Seven Stages of Enterprise SaaS Qualification
Being scientific about your sales process allows you to help your sales team close more deals and better forecast your business. Here are the sales funnel stages to stay scientific.
One of the hardest parts of building a business is selling — mostly because it relies on other people outside your organization to say “yes,” sign on a piece of paper and hand over hard earned money. Sales is unlike most other task-based positions (engineering, design, product, operations, etc.) within an organization where you get X output by putting in Y input. That’s why sales people get paid so much.
Even though there isn’t a clear output in sales (example: “make 5 calls and you’ll get a sale”), there is still a process founders and sales executive can follow to ensure the team is directionally doing the right things.
Over the years, I’ve moved from a 5-step process to an 8-step process for enterprise SaaS, where Sales Development Reps are responsible for the first 4 steps of the process and Account Executives are responsible for the last four. SDRs get paid on Stage 3 - Stage 4 conversion, and Account Executives get paid when a deal closed. When I was leading sales teams and running RevOps, I would check my reports daily within Salesforce to see what stage my team had the most leads in. Were my SDRs having trouble moving from Stage 1 - Stage 2? How could I help them move quicker? Were my AEs having trouble moving from Stage 4 to Stage 5? What could we do to move prospects further along the funnel?
Having clearly defined stages also allows you to better forecast your business. As an example, if you know you have 3 deals in Stage 6 worth $1M each and 5 deals in Stage 5 worth $750K each and a conversion rate of 80% and 60% respectively, having defined stages with conversion rates allows you to forecast that you’ll close 2 of the $1M deals and one of the $750K deals by end of quarter for a total of $1.75M in ARR.
The stages I always use for enterprise SaaS are below:
Stage 0 - Graveyard
Probability to close: 0%
This is a business you could pursue, but no initial research has been done on them. No outreach has been made. You have no reason to believe they know anything about your business.
Stage 1 - Prospect or Marketing Qualified Lead (MQL)
Probability to Close - 5%
Two scenarios move an account to Stage 1: a founder or Sales Development Rep has done some homework on this company and there is reason to believe they would be a good fit. They have the right number of employees, the right amount of revenue, the right industry, etc. that makes them a good fit.
The second scenario is that people from this company continue to do research on your business. They download white papers, they visit your website and they trigger their lead score to increase above 99 (more on lead scores in another post coming soon).
Regardless of how the account got to Stage 1, they stay in stage one through any initial contact with multiple (or one) lead at the company.
Stage 2 - Discovery
Probability to Close: 10%
An account can move to Stage 2 after a Discovery phone call has taken place. A sales development rep sets up a 15-30 minute discovery call to learn more about the prospect and gauge their interest. Often times, it helps to have Account Executives on these calls as well for larger accounts to make the transition smooth.
On these calls, the Sales Development Rep is trying to assess if the prospect has BANTR - Budget, Authority, Need, Timing, Resources (more on this later, too).
Stage 3 - Demo
Probability to Close: 30%
An account can move to Stage 3 after an initial Demo has taken place and next steps have been established. During this pass, the Account Executive typically has been on the demo and agrees that the SDR has done their job to find and qualify the lead. Now the Account Executive ready to take it on and continue the sales process — conducting more demos and working the account through the sales process.
Stage 4 - Alignment
Probability to Close: 40%
An account can move from Stage 3 to Stage 4 once BANTR has been discussed and confirmed again (with the AE leading the conversation the second time), and the account is ready to talk about the close plan (“What are the steps from here to implement and get started?”)
Stage 3 to Stage 4 often takes multiple demos, with multiple stakeholders. This is where most deals get held up, as enterprise companies are constantly changing, priorities and budgets are shifting around, new stakeholders get hired/fired. So if you’re tracking time in Stage, this tends to be one of the longest times in stage other than Stage 1.
Stage 5 - Short List
Probability to Close: 60%
An account can move from Stage 4 to Stage 5 when the account has confirmed that they’ve narrowed their selection down to 3 possible vendors and your company is one of them. This is especially easy to determine when companies are going through a formal RFP process, but you can also ask the account “How many other companies are you evaluating?” to get your answer. Most companies will be upfront with this, as it gives them an easy out if they don’t select you.
Stage 6 - Contract
Probability fo Close: 80%
An account can move from Stage 5 to Stage 6 when the account has asked for your contract to begin the legal process and redlines. Even though you’re sending the contract to the customer, this is also a tricky place where deals get held up. You’re introducing new people on both sides and negotiations can take weeks with large companies whose legal departments have lots of other contracts being passed through.
Stage 7 - Closed Won / Closed Lost
Probability to Close: 100% / 0%
After the contract is signed, the account is moved to Stage 7, Closed Won that signals to your Services team that it’s time to take over the account.
If the contact isn’t signed or you’re disqualified at any point throughout the sales process, the account is moved to Closed Lost.
Stage 8 - Recycled
I’m a big fan of having an 8th stage for “Recycled” accounts. These are accounts that went through the sales process at one point and were interested, but decided not to make any decision on a vendor in the fiscal year. It happens a lot in large companies where they set aside budget for one thing and started a process with a vendor, but other priorities came up or they went over budget in other areas, and their process to purchase got moved to a different quarter or different year. Keeping track of these budget cycles allows you to stay top of mind through drip marketing campaigns and go back to these prospects when their next cycle is coming up.
If you have questions about any of these stages and/or need help setting up your funnel in Salesforce/Hubspot/etc, please reach out. Happy sales hunting!