Backside-up or High-down for Early-stage B2B SaaS Companies? | by David Hart | The Startup | Apr, 2022

Which is finest and why?

Whether or not start-up SaaS companies realise it or not, they’re confronted with a call to make about whether or not to adapt a bottom-up or top-down go to market technique. It could be that it’s a call that’s already made for them given the kind of providing they’ve, however in lots of instances it can require an energetic selection.

There’s a third possibility, too: which is to aim each. And in actuality, there’ll all the time most likely be a component of each, however given their very restricted sources, corporations want to decide on a route.

What will we imply by bottom-up and top-down?
Backside-up usually refers to promoting to particular person end-users, then graduating to small groups, departments and ultimately complete organizations. Against this, top-down can be the place you begin with essentially the most related senior chief in a company and that one gross sales course of unlocks all the things inside that group that’s related to your service.

If, for instance, you’re promoting a payroll answer, you would want to promote it on the senior govt degree since a person worker utilizing a payroll system for themselves wouldn’t work. Nonetheless, a advertising and marketing software might be utilized by a person to handle a selected marketing campaign or initiative and if profitable might be rolled out throughout the broader firm.

Traits of a bottom-up strategy
A bottom-up go to market technique will look completely different to a top-down one. Particularly we might anticipate to see the next:

1. Particular person subscribers and smaller Common Buyer Worth (ACV). Until you’ve got a really excessive ticket product, your per seat strategy will imply that you could be solely be charging $20-$50/buyer/month.
2. Extra reliance on content material advertising and marketing. The Buyer Acquisition Value (CAC) can be constrained by the ACV. When you work on an assumption that you really want not more than a 12 month payback and your ACV is $600/12 months, then your choices for paid promoting are restricted (however not fully prohibitive). The most effective strategy can be a mixture of the 2, however build up a powerful content material technique early on can pay dividends over time.
3. A self-serve, extremely optimized on-boarding course of. The price of promoting and on-boarding a buyer value $600/12 months needs to be stored low. Which means a simple to grasp, easy means for purchasers to attempt, pay and get began on the service is essential. As a substitute of a technique of an SDR qualifying a result in Account Govt demoing and shutting the lead, you would possibly as an alternative depend on webinars and even asynchronous pre-recorded demos to handle your sources.
4. Reliance on Product Led Development methods. With much less sources obtainable to promote person-to-person, your product might want to do the promoting for you. It might want to encourage growth and use your current customers as evangelists. That is no dangerous factor because it forces a deal with the top consumer expertise, which finally must be nice whichever gross sales strategy you’re taking. On the identical time, the product will seemingly have a one-size suits all strategy with little or no in the best way of customization.
5. Quicker gross sales cycles. There must be much less to contemplate: subscribing to your service received’t break the financial institution, the product ought to clear up the issue in an apparent means and the impression for the shopper of constructing a nasty resolution is far much less critical. The choice ought to actually be simple. Because of this trial durations will be as quick as a few weeks.
6. Growth of a highly-automated Advertising and marketing Machine. Understanding learn how to attain clients, learn how to drive them in the direction of your gross sales funnel after which automating e-mail sequences and supporting content material as they make their means in the direction of changing into a buyer.
7. Plenty of clients that you just by no means converse to. You must all the time discuss to your clients, but when your technique is extra about driving lower-value clients, at the least to start with, then numerous the main focus can be about learn how to discover these clients cost-effectively and get them by the method to a closed sale. If you’re doing it proper and profitable 1000’s of shoppers, it simply received’t be sensible to talk on to all of them in the best way you’ll do for those who have been promoting a a lot larger worth subscription to a CEO.
8. A lot smaller funding in gross sales and advertising and marketing. The skew between gross sales and advertising and marketing vs product improvement can be extra in the direction of product improvement for a bottom-up strategy. That is partly due to the necessity for product-led progress, but additionally the costly lengthy gross sales cycles, led by extremely paid gross sales individuals, is much less of an element.
9. Simpler to change into predictable and scaleable. After I ran the ScreenCloud gross sales and advertising and marketing operate, promoting to smaller corporations in our early days meant that we might get to predictability and scaleability actually quick. This meant that conversations with traders was simpler as a result of we might level to actual knowledge to indicate our seemingly future trajectory.
10. Larger churn and hitting a plateau. Smaller worth clients have shorter gross sales cycles as a result of the stakes are a lot decrease. However conversely, that additionally signifies that their organizations are much less reliant in your product and due to this fact extra prone to churn. In actual fact, in case you are counting on both a person or an SMB to purchase your merchandise, you’re additionally extra vulnerable to individuals leaving their job or the enterprise closing down.

Traits of a top-down strategy
Just about the alternative is true of all the things above:

1. Your major focus is promoting a excessive worth subscription. For this you’ll need to promote to a number of stakeholders all with completely different ache factors. An IT Director is likely to be involved with safety, whereas the CMO will solely care about whether or not her workforce will be extra focused with their campaigns. A CFO could also be stressing concerning the rising SaaS price range, whereas the CEO will need to have the ability to present the board that they’re on observe to hit their quarterly growth targets.
2. As a result of the prize is larger, so too would be the quantity of funding which you could moderately anticipate to make to win it. A CEO just isn’t going to click on on a Google Advert and determine there after which to enroll to a $100k+/12 months subscription. The chances are that you will want to get in entrance of all the choice makers and that may contain a mixture of paid media, deep-dive content material/white papers/thought management, outbound advertising and marketing, a number of phases of gross sales pitches, proof of idea, contract negotiations and extra. It could additionally require funding in your model. “No one ever acquired fired for hiring IBM”, however you drop 1 / 4 of one million bucks on a beginner that no person has heard of and all of it goes mistaken, then your neck perhaps on the chopping board. Having a model, rightly or wrongly, is reassuring to the client. However constructing a model is well timed and costly.
3. High-down gross sales usually includes a number of demos to completely different stakeholders, with a Q&A session. There could also be a necessity to supply technical knowledge, safety certifications, full a provider questionnaire and that’s all earlier than the authorized workforce begins ripping your Ts&Cs to items.
4. Buyer Success is a vital a part of retaining and increasing the accounts. When the ACV is critical, the expense of servicing the shopper can be far more justifiable. Skilled Providers can even likely come into play. That is each good as a income, however dangerous in that it may well change into a distraction: the gross margins can be means decrease than SaaS and the income can be non-recurring which means that it received’t contribute a lot when it comes to future valuations for funding and acquisition.
5. Gross sales cycles are for much longer for all the explanations outlined above. It makes understanding the gross sales cycle, the pipeline protection and the gross sales phases ever extra vital. Hiring in opposition to a prediction of $Xmillion in new income subsequent quarter, given the gross sales cycle, signifies that main indicators comparable to the dimensions of the pipeline will change into far more vital than the simpler to foretell 14 day trial to conversion motions that you just see in bottom-up gross sales.
6. The necessity for a extremely automated advertising and marketing machine doesn’t go away (except your Whole Addressable Market is just a handful of shoppers worldwide wherein case automation might be not the secret). The automation is definitely extra refined because the strategy will differ relying on the personas you’re concentrating on and different cohort data comparable to measurement of firm and vertical market.
7. I began my tech profession in digital consultancy. One of many appeals that me and my two co-founders noticed in transferring from being a guide to having a SaaS enterprise is that we wouldn’t be topic to the whim of our purchasers. As a substitute we might have a great deal of purchasers and if one or two have been being unreasonable then it wouldn’t be a trigger for dropping sleep. With top-down gross sales, you come full circle — properly, virtually full-circle. Large purchasers want the assist and particular person understanding that an company shopper would demand. Talking commonly to clients and prospects to genuinely perceive what their enterprise challenges are, their voice and their frames of reference is what makes the distinction at this degree.
8. High-down gross sales and advertising and marketing signifies that the proportion of spend will inevitably skew extra in the direction of gross sales and advertising and marketing. With bottom-up gross sales, gross sales individuals could also be actually simply holding prospects’ arms as they trial the software program, with top-down the gross sales course of is extra concerned and sometimes takes place larger up the decision-making funnel. With bottom-up the gross sales workforce will get entangled when a possible buyer reaches out and asks for assist or additional data and the promoting could also be fairly floor degree. High-down wants individuals to generate and qualify leads in addition to to shut them. Gross sales individuals in enterprise gross sales are sometimes very properly paid and work on vital fee constructions. They might want to have a deeper understanding of the expertise behind the product in addition to a radical perception into the actual pain-points of the varied stakeholders they’re promoting to. The entire course of takes longer and it actually prices extra.
9. The problem for all SaaS companies is to develop a predictable, repeatable and scaleable gross sales technique. With bottom-up gross sales it’s simpler, cheaper and sooner to realize this. However for those who’re nonetheless seeking to scale to $100m in ARR, you’re going to battle and doubtless plateau means earlier than you attain $100m. Why? As a result of attending to $100m in ARR in case your ACV is just $1,000/annum, would imply you’d want 100,000 clients. Not unattainable, however powerful going. And when you think about that smaller clients usually tend to churn, you would possibly must win greater than double that earlier than you hit $100m. Against this, in case you are routinely promoting >$100k ACVs, then you definitely “solely” want 1,000 clients. Reaching the identical predictable, repeatable and scaleable technique on the enterprise degree is tougher and takes longer. There may be much less knowledge to work with to start and the upper the ACV, the extra dependencies there are and the much less predictable the end result.
10. However the massive upside is, as a result of the dimensions of the funding, the desire of your clients to make it a hit can be stronger. The inconvenience of ripping a system out once more, particularly as end-users begin to depend on it to do their job (aka ‘the ‘stickiness’ of a product), makes churn much less seemingly. Take a look at any SaaS firm’s metrics and it’ll undoubtedly present an inverse relation between measurement of ACV and % churn. The one caveat to that’s in case you are a top-down SaaS enterprise with solely a handful of high-ticket enterprise clients, then if anybody churns that may have a sudden and vital impression in your ARR and your progress numbers. That is very true the place you’ve got one or two clients delivering a major majority of your SaaS earnings.

So which must you select?
As I mentioned, in some instances your product might select for you. But when your product might doubtlessly do each, I might advocate firstly not attempting to do each: you want focus. Within the early days, deal with bottom-up. Use your restricted sources to get the fundamentals proper and depend on phrase of mouth and inner evangelists inside these bigger organizations to get your product adopted wider inside the enterprise.

That’s to not say that you just flip any enterprise deal away, however recognise that it might find yourself being an enormous distraction each when it comes to time and sources, but additionally when it comes to your product roadmap. Use it as an alternative as a studying alternative: see what the bigger companies need and the place your gaps are.

As you get bigger, you most likely might want to work out the way you begin to win greater contracts in case your ambition is to develop to someplace north of $10m. Whenever you determine to essentially push for this can rely available on the market, your product, your present understanding of your clients and your stage of funding.