Exciting times! We recently brought on our second inside sales person. Mimi is officially on her 2nd quarter, and Alvaro is jumping right into his first quarter, which is our very important Q4. And we want to end 2015 on a very high note!
My background and most of my experience is in online and direct response marketing, and that’s how we drive tons of usage and what we call ‘auto convert’ sales. That’s where we focus on smaller dollar amount sales via in-app conversion without a salesperson’s involvement. So although I’ve managed sales folks and developed sales plans at previous gigs, it’s not in my wheelhouse, as they say. So fortunately, I have sharp sales people I trust, board members with mucho experience in mid-market and larger company sales, and lots of sales friends to tap into to develop Dasheroo’s first quarterly sales plan.
When you’re talking sales planning, you have to get familiar with terms like ACV, MRR, ARR and CAC:
- ACV = Annual Contract Value
- MRR = Monthly Recurring Revenue
- ARR = Annual Recurring Revenue
- CAC = Cost of Customer Acquisition
I’m not gonna get in deep on the actual calculations in this post; there are plenty of excellent articles that do that just fine, I personally like a couple from the ‘For Entrepreneurs’ site: SaaS Metrics 2.0 – Detailed Definitions and SaaS Metrics 2.0 – A Guide to Measuring and Improving what Matters.
The gist of this post is the process of establishing what those values should be for our early stage startup. It’s all about setting aggressive, yet achievable goals that are aligned with building Dasheroo to become a very successful company.
So where to start?! We need to drive revenue, but we also need to realize at this early stage that we also have a lot to learn, including:
- What are the key blockers to closing deals?
- How long is the sales cycle?
- What type of financial commitment will customers make?
- Can we grow revenue per customer over time?
- Can we get customers to commit to an annual agreement, even if they want to pay monthly?
- Will they stick around? Churn kills!
All of this helps us establish the metrics that build a robust and accurate sales model, focusing on the Big 4 I mentioned above (ACV, MRR, ARR and CAC). Don’t get me wrong, it takes several quarters, I’d say at easily four quarters to get some valid numbers and account for seasonality to get to a point where there’s a good level of confidence in the model. But you have to start measuring Day 1.
I was, and still am, a proponent at this stage in driving a number of qualified deals rather than focus purely on revenue. That might sound crazy, but once again at this very early stage (we only launched billing in May) I think it’s important to get salespeople focused first on closing good deals, learning what keeps those customers around, or the features we need to close them, and using that information to ratchet up subsequent quarters, and factoring in MRR increases and ACV targets.
The second quarter I start to factor in some increase in MRR so they are also focused on developing a strong customer base as opposed to 1-offs that churn quickly or that we cannot grow into larger accounts. So here it is:
We’re new and our salespeople are new, too! Here’s our initial sales plan for our newbies
Yes, we have revenue numbers ascribed to this model as well, but I haven’t even shared those with my board yet, so it’s too early to publish it here!
I’m sure our plan will evolve and strengthen as we go, but it’s a start. How do you approach sales plans early on? It;s always a bit of gut instinct but I’d love to hear your experiences, either bad or great!
