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Becoming Cash Flow Positive In SaaS Business & Growing Revenue By 3 Times In 3 Months: The ShieldSquare Story

In Q1 2016, we saw our hard work payoff. We achieved some notable milestones. We became cash flow positive and our annual revenue rate (ARR) grew by 3 times in 3 months. We expanded our customer base to 68 countries (with over 90% of the revenues from outside our home base), and doubled our team to 50. Our Average Revenue per account (ARPA per year) has doubled to $10,000. Above all, we pushed ourselves to become one of the top 2 bot prevention vendors across the globe!

This is quite an achievement, and I’d want to share some of my learnings on what worked, and how we got there.

Who Are We?

We are ShieldSquare – a startup based out of Bangalore that has come up with a world-class solution to fight bad bots that scrape content, spam forms and engage in various forms of site abuse. We started off in late 2013 with a founding team of five incubated at Microsoft Ventures Accelerator, Bangalore. We worked hard on building the product and refining it by working with early customers till the first half of 2015. We launched ShieldSquare for the global market in mid 2015 and started getting good traction. We decided to shift gears and accelerate the business growth for the year 2016 and this is how we went about doing the same.

Expanding To Outbound Lead Generation Channels

We initially focused on a low-touch approach in getting leads via inbound channels. With the right keywords, and after a lot of optimisation, we became the No.1 in search ads. We started getting a good number of leads, and this also helped us secure a top global financial portal as our customer.

However, as the average deal sizes through the inbound approach were small, we kickstarted our outbound marketing campaigns with aggressive sales targets. We launched personalised email marketing across different verticals, analysed the technologies our prospective customers were using and focused on them. This helped us reach out to the Europe and US markets, and win marquee customers – still keeping it a low-touch approach.

Incentivising Customers To Opt For Longer Duration Plans

We wanted to have a win-win situation for our customers (lower total cost of ownership) and us (cash flow and predictable business growth). We removed monthly subscriptions, and started providing significant discounts to customers that opt for annual subscriptions. Why? Because we believe that the the cash paid today is many more times valuable than the same amount paid after a year. If the valuation of the company increases by 5 times over 12 months, the cash being realised now is 5 times more valuable than the same amount realised after 12 months. We now plan to expand this strategy to incentivise customers that go for 3-year subscriptions.

Then Came The Growth Hacks!

Our regular efforts resulted in regular leads, but we wanted higher conversions with minimal touch.  We  launched a few growth hacks that are first in this industry, to increase our conversions. Our free-forever diagnosis plan helped our prospects try, and experience our product with no upfront commitments. Our free tools  ScrapeScanner and BadBot Analyser  provided reports that enabled our prospective customers understand the need for ShieldSquare and prioritise it internally.

scrapescanner free tool

Wise Investments To Achieve Growth

One way for businesses to reach positive cash flow is to get the team to work 2 times harder, cut costs, and the like. But our team was already working 2 times harder and our costs were tightly managed.   Another way—the more sustainable way—to reach positive cash flow is to grow revenues! We chose this path for becoming cash-flow positive!

  • Growing revenues require building solid sales, marketing and product teams, and we invested on growing our teams across functions and bringing in passionate talents to drive these teams.
  • There are certain things that might seem unimportant, but rather carry great value. Our employees at Bangalore enjoy free breakfast, lunch and snacks, while the same will be implemented soon for our folks in the Chennai, who are already beating the heat with the free tender coconuts we offer twice a day.

It’s Ok To Say “NO”

In business, priority is everything. 20% of the activities we do contribute to 80% of the results. Here’s how we prioritised things to be more productive:

  • We steered our focus away from activities that are of less or no value to our business, like attending feel-good/networking events. Rather, we reached out to our advisors and mentors whenever we needed guidance and advice.
  • We have restricted ourselves from meeting prospects until we qualify them. But we keep engaging with various players to get better educated about the market, trends and customer requirements.
  • As we were focusing on building the business and not raising funds, we have politely refused the calls and meetings from VCs who wanted to know about the business. Yet, if any of them insist on learning more about the exciting things happening at ShieldSquare, we invite them to our office to meet the team. This really works as only those who are serious will come to our office to have a conversation, while the others drop out.

Strong Foundation

We have promised ourselves that we would never compromise on the core values that took ShieldSquare to the global audience. It would have been impossible for us to be in the global top 2 position in our space, if not for the following:

  • A world-class SaaS internet security product that caters to  the problems of customers
  • Self-serve platform that requires minimal effort to integrate
  • Strong 24×7 support processes to help our customers
  • A great onboarding experience for customers using diverse tools

The aforementioned are the key learnings from our own trial and error experiments as well as interactions with our awesome customers and advisors. The key takeaway from these learnings would be to believe in our own instincts instead of reinventing the wheel.

The overall experience of developing a stellar security SaaS product for the world was amazing! As it turns out, the feedback we get from our customers are equally overwhelming, and yet it reminds us of the fact that the journey has just begun, and we still have a long way to go.

Guest Post by Pavan Thatha, Co-Founder & CEO of ShieldSquare, one of the fastest growing Saas Security company globally.

 

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‘SaaS’ – the product advantage and need

India has all the potential to lead the world in the SaaS segment, yet the largest number of SaaS companies relocate out of India, for want of ease-of-doing-business. SaaS is one of the major blocks in the emerging Software product Industry of India and it needs urgent attention in this digital economy age.

Whether SaaS is a product or service is often debated.

From the perspective of integration of SaaS into the overall policy frame work of the country, it is crucial for us to understand the dynamics of the SaaS business.

This is the first in a series of  blogs to understand the dynamics of  SaaS as a sub-sector within the Software Product Industry. The idea of this blog is not to prove that SaaS is not a service, but to emphasize that it closely relates to the Software Product Industry, and is distinct from the custom built, project/program run or SLA based IT/ITES services Industry. And further, there is a need to include this as a part of the Indian Software Product Industry (iSPI) in order to be in an advantageous position to both  – promote the SaaS business and also to develop an eco-system that is synergistic to all segments of the Software Product Industry.

SaaS has both a product and a service component. The product precedes the service. The service is not just the access but also the elements of all that goes into providing service to a consumer. Whereas customer satisfaction is focal to the service component, the attractively featured product, stability, cutting edge technology, speed and security are focal to the product side. The product needs a continuous investment and development. Product is the flesh and blood of the SaaS business body, and the body needs the air of service, to breath and run. The interplay between the product and the service component of a SaaS offering is important for success.

SaaS – Product advantage side

SaaS as a product or a service is a border line debate. Here are some important pointers to why SaaS has more weight to be classified as a product than a service:

  1. Software-as-a-Service is an online access or delivery model, thus offering a different business model. In most situations, the same Software (with same features) product can also be sold in a Pre-packaged form, delivered and used in an on-premises model.

A software in any form (on media, downloaded online, on premises or accessed online over Intranet or Internet) provides a service to a user but the software itself is a “product” or an “intangible good”. There is no doubt that SaaS is also a pre-packaged software. The distinction is in the delivery model and the business model.

Hence, all three forms i.e. the Pre-packaged software sold on a media, downloaded online and SaaS model possess the properties of ‘digital/intangible goods’. The other models of channel sales and distribution e.g. EULA, paper license and self-generated access PINs, all can apply to any of these three forms.

  1. SaaS is subject to the same IP law and IP right issues as the non-SaaS product is.
  2. SaaS is mostly sold in an MRP format, the price-quantity relation is very clearly defined. MRP is a concept clearly applicable to supply of goods, produced.
  3. The condition ‘license for use’ can be a condition for a service but for a product the license is for “right to use” and as soon as the license is sold to the customer, for a consideration the “right to use” is transferred for the specified period of time. Thus, implying a condition of transfer of “right to use”.
  4. Trade is the most important aspect: Many people assume SaaS means a direct B2C relationship between the SaaS Product Company and the end users. No SaaS company can become global  unless it focuses on the ‘trade’ aspect of the business.

Even direct B2C has to incorporate trade as an important attribute. Microsoft when it sells office365 hosted product is a SaaS company that is trading a bundle of products and an integrated services through its channel partners. Scale can be attained only when a SaaS producer take with him a strong ecosystem of trading partners.

When trade has to be activated as an important attribute of a successful SaaS business, the transfer of ‘right to use’ or trade of ‘right to use’ becomes inevitable. Being a product company carries a built in message to channel partners for trade.

What is traded is the features of product, the ‘goods’ that you sell and the ‘service’ component gets activated only when the end-user interfaces. B2C can either convert in to a B2B2C or B2nb>c.

  1. The Software Products of modern age may be a combination  of complex scientific or commercial applications with a mix of data, voice, video, images, texts, document files.

A combination of one can produce another. SaaS therefore, cannot be limited to the strict periphery of a ‘computer program’ or ‘information technology software’ but graduate to be a ‘digital good’ that forms the basis of a ‘digital economy’.

  1. Considerable capital is invested in R&D, product development and product improvisations on continual basis in any SaaS based product. The differentiation is achieved in Product side by bundling the differential features. The Differentiation in service side is also incidental to the robustness, user friendliness, ease of use, security and most importantly the together the quality of product itself.

Hence, even when the service side is so important to the SaaS business, the Q-o-S itself depends heavily on the quality of the SaaS Product.

The Software Product and SaaS Industry in India

The global Software Product Industry is estimated to reach $1.2 trillion by 2025. The Indian Software product industry today is about 5% of the total exports. The total revenue of software product industry in India is $6.1 billion today. Indian Software Product Industry by conservative 10% estimate will be $100+ billion by 2025.

According to the Google-Accel Report  the SaaS business in India is about $600+ million and will be $10 billion by 2025, which makes it 1% of the entire Software product estimates.

IDC has a higher forecast which says, by 2018, 27.8% of the worldwide enterprise applications market will be SaaS-based, generating $50.8 billion where SaaS revenue is forecast to grow at 17.6% CAGR. 27.8% translates to approximately one third of worldwide enterprise applications market.

If a combination of all these numbers are to be believed, the global SaaS market in 2025 at a CAGR of 17.5% will be $157 Billion. If the share of SaaS (27.8% of global enterprise app market) comes true and is retained the SaaS business in 2025 will be much higher than $157 Billion.

The domestic market in India is not strong enough. Most SaaS players are presently targeting the matured global markets with matured online acceptance and internet penetration. The online acceptance in India is also on rise and the rising e-commerce industry speaks volumes about it.

The Domestic market is going to get further strengthened due to various factors in coming times. “Digital India” will increase internet penetration as well as improved bandwidth accessible to consumers. A drive for cashless economy will push large number of SMEs. “India Stack” will enable large number of SaaS products. Government buying will increase in SaaS space with acceptability of cloud and opex business models.

In view of the above, India can certainly aspire to be at a much more than $10 billion by 2025. India will need to harness its prowess to aim at 15% global SaaS market and hence aspire to cross the $20 billion mark by 2025, which is double of the Google-Accel report which seems to focus just the SMB market.

Pursuing the Policy for Software Products

The above mentioned targets require a serious look at the country level “strategy” and developing a complete eco-system that can help the SaaS industry boom in India.

This requires consolidating Software product as an Industry with SaaS as an important vertical block and accordingly a need for following:

  1. Focused policy by Govt. of India
  2. Aligned trade and tax regimes
  3. Participative Industry action by various agencies on ground

iSPIRT has been following action at various levels on all of the above.

The National policy frameworks provide recognition to an Industry sector or sub-sector as well as provide a strategic frame work for growth of this Industry. There are two major Industrial policy frameworks.

  1. The IT Policy is primarily catering to the IT Services industry and has mixed agenda.
  2. National Policy for Electronic (hardware). The focus of this policy is to promote electronic products.

There is no national level policy focused on Software products.

To further this objective, iSPIRT is pursuing a National Policy for Software Products (NPSP). SaaS naturally forms a part of this proposed NPSP within the realms of Software products industry. Included part of these plans is the trade and tax specific issues with Govt. of India on reforming and making these regimes futuristic to compete in the world trade and ease of doing business in India.

One of the results of this active follow up on Govt. policy has been the Startup policy. SaaS has one of the biggest tractions in the Software Product startup space. SaaS startup is closest to the Software product startup in terms of issues and challenges faced.

Conclusion note

Both the product and the service side of SaaS cannot be ignored. Even the service component in SaaS is about using this digital (intangible) product. Both  – the product is intangible and also the service it provides is intangible  – just as any other enterprise on premises software product. Yet, product is an overwhelming part, right from stage when SaaS is conceived.

The issues of product development, funding, marketing, trade and taxation are all common to the Software Product Industry.

In view of the above, it is advantageous for the SaaS Industry to position itself as a product-based service providing industry.  This will help build an integrative Software Product industry of India, which can develop global products in all segments enterprise, on premises, mobile apps, cloud and SaaS based, even as we keep progressing towards building SaaS as new generation Industry.

SaaS will be the segment to reckon with as India emerges into a Software Product Nation in next decade.

References

[1] Google Accel Report – SaaS India, Global SMB Market, $50B in 2025 Public Version 1.1 – 7 March 2016. http://www.slideshare.net/AccelIndiaVC/google-accel-report-saasinindia-public-version-11-7-march-2016.

2 IDC report reference. http://www.forbes.com/sites/louiscolumbus/2014/12/20/idc-predicts-saas-enterprise-applications-will-be-a-50-8b-market-by-2018/#1de5d71295ae

3 Startup India http://startupindia.gov.in/

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Why WebEngage’s CEO @avlesh wishes #PNgrowth existed a few years ago?

WebEngage is probably the most important product startup from India’s business capital Mumbai – it builds customer engagement tools for SaaS businesses, is very popular and successful, and is used by thousands of businesses worldwide. Avlesh is one of the original hustlers of the Indian ecosystem, and he has built a world class product company in a matter of just four years.

When we talked to Avlesh about #PNgrowth, he was very excited, and stressed the importance of peer to peer learning in an ecosystem like ours which still hasn’t got as much attention as it should have. As he stresses, it would be very helpful for people if they don’t make mistakes in the first place, rather than learn after making a few. #PNgrowth would have helped him and WebEngage if such an initiative exited when they were starting out, he said.

Avlesh says that #PNgrowth can help entrepreneurs share different ideas of growth among them, and in doing so, share stories of how they scaled, the challenges they faced, and how they got to where they are.

#PNgrowth, in collaboration with Stanford’s Graduate School of Business and Duke’s Fuqua School of Business, iSPIRT’s #PNgrowth initiative aims to get the people who want to learn, and the people they need to ask in a room, and give them the perfect space to learn and grow.

You can learn more and apply for the program here.

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Jump Start Your SaaS Business by Selling to US Market: Learn the Nuts and Bolts from Whodunnit

jumpstart-guid-1Are you a first time SaaS entrepreneur targeting the US market? Learn it from the masters through the Jump Start Guide to Desk Marketing and Selling for SaaS put together by Krish Subramaniam (Chargebee), Niraj Ranjan Rout (GrexIt), Sahil Parikh (Brightpod), and Suresh Sambandam (KiSSFLOW). Aaron Ross launched the guide during the first SaaSx event in Chennai put together by iSPIRT, attended by more than 100 SaaS entrepreneurs.

The following are the take-aways. Use the guide to understand in-depth and develop your strategy to hit $100 million in sales. All the very best!

Marketing

  • There are four different strategies employed by Indian entrepreneurs for customer acquisition: Learn from Wingify, KiSSFLOW, GrexIt, Freshdesk.
  • Free trials don’t work for higher sales value. And prices are not listed publicly by most companies.
  • What is the right pricing? There is no one sutra to it. But get it right before you push your sales pitch. Learn strategies from the hackers who did it before.
  • Have a team in place to handle marketing efforts with clear segmentation of the team: marketing/product/sales. Have clear-cut roles as they often blur.
  • Understand the 10 recommended activities before you start marketing.
  • Focus on building the trust of the customer visiting your product website for the first time. To make it attractive, for example, think of a “Benefits” page instead of listing “Features.”
  • Learn how to build content around long tail keywords for effective SEO.
  • Marketing based on content generation (content marketing) has many dimensions to it. Use all of them for maximum benefits.
  • Social channels ensure better outreach. Make your presence felt on social pages.
  • Retarget your customers who just dropped by your website.
  • You can innovatively market using your product itself.
  • Get a marketing team in place.
  • There are some sales channels you must ignore before starting the SaaS company.

Selling

  • Learn what catching, coaching, and closing mean.
  • Winning the first few customers is the founder’s job.
  • Learn what tools to use for customer development.
  • Develop an effective funnel.
  • Facilitate self-selection and build engagement with the customers.
  • Collect key information during the engagement process.
  • Post-trial offers work for closing the customer.
  • Learn the customer closure techniques to use.
  • Structure your sales team clearly.
  • Doing a great customer service after sales is essential to retaining the customers. Learn the tips.

Download the guide here{link}.

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My Learning while building a Bootstrap Startup in India

I had written a post How I built a 1100+ users SaaS business as a Single Founder with Zero Marketing Budget some time back which got covered at YourStory. Since then I have got lot of mails asking many questions, I did tried my best (and will always be) to answer to everyone but it is not possible to reply to everyone so I thought I should write down a post putting down all my learning.

I feels most of the failed startup owners quietly disappear instead of sharing their learning and unfortunately what all I learnt, learn through failures after paying big price so I thought to share my knowledge and learning to other startup founders and entrepreneur so they can learn from it. I am writing it the way as I feel it, take it with pinch of salt.

  1. There is nothing great about building a startup – You will start a startup with lot of excitement, want to make lot of money, change the world etc but the kicks will be temporary. Starting a startup, running a startup and making money from a startup are three totally different and often separate things.  Fun is in the first part but that has shortest life. Lot of people get sucked into thinking that there is something great about startups, there really isn’t. If you want kicks or wants to make money, there are less risky options available. Startups have very poor success rate, so you better understand the risk/reward and have solid reason behind doing it
  2. India doesn’t have a startup ecosystem – There is lot of noise in India specially in bangalore about startups but really there is very little signal. Way too many people get sucked into this “startup” way of building business losing time and money both. There are plenty of startup trolls, advisors, accelerators, investors, has been wannabes in Balgoare who know nothing about building business and are just there for kicks, greed, ego and entertainment. If you are a startup founder, be careful. you are the only one who is taking risk, never forget this.
  3. It is very difficult to build a good team – Every seasoned entrepreneur can vouch for this, it is extremely difficult to hire and retain good talent, building a strong team is even more difficult. You will not find co-founders from startup events. Indians are also very emotional people, which often causes problem in building strong team and specially between co-founders who don’t know each other before partnering.
  4. Exponential growth is a myth – Very few startups grow exponentially, don’t get fooled by those who are saying they are growing exponentially. Those who say numbers openly have a reason behind it. Most of the startup and startup founders also lies a lot.
  5. Never compare your startup and yourself with anyone – I never read Indian startup blogs, techcrunch, HN etc, as it is waste of time. I am least interested in knowing who has got thousands of users or who got millions of funding, as you will never know the underneath reality. There is way too much going on with every startup and startup founders which you will never know. So don’t waste time following other startups unless you can learn something from them.
  6. Bootstrapping is not easy – I have found bootstrapping to be difficult specially since I am doing it from Bangalore with no local support. I do know what I am doing and understand how to manage money and expenses and have a profitable startup but still, if you are first timer, expect lot of things to go wrong. Your expenses will be 2X-3X then what you think. I have learnt to manage expenses but only by failing and losing lot of money which hurts, or at least it used to.
  7. Deadlines are meaningless – I have missed all my deadlines till now. Earlier it used to bother me, now I just don’t care. I have found it very difficult to set deadlines as there are way too many unknown variables so it makes sense to not set too many deadlines and sleep well in night.
  8. You need help from all corners – This is something which I have seen with all successful startups. They always have some support system in terms of family, friends or some network. There is always brother, father, close friend, spouse etc as well as office space, logistics support system with successful startups. These things often happen at background and people never realizes this or acknowledge this but this local support system plays huge role in success of startups.
  9. Single founders have limited bandwidth and fast burn rate – No one talks about founder burn rate but they have limited bandwidth. There is huge difference between single founder, two founders and three founder teams. A single guy can at max manage 2-3 people, any more and things will start falling apart. I had made a huge mistake earlier when I tried to manage 5 people which I couldn’t and it became ugly. Do not chew more than what you can swallow.
  10. Don’t micromanage or use metrics – using KPIs, metrics, media mentions, traffic and even earnings are often deceptive in early stage startups. As startup founder, you are anyway will always be bias and will only look at things which you want to see so don’t waste too much time on these vanity metrics. They are not as important as you think they are.
  11. People are not making as much money as you think they are – Earlier i used to think all these VC funded companies who have raised millions of dollars and people who are running the startups/companies makes lot of money. In reality, very few are making that kind of money. Founders become employees the moment you form a private limited company and raise funding and are not in full control irrespective of what they say publicly. Things never look what they are anyway, so if you think are thinking that there are tons of people making tons of money doing startups, you are wrong. Contrary, I have seen lot of people doing self owned services/development business or running small online businesses are doing fairly well. So if you can successfully build a small business, do it instead of building a big failed business.
  12. There is nothing great about product companies nor anything bad about services companies – I had met someone in 2012 who proudly said they are a product based company focussing on Indian SaaS B2B market. They had 80 employees and with about 8 lakh rupees in revenue. I don’t think product companies need that many people, unfortunately in India, there is no such thing as product company, every product or services or B2C or B2B company eventually becomes an Operations company. Don’t get sucked into these definitions of product or service company, there is lot of overlapping between them when you are building India focussed business.

Guest Post by Pushkar Gaikwad, InBoundio

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How to Structure Sales and Marketing in a SaaS Business

PlaybookRTThe discussions continued post-lunch in the Playbook Roundtable led by Girish Mathrubootham, CEO and founder of Freshdesk, organized at the Freshdesk office in Chennai. During the extended session, Girish outlined the sales and marketing structure in a SaaS business. While this may be only taken as a pointer to setting up the sales and marketing teams, each business owner needs to focus on the appropriate strategy that brings him the maximum number of customers. As explained in the last report on this roundtable, firming up the business model after iterations and adaptations is very important before a SaaS business would scale. Remember the product is the key. And when the celebrated investor Andreessen Horowitz featured in his blog Mark Cranney’s “If SaaS Products Sell Themselves, Why Do We Need Sales?” it kicked a lot of debate on why Cranney is right. Some strategies outlined by Girish might be of great help in not only positioning your product but also making sure that customers continue to use it after they buy it. The Q&A format continues.

How do you structure the sales function?

The sales function has two components: inbound sales and outbound sales. For inbound sales, the ability to identify good people to fill the position is absolutely essential. If they have capabilities of researching on the customer and can write personalized mails, that works better than lifeless common mailers. Further, the response rates increase in case of personalized mails although it might not convert into sales immediately. The inbound sales guys should be able to identify themselves with the customers and a “We” pitch infuses confidence into the customer’s mind. In all, inbound sales people should be able to make the customer feel special about interacting with the product and the organization behind it.

Outbound sales is a pure arithmetic in one sense. Read Predictable Revenue by Arnold Ross. If you invest x amount of money, you harvest an amount y (usually as multiples of x) as revenue. To be able to achieve this, you need to have a structure sales organization inside the team. It could be divided into market research team (which identifies potential target sectors and customers), sales development team (which continuously interacts with the customers to understand their requirements and explains to them how your product can address their needs), and an account executive team (which specifically oversees one or more specific customer accounts). This should be supported by the pre-sales team.

People are key to all the roles mentioned. It’s important for the CEO or the senior management to identify who is good at what and then placing them at the position they can perform best. If someone is capable of creating a good rapport with the customer, move that person to pre-sales. Some people show an inclination to solve problems. Put them in the support team.

A small hint about shifts. Keep the people in the same routine, which means keep them in the same shift they come in. Some people like night shift and if they want the night shift, keep them there. Rotating shifts might need to unnecessary resetting of biological clocks of the shift people that might show up as poor performance. Be wary of this.

Should you hire a salesperson in the US?

This question continues to create varied views in the minds of SaaS entrepreneurs who find the US market attractive for their product. The right answer is it depends.

If you are able to close the deal through online and telephone interactions, it’s good and some big deals might also happen. But it’s not a scalable model. A salesperson in the proximity of the customer at times becomes necessary to go after big-ticket size deals and close them. Customers feel confident about having a support person near them. It also involves cultural and mind-set issues and the customers become comfortable with the organization present in the same country as them. It would be better if you would hire a person after you are sure that big ticket size deals would happen. The salesperson should be capable of going after big deals and closing them. One note of caution: Make sure your sales person is working full-time for you and not moonlighting. What is the final word? Again, it depends. The best option is to hire a full-time sales person in the US for closing big-ticket deals. Beware of the cost of the sales guy and the difficulty of getting sales out of them. There have been bad experiences for some. Maybe learning about that helps and also get tips on how to hire the sales guy in the US. There is no one strategy that works and it’s largely your own learning curve. But some pointers from people who already have a sales team or a sales organization in the US helps.

Identifying the right sales people

Sales people are either hunters or farmers. Hunter sales people hunt for new customers and go after new domains aggressively. Farmers have the ability to nurture the existing customers. It’s important to identify a person’s skill and decide where they fit in the sales organization. Read Jason Lemkin’s interview on SaaStr.com.

Retargeting customers can be done through Google mail. Don’t overdo mass mailers. You run the risk of Google labelling you a spammer. Write personalized mails.

Remember, a closure of sales that results in a recurring revenue (for example, through subscriptions) converts into a higher revenue over a period of time, without the need to add new customers for an increase in the revenue.

What is the role of marketing in a SaaS business?

The marketing team should generate qualified leads, which the sales function also should do. Both of this converts to good sales.

Once you identify your target, make sure you gather a valid e-mail address and a valid phone number. There are ways to do it. Learn them.

Social media helps a great deal in lead generation. Customer acquisition happens. If you are looking at competitor social media feeds, you at times spot an unhappy customer, who wants a specific feature or has a need, which your product fulfills. Instant connectivity on Twitter facilitates this connect. Trap them and convert them into your customer.

A step-wise filter for tracking leads works wonders. Right from a prospective customer approaching your product through your website, keep track of the customer to see what is he interested in the product. If he shows more than a mere curiosity interest, track him to see the various levels at which he interacts with the product. Sometimes, customer might return after sometime. Help the customer in whatever ways possible to convert him into a buyer of your product.

How free should be the free trial?

Various strategies work. The free-trial period varies between 6 and 11 days. Look for an optimum number. Any amount of free trials is not going to hurt your business. Think of a longer horizon of the free trial. Say 30 days. This is a feel-good or hygienic factor that keeps the goodwill of your business with the customer. Provide support during free trial and try to educate the customer in what he doesn’t know. You will earn respect and convert a doubter into a customer.

Be disciplined to knock off “parasitic” customers. Keep track of customers on free trial nearing their free trial period. If your plan is to close their account, send a polite mail announcing that their account will be inactive after x amount of days. Make it as if it’s your company’s policy to delete accounts that are dormant for a period of time. Sometimes surprises spring up. The customer might sign up. Periodically getting rid of customers who don’t bring any value to your business is a good idea.

The sales strategy and expanding into new geographies

If you want to expand into a new geography, do your homework thoroughly. Study the terrain in depth before setting your foot in. You must know where you are getting in and what segments you are targeting. Understanding the culture and business practices in that geography works immensely. For example, Australians want you to call them, whereas the English wouldn’t encourage that.

Acquiring a big customer at the beginning is thrilling. But weigh your options clearly before signing on the dotted line. If your sales and support would not be able to cater to the needs of the large enterprise customer, you are better off saying “no” rather than change your business model and focus your energies on one customer. You may not be able to scale instantly on demand. Never significantly or drastically alter your business model for one customer or for one big breakthrough. It would eventually hurt.

Seal the lower end. But the lower end is always going to be cannabalized. Beware of competition and remember you can’t be cheaper than free.

Onboarding the customer

Normally, there is a problem of customers falling off after, say, a couple of months. So it is better to have a customer onboarding team to track sign-up. Live tutorials can handhold the customer for the initial period of using the product. Videos are helpful for non-tech customers.

Don’t disturb the core tech team for small technical glitches. Customer Action Response Team (CART), which fixes small bugs, is a great strategy. Focus on fulfilling customer expectations. Remember, when you solve a customer problem, you earn a happy customer.

To take a cue from Jeff Bezos, hire people who are not able to say “no” in customer development and hire people who say “no” in business development. Empathy is a great trait. Empathize with the customer and their problems and see how best you can solve them.

It’s always best to “farm” the first top 100 customers or key customers who bring 80% of your business. Remember, 20% of the customers bring 80% of your revenue. Focus on them.

With everyone in the room taking away valuable lessons with them, the roundtable wound up on a happy note.

 

 

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Customer Acquisition Models for a SaaS businesses

Software-as-a-Service is paradigm shift for the software industry. The most profound impact of SaaS is on the software businesses revenue and cost models and therefore the cascading impact it has on the way the business is organised.

Customer Acquisition for a SaaS business therefore requires a complete re-think. Since you are not going to get your money up-front,  how are you going to fund the costs of acquisition? The  conventional customer acquisition model where these costs are a manageable proportion of the cash generated up-front works fine in the old on-premise software business but will bleed you in the SaaS business. As a SaaS business you need to ensure that your CAC (Customer Acquisition Cost) remain under first year revenues (and even less if you are not adequately funded).

CAC starts with the cost of creating awareness and includes the sales effort costs. But what very often is not added to the CAC is the cost spent in getting a new account to revenue (aka implementation) as well as the cost of retaining the account right up to the period to which you calculate your LTV (Life-time Value). Depending upon the nature of the product this could be a few months or a few years. Given that you have signed up an annuity based revenue stream, your cost rightfully must include what you need to spend to ensure the tenure of that annuity.

So what sales model should you adopt? The choices range from a pure web-based one to a the tried and tested feet-on-street model and a hybrid one where you use the web to generate leads and feet-on-street to convert those leads. There is also the option of building a channel partner networks and selling through them.

The choice of the sales model to be adopted must take into account two key dimensions: The complexity of your product and it’s price point. A complex one enterprise application for instance will require substantial sales and pre-sales consulting support to sell as opposed to personal productivity app. Selling the former through a web model may not lead to much sales while trying to sell the the latter through a feet-on-street model will lead to a very high CAC and a drain on cash flows.

Channel partners can be a substitute for company sales reps but only when the product is in a category with a well established business need and the product brand is recognised with some degree of pull.

If the strategy requires using low-price as a differentiator or the market is unable to accept a high price-point for a new entrant, it will be foolhardy to try and build a direct sales model. At least it will be struggle to scale the customer acquisition.

A way out of this is to remove the complexity from the sale and switch to a substantially on-line sales model. In my next post I will talk about the challenges in creating an on-line sales model for a more complex product that is generally expected to be sold through a direct sales model. Meanwhile, I would be waiting to hear from you what you think needs to be thought differently when considering Customer Acquisition for SaaS businesses.