3 Pointers to Help SaaS Startups Decide How to Invest in Sales and Marketing Spending money on marketing and sales will only give results when you adopt a strategy that has worked in the past
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The Indian Software as a Service (SaaS) startup story has been going strong since 2015, when Indian funding boomed. In fact, 1,341 SaaS startups were launched in India that year. Companies like Zoho, Freshworks, and OrangeScape are raking in revenue of more than USD 100 million a year. The Indian SaaS ecosystem is booming, with its roots in Chennai, where most of the young companies are based.
If you are a Saas startup, you have probably realized that marketing a SaaS product is entirely different from any other type of marketing. At the same time, sales and marketing are also an integral part of your entire strategy, because you are selling an intangible, constantly-changing product that only a handful of businesses understand and require. You know that, unlike physical products, a simple ad campaign just won't do. Having established the significance of sales and marketing for a SaaS startup, it is evident that investing in it should be well thought out, and not just in terms of money. How much should you invest and how to decide that?
Here are three pointers.
Step by Step, Person by Person
Sales and marketing team can be built from a single individual. To start with, you can hire only one person and wait for that person to become ROI (Return on Investment) positive. In other words, the person must be able to justify their cost with their own independent actions and activities. Next, you can go for a "batch approach" and start hiring in buckets. For instance, you can hire 2 people in the next batch, and after they show a positive ROI curve for a certain time, increase the batch hiring size to 3, 4, and so on.
The investment in sales and marketing in a SaaS company is not always monetary, says Ketan Kapoor, CEO and co-founder of Mettl, a SaaS-based company and talent measurement firm that enables businesses to make people decisions in talent recruitment, management, and training across industry verticals.
"Simply go for bootstrapping. Remember that efforts can snowball over time, giving you incredible results," he says.
Kapoor says this is a highly-scalable strategy that allows you to grow your business without having uncertainties about running out of budget. "You only have to make sure that every employee in your batch is ROI positive before you move on to the next. This way, you can start with a proven marketing channel that offers high ROI, and with time, experiment with new channels," he says.
Wait for Product Market Fit
The investment in sales and marketing in SaaS should go hand-in-hand with its growth and expansion. Investing too much too early can result in disaster. It is wiser instead to wait and establish product market fit first.
As Florian Bersier, CEO and founder of Geneva-based SaaS company Gmelius says, "I don't think an early-stage startup has enough visibility, experience, or deep knowledge of its market to effectively capitalize on its marketing efforts and spending. Same reasoning goes for sales. However, once product market fit has been proven, and organic growth is solid, it's time to scale up the acquisition funnel by investing a considerable amount of effort and money in marketing."
Chalk it Out Before You Spend
One can make an amazing amount of progress without spending money, so keep looking for ways to take your marketing and sales further before spending any money. Eventually, you'll find a channel or two primed for investment. Then you can throw money at it like coal on a fire, and watch your sales shoot up.
Spending money on marketing and sales will only give results when you adopt a strategy that has worked in the past. Kenneth Burke, Marketing Director of Text Request, a US-based SaaS startup that works mostly with small businesses, says, "I would invest nothing until you have a proven strategy."
For example, if you're planning to spend money on Google Ads, you can first create blog posts for the same search terms to see if people who come to your website for that search actually want to work with you.
Sean Dudayev, Business Growth Expert at Frootful Marketing, says SaaS companies often make the mistake of putting a lot of tech people in a team, with no sales and marketing people. "It's often the most underrated skill in a SaaS company. Successful companies realize that without a good sales and marketing system, there isn't explosive growth," he says.
Although the sales process in a SaaS business works faster than in other product companies, rushing into a sales process is never the way to growth. Remember, you only have a handful of customers who need your product. So why not do your homework on their needs?
Bersier, says, "A sales process is only efficient when your different customer segments are identified, and you're fully aware of their needs. This takes time and should not be rushed."