100622 value chain, g t-m strategy, sales model

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  • 1. Value Chain mark leslie mleslie@leslieventures.com Go-to-Market Strategy Sales Model
  • 2. Value Chain mark leslie mleslie@leslieventures.com Go-to-Market Strategy Sales Model
  • 3. Value Chain ► What is a value chain  All the independent entities required to bring the product to the end user  Each independent entity adds value and receives compensation for that value ► End user price is the price that final end user pays for the product or service ► Revenue to your company is the amount of revenue you receive ONLY for your segment of the value chain
  • 4. Value Chain Direct to End User Cost of Goods (Supply Chain) Profit + SG&A + r&D EndConusmer $ EUDiscounts Notice the little r and the big D ! Revenue List Price
  • 5. Value Chain Resellers Cost of Goods (Supply Chain) Profit + SG&A + r&D EndConusmer $ EUDiscounts Reseller Revenue List Price
  • 6. Value Chain Distributors / Resellers Cost of Goods (Supply Chain) Profit + SG&A + r&D EndConusmer $ EUDiscounts Reseller Distributor Revenue List Price
  • 7. Value Chain International Distributors Cost of Goods (Supply Chain) Profit + SG&A + r&D EndConusmer $ EUDiscounts Reseller Distributor MasterDisti Revenue List Price
  • 8. Your Product Becomes your Customer’s COGs Value Chain OEM or IP Licensing Cost of Goods (Supply Chain) Profit + SG&A + r&D EndConusmer $ EUDiscounts Reseller Distributor MasterDisti Cost of Goods (Supply Chain) Profit + SG&A + r&D Reseller List Price Revenue
  • 9. Value Chain Your Acquired OEM Product or Licensed IP Cost of Goods (Supply Chain) Profit + SG&A + r&D EndConusmer $ EUDiscounts Reseller Distributor MasterDisti Cost of Goods (Supply Chain) Profit + SG&A + r&D Reseller Cost of Goods (Supply Chain) Profit + SG&A + r&D Reseller List Price Revenue
  • 10. Value Chain mark leslie mleslie@leslieventures.com Go-to-Market Strategy Sales Model
  • 11. 7/25/2013 S351 11 Sales and Marketing BC Simple Products $ Many Customers Low Touch BB Complex Products $$$$$ Few Customers High Touch Importance
  • 12. GTM Strategy ►Match the product price / complexity to the sales and marketing strategy ►A high cost complex B-B product requires a high touch direct sales model, typically with technical support ►A low cost, simple, B-C product requires a very low touch, low cost sales model, but generally more marketing costs ►Let’s analyze the economics of a couple of GTM strategies
  • 13. NanoSec Server Company ► Servers are valued at 10K per unit, and are sold in single units, and in multiple sales sometimes as large as 250 units ($2.5 M) ► The average deal (ASP) is $250K ► Sales require high touch, face to face technical selling ► Gross Margins are 50% ► This is a highly competitive market, and total time from suspect to final close averages 9 months
  • 14. Direct, High-Touch, Technical, B-B Sales Rep – Cost to Deploy
  • 15. Direct, High-Touch, Technical, B-B Sales Rep – Cost to Deploy Payroll Other SR SE Mgmt Payroll Ovhd = 20% T&E Overhead (office, admin, etc.) Totals
  • 16. Direct, High-Touch, Technical, B-B Sales Rep – Cost to Deploy Payroll Other SR 100 100 SE 100 25 Mgmt 50 50 Payroll Ovhd = 20% 50 T&E 60 Overhead (office, admin, etc.) 60 Totals 300 295
  • 17. Marginal Contribution per Rep? ►Product Gross Margin = 50% ►Product Sales of $1.2M is breakeven ►For total sales cost to equal 15% of revenue (typical operating stack) sales rep must generate $4.0M / yr.
  • 18. Match to the market ► With an ASP of $250K, that would require 16 transactions per rep per year. ► What kind of pipeline is required for this?  Suspects ► Need to qualify  Prospects ► Need to convince ► competition  Verbal selection ► Need to close  Final close ► Need to book ► Is this possible? ► What happens to this plan if the ASP is 25K
  • 19. Capacity Plan ►Once this model is developed, the company can develop a capacity plan ►Full Time Equivalent (FTE) SR takes account of:  Sales Rep / SE learning curve (time to productivity)  Attrition ►Company’s revenue is determined by the FTE’s on board each quarter
  • 20. Recruit.Com ► A SaaS based product that helps hiring managers to recruit personnel  Resume management, interview scheduling, candidate scoring, selection, offer letters, recruiting analytics, etc.) ► Transactions are based on number of user per month, with each seat yielding net revenue of $100/mo ► The average deal (ASP) in the first year is 8 seats, equals $10K ► Market decays at the rate of 25% / year ► Sales require extremely low touch method  Click-and-try  click-and-buy (one seat)  Insides sales, present / close over the phone  As the company matures, renewing and upselling are important ► Gross Margins are 75% (cost of infrastructure)
  • 21. Low-Touch, B-B Sales Rep Cost to Deploy
  • 22. Low-Touch, B-B Sales Rep Cost to Deploy Payroll Other SR SE Mgmt Payroll Ovhd = 20% T&E Overhead (office, admin, etc.) Totals
  • 23. Low-Touch, B-B Sales Rep Cost to Deploy Payroll Other SR 40 40 SE 10 Mgmt (one per 10) 10 10 Payroll Ovhd = 20% 12 T&E 5 Overhead (office, admin, etc.) 50 Totals 72 105
  • 24. Marginal Contribution per Rep? ►Product Gross Margin = 75% ►Sales of $130K is breakeven ►For sales to equal 10% of revenue sales rep has to achieve $1.7M / year
  • 25. Match to the market ► With an ASP of $10K, that would require 170 transactions per rep per year = 3.5 per week ► What kind of pipeline is required for this?  Suspects ► Need to qualify  Prospects ► Need to convince ► competition  Verbal selection ► Need to close  Final close ► Need to book ► Is this possible?
  • 26. Another Perspective Unit Economics of Recruit.Com ► In startup, annual rep productivity might be 400K / year, and grow slowly. ► So, how does this work? ► Cost of Customer Acquisition  Sales Cost for initial deal  Cost to sell renewals / upsells ► Lifetime Value of Customer  Gross Margin of monthly Revenue Stream  Average Lifetime (3 – 5 years?)  Account Seat Growth  User Base Decay ► Build out of this kind of business requires a lot of upfront capital, but yields a highly predictable, highly profitable business in maturity
  • 27. Value Chain mark leslie mleslie@leslieventures.com Go-to-Market Strategy Sales Model
  • 28. Sales Model ►Who ►What ►When ►Where ►How ►How Much $
  • 29. Who Buys ► Who is the business / economic buyer  Looking for ROI ► Who are the actual end users in the organization ► Who is the technical buyer  Implementer  Will compare competitive alternatives ► Who is the recommender  Who actually does the evaluation ► Who actually signs  What are the typical signature levels required for this product ► Department head ► Department VP ► CFO ► CEO ► Board of Directors
  • 30. What are the Steps ► Lead ► Prospect ► Introductory presentation ► Demonstration (proof of concept) ► Technical presentation ► Pilot ► Final presentation ► Best and Final Offer ► Negotiate contract ► Receive PO
  • 31. When ►How long, on average from lead to deal ►What is the range of time ►Does the range of time vary by deal size
  • 32. Where ►Where are the customers? ►Domestic vs. International  Feet on the ground required? ►Vertical ►Major Accounts / National Accounts / Global Accounts
  • 33. How ► Direct Selling  Technical support to selling  Inside sales  Telemarketing  Lead generation ► Channel Selling  All of the above  Channel reps and channel management ► Manufacturers Reps ► Retail  Distribution  Shelf space and stocking ► OEM ► IP Licensing ► Multi-tier Distribution ► Etc.
  • 34. Value Chain mark leslie mleslie@leslieventures.com Go-to-Market Strategy Sales Model
  • 35. Copyright Mark Leslie One Final Thought…
  • 36. Copyright Mark Leslie it is regret for the things we did not do that is inconsolable. Sidney J. Harris (1917–86) Regret for the things we did can be tempered by time;