Surviving and thriving in tough sales conditions

New selling conditions will prompt adaptation & evolution

I’ve been selling professionally since 2013, which is an eternity in “startup time.” However, it’s not an eternity in “macroeconomic cycle time.”

I’ve never sold through an extended recession or a downturn. It would be interesting to talk to people who sold at Salesforce in 2008 during the great recession, but clearly, the SaaS landscape has evolved dramatically since our last major bear market.

Back then vs. now

On a positive note, SaaS and “the cloud” have crossed the chasm. When I sold Dropbox in 2013, it was difficult to convince some CIOs that their data should not live on prem, and that our cloud storage platform had enterprise grade security. Now, there has been mass acceptance that the future is cloud-based.

However, things are tougher in other aspects: there are far more SaaS companies, each category is more crowded as the number of startups that got funded exploded, and old sales tactics aren’t working as well due to increased levels of noise.

Buyers are inundated with mass blast outreach, and they are savvier at evaluating their own tools. It seems like, no matter how hot of a company you are early on, you reach a moment where you go “holy moly, it’s going to be really hard, if not impossible, to 3x this year” because inbound never scales at the same rate as your sales headcount.

Even in normal market conditions, the odds of continuously achieving rocketship like growth are stacked against you due to gravity, so what happens if there is a massive negative shift in demand and budget for SaaS?

As someone who had a quota when COVID hit in 2020, I can tell you that massive injections of negative sentiment are not pretty or fun.

Cascading impact

I’ll tell you what my experience was like managing sellers in April 2020 when COVID hit:

First: every single buyer who was interested in buying had massive leverage to protest against the pricing, or walk away from a deal that we had verbally agreed to.

Second: when the macro landscape shifts dramatically, there are no rules or social contracts. You start to realize how much of sales is driven by relationship building and social contracts. How can I get mad at someone for not buying when their headcount got slashed, when budgets got frozen, or when they are fearful for their job?

Third: overnight, pipeline dried up and we had no clue when deals might close. It was very scary. You start to ask yourself, “how essential is our product to prospects? How essential is our product to existing customers?”

Luckily for sellers…

In 2020, the fed printed trillions and essentially bailed “the market” out. Plummeting stocks started to recover, bounced back, and reached all time highs again.

The existential fear that started to permeate the companies we were trying to sell to subsided, companies shifted from survival mode to growth mode again.

But I realized that my entire professional life had essentially existed in “growth mode.” I had never even been a professional in a “survival mode” market, and we may not be out of the woods here. We could be facing a market bracing for a return to survival mode.

Implications for SaaS

I remain bullish as ever on SaaS, and especially bottom up SaaS, I think it’s the best business model of all time. The ability to create code, scale that to millions of users through the internet, and empower them to drive ROI at work is insanely powerful.

However, the ability to sell has always rested on a foundation of psychology, specifically, buyer psychology. At some level, a human being must make a decision to buy, and the way those decisions are made is an equation that must shift when economic times become more difficult.

In tougher times, that equation doesn’t focus entirely on buying upside or FOMO like it does in a bull market. In a bear market, that equation includes questions like:

”If I ask for budget for this product, what will I not be able to buy as a result?”
"What ROI do I expect from this product, compared to what I’d have to pay?”
”Who will be mad at me for buying or not buying this product?”
”What will break if I don’t buy this product?”

Heads up for product teams & exec teams

Your product has to become CORE infrastructure to your buyer. Your customers very likely use your product for core business processes in one of three categories:

1. SaaS to deliver their product
2. SaaS sell their product
3. SaaS to run their company

Those are the big 3 categories from my perspective. You can fit in any of those three, but you should be core to operations, deliver unquestioned ROI, and be the type of product that, if someone proposes churning or not buying when a decision is imminent, there would be a revolt.

Bottom up SaaS in a recession

As a note, bottom up SaaS has some natural advantages here. Here are some aspects of bottom up SaaS that serve to mitigate downside risk:

-organic (ie, free) leads
-organic user love and adoption
-higher than average usage (DAU/WAU/MAU ratios)
-higher than average buy in from the userbase, which means easier to buy, harder to not buy, and harder to churn
-strong “what’s in it for me” for a larger user population

Heads up for sales & CS teams

Basically, it’s time to turn your paranoia meter to a 10. Assume that your best deals won’t close, that your best customers will at least consider churning. Assume that when a buyer proposes your product to their committee of decisionmakers, they will likely face heavy pushback.

I think it’s a matter of tuning out the noise, and returning to strong sales fundamentals. Try not to worry about anything other than running a strong sales process, and controlling what you can control. If you’re a seller, hit your prospecting metric goals, run strong discovery calls focused on situation, pain, impact, and ROI, and try to deeply understand the reasons why this prospect will NOT buy from you, and problem solve against those things.

Try to be more cautious in your forecasts, and grill your decisionmakers a little harder on all the steps that must be taken for a purchase to happen. Try to create a bulletproof case for why your prospects should buy and/or renew, try to tie that to ROI as much as possible, try to generate as much buy in as possible, and try to attack [via problem solving & collaboration with your evaluators] areas that you think represent a risk to the deal getting done.

It’s very easy to recommend these things in a Substack article, and very hard to accomplish them in reality. But tough times are where great sellers will separate themselves from the lucky, and it’s an opportunity to sharpen skills and evolve as a seller.

Thanks for reading EarlyGTM post #13!

Mike Marg, Investor, Craft Ventures

(for more thoughts on go to market, @mikemarg_ on Twitter)