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7 Guidelines you Should Heed on SaaS Sales with Jason Lemkin

9 min read
October 31, 2013

You know that popular digital signature app Echosign that sales people around the world love? Well that was Jason Lemkin’s most recent business. He started the company, sold it, and drove the business unit to over $50,000,000 in ARR.

Needless to say, Jason has had a ton of success in all things sales.

Want to know what he’s learned? Great. He shares openly on his blog and Quora account. They’ve made him one of the top authorities on SaaS businesses. We’ve read everything he’s written. Our favorite points are below:

1. The Top Metric In SaaS

Metrics are popular in SaaS. Rightly so. But it’s incredibly important to make sure you’re looking directly at the best predictors of your business. While current sales are important, churn, growth, etc, they’re measurements of the past performance.

How can you know what’s happening right now?

Try using your Qualified Lead Velocity Rate (LVR)– your monthly growth in qualified leads. It’s the most important metric in sales.

Jason recommends setting your top goal to growing your LVR 10-20% greater than your desired MRR goal to hit your revenue goals.

This method is real-time. It’s simple to measure. And as long as you’re using qualified leads and consistently reaching goals month to month, you’ll have a crystal ball of the future. It recently got picked up in Wall Street Journal.

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2. Hire One Customer Success Manager for Every $2M ARR

There are a lot of different rules that sales professionals use when growing teams. Some are specific and hard to apply, and some are really helpful. This is the latter.

Hire One Customer Success Manager for every $2M in Annual Recurring Revenue.

Your customer is the focus of your business and you’ve got to keep up with their needs. Jason approaches this issue looking at the different types of businesses by their annual contract value (ACV) and recommends the following CSM behaviors:

  1. At huge deal sizes, you need a CSM to be able visit your customers at least twice a year. They’re big customers and you need to keep them happy. Nothing should happen to these accounts which the CSM is not fully aware.
  2. ACV ~$20k. You’ll (hopefully) see more of these. If they’re local, go visit them. Talk to each of them at least 5 x year.
  3. As the deal size falls below $5k, this is a great time to introduce automation to keep engaging the customers past initial interaction and on-boarding.

While your sales team is critical, they really only introduce customers to the experience of being a customer, which is then implemented by your CSM. Don’t underestimate their importance. Much of how your brand is viewed by customers will be based on this ongoing relationship.

You’ll get as much as six times the initial deal size out of many of your customers after the initial deal is closed.

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3. The VP of Sales is the Most Risky Hire

For early stage startups with little recurring revenue, it can be difficult to commit to hiring such an expensive position. You must create an environment where you can get a great VP of Sales.

Otherwise, you’re flushing time and money down the drain. It’s all about creating a great place to work- one that will help you get traction through scalable, repeatable processes. Don’t hire the wrong person too early or you won’t be able to rebound.

Ok, ok, but now you’ve moved on to hiring. What do you need to know when bringing on your first VP of Sales?

  1. Have a Clear Quota: Promising they’ll do their best just isn’t enough, make sure to develop a clear quota for the VP to hit.
  2. Pay Bonuses Monthly: This is your way to constantly gratify your VP of Sales for succeeding. If they’re doing a good job, they deserve the payout.
  3. Align VP of Sales to Costs AND Revenue: Sales can be expensive early on, so make sure your new hire realizes the costs involved with bringing on reps and creating a great process.
  4. Start Early: You’ve got to take your time with such an important role. Start looking for a VP of Sales 12 or more months before you need them.

Of course it’s going to be stressful to hire such an expensive, crucial role to your team. But with these specifics, you can safeguard against failure early on.

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4. The Lowest Cost Your Product Can Be And Still Warrant an Inside Sales Team

When your product is priced at $20/mo, it’s hard to support an inside sales team. But how low can your pricing be and inside sales still make sense?

When you do the math, you’ll find the cutoff for an inside sales team is around $300/month.

Of course, this is entirely dependent on the number of deals your specific reps have, their salaries, their calls/demos, etc.

But SaaS is flexibleyou can have a lower price point, as long as you do it the right way.

  1. Low Price, More Deals: If your price point is lower than $300/mo and you have enough leads, your reps will get really efficient at closing small deals. If they can triple their 8-12 deals/month, you’re still making great money.
  2. 2. No Wasting Leads: With a low price point, you need to capitalize on every lead. Don’t ignore customers that want small deals, the money adds up.
  3. Cheap Training: Bringing on new reps? You can train them with this lower price point without worrying too much about losing money.

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5. Factors/Skills Every VP of Sales Must Have

It may be surprising, but directly selling isn’t one of the top three traits needed for a VP Sales. There will be too many other things on their plate for them to personally own specific revenue pipeline.

So what are the top three things your VP of Sales needs to master?

  1. Recruiting: Your VP of Sales is the core of your sales team. But remember, it’s just that, a team. And a team is only as strong as it’s weakest link. Your VP of Sales has to be able to hire reps that are not only motivated, but fit your team well. Hiring reps is the single most important job they’ll have.
  2. Hands-On Attitude: While your VP of Sales won’t be selling personally, they need to be able to spend time training and coaching reps that have been hired. It’s important to work closely with reps, particularly just after being hired. It’s also important for the VP of Sales to be able to keep an eye on upcoming problems and opportunities.
  3. Tactical Approach: Once the first reps are there, a process needs to be implemented. It’s specific to every company, but it’s up to your VP of Sales to figure it out.

    What’s the best way to compete in your space? How do you best segment customers? What’s the best way to maximize revenue and get the highest ROI? These are all questions your VP of Sales needs to answer and be able to solve before growing a scalable, efficient team.

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6. When You Hire Your First Rep, Make Sure You Hire Two

You’re going to have to hire reps to grow your team, and in turn, your business.

It’s (hopefully) inevitable.

While you might not have the capital to hire an entire team immediately, make sure and hire at least two reps. If you hire just one, you’ll run into one of the following problems:

  • Your Rep Fails:

They’re not meeting quota, they might blame your product or marketing. And they may be right.

The truth is, you’ll have no idea why they’re failing.

It may be product or marketing, or even just that they’re not a good fit for your business.

  • Your Rep Succeeds:

They’re exactly what you expected. Exceeding quota, working hard, and expanding your user base.

You’ll still have no idea why they’re succeeding.

Is the product selling itself? Are they great on the phone? It’s hard to tell. You really won’t know, because you have no basis for comparison.What you need to do is hire two. Take the initial monetary hit, and you’ll reap the benefits in knowledge scalable revenue later. These first two reps are your basis for creating your sales team. It’s important you learn from them, and them to learn from each other.

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7. Never Openly Complain About Marketing

Your VP of Sales and VP of Marketing should be your Mom and Dad of revenue.

They’ve got to work together like a well-oiled machine, otherwise, there’s a huge waste of time and money. Not to mention scaling will get messy.

From the sales side, what can you do to keep things moving smoothly within your business?

  1. Come To a Consensus About What a Qualified Lead Is:

    Not just a marketing lead or a sales lead, but certain qualifications on what makes a great client. If the two teams have different definitions of a qualified lead, they’re working towards different goals.

  2. Don’t Fight In Public:

    If you think marketing could be doing a better job, talk in private. It’s much easier to avoid fighting and find an adequate solution in you talk behind closed doors, one on one. No one wants to see Mom and Dad fight.

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If you’re interested in more about Jason, you can keep up with his blog. We’re lucky to have learned so much from one of the foremost minds in SaaS selling and are glad to share it here.