Practically every software-as-a-service company wants to move up-market and sell to enterprises as well as to smaller customers. Doing so can lead to bigger contracts, more growth and the kind of scale required to become a well-known technology name — think Workday, ServiceNow, Palo Alto Networks or Snowflake.
Despite how well trodden this path is, it’s a surprisingly difficult motion to get right.
In my current role as an operating partner at Battery Ventures, I field questions daily from companies with bottom-up sales motions — those focused on smaller customers who often buy software themselves — about how to make the jump into enterprise. The first thing I tell them is that moving up-market to the enterprise is a lot more complicated than they might think.
Unfortunately, a lot of founders make the mistake of thinking that hiring a bunch of highly paid account executives (a fancy name for salespeople) is the same as “going enterprise.” It’s not.
Moving up into the enterprise requires fundamental changes to every function in the company. It means hiring for new roles that don’t exist and adopting tools that will match the new processes you’ll implement. New roles, tools and processes mean additional expenses.
So why do it? Because, when done right, the benefits outweigh the cost and complexity. An enterprise sales model allows you to widen your total addressable market and go after customers with better net-revenue retention and stronger long-term value.
Moving into the enterprise is tougher than it seems, and many companies aren’t ready to do it, especially in this market.
If you’re making your move into the enterprise now, the stakes are rising. Volatile tech markets and fears of a recession mean enterprise technology buyers may be even less likely to spend money on new, unproven tech in the coming months or years. So if you’re new to the enterprise market, you need to enter the fray fully prepared to do it right.
Key components of growing up enterprise include changes to your product, marketing, sales, legal, finance, HR and customer success. I’ll give an overview below of each of these areas and relevant considerations for companies thinking about diving in.
But first, let’s assess your company’s overall enterprise readiness.
Note: This post is an excerpt from Bill Binch’s new e-book, “Growing Up Enterprise.”
What does “enterprise readiness” mean for your company?
First, ask yourself if any priorities rank above your move to the enterprise. Are you expanding globally? Are you releasing a new product (product, not feature) in the near term?
I’d strongly advise waiting on the enterprise motion until it can be your company’s highest priority — something that’s talked about in the weekly CEO staff meeting.
Why is this so important? Because enterprise readiness extends well beyond sales and marketing. Nobody wants sales and marketing to reel in a big-fish customer only to have the deal fall apart due to operational obstacles. Let’s run through a few common scenarios to illustrate how this can play out.
Imagine German carmaker BMW wants to spend $500,000 with your organization. But to do so, they need to have their data reside within Germany. Do you have a server based there? If not, how long would it take to be set up? How much would it cost? You’ll need to assess these questions and decide whether it’s cost-effective to make the effort to get this new customer.
Now imagine Qantas Airlines in Australia engages with your team and wants to spend $500,000. But they need a white-glove experience with lots of hand-holding during implementation and rollout. Can your company succeed in helping a large customer with a remote-geography launch? Can they offer around-the-clock support across time zones? How?
A final scenario: Boeing USA wants to spend $500,000 with you. You send them your master service agreement (MSA), but they send you back their MSA and inform you that they won’t purchase unless it’s on their paper.
Do you have in-house legal counsel? Do you know the critical elements that you must protect on your legal rights, like liability caps and indemnifications? Do you have the right level of corporate insurance caps? Is your security robust and enterprise-grade (SOC2, ISO certified)?
The takeaway here is that enterprise readiness must be a companywide mission. Note that all the scenarios outlined above are outside of sales and marketing, which are the corporate functions you might think of first when it comes to going enterprise. In reality, your efforts to prepare for selling to the enterprise should encompass product, marketing, sales, legal, finance and HR, as well as customer success.
The following seven tips speak to each of these functions in turn.
7 ways to grow up enterprise
Innovation is the key to unlocking value in the enterprise
Listen up, product: Security features like single-sign-on, APIs, SOC2 and GDPR compliance are not innovation. They’re an enterprise requirement, and sometimes, even table stakes.
Enterprise requirements should not be considered the same as enterprise functionality. As you grow your company, critical to your thesis should be the idea that your product can create greater value inside a company.
Your road map should tell a story of a focus on enterprise needs
Once you’re confident your product really works (i.e., scales) for the enterprise and you’re meeting the security requirements, product leaders should ask if the product performs differently in the enterprise in a way that provides greater value than the core version.
It’s critical for the enterprise team to “sell the road map,” but a lot of early-stage organizations mess this up. They get too tactical and focus on features. My advice is to resist this urge.
Your road map should tell a story of where the company is going. A road map reveals how you’re a thought creator — how you’re building the future. Enterprise value should be at the center of that future.
Marketing should shift to a focus on acquisition + developing cross-marketing chops
For earlier-stage companies focused on SMB, it’s all about acquiring more logos. That changes when you sell to the enterprise. Cross-selling and upselling are two forms of marketing expansions that drive enterprise-level success.
When a company transitions to the enterprise, marketing changes in ways too numerous to explain here. Perhaps the biggest shift is that your marketing becomes less about products and more about outcomes. Expect to run more lower-volume marketing programs with higher-touch events where you have 1:1 time with your buyer and really engage them.
Value selling and a rigorous sales methodology are critical to selling “above the line”
As you move to the enterprise, you’ll refocus your methodology to value selling. That means being equipped to help your buyer create a business case that they use internally to justify your software price.
These business cases focus on a few classic themes: (1) how this software will increase revenues, (2) how it will reduce costs and (3) how it will reduce risks. This ROI work should be bundled up into a format your buyer can use.
Align marketing and customer success with sales
Selling to the enterprise means segmenting your customer success teams to align with your marketing and sales teams.
In the early days of your business, you treat all customers the same way. But as your company matures, this approach needs to change, too. Onboarding, implementation and tech support will all become bigger and more customized as you bring more enterprises on board.
If your customer success team can become more efficient with your transactional customers, you get headspace to apply to your enterprise customers. Are there product-led processes that you can apply to your sales-led process? If you can, you’re putting your transactional business on rails, which creates runway for your enterprise teams.
Data quality can become a problem if finance and sales ops don’t translate the future into metrics
Enterprise expansion can take the form of organic growth or upselling — your customer may add staff, which makes their license increase from 100 to 120 seats. Or, they want to buy an add-on product, which gives you an opportunity to cross-sell. As you move up into the enterprise, you’ll want your CRM, ERP and BI tools to be ready to calculate these new kinds of expansions.
Some key metrics here include the annual contract value (ACV) of your enterprise deals, and your average revenue per account (ARPA). If you started off selling to SMBs, your ACV will likely be higher than your ARPA. You should keep an eye on ARPA each quarter, because if you’re successfully penetrating the enterprise, it should be growing.
Net-revenue retention (NRR) is also critical. You may be able to land big deals, but do you have the expansion motion perfected? Increases in NRR demonstrate that you’re succeeding in your expansion efforts.
Growing up enterprise has real associated costs
Expensive people in new roles, lower ratios of sales managers to enterprise account executives, and other investments will temporarily create havoc with your customer acquisition cost (CAC) and long-term value (LTV) metrics. Enterprise customers tend to improve LTV (as they drive better NRR), but the initial, enhanced cost structure will submarine your CAC. That’s to be expected — just prepare to navigate through it.
In conclusion
Moving into the enterprise is tougher than it seems, and many companies aren’t ready to do it, especially in this market. To succeed, a tech company needs to rank “going enterprise” as a top priority and engage everyone to help with the transition.
There’s no one-size-fits-all playbook for how to get this motion right, but there’s certainly a wealth of experience to draw upon. This post distills both my personal experience going through this process and many conversations I’ve had with sales leaders, marketing managers and CEOs who had been through this evolution. But this is just the tip of the iceberg!
No matter where you are on this journey, moving into the enterprise is possible with the right planning and mindset, and is usually well worth it.
This post is an excerpt from my new e-book, “Growing Up Enterprise,” which we created to support founders everywhere, Battery portfolio companies in particular. Contact me if you’d like a copy!