All posts by Chris Delacruz

Is #Europe’s Economy Pulling Ahead of USA?

April 24, 2017


The Eurozone Composite Output Index for March rose to a 71-month high of 56.4, while the same metric for USA retreated to 53.0.

This data comes from IHS Markit Ltd. (Nasdaq: INFO) Purchasing Managers’ Index (PMI) monthly survey of 30 countries. PMI survey data is closely watched by central banks and financial markets worldwide.

Despite the lingering effects of the Greek debt crisis from 2015 and the surprise Brexit vote of 2016, could the European Union GDP nonetheless be pulling ahead of the US economy?

As another data point, the Q1 2017 European Scaleups Report from the Antwerp Management School documented 466 VC funding deals totaling €3.8 Billion in Q1 alone, an 11% increase in deal volume from the same period last year. France, Germany, UK and Sweden led the pack with the most deals. And last year, Spotify broke records and impressed everyone with a €1.3 Billion capital raise.

Importantly, the study counted only VC fundings larger than 1Million Euro, so the €3.8 Billion figure doesn’t even include the thousands of incubator deals, friends and family rounds, and seed investments that precede institutional VC investments.

What do these trends mean for VCs, CEOs and CROs of US technology companies looking to grow their revenue base via global expansion?

Economic growth attracts investors’ attention and dollars (or Euros, or…) and keeps their focus. Germany is currently the top-growing country in the EU, followed by Ireland, Spain and France. Italy’s GDP output slowed a bit and is currently lagging the EU average. Global investors and traders usually move their money into the stock markets of countries where overall economic growth is already evident or anticipated, because an increase in the overall economy translates to good news for constituent corporations and their stock prices. Rising revenues and stock prices for these publicly traded companies means a healthy budget for technology investments and purchases from companies like yours.

In a nutshell, the healthy fund-raising environment in Europe shows investor confidence and maturation in the tech ecosystem, and the rising Composite Index scores means that Europe is a good place for American tech companies to sell their software and products. European companies are buying.

Here at SFE, we have engaged with more than 200 clients selling their technology products to enterprises in 28 different countries within the EU. Depending on what metrics you follow, we believe the economies of EU versus USA will continue to trade places for the lead—which is a good thing. What this neck-and-neck race means for US and EU tech companies is sustained investor attention, and an economic environment that continues to be ideal for expanding sales internationally (both US-to-EU and country-to-country within the EU). Trade fluctuations on either side of the Atlantic may cause short-term index gains in one region over another, but the long-term trend is that both EU and USA economies are winners.

SFE is a pioneer of the sales-as-a-service model, starting in 2003. More than 200 enterprises have trusted SFE to expand their sales into Europe and other international regions using our Accelerated Sales Platform. Our Platform includes Accelerated Market Analysis, Accelerated Lead-Gen, and Accelerated Sales modules, which can be delivered as an integrated service or as stand-alone modules.

Our platform is deployed through our international team of 75+ Sales Professionals who represent your brand in-country/language, blend into your company culture, and use their local market knowledge and sales contacts to make revenues and ROI manifest quickly.

If your company is interested in setting up channel sales or selling direct to enterprises in Europe, SFE can help you so let’s talk.

 

How to Hire & Manage SaaS Sales Teams

April 5, 2017

In our previous post, we offered ‘4 Best Practices’ for how to sell SaaS technology products to enterprises throughout Europe—from choosing the right country as your entry point, to how to act like a local in each territory. In this post, we’ll talk about how to hire and manage the sales teams to deliver stellar results.

Sales teams that are accustomed to typical software license deals often take an expenses-be-damned approach to making the sale. However, a SaaS license does not generate the same kind of up-front fees, so a more measured approach is needed to keep customer acquisition costs in line with revenue ramp-up. Below we talk about how to build the right sales team to go after SaaS sales, and how to keep them motivated.

Identifying the Right Talent

Sales teams are usually built either from the bottom-up or from the top-down. Bottoms-up teams hire young account managers and promote from within; top-down teams find a VP of Sales who then attracts a senior team around them.

Hiring large teams of entry-level reps tends to be expensive-per-dollar-booked, because each rep books a smaller quota. Less senior teams also require more training. On the other hand, you can recruit a top VP of Sales who will bring with them a team of senior account exec’s and a spreadsheet of enterprise buyer relationships—but they will be more expensive.

The SaaS business model is a relatively new invention (from the late 90s), so if you can find an experienced VP of Sales who knows SaaS, hire them! That said, it’s rare for a startup to have the resources to attract such an experienced sales executive, in particular when launching in foreign markets.

Setting Commission Expectations

Because SaaS products are sold on a subscription model, the value of a deal is difficult to measure up front and therefore your justified cost-per lead and cost-per-acquisition is hard to nail down as well. You need to factor in sales, the sales cycle time, renewal rates, and other factors that are beyond the control of the initial salesperson.

Due to the opacity in the up-front value of the SaaS sale, it’s equally imprecise to put an exact value of a sales person’s contribution.  A fair and objective formula for compensation is to value the deal based on a formula based on recurring revenue. You might also want to factor in the total acquisition costs and expected lifetime customer value when setting goals.

In addition to gross sales goals, keep in mind that improving the sales conversion rates at any stage of the cycle goes straight to top line revenue. In a high volume sales operation like SaaS sales, you can’t afford to waste time on window shoppers, or custom deployment requirements, or highly competitive bake-offs. Increasing conversion ratios requires sales reps to properly quality opportunities, then provide timely feedback about a prospect’s true level of commitment.

Accelerating Revenue (Leverage Through Marketing)

Successful SaaS sales executives can’t do this alone. Outbound calling and in-the-field meetings can quickly mushroom acquisition costs by sucking up too much sales investment in relation to too little commitment from prospects. Instead, SaaS price points demand that sales teams have a tight working relationship with marketing.

Marketing provides leverage for your sales investments.

By providing leads in bulk (vs. sales reps creating leads one-at-a-time), and automatically (digitally) qualifying and nurturing leads until precisely the point that they are ready to make a decision, sales teams can leverage marketing to scale their own efforts and accelerate their revenues. Clients often implement these marketing strategies in their home markets, but then forget or delay marketing when expanding to new countries, and this creates a huge impediment to success.

For our clients at SFE, we offer an ‘Accelerated Lead-Gen’ module where we take responsibility for finding and qualifying leads for sales, using the latest digital marketing technologies and inbound-marketing techniques.

Motivating Performance

The skills needed to deliver on a $1 million quota when the average SaaS deal value is just $10K are different from the skills required to land a single $1M deal: your sales reps need the stamina (and support) to deliver 100 deals vs 1.

Public acknowledgement of sales wins, creative perks, and team-building activities can make a big difference in performance—as can ongoing mentoring and coaching. Especially for international sales, sending a team off to figure it out for themselves (even an experienced team) will lead to frustration. Sales staff members need to be backed by quality leads, efficient internal processes, and time and attention from senior management.

Sales as ‘Service Delivery System’

The SaaS software model presumes large scale economies—volume and speed—to make low subscription-based pricing work. Likewise a SaaS sales operation needs to function with an efficiency that can deliver sales within optimal cost parameters. It requires a capable front-line sales team, supported by an efficient marketing process and lead hand-off, and a management infrastructure that can monitor, guide, and mentor.

SFE has honed its SaaS sales experience across 200 companies in 28 different countries, and has developed its ‘Accelerated Sales Delivery’ system to bring those efficiencies to you.

If your SaaS company is considering the daunting challenge of building up sales teams to crack open international markets, please consider the services of SFE.

Rick Pizzoli
CEO & Founder

How to Sell SaaS to Enterprises in Europe: 4 Best Practices

March 20, 2017

What is the difference between selling SaaS technology in Europe versus North America? Unlike USA, Europe is not one addressable market but 28+ different Countries, so your SaaS sales success boils down to choosing the right geographic rollout and looking and acting like a local in each territory. See below for 4 Best Practices for how to succeed, or shoot me a reply and I can walk you through it.

According to Goldman Sachs research, Software-as-a-Service (SaaS) sales revenue totaled $106 billion globally in 2016. Cisco’s Global Cloud Index forecast estimates SaaS will encompass 59% of total cloud IT workloads by 2018. Within those global figures, North America accounted for more than half of the market (54%); however Europe represents a less saturated market that is potentially a better opportunity depending on the country. SaaS adoption rates vary widely with Finland, for example, seeing SaaS penetration at 51% while Poland is just 6% (figures according to Eurostat).

The original premise for SaaS software was that it is easy to buy: with just a credit card and a few clicks, you can be running sophisticated enterprise applications without any IT involvement or accounting approval cycles. In the previous era of on-premise software, 70% of software sales went through channel distributors (versus only 23% of SaaS sales going through a channel now). But despite its ease of purchase, SaaS software in enterprises rarely ‘sells itself;’ today’s enterprise SaaS vendors rely heavily on direct sales

So what could be so hard about selling SaaS in Europe? Let’s look at those four best practices.

SaaS Best Practice #1: Start With a Global Mind Set

In SaaS sales, it helps to have a global mindset from the very beginning, as it will guide your early decisions in product development, channel strategy, and other core infrastructure. Adopting this global perspective is admittedly more difficult when your company is strong in your home market and your home territory is large. For example, you can afford to be strong in just Germany, or just France or Sweden or U.K., where probably 80% of your first $10 million-or-so of sales is coming from your home territory.

But companies from countries like Israel or Finland have no choice but to sell globally, and the product development choices they make early on pay dividends. To put that into a North American perspective, a U.S. company would never choose to sell into just one State – yet the economy of California or Texas alone is larger than most countries.

Put simply, you will eventually out-grow your home country so start thinking globally right away.

SaaS Best Practice #2: Choose the Right Entry Country

Many U.S. companies choose to enter Europe by setting up an office in the UK, where the language barrier is less acute. While that choice may be logistically easier, UK may not be the best market for your particular product.

Narrowing down the right market-entry country is a strategic decision. Start by doing desk research into which countries your direct and indirect competitors sell, and interview local companies that might be good targets. Then analyze your trade-offs:

  • Addressable Market Size:  does the country have the potential to be 10x your current market? Or just 1x… or 0.1x?
  • Competition:  will you be selling against 100 competitors, or just a few?
  • Regulations:  are you competing in a regulated sector like FinTech? Are some countries an easier fit for your product, even if the addressable market is smaller?
  • Difficulty of Replicating Value:  what tweaks will be needed to your product to deliver the promised value to your target prospects? Will it take a few weeks to localize some code, or months of new development work? Will you need to radically alter your sales processes and pricing? What will it really cost you to replicate your current value proposition?

Here at SFE, we offer an Accelerated Market Analysis service where we use local domain experts to help you arrive at an optimal country-by-country roll out strategy.

SaaS Best Practice #3: Act Like a Local

U.S. companies often are spoiled to the fact that almost everyone around the world can speak English. But that doesn’t mean you can get away with simply exporting your product and sales processes as-is. European enterprise buyers are skeptical of U.S. companies that aren’t willing to localize their product and related materials to their country, because it doesn’t feel like a long-term relationship. Think of it from a buyer’s perspective: how committed are you to on-going support and product development if you won’t invest a little up front?

Here are four ways to signal that you are a local:

Local Sales Staff:  Local sales staff (hired or engaged as a service) have an existing network of in-country buyer contacts — especially important for enterprise sales — but they are also native language speakers who know the subtle cultural cues and nuances that help guide sales to a close. So much of enterprise sales is about trust and perceived commitment to the region.

Localize Your Pricing:  When converting prices to the local currency, go beyond just the current exchange rate. Consult with local sales experts about what are natural pricing break points (either perceived barriers or thresholds for expensing vs. capitalizing budgets). And also consider what components are expected to be included versus priced as extra – these expectations differ by country. Also remember to be clear whether your prices include or exclude VAT (Value Added Tax) for European countries, which can be sizable.

Localize Support Materials:  Localizing your supporting materials is a matter of degrees. At the simplest level, you should localize your website and domain; next is localizing marketing and sales materials (especially your case studies!), then customer support materials. Remember also, if you offer support services, that you might have to find the people who speak the local languages or contract out to a 3rd party support service. Lastly, you probably do NOT want to localize your legal contracts.

Get a Local Domain:Sure, a .co a .io domain name is pretty universally accepted. But you can show your commitment to a region by getting a .fr, .de, .es top-level domain (TLD). Also set up a local telephone number (Skype-in works well) and a local email drop.

Localizing the product itself depends greatly upon its complexity. Some channel partners might require localization (e.g. SAP might require that you localize for Germany), and in those cases you will want to negotiate for minimum guaranteed sales.

SaaS Best Practice #4: Use SaaS Model for Your Actual Sales:

Just as companies are moving to SaaS services to avoid huge cap-ex investments and risky software deployments, so are companies moving to a Sales-as-a-Service model to reduce the costs and risks of expanding sales. Instead of recruiting international sales teams, entering long-term office lease contracts, and investing hundreds of thousands or even millions of dollars to open a new region before it is even proven, many enterprises are outsourcing (or at least kick-starting) their international sales teams with in-country experts who work as fractional / on-demand resources.

SFE is a pioneer of the sales-as-a-service model, starting in 2001. Already more than 200 enterprises – brands like Adobe, Tivo, Applause and RingCentral — have trusted SFE to expand their sales into Europe and other international regions using our

Accelerated Sales Platform. Our Platform includes Accelerated Market Analysis, Accelerated Lead-Gen, and Accelerated Sales modules, which can be delivered as an integrated service or as stand-alone modules.

Our platform is deployed through our international team of 75+ Sales Professionals who represent your brand in-country/language, blend into your company culture, and use their local market knowledge and sales contacts to make revenues and ROI manifest quickly.

If your SaaS company is eying global sales, let’s talk.      –Rick

Rick Pizzoli
CEO & Founder

5 Sales Disciplines of a VC-Backed Growth Company

December 9, 2016

5 Sales Disciplines of a VC-Backed Growth Company
(lessons from our in-the-field experience)

All VC-backed companies need to grow. For start-ups and mature companies alike, there is actually a real cost to not expandingsales and distribution quickly enough. But in our experience, growth can also be risky and expensive if not done well.

We set out to write an advice piece listing the top-5 successful sales disciplines for rapidly growing VC-backed companies, based on our 20-year experience leading their sales teams. A bit of Googling to see who else has written on the topic shows that everyone from Harvard Business Review to McKinsey has compiled lists of do’s and don’ts. These are analysts and consultants who don’t get their hands dirty with the actual selling, preferring to conduct surveys and wax philosophically instead.

Unlike those consultants, SFE works directly with technology startups–typically funded by top-tier VC firms–as we lead their international sales expansions. We’re hands-on, selling in-the-field in 28 countries and holding direct responsibility for sales results. Working with as many companies as we have, it’s easy for us to see some common patterns that lead some VC-backed company to success (and others to failure) from direct experience and without any surveys:

1.) High-growth companies aim for sales growth and profits

VCs want their portfolio companies to go from zero to a thousand miles an hour as quickly as possible, and if it means bleeding red ink that’s OK in the short term. But eventually the company needs to exit and, in the past few years, capital markets have grown leery of growth-at-all-costs unless there is some proof that profitability can be achieved. The most successful companies we’ve worked with are hell-bent on global growth, but they approach new market opportunities with both a global domination and a profitability mindset.

2.) High-growth companies see macro opportunities before they become ‘obvious’
When Wikipedia launched in 2001 as a community-maintained online dictionary, the folks at Microsoft’s Encarta group were probably laughing. When Apple nixed the CD drive from its new MacBook Air in 2008, it was heresy. When Google started working on self-driving cars in 2009, it was perceived as an indulgent sci-fi exercise. High-growth companies see macro trends long before they become ‘obvious’ and they act quickly and decisively even as the critics tease them.

In a more mundane example, several of our clients at SFE have been doubling-down their investments in expanding to the UK market even as critics fret over Brexit because, in the macro view, now is actually the best time to enter UK since 1955.

3.) High-growth companies keep their burn rate in check

The advantage of having VC capital backing you is that you can burn cash to out-distance competitors. But that doesn’t mean that your spending goes un-checked. Series B and C rounds are raised mostly for fueling sales and marketing. And the smart companies we work with expand their sales and distribution channels aggressively, usually investing in international markets sooner rather than later.

You do not need to drop $1M in opening a London office, which can distract senior management and delay customer engagement, and which ignores the entire rest of Europe. Smart companies invest in services that deliver actual revenue — like like developing channels and doing localized lead generation in each target country. Our clients at SFE leverage our network of in-country sales consultants — located in 28 countries throughout Europe — to test new regions cost-effectively and to develop distribution and sales results using local contacts.

4.) High-growth companies stay focused

A small or medium sized company typically can do only one thing really well. If you try to do too much, your competitor who is doing ‘just the one’ will do it better and will win. High-growth companies have a discipline of focus, which starts with product development and core messaging, and continues all the way through to international expansion. They stay focused on core verticals, and they build their sales and marketing tools and service teams around those core verticals.

5.) High-growth companies keep the core team lean and trust Partners for growth

Adding employees increases capacity, but it also increases management overhead and fixed costs — not to mention it can also dilute founders’ equity. The high-growth companies we work with often use best-of-breed contract services — from legal and accounting, to marketing and international sales expansion. They keep their core team lean and focused on developing a core product value and customer service, and they leverage a network of specialized partners that are highly qualified and can provide the flexibility to grow and adapt to an ever changing environment.

If you manage a high-growth company, we want to talk to you. Since 2003, SFE has lead successful international sales and distribution growth for more than 200 clients into Europe and other expansion markets.

Rick Pizzoli
CEO & Founder

 

Realities of Selling into Post-Brexit UK

November 8, 2016

Realities of Selling into Post-Brexit UK

Since the UK’s vote to leave the EU on June 23, the Pound has been pummeled, politicians have resigned, and investors were spooked. But UK citizens and companies have largely gone about their business as usual. The country still spends $28.9 Billion on imports and represents the 5th largest economy in the world. The reality for companies selling into the UK market is the economic dynamics and exchange rates are working in their favor, making it is increasingly affordable to sell there.

While we’re not economy experts or fortunetellers here at SFE, we do enough business across borders that we feel it’s important to track and report to you on this dynamic new post-Brexit environment. Our UK sales partners have had front-row seats to witness the gyrations.

Financial markets hate uncertainty, so the reaction of the British Pound is hardly surprising considering that UK witnessed in quick succession a vote to leave the EU, resignation of its Prime Minister, and a leadership crisis in the Labor party.

The position of the Pound continues to decline against the US Dollar, but this imbalance has its benefits: UK exporters will benefit, as well as tourism, and perhaps most importantly businesses selling into the UK from abroad have discovered an overall improvement in the risk profile. That is, it has become much less costly for software and technology companies to launch and sell into post-Brexit UK.

Further, the change to the ‘back of the queue’ view on trade from the US, quickly followed by Canada, Australia, Germany and 11 others—all now seeking trading agreements—mean the fifth largest world economy will not disappear overnight. This fact was recognized by Theresa May, who has appointed a new role to the Cabinet of Secretary of State for International Trade. Imports into UK have averaged USD $28.9 Billion annually since 1955 and reached an all-time monthly high in August 2016.

At SFE, our value as a beachhead for new business development in Europe has only improved as a result. And while we cannot predict market fluctuations in the distant future, what we can say with some confidence now is that the UK is very much open for business and trading partners will not be so quick to erect barriers as the rhetoric may have once indicated.

Interestingly, some are positioning this post-Brexit window as a chance to strengthen a UK manufacturing industry that has been gradually eroded in the last 15 years – good news for software and equipment vendors alike. Further, the IMF revised their UK growth expectations and, in fact, they now forecast more positive growth for the UK in the next two years than for France and Germany. And despite some uncertainties over Brexit, the UK will remain attractive to foreign investors because of the transparency of its legal and regulatory environments.

To those living in the UK there is economic concern, but tempered now with a sense of excitement in the air as the dust settles. The one thing that we can be sure of is that the post-Brexit environment can create opportunity and this could be the best time to launch in the UK with lower costs and potentially high rewards.

Rick Pizzoli
CEO & Founder