How to sell SaaS: 9 tips for startup sales success
At Close, we know how to sell SaaS. We began as Elastic, Inc., an outsourced sales solution for Silicon Valley startups. After we developed Close for internal use, we pivoted and began to sell our inside sales software to SaaS sales teams.
We’ve worked with thousands of startups and seen countless successes and failures. We know what works, and we know what doesn’t. In our experience, these are the nine cornerstones of SaaS sales success.
1. Keep your trials short
A long trial might seem like a good way to hook your customer, but you’re really just hurting your startup. For 99% of startups, trials shouldn’t be any longer than 14 days. Here’s why.
Most people don’t use free trials for the full duration. Take a look at your data and you’ll see that the vast majority of your trial users duck out after about three days.
Users take a short trial more seriously. Your prospects will procrastinate, and when they procrastinate, they forget. With a shorter trial period, they’re more likely to try your product immediately.
Lower customer acquisition costs. When you shorten your trial, you also shorten your sales cycle. If you’re able to shorten your sales cycle from six weeks to three, you will significantly reduce your customer acquisition costs.
If you still have a low conversion rate after shortening your trial, try these three strategies to nurse lost trial leads into activation.
2. Optimize your email campaign
Unless you have a killer email campaign, most of your prospects are going to forget you exist within hours of enrolling in your trial. Here are three strategies to get the most out of your drip email campaign.
Use “human” email addresses. Don’t ever send an email from a department. Instead of “Sales@YourBusiness.com”, use “YourName@YourBusiness.com”.
Send a lot of emails. Christoph Janz's, one of the most successful SaaS investors of all time, advice to SaaS founders is, “If no one is calling your emails 'spam', maybe you're not sending enough emails.”
Send activity-based emails. Your drip campaign should automatically email your leads for a number of "If no one is calling your emails 'spam', maybe you're not sending enough emails" situations, including when they sign up, if they visit the account or cancellation page, and if their trial is about to end.
3. Call your trial signups immediately
Most fledging SaaS businesses don’t call their trial users, and those that do often wait until the last day. They don’t know how to sell SaaS. In the early stages of your startup, you should call every single trial user within five minutes of signup. If you do that, you’ll:
Drastically improve your reach rate. There’s a good chance the prospect is still at their computer with your product fresh on their mind. The longer you wait, the less likely your prospect is to answer.
Quickly qualify or disqualify prospects. You need to make sure that your solution is a good fit for your prospect’s needs before you offer to close the deal. If it isn’t, you can use the call to help them explore other options.
Handle objections effectively. A controlled phone call is the best environment to successfully manage objections. If they don’t have any, you can use this time to preemptively resolve common objections.
The business that understands the customer, owns the customer. Pick up the phone and get to know your trial users or they’ll never become your customers.
4. Give short, value-focused demos
The most common mistake I see startups make when giving demos is treating the demo like a training session. Your lead doesn’t need (or even want) to see every little thing that your product does. They want to know how it will help them be more successful. Here are three strategies to give product demos that sell.
Qualify first. Don’t use demos as a qualification tool. Always qualify your leads before you give them a demo.
Keep it short. 30–60 minutes is way too long. If you can’t explain how your product helps your prospect within 15 minutes, you don’t know your product or your prospect.
Focus on benefits, not features. Your prospects don’t care about every little button on your interface. Don’t tell them what your product does, tell them what it does for them.
A successful product demo is a demonstration of value, not a training seminar. Treat it that way and you’ll be much more effective.
5. Follow up relentlessly
You will rarely close a deal on the first call. Startup sales success is dependent on your ability to follow up repeatedly. How often?
If your prospect has ever expressed interest in your product, follow up forever. Don’t settle for silence or “maybe”; maybes kill your startup. Keep calling and emailing until you get a clear “yes” or “no”.
If the lead is completely cold, follow this 14-day plan:
Day 1: Initial contact.
Day 3: First follow-up. Reach out at a different time of day with a condensed version of your initial message.
Day 7: Second follow-up. Reach out at a different time of day and restate your call to action.
Day 14: Third follow-up. If you haven’t received any response from your lead, send the break-up email. This is where response rates skyrocket.
If you don’t receive a response to your break-up email, move on to more promising leads.
6. Set your prices (really) high
SaaS companies who rely on pricing to be competitive aren’t confident in their products. They think that the only way they can become viable is by devaluing their solution.
Pricing shouldn't make your product competitive—value should.
Learn from Cloudsponge and experiment with pricing. You’ll know you’ve got it right when:
- 30% of your prospects say, “You’re crazy, I would never pay that!”
- 30% of your prospects say, “Your product is really cheap.”
- 40% of your prospects say, “Your product is expensive, but worth the price.”
It’s okay to be too expensive for some prospects. In fact, if you never lose deals over pricing, then your SaaS product is too cheap.
7. Sell prepaid annual plans
Startups love SaaS products because of the reliable monthly revenue. While those plans may offer consistent revenue, it’s a slow trickle.
When growing your SaaS startup you need a waterfall of revenue, not a trickle. Consider offering your prospects discounted rates if they buy a prepaid annual plan.
Although this may bring down overall revenue in the moment, it gives you immediate access to substantial cash flow. You can use this influx of revenue to hire a sales team, expand into new markets, or improve your product.
8. Don’t give discounts
Discounts might seem like a great way to get reluctant prospects on board, but they end up doing more harm than good. It’s not how you sell SaaS. Here’s why:
Discounts make salespeople lazy. It’s hard to sell prospects on value and easy to lower the price. When discounts are an option, count on your salespeople abusing it.
Discounts make predictable revenue impossible. When every new customer pays a different price, there’s no way to know what your revenue will look like next week, let alone next year.
Discounts are bad for branding. Customers talk, and when they start to realize that their competitors are getting the same product for cheaper, they aren’t going to be happy.
You need a strict discount policy, and you need to stick to it. Outside of prepaid annual plans, we recommend not offering discounts at all.
9. Never close a bad deal
Never sell to unqualified customers. Sometimes that will mean saying “no” to a customer who wants to give you money. Closing an easy deal might be tempting, but the cost of churn will always outweigh short-term revenue.
Here’s why selling to the wrong customers will kill your SaaS startup.
When you sell to an unqualified prospect, they aren’t going to be successful. They’ll have a lot of complaints and require a ton of support. These customers demoralize your team with negative feedback and start spreading bad reviews online. Eventually they’ll churn, and they’ll blame your product for their failure.
And they’ll be right. It’s your responsibility to prevent bad customers from buying your product. Make sure you properly qualify every lead with these four steps:
- Create an ideal customer profile
- Identify your prospect’s needs
- Figure out their decision-making process
- Determine your competition
Complete those steps and you’ll know whether or not the prospect is a good fit for your product. If they aren’t, that’s fine. Help them find a solution that is, then move on to other leads. This is how to sell SaaS the right way.
Get out there and crush it
SaaS sales is hard, but it isn’t impossible. If you incorporate these tools and strategies into your sales cycle, you’ll drastically increase your chances of success.
So share this article with your network, make sure everyone on your team knows how to sell SaaS, then pick up the phone and start selling.