By Kevin Dobbs
Montclair Advisors, LLC
Now that many software companies really feel that the risks associated with a second recession are firmly in the rearview mirror, it now seems like everyone is looking to grow their businesses.
I read a great post yesterday by Bruce Cleveland at InterWest Ventures about the Value of Growth for SaaS Companies, which I thought really accurately captured a challenge that many software firms face when transitioning to a SaaS model. This is a subject that is near and dear to me given my background as a reformed marketing executive and someone who was responsible lead generation at Oracle years ago during the Tom Siebel and Marc Benioff era. I think it was Tom Siebel when he was running Oracle’s inside sales team that told me “I want it to rain leads from the sky!” At the time I was actually shocked because he was asking me to literally drown his sales team with qualified opportunities who wanted to buy Oracle’s database products.
As I have come to learn that he knew exactly what he was talking about and his track record demonstrates that productive sales teams deliver amazing revenue growth results. Bruce’s post highlights that a SaaS company without meaningful growth is not worth very much and probably will fetch the low-end of the valuation curve, which is still pretty good in today’s crazy market (See last week’s post about the SaaS Bubble). So how are high flying SaaS companies like Salesforce and SuccessFactors achieving CAGR’s in excess of 30% every year? Check out this chart I put together on some of the leading publicly traded SaaS firms (sans Salesforce because they will skew the chart):
As you can see the companies with the higher growth rates are also the ones that have high market caps (valued more highly by Wall Street). What is really interesting is that SuccessFactors was able to grow by almost 50% for the past three years, even through one of the worst recessions in the last 100 years. The value of growth can also been seen by a company that recently went public, Cornerstone OnDemand, they have been rewarded with a market cap that is over $800M even though the company lost more than $40M last year. Seems crazy right? But they have a great organic growth story along with a major channel relationship with ADP which could also signal even faster growth in the future.
If you talk to any software sales rep they often complain about their pipeline and the lack of quality leads. Reminds me of those coveted Glengarry leads from Mitch and Murray downtown. So at the heart of all of these companies and their rapid growth rates is that they have all developed a core competency to generate high quality leads and build pipelines quickly.
(click on picture to see clip)
Here are some tricks that I have learned along the way that will help you to build out your SaaS lead generation strategies:
- Use a Portfolio Approach – Depending on your product, buyers, and market there may be many ways to generate interest. Campaign elements of a typical lead generation strategy are a combination of organic and paid web traffic, email campaigns, webinars, customer programs, social media and targeted events. Don’t put all of your investment in a single demand generation approach, but reward the tactics that generate quality leads at an affordable price.
- Test and Test Again – With the portfolio approach you will need to continually test your messaging, packaging, value propositions, and price points. The best-in-class SaaS firms are continually testing and refining their lead strategies. This is important as most SaaS marketing organizations are trying to lower and optimize their Customer Acquisition Costs (CAC).
- Automate Where Possible – There are a lot of great Sales 2.0 tools available today that can give you a real unfair advantage in the lead generation process. Companies like Marketo, Pardot, Eloqua, Constant Contact, NetSuite and even Salesforce offer many tools to help you automate and analyze your marketing efforts. I would definitely recommend implementing a lead nurturing or drip marketing program to continue to work your lower quality leads, this is a great way to build your pipeline over time with little direct human intervention.
- Track Everything – Make sure your sales operations and marketing teams are tracking and analyzing all of your lead activities and conversion rates. You don’t need to be overly complex, but just tracking some basic things like lead scores, lead acceptance rates, leads converting to opportunities and close rates can help your organization to fuel your high growth SaaS sales engine.
