Phone sales / Inside Sales for Startups

by Bryan Starbuck
CEO of TalentSpring
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Company Confidential, 2009
Strategy for Phone Sales
for Early Stage Start-ups
Bryan@TalentSpring.com
Blog: blog.BryanStarbuck.com
Blog: blog.TalentSpring.com
Twitter: @BryanStarbuck
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High Growth from Phone Sales
2008 Revenues from Phone Sales Strategy companies…
$168 million
$215 million
$163 million
$295 million
$152 million
$87 million
$178 million
$1 billion

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Sales Strategies
Channel Sales
eCommerce
PhoneSales
Sales Strategy

No Sales People (no capital)
Lower Risk Marketing
Higher Prices
Faster to scale Sales
Able to Create Demand
No Sales People (no capital)
Sales is Outsourced
Most benefits from Phone Sales

Pros

Higher Risk Marketing
Lower Prices
Can’t Scale as Easily
Capital needed for Sales Team
Time needed for Sales Efficiency
Often not an option
Risk that Channel won’t perform

Cons

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B2C vsSmall vs Mid-Market vs Enterprise
B2B
Small Companies
Consumers
B2C
B2B
Mid-Market
B2B
Enterprise
1,000 to 20,000 Employees
0 to 1,000 Employees
20,000+ Employees
eCommerce
Phone Sales

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Sales Pipeline
Qualified
Demos
Trial
78,000 Employee Company
Close WIN
Close Lost
25 Companies
31 Companies
71 Companies
Demo-to-Sale
3 : 1
Lead-to-Demo
4 : 1
$20 per Lead

High Risk:

Viral
Blogging
Widgets
SEO
Content
Contests
Word-of-Mouth

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eCommerce has High Risk Marketing
Dave McClure’s eCommerce Marketing Model
Low Risk:

Google Adwords

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Lead Marketing
Number of Leads
Lead Marketing
Cost-Per-Lead
Lead Quality

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Plan against Sales Reps
Create highly efficient Sales Reps teams
Their Focus:

In cube, on the phone
Time in CRM Software
Perfecting moving customers along

Measure Results:

Able to CLOSE
10 Demos-per-REP-per-Week
SALES-per-REP-per-MONTH

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Bootstrapping Phone Sales Strategy
Hire 3 Sales Reps
Reach CFC* Sales Reps
Stage #3:
GOAL:
Founders Sell

Find Objections needing Features
Positioning Strategy

Stage #1:
GOAL:
CFC* is cash-flow contributing
Hire VP of Sales

Validate assumptions needed to close sales
Training Material

Stage #2:
GOAL:
Raise Capital to Scale

CAC < 1.0
Manage Growth

Stage #4:
GOAL:

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Must Read Books
The Perfect SalesForce
by Derek Gatehouse
Spin Selling
by Neil Rackham

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Buy-Offs needed to Close
Understand Participants
Financial Buyer
User Buyer

Map out Demographics
Tactics to unblock each
Showing ROI often required
Don’t interview “friends” to find blocking issues

Technical Buyer
Final Decision Maker

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Closing the Sale

CLOSEwhen they RECOGNIZE value
Know when progress isn’t happening
Handle Budgets & Finalizing details

#1 Number of Seats:

Department X scale with Company Size
Example with Mega-Corp:
90,000 employees
600 Dept X Employees

#2 Number of Companies:

Target Markets:
Large Enterprises
Mid Market
All companies need to Solve-Problem Y

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4 Critical Factors of Inside Phone SaaS Sales
#3 Up-Sell Products

Our Up-sell modules allow revenue to scale per seat

#4 Yearly Fees

Do they pay 12-months SaaS seats up front?

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Is Phone Sales Strategy for Me?
Use Phone Sales Strategy If:
Sales REPscan perform>> $8k*
per month in sales
Selling to B2B
Enterprise or Mid-Market
(* Adjust based on base salary required to close sales)

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Is Per-Seat Pricing for You?
Do you have Per-Seat Licensing?
Why Not?
In pricing strategy, per-seat is powerful and very often used for a good reason. Triple-check if you forgo per-seat pricing. What SaaS companies are over $50m in sales without per-seat licensing?

Strategic Sales Growth
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MRR or CMRR Definition
Source: Bessemer Ventures (bvp.com)

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CAC-Ratio & Growth
Definitions:
CAC = Customer Acquisition Cost
CAC-Ratio = 1.0 means CAC returned in 12-months
Example:

$10m in capital deployed
In 12-months, $10m in capital returned
Returned after Servicing customers

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CAC-Ratio & Growth
PRO:
CON:
First movers to grow large have an advantage
Growth often needs capital & strategic financial planning
5 years per customer lifetime common in SaaS
Generation #1
CAC
$10m
MRR
(Year 1)
Capital
$10m
(Year 2)
…
(Year 5)
Generation #2
CAC
$10m
…

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Calculating CAC Ratio

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“SaaS Category”
After company #1 proves SaaS Category with product acceptance...
SaaS Category
2nd
1st
…and CAC Ratio < 1.0…
…then companies raise capital to become biggest
3rd
4th
5th
6th
7th
8th
Examples of SaaS Categories:

Sales Department’s CRM
Staffing Department’s ATS

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CAC Ratio Comparables

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When to Scale Sales REPs
Scale REPs when:
They are 2x Fully-Loaded Costs
CAC Ratio < 1.0
Example:

$35k base
10% commissions
Don’t scale if less than $8k/month in sales

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Capital to Grow to Top Category Leader

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Capital to Grow to Top Category Leader

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Key Metrics

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Key Metrics

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SaaS better than Enterprise Software

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High Growth from Phone Sales
2008 Revenues from Phone Sales Strategy companies…
$168 million
$215 million
$163 million
$295 million
$152 million
$87 million
$178 million
$1 billion

30
Summary
Manage To Metrics

Demos-per-REP-per-Month
Demos-to-Close Ratio
Sales-per-REP-per-Month
Churn
CAC: Customer Acquisition Cost
CAC Ratio
CLTV: Customer Lifetime Value
Manage Cash

END
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Bessemer SaaS Law #3

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CAC Comparables
EV/TTM = Enterprise Value divided by Trailing Twelve Month revenues
Enterprise Value = Market Cap plus debt, less cash and marketable securities
CAC

40
SalesForce CAC Ratio over time
CAC
Ratio

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SaaS’s Industry Growth Rates

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SaaS vs Enterprise Software Growth
FCF = Free Cash Flow

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Public Markets Decline

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SaaS Trading Multiple

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Ratios of Payment Periods

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CAC Ratios < 1.0 don’t Scale

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SaaS Companies