How to avoid making costly mistakes in your B2B SaaS sales qualification process?

‘….It’s just not sustainable for me…’

This is how a SaaS CEO recently started a hot seat in my Mastermind program.

Most founders (initially) get their ICP wrong

Recently, I read this article from Lenny Rachitsky about the question: How to identify your ideal customer profile?

The big problem: SaaS Qualification is ill-defined

To master that art, it’s vital to understand the problems with qualification first. The first one is: Qualification is ill-defined. Apart from the ‘N’ in BANT (Need), I want to address something other than the basic qualification principles in Sales. Plenty has been said about the aspect of ‘Will they buy?” and “Will they buy now?”.

No, I want to dig into the qualification art that’s far more impactful. The question: Will they buy from us?

Far too many SaaS pipelines are filled with ‘deals’ that ignore to answer this question. It’s the reason behind many sales issues – and even more business issues that follow after the sale is a fact.

I am deliberately putting the sale in italics because if the question ‘Will they buy from us?’ isn’t a clear YES – the only way to go is to do a hard sell if losing is not an option.

That’s how many SaaS businesses end up in a vicious cycle of problems that’s hard to escape:

• Rough implementation projects
• Below-average gross margins
• Above-average churn rates

And so on.

 

Will they buy from us?

It isn’t a question only Sales needs to worry about.

It is a critical question everyone in a B2B SaaS business needs to have front and center in all they do – starting with top management.

If top management hasn’t created crystal clarity about the specific characteristics of what ‘a customer that buys from us’ look like – it’s waiting for those problems.

 

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Question for you to reflect upon

Beyond their revenue, number of employees, industry, or region – what specifically characterizes those customers where you don’t have to sell – because they buy?

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Now, let’s dig a level deeper. Beyond the big problem of definition, there are a range of mistakes that should be avoided.

The top 6 mistakes made in SaaS qualification

SaaS Qualification mistake #1: Too Vague

The biggest mistake made in qualification in B2B SaaS starts very early in the process: The fundamental decision of Who you are for and Who you are not for. I’ve written at length about this before (check my Essay here), but let’s put the finger on the weakest point for this post. Nine out of 10, it’s way too vague.

Why? The simple reasons are the pure fear of missing out on an opportunity and the urge to have the largest possible TAM to impress investors.

But that doesn’t help. Not you. Not your customers. Not your investors.

Being specific helps.

Let me give some examples. Imagine you’d deliver an ERP solution – and this was on your website:

1. An ERP solution for service-centric companies.
2. An ERP solution for Management Consultancies.
3. An ERP solution for Multi-national Management Consultancies.
4. An ERP solution for Multi-national Management Consultancies that want to accelerate growth in the US.

See the difference? Specificness helps in a variety of ways:

• It resonates instantly with your ideal customers
• It triggers Rolodex moments with people who KNOW your ideal customers

Specificness triggers a focused reaction, whereas unspecificness does not.

Being specific also helps the other way: Expressing who you’re not for in a credible way. It actually strengthens each other.

Let’s take the example above again:

“We offer an ERP solution for Multi-national Management Consultancies that want to accelerate growth in the US.”

It’s designed for businesses that value:

• Bottom-up empowerment over top-down
• Personal touch over procedures
• Flexibility over control
• Quality over speed
• ….

Just because you can functionally help a company doesn’t mean they are a perfect fit. We must remember we’re dealing with humans – personalities that stand for this – not for that. That’s fine.

Leverage that.

In short –

Get specific.

If you want to appeal to the right people,

you have to hit the right nerve with them.

 

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Question for you to reflect upon:

In what way are you credibly repelling the wrong people in your communication and segmentation? What if you did?

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SaaS Qualification mistake 2: Weak sensors

We spend so much time thinking of the customers we are trying to attract that we often neglect the equally important question: Who should we try to repel from?

You know – Those customers that perfectly fit your demographics or firmographics criteria (size, vertical, region, etc.) broadly fit functionality-wise but who you still should say no to because they slow your business down.

So, that question became the focus of yesterday’s SaaS CEO mastermind.

The prompt: What signals should you become sensitive to to signal the customers you should repel?

We broke out in pairs, deeply reflected, and arrived at some valuable criteria. Here are some of them:

• There’s a value-fit gap.
  The value your prospect wants isn’t the same as the unique value your solution was designed to deliver – hence, there is a risk for early churn.
• There’s a mission-fit gap.
  There’s a difference in aspiration of what you’re both aiming for to make a meaningful impact – hence a risk for early conflict and frustration.
• There’s a commitment-fit gap.
  Their perception of the commitment level required to transform successfully differs from yours – hence, a resource and energy drain risk.

A couple of things on this:

If there’s not a fit, that’s OK. They’re not stupid; you’re not stupid. They just want something else.

• They aspire to something different.
• They care about something different.
• They have different risk-tolerance levels.

That is why it is so critical to identify this as early as possible in the process. Failing to do so always results in friction – and you’ll notice that in several (subtle) ways:

• These customers never become fans.
• They’re draining your precious resources after the sale.
• They’ll push you off track and bloat your product roadmap.
• They’ll never get the momentum ideal customers experience.
• They’re much more costly to manage, hence eroding gross margin.
• Their lifetime value is far lower than your ideal customer showcase.
• They’re decreasing your retention rate.

Here’s the thing:

Remarkable SaaS businesses aim to turn every customer into a fan.

And that starts by developing the sensors for the ones that don’t have that perfect fit.

 

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Question for you to reflect upon:

What characteristics define the customers you should repel from?

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SaaS Qualification mistake #3: Too Early

The next mistake I constantly see in SaaS qualification is: Stepping in way too early.

The prospect is not ready at all to make a decision – no matter how compelling our arguments are or how hard we push.

There are two fundamental issues:

1. Hand-over from Marketing to Sales is ill-defined.
2. Marketing and Sales have individual targets.

What happens:

• The sales team wastes precious time on people who ghost them.
• Fingerpointing about who’s to blame for underperformance.
• Management makes decisions on unreliable forecasts.

Here’s the thing.

In theory, Marketing Qualified Leads (MQL) and Sales Qualified Leads (SQL) are separate stages in lead qualification.

They represent different levels of engagement and readiness of a potential customer to make a purchase.

The ultimate difference lies in two subtle words: Interest and Intent.

• An MQL is a lead that has
  • shown interest in a company’s products or services but may not be fully ready to purchase.
  • engaged with marketing efforts, such as filling out a contact form, downloading a whitepaper, subscribing to a newsletter, or visiting the website multiple times.

In other words, They typically exhibit behavior indicating interest but haven’t necessarily expressed a strong intent to buy.

• An SQL is a lead that
  • may have had direct conversations with a sales representative, requested a product demo around a specific problem, or submitted detailed inquiries about pricing and implementation.
  • have cleared specific criteria set by the sales team, such as budget, authority, need, and timeline (BANT).

In other words, they are considered more sales-ready because they have shown a stronger intent to buy soon.

So, how do you go about it?

Two simple tweaks:

1. Align targets between Marketing and Sales. It gets them to talk to each other because now they’re in it together.
2. Clearly define what needs to be true for an MQL to turn into an SQL. It cuts out the irritation and waste.

Remember:

Average SaaS companies are busy with everything that shows interest.

Remarkable SaaS companies perform because they prioritize strong intent.

 

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Question for you to reflect upon

What % of your Sales Pipeline can be labeled ‘Too early’? What would happen to sales performance if you move them back into nurture mode?

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SaaS Qualification mistake #4: No Guts

One dangerous mistake in sales qualification I constantly see: We don’t have the guts. We want too badly.

Here’s the thing

A prospect connects. They schedule a meeting. The functionality they’re asking for is something you can deliver. Qualified.

Not so fast. Just because they are looking for functionality you can deliver doesn’t mean they’ll buy from you.

Functionality is table stakes.

It gives you the right to have the conversation in the first place. In a competitive market, it gives you a 10% chance to win the deal – at best.

Let me illustrate

Yesterday evening, I ran a workshop with an enterprise SaaS sales team about the consequences of the repositioning project we did for their business.

As we went through the unique characteristics of the type of customers with the highest chance of becoming their ambassadors, one participant suddenly realized she should dump half her pipeline.

“This now makes total sense,” she started, “and I just realized we have never really had the guts to say ‘No’ as soon we sense the signals of a customer we do not want (even though we can help them).”

“Somehow, we believe there’s a chance we might be able to do a deal with them – but more often than not, it’s misleading.’

Remember

Saying ‘No’ to a prospect who’s not a perfect fit is a gift.

It shows you care and that you’re in there for the right reasons.

It makes you credible, respecting their time and effort as much as yours.

If you want to over-achieve your target every quarter

Focus on the prospects that are the look-alikes of your biggest fans.

Win rates will double, sales cycles will come in 3-4x faster, and deal size will grow significantly.

 

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Question for you to reflect upon

If you look at your sales pipeline, which deals are in there because you didn’t have the guts to say ‘no.’ What would happen if you told them ‘no’ today?

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SaaS Qualification mistake #5: Too Fast

Just because someone requested a demo for your SaaS product via your website, doesn’t mean you should just give them a demo….

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SaaS Qualification mistake #6: Too Money Stressed

Last but not least: Money.

I regularly have heated discussions with SaaS founders when I tell them part of their traction problem is related to their segmentation.

“Your problem is that you’re aiming way too broad,” I conclude.

“Do you mean I should say no to these businesses?” they argue.

“Indeed,” I reply

“But they pay…”

Here’s the issue with that:

The fact that they pay is not important.

Sure, keeping the lights on is important. I get that.

The problem is that they’re paying them more than they get paid.

Let me explain. Customers that are not a perfect fit…:

• have a higher cost of acquisition to start with,
• but then are more challenging to implement,
• give your customer success team a hard time,
• drain your R&D team capacity
• ….

Imagine they ‘pay’ you €10,000 for their annual subscription, and you’re aiming for a gross margin of +75%. (Gross margin is the percentage of income a company is left with after subtracting the costs directly tied to getting your products out into the market.)

It means you only have €2,500 wiggle room. Not a lot if you consider this amount also includes your hosting services, payroll cost for employees and programs directly involved in customer support, professional services costs, any travel related to product implementation and support, and development costs for building, including engineering salaries.

And then I am not even considering the harm they can do to your reputation – cause word of mouth from these customers can be killing.

It’s not hard to imagine that certain customers (even though they pay) can seriously drain your gross margin for years (or worse, forever) while others help you grow your gross margin to benchmark levels.

Which customers you decide to attract is your choice. Don’t take it lightly.

 

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Question for you to reflect upon

Which customers are detractors of your gross margin? What if you’d avoid those customers from entering your business (or even drop them)?

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In Summary:

We started this essay with the question: What can you (OR your sales team) do differently to free yourself from having to do those calls that will not result in direct business?

And the short answer to that question is: It’s not about volume. It’s about value and respecting both your prospects and your own time.

So, how do you go about it?

The fundamental thing to focus on is to get your Ideal Customer Profile (ICP) right. For many SaaS professionals, that’s hard. Until you take the opposite approach, define what customers you do NOT want.

It will help you get more precise about the customers that will make your business great.

But then, does it solve the problem of getting your ICP right? The answer is no – it helps a lot, but there are still traps you can fall into.

Here are the top 6:

1. SaaS Qualification mistake #1: Too Vague
   Why? The simple reasons are the pure fear of missing out on an opportunity and the urge to have the largest possible TAM to impress investors. But that doesn’t help. Not you. Not your customers. Not your investors. Being specific helps.
2. SaaS Qualification mistake 2: Weak sensors
   Remarkable SaaS businesses aim to turn every customer into a fan. And that starts by developing the sensors for the ones that don’t have that perfect fit.
3. SaaS Qualification mistake #3: Too Early
   Average SaaS companies are busy with everything that shows interest. Remarkable SaaS companies perform because they prioritize strong intent.
4. SaaS Qualification mistake #4: No Guts
   We believe there’s a chance we might be able to do a deal with them, but more often than not, it’s misleading.
5. SaaS Qualification mistake #5: Too Fast
   People come to your website because they struggle with something – and it’s that ‘ something’ that we need to focus on first. So the golden rule is: Discovery first, then (maybe) demo.
6. SaaS Qualification mistake #6: Too Money-Stressed
   Yes, you need customers to pay the bills. The problem starts when you allow ‘not ICP’ customers to enter the business and end up ‘paying’ them more than you get paid.

There are way more mistakes made, but fixing them will put you in a much better position.

That’s your opportunity for this quarter. Don’t only define your ICP; live your ICP in every part of your SaaS business.

 

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Question for you to reflect upon

Which of the six mistakes above will give you the biggest bang for the buck if you fix it? What if you’d address that one today?

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Additional resources to help you create your perfect segmentation cocktail

The easiest way. Book a free call to explore if there’s a fit to do this together.

Otherwise – here are three other options

• Read my essays to create remarkable traction.
• Read my book, The Remarkable Effect.
• Or simply subscribe to my daily email down below.