Dear SaaStr: Why Do Most Entrepreneurs Under Price Their Offerings Initially?
Yes, most of us at first under-price and then slowly raise prices as we gain confidence. It’s because (1) we aren’t trained sales leaders, and (2) we worry most about not losing the deal.
Founders know the value of a key logo can be 10x-100x the value of the contract itself. Most especially in the early days. Closing those first 10, 100, 200 customers proves your value, your reason to exist, demonstrates traction, etc. When we finally get a good lead, we just don’t want to blow it. We want to do whatever it takes to win it.
And that’s OK. In the end, it won’t matter too much if your first 100 customers pay you $50,000 in total or $100,000. It will matter, but not too much. What will matter is that you don’t squander the leads, that you make them happy, that you learn from them, and that they refer others to you.
But after that, you need some professionals.
A sales leader will be much better than you at maximizing the revenue per lead. Often 2x better. And she’ll be better at closing than you are. Most founders are good “middlers” — great at demos, explaining value, etc. — but not great closers.
Add a true closer, and someone better at maximizing deal size, and a dedicated sales leader may do 4x+ better than you as head of sales.
But maybe not in the beginning. Not when just not losing deals matters most.
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Jason Lemkin, Khareem Sudlow
