that your sales force might end up costing you more than they actually bring in. As a rule of thumb, the customers your want to target with inside sales should have an LTV of at least $5,000 – $10,000 to make it work.
Important to note here is that you need to segment your users into two groups before calculating their LTV.
The ones you would like to go after with an inside sales approach, and the ones who will continue being served through a self-service model. You then calculate the LTV only for the former group.
The first thing you want to check is if your customers on the high end have a Lifetime Value (LTV) that would actually supports a full on sales cycle.
Joe WadcanLecturer in sales at UC Berkeley
2/ Are Bigger Customers Actually Struggling to Convert?
With this test you figure out if investing extra resources on bigger customers would actually make a difference. The idea here is to take the two groups of users from above – small and big customers – and calculate the free to paid conversion rates for each of them.
If there is a gap in the conversion rates, it’s a good indication that a sales team would be able to help bigger customer in their purchasing process.
If there is no gap in conversion rates between the two groups of customers, you should probably check twice if adding a sales team is actually worth it.
3/ Is There Complexity in the Sales Process for Bigger Customer?
The idea behind this question is to check if you sales team can actually add value to the sales process.
Let’s assume you have a very simple product with a straight forward sales process. In this case, adding a human interaction to the purchase process might actually just result in more friction for the user.
It is more likely though that bigger customers experience some kind friction and complexity in the purchase process. The friction might be caused by your product, but in many cases the complexity is actually created by the customer itself.
To give you an example: Selling to enterprise customers means talking with various stakeholders. Their IT staff might ask your for a security audit, their finance team will ask you for an invoice, and so on.
In those situations, a sales rep can help a prospect by guiding them through the purchasing and onboarding process and turn road blocks into speed bumps.
Not every SaaS needs an inside sales team. But for companies with a relevant business model that are ready, supplementing the self-service model with an active sales force can deliver an incredible boost in growth.
If you’ve answered YES to all three questions above, you definitely should consider getting started with inbound sales. In our next blog post we’ll explore how you can get started easily without breaking the bank.
Otherwise, it might make more sense to hold off. That’s not bad news at all. It just means that a sales assisted model might not be a good fit for the solution you are selling.