On the flight home from a recent holiday to Greece I read From Impossible to Inevitable: How Hyper-Growth Companies Create Predictable Revenue by Aaron Ross and Jason Lemkin.
The authors are heavyweights from the world of software as a service (SaaS) and I’m pleased they’ve taken the time to share their experiences of creating high growth sales engines. Ross was Director of Corporate Sales at Salesforce.com and Lemkin co-founded EcoSign, which was acquired by Adobe and more recently he is known for his work with the hugely popular SaaStr.
The book offers a glimpse into how two very different businesses generated predictable recurring revenue and grew into the SaaS success stories we know and admire. Both companies are pioneers and paved the way for the many exciting companies operating in this space today.
The book is a fascinating read and five revenue lessons stood out:
1. Build repeatable systems to generate predictable revenue
In order to generate predictable revenue you must invest in consistent lead generation, then develop robust systems to ensure leads are nurtured and handed over to sales efficiently. Predictable lead generation is absolutely vital to the success of a business. If a company has predictable lead flow it can get many things wrong and still be successful, but if it gets lead generation wrong it will struggle. On the upside, when you have a fully optimised marketing and sales machine, it becomes easy to predict with confidence how many leads are required each week, month or quarter to make a sale.
2. Create a sales organisation of specialists
The best sales organisations are made up of specialists where everyone has clearly defined roles within the sales process and are incentivised accordingly. Many SaaS businesses have business development reps (BDRs) or sales development reps (SDRs) who are responsible for connecting with and qualifying prospects, as well as nurturing opportunities and setting up product demos. Once the demo is arranged the opportunity is then handed over to a sales rep whose responsibility and skill is closing the deal.
3. Develop an up and cross-sell strategy
Strategies which increase the lifetime value (LTV) of a customer are an important lever for SaaS businesses to grow revenue and improve the health of its unit economics. The most effective way to increase LTV is by up and cross-selling to existing customers. It’s typically quicker, cheaper and easier to sell to customers that already know and trust you business, rather than acquiring new customers via marketing channels. It’s hard to make a big business out of small deals, so companies should first look to sell bigger deals and secondly up and cross-sell to existing clients.
4. Speed is a competitive advantage
Getting deals done quickly is a competitive advantage and the best sales organisations have speed built into every stage of the sales process. Completing a sale before the end of a month has a significant, material impact on the bottom line of a SaaS business. By moving more quickly than the industry or competitors, sales teams can accelerate the pace of growth at their business. There’s a very real cost associated with being slow - and a great deal to gain from being first.
5. Invest in customer success
For SaaS businesses to turn a profit they need their clients to succeed and continue paying for their products over a long period of time. This is easier said than done, but is what increases LTV, retention and recurring revenue. By investing in customer success teams to provide strategic guidance, account management and support, businesses will reduce churn and increase spend per client. Customer success is a vital cog in the SaaS sales engine - it has the potential to generate considerably more recurring revenue than the original sale.
If you want to deepen your understanding of SaaS businesses and how they generate predictable revenue, then read From Impossible to Inevitable: How Hyper-Growth Companies Create Predictable Revenue. Ross and Lemkin have shared the playbooks they used to increase sales and create recurring revenue. The book is recommended reading for anyone looking to understand the tactics, strategies and processes companies deploy to generate predictable recurring revenue.