This is the second article in my 5 part series (introduced here). The series focuses on how your B2B SaaS business can increase revenue retention and expansion through your customer acquisition strategy.
In short, I’m explaining how to align your Customer Success strategy with your Sales strategy.
In the last article, we reviewed the why and how behind using a prescriptive outcome-focused Sales strategy. This will enable you to acquire customers that your Customer Success strategy is then able to retain and expand.
In this article, we’ll take a step backwards in your Sales process to where you are beginning to perform discovery and start qualifying prospects.
SaaS and its various subscription revenue models has undeniably changed the shape and strategy of Sales pipelines in software companies.But whether you subscribe to the double-funnel or the helix pipeline, the prospects you allow to progress through your early-stage pipeline significantly influences the subscription unit economics you end up with.
This is why we need Ideal Customer Profiles.
Defining and using an Ideal Customer Profile(s) to drive your Sales qualification criteria will create a more effective and efficient Sales pipeline for your recurring revenue strategy.
Effective means increased win rates, larger initial Average Order/Contract Values (AOV/ACV) and, our focus here, the acquisition of customers that will drive higher revenue retention and expansion rates.
Efficient means faster sales cycles, less M/ARR pipeline burn and higher productive utilization (measured by ARR generation) from your Sales and Customer Success headcount involved in the sales cycle.
Ideal Customer Profiles vs Ideal Buyer Profiles
Does your B2B SaaS company has a defined sales qualification criteria that is proactively applied as part of your overall Sales strategy?
This is distinct from having a PowerPoint template or SFDC form that was once billed as the heart of your new shiny opportunity review process but is now gathering dust and remains empty for most sales opportunities.
Whether you fall into the former or latter situation above, ask this question of your current sales qualification criteria:
Are you qualifying prospects on their likelihood to buy or their likelihood to become a successful customer?
It should be and can be both.
An Ideal Buyer Profile is certainly useful. I, and Hubspot here, highly recommend having one to help focus your sales pipelines.
I recommend your Ideal Buyer Profile accounts for the buyer’s company profile plus the buyer personas within said company. Your Ideal Buyer Profile should be able to answer these 3 headline questions about your Ideal Buyer:
- What tangible/quantifiable facts indicate that a prospect is likely to prioritize the strategic goals your solution helps achieve?
- Vertical/Age/Business Model/# of employees etc
- What tangible/quantifiable facts indicate that a prospect’s potential budget is likely to align with the investment profile (subscription cost, subscription terms, professional services cost etc) of your solution?
- Revenue or Market Cap/Geography/Public or Private/Other SaaS investments etc
- Who are the buyer personas that, when confirmed as supporters of your solution, the likelihood of a sale increases?
- These would include commercial decision makers, technical decision makers and their respective influencer peers, reports and managers.
A pipeline full of prospects that have been qualified as meeting the majority of your Ideal Buyer Profile, makes achieving your bookings target for this quarter look very doable.
However, as a leader of a B2B SaaS company, you know that achieving bookings targets is just one half of the equation you must complete to have a sustainable, growing and highly valued company.
The other half of the equation requires a customer and revenue base that is retained year on year and expands in revenue size.
To help achieve this second half, recognize that an Ideal Buyer Profile is just one part of an overall Ideal Customer Profile that your business needs to define and then use to drive your sales qualification.
An Ideal Customer Profile defines a prospect that not only is a strong candidate to purchase your SaaS product but is also a strong candidate to become a customer that can be retained and expanded year on year.
An Ideal Customer Profile should answer the following 2 questions in addition to the 3 listed earlier for an Ideal Buyer Profile:
- What tangible/quantifiable facts indicate that a prospect can realize measurable outcomes (contributing to the achievement of their strategic goals) by adopting features in your product?
- Current Processes/Org Structure/Job Definitions/Incumbent Solution
- Who are the user personas in a prospect that, when confirmed as supporters of your solution, increase the likelihood of successfully changing the prospect’s current state as required to enable value-based adoption of your solution?
- These would include exec sponsors, power users, external stakeholders (if your solution interacts with your customer’s customers, partners or other vendors) and technology/infosec stakeholders
In short, an Ideal Customer Profile asks the questions needed to understand whether a prospect is likely to A) want to and B) actually make the changes necessary to achieve the outcomes that you will be prescribing and then helping them achieve with your SaaS product.
Qualifying in this way ensures that your Sales and Customer Success teams have enough knowledge of the prospect to prescribe compelling Value-based Outcomes and present a clear adoption plan to the prospect that will close the sale.
Going Back In Time With SaaStastic
If my last article, we worked through the final stages of an example sales opportunity with B2B SaaS company SaaStastic. Let’s revisit this example but step back in time to when SaaStastic were first qualifying their sales opportunity with SoftWhip.
Reminder: SaaStastic is a B2B SaaS company and SoftWhip is a prospect.
SaaStastic’s have defined their Ideal Customer Profile as including these attributes:
- Software engineering firms
- Based in the U.S.
- Links to SaaStastics’s current services and support delivery capabilities
- With 30 or more people in the software engineering team in the U.S. i.e. a high cost base
- Links to SaaStastic’s Ideal Customer’s strategic goal of cost reduction
- An In-house QA team as part of that engineering team
- Links to SaaStastic’s Ideal Customer’s jobs
- Company age of 10 years or more i.e. likely to have old legacy systems and/or many manual processes
- Links to SaaStastic’s key Value Enablers including automation of tasks
- Looking for/open to multi-tenant SaaS products
- Links to SaaStastic’s product architecture and functions
Early in their sales cycle with SoftWhip, SaaStastic’s Sales team performed discovery and learned that:
- SoftWhip is a 20 year old software development company based in the U.S. with an engineering team over 50 people strong
- They have an in-house QA team that has many manual processes
- They are looking to buy a SaaS solution for lower TCO and to serve as an OpEX investment
- Their CTO is sponsoring the search for a product that would deliver a reduction in his engineering cost
- The Director of QA is involved in the decision making process and is “open to change”
SaaStastic’s Sales team used these facts to qualify SoftWhip against SaaStastic’s Ideal Customer Profile.
After review, SaaStastic progressed SoftWhip onto the proposal stage of their sales cycle where Value-based Outcomes were prescribed and an Adoption Plan presented.
What would you have done?
Qualify SoftWhip ‘in’, increase the opportunity confidence in the sales pipeline and progress to the next stage of the sales cycle?
Yes, so would I.
I’d be applying a ‘yellow flag’ to the Director of QA but, overall, there’s enough here to keep pursuing SoftWhip as a future customer that would likely be retained and expanded by SaaStastic year on year.
You’ll have to check out my last article to see what happened next in the sales cycle with SoftWhip. Hint: SaaStastic’s prescriptive strategy proves me right about the potential risk linked to SoftWhip’s Director of QA!
Qualification never ends in a sales cycle.
This is especially true if you’re targeting enterprise customers. P.E.S.T analysis, S.C.O.T.S.M.A.N analysis, change readiness analysis. Calculation of payback, TCO, ROI and NPV. All these would add value to how you’re qualifying prospects in/out of your SaaS pipeline.
But before you go google how to calculate Net Present Value for your solution, let’s quickly recap and conclude.
Unless your B2B SaaS company is in the process of seeking product/market fit, I expect you have several (hopefully lots!) customers that you have successfully sold to AND who have achieved their strategic goals with your product. If so, you have the DNA with which to define at least one Ideal Customer Profile.
By using this Ideal Customer Profile as the foundation for your Sales qualification criteria, your Sales pipeline will more effectively and efficiently fuel your recurring revenue engine.
How many prospects are in your Sales pipeline right now that don’t fit with your Ideal Customer Profile?
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