Dear SaaStr: How Do I Deal With Long Sales Cycles?

And Next Time -- Ask for $1,000,000 a Year. I'm Not Kidding.

Dear SaaStr: What is the best way for a SaaS company to deal with long sales cycles? What strategies from an individual and company standpoint have been effective?

>> You gotta Chill.

By that I mean, get used to it. Change the way you think. All the advice above/below is accurate and terrific at a tactical level.

But you're going to have to change your mindset, to the long game. Start thinking about lead nurturing, marching your opportunities through the cycle, identifying and supporting budgeting processes, etc. etc. Start changing your processes to adapt.

Once you're a few years into it, it won't really matter. Long sales cycles are brutally painful when you start ... and shortening them almost always helps ... but once you hit just $1-$2m in ARR, it's just part of the sales process of your company. Since SaaS compounds, and churn except at the low end is low-to-negative ... it works itself out into a natural cadence, and in the end, it won't really impact your MRR growth. You’ll have not just 1 “Big Deal” in the pipe, but 5 and then 10 and then 20 and more. You’ll layer these longer sales cycles on top of each other so several close each quarter.

And in fact, while you may be jealous of your Freemium friends -- don't be. When you dig into a lot of freemium models, you'll see the same thing -- only "worse". Many Freemium leaders take years to convert a free user to paid. And many Freemium models have much higher churn than those big enterprise deals that take so long to close.

A Great VP of Sales Really Will Help a Lot. She will pull in those long sales cycles into shorter but still long sales cycles. She will spend a lot of her time here, in fact, as you scale. Your sales cycles may fall 30%-40% with a great VP of Sales. They’ll still be long. But less long, and more certain.

A little more here: SaaS and The 7-10 Year Sales Cycle

Next Time — Ask For $1,000,000. A Year. I’m Not Kidding.

There are two exercises I like to do with SaaS companies that are marching up-market.

The first is to challenge them to double their highest ACV ever on the next similar prospect. If your highest paying customer pays you $30,000 a year … even if all the rest pay you only $3,600 a year (a not uncommon scenario) … then why can’t you get $60,000 a year from the next Big Prospect that come in the door?

What’s the difference between $30k and $60k a year, after all? I mean, really?

What I do know is if one customer values you a product enough to pay you $30,000 … there’s another than will pay $60,000. Maybe it’s a customer that’s 2-20x larger. Maybe it’s just a different situation. Maybe it’s just getting a real VP of Sales that knows how to do the ask.

Whatever it is — ask. Maybe you can get it. And if you can’t … you’ll learn why. Maybe it’s one core feature gap. Maybe you’re aren’t “enterprise enough”. Whatever it is … you can probably build that, and fill that gap.

When I challenge founders to do this … it almost always works. They report back 30, 60, 90 days later that what do you know … the next Big Prospect paid 2x whatever their highest record ACV deal was to date. Sometimes for the same exact product. Sometimes with a feature commit as part of the deal. But one way or another … they find a way.

Then, once they’ve done that, doubled pricing at the high end at least … maybe later, once they get past $5m ARR or so and build up confidence … I ask them to ask for $1,000,000 next time. Or at least — $500,000 a year. OK, more often, $500,000.

If it’s a true solution sale. More on the difference here.

Now, if your biggest customer pays you $60,000 today … asking for $500,000 a year, or even $1m, may sound nuts.

But turns out it isn’t.

Do it when a prospect asks you for something that pushes your solution. When it’s clear they want to buy, but they want the product to go further than it does today.
“Well, we don’t do that today. But for $700,000 a year I can commit to having that by Q2’23.”

Try that line.

It might work. And if it doesn’t … I bet you worst case, you will learn. If it’s a Big Customer, and the problem you are solving is important … it will more often create a dialogue than a No.

Variant #2 is to go back to an existing, successful customer and say “We want to do more for you. What could be do to get the deal up to $500,000 or $1m a year?” This will create a dialogue. And maybe even a yes.

This thing is — the bigger and more important a solution is in the true Enterprise … the more it’s worth.

Budgets are fixed in an absolute sense. But they flow to the biggest and best-est solutions. As you march up market, you also need to march “up value”.

Ask for $500,000 or $1m ACV next time, too. (Once you’ve gotten comfortable already doubling your existing highest-end pricing).

You won’t get it for the product as it is today. But … you might get it for where the product just might go in the future.

See where it takes you.

Maybe to $100m, and beyond, faster than you would have expected. Or even believed.