Moving upmarket from SMB to enterprise for SaaS: when and how

In episode 3 of B2B SaaS Marketing Snacks, Mike and Stijn talk about the differences between SMB and enterprise when “moving upmarket”. While the podcast takes a more senior perspective, I’d like to revisit the topic from the top to make sure marketing newcomers can follow along. So make sure to go give it a listen then come back here for more information!

Background and definitions 

• SMB is the acronym for “small and midsize business”. 
• Most commonly, company size is defined by the number of employees and/or by revenue. For example, Gartner defines small businesses as organizations with fewer than 100 employees and enterprises as those with 1000+ employees.
• “Moving upmarket” is an expression commonly used to refer to starting to sell to people with more money. In the SaaS world, moving upmarket is an inevitability. When we talk about stages of growth, we talk about reducing churn, getting customer lifetime value (LTV) higher than customer acquisition cost (CAC), and improving average revenue per unit (ARPU) i.e. deal size.
• All three of these metrics are affected by moving upmarket as the podcast explains.

With all that covered, let’s dive in!

What is moving upmarket?

Before answering why and how to move upmarket, you have to ask yourself if that’s truly what you want to do. Moving upmarket is the next stage in your growth, not just going after bigger accounts. The commitment and transition in metrics required are not to be taken lightly.

That said, let’s keep it simple. 

Your first step is defining what moving upmarket means to you. To echo the podcast, that could mean customers who buy more, that have more employees, a higher revenue base, more locations, or starting to look at later stages on the technology adoption curve. Usually, the late majority tends to be made up of bigger, slower companies.

Moving upmarket is an arduous process that often takes several years. It’s an opportunity to confirm your PMF but it’s also the time to revisit your product features and roadmap.

When should you move upmarket?

Once you have an idea of what “upmarket” looks like for you, it’s time to ask yourself if you really should be making that shift. The answer can change based on product, market, team, timing, or any other host of factors.

The common pros of moving upmarket usually outweigh the cons, but that’s a case-by-case evaluation you must make yourself:

Pros:

• Fewer competitors are able and willing to fulfill enterprise needs
• Fewer accounts to nurture and service
• More multi-year deals
• Enterprise customers usually bring with them higher LTV
• lower churn

Cons:

• Higher CAC
• Longer sales cycles
• More risk since each customer is a big portion of your revenue
• A bigger emphasis on customer success for satisfaction and retention
• A need for new processes (e.g. manual payments)
• Expansion of your sales team
• Risk of making the move too early (e.g. before reaching product-market fit)
• The need to revisit your ICP and personas
• Revisit your SEO and content strategy
• Revisit your product features and requirements

Which of these apply to you? Which points not listed here should you also take into consideration?

If the answer to “should we move upmarket” is yes, could it turn into a no in the next year? If the answer is no, what would it take to change that to a yes?

Even if this is not a realistic conversation for you to be having at the moment, exploring the idea will give you a better understanding of your position, situation, and future.

How to move upmarket

Alright, that was a lot of conceptual talk, but let’s get to the practical part. What are the steps? You’ve gone through defining and evaluating the process. What comes next?

Product

So far, your product has been working for SMBs with a few seats or maybe just one. At the enterprise level, users might require new features and the use case might be different.

On top of that, bigger organizations bring with them a suite of security and compliance requirements. Some examples of product considerations include:

• Features for enterprise users
• Permission levels
• Two-factor authentication
• GDPR compliance
• Integrations with other SaaS products commonly used by enterprises
• Admin features for those who may never use the product’s primary functionality but will still require the product to take their needs into account

These all lead to the same conclusion: focus on the customer. Make sure you understand their use cases, hop on interviews, collect usage analytics, and understand the difference between SMB and enterprise both at the individual user level and the organization level.

Innovators and early adopters are comfortable dealing with bugs and slower customer support; they may never have brought to your attention a need for security or privacy features that are standard expectations at the enterprise level.

Customer success

Bigger enterprises simply have more on the line day to day than SMBs. They can’t afford their thousands of users across several continents to all be impacted by one software malfunction. They can’t afford non-compliance lawsuits or security issues like getting hacked or improper access permissions. Your documentation should leave no questions about security.

Bigger accounts are worth more yes, but they also cost more. Not just in acquisition but also in retention. Natural churn rates are lower for bigger companies that value stability. But that can quickly prove untrue if your customer success capabilities don’t keep up. 

There are only so many big enterprise accounts in your market. Once acquired, the value of your initial deal looks very small compared to the value of their repeated renewals and upsells.

A smooth onboarding process is a critical first impression that must be built upon with excellent customer service. 

Marketing and sales

Once the product is customized and you have determined that your customer success team can sustain the needs of enterprise organizations, it’s time to actually acquire them.

Pricing is most likely your first concern. Your current pricing structure doesn’t account for multi-year or thousands-of-users deals. A core pricing concept is making sure your pricing grows with your client. That not only applies to new clients but also to current clients upon renewal. A 3-person team doesn’t cost the same as a 1,000-person team to service. The value provided is likewise not equivalent. The pricing should reflect that. It should also reflect the longer sales cycle which, if not handled properly, could lead to a rocky transition as you could go two quarters to two years working a deal.

Your branding and positioning should reflect your new target audience as well. As mentioned in the podcast, a lot of work will go into re-developing your ICP and personas to make sure you’re getting through to them. That means new keywords and a renewed focus on bottom-of-the-funnel content. You’ll find enterprise buyers will care a lot more about proof of concept. Not only will they want to look at more whitepapers, case studies, benchmarks, etc., but having enough content will allow you to nurture your prospects between the few touches during your year-long deal. This kind of collateral base is your ultimate sales support. It might be hard to get excited about high-intent keywords due to their usual low volume and clicks/views, but your sales team will be able to tell you whether it’s helpful or not when they can lean on it during their conversations with prospects. 

If you haven’t had the need for a sales team so far, that’s about to change. Self-service is great, but enterprise customers expect to have someone to talk to, take them through a demo, and answer their questions. Developing and nurturing a relationship is what marketing, sales, and customer success work together to achieve.

To reiterate the points made in the podcast... 

• Understand the personas that make up the buyer’s journey
• The larger the company, the more complex the buyer’s journey and the more people there are involved
• Make sure you answer the questions associated with the different funnel stages
• Awareness - why change?
• Consideration - why you?
• Conversion - why now?
• ABM, nurture campaigns, and all kinds of content benefit from an expanded collateral base and a renewed SEO and keyword strategy.
• Multiple decision-makers are spending someone else’s money.
• The longer buying cycles will change marketing ROI, time to cover CAC, and other metrics. That can be offset by adapting your pricing.

Conclusion 

SaaS companies are faced with several growth options. Moving upmarket is a decision that requires buy-in at every level of the company. If dedicating the sales and marketing resources needed or customizing your product for enterprise aren’t within your capabilities just yet, moving upmarket may not be for you. If you can handle the longer sales cycles, the multiple stakeholders in the buying journey, the required shift in content, pricing, and overall marketing and you’re confident in your customer success team, good luck on your journey to higher ACVs and LTVs, and ARPUs and lower churn rates.

Note: This series will serve as a companion reading for B2B SaaS Marketing Snacks, which are bite-sized intros to some of your most pressing B2B SaaS Marketing questions.

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