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You can't "just wing" SaaS sales.
Even if you have plenty of traditional sales experience.
Because, within a SaaS sales cycle, customer lifetime value (CLV) and potential churn rates are as important – if not more important – than closing a sale.
After all, SaaS isn't about selling to customers once. It's about making sure they purchase an ongoing subscription and stick around with your company for the long term.
This means that you, as the SaaS salesperson, need to:
- Find the right leads
- Make a connection
- Educate prospects about a complex product
- Show them how it resolves their issues via a demo or a trial
- Convince them to make an ongoing commitment
- Check in to make sure they're happy (and potentially upsell and cross-sell)
But don't get discouraged – all you need to succeed (apart from a can-do attitude) is a better understanding of the SaaS sales cycle.
And we're here to help.
So keep scrolling, and we'll equip you with the knowledge you need to become the Michael Scott Dwight Schrute of SaaS sales!
What Is a SaaS Sales Cycle?
A SaaS sales cycle is the visual representation of the stages that, as a whole, form the entire process of selling web-based software. In essence, this framework shows you all the different steps a person – in B2C sales – or a company – in B2B sales – takes on their journey from a lead to a loyal customer.
SaaS sales cycles are framed from the perspective of the sales agent (what the salesperson needs to do), and they help you better understand and track your prospects' buying process.
This methodological approach enables you to map your actions back to what your customers need at a specific moment in time, leading to an optimized sales process and a high-performing outreach strategy.
But how is a Saas sales cycle different from a traditional sales cycle?
We alluded to it in the introduction, but here's our complete answer:
- You're selling Software-as-a-Service – an intangible, complex web-based application
- It's a long and winding process with many touch points, in which you're as much an educator as a salesperson
- You need to personalize the solution to your client's needs, i.e., an insurance salesperson will have different CRM needs compared to a construction company
- You're gunning for a long-term commitment from the client
- Upselling and cross-selling are just as important as winning new customers
This is what the typical SaaS cycle looks like (and notice how the last stage is "nurture" and not "close"):
Let's explain these seven stages in a quick table:
The SaaS Sales Cycle Stages
SaaS sales cycle stage
Engage in lead generation activities (i.e., research or content marketing) to create a database of contacts potentially interested in your solution
Reach out to your leads
Pro tip: use a lead information system to prioritize those with the highest lead score
Evaluate if your leads are a good fit – ensuring you don't waste time and resources
Present your solution
Show your qualified prospect the value of your SaaS app
Pro tip: make sure to personalize your demos and presentations
Use your sales skills and your company's playbook to confidently answer your prospect's questions and move closer to a sale
Close the deal
Nurture your prospect until they're ready to sign a contract and get started with your web-based software
Nurture new customers
Don't stop after you've dotted the i's and crossed the t's on the contract – check in with your new customers and make sure they're getting the most out of your solution
Pro tip: identify potential upselling and cross-selling opportunities
Quick digression – if you're looking for actionable tips on how to excel at each stage, bookmark this blog post and return to it after you've finished this post.
Now back to our discussion of SaaS sales cycles:
The 3 SaaS Sales Cycle Models
You have a choice between three major SaaS sales cycle models:
And there's no "right one." It all depends on the nature of your SaaS solution.
Let's briefly check them out.
1. Self-service sales model
This product-led approach relies on marketing efforts to drive traffic to your sales pipeline.
Or in other words, you won't be proactively selling.
Many B2C SaaS brands (like Spotify) use a freemium model to attract customers. They rely on users signing up and upgrading by themselves via an online onboarding process.
This model is ideal for simple, lower-priced, high-volume SaaS apps that can leverage a fully automated funnel.
2. Transactional sales model
Most B2B SaaS companies follow this sales-led approach (even us!).
This model uses a mixture of sales reps and content marketing to nurture leads as they progress through the sales cycle.
Human interaction is required because customers gradually become less willing to purchase through an automated funnel as prices increase.
They want to experience your company before deciding to sign up – and you need to demonstrate that:
- You care about customers
- You're willing to offer personalized service
- You're committed to a long-term relationship
3. Enterprise sales model
This last model is generally reserved for high-ticket, specialized software aimed at enterprises (hence, the name).
Think Oracle and Microsoft.
All the sales techniques you follow need to focus on breaking through the various levels of bureaucracy and reaching the final decision makers.
This means this model comes with long sales cycles and many stakeholders.
Your sales reps and their extensive product knowledge are crucial to success.
Alright, so now you know what a SaaS cycle is and the three major models, we can:
- Tackle one of the most commonly asked questions we hear from salespeople new to the world of Software-as-a-Service
- Show you how to improve your SaaS sales cycle
Onwards and upwards.
How Long Is a SaaS Sales Cycle?
According to research by Hubspot, the average SaaS software sales cycle is 84 days long. However, the average length changes if we take annual contract value (ACV) into account, becoming 40 days long if the ACV is less than $5K (or $416 a month) or 170 days long if the ACV is more than $100K (or $8333 a month).
Quite a difference, right?
And price is only one of the five factors influencing the length of a software sales life cycle…
This means the more honest answer is, "SaaS sales cycles usually last for multiple months, but it's different for every company."
To help you determine your sales cycle's ideal length, we'll break down the five influencing factors to consider.
Factors that affect the length of a SaaS sales cycle
This one is a bit of a "no duh" factor.
It's evident that the higher the price point, the longer your SaaS sales cycle will be.
Expensive solutions take up a significant portion of your client's budget and typically involve multiple decision-makers.
Type of customer
Your target customer persona also influences your sales cycle:
- If you target consumers, your sales cycle will be simpler and shorter as decisions are usually made quickly by a single person
- If you target small businesses, your cycle will be slightly longer; however, you'll still only be dealing with a small number of stakeholders
- If your target medium-to-large enterprise, expect a long sales cycle with structured purchasing processes and many stakeholders
Product or deal complexity
Another obvious one:
If you're selling a complex SaaS application, you'll need to spend more time educating and guiding your prospects before they feel comfortable enough to sign a contract.
Many SaaS companies offer a free trial to convince prospects to become paying customers.
While this is an excellent idea for showcasing your product's many benefits, you'll need to factor the trial period's length into your sales cycle.
So, for example, you'll have a longer cycle if your free trial lasts 14 days rather than 7.
P.S. Don't shorten your trial period just because you want a shorter sales cycle – use a data-driven approach to determine the shortest free trial that still delivers on your KPIs.
Experience in the market
If you decide to enter a new market, you should expect a longer sales cycle (at least until enough industry players get to know your company and your software).
But enough about how long software sales cycles are. You get it; they're long and complex.
So instead, let's dive into the actionable tips and show you…
9 Tips For Improving Your Own Software Sales Cycle
First, a quick TL;DR overview of the nine tips:
- Choose a SaaS sales model
- Identify your target audience
- Create a value proposition
- Enable your team with the right tech tools
- Determine qualification criteria for your prospects
- Build a sales playbook for your team
- Set activity and revenue goals for your sales reps
- Create a robust customer success program
- Keep track of sales performance using KPIs
And now the details:
1. Choose a SaaS sales model
Before doing anything else, you need to be clear on which of the three sales cycle models you want to implement.
Pick the wrong one, and your entire sales cycle will be out of tune with your product.
So, if you're still unsure, head back to the SaaS Sales Cycle Models section and find the one that fits your company best.
2. Identify your target audience
You can't sell and nurture your prospects through a sales cycle if you don't have an ideal customer profile.
You need to know:
- Who your target audience is (demographics, psychographics, behavior, location, firmographics)
- What their goals and challenges (a.k.a. pain points) are
- How your SaaS application can solve their problems
Here's a great example to follow when you build your own:
3. Create a value proposition
Once you know who you're targeting and what they're looking for, you should develop a value proposition perfectly aligned with your target audience's needs.
Remember to focus on the benefits your SaaS solution delivers rather than the fancy features or technical details that sound cool (to you).
At this point, you'll also need to decide on two important factors:
- Will you offer free trials? If yes:
- How long will it be?
- What features will you showcase?
- How will you integrate it into your sales cycle, and how often will your sales team check in with users during the trial?
- Will you offer monthly or annual contracts (or both)?
4. Enable your team with the right tech tools
To shorten your sales cycle and make sure no leads fall through the cracks, you need to equip your team with the right sales tools, including:
- A sales CRM
- A communication platform
- Automation software
- Lead generation tools
- Lead scoring software
- A sales playbook app
- Documents/e-signatures programs
Psst – Ringy is an all-in-one sales CRM with built-in communication and automation features, so you can simplify your tech stack and save on subscription fees.
Just saying 😃
5. Determine qualification criteria for your prospects
Your inbound marketing and outbound prospecting efforts will bring in a lot of leads (if you’re doing lead gen right).
And you won't be able to contact them all without hiring a sales team that looks like this:
You'll need to prioritize your leads to nurture the right ones, and that's why we recommended lead scoring tools in the previous point.
However, sales cycle software won't do you much good if you don't have a solid set of qualification criteria that help the AI decide whether a lead is a good fit or a waste of time.
You can rely on one of three frameworks to qualify leads:
- BANT (Budget, Authority, Need, Time)
- GPCT & BA (Goals, Plans, Challenges, Timeline & Budget, Authority)
- MEDDPICC (Metrics, Economic Buyer, Decision Criteria, Decision Process, Paper Process, Implications of Pain, Champion, and Competition)
6. Build a sales playbook for your team
SaaS is hard. We've already determined that.
So don't abandon your reps to their fate and place your company's future in their hands alone.
Instead, support them by building a sales playbook and integrating it with your CRM and sales automation software.
This will help your sales team:
- Present a unified experience
- Collect better information about prospects
- Rely on collective experience to overcome objections
- Improve your follow-up practices
- Shorten your sales cycle
7. Set activity and revenue goals for your sales reps
There's nothing like good old-fashioned motivation to get your team selling and nurturing.
And by good old-fashioned motivation, we're referring to SMART sales goals.
You can break them down into:
8. Create a robust customer success program
SaaS isn't about making one-off sales – the initial sale is only the first handshake.
You need to keep your customers happy long-term because if not, they'll churn and take their business to another SaaS company that cares about customer success.
So what do you need to do?
Build customer success into your sales approach so that you:
- Can help during the later stages of the sales cycle journey (for example, during the free trial to convince the user to press "go" on a paid plan)
- Are around for new customers when they need it most (in the form of business support, knowledge base, FAQs, or even just a friendly call)
- Take a proactive approach to solve new customer issues, rather than waiting for an angry customer to churn silently
9. Keep track of sales performance using KPIs
You can't succeed in sales if you don't track your performance and commit to improving your results.
And in a SaaS company, these are the KPIs you should be watching like a hawk:
- Monthly recurring revenue (MRR) and annual recurring revenue (ARR)
- Customer acquisition cost (CAC)
- Net revenue retention rate (NRR)
- Churn rate
- Net promoter score
- Customer lifetime value (LTV)
- Sales qualified leads
- Deal velocity
- Sales cycle length
- Win rate
For more details about these metrics, we suggest you check out this article by Cloudzero.
Master the Art of the SaaS Sales Cycle
In SaaS sales, practice makes perfect.
So don't just leave our nine tips as words on a webpage – put them into action by reviewing your current sales cycle and determining where you can improve!
And, if along the way, you decide you need better sales tools to help you achieve your goals, don't hesitate to reach out and request a demo of Ringy.
We'll be more than happy to show you how an all-in-one sales CRM can help your SaaS business have better conversations with your prospects and customers at every stage of the SaaS sales cycle.