Dancing with Elephants: How to Master Enterprise Sales
Learnings from two enterprise SaaS successes with Bastian Nominacher, founder and CEO of Celonis, and Carsten Thoma, founder of Hybris and later President of SAP Hybris
Enterprise has not always been sexy. Especially over the last years, businesses selling to consumers or small companies often seemed to be the more attractive VC targets, promising hyper growth from day one. While 2020 and 2021 saw an unprecedented tech rally in public and private markets, the macro environment changed drastically in 2022. Skyrocketing inflation, interest rate hikes, and halting economic growth have created downward pressure on venture-backed companies, especially when being built on capital-intensive growth and business models that are unfit to scale. With capital becoming more costly and scarce, startups need to build on strong margin profiles instead. Enterprise SaaS is uniquely well-positioned to weather this storm. While taking longer to build, enterprise companies can be more resilient than companies selling to consumers or small businesses. They help companies navigate macro storms, such as inflationary pressures, decarbonization, or deglobalization. Crises thus often become adoption drivers for new enterprise software.
From a venture perspective, the prize to win can also be disproportionately higher in enterprise SaaS. Compared to a bottom-up sales motion, enterprise software companies can reach contract values that are orders of magnitude higher, substantially upsell within a customer through land-and-expand strategies, and benefit from the segment’s higher retention rates. Sapphire Ventures finds that, over the last 25 years, enterprise accounts for the majority of billion-dollar exits as well as total exits.
At the same time, selling to large companies is a challenging endeavor. Sales cycles are long, and enterprise purchasing processes are complex. While the venture ecosystem is (rightfully) singing praise for rapid growth and swift iterations, enterprise startups may face a lack of commercial data early on. Whereas companies in other market segments can use quick early sales and usage insights to make critical product decisions, frequently iterate on go-to-market strategy, and raise follow-on rounds quickly once product-market fit is found, enterprise startups may need to exercise more patience until oiling a repeatable go-to-market and product engine. With sales cycles often spanning several quarters, they cannot leverage the same velocity of early market validation.
To give founders actionable insights into tackling enterprise sales' complexity, we sat down with Bastian Nominacher (Founder and CEO of Celonis) and Carsten Thoma (Founder of Hybris and later President of SAP Hybris). With Hybris and Celonis, they have built two of Europe’s largest enterprise SaaS success stories, scaling their companies to several €100M’s in revenues while unlocking some of the world’s largest enterprise accounts. In short, they have perfected enterprise sales. Below, we have summarized their five key learnings:
#1 Customer research – Understand your prospects inside-out
Large organizations develop their own company culture, organizational structures, and decision-making mechanisms. They even have their own language to discuss business matters, which, if not spoken by the seller, may make a trusted sale more difficult. Thoroughly understanding the pre-conditions for selling to your prospects becomes a necessity to adapt your sales tactics:
Ongoing strategic initiatives: As you often sell to companies across many different industries, understanding what specific value your product can provide given your prospect’s context is essential. Fortunately, publicly listed enterprises publish extensive annual reports. You can leverage these reports to understand the key challenges affecting their sector and the C-level initiatives the company is currently driving. You can then translate these insights into a concrete value proposition to sell to your buyer. For example, if you find that a core focus of your target company is automating more administrative tasks, the value proposition you pitch should emphasize how your application can help achieve that goal.
Pricing anchor: To estimate the value you can capture, your customer’s spend on other software solutions can inform your assessment. ERP systems, for example, are natural pricing anchors in enterprise SaaS. Given the importance of ERP systems to a company’s operations, they are often the most expensive software product a company purchases. To price aggressively, yet also realistically, you can triangulate the willingness to pay for your product through the amount a company spends on its ERP solution and the value your product creates relative to an ERP system.
#2 Sales pitch – Tie your value to your buyer’s incentivization
A great approach to ace enterprise sales is consultative selling. It allows you to act like an advisor to your buyer, gaining a deeper understanding of their situation. Being strategic about their needs allows you to tailor your sales pitch along their incentive system:
Individual performance KPIs: Your buyer typically needs to deliver against specific goals set for their department. Your buyer’s function and position within the company will give you a strong indication of these goals. If you intend to sell to a C-level executive, the sales process will require a thorough understanding of the company’s strategic initiatives. While you should mirror the company’s key strategic initiatives in your sales pitch when selling to a C-level executive, you need to sharpen your value proposition to the more narrow optimization problem your buyer faces when selling to a specific department. While procurement, for example, is typically incentivized on savings, other departments might focus on different goals, such as product quality or service level. Where possible, adapt your general sales pitch to be specific about your product’s contribution to that goal and have appropriate product marketing and sales material at hand.
Risk-aversion: Famously, “no one ever got fired for choosing IBM”. In many enterprise SaaS categories, you will compete with established software vendors to at least some extent. The early-stage nature of your product and company may inhibit your conversion likelihood given your buyer’s natural incentive to rely on proven solutions that entail low risk for their company and, ultimately, their career. A great strategy to mitigate this problem is over-indexing on winning a flagship customer in your target industry. If, for instance, the telecommunications industry is one of your core target sectors, you could focus resources on winning a renowned customer such as Deutsche Telekom. Winning your first flagship customer will immediately give you credibility and decrease the perceived risk of adopting your product. Instead of fighting an uphill battle, you should aim at becoming the “IBM” within your targeted category early on.
#3 Buying persona – Don’t shy away from tough grounds
Large companies typically have multiple divisions, business functions, and decision-makers you could sell to. Being able to unlock budget pools wherever you find them allows selling early versions of your product to small sub-entities of large organizations when your product is not yet ready for wider distribution. Enterprise SaaS companies need to be conscious of two elements when thinking about their buyer persona:
Complexity of division: While some organizations are highly centralized, other companies operate more decentrally. The divisions of many large enterprises are so heterogeneous that some are notorious for being a difficult territory for implementing new technology, whereas others represent more worry-free customers. Somewhat counterintuitively, purposely starting with tougher divisions can be a secret to success. Companies know all too well which of their divisions are most difficult to succeed in. Successfully implementing your SaaS application in one of them allows your customer to build confidence in your solution and positions you well for rolling out in the rest of the organization. Similarly, challenging sectors can offer you a truly unique positioning. The public sector, for instance, is often avoided for being difficult and costly to enter. But once you have set foot, you can tap on large budgets while facing little competition.
Multi-stakeholder decision process: Given the complexity of large enterprises, there will likely be more than one persona involved in the sales process. Often several stakeholders with different needs and motivations will influence the decision to buy your product. You should tailor your product marketing and sales material (incl. objection handling) to each stakeholder, often using different documents along the process. The IT department, for instance, is one of the most critical stakeholders to convince. In the earliest stages of a company, “staying small and avoiding IT” can be a suitable strategy for new entrants. As you grow, however, this is no longer a viable path. With companies now using more than a hundred different SaaS applications on average (a 10x increase compared to 2016), aggravating cyber security risks, and growing redundancy concerns when using several SaaS applications for the same task, today’s enterprise IT departments are more powerful than ever. Carefully build trust with your customer’s IT department and address their key concerns. Just as for your sales pitch, you can develop a storyline to “sell” your product to the IT department, building visibility and confidence. Scaling Celonis and Hybris, Bastian and Carsten have observed that while most of the time, enterprise CIOs are not your buyer, they certainly can block the purchase process.
#4 Sales organization – Don’t rush it
Having the right people and the right organizational structure will accelerate your performance across all stages of the sales process. While much advice exists on building successful sales organizations in startups, the insights often don’t quite match the reality of enterprise SaaS:
Timing the hire of a VP Sales: A common piece of advice is hiring a VP Sales as early as possible to accelerate sales ramp-up. In enterprise SaaS, however, reaching repeatability in your sales process can be a good indicator for when to hire a senior sales leader. Early on, founders need to first create sales repeatability themselves. This involves showing that a founder can close well above the sales quota set for new Account Executives, as well as preparing extensive sales training material for new joiners (no matter their seniority level). Oftentimes, industry and client cues sit within the founders’ heads, but in the stressful day-to-day, these insights are not written down. Detailed objection handling guidelines are nowhere to be found. Hiring a VP Sales at this stage, who cannot be able to understand the market and product the way that founders do, will often lead to low accountability across AEs, or a new joiner bringing in their own sales philosophy when the sales process is not mature enough yet and requires more of an explorative and qualitative mindset. Once more material on the sales process exists, experienced VP Sales can be a great resource to further develop and professionalize sales learning resources, as well as scaling bigger teams of AEs and SDRs.
Involving solution engineers: In more complex industries, sales reps alone often won’t have sufficient subject-matter expertise to convince a potential buyer, especially if that buyer leverages highly specialized and technical stakeholders to challenge the value of a product. To complement your sales reps’ skill set, you may need deeper domain expertise – here, solution engineers can do the trick. Successful enterprise software vendors often send a 1:1 ratio of solution engineers and sales reps to prospects, combining sales skills and domain expertise. Once solution engineers become an integral part of the sales process, they should be incentivized accordingly. Offering variable compensation to solution engineers should become a philosophy in your company, with a variable component in the same dimension as your sales reps’ incentivization.
#5 Partnerships – Dance with the elephants
Enterprises already rely on technology and services from major software vendors in practically every business function. Partnering with established software providers allows you to leverage their distribution power and bring your product to their existing customer base. Managing the balancing act between the opportunities and dangers of partnerships with software giants is crucial for managing your partnership ecosystem:
Selecting for mutual benefit: Partnerships thrive when both partners are equally incentivized to invest resources into the partnership. Partnerships should not only look great on paper but deliver concrete sales outcomes. You will often find great, mutually beneficial partners in software companies that have a highly profitable core offering (e.g., an ERP solution) but lack the innovative power or ecosystem platform that would allow them to respond to changing customer needs. To avoid customer churn, these SaaS vendors may be eager to bring you into some of their largest accounts. While partnerships can help you scale rapidly, it is important to note that in our experience, partnerships rarely work ahead of the Series B stage. Before, your distribution engine is typically not ready for scaling through external partners, lacking the required product maturity and sales enablement material.
Creating strategic optionality: While you might start small and fully complementary to your partner’s core offering, your full product vision might entail overlapping value propositions. Having a clear understanding of your partners’ long-term strategic rationale will also let you create optionality. Partnerships between strategically unaligned, uneven software companies typically end in only two ways – an acquisition offer or your partner moving on. If your product proves successful in the market, your partner won’t find it appealing to let you come into a position of strength and capture most of the value created yourself. Celonis is a prime example of managing strategic optionality. In 2016, SAP entered a reseller agreement with Celonis, distributing the Celonis solution to existing SAP customers. Rumored to have tried acquiring Celonis, SAP moved on to acquire competitor Signavio, driving a wedge between the once-close partners. Celonis went on to become one of Europe’s most valuable software companies, reaching a $13B valuation in 2022. When entering partnerships with elephants, you should always optimize for control and follow a two-pronged approach, keeping a clear view of an M&A path as well as an independent path.
In the past, tough macro environments have been the seeding ground for the creation of large enterprise companies, such as Microsoft, Okta, Cloudera, and many more. Crises are a forcing function for companies to refocus on cost-efficiency. They are also an opportunity to set up the lean foundation for enterprise companies that truly scale later on.
Never waste a good crisis!
Written by Philipp Handel with input from Judith Dada (General Partner at La Famiglia), Bastian Nominacher (Founder and CEO of Celonis), and Carsten Thoma (Founder of Hybris and Key Advisor at La Famiglia). La Famiglia wishes to thank Basti and Carsten for sharing their deep enterprise knowledge with the next wave of founders.
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