The Sales Motion Napkin
A simple guide to define the sales motion for your product
Early on in a product’s evolution, the temptation is just to sell. Sell for any amount to whoever wants it. And to an extent this isn’t terrible if your main priority is to just learn about customers and get a sense of what they’re looking for. But it’s not super helpful if you are trying to create any sort of financial model or plan for what the business might look like and might need as it scales.
Understanding your sales motion, even in the very early days, will allow you to get a sense of what you’re going to need to do. Especially helpful if you’re thinking about:
Quantifying your ‘Funding Gap’
Building a revenue model for an investor deck
Sanity-checking whether the metrics make sense for what you’re planning
Fortunately, it’s not really hard to get our heads around this as there are some pretty established benchmarks that will probably apply to your business, too. Although in some ways it’s a bit chicken and egg: if you’re expecting a low Annual Contract Value then you can’t spend s on finding each new customer. On the other hand, if your product is designed for CEOs at FTSE 500 companies, you're not going to be able to afford to sell to them at a low price because your acquisition costs will be high.
Read on for a visual explanation.
Firstly, what do I mean by ‘Sales Motion’?
For me, the term Sales Motion refers to the entire process your business takes from identifying and marketing to your ideal customer, the process of selling to them (and everything that entails), onboarding them, supporting them as a customer and encouraging them to renew.
Your product could be sold very cheaply or for millions of dollars
Your product could be aimed at individuals or multinationals
Your product could be straightforward to use or could require loads of customization
But what’s more likely is that it’s somewhere in the middle. And that’s where it can sometimes become tricky to know how to work out your sales motion.
The SaaS Sales Motion Napkin
(with apologies to Christoph Janz)
I started to think about whether there was a simple way to present a set of benchmarks for what you can expect based on any assumptions you can currently glean from your product and its customers, even before you have generated any revenue. Then I thought of the brilliant SaaS Funding Napkin by Christoph Janz (an investor in the company I co-founded, ScreenCloud). If you haven’t seen it, I thoroughly recommend it. It gives founders an idea of what sort of funding they can expect and at what valuations based on some assumptions about how the business is performing and the milestones it has reached.
So I thought, I should just steal the format, so here is mine related specifically to Sales Motion.
How does the napkin work?
You may have an idea about some of the aspects of your product and its sales motion but possibly not all. If you need to pull together a three year plan for an investor deck (as an example), how do you create something that looks credible? By using my napkin!
Let’s say you believe your product is aimed at mid-sized companies. And you have worked out a price and you think that each of your customers is going to deliver an Average Annual Contract Value (ACV) of $5k. But that’s about as much as you know right now. If you look at the napkin you’ll see that $5k fits into the Mid-Sized tier nicely so that’s a tick. Congratulations. But then if you look down that column there are some other benchmarks that will help you with your planning.
For a start, don’t assume that you’re going to put out a Google Ad and get a sale there and then. There will be a lead time (or a sales cycle) that will probably be longer than a month or two. So when you are looking in your forecast and spending £10k on sales and marketing in March, you should assume that the results of that spend won’t see any impact on your revenue until May.
Similarly, down the road, you will likely need to be looking at hiring Sales Development Reps, running webinars, attending/exhibiting at conferences etc, even if you can do a lot of that yourself to begin with. None of this is cheap but you can start now researching those costs and building them into your plan.
However, if your ACV is $5k, and assuming you have the cash available, you can afford to spend $5k in acquiring each customer. The benchmark here is that you want no longer than a 12 month payback period. So if your Customer Acquisition Cost (CAC) is $5k to win $5k of ACV then you’re OK. (In fact, you probably need that ACV to be the net amount after your costs of sales is included - but let’s not split hairs, this is about benchmarking).
You can also see that you will need some people to spend time with the customers to make sure they are happy and getting value out of the service. All of this needs to be factored into the costs.
Bottom Up and Top Down
If you’re anything like us, you might begin by aiming at SMEs/SMBs and putting all the automated processes in place to keep your CAC down. It typically means a less complex technical offering where customers can self-serve and self-onboard.
But you might have the plan (like we did) to move upstream after a few years and start selling to bigger companies with more complex needs and with bigger budgets. Again you can use the napkin to assess the impact on your sales motion. Don’t do what we did and assume your CAC will remain more or less the same, or fail to model much longer sales cycles.
Similarly, if you already have a big team supporting your enterprise customers but you want to include new revenue opportunities from smaller customers, you can see that you will need to have automation and maybe things like live chat in place. Typically companies that start selling to enterprise plug any gaps with human beings. But if they move to a point where they have a tier of customers with an ACV of $100 then the economics don’t work any more. Have you got a plan in place to automate as much as possible and add customer service people where you might have had account managers? In the absence of being able to run demos, are you set up for customers to set themselves up on a free trial? Does the product even allow for people to self-onboard or will it need a radical rethink of the feature set you are going to offer?
Wherever you are, I hope this can be of some help.