Matthias Hilpert & Martin Giese
The size of your clients matters when you design your sales processes as a Business-to-Business (B2B) startup. That is the essence of the very successful article “Five ways to build a $100 million business” by our friend Christoph Janz @ Point Nine Capital.
The core message of the post was that there are quite different ways to build a business that generates $100 million in ARR (Annual Recurring Revenue). This can be done by focussing on either a huge volume of small ARPA (Average Revenue Per Account) customers or a smaller volume of large ARPA customers. Depending on what strategy you follow as a founder you will need a very different approach to building your company, and the different approaches require different skills and a different organizational prioritization as well as a diverging product feature set.
When we wrote our book “Fast Forward - B2B Sales for startups” in 2021, we used the concept of the five animals as a central element in the definition of an ideal market segment. We went also further in identifying the key differences of the two animals that are “more equal than others”, ie the deer and elephants.
Today we wanted to dive a bit deeper into the differentiation of the Sales System of a deer hunter company with an average revenue per account or ARPA of around $10K vs. an elephant hunter company with an ARPA of around $100K.
What do we mean by a Sales System? The Sales System is basically a number of elements that have to be defined and synchronized to build an effective sales machine. We have outlined these elements in the table below and covered the most important ones also here: the standardization of the product and contracts, the sales process and pipeline, and the structure of the Sales team.
Standardization
As a deer hunter you will have to rely on a very standardized product. With an ARPA of around $10K a year, there is simply little room for putting a lot of effort into building features for individual customers or even a small group of customers. When the target is to build a product for 10,000 customers the only way to scale is to keep it simple. The same is true for contractual agreements. The goal here is to focus on a very standardized contract and terms & conditions in order to enable one-click agreements.
There is more room for engaging with individual requirements as an elephant hunter and most of the time, when you are closing a $100K+ contract there is also a definite requirement by mid-market and enterprise customers to customize or add professional services (eg larger onboarding services or data migrations) on top. This can be helpful to capture a strong opportunity to expand this customer and may also help in onboarding and lock-in. Keep in mind, however, that also with elephants there needs to be a limit on sales and product resources spent to close this customer in a profitable manner. For example you should avoid building a feature that will only be relevant for one customer. On the other hand, it’s OK to move a planned feature forward in the roadmap to close a customer.
Sales Process & Pipeline
One of the most important differences in hunting deer vs elephants is the lead times that should be expected. When there is Product/Market Fit, lead times for deer should be significantly lower compared to elephants, simply because there are fewer people in the buying team at the customer that need to be convinced and hence there are also much fewer calls and meetings needed (or internal politics to overcome). This also means that if you find yourself with elephant lead times when selling deer ACVs you will need to work on your product market fit.
Over the last years there has been a strong growth of new types of “elephant”, eg large tech scale-ups and unicorns. Very often agile decision making and budgeting at these still young and innovative organizations is leading to shorter lead times for relatively large budgets compared to more established players with a similar size. That certainly makes this type of customer more attractive over their “older” peers.
The size and velocity of the sales funnel or pipeline is another key separation between deer and elephants. When you’re hunting elephants, your funnel will most likely take on between 10 and 50 new prospects on a monthly basis when you’re working towards $1M ARR. This changes completely when you're out for deer. Here you will have to contact hundreds or thousands of new prospects on a monthly basis to achieve a similar new ARR figure. Once you reach larger revenue numbers and team sizes, naturally these numbers increase accordingly.
Sales Organization
Lastly we see quite a different evolution of the sales teams themselves. Founders that focus on deer usually build up a larger, but more junior SDR (Sales Development Representative) team to manage the initial part of the funnel and have later a higher number of AEs (Account Executives) with more limited seniority for the closing afterwards. These teams rely on a high level of automation in order to manage the large throughput they have in their pipeline.
On the other hand, we see founders that target elephants (and even more so whales) build up their sales teams initially with very senior AEs, regularly with 5-10 years of experience. Their sales process is less automated and the focus is on building up a high-trust and long-term relationship with their champion and economic buyer to be able to close deals of $100K and more.
There are quite a few more details on the differences of the Sales Systems between deer and elephants and we have outlined some of them in the table below. We are very keen to hear also your views on this and if you have further learnings on the topic we would much appreciate your comments and please also do reach out directly.
Good luck hunting!
| | Deer | Elephants |
ARPA | | €10,000 | €100,000 |
When to target | | Early/Mature product | Mature product |
Market segementation | Employees | 250-1,000 | 1,000-100,000 |
| Revenue | €100M - €1B | €1B+ |
Decision making unit | Decision maker | Managing Director/CEO | Management Board level -1 (EVP, SVP) |
| | Management Board level -1 (Director, Head of) | Management Board level -2 (VP, Director) |
| Involvement of Purchasing department | Possible | Mandatory |
| Involvement of Legal or IT departments | Likely | Mandatory |
Standardization | Product | Standard SaaS | SaaS (if required with limited Customization) |
| | | Professional Services |
| | Standard Hardware | Hardware (if required with limited Customization) |
| Contract and T&Cs | Standardized | If required with limited Customization |
| Signature | Online Signature | Physical signature or Purchase Order (PO) only |
Process | Lead time | 1-6 months | 3-24 months |
| Proof of Concept | Possible without | PoC mostly mandatory |
| # interactions prior to sale | 5-10 | 10-50 |
| # people in decision-making team | 2-3 | 3-10 |
Sales channels & tactics | | Inhouse sales | Outbound led Inhouse sales with some field sales for bigger ACVs Account Based Marketing tactics |
Pipeline sizing (<1mio ARR) | Prospects per month | 1,000+ | 100+ |
| Leads per month | 100+ | 10+ |
| Opportunities per month | 10+ | 5+ |
Sales automation | # tools in sales tech stack | 10-20 | 1-5 |
Operational Sales Reporting | Focus | Pipeline & team focus | Deal focus |
| | Conversion rates | Qualitative deal progress |
Organization | Sales team size for €1M ARR | 20-40 | 5-10 |
| Focus | High velocity hiring/firing | Senior industry expertise |
| | Sales academy / Career path | |
Remuneration | Salary level vs. market | Above average | Top quartile |
| Commission | Sophisticated commission system | Standard commission system |
| | Monthly commission payouts | Quarterly commission payout |
Motivation | | Varied contests and incentives | |
Channels | | Direct | Direct |
| | | Indirect & Integrators |
PS: Our thanks goes to Christoph Janz for the great feedback on the article.