We’ve built an outbound sales machine at Spendesk
. But we sell to SMEs, which under traditional Silicon Valley playbooks means we should have built an inbound sales machine.
The logic behind building an inbound machine is because the contract values you earn when selling to SMEs are smaller, thus making it too expensive to hire a sales team.
But the problem with this playbook is its void of context. For example two critical pieces of Spendesk’s success are a) super low churn and b) super high net retention rates.
Let me explain.
If your customers stay for longer and they spend more each year, it means the lifetime value increases. This means you can spend more to acquire each customer and play with more expensive acquisition channels. Which in our case was necessary because we’re selling a complex product that requires a salesperson to explain our value proposition well.
Take these two hypothetical scenarios for example.
A customer stays for two years and pays $10k each year. Their lifetime value is $20k. You can spend no more than $6k to acquire them.*
$6k isn’t huge. There are a limited set of acquisition channels that work under $6k, outbound sales isn’t one of them. You’re more likely to stick with inbound channels like organic SEO, and some paid demand generation.
*A SaaS company with a LTV/CAC of less than 3x is not considered scalable
A customer stays for five years because the product is sticky. Since the customer is a fast growing startup they’re growing quickly and so does their usage. They spend 40% more each year with you. This means your Net Retention Rate is world class at 140%.
Thanks to the low churn and high net retention the lifetime value is now $50k. You can now spend a whopping $16k to acquire each customer ($50k/3).
You still sell to SMEs, but thanks to the unique nuances of your business model you can pay a lot more for them. With $16k to spend you can leverage more expensive acquisition channels like outbound sales, and live events.
As you can see the problem of the “inbound sales playbook” is that it doesn’t take into consideration the context of your market, churn rates, net retention and so on.
It’s far more important to understand why a playbook has worked previously, than to blindly copy it in the hope you share mutually identical contexts.