2 minute read / Aug 8, 2017 /
How to Decide When To Move Upmarket
At some point in the life of most SaaS companies, the business will be faced with the question, when should we move up market? The strategic question might be catalyzed by increasing cost of customer acquisition in the core SMB segment. Alternatively, a surge of large customers paying for the product might trigger the question. Or account executives might raise it. Whatever the reason, this is a key strategic question.
Moving upmarket is an experiment. It’s a new sales motion. Very few businesses have clear demonstration of success in enterprise sales cycles without effort. The first step in deciding when to move up market is an asset allocation question.
How much cash is the management team willing to invest into the enterprise experiment? This is risk tolerance.
How much investment is required to fully test experiment? Critical for ensuring the effort has enough runway to succeed. In addition, enterprise sales often requires more staff than SMB sales. Field marketing and sales engineering are two essential roles in enterprise sales that have no counterpart in SMB.
Given those two figures and the cash balance of the business is now the right time?
The second consideration involves metrics of the sales funnel. Does the business provide enough prospective customer pipeline to enable an enterprise account executive to exceed quota? Do the unit economics associated with a different kind of fundamental unit of growth that includes field marketing and sales engineering pencil out?
Third, to what degree do the SMB and enterprise roadmaps overlap? If a SaaS company can build the same product to serve both constituencies, then the product and engineering organizations should not need to endure substantially more stress to satisfy both. If on the other hand, the demands are unique to each segment, is the business ready to handle diverging product roadmaps? Alternatively, is the business ready to downshift innovation on the SMB product, and invest more in the enterprise product?
The same question also applies to marketing. Can a single marketing message work for both segments?
Lastly, is the company culture ready to sustain a different sales motion? Some companies eschew the idea of selling into two different segments, preferring to treat most customers similarly. Is the management team ready to respond to increasing demands from sales teams on product management, customer success and marketing?