Navigating Sales Challenges In The Post-Pandemic Era

In the dynamic landscape of VC investment, trends within emerging technology verticals can shift rapidly. As of December 31, 2023, SaaS is regarded as the third-largest vertical, trailing AI & ML and fintech, with 2,776 early-stage VC-backed companies, according to PitchBook Quantitative Research: VC Emerging Opportunities.

A bottom-up analysis focusing on expected exit rates and returns positions SaaS as a standout performer. Early-stage SaaS companies are anticipated to successfully exit at a rate of 78.2%—a net 13.7% higher than the second-ranked vertical. This sector has consistently topped the rankings for expected successful exit rates over the past seven years, boasting nearly 3,000 companies currently eligible for VC exit predictions, second only to AI & ML. However, innovation, as gauged by the relative share of published patents, has seen a downturn. In 2023, the share of published patents by SaaS companies dipped to a two-year low of 12.2%.

This particular article focuses on Enterprise SaaS, a broad horizontal sector unified by its commitment to delivering business solutions, with a particular emphasis on the customer relationship management segment - sales. In today's rapidly evolving business environment, where market conditions change swiftly and customer expectations are high, strategic approaches and a deep understanding of emerging trends are essential for navigating sales challenges.

Why Sales Representatives Are Not Meeting Their Quotas?

The report by Quotapath, Solving the Biggest Sales Compensation Challenges, reveals a striking reality: a significant 91% of organizations face challenges with less than 80% of their sales representatives meeting quotas, attributed to factors like market volatility, skills gaps, misaligned sales strategies, and unrealistic quotas. To change the situation, Iliana Quinonez, a Startup Advisor, Angel Investor, and Former Salesforce Executive, advocates for the exploration of new methods, stating, "Instead, new creative joint sales models, collaboration-driven matrix teams in the sales process, and other methods should be explored."

Gabriela Constantinescu, Co-founder and CPO at Chambr, a Techstars portfolio company that helps sales reps close more deals through game-based simulations, examines the complexities of the sales landscape, stressing the importance of adaptive learning and behavioral change. She highlights the necessity for innovative solutions and personalized approaches, “It’s a complex and nuanced situation with many layers. Sales is learned through practice, and there's a significant gap between insights and feedback from sales tools and actual behavioral change. There's a world of difference between telling people what they should do and them actually doing it.”

Chambr's interviews with junior sales representatives and managers have unveiled an intriguing, non-obvious connection. Alex Poe, Co-founder and CEO at Chambr, shares, “We’ve noticed that even more experienced reps struggle, especially when new product features are introduced. Some reps were not up to speed even six months after their release.” This suggests that adaptability to new features during rapid development phases is critical.

Gabriela further adds, “Conversations with managers have also brought to light several insights. Some observed that talent from startups often outperforms that from established enterprises. Others mentioned difficulties in keeping up with product releases during rapid development phases. For some, the focus is on adoption, with teams overwhelmed by the number of tools they must use.”

Certain sectors, such as High Tech, Finserv, and HigherEd, face distinct challenges. The High Tech sector struggles with rapid landscape changes, the rise of AI/ML, and the impact of recent layoffs. Finserv grapples with macroeconomic factors and geopolitical instability, while HigherEd confronts geopolitical and social pressures. Iliana Quinonez remarks, “We are witnessing an unprecedented time when at least five top educational institutions lack leadership due to these challenges.”

The Role of Training and Enablement

Sales training is crucial for enhancing performance, yet it is often overlooked. Alex Poe highlights the shortcomings of traditional onboarding processes and advocates for a comprehensive development path tailored to individual strengths and areas of expertise. He details, “I’ve seen companies onboard reps in just two or three days, leaving them to their own devices with only a monthly check-in. This approach contributes to less than 25% of U.S. sales reps meeting their quotas.”

Learning is challenging, requiring intentionality. As every person learns differently, effective training must be timely, relevant to the industry, client base, and products, and personalized to leverage the sales representatives' strengths and weaknesses. Alex observes, “Conversations with sales enablement managers have shown that teams benefiting from a structured development path outperform others by 20-25% in conversion rates.”

The post-pandemic era has introduced new sales challenges, including remote work, evolving client expectations, and enablement hurdles. Rapid technological advancements have led to the development of new tools and platforms for sales teams. Artificial Intelligence (AI) has notably revolutionized this space, enabling sales representatives to automate tasks such as outreach, personalize emails, and enhance data analytics and market research. This innovation opens vast avenues for further advancements. Alex Poe from Chambr shares his perspective, “I personally believe that, at least in the near future, AI will augment and enhance what the sales team can do, not replace it. Just imagine, how likely are you going to respond to a cold phone call or email if it’s done by a machine? In the end, it still needs to be the sales rep on the other side of the meeting. Maybe that will eventually change in time.”

Gabriela Constantinescu sees the evolution of sales training as a prime opportunity for realignment with the demands of the 21st century. The traditional passive learning model is increasingly inadequate, calling for a shift towards more engaging and practical approaches.

Echoing this sentiment, Iliana Quinonez advocates for the integration of gamification, collaborative models, and peer support into training and enablement programs, aiming to enhance their effectiveness significantly. As technology continues to reshape the market landscape, sales professionals are required to cultivate new skills and qualities to thrive. Adaptability has become paramount, with rapid technological progress and shifting markets presenting constant challenges.

Additionally, customer empathy and centricity have gained importance as differentiators in a competitive environment. A Salesforce report, What Are Customer Expectations, and How Have They Changed?, highlights this shift, noting that 80% of customers now consider the experience a company provides as crucial as its products and services. This underscores the need for sales representatives to prioritize understanding and addressing customer needs on both corporate and personal levels.

Furthermore, resilience has emerged as a vital attribute, enabling sales professionals to recover from setbacks and navigate the increasing challenges of sales cycles. Collaboration, too, has taken center stage, selling is no longer about products but about offering solutions to specific customer problems, requiring a coordinated effort across teams.

What are investors looking for?

The economic landscape of 2023, marked by market volatility, has prompted a reevaluation of growth strategies among SaaS companies. The focus has shifted from aggressive expansion to achieving efficient growth, evidenced by a significant drop in capital and deal count in the year's first quarter. This recalibration towards key performance indicators (KPIs) reflects a strategic approach to demonstrating a company's value and potential for sustainable success. Metrics such as gross revenue retention, customer lifetime value, and customer acquisition costs, along with the team's experience and the unique advantages of your company, paint a clearer picture of the company's worth. Alex adds, “The question I get asked a lot - What is your unfair advantage? A couple of answer examples to that one: a patent, a stellar founding team, a tech moat, a unique market insight, proprietary IP, or a crucial partnership.”

If we are talking about specific trends or innovations within the sales technology sector, AI still keeps attracting significant investor interest, but even in this industry, the push is for concrete use cases for which customers are actually paying you for. Alex continues, “It’s not enough to just say you are an AI startup. That early traction is very important.”

However, there are red flags that VC investors watch out for when considering investments in sales startups that founders need to mitigate somehow. One of them is a competitive landscape. Alex Poe, Co-Founder and CEO at Chambr, explains the importance of doing your research and analyzing your competitors in the space. Many tools are tackling the sales process automation and optimization, contrary to sales training and sales reps’ growth that are less served areas.

Gabriela, Co-Founder and CPO at Chambr, mentions that demonstrating a direct impact on ROI, such as through increased conversion rates or revenue, is crucial for differentiation in this crowded market. “These areas need to be clearly tied to the ROI, like increasing conversion rates and driving more revenue for companies. Having a strong differentiator and a deep, unique insight that other players on the market don’t have comes up a lot in our investor conversations.”

Despite these challenges, opportunities abound for those who can offer genuine value to their customers. The sales sector remains a fertile ground for innovation, with companies eagerly seeking new technologies to enhance revenue generation. The key to standing out lies in delivering solutions that not only meet but exceed customer expectations, leveraging the transformative potential of technology to redefine the sales landscape.