The Read
SaaS Sales Efficiency through Covid: Reading the Tea Leaves for Startups (Tomasz Tunguz)
Since 2016, the average public software witnessed its sales efficiency winnowed from 52% to 47%, a decline of about 10%.
“Today, the macroeconomic uncertainty & the Fed’s interest rate policy to slow the US economy have lengthened sales processes across larger & likely overstaffed sales teams. The resulting pipeline shocks tanked efficiency…Combined with a market whose cost of capital has surged with the Fed Funds rate, these trends will demand teams innovate to create more efficient customer acquisition channels.”
Why it matters
First, I learned in business school & my time in management consulting that I’m a bit of a nerd for financial statement analysis, so this just appeals to my dork-out side.
Second, Tunguz relates macroeconomic conditions caused by the disruption of the Covid breakout (improved efficiency) to today’s macro conditions (decreased efficiency). Thinking about how these conditions can impact your own sales and marketing efficiency is a valuable exercise for any startup that serves businesses.
Innovating around customer acquisition is an important dimension to explore as a startup. Particularly for SaaS startups, sales cycles are long and adoption curves are steep. Innovations that work for another business may not work for your own. So these market conditions speak to the need to deep-dive into disciplined explorations of your TAM and its segments plus experiments to learn which methods are most effective at targeting and converting each of those segments. Most startups leave market research and sales on the floor until it’s too late due to Silicon Valley bias towards “build it and see what sticks” – but if your runway is short and your sales cycle is long, you have a limited number of acquisition experiments you can conduct before the money runs out.
#entrepreneurship #saas #salesandmarketing #sga
Related Links:
- Doblin’s Ten Types of Innovation framework – Introduced to me by Matt Locsin at Publicis Sapient, many startups focus on product and experience; innovating sales ops and marketing channels is often untouched early on.
- A Beginner’s Guide to the Sales Process for Startups from Zendesk
- Understanding SG&A and Sales Efficiency
What I’m Reading is my regular posting about news, science, and technology that is relevant for business, startups, and entrepreneurship, plus a brief analysis of why it’s interesting. Follow me on LinkedIn for more.
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Ellen excels at product and UX.