In this post you’ll learn why the bottom up SaaS go-to-market model is being adopted by more and more SaaS companies. Historically, software was sold using a top-down go-to-market model. Where very experienced sales teams, with significant incentive structures were out trying to land huge enterprise deals, selling to the C-suite.
However, now more than ever SaaS companies are looking to:
spend dramatically less on sales & decouple revenue from sales headcount
achieve a precise understanding of their CAC and LTV
scale in a way that sustained growth becomes predictable and repeatable
SaaS leaders understand that companies who are able to achieve these three things tend to be more profitable in the long run, which in turn allows them to command premium valuations.
“According to Symantec, enterprises on average use up to 928 cloud apps but their CIOs think their organizations are using just 30 to 40 apps. Individuals and teams have become the curators and purchasers of best-in-class, SaaS applications, which they mesh into operating systems that are tailored to their specific needs.
Teams within large organizations want flexibility and agility despite the added complexity. As a result the CIO office is shifting focus from procurement to assuring security, compliance, and interoperability across enterprise systems. A number of other sources suggest that 48% of enterprises reported nearly all of their applications were SaaS in 2018. However, 86% of enterprises expect to have largely shifted to SaaS apps by 2021.”
So, let’s explore the major differences between a top down versus a bottom up SaaS go-to-market model.
Benefits of top down:
Obviously, if given the choice anyone would prefer bigger deals and larger contracts. Negotiating these larger contracts allow companies to lock-out their competitors for longer periods of time. They also, many times, will come with additional training, maintenance and support contracts – making you super sticky and creating significant barriers to change. Because of this, companies using top-down can count on residual revenue for the duration of the contract and beyond.
Disadvantages of top down:
However, top-down does come with its drawbacks. Because of the nature of the bigger deals and larger contracts, sales can see big swings in revenue and it is a lot tougher to predict sales and revenue figures. Of course these larger contracts also translate into longer sales cycles which can include numerous stakeholders. Lastly, if decision makers end up purchasing a solution without complete stakeholder buy-in companies can run into user adoption issues. Nobody wants to buy a solution that users don’t like or use to the full extent of the software’s capabilities.
Benefits of bottom up:
Here is why the bottom up SaaS go-to-market model has been so attractive to SaaS leaders. First, the sales are aimed at users, so you don’t have to worry about push back and it is easier to get high usage and adoption metrics. Smaller sales and faster adoption allow companies to have more predictable and repeatable sales and revenue figures. Saving investment dollars on sales allows for those investments to be redirected at R&D. This allows companies to be more responsive and tailor the product to the users needs – making them even more sticky.
Disadvantages of bottom up:
Most of the disadvantages of bottom up revolve around the fact that is takes longer to get to profitability. Starting off with freemium or small contract amounts means you have to plod through months of lower revenue until you hit the tipping point at which time you break even and become profitable. With top down, you may only need a couple of big contracts to make a year profitable and hit your revenue goals. The other issue that many bottom up companies have is transitioning users from free to paid. This can take time to figure out and can slow growth in revenue.
Is Bottom-up right for you?
Here are four questions to consider when asking yourself if a bottom up SaaS go-to-market model is right for your company:
Can a prospective user easily try your product?
Are your decision makers in-line workers?
Can team and/or individuals get value from the product without needing full company-wide rollout?
Is the data you’re housing going to trigger any compliance issues?
Make sure a user can try your product with as little friction as possible:
Easy to get started
No involvement from IT or legal
Make sure they can see the benefits right away:
It has value to them Individually
Doesn’t need company wide adoption to see value
Once you’ve done these things, then you must ensure these early adopters have a great experience. This will lead them to share your solution with coworkers and management – helping you push adoption within the organization.
The bottom up SaaS go-to-market model is what we’re seeing work and believe that companies who fit many of the criteria outlined above should consider adopting it as a way to drive sustainable, repeatable growth.
Interested in having a conversation about how to get your SaaS company sustainable and repeatable growth? Contact us.