A fundamental principle in SaaS sales is that the size of a deal must be large enough to justify the effort required to close it.
Fantastic framework. This is the classic dilemma around ACV.
What a terrific post with so few words. Just an fyi - the link on sales team setup isn't working.
A great summary,
I think if you focus on revenue drivers..
10% more customers
10% more value
10% more frequency of purchase
will compound to 33% more revenue
Very clear and succinct framework. Lots of startups seem to be trying multiple quadrants together, thereby peanut buttering their focus and investment.
A good recent counter example is Brex, who made a clearer/harder pivot to optimize for higher ACV customers in the last year or so.
When you’ve torn through libraries and articles on how to launch and build a startup like their tissues because you have no background, no examples, no family who believe you, developed dark circles under your eyes and on the brink of divorce because you refuse to give up on your baby company, then you’ll appreciate this very transparent and transcendent blog from such a giant authority in this space. David clearly refuses to gatekeep information and knowledge that would otherwise have stayed in Silicon Valley cerebral silos. I’m thunderstruck by the outpouring! Thank you for sharing!
Very concise. Appreciate the clean explanations.
Very helpful framing, thank you.
1999, my firm at the time, MarketBridge, and specifically Tim Furey and Larry Friedman authored a seminal book on channel CAC, called the Channel Advantage. The premise was that, as marketing and sales bifurcated into field sales, single- and two-tier distribution, call centers, and the web, each with their own CAC and customer experience sweet spot, enterprises have an opportunity to optimize growth by driving certain transactions through certain channels. In short, align transaction complexity with channel cost. At the time, Dell was disrupting the PC world by going direct-to-web, which the book references in-depth. One can argue that each channel has a maximum complexity before a customer prefers to move to or combine the experience with other channels. And, likewise, one could argue that Dell's success (and profitability) occurred because, at the time, a PC (at, say, $2K-$4K) was a very large transaction to drive almost completely via web, with little human interaction. They maximized transaction size and complexity on a low-CAC channel.
Great info and this is true for sales/biz dev in lots of other industries outside of SaaS, also.
Many product related and sales ops great recommendations but in many cases Saas miss to articulate a key point for the EB: what is the business value, KPIs that will benefit from the product. The sooner that’s clarified the shorter the sales cycle. Along the way you may also turn small ops into big ones.
AE's often sell without ever identifying the pain or need of a prospect. Even if they do sign, these types of customers often churn. More time needs to be spent on discovery at the top of the funnel and more time needs to be spent on defining success criteria if a new logo lands.
Dear David & Brian,
I wanted to take a moment to express my gratitude for your recent article on "Difficulty Ratio." Your analysis of the relationship between deal size and cycle time in SaaS companies is both enlightening and practical, and I appreciate the insights you shared. I have never considered this approach before, and I found it extremely helpful to categorize ideas into different buckets and fine-tune areas of interest. Your guidance on how to improve one area to enhance sales was particularly eye-opening for me.
Thank you for sharing your expertise and your insights have provided me with a valuable perspective on how to approach SaaS companies and improve their sales processes.
Brian/David, how do I get in touch with someone at Craft?
I can be reached at email@example.com o m
I read that you are planning a new podcast.
I am looking for someone to partner with to do a weekly current events show.
If you are looking for a cohost, I would love to work with you. I approached Michael Tracey, but he has not responded yet.
Just call if interested.
This is super timely for me. Working on launching SaaS based business soon. Would love learn a little on how owners before selling can lock in the technology or flow of application legally with copy-write and trade protection. Thus insuring you are not duplicated or immediately bamboozled by facebook.
Is there a typical methodology for how to measure when the start of the cycle time is? From Opportunity Creation date? Lead Creation date? First website visit of prospect?