Enterprise

The 3 biggest sales mistakes enterprise software companies make

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Philip Levinson

Contributor

Philip Levinson is a venture advisor at Learn Capital.

For early- to mid-stage B2B software and SaaS companies, selling in to the enterprise is hard. Getting a lot of enterprise customers to pay for your solution on a repeated and long-term basis without seeing your sales growth stall out at $15-25 million ARR? That’s really hard.

Welcome to the challenging world of enterprise sales.

Companies like Salesforce, Workday, NetSuite and athenahealth found lasting B2B sales success and turned their companies into pillars of the enterprise SaaS ecosystem. But the majority of private enterprise companies still face this Mount Everest of a challenge. Many factors can slow a company’s B2B sales progress, including competitive challenges, timing issues and product deficiencies.

Here are three big sales mistakes we see private enterprise software companies make:

Mistake No. 1: Good product-market fit is not good enough

George Mathew, president/COO of Alteryx says, “In today’s enterprise software market, it’s important to define a user experience that is 100 times better than the status quo.”

There are a number of reasons for this, including the fact that inertia, incumbency and bureaucracy are all working against you. For emerging companies, this means finding a way to be exponentially better with fewer resources. As a result, focus is key.

Yammer co-founder David Sacks addressed this when he took over as CEO of Zenefits earlier this year. “Companies execute better when they ruthlessly prioritize and sequence their efforts,” Sacks wrote. “For us, that means hyper-focusing on the small business market where we have product-market fit.”

What does this mean — “hyper-focusing … where we have product-market fit”? It means pursuing those market segments for which your product has a unique and compelling solution — exponentially better than the status quo — and pursuing only those segments.

Many private B2B companies have developed solutions that are working for a subset of customers, but are still challenged with sales cycles longer than ideal. Average revenue per customer remains below the target. Or new customer sales growth is incremental, not exponential. In other words, the product-market fit is not compelling enough.

Sometimes the market-fit issue with developing enterprise companies stems from insufficient focus. Ruthless prioritization, as advocated by Sacks, does not come naturally. Market fit can improve from having more ongoing dialogue with customers. For targeted sectors, your solution may simply be just a nice-to-have service and not compelling enough to overcome typical enterprise barriers.

With more market focus, however, companies can find a sweet spot by developing an acute understanding of customers’ needs in a particular segment, which is more nuanced than the broader sector requirements. To succeed, resist the urge to broaden your focus too much or too soon, and then scale proportionately.

Mistake No. 2: Are you competitively disadvantaged?

Competitors come in many different shapes and sizes. As Zendesk CEO Mikkel Svane says, “There’s an incredible variety of software products out there.”

Indeed, read the “About Us” section of all the companies in your market universe, and consider how many of those view your space as theirs. Your competitors include other private companies and larger established incumbents with massive sales organizations. You also compete with customers’ own internally developed efforts, which may be inferior but can be difficult to overcome given ties to their own solution.

Competition also includes service and reselling companies that represent third-party vendors.

AppDirect co-CEO Daniel Saks points out that 70 percent of on-premise software sales have traditionally been channel-based. He adds, “80% of on-premise software vendors operate a channel program to enable other companies to sell their products, while only 20% of SaaS vendors operate similar programs.”

This channel and reselling hurdle highlights a competitive challenge for SaaS companies facing off against traditional software vendors. It’s a zero-sum game among vendors, so signing a customer means a loss for someone else.

One often overlooked step is simply engaging with customers about the competitive landscape — including prospective as well as won/lost targets. Invest time to glean important, insightful information about your competitors and adapt accordingly.

Mistake No. 3: Bad timing — outta sync, outta luck

With enterprise sales, timing can make or break a company. Bad timing in the B2B sales process can stem from several factors. Here are three common timing issues:

Timing problem No. 1: You’re behind the market demand curve with a not-exponentially-better product — and losing to competitors or incumbents.

If you don’t give customers sufficient reasons to make a change, you will encounter too much inertia to close business. The enterprise customer’s default action is to stick with their current solution. Be aggressive in solving this problem by uncovering more unique, urgent requirements, and then credibly and proactively addressing those. More target market focus and customer-driven product iteration can help you move ahead of the curve.

Timing problem No. 2: You’re ahead of the market demand curve and struggling to close sales.

Enterprise markets can be unwelcoming to pioneers, so consider finding ways to bridge an entrenched solution to your ahead-of-the-curve solution. For example, TigerText introduced a secure enterprise mobile messaging platform to healthcare customers in 2010 but faced resistance from hospital employees that still relied on pagers. To overcome this, they developed a messaging solution that included paging options. To get your foot in the door, you may need to support valued but possibly outdated requirements to help companies transition to your platform.

Timing problem No. 3: You’re suffering under the weight of a long sales cycle and not closing enough deals quickly enough.

SaaS products and business models have shortened sales cycles in some sectors for a number of purchases in recent years (e.g. see Harry Stebbings’ interview with Immediately’s CEO Branko Cerny). This is not true for all purchases in all enterprise markets, however, including large purchases in regulated industries or many Global 2000 companies.

How to accelerate slow sales cycles

What to do about those long and costly sales cycles?

“Selling to the consumer is about selling positive emotions. Selling to the enterprise is about suppressing negative emotions,” says GoodData CEO Roman Stanek. “Enterprise IT is not a culture of early adopters.”

He is right — but there are a few practical strategies that can get slow-moving targets to move.

Employing best practices with your sales and marketing processes is critical. In many Global 2000 companies, there are multiple groups of decision-makers or influencers involved, including product users, IT gatekeepers, administrative or executive groups and compliance teams, any of which can slow down your sales process.

With incomplete information flowing back to the sales team, it’s critical to measure and track all customer communication and best practices by carefully utilizing your CRM and marketing automation tools — and then managing your team accordingly. Work to build a company wide culture to document customer communications and make best practices repeatable across sales, marketing, customer success and business development teams.

Also, there are countless times that we have seen large, long-term enterprise deals go to a competitor that has successfully triangulated the buying process or leveraged backchannels. Your team’s success in triangulating with customer targets and establishing backchannels of communication with friendly insiders is vital to winning long sales-cycle deals.

In fact, even though your product is B2B, perhaps the biggest mistake you can make is forgetting that your sales process is still P2P (peer-to-peer). Executives make decisions for all sorts of reasons that are not based simply on product features or depth of IP. With a long sales cycle, building rapport at many levels in the customer organization chart is critically important. Mastering these softer P2P skills can help drive successful triangulation and backchanneling, which lead directly to more enterprise sales.

“We’ve seen that successful enterprise sales stem from a variety of factors,” says Nick Elprin, CEO of Domino Data Lab. “But in closing the largest and most important deals, people skills are ultimately at the top of that list.”

Agreed.

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