Research Shows How SaaS Companies Achieve Best-in-Class Sales Performance

Best in Class SaaS

What does it mean for a software as a service company to achieve Best-in-Class sales performance?
And what is the financial upside to achieve this level of performance?

Research performed for the Sales Excellence Report surfaced the data that answered these questions.

A survey was used to acquire sales data from software as a service firms. The data was used to rank respondents into one of three performance archetypes:

  • The top 15% were designated the Best-in-Class
  • The next 50% were designated Medians
  • The lower 35% were designated Laggards

The respondents revenue performance results were then correlated with business development strategies, processes and technologies. This allowed us to understand what methods most impacted financial results, and what the Best-in-Class archetype did differently than their lower performing peers.

Measuring SaaS Sales Performance

The initial data set was organized to measure revenue growth and the factors that most impact that result.

Sales Growth

Based on the most recent three-year average, the Best-in-Class archetype achieved an average ARR growth rate of 39 percent. That was an impressive 102 percent higher than the combined average of the Laggard and Median archetypes.

The data also demonstrated that ARR varied significantly by company size, as shown in the chart below.

SaaS Growth Rates

Interestingly, regardless of company size, the Best in Class archetype achieved similarly higher revenue growth when compared to Medians and Laggards.

To understand how they achieved such disproportionally higher results, we compared business development methods and their impact to financial results.

Several methods delivered oversized results. For example, two methods that consistently contributed to Best in Class performance included increasing share of existing customers and increasing sale win rates for new customers. These results are shared below.

Customer Share Expansion

In contrast to many other industries, software-as-a-service companies often realize the majority of company growth from existing customers.

That makes improving customer share, increasing customer lifetime value, and decreasing customer churn mission critical imperatives. The below column chart shows the amount of customer share expansion for each performance archetype.

SaaS Customer Share Expansion

Most businesses measure customer profit, but that's a backward-looking historical metric.

Customer share and Customer Lifetime Value are predictive analytics that forecast future value. They are leading indicators of customer retention and company revenues.

They are powerful because even small improvements multiplied by the number of customers create large revenue and profit uplift.

Sale Opportunity Win Rate

The sale opportunity win rate shows the percentage of opportunities won. It's an efficiency metric that measures sale closures relative to pursuits.

The top performers achieved an average 16 percent higher win rate than the combined average of the Medians and Laggards. That's a significant uplift that delivers a linear impact to revenue growth.

SaaS Sales Win Rate

This is an influential measure because increasing conversions immediately improves short term revenues and creates a multiplier impact to long term revenue growth. Small improvements to the sale win rate deliver large increases to top line revenue. Improving sales conversions is also far more effective and less costly than just playing the numbers game of increasing the volume of selling pursuits.

For most software companies, increasing the salesforce win rate is the fastest path to significant and sustained revenue growth.

SaaS Sales Growth Best Practices

Now you know what best-in-class sales performance looks like. So, your next question may be how to achieve these results for your software company.

The research answered this question by analyzing data that measured company strategies, selling processes and technology effectiveness. That analysis identified 9 business development programs that delivered the most significant sales performance impact and most separated the Best-In-Class archetype from the others.

These 9 growth programs are referred to as evidence-based best practices and shown below.

1

Predictable Sales Process

Most software companies have defined selling processes. However, the research found that most of those processes do not deliver predictable results.

The research also found overwhelming evidence that sellers who use optimized selling processes outperform those who don't.

Two process results stood out.

Sellers who used formal and optimized selling processes achieved 6% higher sales win rates than those who did not.

Sales teams with formal and optimized processes were 42% more likely to achieve their quotas.

Optimized processes accelerate staff onboarding time, improve productivity, focus limited time on right opportunities, accelerate velocity, lower cost per customer acquisition, improve forecasting and most importantly, increase opportunity conversions.

2

Sale Methodology

A sale methodology advances your selling strategy from what you sell to how you sell. It defines the specific methods and actions that most influence sales outcomes.

Respondents with actively used sale methodologies earned an average 5 percent higher sales win rate than those without. They were also 1.6 times more likely to achieve year over year revenue growth and 1.4 times more likely to achieve their annual revenue target.

The most cited sale methodology among the Best in Class archetype was The Challenger Sale model.

3

Annual Sales Plan

The annual sales plan defines the specific and sequenced actions to achieve the company's revenue goal. For most companies, it's a roadmap that plots the most direct route to achieving the annual revenue target.

The data found that almost all respondents created annual sales plans. However, for most laggards and medians it was a one-and-done exercise. That was different than the Best in Class which advised they used the plan as an active operating tool throughout the period. For example, the plan was integrated with their CRM system and used to measure progress, identify variances in real-time, and implement swift course corrections as needed.

4

Strategic Account Management

Strategic Account Management is an account planning approach to increase customer share and profits over extended periods. This selling method uses strategic account plans as the blueprints for planned customer expansion and future sales.

The research found that only 19 percent of companies use formal or defined Strategic Account Management programs. But those adopters achieved 23 percent higher revenue growth with existing customers than sellers without these programs.

5

Sale Opportunity Win Plans

The average sale opportunity win rate is 51 percent. When sale opportunity win plans are consistently used, the average sale win rate is 56 percent.

Sales teams that consistently developed opportunity win plans achieved 10 percent higher quota attainment than those who did not.

The data shows that only 19 percent of sellers consistently develop sale opportunity win plans. However, 96 percent of that small group achieved Best in Class sales performance.

6

Customer Retention

Managing customer retention is an imperative to achieve a sustainable software as a service business. In fact, for many companies, customer retention has become a top business growth strategy.

The research found that that the top performers achieved 97.5 percent customer retention. That was 3.5 points higher than Medians and 7 points higher than Laggards.

It also found that many companies reduced churn by identifying customers at risk and injecting some type of save procedure. However, many of the top performers went a step further and identified the root causes of churn. That permitted them to fix the causes of churn at the source and proactively eliminate much of that attrition.

7

Strategic Pricing

While only 9.5 percent of companies routinely calculated price elasticity for a majority of their solutions, 85 percent of that group were Best in Class leaders.

The combination of a formal price strategy and active price optimization program increased revenue growth an average of 3.2 percent. Respondents with active price optimization programs were also 34 percent more likely to achieve year over year revenue growth.

8

Sales Coaching

Seller coaching applies insights, dialogue, collaboration, feedback and practice to improve salesperson performance. It develops each seller’s potential and grows the cumulative revenue impact of the salesforce. It was also the single greatest contributing factor to improved staff productivity.

However, not all coaching programs delivered a positive payback. Only 24 percent of participants with informal and irregular sales coaching reported a positive ROI. But that figure more than tripled to 79 percent for participants that brought structure and regular cadence to their programs.

9

Performance Analytics

Almost all respondents used some form of analytics. But while most relied on static reporting built on historical data, the Best in Class more often used dynamic data and shifted their information from hindsight to foresight.

They were 2.2 times more likely to use interactive reporting, 2.8 times more likely to use predictive analytics, and 3.2 times more likely to integrate AI into their decision support.

SaaS Sales Best Practices

Successfully replicating any one of these best practices will deliver an incremental uplift. That may be enough for some.

Others may seek more significant and sustained revenue growth. That requires a more holistic approach, which can be achieved by replicating a mix of the evidence-based best practices.

The research was conclusive in showing the leaders excelled in at least five, and on average, 7.5 of the nine best practices.

SaaS Best Practices

Lets Get Growing

Sales performance recommendations without supporting data are just opinions. These 9 evidence-based best practices are sourced from field research and show what the top performing salesforces do differently than their lower performing peers.

When you start with data-driven findings, learn from the top performers and replicate their methods to repeat that performance, you eliminate guesswork and pursue the straightest and shortest route to targeted outcomes.

One more thing.

Most survey respondents indicated they adopted all or most of the 9 best practices.

However, survey questions that drilled into selling processes suggested otherwise. The research found there is a big difference between adoption, which is often a casual participation and disciplined execution, which creates expertise.

Disciplined execution requires focused programs with executive sponsorship, budgeted resources, supporting technology, performance analytics and continuous process improvements.

And when the criteria for disciplined execution was considered, only the Best in Class archetype engaged in 7 or more of the best practices.