SaaS Interviews with CEOs, Startups, Founders
Sell SMB SaaS? He Generates $20m/yr using "Impossible" Outbound, Craver CEO
03 Dec 2024
Chapter 1: What is the main topic discussed in this episode?
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Hi, everyone. My name is Amin. I'm the CEO of Craver, a food tech startup working on SMBs. And today, what we're going to be talking about is the SMB SaaS playbook and how you can go building a high-growth SaaS engine by bridging the gap between the enterprise and SMB tactics. Over the next 20 minutes, this is what we're going to be looking at.
So one is, let's have a look at the SMB SaaS landscape, why SMB SaaS is a goldmine of opportunity, and what are the key differences between SMB and enterprise SaaS, and which one of those differences actually matter. We're going to be then looking into bridging the gap between the two, how to adapt enterprise tactics when it comes to sales and marketing to SMB SaaS.
and the importance of diversification when it comes to the sales and marketing tactics specifically for SMBs. We're going to be talking a little bit more about that. Of course, I'm going to be sharing some of our tactics and strategies and the practical tactics that you can implement to accelerate your growth today.
Now, why am I talking to you about this is because after an initial growth that we had, we've been dealing with six consecutive quarters of stagnation. We hit a wall in early in 2021 and we were not growing anymore. Those six quarters is where we were really trying a lot of different tactics, figuring out what's not working, to be able to reignite our growth.
And thankfully, we were able to do that. So those strategies that helped us reignite that growth are gonna be what I'm gonna be talking about today. And how did we go from there to turn around and really start our growth engine again? But first, I want to talk about the SMB SaaS landscape, and it's super important. This is why I'm so bullish on SMB SaaS in general, vertical SaaS.
It is a goldmine of opportunity. There's more than 30 million SMBs in the US alone. So the size of the market is very big. And when it comes to what they need and how you can serve them, These SMBs a lot of times are competing with enterprise. Like we are in the restaurant market. Our customers, coffee shops, local coffee shops is competing with the Starbucks of the world. Is it better now? Okay.
No worries. So these are competing with enterprise already. So again, a coffee shop, a local coffee shop is competing with Starbucks, competing with Dunkin', but they don't have the tools and the technology available to them to be able to compete when it comes to technology. And as a result of that, in this David versus Goliath,
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Chapter 2: What is the SMB SaaS landscape and why is it a goldmine of opportunity?
you hit the wall and you would think that the market is the problem. And a lot of times, I bet that the market itself is not the problem, but our approach to the market is usually the problem. The way that you can sell to an SMB is different than enterprise. What they need is different, how they buy is different, how they find you is different.
So it's very important to take that opportunity to detour and to change your approach on how you sell to them. So let's talk about bridging the gap. And basically, the mantra here is that you don't have to reinvent the wheel. We just need to adapt those tactics. Enterprise, there's a lot of literature out there. Enterprise SaaS has been honing their tactics and strategies over the years.
There's a lot there to learn and we should do that. We should pick up those pieces. But when it comes to deploying them, you need to adapt those tactics and not just adopt them. We've done that with a bunch of tactics from enterprise early years. We adopted them and they didn't work. I mean, just put them aside. Outbound doesn't work for SMB, put them aside.
Then we had to come back to it a few years later, figure out why doesn't it work, and figure out the formula, and then go from there to actually adapt it to our business, to the SMB market that we are going after, and really make it work. The last thing here is about diversification. For SMB SaaS to really success, succeed in selling to SMBs and growing, you need to diversify. It's very simple.
If you have an enterprise SaaS business, in order to get to that $1 million mark, a lot of times you just need one client. Sometimes you need four, five, maybe 10. But when it comes to SMB, you need hundreds of clients to be able to get to that point. The approach that you can get on an enterprise to go and knock on every door to get to those handful of client does not work when it comes to SMB.
So you need diversification because a lot of times things that happen is that some of those strategies work for a while and stop working. You need to come back to them and fix that and we had to deal with that a lot. If you don't diversify, you will not be able to succeed there. So I want to jump on the Outbound. I already mentioned it.
Outbound was the strategy that we adopted first without adapting to it, and it didn't work. But we came back to it, and we were looking at Outbound specifically.
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Chapter 3: How can enterprise tactics be adapted for SMB sales and marketing?
Why didn't it work for us? We were working with restaurants. Our ARPU at the time was around $4,000 per year. What the literature was telling us is that if you don't have an output of 25, 50, better, 100 grand a year, outbound doesn't work for you. Well, what was missing from that big headline was that there are assumptions in there.
The assumption on the number of leads that an SDR can generate in an enterprise, which is around one or two per week. There are assumptions around how long it takes to close a deal in enterprise, which is between three to nine months on average. Those assumptions were not true for us, so there should have been a way for us to figure this out, and this is what we did.
We had to increase and adjust our ARPU and increase that ARPU, and I will talk a little bit more about that a little bit later. We were able to increase that from $4,500 to $7,000, but then we figured out our median time to close a deal from a demo, to a closed deal is less than seven days. So that three to nine months does not apply to me.
So I can change the formula in a way that can apply to me. So if I put that one week, two weeks average in that formula, then what I can do, I don't need 50 demo book a week, but I need a seven to nine demo book a week from an SDR. The question was that, can I go and achieve that? So you can change the formula if you just go look at that and just don't take the headline.
So that was something about Altman. I'm gonna come to this. Altman is, in my view, is the most underused enterprise tactic that almost any SMB SaaS business with about $5,000 in ARPU, average yearly contract value, should be able to use today. Today, Altman is producing 30% of our top line revenue every month. Now, let's jump into the tactics and the strategies.
So Altman already spoiled it a little bit, so we're gonna go a little bit deeper on this side as well, but Altman is an important one. So increasing ARPU was a key for us to make it successful on Altman. The other thing that was key was channels. Again, looking at the literature for enterprise SaaS, Altman means cold email. But for us, cold email doesn't work.
We are working with restaurant owners. They use email, but they don't really open it. We tried a few different things. We tried Instagram and LinkedIn messaging. Instagram worked a little bit. LinkedIn, they're not on LinkedIn, so that didn't work at all. But we figured out, actually, what works for us right now, today, what works for us on Altman is actually the old school cold calling.
We pick up the phone, we call the restaurant, and we don't call their mobile phone number, we call the actual restaurant, which we can find the data. And for our target customers, a lot of times you can find a manager or an owner at the restaurant. And if we can hone our messaging, we can get them on the call and we can book that demo.
Right now we have an SDR team that consistently booking nine to 11 demos a week from cold calling. The other thing that we had to do, so we had to test channels to figure out what is the actual channel that we need to use to deploy that. The other thing was that you need to find the right team.
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Chapter 4: What strategies helped reignite growth after stagnation?
We learned that the hard way of really optimizing on something that doesn't convert. If you can tell the algorithm what actually converted, it can go and find you more of that. And we have been able to do that successfully with Meta at one third of the cost of our Google Ads. And Google Ads comes with intent, Meta doesn't.
But we can convert that much better now because it can find the right type of people for us. The other thing super important here, and this is a mistake I see a lot of founders do because we don't have time to spend on ads all the time. We set and forget. This has been the biggest mistake that we've done early days. The returns become diminished over time and it happens very fast.
The fourth one on this one is planning ahead. Right now, for example, for us, we're going to drop our ad budget in the next two and a half months significantly. Why? Because Meta is going to be flooded with ads because of the election. The cost for ad on Meta is going to go through the roof, and we don't want to spend our money on high-cost leads.
But then we're going to come back in January after everybody has spent their money, and we're going to double down on January. So you need to plan ahead with this, and you cannot really get to the results immediately. And last thing is diversification. I already mentioned that more robust. I have a slide on this and tell you why, what has happened to us.
But you need to reduce your reliance on any single channel. Otherwise, you're not going to be successful. We have had that problem on this one significantly. Let's talk about increasing ARPU. This is what we did over 24 months, increased our ARPU 54 percent from about 4,500 to 7,000. There are a couple of different small steps here and one big step.
Smallest step was that once we figured out our ARPU is the blocker for outbound, what we did instead of going horizontally and building for other markets adjacent market, we went vertically, added more features, added more pieces to our software that will make it more valuable to the customer. If I can create more value for the customer, now I can charge more for that.
So we created different tiers for our subscription and we're able to upgrade people through that and really increase our output through that. The other thing, the big jump that you see in the middle is a price increase. I highly recommend that because I believe most of you right now are undercharging for your tool.
Price increase seems scary, and our price increase was significant, on average about 30 to 40%. The net result of that was 25% increase in revenue for us, but basically we lost customer. We lost customer, but we were better off after the price increase. And it also enabled the outbound strategy for us. The next one is about different channels.
This is an actual text one of our sales people sent for the signing up. Text messages work really, really well right now for our customer base. And again, this is another piece about testing different methods and mediums. And this is true not just for outbound, this is true probably for a lot of other channels that you can use, and you can use it at different parts of your funnel.
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Chapter 5: How can SMBs compete with enterprises effectively?
My name is, again, Amin. LinkedIn is the only social media that I use right now. So if you want to connect with me on there, and my email is there if there are any questions. But we do have two minutes if there are any questions.