Getting to Initial Scale

Everything is Sort of the Same at a Given ACV (Annual Contract Value)


Jason Lemkin

Screen Shot 2013-12-11 at 12.22.58 PMAs you try to hire up for your SaaS company, you’re going to faced with a lot of choices and trade-offs.  No hire is the perfect package.  Do you take a risk on someone a little more junior than you’d like?  Someone from a company a little larger than you’d like?  Someone from a very different industry?

I don’t have all the answers here.

But there’s one thing I can tell you in SaaS, at least:  Everything (Except the Product Itself) is Sort of the Same at a Given ACV (Annual Contract Value) Level.

By that I mean:

  • If your deal size is say $5k per year, there’s a certain way you sell.  A certain way you market.  A certain way you retain customers and prove support.  A certain way, even, that you build software.
  • With $20-$50k deals, it’s different.  You can spend more time with prospects.  You close fewer deals.  Customers will expect more services, more account management, more configuration.
  • At $100k+ deals, it’s different again.  You’ll need to get on a plane, most likely.  You may need solutions architects, more sales engineers, more support.  Marketing can do things that seem very expensive, but don’t need much yield to be High ROI.  Your engineers can build complex features than only a handful of customers use.  Your VP Product will really get to know individual customers.

I’ve learned I can pretty much predict what you’re doing, and what you will be doing in your SaaS company, and help you staff up, if I just know three things: 1.  your stage, 2.  your current Average Deal Size / ACV, and 3. your target Average Deal Size / ACV for next year.

You’ll want different sales people for different segments, obviously.  But more important, you have to start with just one VP of Sales.  One VP of Product.  One VP of Marketing.  None of even the best candidates will have done it all, all segments.  So I’d pick candidates for all these positions, even VP of Engineering, that has worked extensively with customers/products at your target deal size.

My learning, suggestion and insight is just this.  Hire the smartest, bestest people you can.  Of course.

But then, hire people who can sell, who can market, who can ship software, who can retain customers, and who can build features, that match your target average Deal Size for next year, for the next level of your company.

Then they’ll have already learned 80-90% of the skills you’ll need to have to succeed in your organization.  You can drop them in and they’ll just succeed.  Even if they have no idea how your product really works, what your customers are really like, or what makes you special.

Published on December 12, 2013
  • Thanks Jason for the very insightful piece of wisdon.

  • Tito Bohrt

    Can you elaborate more on how those approaches differ. It seems to me that as more and more companies have key decision makers spread across the country, selling via online meetings is becoming more and more common for even $100,000+ contracts. They do expect a superior level of support, but the sales themselves, seem not to require in person visits as they did 10 or even 5 years ago…

    • Jason Lemkin

      You can close a $100k deal on the phone, especially once you have a mini-brand. But you can close even more, have less churn, and far better upsell potential when you go there.

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