You’re a SaaS startup CEO, or maybe a VP-Marketing or VP-Sales. Or you hold some other appropriate early stage, senior executive title – no matter. The company has come up with an interesting idea and built a prototype. You’ve raised a seed round, flew headlong into development and now at long last have a product ready to market. Whew! So what now? These phases were all very difficult and your team should be commended for getting this far. It’s not a trivial road to travel. But you’re now entering the phase which is arguably the most challenging of all for a SaaS startup – obtaining your first 100 customers. To examine this gargantuan task, we’ll divide initial customer acquisition into three relatively distinct stages:
Stage I: The first 10 customer acquisitions are often done by “hand to hand combat”
What we’re talking about here is doing “whatever it takes” to make a sale. That may mean the CEO is the lead sales rep for every deal. It may mean that you have to highly customize the product for every new prospect. It might mean extreme discounting, or assigning a support person to act almost as part of the full time staff of the customer for months at a time. Every situation is different, and hopefully none of these extreme measures are necessary. But if they are – do it! Nothing is more important at this stage than building that initial reference list of 10-20 customers. As an aside, it’s important that most of these initial customers are “reference-able”. This is important for the later stages below. What do I mean by “reference-able? It means that these initial customers are willing to speak to new prospects, investors and the press on your behalf.
This first stage is characterized by:
- Mining your team’s personal networks for potential early prospects and/or referrals to them
- Investment is a targeted trade show or two; this is not an efficient marketing spend platform in the long run. However, early on it will allow you make personal contact with prospects in your target segment, enabling early learning to occur
- A lot of hands-on learning about customer wants, needs and desires, as well as some marketplace realities that may come as a shock
- Testing out different value propositions and pitches – many which will fail
- Developing a draft profile of a good prospect – and maybe more importantly, the characteristics of one that isn’t
- Beginning to accumulate a list of benefits that resonate with targets, as well as those objections that you hear with some frequency.
- The lessons that you learn from the above enable you to begin the early stages of “systemizing” the sales process
Stage II: The next 40 sales start to incorporate scalable methods
Ok, now you’ve managed to get those first 10 or 20 customers, often won at a high cost in sweat and months of equity burn. What’s next? Hopefully, you’ve begun to obtain enough answers above that even if you’re still selling using a resource-intensive method, you at least have formed a “road map” on how to approach and pitch prospective customers. Usually, this early experience in the first stage allows you to target your prospects better and shorten sales cycles, at least a bit. One key skill that you hopefully pick up in the first stage is the ability to quickly differentiate between an early adopter and a mainstream or late adopter prospect. Only the early adopter types are generally going to by buyers in these early stages, so being able to quickly identify which category a prospect falls into will help you start to become more efficient in your sales activities. So much of the early efficiency improvement comes from simply not wasting time on those who won’t be buying anytime soon. Take note that this differentiation between early adopters and the rest of the market is primarily a psychographic one, not a demographic one. So you need to develop a skill of understanding your buyer at a deeper level, categorizing them into early/late adopter buckets as soon as possible to accomplish this efficiency.
This second stage may include:
- Still heavy involvement by the company principals, but hopefully not on every account and with an overall reduction in their participation in the tactical sales “heavy lifting”.
- At this stage, it’s important to begun the process of offloading tactical sales activities to other personnel, preferably newly hired, dedicated sales reps. Note that this is only practical once you have formed at the least the skeleton of a successful, repeatable sales process.
- Begin the use of real outbound/inbound marketing methods to generate leads (or make actual sales, in the case of a low-price product). This might typically include some PPC advertising, direct email, a Blog hosted on your website and social media marketing, as well as other low cost marketing activities.
- Beginning use of a CRM and marketing automation software
- Hiring of you first dedicated sales rep(s)
Stage III: Customer acquisition #50-100 acquired utilizing scalable methods
If your SaaS startup is still largely using non-scalable methods at this stage because A) you don’t understand scalable methods B) you don’t have the resources to use scalable methods or C) every sale actually does require intensive, hands-on participation by company principals or other scarce resources, you’re likely in trouble. The exception to this is if your entire market is only a hundred or so customers and every sale is $1M or more!
So what do these scalable customer acquisition methods look like?
- Good characterization of your “Prime Prospect Profile” or “Buyer Persona”, which should influence every marketing and product plan going forward
- For SMB SaaS markets, the building up of an inside sales force (unless it’s a low cost product with “extreme” ease-of-use allowing fully marketing-driven self-service sales). An inside sales force may be a good intermediate step, even with a low price product.
- For Enterprise SaaS markets, the building up of an outside sales force (if required by market, product and price point)
- Content/Inbound/Social Media (and other low-cost) marketing programs as core marketing methods. This began in Stage I and should now be in the optimization phase, with continuous improvement via iteration and testing
- The marketing and sales budgets – while still large relative to revenue – should begin shrinking as a PERCENTAGE of revenue, but still increasing in absolute terms
- Very little direct involvement in tactical sales activities by executive management. At most they should be involved in key accounts, with maybe an occasional “closing” visit for regular accounts
- All marketing and sales activities should be well on their way to becoming “systematized”, with continuous increases in efficiency in all processes
- Use of channels in the sales/fulfillment process, if appropriate
- Thinking about international markets if not actually making the move in this direction
By the way, “first 100 customers” is intended as an example. Depending upon your price point, market size and product/sales complexity, your mileage will vary. It could be the first 25 customers or 1000 customers. The key takeaway is that there are important stages you must go through on the way to a product/market fit, a repeatable sales process and ultimately successful scaling.
So that’s at least one road map to getting through that painful initial customer acquisition phase. I’ve covered the topic very generally and the specifics of your business (price point, market segment, product complexity) will cause your road map to vary, possibly considerably. What have been your startup customer acquisition experiences? Leave your comment or question below so we can all learn collectively from multiple experiences.