“Disqualifying” is the New Qualification

This is a follow up to my post about the death of the sales funnel and the rise of the sales hourglass. The conversation from the community was great and there were some interesting comments on the concept of the sales hourglass.  I wanted to clarify a couple things as the conversation made me realized was not clear. One of the comments was from Tate Smith at Consensus, he was describing something that is very interesting which is the qualification process within the sales process.  The sales hourglass still has a complete qualification process as a sales funnel.  The concept of the sales hourglass is more about how you get a small deal (or module) in the beginning and then grow your deal as your relationship and trust is established with the customer.

So let’s first take a look at qualification because I believe that this is a very important topic that is not always covered in exactly how Tate describes it through his comments. Tate’s point is that in many cases in selling SaaS software that you need to do  better job of disqualifying – at the end of the day disqualifying is essential for a profitable business. In many cases with SaaS you have too many opportunities that you’re working through the sales process. If you do not qualify people out quickly you will be wasting your time on non qualified opportunities. Taking the “disqualification” process one step further, it affects the long-term viability of the customer’s profitability, customer experience and churn process.

The part of the qualification process I’d like to talk about is this concept of not bringing the customers into your organization that are not a good fit either for your software, for your sales process and even for the culture within the organization. The reason for this is really because if you take a look at customers from a higher level/strategy – if the product is not a good fit or how you conduct business (aka your culture) is not a good fit  then the experience overall will most likely not be great for the customer. Now this is a over generalization however I think it’s a good way to apply the 80/20 rule when thinking about the qualification process within your organization. Businesses will have a really hard time with this shift in mindset because everyone is hyper focused on monthly recurring revenue (MRR). It doesn’t matter if you are a start up company or a Fortune 500 EVERYONE is looking at that bottom line within a monthly or a quarterly basis. Organizations that understand the SaaS game is more long-tail and focus on the sales hourglass will see that the profitability will come in the year three. If you are getting customers churning in years one or two then you are “bleeding: cash. The customer acquisition cost will take over the business and eventually lead to alot of pain within the business, your customers and your employees.

When you take a step back and think about obtaining the right customers at the right time in the business it makes complete sense. However when the pressure of Wall Street, the investors or anyone else that wants to make the company grow potentially faster than it should really grow will cause a lot of pain. The cost of acquiring a new customer is much higher than the cost of retaining and growing an existing customer (aka the sales hourglass). Additionally the upside of a great customer experience could exponentially expand the revenue potential as a customer refers you to net new customers.

As we conclude, take a minute and think about the best customer experience that you provided for a customer over the last 12 months:

  • What was the feeling for your customer?
  • What was the feeling for you?
  • What was the feeling for your organization?

Now think about how that great customer experience will be able to expand beyond the initial contract and how that customer has extended from a one-year contract to a three or five year contract.

  • Was the customer that you provided that exceptional experience to willing to give great references for you?
  • Provide social media exposure for you and/or your organization?
  • Include you in additional conversations that may affect you or other parts of your organization?

Make sure that you think about, or your organization, thinks about the customer profile that you’re bringing into your organization – do not be afraid to ask the question – Does this customers will fit into our culture and become a multiplier with your business strategy.  Look at the success of up and coming companies such as Vayner Media (Gary has said he has walked away from customers that would be detrimental to the business – it is just reality) Your customer base is your oxygen line and it is essential that that oxygen line stays open and flowing freely as your business grows and expands.
I would love to hear your comments and feedback on this post.

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