Every customer you close, the next day, is at some risk of churn. A month-to-month customer can basically cancel anytime. An annual contract customer can sort of cancel anytime, but that churn probably won’t show up for the better part of a year, even 2 or 3 (more on why Year 3 is the biggest risk for bigger customers here). You know this, of course.
But the riskiest deals of all are Small Deals at Large Companies. Yes, the logo looks great. Feels great. Is great. But you start off at an almost immediate risk of losing the deal.
Why is this? Because small deals at large customers are almost always just an experiment.
Imagine a Big Co. They might pay $3m a year to deploy Salesforce. And $3m in consulting fees to deploy it. And say $700k a year in CPQ tools and others to get Salesforce to do what they want.
And say they pay $20k ACV for your little SaaS app to make it all even better. $20k may be a huge deal for you at this stage. But to that customer? It’s a very small part of a $2m+ project. One they like. That they are willing to put into production and manage business process change for. Which is important.
But still, it’s immaterial to the overall cost of the business process in question. So it can easily be discarded.
Furthermore … and this can take you a while to figure out … experiments are at high risk for competitive vendor change as they scale.
An experiment is just that — an experiment. If you tried Vendor A for an experiment, and the customer liked it … but it had A Big Feature Gap … and your competitor doesn’t. Then all the experiment might do is line your competitor up for The Big Win later.
Even worse, Small Deals, by bypassing the CIO’s office and other process steps — put you at even more risk once the project is a success. Because the CIO’s office, or the SVP’s office or whomever … may do their own competitive bake-off. And not pick you. No matter how happy your little silo, your champion of your little deals at BigCo, is.
In fact, Small Deals at Big Cos are so risky in the medium term, some SaaS companies don’t even pay sales reps commission on them. Not until an account is either X% penetrated, or approved by the CIO’s office, or approved by Procurement, or other gates.
So what’s to do? Well, you probably know what to do. You just probably aren’t doing it yet:
- Consider assigning Customer Success resources to the Potential Account Size, not Actual Account Size. At least sometimes. Make sure if you close Google for $20k … your CS team is still treating them like Google at $250k. Or $2.5m a year.
- Consider all Small Deals at Big Cos. as Unclosed Opportunities for The Other 90% of the deal you don’t have yet. Don’t just track the total potential account size. Consider them unclosed opportunities you have to go get. And make sure they are resourced properly.
- Map out the account and penetrate at all levels. Real enterprise salesteams know how to do this. If you got in through a back door, without going through the proper channels — then you don’t even have anything close to proper buy-in. You may need it from every key stakeholder at the customer.
- Consider Lost Small Deals at Big Companies not really lost yet. Don’t make this rookie error when you lose a Small Deal at a Big Co. The big deal there is likely yet to be closed. You may have a great chance of getting the upsell, the bigger deal, in 90 days, in 180 days, in 365 days. Keep on this account as an Active Opportunity. And marketing and demand gen should have separate campaigns for these customers.
- Sometimes — sometimes — push for a larger deal to start. This can be a tough playbook to pull off without an experienced VP of Sales that’s done it before. But sometimes, it’s better to push for a bigger deal and not start with one small group.
- Get on a Jet if you can. Go there. Go visit your champion. And ask to meet >>all<< the other stakeholders. Ask them to assemble as large a group as possible for the meeting. Your competitor will. If they get the other stakeholders in the meeting, and you never do … even if you won the Small Deal … you’ll likely lose the Large Deal later. A Zoom isn’t the same, but it’s a lot better than nothing. It just doesn’t bring everyone together, and you front of mind, the same way.
That great logo? Be nervous. You should be. When the deal is Adobe Signed … the work has just begun. Even just on the sales side.
(note: an updated SaaStr Classic post)