We met with a SaaS business that in our view is operating using best practices. Below some of my notes which you may find helpful for your own SaaS business.
Customer Success. At this company, customer success reps are specialized by industry so that they can speak the customer’s language and develop some real domain expertise the customer appreciates. Additionally, CS reps are not given a certain number of accounts, rather they’re given a certain amount of MRR to manage, because MRR tends to correlate with client neediness (larger accounts require more attention). Performance of the CS team overall is monitored, but it’s also monitored down to the representative level — CS reps are expected to have no more than 2% gross churn each quarter. Finally, CS reps touch their clients a lot: for the largest customers, contact is weekly. For the smallest customers, contact is monthly. Depending on the size of the customer there may also be comprehensive quarterly, semi-annual, or annual reviews with the client.
Good CS starts with the sales team. To make CS’ life easier, the company has figured out exactly who their customer is and sells only to those customers who have a deep need for the product. They have a laser focus on the ideal customer profile. As a result the company enjoys fantastic net dollar retention rates with upgrades far outpacing downgrades and churn. Whenever CS identifies an upgrade opportunity, it’s flipped back to the sales team, because the CS team prefers to focus on customer success and not selling. The company is going to put a commission structure in place for CS reps that flip leads to account executives, but the close will strictly be up to sales & marketing.
Onboarding. Onboarding is done over 60 days and customers are given as many trainings as needed during that time. Onboarding is not looked at as a source of revenue, rather it’s to get the customer comfortable with the product. Data is critical early on and if the data shows a client isn’t using the product as much as expected, additional training will be offered proactively through the first 30 days. At day 30, there is a progress check to make sure the customer is adopting. From week 5 to 8, there is a once a week check in. At day 60, things will become more customer success focused and touch will be based on size of client.
Sales & Marketing. The company believes in promotion from within: one in three SDR’s is expected to get promoted to a sales position. Additionally, such promotions happen fast: either you’re promoted in 6 months or you’re out. If you wait 12 months to promote an SDR, you’ll probably lose them because of the high burnout rate at the position. The company also believes young and hungry beats old and experienced and will hire SDR’s and sales reps who show ambition versus the ones with the deepest rolodex. To the company, hiring sales talent straight out of college is a good thing. Even though the company has SDR’s, account executives are expected to do some prospecting on their own every day. SDR’s should be making 75 calls per day and 45 custom emails to prospects. The sales team at this company earns above market compensation comprised of a decent base salary and strong commission. As a result, the company has very productive sales reps and no turnover.
Patents. The company does have some patents, but they’re not wasting resources and money trying to enforce them. Rather they got the patents so that an acquirer will find the business more attractive because the acquirer can then go out and enforce the patents against competitors.
Sammy is the Managing Partner and Co-Founder of Blossom Street Ventures. Visit us at blossomstreetventures.com and email directly at firstname.lastname@example.org. We invest in companies with run rate revenue of $3mm to $30mm, with year over year growth of 20% to 100%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $4mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.