Wondering what are some SaaS sales challenges you should be aware of?
Admittedly, there are several challenges unique to selling SaaS tools. So we did the legwork for you and asked others in the industry what challenges they faced in 2021. This way, you’ll learn straight from the industry experts’ experiences including how they tackled the issues.
Here’s a rundown of what’s covered in this post:
What is SaaS Sales?
SaaS sales is the process of attracting, nurturing, converting, and retaining paying users for your application.
Note that SaaS sales doesn’t stop at converting users. Instead, it goes on to retaining and upselling them. This is key otherwise you experience high churn or unsubscription rate.
Stages in a SaaS Sales Process
Here’s how the SaaS sales process is divided. As we dig into the challenges, you’ll see they’re spread throughout the sales process.
Here we go:
- Prospecting. This involves attracting your target customers either actively by using tactics such as cold outreach or passively such as by using content marketing.
- Qualifying leads. This step covers filtering the generated leads using a proper lead scoring system.
- Presenting. That is, the demo stage where you walk potential customers through how your SaaS app will benefit them.
- Objection handling. Or, dealing with the objections leads have. Commonly these center around your SaaS being costly and the service not helping a business enough to invest into it.
- Closing. Expertly handling lead objections leads to this the closing stage when you convert the lead into a customer.
- Nurturing. The SaaS sales process continues beyond closing. The aim is to retain customers so the focus is on building strong customer relationships.
Most Important Metrics for SaaS Sales
Before we dive into the challenges unique to SaaS sales, let’s quickly walk you through the key sales metrics you should be tracking throughout the process:
- Lead velocity rate. The rate at which you generate qualified leads.
- Lead to close rate. The rate at which you close generated leads into paying users.
- Customer Lifetime Value (CLTV). Or the expected revenue that a paying customer brings to your SaaS.
- Average Revenue per user. A measure of the money each user generates for your SaaS.
- Conversion Rate. The rate at which your freemium users or leads convert into paying customers.
- Monthly Recurring Revenue (MRR). The projected revenue you can expect to receive from paying customers.
- Monthly Active Users (MAU). Or the number of unique customers interacting with your SaaS.
- Customer Acquisition Cost (CAC). How much cost it takes to acquire a customer.
- Customer churn rate. The percentage rate at which paying users cancel their subscription.
PRO TIP: How to Track the Right Metrics for Your SaaS Company
It’s not easy to know which KPIs to track for sales, marketing, and customer success in a SaaS company. There are many possibilities, and so much to do! Why not start with the basic metrics that determine the health of your company?
- Sales (Gross) Volume: How much revenue did your sales team bring in this month, this quarter, or this year?
- MRR Growth: How fast are you growing revenues from recurring subscriptions?
- Customers: How many customers do you have right now?
- Customer Churn Rate: What’s your customer churn rate, and how much revenue have you lost to churn?
If you want to track these in Stripe, you can do it easily by building a plug-and-play dashboard that takes your Stripe customer data and automatically visualizes the right metrics to allow you to monitor your SaaS revenue performance at a glance.
You can easily set it up in just a few clicks – no coding required.
To set up this Stripe dashboard, follow these 3 simple steps:
Step 1: Get the template
Step 2: Connect your Stripe account with Databox.
Step 3: Watch your dashboard populate in seconds.
The Unique Challenges of SaaS Sales
Of the leading SaaS sales challenges that the industry faces, is turning free users into paying customers. This is the toughest to achieve according to 22% of our respondents.
18% say aligning sales and marketing is also a challenge with 16% saying too much competition is another challenge. More SaaS sales challenges include product/service complexity, unrealistic expectations, and SaaS sales.
Some respondents (between 5% to 3%) also say that wasting time and resources on unqualified leads along with the unique sales models of the SaaS industry are two of the toughest challenges they faced in 2021.
These observations come from people strictly in the SaaS industry.
Lastly, about half of the SaaS contributors we surveyed are in their growth stage. Roughly 30% are SaaS startups and 15% are in their stepping-stone stage.
In short, you can say that these folks know quite a bit about the unique SaaS sales challenges. So with that in mind, let’s dig into the details of these challenges:
- Targeting the wrong audience
- Generating quality leads
- Qualifying leads
- Creating a feasible SaaS sales model
- Aligning sales and marketing teams
- Converting free users to paying ones
- Lack of productivity
- Prioritizing customer retention
- Vast competition
- Getting the messaging right
- Labor crunch
- Diversifying sales
1. Targeting the wrong audience
“Our biggest challenge was reaching a target audience,” admits Melanie Musson from LifeInsurancePost.com.
“We started the year with what we thought was a grasp on who our target audience was, but through the year, we realized it was a vague description.”
The solution? “As we narrowed our description, we were able to target our advertising and reach the right audience. This has led to greater profits and growth.”
Related: 11 Experts Share Their SaaS Growth Hacking Secrets
Not only does getting specific about your target audience helps but talking to them helps refine your buyer’s persona too.
For instance, when you land an ideal customer, incentivize them to jump on a one-on-one conversation with you. From there, learn more from them including the way they describe your SaaS tool. Use this raw material to inform your target customer profile and attract the right people.
2. Attracting quality leads
“The biggest sales challenge for TutorCruncher in 2021 was generating quality leads (within a target CPA),” shares Tom Hamilton-Stubber from TutorCruncher.
“In order to overcome this challenge, we turned to marketing automation tools to help them generate more leads,” Hamilton-Stubber writes.
“We’re very fond of Hubspot and it’s helped equip our sales team with the intelligence that they require to go after our ideal customers. We also used strategies like content marketing or outbound selling to reach our target audience.”
Meaning: Leverage marketing tactics like creating audience-relevant content to attract quality leads. Then, map out a plan to nurture with more middle to bottle funnel content and targeted personalized outreach.
Related: What’s the Right Content for Each Stage of Your Content Marketing Funnel? 40 Marketers Share Their Advice
Troveworks’ Guillaume Vives echoes the same struggle. “In Marketing: One of the biggest sources of sales leads has been participating in big events and conferences. With the COVID pandemic, most of these events became virtual and we saw a huge spike in participation.”
“For instance, an event that would attract 2,000 participants in 2019 would now attract 6,000 to see 8,000 virtual participants in 2021. That’s good, right? Not really. People visiting virtually don’t engage as well as when they visit physically a booth. They browse quickly and go away.”
Meaning: “The number of serious leads in 2021 out of these events has been much lower than in the past” for Troveworks.
“In Sales: As we move to digital-first sales interactions, customers get most of their information before they meet with sales reps. Their decision is made and the value add of the sales reps is becoming more of an order taker,” Vives notes.
“In 2021, we saw this trend accelerate as the lack of physical interaction prevented sales reps from building relationships with customers. We also saw the acceleration of eCommerce: more and more sales are not done on eCommerce and not by sales representatives.”
“The types of products that sell well on eCommerce are different and cheaper than what sales representatives typically sell.” As a result, Vives shares, “we had to adapt our product portfolio.”
Other than that, consider using email marketing for building relationships with customers. The key, however, is to send them value-backed emails as well as messages to check in on how they’re doing instead of using a sales-first approach.
3. Qualifying leads
“Qualifying leads is a more painstaking issue,” notes Jeff Mains from Champion Leadership Group LLC.
“The lack of free demonstrations and free trials in the realm of corporate SaaS lulls sales teams into a false feeling of hope when a prospect asks for a demo.”
Says Mains: “When a lead requests a demo, salespeople see this as an indication that the lead is better qualified or more prepared to buy than a lead who does not want one. And this is an issue — enterprise SaaS sales require more effort on the salesperson’s part to qualify the leads.”
Here’s how Mains’ team solved the issue: “When our lead qualifying procedure or lead scoring method is too basic, we end up wasting a significant amount of time, money, and energy going after low-quality leads.”
“One of the ways we’ve improved our process is by placing some lead-qualifying barriers in the path of leads who emerge out of nowhere and want a product demo,” Mains explains. “Our leads are screened using a self-guided questionnaire, which allows us to safeguard the most precious resource we have: our time.”
If you’re struggling with qualifying leads yourself, consider getting clarity on who your target buyer is. Then, create a checklist and questionnaire for qualifying your leads.
4. Creating a feasible SaaS sales model
“The biggest challenge my SaaS business faced in 2021 was in establishing a feasible model,” Cash Flow Portal’s Perry Zheng opens up.
“Those who have worked with SaaS products or run a business on the model know how difficult it is to establish a customer base. Nowadays, money is the single most important aspect and I had to invest massive funds into my business to set up a product campaign that would attract a new base of customers.”
“Usually, SaaS-based products get an early boost and strong clients in the start,” Zheng observes.
“It is difficult to build a new customer base due to the competition in the market. I relied on automation to solve my issues with the second customer wave. Due to COVID and many employees leaving the company, automation was the only option left and it has rewarded my SaaS business,” explains Zheng.
For Banquist too, their SaaS model was a challenge, says Seb Evans. “We couldn’t keep up with demand. We launched our business in May of 2020 and we were sold out in less than 10 minutes.”
“Since then, we haven’t sold out that fast but it’s been a challenge to keep up with consumer demand,” Evans writes. “We’re currently fully stocked on all of our services, but it took some maneuvering. We got a better handle on our inventory control and we’re now more organized.”
“We source only local ingredients, so we first figure out what’s in stock and what will be easy to get before putting one of our packages together.”
Concluding, Evans shares some lessons the team learned: “The past year taught us the importance of organization, inventory management, and how to better handle supply and demand.”
If you aren’t already strong in these areas, start working on turning them into your strengths before these concerns plant problems in your SaaS business.
5. Aligning sales and marketing teams
“For me, the biggest challenge was marketing and sales teams weren’t aligned,” shares Hyperweb’s Kyle Arnold.
For SaaS sales success, both marketing and sales are critical. New leads and prospects are generated through the marketing funnel. Sales representatives, on the other hand, close a large number of those transactions,” Arnold lays out.
Since both teams play such critical roles, it’s essential they’ve “same aims and objectives, and that they interact with each other on a frequent basis.” Not to forget, it’s only when these teams are aligned that they can attract correct leads that are more likely to convert than otherwise.
However, for Arnold’s “that didn’t happen in my team until later in the year, which was a terrible mistake.”
The Better Proposals teams faced the same SaaS sales challenge. Mile Zivkovic shares, “Our biggest SaaS challenge this year was aligning the sales and marketing teams.”
And here’s how they solved it: “We made an effort to further educate and train our marketing team and allowed them to shadow the sales team on calls in order to gain knowledge on our customer base and their demands,” writes Zivkovic.
“Having the 2 teams work together was a real success and we will be reusing this strategy in the future.”
“As early as feasible, bring marketing and sales teams together. Instill systems to assist them in operating together rather than as two separate organizations,” Arnold shares.
Besides educating teams, another good way to align both the marketing and sales teams is to get them to use a CRM that serves as a single source of truth for both teams. It has to offer a customer 360 view too so that both teams have access to each other’s data to optimize marketing campaigns and sales cycles.
6. Converting free users to paying ones
According to our survey, this is the leading challenge unique to SaaS sales. At Kotobee, Nahla Ibrahim shares they came face to face with the issue.
“Our company specializes in offering tools for elearning and digital publishing. Thankfully, due to many schools and Universities turning into online learning in the past year, our business has been booming, especially since we offer a freemium version of our tools,” Ibrahim explains.
“Unfortunately, though, this created a challenge for us as a high percentage of the new users found the free version to be sufficient and that it’s not worth upgrading to a paid version.”
Related: How 20+ Freemium SaaS Companies Increased Signup-to-Customer Conversion Rate
“After realizing that this was the case, we worked on resolving this by adding more features that would attract the basic free users to upgrade their subscriptions,” Ibrahim says, explaining how the team overcame the challenge.
“We did that by first sending a small survey asking our users what they’d like to see in our tools. We then picked the most asked for features such as mini ebook apps and ebook templates and we implemented them right away. That was a really helpful move as it increases our conversion rate over time.”
The takeaway? We have two:
- Provide a highly valuable freemium version of your SaaS tool but make sure it’s not completely sufficient. Otherwise, it gets hard to convert free users into paying ones.
- Always talk to your customers. Whether it’s adding more features or changing your pricing or planning your blog content strategy – hop on calls with your customers to learn exactly what they want.
7. Lack of productivity
At Airfocus, the biggest sales challenge was internal according to Malte Scholz. “We struggled with productivity and organization due to COVID-related factors. There were periods when people got sick or too stressed to function well.”
“This was a tough situation since we could only wait for things to normalize.”
Here’s how the Airfocus team dealt with the concern: “In the meantime, we tried to keep sales levels as high as possible, although this wasn’t our best period. I was mostly struggling with the uncertainty since I couldn’t make any long-term strategic moves. The situation kept changing on a daily basis and the area that suffered the most was our sales department.”
If your team is battling with productivity issues, try evaluating their workload. If they’re overburdened, look for solutions to engage them and shift the workload. If it’s in your budget, hire a new employee who can shoulder the burden. Or, outsource work to freelancers.
It’s also best you review your vacation policy and see how many are taking time off (while remaining fully unplugged from work). This is essential for saving your team from burnout.
Related: 24 Best Metrics for Measuring Marketing Productivity
8. Prioritizing customer retention
“Customer retention became the number one priority for everyone in our company in 2021,” comments Chris Campbell from ReviewTrackers.
“After the worst of the pandemic in 2020 and a shift to remote work, our marketing shifted from acquiring customers to focusing on customer communications,” Campbell elaborates.
Here’s how they did so. “We’ve pushed sharing relevant content sales that could be shared with prospective audiences to assist with their business challenges,” explains Campbell.
“The whole team spun up webinars, built out special offers, created plans to mitigate churn, and talked to every single customer to see how they were doing throughout 2021.”
Says Campbell: “We felt it was important this year to get in touch with our humanity as a company, with small things like simply checking in to see how our customers were doing more often. I am very happy to share that our customers are just as optimistic as us for 2022.”
9. Vast competition
Put another way, this involves your target buyers having a variety of options to choose from. This makes it a challenge to stand out from the competition.
PhotoAiD’s Natalia Brzezińska admits, “The biggest sales challenge we faced in 2021 was definitely the vast competition among biometric photography startups and companies. It isn’t easy to become noticed and convince the audience to choose (and pay for) our services when they have so many options.”
“All in all, that’s how the business struggle looks like, doesn’t it? We needed to find our way, maximize creativity and discover how to outrun others.”
CocoFinder’s team also suffered the same SaaS sales challenge. Harriet Chan highlights, “Oversaturation of the SaaS industry was a major challenge in 2021 for my company. This challenge meant that we had to do more than anyone else in our niche to make sure that we could stand out and attract subscribers who would benefit the most from our product.”
So what did they do? According to Brzezińska: “We discovered that investing in establishing cooperation with educational institutions – universities, colleges, or high schools – pays off. We allocated a lot of funds to initiate contact with them, and fortunately, it had a very positive effect on increasing sales.”
Put another way, you need to look for the right business partners – even consider collaborating with industry micro-influencers for getting your SaaS in front of the right audience.
Related: 12 Tips for Tracking and Measuring Your Influencer Marketing Campaigns
This strategy works because your target customer sees others – your partners who they already know – trusting you. This improves your case of social proof, helping your tool break through the noise.
At CocoFinder, Chan shares, “The oversaturation in our industry saw us embrace radical marketing techniques that would help us lead the pack and become the ideal search engine for our customers.”
Here’s what they did according to Chan:
- “We revolutionized our content marketing by firstly researching our target market afresh to ensure we are in tune with their needs.
- Additionally, we also embarked on a rigorous email marketing campaign to help us gain more subscribers and retain those we already had.”
Related: Content Marketing ROI: The Best Tools, Methods, and Metrics to Measure Content Success
10. Getting the messaging right
This is essential for attracting the right leads and resonating with them. But at Motivosity, Logan Mallory, says “getting our messaging right was the biggest challenge in 2021. “
“We needed to find the right balance of creating a sense of urgency in purchasing our software while also being sensitive to the state of uncertainty in many company’s budgets and development plans.”
“We honed in on how our software would ultimately help them increase revenue as well as boost employee engagement and retention rates,” Mallory explains.
To reiterate, on your customer and target audience one-to-one calls, pay attention to how they describe your product. Then, use that language to shape your messaging.
11. Labor crunch
“By far, the labor crunch has been the biggest challenge we’ve faced as a business in 2021,” observes Alina Clark from CocoDoc.
“For businesses that depend on outsourcing to get things done, the lack of qualified workers, and an extremely small talent pool was a debilitating factor,” Clark continues. “There were brief periods during the year when we had to suspend some of our business practices because we couldn’t find anyone to do the job.”
“Even then, adopting flexible work schedules, remote working, and offering incentives that work with the current crop of talent has helped us live through the challenges,” outlines Clark.
“In retrospect, having a scheme to acquire and retain employees is a crucial thing for businesses like ours in the future.” So you know what to do, right?
12. Diversifying sales
“From our second beta stage last year, we started expanding our reach to smaller businesses that might have found our software too complex for their seller level,” SoStocked’s Chelsea Cohen highlights. “In that regard, one of our main challenges was diversifying sales.”
Explaining how they resolved the issue, Cohen writes: “I’m a firm believer in the power of customer feedback and word-of-mouth. Our clients’ results form part of our success metrics.
So this year, we’ve focused on refining our user experience and using client data to make the service more customizable, and those steps did help boost our conversions.”
Optimize Your SaaS Sales Process with Databox
Now that you know the challenges SaaS sales commonly face, we’ve one simple nugget of advice for you: optimize your process.
A good place to get started on this is by keeping an eye on all the essential sales metrics such as your conversion rate, churn rate, monthly active users, MRR, and more.
Want to track all these essential numbers on one screen for your ease? Use Databox to create easy-to-read SaaS dashboards featuring metrics most essential to you on one screen.
These dashboards are a great way to bring vital data to all teams, therefore, helping align sales and marketing teams in a way. Plus, tracking the metrics in an easy manner means you can quickly detect a decline in any numbers and take corrective action too.
So get started today by signing up for Databox for free.