What Vertical SaaS Founders Get Wrong About Sales: An Interview With Fractal's Mike Flores

Once a month, we’ll be featuring a Q&A with one of our vertical SaaS experts. This week’s interview is with Fractal’s Sales Director?Mike Flores.

Before joining Fractal, Mike was the Sales Director at Ironclad and the VP of Sales at Snapdocs. During this conversation, Mike offers his perspective on a wide range of sales topics including how vertical SaaS sales differ from horizontal SaaS sales, how to sell before your product is ready, and what vertical SaaS founders often get wrong when they launch their go-to-market motion.

How does selling vertical SaaS differ from selling horizontal SaaS?

Horizontal sales motions are a gift and a curse because the market opportunity can seem infinite. But if you don’t take a very disciplined and focused approach to discovering your target personas, then you run the risk of random acts of sales instead of trying to find true signal and doubling down on that. That’s a nice thing about vertical software companies — they force you to have specialization. At Fractal, we’re challenging founders to be even more specific about their customer profiles within their vertical. For example, let’s say your vertical is optometry. What types of optometrist practices are an ideal fit? How specific can you be as you build an ideal customer profile? This forces founders to have a strong POV about the value they’ll bring to this niche within the vertical. And adding value has to be the number one objective for every salesperson.

How does a vertical SaaS founder determine which customer profile they should start selling to?

As a founder, you’re constantly looking for signal. Signal leads you to prospects with the highest propensity to take a conversation and ultimately convert to a customer. Usually that means someone most likely to be driven to change. The customer profiles I love are new hires if we’re talking about a more complex organization. A new hire is out to prove themselves. But it could also be a new manager or a brand new company. Those are all prospects that have to take a new lens on their process and have the room to make a change. In some cases, they’re expected to make a change. If the company has been around for 50 years and doing things the same way for 50 years, they’re probably not going to take your call. So these days there’s plenty of data out there that makes it easier to find that signal. It can tell you if they’re using a certain solution or a certain competitor, how long the business has been around, how much the business has grown, and so on. Those are important signals founders can use to build a profile.

Are these ideal customer profiles usually already familiar with the cloud or is it better to sell into whitespace?

I’ve found that the most expedient path is with somebody who already has unmet needs with an existing solution and they’re going to rip it out and replace it. Newly founded SaaS companies should be seeking a true early adopter. This is usually a prospect who has so much pain that they’ve already been doing something to try to solve for it. It’s going to be hard to convince someone who isn’t actively trying to solve their problem one way or another that they have to take action on that. Companies that are still using paper and pen probably haven’t felt enough pain to invest in software. They haven’t had the epiphany that there’s an easier way of doing their work. This isn’t to say that it can’t happen, but if you’re really looking for a signal, it’s going to be someone who’s using an inferior solution or is overlooked by a software behemoth in the industry.

This article originally appeared in Fractal’s weekly?Vertical SaaS newsletter. Subscribe today to get future articles delivered straight to your inbox.

How do the specific characteristics of an industry influence a founder’s go-to-market motion?

It’s all about matching with your customer’s behaviors. For example, compare a lawyer or someone who is behind their desk quite a bit to a home services company where they’re on the road a lot. You’re going to be able to get the home services company on the phone, but you’ll probably see lower conversions because it’s going to be harder to get them to sit down and take a meeting versus somebody who is behind their desk all the time and can make time on their calendar. The important thing for vertical SaaS founders is to try to be empathetic and put yourself in their shoes. Ask yourself: “What would be the most natural and easy way for them to take in the information they need without having to move their day around?” So call them between jobs or find out when they normally take lunch so you can make it as convenient as possible for them.

In the early days, should vertical SaaS founders try for in-person meetings with prospective customers?

Founders should strive for in-person meetings often because the customer is taking a chance on you as a founder versus being fully bought into your (very nascent) current solution. This often means selling to local customers first, if possible. Aside from in-person meetings, there are a lot of other benefits to that such as the ability to come in for onboarding your customer or troubleshooting in person. That’s a huge advantage. There’s going to be an opportunity for the founder to refine their product later and scale it out of their local customer base, but if you have that opportunity to sell locally why wouldn’t you?

Why should founders lead sales during the early stages of their company?

The best founders lead from the front. Sales is usually met with trepidation from first time founders. It is the scariest thing about starting a vertical SaaS company. What I try to tell them is you’re not going into a conversation to trick somebody and you don’t need to say the perfect line at the perfect time.

How can a founder know when they’re ready to grow their sales organization?

We’re pretty principled about this and believe that founders have to prove that they can sell their product themselves before scaling. It’s all about matching the right message to the market early on, and this takes?many?iterations. Founders need to validate it enough on their own before handing it off. A common mistake that most founders make is that they try to outsource sales too quickly. There’s going to be a lot of rejection and they tend to think that is a function of poor sales execution, rather than unrefined product-market fit. The job as a founder is finding product-market fit and it actually is worse to bring in someone that doesn’t have the same domain expertise and product mindset because you’re going to get a lot of false positives. You run the risk of seeking shortcuts to get a deal done, which could result in pivoting your strategy and resources toward these false positives. The founder should demonstrate the rigor, focus, and discipline to go after the right customers.

How can vertical SaaS founders sell to customers if their product isn’t ready yet?

If you don’t have a product yet, sales is just recruiting fellow business owners to see your vision and invest in you as a visionary. Ultimately you’re trying to match a problem to a solution and that problem exists before you have anything to show your customers. So you’re getting the prospect’s buy-in on your point of view of how their problem should be solved. A lot of work we do with founders at Fractal is helping them validate that the problems their customers have on a day-to-day basis is making an impact and it’s untenable for their prospects to continue that way. If it’s a problem your customers can live with, it’s probably not the right one to lead with. If they’re not like “my company can’t grow or get to the next level and I’ve tried to solve that by doing X, Y, Z, but it didn’t work,” then it doesn’t matter if you don’t have a product to show them because they’re not convinced that they have a problem. I actually think founders are more effective as a salesperson before they have a product because it forces them to talk about problems, impacts, and the cost of things not changing. There’s not a product demo that can be used as a crutch and hopefully sell itself.

What are some common misconceptions that first time vertical SaaS founders have about sales?

I haven’t met a founder who hasn’t done something in their past that translates well to being a good salesperson. If you’re a problem solver at heart, then you’ve really been in sales your whole life. But when people think of sales, the words that come to mind are often “untrustworthy,” “pushy,” or “sleazy.” It’s because everyone has been through an awful sales experience at least once in their life. It’s important for founders to leave that on the table and get back to square one in terms of what sales is really about. And what it’s really about is you’re trying to persuade someone to take an action on something that you think is important. We do this in so many aspects of our lives for things we care about, whether that’s a political cause or advocating for a raise at our job. I think that’s how vertical SaaS founders really see success in sales. They are passionate about what they do and they’re going to fight for it because they think it’s horrible that people in their industry have to work using inferior solutions. And don’t get me wrong — they’re still going to face a lot of rejection and they need to be prepared for that. I think that’s what sets founders apart from someone who is not an entrepreneur. They need to be persistent enough to get through all the friction that comes with trying to challenge status quo.

What is the single piece of advice you’d give to someone who is thinking about becoming a vertical SaaS founder?

The biggest risk to someone entering this area is that they can’t find passion in something that, on the surface, isn’t particularly “sexy.” It’s important to be able to find passion in a niche, have genuine curiosity about the industry, and a genuine openness to improving the mind-boggling work processes that still exist in that industry today. You have to lead with empathy in whatever vertical you choose. If you lead with empathy and you’re genuine about wanting to improve a process rather than just finding shortcuts, you’re going to do well.

If you’re interested in being the CEO or CTO of your own vertical SaaS company,?apply to Fractal’s entrepreneur-in-residence program today.