What we can learn from Ants to improve SaaS conversion rates

SaaS onboarding is the beating heart of your business. In our era of freemium, trials and other piloting processes, ramping up prospects who signed up for your product can make or break your forecasts. Increasing free-to-paid conversion rates is therefore a daunting task. You may feel overwhelmed by the incredible amount of factors you can tamper with. The myriad of solutions out there while doing a great job at solving specific problems rarely help identify the main levers of improvement for SaaS conversion rates.
Today, we’ll discuss an approach to identifying these levers and how to execute against them.

Ant colony optimization

At this point you might be wondering what’s this business about Ant Colonies helping improve SaaS conversion rates.
In the real world, ants have developed a rather intriguing heuristic to optimize their path to food patches. They initially wander in random directions away from the colony, laying a pheromone trail on their path. As they find food and return, they increase the amount of pheromone on the path to the food. The other ants from the group are attracted to the strongest trail which will be the closest to a food source. As the pheromones evaporate, the shortest paths become increasingly more attractive until the optimal path is found.This optimization algorithm is called the ant colony algorithm. Its goal is to mimic this behavior with “simulated ants” walking around the graph representing the problem to solve.

At MadKudu, we’ve built such an algorithm and its goal is to mimic this behavior with “simulated ants” (trial users) walking around the graph (performing sequences of events) representing the problem to solve.

Identify milestone events

You’ve probably heard about Facebook’s famous “7 friends in 10 days“. The key drivers of conversion, or “key conversion activities” are user activities that are most associated with conversion. Identifying those key activities allows to focus your engagement efforts on things that truly move the dial. For example, you can write content that most effectively helps users get value from the product, and convert them.

At MadKudu, we use a standard decomposition of onboarding events into 3 groups. Using advanced analytics, we identify and distinguish between those 3 types of activities:

Activation Activities

These are activities that users absolutely need to do to convert, even though doing them does not indicate they will convert. In other words, they are required but not sufficient.
These activities are typically things like “setting up an account” or “finishing the onboarding steps” or “turning on a key integration”.

Engagement Activities

These are the core activities of your product. This is where users get recurring value from your product. Users who perform these activities often will convert. Those who don’t will most likely not.
The key is to find which activities truly matter and how many occurrences are necessary until the point of diminishing returns is reached.

Delight Activities

These are activities that are done by few users, your most advanced users. Users who don’t do those activities are not less likely to convert. But those who do are very likely to convert.
Make sure to identify what these activities are and promote them to advanced users when the time is right.

DIY

In order to map out your onboarding events, you can calculate for each event:
– the conversion rate of users who performed the event: P(X)
– the conversion rate of those who did not: P(¬X)

You can then determine the impact of performing the event (average conversion – P(X)) and the impact of not performing the event (average conversion – P(¬X)).

Finally you can graphically represent your onboarding events as such:

Anything on the left is a requirement to have a chance to convert. Anything at the top is strongly correlated to converting.

Or you can contact us ;-)

From analytics to results

There are many ways to make this actionable, here are just a few:

  • Create a behavioral onboarding drip (case study)
  • Close more delighted users by promoting your premium features
  • Close more delighted users by sending them winback campaigns after their trial (50% of SaaS conversions happen after the end of the trial)
  • Adapt your sales messaging to properly align with the user’s stage in the lifecycle and truly be helpful

If you’d like to dive deeper into your onboarding funnel or discuss implementing some of the tactics above, you can signup for MadKudu or reach out to us.

Photo: www.cusuitemusings.com/
Image: Multiobjective Optimization of an Operational Amplifier by the Ant Colony Optimisation Algorithm (http://article.sapub.org/)
Plot: MadKudu “Happy Path” Analysis Demo Sample

3 reasons why B2B SaaS companies should segment trial users

99% of the B2B SaaS companies I talk to don’t segment their free trial users.

This is a shame because we all know our trial users can be very different from one another.

For example, have you heard of accidental users? Those users signed up thinking your products was doing something else and leave soon after realizing their mistake (much more common than what you might think!).

Or what about tire-kickers? Yes, a surprisingly large number of people like to try products with no intention of buying ever (more about it in this great post from Matt Pope).

There are also self-service users. They are actively evaluating your product but don’t want to talk to a human being, especially a sales person.

The enterprise buyer is an interesting profile. She will likely buy an expensive plan and will appreciate to get help from an account executive.

 

“Sure thing… why should I care now?”

Fair question. Here is what happens when little is done to identify the different types of trials.

1. The overall conversion funnel has little meaning

A SaaS company we work with was worried because their trial-to-paid conversion rate had decreased 30%. Is this because of the new product feature they just released? Or maybe there is an issue with the email drip campaign? The explanation was simpler: A large number of tire-kickers coming from ProductHunt suddenly signed up. Their very low conversion rate crashed the overall conversion rate.

Looking at the trial-to-paid funnels by customer segment is the best way to understand how your product and sales activities affect conversions, regardless of variations in customer signups.

2. You are selling and building the wrong product features

Understanding how your product is used is essential to effectively sell and improve your product.

But looking at overall product usage metrics is misleading. The accidental users and tire-kickers usually make up a large chunk of your customers. Looking at overall usage metrics means that you may well be designing your sales and product strategy to fit your worst customer segments!

When looking at product usage, make sure to focus on your core user segment. The features they care about are the features to sell and improve.

3. You are spending your time and money on the wrong trial users

There are lots of ways in which a lack of segmentation hurts your sales and customer success efforts:

  • Tire-kickers take away precious time from sales and customer success. This time could be spent on selling and helping core users.
  • Customers with high potential value don’t get extra love. Many sales teams spend huge amounts of time on tiny customers while underserving larger customers.
  • Trying to get buyers to use your product and trying to get users to buy is a waste of everybody’s time. In B2B, the buyer is often not a heavy user. For example, a CTO will pull the credit card and pay for an app monitoring software, but he or she will use the software only occasionally. Educating the CTO on the nuances of the alert analysis feature doesn’t help anyone!
  • Sales trying to engage self-service users hurts conversions. Some users appreciate having an account representative help them evaluate a product while others want to do their evaluation on their own. Knowing who’s who is critical for both customers and sales teams.

 

How to get started?

One way, of course, is to use MadKudu (passionate, self-interested plug). Otherwise the key is to start simple. Talk to your best customers to get a qualitative feel of who they are, and look at your customer data to find out what similar characteristics are shared by your best customers. Then put together a simple heuristic to segment your customers and implement this logic in your CRM and analytics solution.

This effort will go a long way to increase your trial-to-paid conversion rates.

Now back to you. Do you have different segments for your trial users? If no, why not? If yes, what are those segments? Who is using them? Continue the conversation on twitter (@madkudu) or email us hello@madkudu.com!

Achieving personalization at scale in B2B sales

I was trying to write a title as pompous and with as many buzz words as possible and I do believe I’m close. Who knows we might even get featured on TechCrunch with these ramblings on how “big data” is enabling the ultimate phase of the B2B sales & marketing revolution…

Over the past few weeks at MadKudu, we’ve run a thorough retrospective on 2016 to flesh out what we’ve learnt, which hypotheses were validated, which were proven wrong.
The exciting learning is that we’re onto something big, something HUGE!
We’ve validated the fact that lead prioritization enablement was commonly sought. But more importantly we’ve realized that lead scoring solutions as they exist today are only duct-tape on a broken process. Since companies aren’t able to handle personalized onboarding at scale, they reduce the scale by focusing on a subset of leads to manually personalize the experience for. Welcome to the world of the inbound SDR. MadKudu is set to change this and bring us one step closer to completing the marketing & sales revolution by operationalizing personalization (channel, message…) at scale.
In essence the main actionable learning is that operationalization is 10x more valuable than enablement. It’s actually a completely different sport.

The Sales & Marketing Revolution

The term revolution is mainly used to describe an overthrow of an order in favor of a new one. But the root of the words tie back to the concept of going full circle. So when we talk about the sales & marketing revolution we mean we’re getting back to a previous state. While we’ll dedicate a specific post to this topic, a high-level history of marketing would go as such:
– Before the industrial revolution, people bought from local stores and suppliers. This was the era of one-to-one personalization of the product to the customer’s needs.
– The industrial revolution changed everything, the product was now king. Our newly discovered ability to mass produce meant we needed to find ways to ship these products. This started the era of the marketing mix’s 4P (product, price, promotion, placement) in marketing.
– In more recent days, the rise of the internet 2.0 marked the rise of the SDR. With online products being available for billions of people and marketing strategies still focusing on bringing in as many prospects as possible, there was a new need to qualify potential customers.
– The “big data” revolution. Data science has started powering personalization and relevance at scale in eCom marketing for a few years now. Amazon led the charge with its recommendation engine and many companies have since then applied data science to make the B2C sales experience more relevant (at AgilOne, we did a lot of this). The shift from the 4Ps towards the 5Cs is another illustration of this trend of putting back the customer at the center of marketing activities.

What “big data” brings to Sales

There is a common misconception that big data equates huge quantities of data and thus is more appropriate for marketing than sales and for B2C rather than B2B. But there are really 3 aspects to big data:
– massive data sets (high volume)
This is what companies like facebook, google deal with. We’re talking trillions of records of data to process. The main challenge here is scalability and is only seen in B2B2C or B2C companies.
– fast data (high velocity)
This is what real time analytics systems deal with. Recommender systems, trading algorithms are great examples of systems dealing with high velocity data.
– complex data sets (high variety)
Here’s the least sexy and known aspect of the lot. B2B companies generate big data with customer records coming from sales data, product usage, customer records, support tickets… While real-time analytics and scalability are challenges the hard nut to crack is the identity layer or combination of all the information in a comprehensible data set. Machine Learning algorithms will only ever be as good as the input they are fed.

Why is B2B Sales broken

The final aspect has been ankylosing the B2B space and has thus become a great source of innovation. Companies are spending billions of dollars to get their data together (getBirdly, Jitterbit), stitching it together (leanData, AgilOne). The hardest part though remains in rendering the data actionable. This is where Big data can help reach the holy grails of sales and marketing: “personalization to foster relevance, at scale”.
Lead scoring tools so far have been built with this in mind. They leverage the multitude of data points available to automate -to some extent- the qualification historically run by SDRs.

BANT Qualification process:
B => mainly firmographic data to determine if the account would have budget for your top tier pricing
A => mainly demographic to determine how close is this person to having a budget line item for your product
N => mainly firmographic to determine if the account likely to be a successful user of your product or at least have a need for it
T => mainly behavioral to determine if the account’s aggregated behavior is indicative of a strong likelihood to purchase your product in the near future.

And so this is where big data has been helping so far. Lead scoring solutions have been doing a great job at getting SDRs to focus on a small subset of leads that they can then write personal emails to through bulk email solutions like Yesware or Salesloft…

Where this approach falls short is that sending emails manually don’t make them personal, let alone relevant. We all receive tens of emails like this every day:
right_person_email

From cartography to self-driving cars

A couple weeks ago, Guillaume Cabane, VP Growth at Segment, made a striking analogy between cartography and B2B sales. Cartography is the representation of the overall landscape of your leads. It is used to determines the routes you need to follow to reach your destination. This is your initial ideal customer profile analysis. The GPS is an automated way of telling how to get to your destination. This is lead scoring as we know it today. The self-driving car is build upon a GPS and executes the commands reliably and automatically. This is the future of B2B sales, the idea of a “software SDR”.
In essence, the great opportunity to seize in 2017 lies in realizing the era of the GPS as a stand alone tool is over. We are now heading into a world of self-driving cars.
Not only are we convinced about this, the early tests we’ve been running so far are encouraging. Our software SDR has consistently outperformed by at least 66% regular SDRs on the amount of qualified demos booked. Not only were we generating more meeting, we also free-ed up time for the sales team so they could focus on what they do best: adding value to prospects whom we’ve engaged with them.

Here’s to 2017, year of the true sales automation!

Image credit : A future lost in time

How To Identify Your Ideal Customer Profile (Podcast)

Last week I had the pleasure of being invited to speak about B2B SaaS Sales on Livestorm’s podcast. In the interview I discussed how, at MadKudu, we led our research for our Ideal Customer, how we’ve kept on refining it and how it helped shape our business.

Here’s the full interview :

 

And here’s the transcript (a big thank you to Livestorm)

Hi Francis, first, could you tell us what is MadKudu and how you help other SaaS businesses improve their sales process and grow?

MadKudu is a predictive analytics solution. We help sales team prioritize leads. We focus solely on B2B SaaS companies, we work with companies like Segment, Mattermark and Pipedrive.

Those companies love us because they come to realize that in order to be successful their sales team need to be helpful and in order to be helpful they need context.

We provide that context on who’s talking to them and why they are talking to them. We provide all the customers data that is available on the behavioral side as well as third party data with systems like Clearbit.

We provide the triggers to sales team in order to reach out properly and maximize their efficiency.

From what I understand, you are one step ahead of traditional lead scoring where all sales interactions are based on specific lead scoring activity such as, for example, “has downloaded a PDF”.

If you think about it, lead scoring is more of a methodology to make sure that you have leads prioritized. The traditional way of doing this is: you pick certain events and certain criteria and assign point to them based on your preconception of how it is important to do one or the other.

Where predictive comes into play is figuring out what number points should be allocated to certain events, or to having certain behaviors.

The three founders of MadKudu have backgrounds in engineering and mathematics and we saw the huge opportunity to stop having preconceived ideas of what criteria were needed to consider a lead to be qualified.

We use historical data to find out what truly is important.

The predictive side is one way of doing lead scoring. It is more tailored to every business out there.

Right, but in order to get predictive, you need to have a certain amount of historical data, including “win moments” such as an upgrade, as well as “lose moments” such as churn events.

Not every company has enough data on the conversion side in order to run statistical models. So, either you have this amount of conversion events, that is top of the funnel events, or you can use “proxys”.

Basically, you can pick other events further down the funnel. Those users with less data can look at their activation rate. So, if you are a CRM it could be uploading your contacts. And this become your “win event” and you can base your model on that.

Then as you get more volume you can iterate on that “win event” and pick another criteria.

So, companies with a certain amount of data can use MadKudu but if, younger companies can also use your predictive analytics based on their activation rate, then does it mean that all companies can use MadKudu?

It’s a very relevant question to the topic today. Not every company is a good fit for MadKudu.

We define a very narrow customer profile to make sure we execute well and deliver maximum value to them.

First, if you have a low volume of data, our statistical model is maybe the way to go.

Maybe you should first make assumptions, test them and then refine your process. Up until you get to a certain point where the amount of leads requires a more complex statistical modeling.

That’s why our typical sweet spot customer have 5–30k new leads coming in every month. Which is a pretty high volume where statistical modeling starts shining.

What are the other parameters that you look at for your Ideal Customer Profile (ICP)? Do you have empirical data that helped you shape your ICP based for example on deal velocity?

Defining your ideal customer profile is the most important thing for an early stage startup. If you think about it, if you aggregate all you ideal customer profile you have your target market, that is the market you want to deliver your product for.

You have to define your product based on the market you are going for. And that’s a pretty big change lately.

200 years ago your local butcher knew exactly how you wanted your meat, a 1:1 personalized approach where the product would be defined by your needs.

Then came the industrial revolution where we became able to mass product, and it was all about how do I ship and distribute the product. That is all the marketing standards such as the 4p’s. It was all driven by “how do I ship this product”.

Today with all the data that is available, with the ability to create a product and distribute it at a very low price, we’re back at this initial stage of people wanting to build product for specific targets. It’s all about the customer. It puts back the ideal customer at the center of every single strategy.

So, you should start with early assumptions of who is your ideal customer that you want to solve a problem for. You want that to be narrow very early on.

If you take the BANT framework (Budget, Authority, Need and Timing), you want to focus on Budget and Need first. Those are the two parameters that will help you build a company.

Need is what will help you generate traffic to your website. If you have the right need you will be able to have a message that resonates and engage people. Once they are engaged you will be able to talk about budget.

When we were at Techstars, our managing director told us “call a hundred of these companies that you define as your ideal customer profile, don’t try to sell them anything, see if the need you are trying to solve is actually there”.

That started generating traffic, people got interested, then we were able to look at the data at how the message resonated with smaller categories than what we had defined with the ICP.

Then we closed our first clients and we refined our definition of the ICP more and more to the point where it was super precise.

We started aiming B2B SaaS that had raised an A round in the past 6 months, that had an Alexa rank lower than a 100 and integrations on their website such as Mixpanel, KISSmetrics or Segment.

So, when we reached out to them it was really relevant and often on point. We had a huge reply rate.

So everything started from those hundred calls, then you refined your ICP, until you reached this level of precision. What specific data points did you focus on?

At that time, we were focusing on improving our trial conversion rate and selling to B2B SaaS appeared to be extremely important. Also, you had to use a technology that we could connect (e.g Segment, Mixpanel, or KISSmetrics.).

Behavioral data and declarative data must be tied together. They bring different kind of information.

I recommend you watch the Ted talk from Hans Rosling called The best stats you’ve ever seen. The main point is that, in this world, all the data is available. The big issue is that we drive our decisions on preconceptions.

We have this customer, very similar to Clearbit, that monitors companies’ growth. They had a definition of their ICP being mostly VCs. The sales team was to trained to deal with those profiles, they knew the playbook to convert them.

What we found in the data is that they had a huge amount of conversion in the recruiting space. They did not understand it and the sales team was constantly rejecting those leads. We realized that those HR companies were interested in spotting companies that were not growing in order to find sources of engineers for their own clients.

There was a great use case and they had not trained the sales team to sell to those companies.

Then, this is where behavioral data come into play. You want to make sure people get a successful experience. Those are events you monitor through behavioral data. For this company, we were able to determine which persona were getting the most successful experience.

So, it’s really important to combine the demographic and the behavioral together.

And how do you integrate the sales feedback to complete that empirical approach and close the loop?

Usually, marketing teams have a budget, they find leads, qualify them, marked as MQLs and send them to the sales team. Then on the other side, on the sales standpoint, they have SALs (Sales Accepted Leads). They take the marketing leads, they see if they are qualified enough and they accept it or not.

So, it’s super important to have this interface between sales and marketing and for any MQL there should be only two options: either it’s accepted or it’s rejected.

Being able to monitor those rejected is where you are going to gather a great amount of feedback. Feedback that can actually correct historical patterns that could be misleading.

It’s also important to have regular meetings with the sales team and go over the list of those rejected leads and say why they were rejected. That’s where you can optimize your MQLs.

photo credit: Francis Brero

3 Things Demand Gen Teams Can Learn from Sales

Guest blog post from our friends at Clearbit

A demand generation manager must meld several operational roles (marketing, automation, analytics) into one core competency—increasing conversions, and ultimately, revenue. They’re the “growth hackers” of B2B marketing, working across disciplines to solve problems.

Just as growth hackers seek the viral loops that will skyrocket their growth, demand generation teams look for opportunities to automate and systematize the customer life cycle.

In practice, that’s meant that demand generation teams have been much more similar to marketing teams than sales teams. But from tools that automate formerly clunky processes to prospecting methods, there’s quite a bit that demand generation teams could take away from the techniques that sales teams are using to great effect today.

1. Prospect like Socrates

Asking questions is the most fundamental skill that salespeople need to be great. Steli Efti at Close.io has more than a half-dozen points he asks himself when talking to a new potential buyer — if he doesn’t know the answers, he figures it out by questioning the prospect:

  • How much value can I add to this person or organization?
  • How will the value I add be quantified?
  • How important will supporting this prospect be?
  • What are their overall wants and needs for my product?
  • What size is this deal and what is their budget?
  • How much additional usage will our product see as a result?

If you don’t know all of these angles on the deal you’re trying to close, then “there are all kinds of ways” that “quoting them a price too early can backfire,” according to Steli.

Extend this logic a bit further back in the customer life cycle. Imagine if your sales reps didn’t have to think through these kinds of questions at all.

Your job in demand generation is not limited to bringing in more traffic to your website. You have to make sure you make that traffic count. To do that, you want to have a clear sense of who exactly you’re generating this demand in.

There are many ways to understand your target customer base, but the old-fashioned way is still the best and most reliable. Pick up the phone, ask questions, listen, and learn. Don’t treat the Socratic method of prospecting as a one-off process that your sales reps have to do to ink deals. Understand your potential customers, their needs, and the amount of value you can bring their organization before the sales call, and the leads you take to your sales team will blow their minds.

2. Use Tools To Reach Peak Efficiency

Smart sales teams have fully embraced automation. Those doing it right are consistently reaping great prospects and warm leads while doing a fraction of the work they used to do.

Today, sales teams with developers are going all-in on Clearbit and MadKudu, who make a series of APIs designed to generate customized lists of leads, qualify them, score them, enrich them, and send them into CRMs.

However, if you don’t have development resources, the easiest way to get started is with Clearbit Connect, a Gmail extension that works like Rapportive used to. It lets you look up the contact information for virtually any employee at any company, segment by role, and see a large swath of company information at a glance.

Here’s an example of the kind of information you can get—name, address, company, role, title, site, social following, and more all from one request:

flowc

To use Connect, just install the Chrome extension and it’ll appear as an option inside your Gmail dashboard:

Demand generation isn’t just about bringing in more leads or helping your sales team succeed—it’s about improving results at all stages of the funnel and driving growth. And there’s no better way to do that than with data.

Find your best customers. Understand who they are, inside and out. Then clone them.

3. Automate & Customize

Cold emailing may seem like a foreign concept if your job is demand generation, but with a refreshed technique it can be a hugely powerful tool for testing new markets and validating hypotheses about who your customers are.

First, you need the target markets you’re trying to reach, the roles and titles of the people that can get value out of your product, and a list of emails.

With a tool like Customer.io, you can take that information and turn it into personalized emails built on liquid tags—little snippets of code that, like variables, let you input whatever information you want.

That means rather than force yourself to rewrite new emails all the time, trying desperately to make them sound fresh, you can create personalized, evergreen emails that actually work. Here’s an example of an email that Customer.io posted on their blog:

This automated-yet-customized approach to the welcome email is how top sales teams are heating up their cold leads and optimizing their pipelines. The power of this technique is even greater, however, when taken in the broader context of a demand generation team’s job.

You’re not just going to get good click-through rates—you’re going to bring in qualified leads who understand the value of what you’re offering.

Top, Middle, And Bottom Of Funnel

Demand generation teams are responsible for one of the B2B startup’s most important objectives—growing inbound awareness, conversions, revenue, and growth.

To reach peak performance, they need to look across all departments and disciplines for the latest and greatest methods. These are three that I think are super valuable—let me know what you think in the comments below. What demand generation processes do you use at your company? What processes do you wish you used?

Make the right “build versus buy” decision with 3 simple steps

A couple weeks ago I attended a Point Nine and Algolia happy hour in Dublin. The premise was on point with a recurring question we deal with on a daily basis when it comes to software: “Should you buy versus build internal solutions?”

Many at the event shared the story of an in-house solution turning into a big costly distraction for their team. The main culprit? The decision to build in house was taken lightly without the hypotheses behind this decision being written down and communicated.

 

I’d like to share here a simple framework I’ve used and that I’ve seen work in this form or another at some of the SaaS rising stars (Algolia, Intercom, Mention…).

This framework helps support data driven, thus dispassionate, decisions on the topic of building vs buying.

The high level structure is:

Step 1: Validate the business need
Step 2: Get a rough but realistic estimate of the cost for the “build” option
Step 3: Decide and review your hypotheses in a given timeframe.

Step 1: Validate the business need

Even Chris Doig in his analysis of the problem writes that everything starts with well-defined requirements. However, as most founders know only too well, every decision to even think about doing something starts with a hypothesis of much positive impact the company can get from a new set of functionality.

Make sure to always go through the exercise of determining how much value you will get from this feature/product you’re considering.

Let’s take the example of building a lead scoring mechanism to help the sales team know which leads they should de-prioritize. The assumption is that the sales team is wasting time on leads that are unlikely to purchase your product at a high-enough price point. Seems fair. But how much value can we expect from implementing such a solution? Keep it simple. Let’s assume you have 10 SDRs, each at a base salary of $50k. If 20% (1 out of 5) of the leads they are reaching out to are unqualified, you are essentially wasting ~$100k annually. And this is without considering the opportunity cost from not spending that time on higher value leads.

With this rough estimate in mind, let’s proceed with evaluating the cost.

Step 2: Get a rough but realistic Define basic requirements and compute an estimate of the cost for the “build” option

Whenever we consider building a solution internally, I like to approach it as I would if I were to write a RFI. This is a great forcing function to decompose the problem and identify the different required functionalities along with their impact on the expected value (aka their criticality). It’s always more than you initially thought, and the estimate for each item adds up quickly!

For example, using the example of the lead scoring, decomposing the problem could lead us to the following set of critical features:

– Build a programmatic way to fetch information about new leads from LinkedIn
– Define a heuristic to score leads based on the data obtained
– Build a scoring mechanism
– Build a pipeline to feed this score back into your CRM.

Once you have those you listed, get an estimate from the engineering team for building each feature. This will enable you to have an idea of the cost of the “build” option.

You can use a simple spreadsheet to estimate the annual cost of building and maintaining a solution based on your team’s size, current MRR…

Download this calculator here.

For an early young company (6 engineers, $100k MRR), the cost of such a solution over the course of a year would be about $80,000.

This may seem high and the truth and that we all have a hard time estimating opportunity cost, maintenance cost (we are typically twice that of initial development)…

In parallel, look around to see what SaaS solutions are available to solve your problem and how much they would cost. A lot of them offer free-trials and/or demos. I recommend going through at least a demo as you will be able to get some valuable information about others who have worked on solving the problem you’re addressing. On the pricing aspect, if no pricing is shown and the product requires a demo, you can be fairly certain the cost will be at least $999/month.

Step 3: Decide and review your hypotheses in a given timeframe

You are now armed with all the data points to take a data driven decision! If you’ve decided to build in house, set a “gate” with your team to revisit the hypotheses you’ve made. For example, decide with your team to have a quick check-in in 90 days to discuss the learnings from building the solution in house and decide whether or not to continue or re-evaluate.

 

Notes
I want to emphasize that no answer can be right without context. What is initially true might very well become wrong. Therefore we’ve built a lot of software to help us determine what are the critical components we would be looking for when shopping around. In these cases it was always essential to timebox the build phase and to constantly remind ourselves that the objective was to reduce uncertainty and unknowns.

Secondly, there is a hidden cost in buying that can come from the rigidity and inadequacy of the SaaS product you buy with your problem. This is why trials and POCs are so popular nowadays (which is why we offer one).

Lastly, the example picked seems like a no-brainer as the solution is for the “business” team. The level of rigour required to go through this exercise for tools used by dev teams is much greater. The main fallacy lying in the illusion that an internal tool will always be a better fit for all the company-specific requirements. This is not only a highly inaccurate; it also leads to ill-defined features. Going through step 1 can save hours of wasted time and headaches.

Segment for CMOs

SaaS marketers are not usually engaged in the day-to-day engineering work. I’m no exception.

A few days ago I asked Sam Levan, our CEO, “what exactly are we doing with Segment?” I had visited Segment’s landing page but didn’t really get the value – it reminded me of the “middleware” concept IT departments have been talking about for years. Sam I talked about Segment and I finally understand it.

Since other CMOs might have similar questions I decided to write up our conversation as an interview. Hope it helps you!

Me: Pretend I’m a CFO, CSO, CMO, or CEO and not involved in day-to-day product development. What value does Segment provide to our business?

Sam: Engineering is the scarcest resource we have. Segment makes our developers more efficient and allows us to deliver value faster. Saves us time and money.

Me: Ok. That’s simple enough. How?

Sam: Like every business we need a set of third-party tools like email marketing, sales, help desk, and analytics to name a few. Sending our data to each service individually takes a lot of time to setup and support. By sending our data to Segment we can re-distribute it to ANY of these services almost instantly.

Segment maps data between our database and these applications.

Me: Can you give me an example?

Sam: Sure. Suppose you want to test out a new tool like Mixpanel.

Without Segment you have to ask the engineering team to integrate with Mixpanel’s API. This starts with a scoping meeting … which leads to a priority discussion … which leads to acceptance testing … and updates when we change our product … or they change their API.

As the CEO I don’t want our developers to have to spend time on this type of work – we need to be improving our product and delivering value for customers, not messing around with APIs.

With Segment you just flip a switch and you can start testing Mixpanel. It usually isn’t quite that simple but much, much easier than the alternative.

Me: Ok, I get it. So what is the downside of using Segment?

Sam: Well obviously Segment isn’t free, so I guess if you only need 1 or 2 tools it may not be worthwhile.

But to be perfectly honest we would probably use Segment even if we only used 1 tool in their platform. All they do is APIs and data mapping and they do it better than anyone.

Me: I’ve used Zapier before to automate rules and share data between apps like Wufoo and MailChimp. How is this different from Segment?

Sam: We don’t use Zapier and I’m not as familiar with their product. But my understanding is that Zapier is more popular with small and non-tech businesses and makes it easy to map fields between products like email, forms, file-sharing, etc.

It seems to be more geared towards solving a specific data-sharing problem between specific applications. Using your example, sharing the data you have on Wufoo with your MailChimp account.

This is very different from exposing all of our internal business data to be shared across different applications.

Me: Ok. Switching gears a bit … MadKudu is also an Integration partner with Segment. What is the value for us of this partnership?

Sam: A no-brainer. Segment makes it easier for potential customers to try MadKudu and send us their data.

Me: I guess that seems obvious … but doesn’t this also mean that MadKudu’s customers could quickly switch to a competitor? Isn’t this how companies like Microsoft became dominant? By building proprietary interfaces and locking-in customers?

Sam: It doesn’t really work that way anymore. Every SaaS company like MadKudu needs to constantly re-sell its value every billing cycle – otherwise customers cancel. I don’t know a single SaaS founder who thinks she can lock-in customers.

Even if that were the case we also benefit from lower support costs by being on Segment since it reduces the costs of supporting our own API.

Me: Ok. Now just to add to the confusion … Segment is also a MadKudu customer?

Sam: That’s right. We use data science to help Segment’s sales team identify their most promising leads and turn them into customers.

Me: Good grief now I know why I find our status meetings so confusing. Let me see if I get this straight:

MadKudu is a Segment customer.
MadKudu is also a Segment Integration partner.
Segment is a MadKudu customer.

How the heck do you guys keep track of all of this?

Sam: (laughs) Yeah, it makes for some confusing conversations. Usually it is obvious from context.

Me: Ok, final topic. You were a data scientist for years before starting MadKudu and have consulted for hundreds of companies. Can you explain the value of Segment’s new data Warehouses solution?

Sam: Data warehouses have been around for decades but have struggled to live up to their promise. One major reason is that getting all business data into one place is a huge PITA.

Moving the data and building APIs is part of the problem – basically the same challenge we discussed earlier about building and maintaining multiple APIs. An additional challenge is understanding what each field means and mapping it to the same logical entity in another application.

This is why a lot of “data science” projects have traditionally struggled to get off the ground – it just takes too much effort to get everything setup and organized in the data warehouse.

Me: Ok, I’ve been a part of projects like this. I can recall months of meetings with analysts and business owners building data dictionaries, mapping fields. It basically sucked.

Sam: Exactly. This is the power and promise of Segment’s data Warehouse. It allows an analyst to quickly run cross-application SQL queries to get answers to critical business questions.

Of course you still have to know what the fields and data means – it just helps overcome a main impediment from getting these type of projects started.

Me: Thanks Sam, I think I get it. Suppose another SaaS company CXO is thinking about using Segment – how can he or she contact you?

Sam: Just email me at sam@madkudu.com. I’ll be happy to jump on a call.

Closing mid-market deals faster is the key to SaaS sales velocity

Guest post from MadKudu.

Overview: what is the most effective way to increase SaaS MRR?

Regular readers of SaaScribe know increasing monthly recurring revenue (MRR) is the #1 challenge faced by SaaS founders. But what is the fastest way? Get more leads? Close bigger deals? Convert more trial users? Close deals faster?

That’s the question we tried to answer in this study. We analyzed the sales velocity of 45,000 qualified leads for 9 representative SaaS companies. Based on these results, the most immediate way for SaaS companies to increase MRR is by closing mid-market deals (deers) faster. We finish with some advice for creating a high-velocity sales closing workflow that targets mid-market leads.

Rabbits, deers, and elephants – oh my!

A few weeks ago we were chatting in MadKudu HQ about the sales practices at a few of our SaaS customers – how they identified the best leads, when they contacted them, etc.

We noticed that most sales reps focus almost exclusively on closing “elephants” (largest deals) and invest little time in “deers” (medium-sized deals). Traditionally this is how software sales has worked: since a rep can only manage a finite number of leads most sales teams will focus the largest deals.

But there are 2 drawbacks to closing elephants.

  1. They take longer to close.
  2. There are fewer of them.

Our hypothesis was that closing mid-market (deers) deals faster was the most actionable way to accelerate SaaS sales.

Sales velocity is our reference

We needed a way to make an apples-to-apples comparison between deers and elephants based on deal size, deal volume, and time to close. We decided to use Sales velocity since the equation considers all 3 variables.

 

 

Sales velocity measures how fast your team is making money. If normal velocity is “miles per hour” you can think of sales velocity as “money per month”. Thomasz Tunguz provides a detailed explanation of sales velocity in this post, but here are the basics.

The sales velocity variables

# The number of leads a sales team can work over a period of time. Deers have a higher inventory of available leads than elephants.

$ The average deal size. We expect elephants deals to be bigger than deer deals.

% Conversion rate, the percentage of leads that convert to paying customers. The rate of conversion for elephants could be bigger or smaller than deers depending on the amount of qualification.

T The average time for conversion, usually measured in days. We expect elephants to convert slower than deers since larger deals require more negotiation and touch points.

Thus the larger $ for elephants comes at a cost of larger T, smaller and possibly smaller %.

Methodology: how we calculated sales velocity for deers and elephants

We started by picking a representative sample of 9 SaaS companies. We then needed to categorize them into cohorts based on deal size.

Using number of employees as a proxy for deal size

Unfortunately we don’t often have the data we need to test our hypotheses. In this study we had no way of categorizing a lead based on deal size, so we used Clearbit to give us a best estimate.

We starting by identifying each company’s “good” leads based on domain, presence in Clearbit’s database, and behavior.

We broke each company’s good leads into 10 cohorts based on Clearbit’s employee_count data – this served as a basis for identifying elephants and deers. We ignored small deals – rabbits.

For each cohort we calculated the average time to convert, number of leads and conversions.

Example data for 1 company

Screen Shot 2016-04-12 at 8.12.14 AM

Results: what we learned from 45,000 qualified SaaS leads

Here are the results for the 9 companies we studied.

Screen Shot 2016-04-12 at 8.19.49 AM

Result 1: Deers are only closing 10% faster than elephants

We divided deer T by elephant T to see which is faster.

Surprisingly, deers are only closing 10% faster than elephants.

Screen Shot 2016-04-12 at 8.25.58 AM

Result 2: The conversion rate of deers is 3x more than elephants

It isn’t obvious why deer % should be so much higher than elephant %. Since sales teams invest more time selecting and engaging elephants you could argue that elephant conversions should be higher.

But deers convert at a much higher rate on average. There is also a large variance among these 9 sample companies.

Deer conversion rates are also high on an absolute basis. 7 out of 9 we studied are converting > 8% of their deers. (if this seems like b.s. remember we filtered these for “good” leads based on their presence in Clearbit’s database).

Screen Shot 2016-04-12 at 8.29.32 AM

Result 4: Deer deals can be 10x smaller and achieve the same Sales Velocity

Given these results for #, %, and T we can calculate the deer deal sizes needed to hit the same sales velocity. If you assume an equal SV for deers and elephants you can solve for relative $.

I’ll spare you the algebra – results are below.

Screen Shot 2016-04-12 at 8.35.48 AM

Thus on average elephant deal sizes need to be 10x bigger than deer deal sizes to achieve the same sales velocity.

Of course I’m assuming all deer leads are # – even given our filtering assumptions this is a stretch since reps can only work so many leads.

Analysis: your practical options for quickly increasing sales velocity

So how can you increase sales velocity? Conventional wisdom says “it depends” because these variables are codependent.

In the long run this is certainly true – you can adjust pricing or increase qualified leads. But you have fewer options in the short run because your team is already optimizing most of these variables.

You’re reading this because you’re not looking for a long-term theoretical plan – you’re looking for fast actionable, wins. Let’s consider your options in the context of this data.

SVblue

Increase $? Not easily.

Most SaaS companies have already tested pricing and are reasonably close to optimizing conversions and pricing. Unless your product is new there are probably no quick wins from price increases.

Increase elephant %? No way.

Your sales team is already calling every elephant – again … and again … and again. If there was an easy way to close more deals they would be doing it.

Increase deer %? Unlikely.

Based on this data the deers already have a high conversion rate. Increasing it dramatically is probably unrealistic.

Marketing automation and product are already doing a pretty good job at getting deers converted. The qualified deers who don’t convert are already pursued by sales after the trial ends.

Increase #? Yeah…right.

How about increasing your qualified leads? Maybe waive a magic wand so more wonderful customers suddenly show up?

Every SaaS company we know is already working hard to prospect for more leads. Any increases won’t come easily (or cheaply).

Decrease elephant T? Nope.

Elephants take multiple touch points to activate. They have customized workflows and often require purchase orders. Your sales team is already trying to close them yesterday.

Decrease deer T? Yes!!

The only remaining option is to close deers faster.

The 9 companies we studied have roughly the same average time to close for deers and elephants. The only logical conclusion is that these companies are not trying to close deers faster.

This is the key insight from this data.

Insight: The fastest way to increase your SaaS revenue is to close deers faster

Deers should close faster than elephants. Fewer people in the decision loop. Fewer meetings. Less negotiation. Deers also pay with credit cards – not purchase orders.

But according to this analysis deers are closing about as fast as elephants – too slow.

Why? Because SaaS companies are relying on the free trial conversion to close deers

These results are consistent with results from our previous study because most SaaS companies rely on trial expiration as the primary buying incentive.

From this previous study you can see how most SaaS trial conversions occur around the end of the trial period – 30 days in the graph below:

Screen Shot 2016-02-12 at 5.48.12 PM

IOW, deers sign up for your product, self-serve and you don’t try to get them to pay until the trial is about to expire.

Action: how you can close deers faster and accelerate sales velocity

You may be tempted to use marketing automation or product workflow to close deers faster – in our experience your inside sales team will be much more effective.

Here are few tips based on what we have implemented with our customers.

Don’t chase the whole herd – qualify your deers

1691205018_90bd181004_b

Flooding your sales reps with a pile of mid-market leads won’t work – you’ll probably decrease your sales velocity. If your sales reps start converting less than 15% of their leads they will become frustrated and less effective.

You need to identify the most qualified deers, engage them the moment they are ready to buy and developer a higher-velocity closing process.

Some tips for qualifying leads:

  1. Leads that are in Clearbit’s database are a good initial filter. You can also disqualify any free email accounts (gmail, hotmail, qq, etc.).
  2. Segment deers and elephants with simple rules – for instance, start with employee_count or plan.

Start with 1 dedicated “Deer Hunter” sales rep

We suggest starting with 1 dedicated sales rep to close deers. Let’s call her the “Deer Hunter”.

Start small and begin tracking the sales velocity of the Deer Hunter.

Build a higher-velocity engagement workflow

The Deer Hunter can’t simply manage list of deer leads and systematically work through them – this takes too much time. Instead, work with marketing to develop a sales automation workflow that gets a deer to take the first engagement step.

For example, an email campaign that asks a deer to reply to a question or schedule a call based on qualifying demographics or behavior.

Create a 1-touch deer closing script

The Deer Hunter needs a script that gets a deer to convert on a single call. The script should include any conversion incentives (i.e. discount, free feature) and minimize product education. Sales should be credit card only.

Target deers who are ready to buy now

Your customers can take specific steps that indicate a high likelihood of buying – invite a friend, add 5 projects, etc.

We call these “Acceleration” or “Delight” events and showed you how to find them in our series on Behavior-based Conversions.

These events are highly correlated with conversions and indicate a customer who is ready to buy now.

In this example hired_accountant is Acceleration event:

graph

Notify the Deer Hunter when a deer is ready to buy

Deers who complete Acceleration events are ready to buy now – these are the ones you want your Deer Hunter to target.

Send your sales teams notifications through Slack, email, or Salesforce when deers complete Acceleration events.

Include information about the customer, actions completed, and anything else the sale rep needs for the deal-closing script. Here is an example of what we send to our customers:

About MadKudu

 

MadKudu helps B2B SaaS apps accelerate revenue by qualifying leads based on demographics and in-app behavior.

Sign up for a free trial of MadKudu now .

Photo credits: the_boglin

Close deers faster: your quickest win for increasing SaaS MRR

Summary: We analyzed the sales velocity of 45,000 qualified leads for 9 representative SaaS companies. Based on these results the most immediate way for SaaS companies to increase MRR is by closing mid-market deals faster. We advise setting up a separate, high-velocity sales closing workflow that targets mid-market leads who are ready to buy now.

A few weeks ago we were chatting in MadKudu HQ about the sales practices at a few of our customers – how they identified the best leads, when they contacted them, etc.

We noticed that most sales reps focus almost exclusively on closing “elephants” (largest deals) and invest little time in “deers” (medium-sized deals). Traditionally this is how software sales has worked: since a rep can only manage a finite number of leads most sales teams will focus the largest deals.

But there are 2 drawbacks to closing elephants.

  1. They take longer to close.
  2. There are fewer of them.

Our hypothesis: the most immediate opportunity to grow SaaS MRR is by closing mid-market (deers) deals faster

So … we quit there. It seemed easier to hold on to an opinion rather than actually look at the data.

Of course I jest. We decided to research the sales data of a sample of our customers to see if there was data to support our hypothesis.

Sales velocity is our reference

We needed a way to make an apples-to-apples comparison between deers and elephants based on deal size, deal volume, and time to close We decided to use Sales Velocity since the equation considers all 3 variables.

 

 

Sales velocity measures how fast your team is making money. If normal velocity is “miles per hour” you can think of sales velocity as “money per month”.

The sales velocity variables

# The number of leads a sales team can work over a period of time. Deers have a higher inventory of available leads than elephants (although acting on them places more pressure on qualification).

$ The average deal size. We expect elephants deals to be bigger than deer deals.

% Conversion rate, the percentage of leads that convert to paying customers. The rate of conversion for elephants could be bigger or smaller than deers depending on how much qualification is done for the lead pool.

T The average time to for conversion usually measured in days. We expect elephants to convert slower than deers since larger deals require more negotiation and touch points.

Thus the larger $ for elephants comes at a cost of larger T, smaller and possibly smaller %.

Methodology: how we calculated sales velocity for deers and elephants

We started by picking a representative sample of 9 SaaS companies. We then identified each company’s “good” leads based on domain, presence in Clearbit’s database, and behavior.

We broke each company’s “good” leads into 10 cohorts based on the employee count attribute in Clearbit. We decided to use employee_count as a basis for identifying elephants and deers. We ignored small deals – rabbits.

For each cohort we calculated the average time to convert, number of leads and conversions.

Example data for 1 company

Screen Shot 2016-04-12 at 8.12.14 AM

Results: what we learned from 45,000 qualified SaaS leads

Here are the results for the 9 companies we studied.

Screen Shot 2016-04-12 at 8.19.49 AM

Result 1: Deers are only closing 10% faster than elephants

We divided deers T by elephant T to see which is faster.

Surprisingly, deers are only closing 10% faster than elephants.

Screen Shot 2016-04-12 at 8.25.58 AM

Result 2: The conversion rate of deers is 3x more than elephants

It isn’t obvious why deer % should be so much higher than elephant %. Since sales teams invest more time selecting and engaging elephants you could argue that elephant conversions should be higher.

But deers convert at a much higher rate on average. There is also a large variance among these 9 sample companies.

Deer conversion rates are also high on an absolute basis. 7 out of 9 we studied are converting > 8% of their deers. (if this seems like b.s. remember we filtered these for “good” leads).

Screen Shot 2016-04-12 at 8.29.32 AM

Result 4: Deer deals can be 10x smaller and achieve the same Sales Velocity

Given these results for #, %, and T we can calculate the deer deal sizes needed to hit the same sales velocity. If you assume an equal SV for deers and elephants you can solve for relative $.

I’ll spare you the Algebra – results are below.

Screen Shot 2016-04-12 at 8.35.48 AM

Thus on average elephant deal sizes need to be 10x bigger than deer deal sizes to achieve the same sales velocity.

Of course I’m making an assumption that all deer leads are # – even given our filtering assumptions above this is probably a stretch since sales reps can only work so many leads.

Analysis: your practical options for quickly increasing sales velocity

So how can you increase sales velocity? Conventional wisdom says “it depends” because these variables are codependent.

In the long run this is certainly true – you can adjust pricing or increase qualified leads. But you have fewer options in the short run because your team is already optimizing most of these variables.

You’re reading this because you’re not looking for a long-term theoretical plan – you’re looking for fast actionable, wins. Let’s consider your options in the context of this data.

SVblue

Increase $? Not easily.

Most SaaS companies have already tested pricing and are reasonably close to optimizing conversions and pricing. Unless your product is new there are probably no quick wins from price increases.

Increase elephant %? No way.

Your sales team is already calling every elephant – again .. and again … and again. If there was an easy way to close more deals they would be doing it.

Increase deer %? Unlikely.

Based on this data the deers already have a high conversion rate. Increasing it dramatically is probably unrealistic.

Marketing automation and product are already doing a pretty good job at getting deers converted. The qualified deers who don’t convert are already pursued by sales after the trial ends.

Increase #? Yeah…right.

How about increasing your qualified leads? Maybe waive a magic wand so more wonderful customers suddenly show up?

Every SaaS company we know is already working hard to prospect for more leads. Any increases won’t come easily (or cheaply).

Decrease elephant T? Nope.

Elephants take multiple touch points to activate. They have customized workflows and often require purchase orders. Your sales team is already trying to close them yesterday.

Decrease deer T? Yes!!

The only remaining option is to close deers faster.

The 9 companies we studied have roughly the same average time to close for deers and elephants. The only logical conclusion is that these companies are not trying to close deers faster.

This is the key insight from this data.

Insight: The fastest way to increase your SaaS revenue is to close deers faster

Deers should close faster than elephants. Fewer people in the decision loop. Fewer meetings. Less negotiation. Deers also pay with credit cards – not purchase orders.

But according to this analysis deers are closing about as fast as elephants – too slow.

Why? Because SaaS companies are relying on the free trial conversion to close deers

These results are consistent with results from our previous study because most SaaS companies rely on trial expiration as the primary buying incentive.

From this previous study you can see how most SaaS trial conversions occur around the end of the trial period – 30 days in the graph below:

Screen Shot 2016-02-12 at 5.48.12 PM

IOW, deers sign up for your product, self-serve and you don’t try to get them to pay until the trial is about to expire.

Action: how you can close deers faster and accelerate sales velocity

You may be tempted to use marketing automation or product workflow to kill deers faster – in our experience your inside sales team will be much more effective.

Here are few tips based on what we have implemented with our customers.

Don’t chase the whole herd

1691205018_90bd181004_b

Flooding your sales reps with a pile of mid-market leads won’t work – you’ll probably decrease your sales velocity. If your sales reps start converting less than 15% of their leads they will become frustrated and less effective.

You need to identify the most qualified deers, engage them the moment they are ready to buy and developer a higher-velocity closing process.

Start with 1 dedicated “Deer Hunter” sales rep

We suggest starting with 1 dedicated sales rep to close deers. Let’s call her the “Deer Hunter”.

Start small and begin tracking the sales velocity of the Deer Hunter.

Build a higher-velocity engagement workflow

The Deer Hunter can’t simply manage list of deer leads and systematically work through them – this takes too much time. Instead, work with marketing to develop a sales automation workflow that gets a deer to take the first engagement step.

For example, an email campaign that asks a deer to reply to a question or schedule a call based on qualifying demographics or behavior.

Create a 1-touch deer closing script

The Deer Hunter needs a script that gets a deer to convert on a single call. The script should include any conversion incentives (i.e. discount, free feature) and minimize product education. Sales should be credit card only.

Target deers who are ready to buy now

Your customers can take specific steps that indicate a high likelihood of buying – invite a friend, add 5 projects, etc.

We call these “Acceleration” or “Delight” events and showed you how to find them in our series on Behavior-based Conversions.

These events are highly correlated with conversions and indicate a customer who is ready to buy now.

In this example hired_accountant is Acceleration event:

graph

Notify the Deer Hunter when a deer is ready to buy

Deers who complete Acceleration events are ready to buy now – these are the ones you want your Deer Hunter to target.

Send your sales teams notifications through Slack, email, or Salesforce when deers complete Acceleration events.

Include information about the customer, actions completed, and anything else the sale rep needs for the deal-closing script. Here is an example of what we send to our customers:

Let us help you close deer faster

I can’t help you hunt deers – I’m a vegetarian and wouldn’t shoot poor little Bambi.

But MadKudu can help you increase your sales velocity by identifying the most qualified deers and telling you when they are ready to buy.

Sign up for a free trial of MadKudu now – you have nothing to lose.

P.S. Could you have written this post?

If so you should contact us – we’re hiring.

 

Photo credits: the_boglin, Kansas Tourism

Why are your job descriptions so boring?

We’re not that picky about who we hire – we just need a qualified warm body to fill the chair.
— Said by no startup CEO … ever

Things are going great here at MadKudu. We hit our growth milestone and our recent pivot allowed us to sign up awesome customers like Segment, Contactually, and Codeship.

But … alas … there is little time for celebrating in a fast-growing startup because success just creates new problems. We now have the #1 challenge facing every startup with traction: hiring initial team members.

We decided to get serious about building our team and invest time attracting the right people. We created a “careers” page and and started writing job descriptions.

I’m tasked with hiring our first full-time marketer. Before writing the job description I did – what you do – read a few dozen open job recs for ideas.

I’ve got > 2901 competitors for the right candidate

Shocker! We’re not the only startup trying to fill a marketing role – actually there are open marketing positions at 2,901 other startups on Angel List alone.

My challenge is getting the attention of the most talented people – those who could compete for jobs at companies like Medium or Slack.

At first I found this prospect intimidating – that is, until I started reading the job descriptions.

Most startup job descriptions are horrible

Generic. Repetitive. Uninspiring. BOOOORING.

Most look like they were written by Dilbert & edited by Catbert.

Don’t believe me? Spend a few minutes browsing jobs on Angel List. Go ahead, I’ll wait.

See what I mean?

“need … excellent communications skills … a team player … “

If “hiring” is a startup CEO’s biggest challenge why do so many put no effort into writing job descriptions?

I attempted to do better

I stopped looking to job descriptions on Angel List for inspiration. Instead I imagined myself talking to an incredible person – someone who has lot of choices – and trying to help her decide if the job is for her.

After a few hours I finished Want to be our Head of Marketing? It could be a lot better but it was the best I could do in the time I had.

How to write a job description that attracts the candidates you want

Sell. The. Job.

The people you want to hire have options. They are probably not even looking for a job. You need to sell the opportunity to work at your amazing company.

Write TO your ideal candidate. Tell her about your company and why you need her help. Make the opportunity sound so compelling that a friend would forward the job description to her.

Suppose your company keeps growing and she does amazingly well. What would be her opportunities? Sell a prospect on your vision for her awesome future.

Skip the superfluous bs

Everyone thinks they are …

… good at communication,
… a team player,
… a self-starter,
… and on … and on.

So don’t include these words in your job description – they just fill up space and make you sound like everyone else. In the history of job searching nobody has ever read a job description and thought …

“hmmmmm… this job sounds good but they don’t mention teamwork … guess I’ll pass since I won’t get to improve my teamwork skills”

good communication skills? Well that’s not me – I’m boring and ramble a lot. Better not apply for this job.”

Say what the job ISN’T – and who will HATE it

One of the easiest ways to attract the right candidates is to say what a job ISN’T. Talk about the pros and cons of your company.

For instance, Silicon Valley is full of legendary companies that “started in a garage.” Sounds cool AFTER the company is successful – but what is it like actually working in a garage? No windows … or air conditioning … plenty of dead crickets … not exactly an inspiring workplace for most people.

Except WE’RE NOT most people – and we want to attract people who share our values. We’re currently working in a shack we affectionally call “le donjon”. (yes, that’s French for “dungeon”).

donjon - 1

It has a whiteboard, a few desks, and lots of coffee stains. In the center is a little bell we ring whenever we close a new deal. I fell in love with the donjon the first time I saw it.

The right candidate will feel the same way.

Give examples. Tell stories.

Why are you hiring? What problem are you trying to solve? Can you describe a recent problem you need the ideal candidate to solve? Can you give a real example?

The right candidate will see the problem and think “I can do that!”

Yes, this takes more time – up front

Hiring can feel like a big distraction when you’re trying to do “real” work. It is much quicker to cut-and-paste someone else’s job description and hope it works out.

Invest the time selling your opportunity to the right candidate – you’ll get better results and save money in the long run.

Want to work in our beloved donjon?

Sweet – you’re one of us. I hope you’ll check out our open positions and apply.

 

photo credit: star5112