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June 1, 2023

How to Keep Winning Enterprise Software Deals in a Downturn

The 2023 market has been challenging for enterprise software companies. The Federal Reserve has been raising interest rates to combat inflation, and the risk of a recession has gone up along with the cost of capital. Companies are responding by pulling back on corporate investments and overall spend.

This softening economic backdrop has slowed demand for enterprise software. CIO surveys, most notably Morgan Stanley’s 1Q23 CIO Survey, indicate that software budgets may see increases in only the low single-digits this year, down from the five percent or higher annual increases we saw in the pre-COVID period. Public software companies have seen their valuations slashed, and many are reducing their workforces to cut operating burn and navigate to profitability.

These market changes have complicated sales processes and raised the level of scrutiny potential buyers face internally. Sales leaders in the Norwest portfolio have noted that the office of the CFO is weighing in on more purchasing decisions and requiring more approvals for sales and renewals. Finance is raising the bar on tangible ROI in purchases while customers are asking for lower pricing and more favorable payment terms (e.g., monthly payment vs. annual pre-payments). More and more customers are even going so far as to ask for terminations of convenience, requests rarely seen in the pre-COVID-19 days. As if those factors aren’t challenging enough, some software companies are seeing more deals stall out as no-decisions as processes languish under new layers of legal and compliance scrutiny.

Enterprise Sales Strategies for a Down Market

To find out what tactics and techniques companies are using to maximize sales in this climate, Norwest conducted a series of interviews with sales leaders across the portfolio:

Our interview panel represents six companies at different levels of scale (from just over $10M of revenue to well over $100M) and they each sell into a different market. We spoke to vendors selling workforce management software to retail clients, compliance software to industrial companies, cybersecurity software to the Fortune 500, and more.

 

 

While all the interviewees were clear that no silver bullets or magic formulas exist, they did share some “common-sense” sales approaches that they have found valuable.

Here are the three core selling strategies that emerged during our conversations.

Evolve the Sales Messaging

Software can drive different kinds of value. Revise your sales message to promote an ROI that is relevant to customers who are experiencing the recession. This updated messaging can help the customer convince their CFO that spending money to buy your software is a sound investment. Take FloQast, providers of accounting automation software, for example. “Software can help you scale during good times, and help you be efficient during lean times,” said CRO Ken Sims.

FloQast helped its clients scale more confidently when they were in growth mode. As the economy contracts and clients focus on cost reductions, Sims explained that FloQast has evolved the sales message to emphasize the resource savings its existing customers can gain by using FloQast to be more efficient.

ROI has always been a core piece of value-based selling and it becomes more important when a CFO scrutinizes new spend. Cority has found success by training its team to sell around key business issues and lay out tangible ROI. It is also important to reiterate the ROI on an ongoing basis, so customers are reminded of why they bought your product in the first place.

A couple of other examples of conveying ROI to customers include:

  • Exabeam embeds ROI indicators in its product dashboard, which highlights the value-added activities that the system creates.
  • Legion incorporates a prospect’s data into its ROI calculator to more tangibly show the specific business outcomes they can achieve with Legion and the cost of delaying an investment.

Invest in Training. Adhere to Process.

All the CROs we interviewed spoke about the importance of training your sales team appropriately for this new environment. Salespeople need to be armed with the right tools and messaging to address the additional objections they are likely to face. Increased rigor needs to be applied throughout the sales process from upfront prospecting to downstream contracting.

Companies such as Cority are also reinforcing processes to empower the internal champion at a prospect so they can effectively sell the solution within their own organization. It is often helpful to have clearly mapped mutual action plans and ROI frameworks so champions can effectively manage their buying committees.

AbsenceSoft does sales enablement training to prepare their sales team for conversations with the various personas involved in the buying process as well as for the next steps they should expect in the sales process.

This is also the time to enforce process discipline across the organization. When selling becomes harder, greater discipline is required to ensure that deals aren’t delayed or put at risk because of missteps. Sales reps need to understand a customer’s new buying journey and press for repeated clarification on process so there are no surprises or hiccups along the way.

“The only thing you can control is process discipline,” said Cority CRO Stephen Molen. “Adhering to a robust sales process is ultimately what allows a business to scale.”

Other process adjustments we heard were:

  • AbsenceSoft has evolved its sales operations to address major deal issues at the beginning of the contracting process rather than at the end, where they historically had relegated them. The sales team tackles major issues upfront to avoid additional layers of approval and legal back-and-forth when a deal is near closing.
  • YipitData is more closely tracking opportunities through the funnel, so it has a better gauge of which activities and strategies are most successful in the new environment.
  • Many of our interviewees are leveraging marketing technologies to improve their lead-gen capabilities and better screen prospects.

 

A tough market is an opportune time for organizations to implement substantive changes to their sales processes. As AbsenceSoft CRO Phil Hodge put it, “A recession is a great time to revisit processes. During tough markets, the team is more embracing of dramatic change.”

Jimmy Hart, CRO at YipitData, echoed this sentiment: “Now is the time to really focus on fixing and improving everything you can. If we can succeed in a time like this, then when the environment recovers, we’ll be even better off.”

The process optimizations put in place during downturns will help maximize sales during a tough market and lead to more robust scaling when the market returns to health.

Experiment with Pricing and Packaging

When customers and prospects are budget constrained, experimenting with new product packages can ensure that accretive deals are not left on the table. For certain companies, a lower-cost essential product with fewer features can be a good way to land an account and provide runway for downstream expansion over time. These changes require a comprehensive conversation with functions across the entire company — How will the product be packaged? How will the various bundles and features be priced? How likely is the customer to buy them?

For companies like Exabeam that historically sold an all-you-can-eat platform at a relatively fixed price, the introduction of different bundles can ensure that your team captures all the incremental dollars it can. Legion, for example, has focused on starting their customers off small before pitching new products and upselling. Another way to start off small is doing more proof-of-concepts or landing in a small segment of the organization and working your way up and around to the rest of the organization – the classic land-and-expand strategy.

What’s Worked for Your Sales Teams?

We are thankful to the sales leaders who took the time to share their insights with us. We hope you have found them helpful as you navigate the current market. If you are interested in learning more about tactics for selling software in a recession, feel free to contact us (John Gu or Jason Chao). We welcome your questions, input, and thoughts on go-to-market approaches that work well in tough markets.

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