In an increasingly competitive SaaS market, many companies are finding it more and more critical to move upmarket and increase Average Revenue Per Account (ARPA).
We recently discussed going upmarket as a remedy for SaaS growth stalls in our post Has Your SaaS Hit A Growth Ceiling? 12 Ways To Reignite Growth. In addition to reigniting growth and increasing ARPA, moving upmarket to sell to enterprise customers:
- Increases market size. If your SaaS is experiencing a saturated marketplace, adding in enterprise customers expands your market.
- Reduces churn. Based on his own observations, Tomasz Tunguz has found enterprise customers have the lowest rate of churn among SaaS customer segments. Various studies have shown smaller businesses go out of business at a higher rate and are more likely to switch vendors than than enterprise companies, leading to higher churn rates.
Pivoting to selling to enterprise customers isn’t necessarily an easy task. With that in mind, we asked leaders of SaaS companies who have already successfully moved upmarket:
What is your #1 piece of advice for SaaS companies looking to move upmarket?
As their answers rolled in, some common themes emerged:
- Validate first. Don’t decide you need to move upmarket before you validate if there is actually real market potential by utilizing feedback from current customers.
- Start small. Start by trying to sell to large customers as a small experiment. The learnings can help you determine if committing substantial resources to moving upmarket are worth it, before you make the commit.
- Ready your company. Moving upmarket means changes to your internal organization such as retraining sales staff, scaling your infrastructure, changing marketing to speak to a more sophisticated audience, etc. In short, up your game.
Here’s what the SaaS experts had to say about moving upmarket to target enterprise customers…
As with any new market, it’s about knowing your customer. When you first built your product, I’m sure you spent a lot of time getting to know your customers. When you’re deciding to move up market, it’s important to do the same thing. This time around, though, it’s a little more complex because your customer isn’t a single person.
Selling to the enterprise means you’re selling to a whole team of people with distinct interests: end users, financial buyers, technical buyers, legal departments, and so on. If you’re going to build the right product and staff your sales team, you need to understand your customer at each level.
How do you do that? Try selling to enterprise customers yourself (or at least become involved) —accept failure if it happens—then keep trying. Being involved in the sales process will help inform the product you need to build and that your customers will love.
Head of Business
Focus on your customers. They’re your best advocates, the foundation for your future growth and scale. The reality is that the most cost-efficient way to run a subscription SaaS business today, while building a sustainable, growing, and thriving company tomorrow, is ensuring that your current customers are happy and successful at every step of their journey. Always be looking for meaningful and scalable ways to improve their success and experience.
Interview your five largest customers to find out why they chose you, what they value most about your solution, and what their biggest pain points with your product are. Validate there’s real market potential before you commit to move upmarket. Founders often underestimate how fundamentally they need to change their business in order to sell to the enterprise. They think it’s just a little adjustment in their sales and marketing strategy, but to really make the shift, the entire team needs to focus on serving enterprise customers.
If you think you’re ready to move upmarket, be sure to consider how larger contracts will affect your entire organization. Young companies often try to move upmarket too early because they’re excited about “winning” larger contracts.
In practice, closing a large contract is the easy part—“earning” the long-term partnership of large customers is much more difficult and requires a commitment from every stakeholder in the company. For example, product needs to deliver more robust administrative functionality, marketing is challenged to up their game with a more sophisticated voice, and every leader is required to learn how to partner with buyers who are often venturing into SaaS for the first time. Additionally, support is more expensive to maintain, professional services can become a necessity, and infrastructure scale must be considered.
The fruits of moving upmarket can be tremendous, but ensure you aren’t sacrificing what made your company great on your path to a large ACV (annual contract value).
Senior Content Analyst
The best thing that SaaS vendors can do to move upmarket is provide multi-tiered pricing plans for teams of several sizes. This plan has three key benefits. It:
- Allows you to serve several types of customers, from teams of 1-10 up to several hundred people;
- Keeps your product from getting too overwhelming for small teams or too lightweight for large teams;
- Fosters loyalty to your product. Users can upgrade their plans as their teams scale rather than migrating their data to different tools.
When enterprise customers see that a software tool offers several pricing plans – including an enterprise plan built for them and their peers – they’re more likely to trust that this plan will provide features and client services that address their unique business needs. And enterprise customers are willing to spend more if they believe they’ll get exclusive value.
Director of Sales
Treat moving upmarket as an experiment. Try it knowing you’ll fail before investing marketing and engineering resources. The points of failure should inform the expected resource need. Once you know where you’ll need to invest, you can more confidently make a call on if moving up marketing is viable.
Chief Customer Officer
Start segmenting and examining your customer and prospect feedback by company size. How happy are your larger customers? What are they telling you about your ability to meet their needs from a product and service perspective? What about your solution hasn’t worked for larger prospects?
Review your NPS from this lens as well. Your Net Promoter Score may be a 57 overall, but if that is skewed by lots of happy free or smaller sized customers you aren’t getting the information you need to assess your readiness to move upmarket.
It might sound counterintuitive, but SaaS companies who are serious about moving upmarket should partner with enterprise SaaS leaders first. Pick an established brand and research them. You’ll probably discover you can do something they already do better – or at least solve one of their many pain points. You’ll get access to their (much bigger) customer database, so you can get your name in front of their audience too. From there, start leveraging your new brand visibility (and enterprise partnership) to move closer and closer to the big leagues.
Founder & CEO
Over-invest in security and support. Large enterprises must rely on your product and service. You should be prepared and able to overdeliver on that expectation.
Expert Marketing Advisors
Take the opportunity to truly understand your customers. Talk to them, while you have the chance. Figure out what it was about you that, despite being a small startup, they decided to purchase your solution. Document those conversations and all early customer wins. Define common pains you solve and identify patterns of purchase…most importantly is adoption and expansion. Every day customers are billing at less than 100% is a day you cannot get back in your journey to maximize ARR but growing together is loyalty.
If you’re trying to move a SaaS application up market from SMB/mid-market, you have to think beyond just selling to the enterprise; you have to think about BUILDING for the enterprise. What does that mean? Build the features that enterprises need in order to 1) use your application at scale 2) minimize their risk (in order to protect their established business).
Having a clear understanding of the features that satisfy these needs (i.e. SSO, RBAC, audit logs, security, deployment options, reporting, etc.) can help you engage each enterprise customer early about their specific requirements.
Additionally, full comprehension of these features can signal the maturity of your company and application to the various stakeholders within the enterprise (security, IT, finance, compliance, etc.). We put together a detailed analysis of each of these features at www.enterpriseready.io
A huge “thank you!” to everyone who contributed to this post.
Now it’s your turn: what is your advice for SaaS companies wanting to move upmarket and target enterprise customers? Share your insights in the comments below.