Transactional vs. Enterprise: How A Company’s Sales Model Changes The Sale

On page 7 of the The Sales Handbook published by Intercom, Des Traynor breaks down four quadrants of “key sales models for SaaS businesses” based on the complexity of the sales process and the average deal size. The idea originally comes from Joel York.

The bottom-right quadrant is marked with an X because, according to Traynor,

“The bottom-right quadrant, a complex sales process with low value customers, isn’t a viable business, so it’s not even worth considering.”

Some of the movement on the axis from “self-serve” to “complex sales process” is driven by the product itself—a more complex product will have a more complex sales process.

But there is also an element of buyer expectations. On page 9 of the The Sales Handbook, John Barrows says,

“You can only automate and educate people so much before they want to talk to somebody. Maybe $5,000-$10,000 is when people get more uncomfortable putting their credit card online and buying without talking to people. But that threshold exists.”

So even with a relatively simple sales process, if your average deal size is high enough, your buyers will probably want to engage with sales in some fashion before making a purchase. This creates the Transactional quadrant.

John Barrows says:

“If you’re selling something that has a super low Average Contract Value (ACV), say, $1,000 for the year, it’s hard to justify having sales in that equation whatsoever. But, if you’re in somewhat of a complex sale that involves a sales cycle longer than 20- 30 days, and at least two or three calls with multiple people, sales is a critical part of that to make sure it goes right.”

The three viable tech sales models.

1. Self-Service: low complexity and low deal size.

Overview: Customers are willing and able to make the purchase on their own. Marketing creates awareness and educational content that drives customers all the way to the point of purchase. Onboarding is completely automated.

Examples: Airbnb, Uber, TurboTax.

Sales: None. Full revenue responsibility falls on marketing. Some customer service.

2. Transactional: low complexity and high deal size.

Overview: Customers are more reluctant to make an online purchase without talking to a human first. Marketing sends highly qualified leads to sales. Sales and support operations are efficient and high-volume. Onboarding is partially manual but quick and non-complex.

Examples: Google Adwords, Amazon Web Services, Stripe, Mailchimp.

Sales: Short sales cycle and high-volume sales activity. Many transactions per rep.

3. Enterprise: high complexity and high deal size.

Overview: Customers require a lot of attention and hand-holding before a deal is closed. Sales is supported with marketing and engineering resources for each individual deal. Onboarding is a long and involved process. Support teams offer high-touch training and issue resolution for current customers.

Examples: Salesforce, HubSpot, Marketo.

Sales: Long sales cycle and fewer, but much larger, transactions per rep.

The sales model determines the tasks of the salesperson.

For a tech salesperson, it’s important to understand which one of these sales models you’re getting into, especially during the interview process.

For example, sales responsibilities will be very different in low-average-deal-size Transactional sales versus high-average-deal-size Enterprise sales.

For the Transactional model, the sales cycle will be short, average deal size will be lower, and sales activity will be high volume—more calls, more emails.

For the Enterprise model, the sales cycle will be longer with more PowerPoint presentations and steak dinners, and the average deal size will be higher.

Comparing these two, Transactional and Enterprise, you’re probably thinking, “Well shoot, I should be getting into Enterprise sales.”

But you’ll need track record of top-performing closing experience on your resume before a company will trust you to hunt their enterprise “whale” accounts.

For this reason, entry-level salespeople in tech are most often hired as either:

SDRs or BDRs in Enterprise sales
AEs in Transactional sales

As an SDR / BDR in Enterprise sales, you’ll be cold calling outbound leads, qualifying inbound leads, and setting appointments for more-experienced AEs.

As an AE in Transactional sales, you’ll be owning the full sales cycle and working a pipeline of your own, but the average deal size will be lower, and therefore, you’ll have to make more calls and close more deals (compared to an Enterprise AE) in order to meet quota.

Click here to read more about the different job titles in tech sales.

Be careful about companies offering a sales position that doesn’t fit their business model.

Recall this part of the quote from John Barrows earlier:

“If you’re selling something that has a super low Average Contract Value (ACV), say, $1,000 for the year, it’s hard to justify having sales in that equation whatsoever.”

If a company is recruiting for an Enterprise AE position but their ACV is $1,000, that just doesn’t make any sense. Either their sales process really isn’t that complex and the job title is a misnomer, or their “Enterprise” AEs are working their tails off on a complex sales process with very low returns for the company (and low commission for the salesperson).

Traynor says the same thing in a different way:

“The problem is that being in the lower left means you usually end up with a high amount of low value customers. This limits how you can acquire customers. Spending $300 to acquire customers for a $99 product isn’t economical.”

Spending on acquiring customers includes salary and commissions for salespeople. So, in other words, if you have a cheap product, you can’t afford to pay your salespeople very much. Or, you’ll be able to pay your salespeople just enough, but then you’ll have to work them to the bone in order to make the business model profitable.

Be wary of recruiters who sell the dream on a sales role that doesn’t match up with the company business model, especially for startups that might not have their business model totally defined.

Break Into Tech Sales