Since early in my sales career, I’ve leveraged the Sales Funnel as the base for any Startup Sales Process. Many best practices picked up along the way have been described on this website. However, the emergence of SaaS solutions and per usage pricing models transform the definition of a sale. In my opinion, the traditional sales funnel is outdated in today’s world. A new Startup Sales Process needs to emerge.
What is a Sales Funnel?
The Sales Funnel is a marketing term for the different steps that a customer takes from being aware of their problem to purchasing a product or service to fix that problem. By breaking down Sales into different steps, startups are able to create a process that delivers the following benefits:
#1 - Know why you fail
Success in sales is the result of multiple steps that have gone well to reach a signature. However, when your sales results aren’t where they should be, how do you know the cause? Sales Funnels are a solution.
Each step has a conversion rate, or the number of leads that go from one step to the next. Startups can easily identify leaks by tracking conversion rates.
#2 - Forecasting
Forecasting the future as reliably as possible is critical for companies to understand where they are performing well and where they need to improve. By associating success percentage rates to stages, Sales Funnels allow companies to estimate and track the value of their pipeline.
#3 - Easy to implement in IT
In CRMs, sales managers create Opportunities. Each Opportunity is composed of an Account (who), the Amount (what) and the Stage (Step in the Sales Funnel). Coding a process that treats sales like a car manufacturing process is easy and efficient. Every CRM and application leverages these building blocks. In essence, the sales funnel has become the standard on which every sales technology application is built.
Why does the ideal Startup Sales Process not fit in a simple funnel?
Value isn’t generated at the sales transaction
Most companies treat a sale as the process of going from Awareness to Purchase. Once the customer has purchased the product, whether a car, iPhone or traditional software licence, the sales cycle is over. A sales process is similar to a GPS trying to take the driver from A to B.
A SaaS Startup has a different business model from traditional firms. When looking at how Startups are valued, three KPIs come to mind:
- Lead Velocity Rate or how fast you grow your top of funnel,
- ARR (Annual Recurring Rate) is more than a startup’s revenue. ARR values how many customers sign on again the year after.
- NDR (Net Dollar Retention) tracks how many customers churn and how many customers grow usage over time.
In other words, most of the value in a SaaS Startup is generated not at the end of the transaction. The value generation begins at the first transaction and snowballs when sales has targeted customers that had a true need for the product and the potential to grow usage quickly and massively over time.
The Startup Sales Process needs to manage to customer lifecycle
SaaS startups live or die by their ability to grow customers over time. Great SaaS companies have NDR over +120%, meaning that the average customer grows usage +20% if there is no churn. Sales’ job is to close accounts today that will generate the +20% tomorrow.
Indeed, he best companies in the world are able to grow their existing customers massively, while their sales teams open the next frontier, whether that be a new demography or a new geography. By powering on both cylinders, your startup will truly be able to grow.
However, to create this sustainable growth, the standalone Sales Funnel needs to be broken. Leads are not turned into closed deals and dropped off anymore.
I recommend to all my friends, partners and customers to buy the best book on Entrepreneurship I know, the Startup Owner’s Manual by Steve Blank and Bob Dorf. In it, the authors discuss a new sales funnel for the startup age: the Get – Keep – Grow funnel.
Get - Keep - Grow: A 360° Funnel
Get – Keep – Grow is a funnel that allows your startup to coordinate sales, marketing and customer success. Thanks to the different steps, the startup’s focus is not to close the account, but to grow the account.
- Get : Tactics and strategies to turn leads into customers,
- Keep : How to keep customers engaged with the product and company,
- Grow : How to turn a small customer into a big customer,
- Viral Loop : How to ensure your existing customers become your biggest marketing channel.
By thinking of your Startup Sales Process as the beginning of a cycle, you should be able to make more strategic decisions on who your salespeople target, what marketing pitch you focus on during the initial closing and how you grow each individual customer over time.
This Startup Sales Process also breaks siloes, as it forces everyone to see the customer in 360°, from initial conversation to an amazing medium for referrals.