What are the best examples of SaaS companies that sell B2C and B2B? (Ex. DropBox) Is this a good strategy, or one that can dilute a companies focus?

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JASON LEMKIN

It’s definitely dilutive in that there’s a constant tension between management time and resources.

On the one hand, the sales-driven side of the business, B2B, “costs” a lot more — you need sales people, customer conferences, booths, customer success, etc.

But.  The deal sizes are much, much larger in the enterprise / B2B customers.  And the customer lifetime value is much higher.  And the churn is much, much lower.

So … to me, the question is, can the smaller segment of your business at least do 10% or more of your revenue (i.e., be material), and/or drive 10% or more of your leads.  If so, it’s worth investing in — relative to its overall contribution to the top and bottom lines.

In terms of successful companies that do both “B2B” (sales-driven) and freemium/B2C-ish (self-service / non-sales driven) successfully, there are many.  But these tensions exist at all of them:

  • Adobe.  $1b+ from Digital Marketing, which is very sales driven and very B2B.  $3b+ from Creative Cloud, etc. which are primarily not sales driven / B2B.
  • Dropbox.  As noted.  Enterprise is material.
  • New Relic, Github, Twilio, etc.  New Relic and many “B2D” companies combine self-service at the low-end and more B2B enterprise sales for larger accounts quite nicely.  Generally, they start as self-service and as the accounts grow, they add a sales team to support larger deal sizes.

But … more often, one of the business lines falls to the wayside as the business scales and one segment clearly becomes immaterial, and therefore, not just a cost center but dilutive to management team and focus:

  • Surveymonkey & Zenefits.  Both just dropped their enterprise sales forces to stay focused on core businesses (self-service+ and VSB, respectively).
  • Box.  All B2B now.  Freemium is < 1% of its revenue now.  Still an important marketing channel, but not for revenue anymore.
  • Salesforce.  Still working it, but at least at $7b ARR, the SMB offerings are still immaterial.

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Published on March 23, 2016
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