Launching your product and generating revenue for the first time is always scary. The first time you put your pricing model up against a customer for the first time, anything can happen. Is it too much? Too little? What if they don’t have a budget? What if they want “just one more feature” before they buy? How much should we charge? Should we have yearly plans with a discount? What about monthly plans? What about churn?
All of these questions can seem paralyzing for early stage teams. And it prevents them from doing the only thing that can actually fix any of these problems; SHIPPING.
Establishing a pricing model
No early stage company has nailed pricing out of the gate. Ever wonder why there are sites dedicated to pricing charts and comparison overviews? Entire design portfolios are focussed on this topic and there are countless answers.
The reality I share with founders is that you need to test and learn. Vaporware pricing should be a part of your strategy. If you go into a sales presentation saying your service is $500 a month, take the time to understand the reaction. Ask the right questions of the decision making team. Ready to sign? What are expectations? What does success look like 6 months (and $3,000 later).
Public pricing page vs. contact us
A common argument I see often is on whether you should publicly share your prices vs. having a “contact us” page. Both have their advantages, but as a young startup it’s too early to tell which model will be best.
My recommendation is to use a hybrid approach that many companies now sue that show introductory pricing and then a “contact us” for enterprise deals. Even Google rolled out this exact strategy.
No need to reinvent the wheel – this hybrid model should work for most B2B SaaS businesses. This gives you a great gateway and penny gap for small customers to get started, and a qualifying sales pipeline for those that may want to become enterprise customers later on.
Your initial sales strategy
When you’re just starting out, you should be doing the selling yourself. Founders that do the selling early on have the most successful teams in the long run. They are able to act as a true player/coach and set expectations and forecast the right commission and strategy to hire the first salespeople (players).
Like many pieces of the startup puzzle there are many roads to success when it comes to figuring out your sales process. Testing and learning yourself is the best way to see what the market will bear.
Your first sales hires
Once you have some experience selling and have closed a few deals, it’s time to think about your sales team. You might be tempted to start with a Head of Sales to take over the entire process, but if you get that hire wrong it’s a very costly mistake.
Instead of one manager or a proven top performer, consider hiring less experienced reps who exhibit high potential. Since you’ve already been doing some selling, you can sit as the defacto head of sales and you can continue to build out your sales process together.
I almost always recommend hiring 2 sales people at the same time. Otherwise the first seller you have will be by default “the best salesperson company X” has ever seen.
Hiring your first VP of sales
When it comes time to grow the team, many lean on the concept of hiring a “VP of sales”. Countless content exists around this topic so I will keep my advice short and filtered to the best judgement I have heard before bringing someone on board.
My favorite question for a VP of sales candidate is:
“Who are your first hires?”
If they go on about team members/players and generic answers that fit all the checklists you are looking for, be wary.
My ideal answer would look something like this:
“I would hire Sally who is at X company right away – she has worked for me for years and at the right opportunity she is ready to join me again. Next I would hire John, who is a killer AE ready for his next role and excited about building a team. Finally I would bring on Jane, who is a great lieutenant I have worked with, whose next move is VP of sales”
That shows that someone is serious about building a sales team, has people that will follow them into battle, and can assemble them fast.
Going to market is an exciting yet scary time. A lot of content exists on how to be successful and how to avoid failure, but no two companies are the same. You may find success by following the advice of others, or you might find your own unique strategies. The most important thing is to test, learn, and adapt, to see what works for you.
Eric is the Head of Expa Labs, a six-month program for early stage companies. The Expa Partners have built and scaled industry-defining startups used by hundreds of millions of users including Uber, StumbleUpon, Foursquare, AddThis, MetroLyrics, and Envoy.