Introduction - Mermaid and linked page
Understanding the journey from initial contact to a lead to a customer is paramount in the context of B2B software businesses. Leads come in various shapes and forms but they fundamentally are generated by two sources:
a) sales teams and b) marketing efforts.
Let’s break down what each of these terms means and how they differ.
This chart below encapsulates the process of lead generation and conversion. The focus of this article is SGL. A detailed introduction to MGL is set out in a separate article here.
graph TB
EC(Existing Customers-Cross Sell) --- MGL
NC-Ref(New Customers-Referral) --- EC
NC-Oth(New Customers-Email Campaign) --- NC-Ref
EM(Email Marketing) --- Website
Website(Website) --- Social
Social(Social) --- SGL
SGL --- Conversations
MGL --- Conversations
Conversations --> PN{Pressing Need}
PN --> |Yes|Opportunity
PN --> |No|Conversations
Opportunity --> SQS{{Sales Qualification Stages}}
SQS --> WL(Won/Lost)
Please note that sometimes the industry refers to SQLs and MQLs. In this context, MGLs are similar to MQLs in that these are leads generated by marketing efforts. However, SQLs relates to Sales Qualified Leads after marketing ‘hands over’ MQLs to them for the sales team to further qualify the opportunities. This article is not referring to SQLs which is covered under opportunity qualification once a lead has been generated either by the sales team or marketing efforts.
Example scoring criteria - Simple Table
Dimensions | Category | Example scoring criteria | Example score |
Lead property | Job title or responsibility | Title (Director or VP) | +12 |
Title (Manager) | +7 | ||
Purchase Authority (decision maker) | +15 | ||
Company information | Target Industry (large company) | +10 | |
Target Industry (SME) | +5 | ||
Geographic location | Target Location | +8 | |
Non-Target Location (e.g., non-English speaking country) | -10 | ||
Lead activity | Web/App activity | Visits Pricing Information | +10 |
Watches Demos | +10 | ||
Attended Webinar/Seminar | +8 | ||
Frequent Website Visitor | +6 | ||
No Website Activity for 1 Month | -5 | ||
Negative Social Media Comment | -4 | ||
Email activity | Email opened | +5 | |
Email Unsubscribe | -10 |
Accounting principle - Table with text
Category | Definition | Pain point | Resolution |
Deferred income | Deferred income is a liability that arises when a company receives payment from its customers for goods or services that it has not yet delivered or started but not yet completed as of period end. This typically occurs when customers prepay for software licenses or subscriptions that will be delivered or used over a period of time, such as a year. | Accounting software programs are designed to record transactions as they occur, with little regard for the timing of revenue recognition.
Deferred income is often complex to track and manage, especially for businesses with multiple contracts and revenue streams. | Adjust manually or with the help of add-on software by creating a liability towards payments received in advance and reducing revenue for the subscription that will be delivered subsequent to the period in question.
Debit Revenue,
Credit Deferred Income. |
Accrued Income | Accrued income is income that a company has earned but has not yet received in cash. In the case of a software company, this can occur when the company has completed work or provided a service but has not yet invoiced the customer or received payment. | Accrued income often requires estimating the amount of revenue earned but not yet received, which can be subjective and time-consuming. Since accounting software programs primarily track transactions with associated cash flows accrued income has to be captured manually. | You adjust revenue manually to include income accrued but not yet invoiced. Revenue increases and an equivalent asset is created.
Debit Accrued Income,
Credit Revenue. |
Prepayments | Prepayments are a type of asset that arises when a company pays for goods or services in advance. This can occur when the company pays for expenses such as rent, insurance, or software licenses in advance. | Prepayments are often associated with long-term contracts or recurring expenses, making it difficult for accounting software to automatically adjust their value over time. | Manually reduce expenses to reflect only what pertains to the period and create an asset for prepayments.
Debit Prepaid expenses,
Credit Expenses. |
Accrued Liabilities | Accrued liabilities are expenses that a company has incurred but has not yet paid or recorded in its accounts. This typically arises when the company has received goods or services but invoices are not received from suppliers as of period end | Accounting systems primarily focus on transactions with associated cash flows and without a supplier invoice expenses are not accounted automatically. This makes it difficult to capture accrued liabilities without manual adjustments. | Adjust manually or with the help of add-on software to include expenses that need to be accrued/built up for the period.
Debit Expenses,
Credit Accrued liabilities. |
Access rights - Loom
Here is an example of our discussion on providing access rights for accountants.
Content marketing calendar - Google sheet
It is important to organise and manage the execution of your content. This is where a content calendar comes very handy.
A content calendar typically lists out the exact content description and release dates on a simple excel sheet and acts as a tracker that allows to manage the execution. (see template attached - )
Tern principles - Google slides
Tern principles - PDF
Here is a copy of Tern principles for your reference.
Content library - Google doc
This link provides an example of a google doc as an embedded object into a content library sample page.
Generate leads - Numbered list
There are multiple ways to generated leads through your sales teams.
- Targeted email campaigns. This involves sending tailored messages to B2B business leads outlining the pain you solve, how you did this for other similar customers in the prospect’s industry and requesting for a potential conversation. With increasing engagement with the prospect, the emails should be more personalised to the prospect. See more below under Prospecting for sample intro emails and follow-up messages.
- Social selling - As the name indicates, this refers to following B2B leads on social media, engaging with leads and developing relationships over time. In the B2B space, the major social media network is LinkedIn and we would recommend this over the other social media.
- Trade conferences/industry events - Trade conferences offer a unique opportunity for B2B software businesses to meet potential sales qualified leads. They provide a platform for direct interaction with decision-makers, fostering relationships and understanding client needs. Prepare by researching attendees and setting up meetings in advance; present your software solutions, tailored to the audience’s needs; network to build relationships beyond the conference; and follow-up after the event to nurture leads. Remember, the goal is not just to sell, but to build lasting relationships that lead to sales.
- Customer referrals. See more below.
- Cold calling - Telephoning B2B leads, explaining the benefits of your product or service is another form of outbound sales effort. We frankly haven’t seen this work very well but this is an option you could consider if you have the time and resources to dedicate to sales efforts.
You can choose one or more of forms above that works best for you. Cold calling is not so commonplace anymore. It is less likely to be a productive option to generate SGLs for complex B2B software sales. In general, we have seen targeted email campaigns to work the best individually and cost effective. Although LinkedIn could be a great source of content marketing, when it comes to generating conversations, we have found that LinkedIn does not work as well as targeted emails.
Prospecting - Callout
Elevator pitch
At the prospecting stage your sales team is trying to move ahead of the gate keepers to start communicating with the decision makers. A good strategy will allow you to establish a touch point with the decision maker to establish an up front contracts.
At the prospecting stage you should prepare the elevator pitch of your proposal that is specific to a target customer segment. This will cover:
- Introduction and company positioning - identify yourself, your company and in broad terms what you specialize in, for what type of clients/Job roles/Industries – in English without using jargon.
- Overall benefit or pain statement - give a special feature or particular pain solution that differentiates your product service or company.
- Pattern interrupt e.g. You might not need our help.
- Pain statements - mention 2 or 3 surface level pains that you can cure, that may be present in the prospects world.
- Hook question - identify a pain to explore.
In our experience, an prospecting email has a high changes of generating leads if it includes some key elements. Let us illustrate the elements with an example.
Good prospecting emails embodies the above elements and as a result grabs the attention of the target audience.
CRM tracking - Bulleted list
In your CRM, you may want to consider tracking all your “cold contacts” in these following categories.
- To Chase - you have identified potential targets/prospects (i.e. individuals within an organisation) but you have to yet to make first contact
- To Re-Reachout. You have spoken to this contact before and it is time to re-reachout.
- 1st Contact* - after sending first email and linkedin (until they respond)
- 2nd Contact* - If no response after a certain period, then they will move to 2nd contact (after sending second email)
- 3rd Contact* - Email or LinkedIn "Is it worth chatting?". If they do respond then move to qualified LI/Email. If they don't respond, send a 4th email and move status to "No response"
- Awaiting Intro. We are awaiting an intro to this person from a known contact.
- Awaiting Meeting Setup. If you are exchanging emails with the contact but a meeting has not been setup.
- Meeting Setup. Meeting has been setup with the
- Meeting Done. Meeting completed and either create a new opportunity or set reminder to re-re-reachout again in six months (or longer) depending on the contact.
- No Response. No response after four attempts.
- Not interested-Go Away. The contact has sent you a note not to contact them again.
- Not interested-Stay in Touch. Contact has politely declined your meeting but asked to stay in touch with you.
- DNC/NA - means Do Not Contact or Not Applicable.
Reachout cadence
- Reachout timelines 1st to 2nd reachout - 7 calendar days
- 2nd to 3rd reachout - 14 calendar days
- 3rd to 4th reachout - 21 calendar days
Winning - Link to another page
The final stage of the journey is ‘Winning’, which represents the successful conversion of a lead into a customer. This is the ultimate goal of the process, signifying that the lead has gone through the qualification stages and has decided to purchase the product or service. From the time of having qualified leads to winning the customers it could take well between six months to a year or even more than a year in some cases. You can refer to our insights on opportunity qualification.
Building expansion into your pricing model - Toggle list
Integrating expansion into the pricing model can be a significant driver of revenue growth for small to medium-sized B2B software companies. By anchoring pricing to a value metric linked to the customer's usage, businesses can naturally increase revenue as the customer expands their utilization. Two common pricing models align price with value to capture expansion: per-user pricing and per-usage pricing. The former, commonly used in software companies, ties pricing to the number of users or seats, while the latter links pricing to the actual usage of the product or service, like the number of transactions processed or storage space used. Both models effectively align pricing with the customer's increasing value, capturing growth in revenue as the customer's usage and derived value expand.
The obvious question that follows is, which value metric should one pick. While it depends on the customer’s experience. If you had a change, you should pick a value metric that fulfills these three key criteria.
- Firstly, it must align with what customers value the most. If you take the example of a B2B email marketing solutions provider, the customers prioritize growing their email lists, thus the pricing model could be aligned to the number of contacts to which a customer sends marketing emails.
- Secondly, the chosen value metric should grow in line with customers' growth and increasing value derived from the product or service. For instance, in the realm of B2B asset management services, 401(k) administrators bill based on a percentage of plan assets, allowing their revenue to increase as their customers' plans expand.
- Lastly, the selected value metric should be easily comprehensible for customers, emphasizing the connection between the price paid and the value received. This brings in transparency to the whole model.
One of our portfolio companies, CADS operates design software for groceries, departmental stores and retailers. It prices the software based on # of users. For the segment in which CADS operates, what matters more is the size of the stores that how many users are modelling. This is mainly because super stores / mega stores are different from small stores and the layout challenges are varied in nature. The right metric should be square footage. The loss or revenue was quite evident, particularly in the case of one of the multinational companies that implemented new retail stores over a period of six years. During this time the customer had expanded into 18 countries. If the price had been based on square footage CADS would have generated lot more revenue vs its current user based pricing model. Value based pricing that captures expansion is hard to achieve as a small business selling to large businesses particularly early on as you need a foot in the door with customers. However once a certain level of stability is achieved, you need to try and push it with your customers.
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