Should my SaaS try to get enterprise customers?
Ever since we started Transistor, we've had interest from larger, enterprise companies. (Especially for our private podcasting feature).
But they don't want to look at our pricing, and just sign up with a credit card. Inevitably, they'll want to book a call. 😱
Even when we try to address their questions over live chat, show them demo videos, and send them our FAQs, many of these companies really want to book a Zoom call with me.
So, for the past few years, I've been doing these demo calls with qualified leads. It's been an experiment!
Is it worth doing enterprise sales calls? Let's do the math.
I just went through my calendar and counted every demo call I've done since Jan 1st. So far this year, I've done demo calls for 26 companies.
We really tried to pre-qualify these folks beforehand. These aren't small SMBs; most them were big brands you would recognize.
Of those 26 demos, 50% became customers.
First, some background. Transistor.fm provides podcast hosting and analytics. In the podcasting industry, most customers are prosumer or SMB. Our most popular plan is $19/month.
So back to the sales calls.
Since January:
I did 26 personal demos for larger enterprises.
Those calls took me ~1 hour each, so my time investment was 26 hours.
50% became customers.
The biggest account was $1,990 / year. On average, each of these new customers pay $730 / year.
Overall, those 26 sales increased ARR by ~$10,000. Is that worth it? If doubled-down could we make more money from enterprise customers?
Is our SaaS a good fit for enterprise customers?
Every market is different.
For example, if you look at ConvertKit's numbers (which are public), most of their customers sign up on their $29 plan:
Their ARPU (average revenue per user) is also relatively low: $65.
My guess is Convertkit's market is similar to Transistor's: individual creators, small brands, agencies, and communications professionals.
From what I can tell, ConvertKit doesn't sign enterprise sales contracts. They've built their business on small, self-serve contracts. And it's working: they have 37,000 customers!
My guess is that MailChimp, Squarespace, and Carrd are similar: the shape of the market is heavily weighted towards smaller, self-serve accounts.
Even Atlasssian, a company that did $1.6 billion in revenue in 2020, doesn't do custom contracts.
In some categories, serving enterprise customers makes sense! This seems especially true for SaaS that do per-seat billing. For example, it was revealed that 40% of Slack's revenue came from contracts worth $100k+/year.
But an enterprise-sales process clearly doesn't work for every market. There needs to be enough demand, at high prices, to necessitate all that additional work you do to get those customers.
There's another important factor to consider: what kind of business do you want to build?
With Transistor, Jon and I wanted to build a business that was:
👩💻 Small: less than 5 people.
😇 Calm: low stress, minimal complexity
📈 Profitable: maintain our current margins, without having to commit to more stress.
Building a business that serves enterprise customers looks a lot different than the company we have now. It would require more staff, more process, more compliance, more legal, more stress, and more meetings. We don't want that!
So what are we going to do at Transistor.fm?
I think I'm going to stop doing demos for bigger enterprise companies.
Why?
Supporting enterprise customers would require us to massively change our company (hire more folks) and our product (build iOS / Android apps, add SSO). It would make everything more complex and, frankly, less fun.
There are other competitors pursuing enterprise podcasting: I've heard uStudio and Storyboard can charge up to $250k/year. But I'm not convinced that the overall demand is big enough to justify the enterprise sales process. (And again, I don't want to build that kind of company).
One thing I will keep doing: doing calls with individual creators and podcasters who are creating good work, and fit our customer profile. 👍
This isn't to say that doing demo calls is a bad decision for other self-serve SaaS. It really depends on the shape of your market, and what kind of company you want to build. It might make sense for you; it just doesn't make sense for us. ✌️
Cheers,
Justin Jackson
Co-founder, Transistor.fm
@mijustin