Are You a Nice-to-Have?

The SaaS Startup Founder’s Guide Concepts, Strategies, and Tactics from SaaS Leaders Table of Contents Introduction 7 Chapter 7 67 Sales Distribution & Segmentation Strategies - By Mike Wolff Chapter 1 10 Chapter 8 74 Subscription Economics: How Customer Experience and Success: Recurring Revenue Changes Both Science and Art Everything - By Tien Tzuo - By Melinda Gonzalez Chapter 2 24 Chapter 9 88 Do the Time CRM and Content: Two Ingredients - By Jason Lemkin and Aaron Ross for Early Startup Success - By Greg Poirier Chapter 3 34 Chapter 10 93 The Climb: How to Get to $10 Filling the Funnel with Content Million Marketing - By Tien Tzuo - By Amanda Nelson Chapter 4 38 Chapter 11 101 Are You a Nice-to-Have? Tools of the Trade - By Jason Lemkin and Aaron Ross - By Greg Poi Chapter 5 43 Contributing Authors 108 Nailing Your Go-to-Market Positioning - By Judy Loehr Chapter 6 56 About Salesforce for 113 Grow Revenue Faster with Startups Messaging Alignment, Playbooks and Onboarding - By Elay Cohen

Chapter 4 Are You a Nice-to-Have? By Aaron Ross and Jason Lemkin The following is another abridged chapter from Jason Lemkin and Aaron Ross’ forthcoming book: From Impossible to Inevitable. As an early SaaS founder, you are likely obsessed with getting to product/market fit, so that you can get to your growth phase as quickly as possible. The first step answering the fundamental question: Is my service critical to the success of my customer, or is it just a nice-to-have? This builds upon an earlier concept that Jason and Aaron posit about focusing on “nailing a niche” along the way to a more universal offering. Salesforce employed this strategy by first “nailing” the sales force automation (SFA) category, before taking on the broader category of customer relationship management (CRM). Aaron boils it down to a simple formula to follow in nailing your niche — Target + Pain + Solution = Your Niche. Do you believe your intended buyers need what you’re offering? Or are you a nice-to-have? One clear sign that you’re a nice-to-have: Everyone you show it to says “cool!” but no one buys. Consumers don’t buy what they need, they buy what they want. How much do consumers spend on Porsches and ice cream compared to broccoli and psychotherapy? Businesses, however, don’t buy nice-to- haves. For example: website • Marketers want a beautiful website, but they need a that converts visitors into leads or buying customers. • CEOs want happy employees, but they need people to show up and do their jobs. • A VP of sales wants increased sales productivity, but she needs leads, accurate reporting tools, and training.

• Venture capitalists want to invest in honorable founders, but they need to generate above-average returns, which may or may not come from companies with that type of founder. It takes a lot of energy to buy and use something new, so if you’re a nice-to-have, it won’t stick. Nice-to-haves fall to the bottom of the to-do list. If the buyer doesn’t need your solution, they won’t be motivated to go through all the work to convince their people it’s a solid product, justify the budget spend, and then roll it out to the team at large. Here are some questions to consider to make sure you create a product that’s truly needed by your customers: • What problem is painful enough that a team of people will spend both their money and time to fix it? • If you are solving a need, how can you describe what you do differently, so prospects also see it that way? • What differentiates the customers who need you vs. the ones who don’t? • Where can you create the most financial value? • Where can you get permission to create case studies or get references? • How can you “sell money”? “Selling money” means proving to Make money by customers that your product will help them proving to customers make more money, spend less of it, reduce that your product the risk of losing it, or stay compliant will help them make (avoiding fines and legal risk). Your product more money, spend will fall into the need category if you can less of it, reduce the demonstrate how spending money with risk of losing it, or stay compliant. you will make them more money. If you say you’ll “increase revenue” or “decrease costs,” you sound just like everyone else. What’s equivalent to money in their minds? Leads, close rates, social activity, collections, employee engagement, or fulfillment. As much as we love and know engaged employees and fulfillment are vital, how do you prove to customers that you can help them make money? How can you make the case that you’re needed?

Chapter 4 Are You a Nice-to-Have? Example: What Acme Learned from Failing at Outbound Lead Generation A $15 million SaaS company, let’s call them Acme Corp., came to us and said, “We need to grow, we need more leads!” Acme had grown to that point by being a partner of Salesforce and getting referrals from them. These referrals closed at a high rate, quickly. Acme was growing, but wanted to grow faster to double its rate with paid lead generation. Referrals and organic growth weren’t enough. But Acme assumed that if it just got twice as many leads, it could grow twice as fast. Trouble Clue #1: The company had been trying different online and offline marketing campaigns for the past three years, with results ranging from abysmal to crummy. Trouble Clue #2: The company started an outbound prospecting program (with Aaron’s help) and totally failed. A total zero. It took four months (well, on top of the prior three years), but the key learning finally was it wasn’t ready to grow faster. This company hadn’t nailed down a niche. The signs were there before, but Acme didn’t want to accept it until it tried outbound marketing and hit a wall. Any kind of paid or nonorganic lead generation (like marketing or prospecting) can be a forcing function that makes you confront the reality of whether you’ve nailed a niche or not. If it doesn’t work, you need to rethink your target customer, and possibly your solution. Acme was in a noisy, commoditized market. All of Acme’s target prospects already had something “good enough.” Its targets’ pains weren’t ones Acme could credibly solve. To the prospects, anything Acme could offer beyond what they already had was just a nice-to-have, and not worth the pain of switching systems. However excited the Acme team was about its own stuff, prospects didn’t get it. They didn’t need Acme’s solution. Target + Pain + Solution Your niche isn’t just picking an industry vertical or target, though being picky about whom you’re targeting is a big part. It also sits at the intersection of the pain they have and your solution. Now, if you’re in the same situation, do you blame the prospects for not immediately buying into your idea or product, or do you admit you have some more work to do?

Chapter 4 Are You a Nice-to-Have? TARGET PAIN Are SOLUTION Or here? you here? Size Doesn’t Matter with Nice-to-Haves While this might seem like a startup problem, large companies struggle with finding their niche and making sure their need is valid, too. A top-five global software company hired us to help the salespeople of a particular division improve their prospecting. They weren’t doing much prospecting, they were spending too much time researching, and when they called or emailed people, they rarely got responses. The salespeople were as frustrated as the execs: “We want to prospect, but what we’re doing is just a waste of time.” Ideally, they should have created a specialized sales team of junior prospectors to do most of the outbound prospecting, but that was impractical. They needed to do something now. This team of salespeople sold to $1 billion-plus companies and up, like Bank of America, who often had multiple divisions. The company had a product list of at least 10 or 15 respected technology solutions it could pitch to pretty much any kind of executive: IT, sales, marketing, finance, HR — basically anyone. Their email, phone, and time management techniques weren’t the main problem. They suffered from selling too many things to too many targets, in other words, they bounced around too much. They’d target

Chapter 4 Are You a Nice-to-Have? the CEO of a bank on marketing, then a CTO for databases, HR for people management, and so on. It’s the same niche problem we’ve discussed, just in a different format. The point is, nailing down a niche isn’t just a problem for startups and small businesses. You don’t solve it once. It becomes a recurring problem as you expand your lead generation programs, geographies, teams, and product portfolio. Your CMO, division, or individual salespeople may need to keep re-nailing down your target customer. Whom you are Continue to ask yourself and your team: targeting that needs Whom are you targeting that needs (not (not wants) you? wants) you? Why should they buy your Why should they product? And why should they buy it at a buy? Why from you? premium? Ultimately, how do you make it And why now? about them, not all about you? It’s hard to resist dumping on buyers about all the great ways you can help them, but if you keep doing that, you’re more likely to confuse than excite them. Keep it simple, focus on your niche, and always make sure you’re a need, because nice-to-haves, simply put, won’t survive.