Why sales has become so hard in the last two years

I’m not gonna sugarcoat it.

Sales is the hardest thing that you’ll do as a founder.

It’s the lifeblood of your company.

You need to get paying clients to generate revenue so you can keep your dream alive.

VCs won’t fund you unless they believe you can close deals.

Every source of funding that you need (revenue + investments) to run your company all comes down to customers willing to pay you money to solve their problems.

But in 2024, it’s hard to do this well. And it’s been hard for a couple years now.

Not just for founders.

But for everyone. Even the most seasoned sales reps are struggling, or at least not producing at the rates they’re used to.

In this newsletter, I’ll walk through what’s happened in the last few years and why it’s hard to sell right now.

Then we’ll go into a few things that you need to get right to be able to have a shot at succeeding in 2024-2025.

Here we go.

Table of Contents

• How COVID fucked up the SaaS market

• The 2021 Glory Days

• The blow up of 2022

• The challenge in 2023-2024

• What to do in 2024?

How COVID fucked up the SaaS market

For years, VC-backed SaaS companies were running pretty inefficiently.

Invest ahead of growth was the common practice. Makes sense when you’re running an ARR business model that has a 3+ year LTV.

Have a CAC worth the first year contract, with a payback period of 12 months, profit on year 2 and 3.

Every SaaS company ran at a deficit.

And it was OK, because on paper, these companies could continue running at a deficit and still have value because of their ARR model. They were technically profitable of paper as long as compounding growth continued.

So more SaaS companies entered the market. Then more. VCs kept funding. Created a massive tech market. You had tech companies helping tech companies make more sales. Becomes it’s own thing. Growth is everywhere.

Then COVID happened. Which was this massive catalyst for SaaS, globally.

Some companies shut down overnight. But the vast majority didn’t.

Things slowed down temporarily. But when folks realized that work from home was becoming a more permanent thing, companies had to quickly adapt to a virtual model.

And SaaS exploded. All kinds of tools were being bought to help manage a remote workforce.

By 2021, sales leaders couldn’t keep up. The demand was so high for everything.

We were in a demand positive market.

Not by skill, but by unforeseen circumstances.

But executives acted as if this was a permanent situation, that was driven by excellence. Not luck.

And this is where sales started falling apart.

The 2021 Glory Days

I was a sales leader at a SaaS company during this transition from 2020-2021. And end of 2021 I was at another SaaS company.

So I saw first hand what happened to sales during this time. And it was a mess that we’re still paying for in 2024.

There are a few major events that happened that changed sales during this time:

1. Because demand was high, sales leaders couldn’t hire, onboard, and train fast enough. Headcount growth was crazy for a lot of VC-backed companies. Folks would get promoted from SDR to AE in 2-3 months (average before this was 18 months), just to have someone catch the demand.

2. Many sales reps weren’t really selling. They didn’t have to. They were just filling orders and keeping up.

3. Because everyone was now remote, market prices for sales people equalized. Before, if you wanted a 300k OTE, you were usually in San Fran. vs 100k OTE in Halifax Nova Scotia, for example. Once everyone went remote, you could work for big market SaaS companies from a small market, and make a lot more. So sales people started jacking up their prices and jumping around.

4. This created a ton of turnover, which exacerbated point 1 even more. Not only did sales leaders have a hard time hiring to keep up with the demand, they also had to quickly backfill.

5. Lots of corners were cut in the hiring process as a result. Sales reps were getting multiple offers per day. At an insane OTE. So if you vaguely liked someone, you had to put in an offer right away, over market rate, or you’d lose the candidate. Almost like a hot real-estate market.

6. These folks would come in, stick around for 6 months, then leave for a better offer. Hop 3-4 times in 18 months and all of sudden you went from making $80,000/year to $350,000 per year in sales. So everyone did it.

7. But it meant that nobody really stuck around long enough to develop skills. But they got promotions and seniority anyways.

8. And companies had to keep raising money and fuel the beast. Cost of sales went through the rough - no other way to keep up but to raise. Even with higher demand.

9. Which means if you raise more, you need to increase targets, or the model doesn’t make sense. So more targets, more hiring, bigger quotas, everything going up.

10. And with this false demand and growth in place, everyone just went way too far out. Product teams started building crap features because they were cool, not because they were useful. Feeding the beast became the standard. When you’re feeding this kind of growth, lots of corners get cut. Everywhere. In every department.

And then 2022 happened, and it all blew up

The blow up of 2022

Remember how I said a lot of execs acted like their growth came from skill/strategy, and not luck of the market during COVID?

Targets were set to be the most aggressive in 2022. Most VC-backed companies were projecting 100% growth over 2021 results. Which meant even more hiring. Even more spend. Even more products. Even more features. More. more. more.

And then a series of events - again not in anyone’s control - happened.

Supply chains were squeezed with all of the demand from folks being at home in 2021. Which caused a ton of inflation. Everything became more expensive, so prices for software started going up. Sometimes more than the value it actually provided.

Then the war in Ukraine hit. Which caused global panic.

And the market went really soft by mid-2022.

Everyone stopped buying SaaS. And when everyone stopped buying, execs quickly realized that CAC was way too high. And headcount was way too high.

Which caused a massive stretch of layoffs.

Now, most SaaS companies at the time were running per-seat pricing models. AI/usage-based wasn’t all that common.

So what happens when SaaS companies are laying off 30% of their employees?

It means 30% churn. Or 30% downsell at least.

So CFOs went into the numbers and said get rid of all un-used software. And also find more software to get rid of. And more people. And offshore where you can.

So that demand-positive market we were in quickly became a demand-negative market.

CSMs had to deal with churn at an unprecedented rate. Sales teams went from hitting 80-100% quota, to 20% quota. Almost overnight.

More layoffs. Which means more churn for SaaS companies.

So what do you do to try and stop the bleeding?

More outreach. More activity. More marketing. But not good, creative marketing that cost time and money. Cheap, quick marketing in times of desperation. Email blasts every day, to hundreds of thousands of prospects.

When reply rates went down for SDRs. And pickup rates went down. What did leaders say? Well make more dials. Send more emails. Do more activity. Reach out to more people.

And remember how I said at one point sales leaders couldn’t keep up with the hiring, onboarding, training?

Those folks who needed to “now do more” were never really properly trained to do it well.

And the AEs who were order takers, they couldn’t close deals anymore. They never really learned the right sales methods, because they didn’t have to.

So sales went to an all time low, for many SaaS companies.

The challenge in 2023-2024

So here’s the challenge.

Because of all of this growth, and very low barrier to entry for new startups to get launched, we’re in an over-saturated market for alternatives.

Buyers have too many choices, and not enough problems.

It used to be that there was room for 5-10 competitors in a space. Which was true.

But now there are 100+ competitors in each space. And there just aren’t enough buyers anymore. At least not right now.

So any “nice to have” product has become almost impossible to sell.

Here’s an example of the martech space:

This was the known martech map in 2023. There are likely hundreds of other options that just weren’t big enough to be on anyone’s radar that didn’t make this list.

There’s 11,000 options in this graph. All competing for marketers attention. All competing for a slice of a very limited budget. A budget that’s getting smaller and smaller each year since 2022 based on CFO pressure of running lean.

And then there are tons of other verticals and functional software that aren’t even on this.

A quick keyword search for SaaS in Apollo gives me 78k options. And I’m not capturing anything that’s usage-based, or AI, or anything like that with that keyword.

There are over a million “software development” companies globally on LI Sales Nav.

See how MarTech changed over the last 12 years.

We don’t need that many options. This is too much. It’s incredibly confusing as a buyer.

But the real problem, what makes sales really hard right now, is getting attention.

Imagine this - 11,000 companies, averaging 10 sales reps who are doing 80 touches each per day. And a marketing department that’s sending on average 10,000 (this is low) email blasts per month.

So on any given month, a company might blast 27,600 messages to prospects. This is on the very conservative side.

Then multiply that with the 11k options for marketers, all doing this.

193 million touches. From 11k companies. All going out to marketers. Every month.

And this here, is why sales is hard right now. Too many options. Vast majority not really solving any real problems for prospects. All vying for limited attention, and limited budget.

It’s easier for a buyer to do nothing right now, than to try to understand the options for change.

What to do in 2024?

So how to you bust through this?

Going back to the core principles of sales and running a business.

Get crystal clear about the problem you solve for prospects. And make sure that it’s a problem that’s big enough for a company to pay money to solve.

Build a differentiated product that solves this problem well for a set of prospects and customers. And it truly needs to be differentiated. I often see new startups launch where there are already 20+ viable options. You’ll need to niche down to win. Or execute way better than everyone else to have a chance.

Then make it clear in your positioning what problem you solve, and who you help. This will help you create compelling messaging for your website, your emails, marketing, prospecting, etc.

Then get hyper focused on “who cares a lot about this problem.” Target them. Verify that they have the problem.

And in your sales cycles, make it about them and their problems. Your discovery should be focused on this and quantifying the impact of the problem on their business. Your demo should show your features in their context of how they solve the problem. Your process should help them buy. It’s about them, not you.

The challenge I’ve seen with a lot of founders right now is that they’re focusing on their own solution. Here’s a cool thing I can do. Here’s why it benefits you. But this is a losing approach in 2024.

We’re in a demand-negative market. Money is spent to solve big expensive problems. Everything else ends up being a nice to have.

So you need to adapt your approach to this, or you’ll continue to struggle.

The bright side of all of this? Everyone has this problem right now. You’re in a level playing field against all your competition, even the bigger ones. Every sales rep is experiencing this.

So get the basics right - nail the problem - and you’ll have a leg up over everyone else.

Let me know what you think of the newsletter! Always want to cover topics that you care about.

For more practical early-stage sales tips, connect with me on LinkedIn.

If you’re looking for more hands-on help implementing your first sales process, reach out for coaching packages.

P.S. Starting the waitlist for the next group coaching cohort starting in September. LMK if you’re interested.