10 Warning Signs Your Enterprise Cloud Company May Be in Trouble

10 Warning Signs Your Enterprise Cloud Company May Be in Trouble

My Monthly Templates

At Emergence Capital, where I serve as operating partner, we’ve worked with some of the most successful enterprise cloud companies, including Salesforce, Veeva Systems, Box, SuccessFactors, Yammer and Zoom. Over the years we’ve learned a thing or two about why some companies succeed, and we have insight into some of the challenges they’ve faced along the way.

In this article, I want to share some of the early indicators that should serve as warning signs to CEOs as they look at the fundamentals of their business. It’s important to pay attention to these early red flags so you can fix them before a problem starts.

1.  Beware of the “bloated pipeline.” You should be worried if pipeline velocity is slowing and getting bloated in the middle. A slowing pipeline velocity kills sales force productivity, especially if the funnel gets clogged as efforts get diluted.

2. Watch out for “disappearing deals.” Start to panic if month-end sales – deals expected to close – are getting pushed out or, worse yet, disappear altogether. Objections like “We just aren’t ready to buy,” may be a sign your product isn’t generating enough urgency to close the deal. Or worse yet, market need is waning.

3. Sales team productivity is dropping. Be nervous if productivity in your sales team suddenly decreases. It’s time to start asking the tough questions, such as:

  • How high is sales rep turnover? Is it trending up?
  • What percentage of reps are hitting their quota? (A good rule of thumb: ~60 percent make their quota; 40 percent miss it).
  • Are annual contract values (ACVs) shrinking over time? Do you have a high-touch sales model? If so, make sure ACVs can support costs.
  • How heavily are reps discounting (particularly when selling into a single vertical)?

4.  The dreaded MQL (marketing qualified lead) definition. Be worried if your sales and marketing teams are not in complete, 100 percent alignment around the definition of an MQL. Is a demo request an automatic MQL? What about a free trial? For those focusing on a freemium strategy, at what point should sales engage to try and convert? MQL definition clarity builds trust between sales and marketing, ultimately empowering both teams to better serve prospects and customers.

5. Inbound is overleveraged. You should be on edge if 80 percent or more of all leads come from your inbound engine. Inbound is great, but it’s not the only solution for long-term, sustained growth. Generally, inbound leads tend to slow – and get more expensive – over time. Instead, play the long game: Build out a strong outbound engine to supplement your inbound strategy. 

6. Fear the “feature wars.” You’ve lost the deal if your conversation begins with “Do you have X feature?” Instead, spend time and energy understanding core differentiators and determining if the market has changed. Worried your competition has copied your core positioning? Dig deep into won (and lost) deals and change the messaging accordingly. Avoid building pitch decks based on features. Instead focus more on winning deals based on the value delivered.

7. Time spent on site is too short. Get scared if high website traffic numbers coincide with a high bounce rate. This may be an indicator of poor messaging – content that isn’t resonating with target prospects. Additionally, you could be attracting the wrong target audience to the site.

8. Infrequent customer contact. You’re preparing for that renewal conversation, but you realize your customer hasn’t logged into the product for a few months and is effectively on life support. Do you have a plan in place for automated check-ins? Don’t wait until renewal time to touch base with customers.

9. Key customers becoming your main focus. Be concerned if big customers are starting to suck your resources dry with requests for customizations and other special needs. Everyone loves a big deal, but don’t let a handful of customers change your focus and vision.

10. Slow new customer onboarding. After signing several big deals, you’re starting to see momentum build. But it’s taking much longer to deploy these customers than you hoped because your customer success team is too small or overburdened with product issues. The longer a customer has to wait to use your product, the less valuable it becomes.

Any one of these warning signs could spell trouble. Constant vigilance is required – not simply when you start to sense trouble.

Leave a Reply

Your email address will not be published. Required fields are marked *