When you’re running a services business, it’s easy to set yourself up for failure. Unscalable sales processes, unsustainable pricing models, and bad contracts can all spell doom for the future of your company.
Before we made the transition to software, we were a services startup called Elastic Sales. We offered a sales team on-demand to venture-backed, B2B startups in Silicon Valley. We’d design predictable and scalable sales processes for these companies, and provide trained salespeople to sell their products and services.
We gained some early traction and landed a bunch of customers, but we didn’t actually have a sales process that fit our own services businesses. We weren’t built for success. So we took a step back and re-evaluated our entire sales process.
And in doing so, we went from $40K MRR to $130K MRR in just two months.
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How’d we do it?
In the early days of Elastic Sales, our pricing model was completely out of whack. To keep things simple, we let companies rent salespeople on a monthly basis—no contracts, no trial periods.
After some time, we realized that we’d need to build out a commission component to our model. For one thing, our customers wanted to tie our performance to what they actually paid us. But we also understood that we’d make more money if we implemented a commission structure, too. We just didn’t know what that structure would look like.
So we designed a solution that we thought worked best for everyone. Customers would pay a fixed cost (per sales rep) for the first two months. After that, we’d design a commission structure on top of—or in lieu of—that fixed cost. As you can imagine, most of our customers were pretty cool with this plan.
Unfortunately, we encountered a few problems
With such a flexible pricing model, there was absolutely zero predictability. We’d never know how many customers we’d have next month, and we’d never know how much revenue we were going to generate. As a result, we had no clue how many salespeople to hire.
What happened next is pretty typical for many services businesses:
We’d go out and close a bunch of deals, and then panic because we had no salespeople to sell products and services for our new clients. So we’d hire more salespeople, onboard them, figure out a sales process, sell effectively for a while, and then another customer would cancel—or a few employees would leave—and we’d have to go out and scramble for customers and salespeople all over again.
When you’re constantly in stop-and-go mode, it’s impossible to build momentum. And it eventually drives you, your employees, and your customers crazy.
So how did we fix the problem?
We stepped back and, for the first time since we started Elastic Sales, identified flaws in our sales process. We’d been so busy taking on clients that we never stopped to consider whether we were set up for success.
That re-evaluation resulted in a few basic insights:
We created way more value than we were charging for
In the first couple months of new customer relationships, we did more than generate revenue through product or service sales. Many times, we had to run experiments to determine the right sales process for each customer. We’d test cold email templates, demos, phone scripts, and more, just to find a process that worked best for that particular customer.
Most of these customers didn’t come onboard with perfect sales models. That’s why they’d hired us in the first place. Not only did they need our sales team, they also needed the insights we gathered before we even started selling for them.
In short, we ended up doing a bunch of extra work for free.
We needed a pilot period
The insights we generated for customers were incredibly valuable. So we decided to frame a service offering around those insights. During the pilot period, our main product wouldn’t be a sales team on-demand—it’d be a report.
That report would include the experiments we ran, the data we collected, the insights we gathered, and the recommendations we had for what to do next—how to change your product, tweak your sales model, scale your sales team, etc.
Customers could then implement our recommendations themselves, or hire us to execute those plans for them. We’d hire the salespeople and develop the sales process based on the model we put together in that report.
We needed to create more predictability
Most prospects assume they can get started at any time, especially when they’re dealing with a services business.
But in order to create more predictability—so we could manage our cash flow and resources—we rejected the idea of onboarding customers the minute they signed up.
Instead, we told them that the earliest they could start was three months from when we closed the deal. We’d say, “Here’s the thing. We take on a limited number of clients each month, and the next two months are fully booked. The soonest we can start is three months from now, and we only have two spots left.”
Those two spots were first come, first served. Whoever put down a fully refundable deposit got them.
We’d charge $25,000–$50,000 for the pilot, and then ask for a $5,000–$10,000 deposit to secure a spot in three months. Once we made these changed, we immediately jumped from $40K MRR to $130K MRR. Three months later, we reached $180K.
Not only did we create more revenue, but we created predictability as well. We knew exactly how many customers we’d have months down the road.
We needed long-term contracts
Once you’ve conducted a pilot, you really don’t want flexible, month-to-month contracts. When you put in that much time and energy, it kills you when customers leave two months later.
And besides, the quality of service you provide inevitably increases over time. Think of it this way: if you hired a new salesperson, would you expect that person to do their best work in Month 1 or Month 2? Of course not. Sure, they can do good work in the beginning, but they’ll do much better work down the line.
The long-term contracts were a way to secure commitments from each other, so that we’d achieve better and better results the more we worked together. Fewer customers will churn if your sales numbers improve month-after-month.
What’s the takeaway?
If you’re a services business, charge for all the value you create. Conduct pilots, create predictability, and get long-term commitments, so that you can scale your business, not just theirs.
Once we made changes based on these insights, we were able—for the first time ever—to have one of our own salespeople focus on selling Elastic Sales. Before that, any time we’d hire new salespeople, we’d have to deploy them to our customers, which is pretty typical for most services businesses. This was a huge advantage, and it really helped us grow more quickly.
Your self-worth determines your net-worth.
There’s no universal way to determine your value to customers. You have to decide that for yourself.
You may try to implement changes like these and receive pushback from prospects or customers. But if you really care about the success of your business, you need to learn to push back, too.
In sales, you won’t always hear yes. You’ll get pushback on pilots, pricing, deposits, waiting lists, and contracts. People push back on everything. That’s part of being in sales. Your job is to manage these objections, and to convert 20–40% of your leads—not 100%.
When you design the right sales process for your services business, and you trust the value you provide to customers, then—and only then—will you be set up for long-term success.
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