Decoding Sales
A podcast where an engineer (Alex Allain, CTO @ U.S. Digital Response) and salesperson (Peter Ahn, Tech sales coach) demystify what it means to build meaningful business relationships in the modern age.
Decoding Sales
Episode 30: Recession-proof sales
High inflation, negative GDP - possible recession? It doesn't matter what you call it, it matters what you DO. In this episode:
👀 Peter shares his view of the state of play and how sales teams should be reacting
🎯 How a recessionary environment forces you to up your game and what you need to do differently
🎱 How to forecast and adjust your quotas in the face of uncertainty
🤝What to do when a customer wants to renegotiate a contract due to layoffs or lost business
To get more sales advice from Peter, check out Peter Ahn Sales School and subscribe to his newsletter for bi-weekly coaching nuggets!
Welcome to decoding sales, a podcast where an engineer, that's me, Alex, and a salesperson.
Peter:That's me, Peter.
Alex:Talk about the art and science of sales as it relates to life and business. In this episode, we're gonna go deep on a current event topic, which is what some people are referring to as potentially a recession, and we're gonna explore the impact of that. So if you're worried about how your startup or your sales team should be addressing an economic downturn, a slowdown in economic activity, you maybe you're looking at the recent CPI numbers and saying, gosh, inflation looks really high. Doesn't that mean uh, Mr. Powell is gonna raise some numbers that make my life harder. Well, you're in the right place. We're gonna explore what's going on in the field right now and how you should be reacting. So Peter let's kick things off. First question here is really, are you seeing indications of a recession or downturn in the field either what your teams are seeing or what you're seeing in the startups that you're advising. Like what's what's going on out there?
Peter:Yeah. I mean, definitely it's, it's still fairly recent since we've heard of a recession and been experiencing it, but we have heard from specific customers, from prospects, they're at the very least reassessing their technology budgets. Um, I'm also hearing this across peers in my field. Obviously, I, I know a lot of heads of sales and CROs, and they're also seeing lead volume decrease as well as their existing evaluations slow down because everybody's being asked to reassess their budgets. So I think the implications of that are you have to be targeting the right buyers, folks who are already had your solution in their budget. Folks who are at the late stages of evaluating something in your space. And then the other thing is your technology has to be a must have not a nice to have. There has to be a really compelling ROI story to to help your prospects and your customers get through the downturn. Um, because you know, any of the peripheral services that again were nice to haves are gonna be cut outta budgets in my opinion.
Alex:That's really interesting. So what you're saying is that everyone is kind of going through this, like budgetary reevaluation, and if they're kind of currently in a deal cycle, that's slowing down. It sounds like because the budget is being worked through and you're just not getting people reaching out to you unless you're, you're kind of in that narrow spot of must have budget.
Peter:Exactly. Yep. Yeah. And, and I'll say like, even for folks that are in the late stages of evaluating your product, there might be a little bit of slowing down. I think ultimately those buyers, most of them will still buy your product because it was in the budget and, and it was, you know, likely something that they were expecting to have in the second half of 2022. But if it, if, if it's not on somebody's radar, it's very unlikely that you're gonna get somebody's attention, you know, from a top of top of funnel perspective, So, yeah, we are seeing that dynamic.
Alex:So as a, as a sales, as a sales leader, how do you navigate this with your team? I mean, you, you set quotas for them on a, I assume, roughly quarterly basis and suddenly middle of the quarter, people are cutting back on budget and you're probably thinking about what do you do for the next, you know, quarter? How, how do you kind of handle that dynamic adjustment?
Peter:Yeah, I think the first thing is not to react too harshly or react too negatively immediately. Um, you know, like I said, at the beginning of the episode, it is still early, so it's important to keep your sellers motivated and also have them ask the right questions, ask more pointed questions to their buyers to say hey, I know that something's happening in the economy. I just want to make sure that our, our deal is still in progress. And if not, tell me like what the length of time is for me to expect this to get delayed. And so I think that there's two aspects first is you know, some companies are still going to purchase, like they plan to, so you have to, you can't react and you can't have your sellers be down on their luck. But the second part of that is you have to allow and, and train confidence in your sellers to ask the hard questions. Um, if there is a slowing down of the decision or, you know, a potential punting of the decision for months or years,
Alex:And do you see that as kind of like start of recession one time, re-eval your pipeline, or is that something that you also expect to need to keep doing as new leads are coming in. How does it differ from steady state at that point?
Peter:Yeah. Yeah. I think, I think you do need to have rapid feedback loops around what's happening in the field. So even though right now, we don't have that much data, you know, let's say we have three or four months of data around how the market is reacting. Um, you know, it's gonna be very different, even two to three months from now. So I, I do think as a sales leader, while you can't react to too heavily, you still do need to be able to like even weekly assess what the sentiment is out in the field. Um, and so I'm constantly asking my reps to make sure they're logging notes about the sentiment, not just, you know, the, the logistics of the deal, but also like how is the buyer feeling and what else is happening internally from a political dynamic and just a cultural dynamic, just to make sure we're keeping a pulse. And so I do think that's very important too.
Alex:I don't, I don't know if you'd really address the thing. I, I, I meant to ask, which I might not have come through very well.
Peter:Yep.
Alex:but I was, I was kind of wondering, do the qualify, qualification questions you ask during a normal deal process. Do you add more in, during a recession or were you what we were describing around those pointed questions is that something that's more about your current pipeline that you're assessing?
Peter:Oh, great question. So. To answer that question. I think the questions that you ask are still fundamentally the same, right? In, in our company, our team right now we're utilizing BANT and there's all these sales frameworks, right. There's medic and the acronyms all stand for different things, but for BANT that stands for budget, authority, need and timing. And so we're training our sellers to ask those questions on every single call and as early as possible to understand the likelihood of a deal happening. Now, the importance of those questions becomes more important in a downturn. Right. Because even though, you know, you're supposed to be asking these in a steady state, we all know it's inconsistent, which reps do the, do the best job of asking these types of questions and the timing and budget questions become much more important. So we're putting much more of an emphasis on that, understanding there's a macroeconomic trend where technology budgets, again, might be reassessed.
Alex:So. In theory. Yes. Everyone is always asking these questions. In practice, sometimes people get away without asking it, but now it's a little bit more important. The there's not as much, uh, alcohol in the party punch bowl, and everybody needs to be a little bit more on their game.
Peter:Exactly. Yeah. It's much more important to be surgical and detailed in how you're asking these questions beyond even your product, having product market fit.
Alex:Mm-hmm
Peter:Which, which is also very important. You, you have to have that at this stage whereas I think a lot of startups were still in the figuring out mode. Now I think it's, it's much more where rubber meets the road, where you need to have something that's a must have not a nice to have.
Alex:Right. That makes a lot of sense. Like before people were willing to make a little bit of a bet that something would, would pay off. Those nice, nice to have now turn into risks rather than opportunities. And I, I wanna probe that a little bit because I know we've talked in a couple of episodes in the past about when you're talking to prospects you are sometimes you'll pitch working with a more innovative company as a maybe implicitly or the subtext is, this is the opportunity to get that promotion. Right. Nobody got promoted for buying last year's technology. And so I'm curious if that is also like how, what are the dynamics of that kind of pitch? Does that also change?
Peter:Yeah. I, I definitely think so. I think the pool of folks who are willing to take risks shrinks, right. So the folks who are kind of on the edge might say, you know what, Peter, like, we'd rather go with Zscaler because they've been in the market longer. I really like what you're doing. At this point in my career, in my tenure, at this company, with the economic downturn, I can't take a bet on Twingate. You know, I think those folks will be more, more out there. Right? They'll be there, they'll be out there in higher volumes, which is why I think it's even more important to continue to ask those questions of your prospects and to continue to focus on folks that are still innovation minded are still willing to take a risk, even considering what's happening. Now, the other part of that too, I, I act, I say that as if, you know, we have no control over that story, um, which is not the case, right? Because the, the other part of that is, you know, in the past, I might have said, okay, this is just not an innovation minded person, but now with the economic um, variables at play I might shift my pitch and say, Hey, I understand you're looking at this from a startup versus a established player, but think about it from an investment in an ROI perspective. You know, even if you go with the established player, they actually require you to have eight to 10 folks at your company to project manage this because their configuration, as we've already gone through is extremely complex. With Twingate sure we are a startup, but you've seen that you can actually set this up with one person. So forget about the legacy versus startup mentality. Just think about it from a sheer cost perspective, and a budgeting perspective, you could potentially de-risk your reputation and you know, you're risk taking on a, on a startup, but you're also actually putting on a really heavy price tag for a legacy player that's gonna require 10 X amount of bodies to actually implement their solution. So I think like the understanding the two sides of the coin is really important. So to answer your initial question, yes. I think people are gonna be much more skittish to buy into a startup, but I think there's a really tangible value play and a value story that a lot of startups can lean into before they give up right before they say, okay, actually like woe is me you know, I can't sell in this, in this dynamic. You just need to change the story a little bit.
Alex:Let me say that back to you a little bit. So you're, you're really saying in a bull market, the risk takers and the innovators are wear it on their sleeve. You can tell who they are and in a, in a recession, that's when you have to kind of dig to see who really is an innovator or not. And you don't wanna just assume that because somebody's a little bit skittish that they are, it might just be that their budget looks a little different, some numbers in their Excel spreadsheet are lower than they were before, but they might have that spirit. And so then you're really trying to connect with them and you can still need, you still need to make an economic case to them that that appeals to that approach and that mindset, but, but that case exists and, and you wanna make it, whereas before, if you were like this, person's in an innovator, that case isn't gonna sway them because just at, at core, that's not who they are.
Peter:Yeah, exactly. Exactly. You, you just, you basically need to. give more guidance for the folks who do want to still innovate and make their economic story much more powerful than it was in the past. Right. And, and it's much more in the forefront. It's no longer the shiny object. It's the shiny object with innovative minds plus it's gonna save us money or it's gonna help us weather this storm, you know, how however long it might take. And I think, I think, um, startups can really confidently lean into that because I do think a lot of startups will be much more positive during the downturn for companies then some of the legacy players, right? Because the legacy players aren't tuned in to, to, um, being agile around poor economic times. Right. Whereas like the startups are gonna be much more attuned and much more flexible, much more fast moving, even in tough times, in my opinion.
Alex:And if you're an audience member working at one of those more legacy, non startup companies, our challenge to you is to prove Peter wrong.
Peter:Yeah, exactly, exactly. And, you know, it's, it's like steering a cruise ship with a lot of these companies, you know, it has nothing to do with the individuals at the company actually. And sometimes the leadership's just a matter of, you know, can you change 5,000 people's opinions, you know, an economic downturn to, to address what's going on, you know, in technology or is it easier to you know, innovate with a hundred people, you know, to, to move towards a, a north star goal.
Alex:Well, and, and something that's so interesting, talking about is the way in which you're describing the internal coordination of a large company. And then we're also talking simultaneously about the cross market coordination of many companies that are all doing the simultaneous dance of, we are cutting budget. We are adjusting to the budget cuts of our prospects, which also takes time and an organization that can move fast. Like a startup can change their message. They can adapt in that marketplace faster, but also help the marketplace move faster through the cycle of the recession from everyone is bummed and cutting costs to suddenly, you know, Peter you're pitching Twingate great ROI and upside. And that gets, that kind of brings you back out of the recession because these companies are more efficient by choosing your product.
Peter:Exactly. Yeah. And, and the other thing too, is if you look at public companies, you know, they're, they're, those employee bases are much more heavily impacted by the recession than private companies. Right? And the obvious reason is because a lot of'em are in the stock market. So, you know, a lot of our competitors that are in the stock market have lost like 50, 60, 70% of their value. You know, these are like 40 billion companies that are now worth 10 billion dollars. And imagine the distraction that holds for an employee base. You know, especially if that's a big oof for somebody joining that company. Now, on the other hand, obviously, private companies, it's gonna be much harder to raise at lofty valuations, but you know, a company like Twingate, a company, that's a startup, a series, a series B startup with enough runway they're focused on delivering right because we're not, you know, our, our stocks aren't being traded out there. We haven't lost 90% of our value. So it, it, that, I think that also is a huge benefit for buyers for public company or, sorry, private companies, I should say, because I think in, I, I think in general, they're gonna be much more focused, right, with less distractions.
Alex:If you can't hear it, folks in the, in the audience, Peter is very animated about this. I think he is really passionate about the playing the long game at the startup versus public companies kind of turning their head around every time the market goes up or down.
Peter:Of course. Yeah. And, and, and I I'd say it has to be a startup that's run very well. Right. Which is why, you know, kudos to our CEO. He has a venture background. He's very, very detailed in terms of how he manages the overall expenses and the, and the, you know, the daily runnings of the business. Of course there's the other side too, you know, I'm not gonna say that I'm not seeing these, you know, layoffs of private companies. You know, these companies that are valued at a billion that are gonna get slash in valuation. There is that too. So there is destruction within private companies as well, but I think overall it's gonna be less than what you see in a public company, especially if you do your due diligence around the founding team and their runway and you know, how much capital they have and, and, um, you know, if they're run as, as a, as a solid business,
Alex:Yeah. And let's talk about that for a minute. One of the things that buyers of startup products are doing is always making a bet on the business. And of course, the reason to be really explicit that they might be hesitant to work with startup is that startup might fail. In a, in a positive market where everything is going up and to the right you're just less worried about that. You're not seeing these numbers go down, you're seeing them go up. So you're like, well that company's worth a, a billion dollars, a big number, too big to fail, or like too big to immediately fail overnight, presumably. So how, how does that play in? Do you end up having to make sort of a, a, uh, for Twingate kind of the going a little bit deeper into the, the financials of the business or the business model or, or convincing people that you're gonna be around next year. How, how do you do that?
Peter:Yeah. Yeah, there is that song and dance in the sales process definitely where, you know, first of all, we do, we are public about who our investors are and how much we've raised. We've recently raised 42 million in a series B. And obviously we're not gonna share a runway or what that means from a burn perspective and you know, how much time we have until we run out of that money. But, um, you know, we are public about the fact that we are healthy considering our investor base, our founders and the capital we've raised. Now, if you're prospect or a potential buyer, I don't think that's it actually, right, because there's a lot of reputable companies that have raised from reputable VC firms that were in over their skis. Right. They raise a lot of money at a billion dollar valuation, but let's say that a million dollars in ARR, you know, that's ludicrous in today's market. You would, yeah. You would
Alex:in the previous market, that's insane.
Peter:Yes, but there are cases like that. Right. And obviously I'm being dramatic, but I'm not too far off from the ballpark of some of these unicorn valuations that happen where investors bet on a dream. Because that's no longer gonna happen it's not enough to ask okay, how much have you raised from which investors? And, you know, the founding team is obviously still important, but you know, a lot of successful people have also failed. So the, what I would say to prospects is ask about the customer base, ask about growth in the customer base and deployment in the customer base because I think that says more about the longevity of the company than the capital that they have. And of course, with Twingate, you know, I. I, uh, I welcome that question because we have an extremely healthy growth rate. So our NRR numbers are well north of the best in class. I'm not gonna mention it right now because they're private numbers, but it's, it's a type of product where as soon as you're in the company that you're selling to the, the product grows as the company employee base grows. And it's something that you can't take away because it's security base, it's remote security base where you need to have that as a table stakes in this, you know, hybrid remote environment. So I would, I would urge prospects to ask that, like, how is your customer base growing? What's your biggest customer and how many seats have you deployed in that biggest customer? Because if your product is used day in and day out, that says something about weathering the, the recession right in the downturn.
Alex:So, so I really like this. So you're, you're in a lot of ways, this is the same thing that you would expect or ask or hope your customers would do already is ask about some proof points. But now it's not just proof points of the, the product, but also of the business and, and giving more confidence that y'all are gonna be gonna be around.
Peter:And, and it's not always about just taking the salesperson's word for it either. Right. You know, there's enough customers out there now where you can do reference calls, right. Or you can ask and say, Hey, what is this product actually like? And I think that becomes more important word of mouth and the community aspect of products becomes much more important in a downturn because you're gonna look for many more proof points to purchase something, you know, in the next, like several months.
Alex:Something I've been wondering about as we've been talking with this, it seems like in some ways, The script is the same. And in some ways the techniques need a higher degree of precision and technique. And so I'm wondering if there are sales people who are better in recessions and sales people who are better in the roaring bull markets.
Peter:Yeah, I, I actually don't think so. I think the best sales people are great in both environments. And I think the stakes are higher in a recession and the worse sales people don't survive quote-unquote. right in terms of hitting their quota consistently because bad habits become much more apparent in a downturn. So you're right it's a, it's an astute observation. The questions are actually exactly the same. You do need to become more precise and more surgical. I know I use that word all the time, but I like it because it kind of paints a picture on how detailed and how diligent you have to be with the questions you ask, and then of course the, your rapport building, the trust building is still there. It's just on another level because likely your buyers are, are betting on one or two things, not several things, because the budget, isn't there to take a bet on several things. So it's much more higher stakes for your buyers too, and they're only gonna align on people that they trust and products that they trust.
Alex:So much like how a recession is gonna clean out a bunch of companies that are actually not any good it also thins out the ranks of the salespeople who are maybe not as talented, uh, which, which maybe suggests that you should be a little bit more careful hiring your salespeople during a recession.
Peter:Yeah, I'd rather have like a tight group of trusted sales people than hire or overhire to try and hit a number. It's all about making your existing team as efficient as possible. And yeah, if you can't sell in a bull market, you definitely can't sell in a bear market.
Alex:Yeah. We've talked about, yeah, what you're seeing right now is indications of slowdown and what it's causing you and your team to have to do differently. What are you looking for to make decisions about that around that, around those changing your plan.
Peter:Yeah, I think there's a couple aspects. One is, um, the obvious one is looking at your late stage pipeline. So the folks who are already ready to buy, ready to sign contracts, if you're seeing a slowdown there, your salespeople are gonna tell you. And at that point, it's about making sure again, that your sales people are asking the right questions and it's not enough to say, Hey, this deal pushed because there could be any number of reasons why a deal pushes to the next quarter is delayed or stalled. Um, but if somebody comes to me and say, Hey, this buyer said they were ready to sign on the dotted line, but they stalled the deal because of the economic downturn and because their budgets are being slashed by 50%, I think the deal's still gonna happen, but it's gonna slow down in six months that's a really important data point that you have to take into consideration. And if 10 out of your 20 top deals is in that category, you should probably think about adjusting your quota. Right. Cuz you have like real data around that. So that's on the late stage pipeline. I think you could really like make sure you trust your sales reps and you're getting them to ask the right questions to get the most accurate answers. On the other side of the coin is more like top of funnel leads. So what's happening with interest. And so I think, you know, at the top of funnel, it's much more difficult to get a good data point around what's happening, but there's a couple things I think about. One is first of all, make sure you reassess your messaging and make sure your messaging is very valid and is, is actually hitting a pain point for the prospective buyers that you're trying to hit. As in like all SDR teams, all marketing teams should look at their emails, their ads, their, you know, display ads and just say, just reassess and, and, and do like a, you know, not only like internally look at your messaging, but also test it with the market to say, Hey, Does this actually resonate with you, this type of messaging? And depending on what the answer is, adjust quickly and make sure you have the right tools for your SDRs to put in, um, custom messages for the people you're trying to reach because generic messaging isn't, isn't gonna get them to reply. Now, if you feel confident in that, and even with that, you're not getting the responses and the replies that you think you should be getting. At that point, you can adjust downstream as well because you know, responses at the top of funnel translate into late stage deals. Right? So these are like the, the things that I think about is what's happening with the late stage deals, and then also what's happening at the top of funnel deals, understanding that you've done everything that you can to make sure both the top of funnel and late stage deals are, are being serviced the right way.
Alex:Yeah, that's a really, that's really helpful. The late stage is you're you're closest to it. It's the highest signal. And then it, it's more difficult the further up you move.
Peter:Yeah, exactly. The other thing I'll say is it's not just about obviously messaging, but there's also these platforms, these intent platforms. I don't know if we've spoken about these, but Bombora, 6 cents, ZoomInfo has some of this data, um, where you can actually track companies.
Alex:Hmm.
Peter:you know, there's these services that tell you which companies are looking for your type of product. And so those products become really important to leverage, right? So we're using Bombora where if Bombora tells us, Hey, this company is looking for a zero trust security platform, that company is gonna be much heavily, prior, much more heavily prioritized in a company that doesn't have that intent data, right, that evaluation signal. So there's also this, you know, execution path where again, you should still in steady state, even in a bull market, prioritizing the companies that are looking for your product, but it becomes much more important because the folks who aren't looking for your product probably don't have the budget, or even like the, the mind space to evaluate your product.
Alex:And it, and it seems like, you know, as a sales leader, you're always making forecasts and projections. And I know you've talked about the importance of this in the past. So it seems like it also would just help you assess, like in your pipeline, how many of them had intent data and, and using that to build your future projections, assuming that you're really only gonna see a higher percentage of people who came in with that intent data. You're not gonna get as, as lucky as often on people who aren't, uh, known to be looking.
Peter:Exactly. Yeah, yeah. Yeah. So it's, it's all a data game, right? Matching up the data and making sure you're utilizing all the technology that you hopefully have to get more narrow in who you target.
Alex:So, one other thing that happens in a recession is that companies try to renegotiate with their suppliers. Can, can you talk a little bit, is that something you see happening and how do you deal with that as a sales team?
Peter:Yeah, it's a great question. And it does happen, unfortunately. When I talk about these, uh, tech companies that are valued at a billion, two, 3 billion, a lot of'em have layoffs. You know, you hear about workforces being cut by 20, 30, 40% sometimes. And, um, you know, that is definitely a dynamic that happens. It has happened to me in the past as well. And legally, even if in the contract, let's say somebody has signed up for 2 million over two years, and now they've slashed 80% of their workforce. My philosophy is as a, you know, good faith partner, you should actually try and renegotiate with them. You know, I, you could actually like legally say, Hey, you signed up for$2 million, so you're gonna pay us that money. But I think what goes around comes around and when there's tough economic times, I think as a sales leader, even if you're gonna take a hit personally, and the company's gonna take a hit on revenue, I think it's much better to do right by, by the companies that are struggling and to still try and make them successful. You know, in a lot of cases, folks will try and downsize, not completely cancel the contract. And that's great for us, right? Because I like to play the long game where, you know, the, the folks who ask for this favor, they'll remember. And in fact, they will tell you in the process to say, Hey, it's, it's great that you're even trying to do anything at this point. And so thank you for, for trying to work with us. And I think that's like such a great feeling to have to know that even if you're taking a hit as a company that you believe in the value of the product so much, that you're willing to, you know, lend, helping hand with the hopes that in, you know, four or five years that this business maybe might come around.
Alex:I mean, but, but how does it help the startup founders that are listening to this thinking about needing to keep their burn rate from, you know, taking their bank against a zero. They don't have four or five years.
Peter:Yeah. Yeah. I think, you know, um, I still think it's a valid reason to increase burn. Or to give up ARR. And if you're in a situation where one or two or three customers being in a downturn is gonna wipe out your business. Probably not a healthy business. Anyways, no matter how early you are. Right. And as long as you have a trusting set of investors that understands what's happening and that you're actually like being transparent about sharing about the dynamics of your customers I think you'll be in an okay spot. Um, easier said than done, obviously, but I don't think like, I, I, I don't think trying to, you know, maintain an ARR level is what you should be looking at when your customers are struggling. Right. And, and again, hopefully you built up a good base. The other thing too is let's say you are in a situation where five outta six of your customers are in a downturn and they're, you know, closing up shop and that's impacting your business as well. You might want to, again, look at who you're targeting. You know, maybe you didn't target the right industries because, you know, even though we're an economic downturn, there are still companies that are moving forward, right. And products that are still growing. So I think either way, it's a good way for you to assess whether or not you're in the right line of business. Um, but I think reputation actually carries more than your AR number in the early days. And so I would urge startup founders to not try and keep the contracts that you initially negotiated if, if the other side is struggling,
Alex:All right. You heard it here, folks, if you can't do right by your customers, your business sucks.
Peter:I didn't say that, but, but yeah, maybe, maybe you could go as far or your business,
Alex:think that was the summary.
Peter:exactly. Or your business ethics suck. Right. Because
Alex:But you were saying, you know, if you're dependent on a couple of customers to hit your. Keep your bank account in positive territory, then, then your business sucked.
Peter:yeah, yeah, yeah. In the long term. Yeah. Obviously in the short term, if you know, one out of 10 customers and your top paying customer, Is leaving and that impacts your bank account you know, that doesn't mean your product sucks. It just means you have to think about how does this play out in the long term. Right. Are you gonna have
Alex:You said their business sucked not their product.
Peter:yeah, yeah, exactly. There you go. There you go. Yeah. But yeah, it's, it's, it's something to think about and definitely conversations that I'm sure a lot of sales leaders are having.
Alex:What if I just came to you, Peter? And I was like, we can't afford your product anymore, but actually we could like, how, how do you sort of figure out if it's a legitimate request?
Peter:Yeah, I think that's where again, getting like really precise and surgical and the questioning really helps. Right. Because if you were to come to me and say, I can't afford your product anymore, and there's nothing in the news about your company doing poorly. Um, in fact, I only hear about growth and I look at your LinkedIn page and you're hiring, you have like, you know, 50 job recs open, I probably call those out. I'd say, Hey, Alex, that's a little confusing because I see a lot of job openings on your site. And I don't see anything in the news to indicate that your industry is doing poorly. In fact, because you're in the COVID testing industry like you're probably in much higher demand than even before this downturn, you know, like just to make up a, a, a potential hypothetical situation.
Alex:You know what I'm realizing, even asking the question, like you're in a position of power, you actually get to ask those questions, maybe even a little bit more bluntly than you might normally get to in a sales process because they came to you asking for, for a favor.
Peter:Exactly. Yeah, because contractually, there's no reason contractually, I'm not obligated to say we can renegotiate the terms. Right. But there, you know, typically this will happen when there's already a lot of negative sentiment in the press and you know, you see things happening. Typically folks come to you when, you know, it's coming. In my experience. And you already have a, have an eye for it because you've seen some headlines in there that you don't like, right?
Alex:So, um, how do, how do you think about renewals during a, a recession? You know, obviously you wanna go out and, and upsell, uh, as much as you can. Does that change your strategy at all?
Peter:Yeah. So for, for us renewals is based off of usage of the product actually. So we look at usage pretty regularly across our customer base. And if we start seeing a hit, even before renewal, We reach out, you know, even if it's three months before renewal or six months before renewal to say, Hey, like we're noticing, you know, less and less usage, is there something about the product or something going on with your business? Right. So again, like presales that doesn't change, cuz you should always be looking at the engagement across your customer base. And it doesn't matter if you're in a recession or a, or a bull market. Now the conversation around restructuring the budgets or not having enough budget for something like Twingate could come up. In our situation luckily knock on wood it hasn't come up that much. And that goes back to again, like make sure you're selling a product that's a must have not a nice to have because a lot of the reason that, that our buyers come back to they've actually like proactively told us, Hey, listen, because Twingate is so crucial to our remote security efforts this is one of the things that we're not gonna cut budget on, which is amazing to hear. Right. So I think the product and, and that, um, the product necessity really comes at play with the renewal. Um, the, the one last thing I'll say is, you know, we're not right now. I I'd say like, if you're in customer success, you know, be careful about raising prices because typically, you know, if you're in a one year contract and the value of the product is so strong in year two, you have the right to increase prices. Um, but you know, I'd say there's, there's something to be said for keeping the price or keeping the price increase minimal, because I have seen a lot of our competitors customers come to us because even if they, you know, presume, like let's say they, they still are okay with the product if you're gonna increase prices by 50%, that's not gonna work in a, in a down economy.
Alex:Well, that, that does lead to another question actually, which is inflation is a big topic and I assume you're gonna see your organization's cost going up, whether it be salaries as the market adjusts, kind of over time or other pieces of your infrastructure. So how do you balance that in this recession for your customers where you might be naturally inclined to adjust your prices based on every other number going up.
Peter:Yeah. So, you know, for, for us and maybe for a lot of SaaS businesses, actually, usually cogs are pretty low, right? So for those of you don't know, like cost of good sold is, you know, metric around how much it costs to actually operate your business. I think a lot of healthy companies will have enough margin to still be able to maintain their prices. right. And so, so the way I think about it, just to answer your question a little bit more bluntly, even if costs were to go up a little bit, you know, for us, we're still, you know, in the positive, right. In most cases. Right. Obviously like, and, and so I think, yeah, go ahead.
Alex:I was just saying, yeah, you're right. Like SaaS software margins are like 80% plus sometimes. So you're, you're saying just like, let your margin erode a little bit right now. And, and deal with that later.
Peter:Yeah, let your margin erode. Let's say though, like on the other side of this, let's say your margins aren't high. Right. And I would still say, be careful about raising prices and eat the cost a little bit in the short term, but still get something of value in return. Right. And have a conversation with your customer to say, Hey, typically we would raise our prices in year two by X amount, but we're not going to in this case, cuz we, you know, you're, everybody's coming up against hard economic times. So are we, we're willing to eat that cost as long as you're willing to introduce us to three more people that could potentially use our product. Right. So then you're like suddenly, still getting value out of that conversation.
Alex:I love this. This is a lot of what we talked about in the episode, The Price, where there are many levers that go into choosing a number and different types of value. So I, I really like this. Like, you're, you're inflating the price, but you're inflating it on this non monetary dimension of like, now you expect your customers to do a little bit more for you.
Peter:Exactly. Exactly.
Alex:terrific.
Peter:Yeah. And I think that could work even in a kind of low margin tech business.
Alex:Alright, Peter. Well, thank you for taking our listeners on this journey into how to navigate a recession and tl;dr: keep doing a really good job at sales and you'll probably be okay, be ready to adjust, pay attention to the signals, obviously adjust your forecasting like that. But a lot of the techniques you're using still apply. And frankly, I'm guessing a lot of it's applying these techniques is about not letting your lizard brain or your hind brain kind of kick in and be afraid and just continue to be smart about playing the, the sales strategies, the same way you always are. And, and just maybe using it as a chance to up your game,
Peter:Awesome. Awesome.
Alex:So Decoding Sales remains free. We have not upped our prices in this recessionary environment. However, we are gonna make a bigger ask of you as our listeners, as we talked about earlier, we would really appreciate your help getting the word out. If you can introduce someone in your network to Decoding Sales, you think might get something out of it. Or leave us a positive review on your podcast platform of choice. We'd really appreciate it. And if you do this, let us know at podcasters@decodingsalespodcast.com.
