It’s hard for a young company to compete up market – enterprise deals are tough, long, and it takes a robust product to compete in that arena. It’s no surprise, then, that most startups don’t start off playing in the enterprise world. They begin selling small deals…and see what sort of traction they can muster.
This is the place Halifax’s Proposify found itself not too long ago. The company had been around for a few years and had subsisted off selling small, self-serve deals. And it was going relatively well: Proposify has grown a team, built a couple million in ARR, done some fundraising, and expanded its product.
Challenges, however, soon loomed over the company – their clients, primarily, small businesses, began to churn, while some went out of business, and others began kicking the tires of other service providers (small deal sizes are easy investments to walk away from, afterall).
Proposify had to make a change…they needed to find a new, more stable market. But despite that rather obvious need, Kyle Racki, their CEO, says he was initially hesitant to pull the trigger and move the company upmarket.
The prospect of a continuous flow of inbound, self-serve deals is enticing.
“I resisted the move. I used to run a web design agency, so I was used to long sales cycles. We were excited by automated self serve sales – we were excited to sell small plans and sell in volume,” says Racki, on a recent edition of The Predictable Revenue Podcast.
“But, after a while, we realized why SaaS companies move upmarket. Churn and small plans start to kill you when you get to a few million ARR. So, when we made the transition, it was a bit tougher than we thought. Pricing was the first big change – we had capped our pricing, and we needed to figure out a new pricing scheme.”
When moving up market, determining a new pricing framework is one of, if not the, most critical concerns. Pricing is a very strong symbol to prospects of where your company is situated in the market – if you’re cheap, enterprise prospects will think your product doesn’t offer the functionality they need, or you’ll leave money on the table. And if you only advertise your self-serve or mid-tier pricing options, then large companies will think you’re not even after their business.
Of course, the opposite is also true: if you price your product too high, people will look for more affordable options. And if you bill yourself as an enterprise tool, but you can actually serve the mid-tier market as well, you’ll lose out on potential deals.
Proposify tried a lot of different pricing, and different tiers, in its early days. For example, they used to limit their pricing by proposals – so, if a customer had 5 proposals on the go, they would pay $25. If they had more than that, it was $50 or $100, with $3,000 being their biggest plan.
Eventually, after much trial and error, Proposify brought on consultants Price Intelligently, to help them settle on an appropriate framework. And the result? Proposify started charging per seat (not per proposal), lowered their pricing on their small tiers, while, at the same time, establishing an enterprise plan.
“That enterprise tier is still a work in progress for us – we’re in the process of moving the Salesforce integration to the enterprise plan, for instance,” says Racki.
“And, of course, once you get into larger-seat deals, people want discounts, but they have so many users, you’ll take that discount.”
(Editor’s note: we had Patrick Campbell of Price Intelligently on the pod a while back to discuss the nuances of pricing your product. You can read about our chat here, or listen to while in-depth interview here)
Naturally, sales gets a lot of attention when discussing a move up-market. That isn’t wrong, of course, but the evolution of your product is key piece of this transition as well.
For example, appealing to an enterprise market often means ensuring your product has better workflows, better security, and better integrations. According to Racki, these are key elements that are needed to support larger companies.
But don’t confuse evolving your product with building every feature under the sun. Making your product serve the needs of the enterprise client, according to Racki, often means going deep, not wide.
You don’t need to do everything – you just need to do what you do well.
It’s not just about features – it’s permissions, security, workflow that has to be built for enterprise,” says Racki.
“It’s fairly easy to build features and end up with a product that doesn’t do anything well.”
Re-training the sales team
Once you have your pricing structure in place and align your product strategy with the market you want to tap into, it’s time to re-train your sales team and develop new sales strategies. Remember: you are venturing into new territory, the processes and focuses that have defined your sales team’s activities likely won’t support your new direction.
For example, if you’re a new and growing company, you may not have established the brand reputation that enterprise customers often look for. To combat that lack of visibility, Racki says Proposify designed a proactive “land and expand” sales strategy that aimed to start with a small number of seats and then expand over time.
“It is difficult to sell big deals those when your brand isn’t established – for us, land and expand has been much stronger,” says Racki.
“So, we would aim to get 20 seats, even though we know there are 500 seats at a certain company. We look at the deal over 2 – 3 years, and see how we can get all 500 seats 2 years from now.”
This strategy, adds Racki, does require an overhaul to your commission structure because the sales team aren’t the ones responsible for expansion, should it happen. The customer success team, in that case, is responsible for those extra seats. At Proposify, a split commission between customer success and sales was designed and has been working well, add Racki.
“Land and expand is thought-out as a strategy, and the comp structure is thought out ahead of time,” says Racki.
“We also put accelerators on commissions, working in spiffs, that was great for momentum, which has really helped keep the team’s mindset in the right place.”
For more on Racki’s thoughts on how to move your company up-market – including how customer success fits in, as well as Proposify’s wins and mistakes from their journey – check out the rest of his interview on The Predictable Revenue Podcast.
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