April 15, 2019

7 Lessons for SaaS Startups from Salesforce.com

When Marc Benioff launched Salesforce out of a one-bedroom apartment in 1999, he had big dreams that would lay the foundation for a new, innovative software model and industry, one that over the last 20 years has, in the words of Marc Andreessen, “eaten” the traditional model for delivering and selling software.

7 Lessons for SaaS Startups

When Marc Benioff launched Salesforce out of a one-bedroom apartment in 1999, he had big dreams that would lay the foundation for a new, innovative software model and industry, one that over the last 20 years has, in the words of Marc Andreessen, “eaten” the traditional model for delivering and selling software. Here are 7 Lessons for SaaS Startups that all emerging SaaS companies can learn from Salesforce’s success.

1) Define your culture and values up front.

In Benioff’s book, Behind the Cloud: The Untold Story of How Salesforce.com Went from Idea to Billion-Dollar Company-and Revolutionized an Industry, he defines the “Plays” that made Salesforce what it is today. Play #7 is “define your culture and values up front.” Establishing workplace values helps all team members to align and harness their talents to work towards the same goals, helping a company to achieve its mission. Salesforce does just that, even to this day. On the first afternoon of work at Salesforce, new hires spend the afternoon getting paid to do service work. The purpose of this is to help new employees to feel good about their jobs, connecting them to a bigger purpose.

2) Prioritize ease of use.

Salesforce was built as a solution to make CRM software easy-to-use, from its out-of-the-box subscription model to its Amazon inspired website. A SaaS startup’s website, app, and any other user-platform should be easy for customers to navigate. Even better, as customers use these interfaces, companies are typically able to monitor specific customer interaction. With this real-time feedback, as trouble spots are identified, companies are able to proactively resolve them and continue enhancing their product, learning from present customers to make their software easier for new customers.

3) Build your business model around customer satisfaction.

According to Melinda Gonzalez, a Salesforce veteran, in the recently released “The SaaS Startup Founder’s Guide,” customer satisfaction means “keeping the customers you already have.” Customers will stay and refer others if they are successful with your service, and it’s much easier to generate cash from satisfied customers that are already happy to pay you than from new prospects you have to win over. Gonzales recommends establishing customer-centric values early, much like Benioff did.

4) Keep on the journey with customers.

Working effectively with customers means not only understanding their interaction with your service, but also their journey and changing needs as their companies change. According to Gonzales, “the need to evolve the definition of customer success” will occur as businesses mature. Salesforce did this early on with its pricing plan, which allowed customers to either grow capacity or functionality, according to each customer’s needs. “Giving customers two ways to expand also helped fuel geometric revenue growth for Salesforce,” according to ProductHabits.com. Understanding customer needs as they change will help to retain customers and potentially help to improve subscription options for new customers. So, when the time comes, which can actually be quite early in your lifecycle, make the investment into customer success, it will continue to pay dividends over the long-term.

5) Constantly ask customers and employees for feedback.

Tien Tzuo, CEO of Zuora, was the eleventh hire at Salesforce.Com and its first Chief Marketing Officer. According to Tzuo: “What I learned was Marc is always testing his ideas, testing his strategy, testing his vision.  Marc is always in a mindset to listen, to observe, to understand, and it’s this discipline that allows him to always be in touch with the marketplace. It’s easy for people in his position to get disconnected and fall prey to myopic thinking. That’s never going to happen to Marc.” In other words, Benioff was committed to continuously improving the Salesforce experience for its customers, rather than presenting a perfectly polished product that a customer could take or leave.Similarly, Benioff values employee feedback. Committed to attracting and retaining top talent (Play #12: Hire the best players you know and Play #105: How to retain top talent), the Salesforce model wants employees to feel good about the work they are doing and help them to contribute as effectively as possible.

6) Decide who to compete with.

In the early 2000s, rather than “developing a hostile attitude toward new SaaS companies, Salesforce leaned in.” They expanded their platform to be easy-to-use for up and coming companies, which made their product more broadly used, increasing its value. Additionally, they launched the AppExchange, so other companies could build their products right on top of SalesForce, thereby increasing SalesForce’s reach, loyalty, value and revenue.

7) Put the cart before the horse.

When Benioff went full-time at Salesforce, he had 10 employees that he had to find an office space for. He decided on an eight-thousand square foot space, which seemed huge at the time. But, his office choice was scalable, just like his software. According to Benioff in Behind the Cloud: “About a year after we moved into the Rincon Center, we were bursting out of the space.”Benioff’s confidence in general has been key to Salesforce’s success. His Play #52: Have the courage to pursue your innovation — before it is obvious to the market. Benioff’s office choice was exactly that.As an emerging SaaS company, it’s important to believe in your product, to recruit and retain the best employees, and to remain agile in all things. In a world of changing technology, it’s crucial to establish your company’s values (hint: customer and employee satisfaction are highly recommended) and to keep changing in ways that help your company to achieve these. We’re interested to hear how you approach your culture and customer-centric product development in your business. Drop us a note so we can get a sense.