When I started out trying to build a business online it was, as I’ve mentioned in the past, for my employer at the time. I was put in charge of running a SaaS business that we’d acquired and were trying to stabilise the product and platform as well as grow the customer base.
The business had a very traditional approach to selling – a lead would come in by happenstance or via someone’s personal networks. The team would reach out to the lead via the phone and the process of wooing the customer would commence.
In the few years of operation before we took over, the system had grown to having 15,000 monthly users, but the business model didn’t reflect usage. As the software was targeted at construction and engineer projects, the people pricing it tried to fit it into a fixed price construct that suited projects.
The big problem was that utilisation of resources was out of control. The system at this point in 2006-2007 was running projects worth nearly $25B across Australia. Multi-billion dollar projects were paying peanuts to use the system and they were running the entire document collaboration aspect of their project on our software.
Two things had to give: one, we needed to change the way we sold the software; and two, we needed to get our prices aligned with our costs.
As a business model, SaaS was really starting to take off back then and it was maturing quickly, but while we were at the vanguard of the technology industry our customers were very, very old school. They were largely hard dollar contractors who wanted fixed prices for everything so they could calculate their margins over the life of the project.
I sat down with my management team and we came up with a model that was based on a “no commit”, monthly per-user charge and a second model that gave unlimited usage (something many customers demanded) in exchange for a percentage of the total value of the project with fixed start and end dates.
When we took this to our salespeople they told us a million reasons why it wouldn’t work but offered no solutions. They explained that Project Directors didn’t “negotiate” with IT people and software companies, we were lucky to be used on their projects.
I realised that my salespeople were simply afraid to have to sell.
They didn’t want to go see clients and persuade them to use our product at a fair price for the value of the software. They wanted to go show off the tools and not have price come into the conversation at all. There’s a luxury that you can’t afford in the real world.
I’d gotten very tired of trying to convince salespeople to go sell stuff at a profit.
And that’s when it hit me, “profit”. Our sales staff’s remuneration was not tied to profitability as all, it was tied to a whole bunch of “feel good” KPIs like user number growth, new projects brought online and customer feedback surveys. Profit never came into the discussion. If an Account Manager brought in five new projects a quarter, 5000 new users and the customer said nice things about him, he got his bonus irrespective of whether or not the company actually made money on the deal.
It was insane.
The first thing I did was tie every member of the sales team’s salary plan back to a gross profit (GP) number. They would get paid when we were driving up our bottom line. Everybody got a GP number they had to achieve.
Next, I instituted a deal governance process so that every offer was reviewed to make sure we were protecting our margins. I explained to the sales staff that we were protecting their numbers from themselves.
Finally, I brought in some sales training specialists from overseas to retrain our staff on how to actually sell. I was convinced our people were afraid of selling and they had a flawed process. The sales trainers pretty much confirmed that for me.
About 65% of our sales team left within three weeks of those changes. I was happy about that, it was the law of the jungle, the weak were weeded out.
After about six months, our numbers started to explode – we grew 40% the first year and went from a company breaking even to one doing 35% GP across the board. Within three years we’d tripled our user numbers and went from $1.5m in revenue to north of $11m earning 40% GP. Our parent company did $20B/yr in revenue and our tiny little software business had the highest margins by a factor of two across their entire business portfolio.
We put in processes and discipline, but the most important thing we did…
We stopped being afraid to sell.
In the online world, the fear of selling is a pandemic. People are afraid to ask their customers for the sale. It’s insane – “don’t ask, don’t get” is a rule I live by when it comes to selling.
People make tons and tons of excuses. They’re afraid that people will think they’re pushy or that they’ll stop opening their emails. I’ve mentioned it before but I had one person tell me that they didn’t send their list emails because they were afraid people would opt out – that was easily the most extreme example I’ve heard.
Now some of that comes from “Imposter Syndrome” which is a thing that a few people online are starting to talk about, but I think that’s only part of it. I think more fundamentally the problem is that people are afraid of being told “no” because they feel that it partly validates all of the negative thoughts they have about what they are doing or not doing in their business.
You have to get past this if you want to have success. Accept that people will say no sometimes (probably more often than not), but you just have to keep making offers because some people will say “yes”. And take it one step further, when someone says “no”, ask them “why not” – don’t be pushy, but treat it like an opportunity to understand their objections so that you can work to overcome those issues for the next time you make someone an offer.
That’s one of the big secrets online – you have to keep refining your offer. Very few people talk about this simplistically, instead, they confuse it with lots of jargon and unnecessary complexity – you know what I mean, things like “Conversion Rate Optimization” or “Copywriting Hacks”. Put that complex stuff aside initially and just focus on understanding what people like about your offer when they buy it and what about your offer prevents them from buying when they say “no”.
Either way though, you need to lift your game and get more comfortable with selling. You can’t be afraid to tell your audience why it’s in their best interest to buy from you because if you’re afraid, you’re going to struggle and until you overcome that fear, everything will stagnate for you.