SaaS Strategy Series: #1 Market Segment Focus

Where are you focused: SOHO, vSMB, SMB, Mid-Market or Enterprise?

One of the biggest mistakes early-on SaaS companies make is trying to sell into all market segments. They will most likely only have mediocre or moderate successful in each.

Early-on SaaS companies should select a target segment they feel they can do well in, and create a repeatable, scalable business model selling into that segment. Only once succcessful there, should they attempt to expand into other segments.

The reality is the sales, marketing and product capabilities to go-to-market in each of these different segments is very different. SMB/vSMB/SOHO organizations need more robust marketing, channel partnerships, and inside sales with self-service attached and self-guided onboarding.

Mid-market requires more sales expertise, solution-selling, middle-of-funnel enablement to create a trusted advisor relationship, and some services for integration and configuration, etc.

Enterprise sales requires much more tenured sales professionals, professional services, and robust SI ecosystems. Enterprise deals have much longer sales-cycles, require more customization during implementation, and more robust system integrator partnerships.

While at Avalara, leadership obsessed over the high growth their competitor TaxJar was showing downmarket. TaxJar had acquired 20,000 customers in a year and a half. Much of this growth was free trials that then needed to be converted, and even after that were much smaller annual revenue deals; both a logo acquisition and quantity play. TaxJar had a strong marketing organization and focused its growth on down-market self-service attach, while Avalara ended up understanding its sweet spot was the sales-assisted mid-market that it could execute on in a scalable, repeatable way.

Few SaaS software companies under 2,000 employees and <$100M ARR can go after all market segments and do so successfully.?The sales, marketng and product capabilities are too different across all segments to do them all well with limited resources, and those that attempt it, end up doing only moderately well in any given segment. Only when companies get into the $500-$1B ARR range like a Salesforce or HubSpot does a company have the resources to expand focus and attempt to penetrate all segments.

For smaller SaaS software companies, pick your sweet spot, focus on building that business in a scalable, repeatable way, and execute on it like a well-oiled machine first.

Questions SaaS leaders and strategists may want to ask themselves:

1. In which market segment can you most effectively create a repeated scalable business?
2. Is your revenue performance in your "sweet spot segment" where you want it to be? (If no, it is likely too soon to be tackling other segments.)
3. To begin entering into other segments simultaneously, what are the other sales, marketing and product capabilities you need to effectively sell into that other segments?

Please feel free to add your own tips and tricks for how your SaaS company has decided where to focus in the market.

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