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- [00:00]
Chris Walker
You're listening to Revenue Vitals with Chris Walker.
- [00:18]
Unknown Speaker
Good to have you all here. We have two more episodes coming up this year, and then there'll be a little bit of a break. I'm sure everyone's taking a break. And so I got one little, like, anecdote story to share, and then that story leads into, like the punchline. So I'll just jump, jump into that as well. So what I'm trying to provide is an example of how you can use a podcast or some form like a live event like this, not only to create pipeline, but to figure out your business's strategy in a way that you have a feedback loop from people in the market. All the, all of you that help me figure this out. And shortening that feedback loops, instead of sending a survey to 500 customers and waiting four weeks and getting responses for qualitative data, that last week I was like, the CFO is the only person that can fix your go to market. And we posted that episode and several smart people came into me, including Sangram and a couple other people that said, yeah, we used to think that too, but here's what we learned. And immediately I have a strategic insight that is false and likely to lead me in the wrong direction. And I produce the podcast and I get the feedback from people, and three days later I have correction, I'm on the right track, smart people hear it, help me, and then I keep going. And it has nothing to do with pipeline production, but it's better ROI than getting one lead from this podcast. And so one of the things, I think I talked about them on the last episode, but one of the three things that is a true competitive moat moving forward is are you closest and have a direct connection with your customer. The people that drive the strategy in your company, not offloading it to a marketing manager, the people that deploy the investments, decide on the product roadmap, do all these real decide on how we're going to allocate investments. The important things do you have a direct connection with the customer like I just did, where I got that insight and feedback, and I can drive my whole company in a much better direction almost immediately because of it. That is a huge moat because in as AI has moved into product development and it is accelerating and commoditizing software development, to be honest, that it's no longer about how fast can you build something. It's about can you build the right shit that actually solves the customer's problem. And so it's a switch. It used to be just how do we release as many features as fast as possible? And now it's about how do we solve the customer's problem. And so it's being a lot more intentional around how close are you to the customer? How well do you understand their problem? How many times have you helped other people like them fix it? What else do you need outside of just your software products so your customer is successful and renews with you next year. And so there is a big learning there. So anyway, the main reason I do this podcast is not for you all to become leads. And the main reason I do this podcast is not to create pipeline, although that is a nice byproduct that delivers a high ROI on my time. The number one ROI is how much help I get from you all live and the community that listens and the feedback that comes in that helps me clarify my ideas and drive my company strategy forward that is aligned to what the market wants and needs. Huge insight. So think about that at your company. It doesn't have to be the way that I set up this event, right? There's a lot of creative ways to do it. But how can you get your key executives that decide the strategy, namely the CEO or whoever is the person that is evangelizing your product and therefore hopefully connected to the strategy and product roadmap. How do we get that person deeply connected with our customers frequently and often and hopefully multiple people, honestly. Okay, so that shift, right? So I thought it was the cfo and the CFO plays a massive critically important role in fixing this issue, but can't fix it on their own. And so now you think about okay, it's the CEO and why is it the CEO because the problem is entirely cross functional, that it's in the cracks and connection points between finance, rev ops, marketing and sales and that center point between them where the actual issue is. And the core issue is that companies want to divide the credit between these four departments around which department source to lead and then compare that to how much money they spent. And so the driver is the financial planning model. And then downstream the go to market leaders now need to live within this planning model which includes marketing sourced or SDR sourced or however finance decides to set up the model, which is usually a decision between people but ultimately comes down to finance. And so being able to bring all these different pieces together and align the functions is actually the core issue. And then why do we have lack of alignment if you try to go one level deeper? Why when we sit in a boardroom or I read a QBR deck that I get from one of our customers. And the conversation is the CFO thinking that marketing is not working and marketing showing they're 107% to plan on their demo request target that the KPI that the main KPI that they report on. Why are we having these levels of debates between people where it's like, oh, I think we have a pipeline problem, I think our SDR team isn't working. I wonder whether we need four more reps next year or it should get rid of three. And it's just a bunch of people weighing in their opinions. And why is because the insights and data that executives have that they get through a process that I'll explain does not help them make what should be fast, easy, simple decisions to get alignment. And so let me just explain how this works and it's relatively complex, but stay with me. Okay? So inside of your go to market, the first thing that you do is you select an operating model. And you likely do that subconsciously. It's not like you and a whole executive team are sitting there together saying, yeah, we're going to use the double funnel. Maybe you do, but a lot of companies just pick one and they, and they think that is the only thing that we can use. Right? So you have the topo double funnel, which is just a combination of the MQL waterfall and then some undefined ABM funnel, unlikely to work for you and unlikely to have a clear way to implement. Then you have the regular MQL waterfall from 2012 and then you have the four funnel MQL model and I'm not exactly sure who is promoting that one in particular. So those that end up being the operating models and then you eventually decide on one. And many companies are like, we used to have an MQL model and now we're moving to a form funnel model because we think it'll be better. Right? And I've shared my high level critiques on this. But when you look at it, it's not only the model that is the problem. Right? The model is the starting point of the problem and a huge contributor to a lot of the issues faced. But watch how it continues to expand. Right? So you have this model that were built by analyst firms that have no practical instruction about how to present it in real life. Right. It's one of my criticisms around Winning by Design. I'm a partner with Winning by Design and I love all the stuff that they're doing, but their book is theoretical. There's no practical implementation. If a hundred people read the book and tried to implement revenue architecture, none of us would do it the same and so it lacks practical application. Then the next thing is that the internal ops teams and data and Salesforce admin teams then make a homegrown implementation of the system without instructions or architecture. Right? So they have to then interpret what does this all mean and then put it together in the CRM using typically the fractured objects that are standard in Salesforce that has been like that since Salesforce existed. So they use that initial technology which spreads out the data between leads, contacts, opportunities, things like that. So you have this homegrown CRM implementation. Then the next thing that happens is that the departments and the people inside of those departments connect dozens of point solution department siloed tactical tools. Think I'm not talking down to any of these vendors, they are all great vendors. But think hockey stack, an ABM platform caliber mind outreach, sales loft, RB2B common room, a million of the other tactical tools that get connected in these point solutions. And those point solutions pull out CRM data that is poorly architected and then they then take bad data and then they help you do something and they produce metrics in their platform that then the marketing manager or the manager level SDR then pulls out for a report. And so then you have the dozens of point solutions that produce all this tactical data. There is no financial data coming into the stream. Right. And I'm going to explain this problem deeply soon. So all of the reporting that's happening does not have the idea of how much did we spend to make this happen? Which is a critical thing that you need to know as you build your reports and drive your strategy. Right. So none of these people have that context. They don't have context on what is our cac, how fast are we growing? How has that changed over the past six months? What do I need to be looking at this data for? None of that context. Then you roll that manager level stuff up into the CMO report and the sales report and the RevOps report and then that is what gets presented to the executive team and the board or select a selection of that to decide what our strategy should be and how we should adjust. I am intentionally using the silence to make that point. Like listen to that whole process about how fragmented and poorly thought out and all the flaws that exist in it. That that is the primary way that executives get their information to drive the strategy. And then at the top you take the finance data. So finance is over there calculating CAC and things like that. So they're up there saying oh my. Like CAC has gone up by 50% over the past four quarters. Growth rate used to be 30, now it's 23 and it's trending down. What are we going to do? And then at the bottom it's sunshine and rainbows. In the go to market report we got 107% of demo requests. Look at our influence revenue report. SDRs are crushing it. We just implemented an AI SDR and got seven meetings. And so you have no connection between the C level and the board that look at the finance data connected with the CRM data and what is the actual root cause of the problem. So you have this disconnection. The disconnection of the finance data is one component, but it's actually the whole process about how it's built that is built around decentralized department silos to run go to market. It's decentralized. The CEO delegates responsibility to marketing to the CMO and then the CMO gets their own reports and that's decentralized. And there's no thinking around how do all of these parts work together to deliver the insights that we need to make strategic decisions. And so what we need is a new method for the first team C level executives, the six most important people in your company that allocate a majority of the budget, actually all of the go to market budget combined and the alignment between those six people about how is our performance, where are the trends, what is the biggest issue in our factory, not whose fucking fault is it or what department is underperforming. It's a terrible way to look at things. Every department spends some of their money across different parts of the customer life cycle. Marketing will spend money to create pipeline, to accelerate pipeline, to renew customers to expand accounts. SDRs will prospect into third party data sources, first party data sources and current customers for expansions. Salespeople will do some prospecting, they'll post some content, they'll do some things like that. They'll also maybe get involved in a renewal or help a current customer that they sold be more successful. CSNAMs will take the success stories and bubble them up and use that on LinkedIn or in community for demand creation. Every department is working across the whole customer life cycle. The investments that a department spends are spread out across the customer life cycle. It's literally the most simplistic model to take the money marketing spent 10 million and this is how much marketing source revenue we got and use that to determine what we should do next year. And so I talked to people and I talked to Very like the most sophisticated company that I have interacted with. So I've probably interacted and seen data from more than 500 companies in the past six years. The most sophisticated company that I know from a rev op structure and things like that has experienced plateauing revenue and pipeline for the past eight quarters and they don't know what to do to keep scaling because they don't have the right data and they're the most sophisticated company out there. So imagine the average company that's at 40 million ARR that doesn't have a ton of super experience in that area. So you run into this issue when you look at the model of that you don't know should I spend a million dollars more on marketing and inside of marketing? Should it be events, should it be digital, what channel, what thing should it be? Headcount, programs, agencies, consultants, what should it be? You don't know? What about on SDR? Should we move it to SDRs? Should it be a million dollars for an AI experiment? Should we think about how to build a team that prospects into our upper middle market segment because a a potential there. How do you decide not only what department gets the money but also how it is spent underneath that you do not have the data to make that decision. So you just say this department gets it and then leave it up to the leader of that department which by the way has a not a comprehensive view of the entire company performance and therefore cannot make the best decision like a CEO or CFO could and we let them decide how to spend the million dollars. So I think that especially given the unit economics pressure that is so apparent, people were I was interviewed on a podcast just an hour ago and the first thing was like people had said a lot has changed and go to market over the past six quarters. And I was like what's changed? What's changed? Companies that used to be growing at 40% are still growing at 20%. Growth isn't accelerating for most are many NRR like after the big churn thing that they got in 2023 NRR for many companies is stable and isn't it hasn't been improving go to market efficiency is still way too high and at the worst performer in public SaaS metrics. And so what's changed in go to market in the past six months or six quarters from a metric standpoint, not a lot. And when you look at a lot of companies companies, they have become more profitable. They have been lowering go to market costs but they haven't been improving go to market efficiency which Means that the costs that they're cutting are not actually strategic in changing the core metric that it's meant to change. And so not a lot has been changing and go to market. And many companies are still lowering their go to market budget overall going into 25. So while some people think things are getting better, and I agree, things feel a lot better now than they did four quarters or six quarters ago. So emotionally, theoretically, if you look at the stock market, many things like that, like things do feel better, but when you look at actual company operations and metrics, things still aren't that good. And so I think that we'll continue to see pressure on unit economics for new logo acquisition that if not solved with a true solution and not a band aid that many companies try, will continue to decimate enterprise value and slow growth. And so I believe that just hoping that the market tailwinds come back and push you forward is a really, really, really bad strategy. And that when you think about the actual problem and now I've probably assessed 30 companies in this way in the past six months, that the main issue is unit economics around the investments to create pipeline. And that that the result of the degradation of that metric causes lower prp, lower total revenue, lower pipeline production, lower quota coverage that shows up in sales metrics and then it inflates cost of acquisition and actually becomes your leading metric to cac. How efficient are we at creating pipeline and delivering ROI at that level is the best leading metric to cac. And I'll give you an example. And many companies will make this mistake. Many companies have made this mistake and many companies will make it in the future. So maybe I can stop one company from doing it. You're 30 million ARR at Q4 of 22. So a couple of years ago, and you just raised another round and you're ready to put your foot on the gas, which many companies have just raised a brc. That's what they're there to do. Their metrics look actually the metrics on paper look amazing at that stage. And if you look back at their metrics, they look amazing before they started doing all this dumb shit. And so then they say, okay, now we raised around now we're going to scale up. They scaled up sales headcount, added a bunch more SDRs and started spending two or three times more on marketing headcount and programs. And that happened over the next year. And they're measuring the success of these investments on pipeline production, raw pipeline production and number for marketing, number of demo requests. And so when they're in the board two or three quarters after they start making those investments. Demo requests are up, pipeline is up, everything looks good. What's happening in the background? They're spending a ton more money and conversion rate is massively degrading. Not only from demo request or any other type of lead into an opportunity, but also from opportunity to one. Win rate is dropping. And so on their dashboard they're like, wow, everything's working in the background. If you look at create pipeline efficiency, that number is steadily climbing from they were below the actual target. They were considered a super high performer at 46% which means basically they spent a dollar in marketing SDRs and they get $2 in revenue and then they have to pay their sales team. They probably have a 12 or 15 month CAC payback. It's like an amazing model. And then over time it goes from 46% and then 53 and then 62 and then 78 and then 100 and then 115 and now it's at 146. And so the $15 million a year that they spend on marketing and SDRs have all of a sudden gotten 3x less productive. Meaning that if they used to get 100 million a year in pipe, now they're getting 33 million a year in pipe. And that metric was started to degrade in Q1 of 23. If they were measuring that metric in that KPI, they would have clearly seen something is going off here five or six quarters ago. Do the math. That's almost eight quarters ago. But they didn't come and hire my company to calculate this metric until 3Q24. And in the process of that six quarters, that metric going from 56% to 125% when they hired us, a 2x decline in productivity cost that company likely $150 million in value for shareholders during that time due to slower growth and higher cac. A massive actual issue. And so the point that I'm trying to make here is purely for the executive team that if you do not have the right KPIs to monitor top level performance and you get so stuck in the weeds and you're in the weeds and looking at the attribution data and department source and all this nonsense and when you look at it that way you miss the top level picture which is like the whole thing is getting less productive. And if you look deeper you can see clearly it's because marketing combined with SDR investments at the top of the funnel are not performing to unit economics. Why because nobody's accountable. Nobody in that area is accountable to a true unit economics target. It doesn't even get measured. And now I want to talk through, because this is the funny part. And I've, I've done these calculators. So, like, I'm not talking shade. I'm just saying the times have changed. But I have done this before and I watch people do it today. And there's many things that I've done before that were appropriate from a strategy perspective or an advice perspective. Five years changes a lot. I made. I give different advice five years ago than I do right now. That's a good thing, not a bad thing. That the traditional way. And I watch because I get the reports right. So whether it's from a digital marketing team or a paid search manager or somebody on LinkedIn that's gallivanting about their results, they will say something along the lines of our Google Ads is crushing it. We get a 3x roas, okay? And then that will be the core metric that those people are trying to achieve. And so let's say, and they think that's good. Okay, so 3x roas, which means for sake of round numbers, we spent a million, and then we have 3 million in revenue. And they haven't determined or clarified whether that's on an influence basis, a source basis, or some other custom model that they're using. So when someone says 3x roas, you really don't know what they're saying, and you really shouldn't listen to their advice until you really do understand it. So, spent a million on Google Ads, got 3 million from some model for revenue. Okay, that's the Google Ad spend. But what about the rest of the digital ad spend? Okay, so Google Ads is Generally less than 50% of total digital ads. So now we add that up. Now we're at 2 million. So now ROAS is down to 1 and a half, 1.5x. And then we need to add marketing headcount, which is double that. So now we're at 4 million. So now ROAS is 0.75. And then we need to add the SDRs, which is another 25%. So now ROAS is down to 0.5, 0.5. So we lose money. Now we need to pay the sales team, which is 2x. And now our ROAS, our CAC payback is greater than four years. And marketing's over there optimizing their Google Ads, saying, yeah, we have a great 3x roas. They're not taking into account any of the other costs. Those calculations are totally out of whack and not realistic and they're celebrating and optimizing for that and investing millions of dollars of our company's money, while in reality it's a terrible investment for the business and nobody else, nobody else in the company can see it. And so those are true issues around how this data is calculated. One, it should not be calculated manually by a marketing level employee or a manager level employee that doesn't have access to the full financial data. And it should come directly at an executive level to the executive team to make executive decisions. So yeah, happy to go in any direction here. I imagine that over time, sort of the people that attend live will shift in good ways. So I invite that I invite newcomers that are here, like, do I belong here? Like is this like the thing for me? I invite you to check it out and participate and so yeah, looking forward to getting into it. Thanks everyone for being here.
- [20:58]
David
Awesome. So we've got David to kick us off with our first question. Go ahead, David.
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Travis
So the thought process, my mind that I think is also perhaps important to kind of figure into the conversation I'd like to get your perspective on this is that the scope and ambition of the unified data environment that one might try to build that brings together all the activities and the spend so you can have a non siloed look at things, needs to be different for different sized businesses. So what you need if you're a $500 million company is probably different because you might have several products at that point in multiple territories, different jurisdictions and so on compared to what you might need and can even use at a hundred million or a $10 million company. But the thing that I think is common across all of them is the mindset. So the actual implementation might need to evolve and change based on situation, but the mindset needs to be there right from the very beginning. And if it can be there from the beginning, which is what I'm hearing you say, it's going to be much more helpful because you that's in your DNA, if you will or can be. What's your thought on that?
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Unknown Speaker
I mean first off the big change from like 2021 until now is that because of the pressure on unit economics and things like that, that the CEO and CFO have to get where previously they could just offload it to them. The CMO and CRO say hey, spend the money and then we'll figure out how to manage it with the board and raise more money. And so like that whole dynamic has changed now where like these two people that three years ago didn't need to take accountability to this necessarily now fundamentally need to. I was trying to think about how I was going to answer your question. In particular when you think about company size like the big cutoff point is right around 100 million in ARR where you start to add like complex GEOs, potentially matrix organization and multiple products like so that's the cutoff where the complexity starts to increase. But when you look at how companies try to solve it, you can take a $20 million company, a $50 million company, a $200 million company and a billion dollar company. I'll talk to all sizes and all of them are trying to implement the four funnel fucking MQL waterfall. Regardless of the size. It seems like most companies are receiving blanket advice and doing following the blanket advice at all stages. So that's how I'm thinking about it. Personally I think that the best way to implement this is to slim it down to either a platform play that's less than 100 million ARR, that doesn't have complex multi product they might sell into multiple GEOs or countries but it's not super complicated. And if you were in the upper market at 500 that the best way to build it would be to build it in the $50 million business unit that operates separately and slim it down into one company and build it at that level. And then when it comes to the mindset, mindset of executives changes through pain and education. And generally you need to feel pain first before you go out and seek the education about how to fix this pain. And so some people will feel, have felt that earlier. Some people have been immune to it because of the market or the business that they're in. And kudos to them for picking an amazing market that is immune to this type of stuff. But that that's the process in what happens. And the analyst firm, the ABM technology vendor, those types of companies that have established business models, large customer bases, big products and things, you know, established category are not going to destroy their company to change the product to fix the problem for how it exists today. They're going to keep selling you the model, the technology or whatever that has been built up to this point. And so all of the existing large vendors have no incentive to change the product and fix the problem. It's a big issue. They need to keep their revenue and their margin.
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Travis
I absolutely agree with what you're saying though there is the opportunity of course every time an executive moves to a new company who has experienced pain Before, I don't want to go through that again. I need to do something different, I need to learn something different. And I think that's what you're. The big opportunity for changes is when maybe people who are today stuck in the role that they're in and the environment and infrastructure and all the bull work that kind of holds up this stuff when they find themselves in a new organization, there's an opportunity to bring something new in then hopefully and perhaps it's easiest in the startups. And so when we're at a startup phase, even though we don't have a lot of data and we don't have very sophisticated systems at all, because in some ways we may not need them. If we can get the mindset in distilled, then then it can grow. That's my, my sense of it. That's at least what I experienced through the pains I've gone through.
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Unknown Speaker
Yeah, I mean I, I buy into like really ingraining it in your company somewhere between 10 and 20 million ARR. Like in that range. It's really not helpful when you have one rep or you're doing founder sales and you just raise the seed. It's like it's too long. You don't have the budget for it, you don't have the people to use it, you don't get the insights from it. It's just not that valuable. And so waiting till like the right point, but doing it at 10 to 20 instead of waiting till 40 or 50 when CAC inflates and growth slows, that would be smart. So you can plan appropriately so that doesn't happen. And then like philosophically I wish that telling these stories about how hundreds of millions of dollars got decimated, how companies growth is slowing, how they went through this whole 18 month delay of basically their company vision to clean up the mess that they created for themselves by irresponsibly scaling expenses without having the proper KPIs to track and that whole issue overall I wish that that story would stop someone from doing it themselves. But I am positive, not positive. From my own experience I know that it won't. People have given me advice and told me hey, don't do that, don't touch the hot burner. And until you touch the hot burner and it burns your hand or whatever painful it is that you have to really feel the pain for yourself to truly learn the lesson, which is just I think something in life that I have adopted.
- [26:50]
Travis
So what I'm hearing here is for companies that are in the five to $10 million range. Take a good look inside. Consider switching what you have organically created and grown from. That has worked, but perhaps is getting a bit rattly around the delivery right now. And think about recasting and redoing, even though it might be painful in the short term, so that you can build the right kind of mindset for the future. Because before that scale, it might be too much work. It might be more headache than it's worth. Ultimately, given what else you need to.
- [27:20]
Unknown Speaker
Be focused on the relative complexity between a 5 million ARR company that has 1 marketer and 3 reps and the founder selling that complexity versus the complexity of a $30 million company that has 15 reps and 7 SDRs and spends 4 million in marketing, has 8 marketing employees, and has 2 agencies. The relative complexity for a CEO and CFO to understand what's going on goes through the roof. At 5 million, you can just ask three people and you know then when you're at 30 million, if you ask everyone, you're going to get a siloed, opinionated view of how they see the world based on their position in the organization. So that level of data is useful, but not what I want to hang my hat on for my strategy. And so that is what drives this, is that eventually process and data is how you actually make good decisions and grow. So talent is the thing that people try to like. A process is the combination of people and technology and an order of operations and some level of like resources or raw materials. And you get, you have an input, you do stuff to it, hopefully repeatably and then you get a consistent outcome back. And people are trying to fix this problem by hiring a new person or like buy another attribution tool or change our attribution model. And what they don't understand is I explained to at the beginning of this episode, the full process is broken and needs to get rethought from the operating model that silos the departments and then all the way up how we think about CRM point solution tools that spread out the data, bottoms up, manual reporting and then the disconnection between finance data and CRM data to drive strategy. That whole stack is busted. And so when we think about what is the actual problem generally people are trying to blame it on a department. Even like I talked to great some of the companies that I respect the most and they're like, oh like we're missing this year because our SDR has only got 43% of revenue and pipeline instead of 47 like we planned. It's Not a marketing issue. We're going to get a million dollars more in marketing. That's the discussion that's being had as to why it's not materializing. And so I think we need to get out of the to recognize that the process is larger than any individual person and any individual tool. It is the connection of how you get from the garbage CRM data at the bottom to driving the $50 million of investments you need to make next year in your annual operating plan. From top to bottom, there are, there are cracks and holes that create flaws and risks and inaccuracies and misunderst alignments and things like that. And that's what I'm challenging people to rethink.
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David
So thinking about this in practice, when you're talking about bridging the gap between finance and CRM data, what are your thoughts on using like an ERP system and integrating marketing data, campaign data into the ERP system to give you this data?
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Unknown Speaker
This is not a marketing ROI solution. Like, it's not about feeding campaign data into our revenue and calculating that type of stuff. Like when you try to fix the problem inside of the marketing department, you come up with a solution that's great for marketing to tell a story. And every single solution that does that is disconnected from the actual financial results. I think that it's a little bit different than like feeding the campaign data into the ERP system and trying to have the ERP System become a SaaS UI platform that gives you insights. That's not what an ERP system is for. And so instead once you actually blend, like get the two data sources together, the data is not structured in a way that you can compare it like the taxonomies between the two. That's why the only way that they can look at it and say which department spent the money, because it's all. They track around the expenses. So all they can do is GL code, which department had the GL code, and then how much sourced or attributed revenue do we have on the other side? And you create this overly simplistic model and calculation that doesn't scale. And so it's not the technical overcoming of blending the data together, it's creating the system underneath it. That the data works when you put it together. And when you do it, really the way to do it is to, like I've talked about six months ago or before, that start with the two most important metrics in the company, growth rate and go to market efficiency and then work all the way down to opportunities and sales cycle and conversion Rates and how does the data connect all the way down. And when you try to do that exercise for yourself, you will see that it would be a lot easier to just hire my company and pay us than for you to do a two year R& D project to try to figure it out. And I'm not being salesy here, I'm just trying to save you a bunch of time. We've been trying to solve this problem for two years. We've tried it with 50 companies. Like somebody trying to do this on their own. I talked to the most financially savvy rev Ops person that I've ever spoken to yesterday was a former accountant, chief of staff, like very financially savvy rev Ops leader. And he knew for sure that he couldn't do this. And so it's just like your CRO, it's a whole different game. We're like asking our quarterback to be our kicker. You know, we're asking people that are, that are there and have superpowers in the business to do something like a CRO to build, manage and run a high performing sales team. And we're putting them in charge of like calculating unit economics and things like that. Or we have our CMO which has superpowers over here and it's like, why don't we just let our capable, talented people handle the function that we hired them to do and then the other people in the company are responsible for creating a system that allows those superstars to win our, win us championships. So I don't even really remember what the original question was, but I think.
- [32:45]
David
You got gave us the answer.
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Unknown Speaker
Okay.
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David
Okay, I'm going to bring on Nancy next who has a question.
- [32:51]
Nancy
Hey Chris, how are you?
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Unknown Speaker
Great to see you again, Nancy.
- [32:55]
Nancy
Good seeing you. So you gave me the punchline because my last, my real bottom line question is so how do you see them fixing this problem? And I think your answer is how are you? I got that. But I want to work backwards about.
- [33:10]
Unknown Speaker
The problem itself just to interrupt you for one second because there's a point that I'll forget and then we'll get to your question. So if you all remember in 2019 when I started talking about the things that I was talking about for the digital advertising, David, remember this? David was there that there was a period of time that was multiple years where I was the only solution, that you were unlikely to figure it out on your own, listening to my free content and that nobody else had been smart enough or seen the problem in the right way to build it. And so there'll be a period. And I'm not being salesy when I say this. I'm literally just for people that believe in this. I'm trying to tell you the truth, which is that you can fuck around by yourself trying to fix this and it's going to take you two years or I can help you fix it in three months. And you're unlikely to find any comparable vendor at the moment until people, a couple of years go by and people start copying what I'm talking about. Just wanted to put that in there. Now let's get to your question.
- [33:57]
Nancy
Okay. I was unpacking it from the bottom. Okay. So the way I unpacked it is, it is true today companies are structured in a silo sort of a way because it's the only way to manage things. Right. You're not going to call a meeting and ask hey, how much money should we spend in Google Ads? And then get a consensus and then tell the CMO, okay, everybody agrees should be 4 million, go do it.
- [34:22]
Unknown Speaker
Right.
- [34:23]
Nancy
So that does not work. So you delegate cmo, you make the Google Ad spend and Chief Revenue Officer, you make the hiring of sales rep whether you want a SDR or not. Right. So that's why.
- [34:36]
Unknown Speaker
Totally agree. Yep.
- [34:37]
Nancy
Okay. Once you set that in motion, they can only measure what they have control over. Right. A CMO doesn't have a visibility of the total GTM data that's required to do what you are advocating. Right. Neither does the Chief Revenue Officer. So I guess what you're saying is you understand why we're in the state that we're in, but because all the tools don't really support the right way of calculating GTM and deciding how to make the right investment. Therefore there needs to be a rethinking of the tools and the process to get to that. And the bottom line is, do you have a way of getting to that today? Is that kind of correct?
- [35:24]
Unknown Speaker
So just to be clear, the organizational structure and how companies organize, I am not advocating that that change. Right. So like it's this is that the way the company is organized is the way that it's organized. But then when we get to the table with the six most important executives about our plan, our strategic plan for next year, that we don't look at the data by the department and it creates a lot more alignment, less finger pointing and way more objective strategic decisions. And so that's what I'm suggesting here is that we just look at the data in a different way and that the CMO should have autonomy and be able to do what they think is best for the business with the budget that they are allocated, that aligns with the revenue targets and CAC targets. And they have autonomy to say we're spend a million on Google Ads or zero. But in the executive team level, when they spend the money, it should be very clear there should be a basically a scoreboard just like there is for the sales team. About is the, are these investments in a, in an aggregate, not one individual investment. And scrutinizing it like an attribution is the aggregate of all these investments in events and digital and marketing headcount and agencies and consultants and SDRs and AI SDRs and technology and tools and blah blah, blah, blah. Is that aggregate investment achieving appropriate roi? And everybody in the company can look at it. And that's something that can be created relatively simply. And so the breakdown is that there are no true business connected early warning signs and KPIs for pipeline production. And so when things are going wrong, companies don't see it until it's way too late. And then they have low pipeline. Because like it's not just about how many pipeline dollars did we put in stage two, which is what most companies measure on. Or they look at it even before that. It's like how many demo requests did we get? And they model it out from there. But if you look at it at stage two, just because you put more in stage two doesn't mean that that's a good thing. If conversion from stage two to stage three drops by 30% but you put 15% more in, it's a net negative. And so like just looking at and then that has no correlation to how much is being spent. Right? If we create 30% more pipeline, but we have to spend 100% more to get there, it creates an unsustain, unscalable, unsustainable model. And so the idea that we just look at pipeline creation at stage two or whatever companies use and make that the KPI for success is incredibly simplistic and not accurate.
- [37:34]
Nancy
Okay, but then when the CMO has his or her weekly staff meeting, say with a performance marketing manager, right, what does she hold him responsible for? The same set of metrics that you're talking about up here or the traditional measurement that we traditionally measure the traditional.
- [37:55]
Unknown Speaker
Way is ridiculously just not foolish to use today. That somebody that truly understands the problem would realize that it's not just target account pipeline. That if you broke it, if you thought about, just like you think about your sales process and you have stage One, which is qualification and stage two, which means X and stage three, that means Y. That in a pipeline process there are also clear core stages that happen. And that if you're able to break that down and set volume, time and conversion, KPIs up there by implementing a new data architecture that measures that stuff, that you'd be able to quickly see the progression. Just like you do, sales opportunities flow through your pipeline and you'd be able to have the visibility that you need. And so when you break it down into a marketing manager or a performance marketer, even a performance marketer is a partner of the supply chain function inside of your revenue factory. They are responsible for getting in market buyers through type of ads into that are set to be prospected to and convert into meetings at a high rate. That is their job. And so they should be accountable for how many meetings and qualified pipeline is being created against that specific revenue. But the CAC target is not eight months. It needs to be super small because we have five or six other stages that we have to pay people, technology and tools for. So it's not like b2c e.com where like you spend Google Ads and the customer converts and the only cost you had was the Google Ad. It is very different in B2B2B. So the marketing manager's CAC target needs to be way fucking lower and way more solidified because they only own a very small part of the process which is in market to meeting or in market to ready to be prospected. So 8 month CAC payback is going to totally flop. We need to be at the 12 months to add up and account for all the rest of the costs in the system. And then if you had, you know, somebody who was responsible for using paid social to drive more net new accounts in market showing intent into the supply chain. Right. You have a separate process there, which is we had a thousand accounts that we said we wanted to get to be engaged with our company and then we go and do the marketing to those thousand accounts and 456of them land on our website, become engaged and then a certain amount of them then are deep engaged enough that they come into the supply chain and performance marketing optimizes for them. I used to promote the idea that marketers should be accountable to revenue. And I truly believe that yeah, when you do it, you should be thinking about how is this contributing to revenue. So that from a mindset perspective I think it makes sense. A performance marketer's job is to get high quality signals to the prospecting team and then to be able to look at the data, to know which of the signals delivers revenue. But I think we really need to slim down and look at what is the goal of this investment and be a lot more particular about what are we trying to do here. And I think that's another just having more granularity around the stages of the process and then where the investments go in the process, I think would create a lot more clarity for people. Imbalanced investments, low roi, parts of the process. It also fundamentally requires that the prospecting engine is required for most CMOs to achieve the goal that they have in the business. And having the prospecting team sit in sales and SDRs and in different places in the organization just make it harder to drive real accountability down. And so I think that potentially companies should reorganize around creating pipeline and then closing new logos. Doesn't change much, but it forces a lot of the prospecting function under marketing, which would be AI prospecting and SDRs. Five years ago I was like, if I'm a CMO, I don't fucking want to manage the BDRs. And now today I was like, there's no way I'm not. So my view on that has changed quite a bit.
- [41:29]
Nancy
Hey, thanks.
- [41:31]
David
All right. I think just in the interest of time, we've got room for another question, so I'm going to bring Travis on. Travis actually has a few questions for you.
- [41:39]
Chris Walker
Chris, thank you for doing this, first and foremost. So one of the things listening to you over the last couple of weeks that I hear, well, I see actually is data and logic. And even it being an intense pain isn't enough to facilitate change a lot of times in these organizations. And so it's typically changed that. It's met with pushback. And even though you have the data to back it and everything you're saying is logical, how much does the dynamic of the team and the alignment of leadership or the board play into this and how do you go about fixing that? Because what I hear consistently is we've either or somebody else brought this up. We've either done it this way for a long time or we've tried that out or it doesn't work. And the physics of the company play into this change taking place. And so even though everything you're saying around processing data and being able to make good decisions is key, how do.
- [42:27]
Unknown Speaker
You fix the alignment?
- [42:28]
Chris Walker
If there isn't alignment at the top, as you're saying, between these departments, how do you go about trying to fix.
- [42:32]
Unknown Speaker
That core fundamental problem that most SaaS vendors are set up to sell software, but not operationalize the software or transform the executive mindset in thing. Look at ABM for instance, right? The, the, the marketing message and the promised land of ABM is amazing. Everyone could have it and actually work the way they talked about. Everyone would do it, but the business is not set up to make it. So I'm just sort of illustrating the point with an example of like, if you do not have executive change management when you're selling a transformational solution like account based marketing, you will fail. And if you do not have downstream the operationalization of that inside of the CRM or the connection part, you will also fail. And so ABM platforms fail on both sides and they just sell a software. No set architecture, no transformational consulting, lackluster results. And now they're finally seeing lower GRR and things like that because their customers simply just can't afford to have a tool that delivers low ROI anymore when they could because it was cool to do ABM in 2021 and nobody cared about the money. Now when you actually want to transform, if you want to help a company do it, or you want to help your own company do it, the only way to do it is to structure it in a way where the board would feel stupid saying no to it. And it can be done that way. And so like, that's the level that we need to be working on here. When I sit in an executive team and we talk about like, our customers deserve a better experience, we did a survey and our customers like say this, right? Or I think that, like I heard over there that these people are doing AI SDRs, like we should do that for our company, there's literally just a bunch of opinions around what we should do, right? And so the difference is that when you frame it up and you say because, and I'll give that company I talked about as an example, right? Pipeline efficiency goes from 46% create pipeline efficiency 46% to 146%, a 3x degradation in performance and efficiency that that costs shareholders $250 million that that metric going in that direction, and then they have to lay off 15 or 20 salespeople. So using the financial data that says if we get this number back to the level that it used to be before, we spent a bunch of money without data, and we did it in an irresponsible way and we created this problem for ourselves, if we can just get back to the performance that we used to have, we'll make $250 million for investors, and it'll probably take less than 12 months. And the only person that can make the decision to fix that problem is the CEO. So frame it up with business data. The board has to feel stupid saying no to it and the CEO has to be the one that champions it. Or for a transformational change, if you want to get your marketing team 5% better and instead of using, you know, some MQL score and you want to use MQAs, like, yeah, go ahead and do that. You like incremental stuff can be done at the department level, even the sub function level, but at that level it's CEO and board. And so that was the major breakdown. Like I spent five years trying basically evangelizing the same thing. I am now just albeit like, like in a less mature, structured way, trying to evangelize this to a CMO and getting met with an incredible resistance. They're not going to put their budget to this. And it's not their fault that. Why would they? They've been there for 12 months, they have a cushy job, the average 10 years, 18 months. Why are they going to come in and rock the boat? And they, they don't even have the money for it. They're going to have to go and ask for somebody else to put the money up. And they're like, I don't want to do this. Meanwhile, I'll give you this last story and then we'll go. So there was a company that I was talking to a couple of weeks ago, SVP of Rev Ops. They were like 60 million ARR. And so the initial call was like, we've just fired, we've moved on with our cmo. Actually, we moved our CMO to just focus on product marketing, kind of like what I had been talking about. And then we have a new person coming in that's owning, creating pipeline and that VP of Revenue marketing rolls into the CRO. So now we have the CRO owning all of this different stuff. And now over the next two years, we need to go from 60 to 100, which is, I can't think about the growth compound annual growth rate. But we're trying to get from 60 to 100 real quick. And so I'm doing the math in my head, right? So I'm asking them, okay, what's your CAC payback period right now? Which was 3.6 years. And the current growth rate was like 21, 22% organic. And so when you do the math and you say, okay, if this company wants to get to that number and then do this. They're going to lower CAC from 3.6 years to less than 2 years and they're going to grow revenue by $40 million. And so what is this project worth to this company? It's probably 5x40 million 5x revenue. On the 40 million added, it's probably a $200 million. Not only the revenue growth, but then the added multiple to be efficient and grow fast to get to that level in that period of time. So let's just say 200 million in value to shareholders win. And there's more. That's the additional value. So there's more value created initially. So you have that number. And then so we're in the conversation and she was like, okay, so how much is this going to cost? And I was like, well, to get started, it's going to be 20k a month. And she was like, oh my God, that is like way too expensive. They're asking somebody to come in and align their Go to Market team in a new structure to help them add $200 million for investors. And 20k a month is too expensive to the SVP of Rev Ops. Unbelievable. Meanwhile, they spend $30 million on go to market and they have a 3.6 year CAC payback, which means that if they paid 20k a month to us, we would need to deliver or help them get either save $60,000 in the full year or add $60,000 in revenue for us to have a better ROI than the entire been blended. So the SVP of Rev Ops just doesn't have the point that I'm trying to make. They do not have the right financial view to decide whether that is too expensive or not. They're going to think it's too expensive because they have to manage the pennies. Then when you talk to the same person in the same organization, the cmo, the CMO says if we could fix that and I would pay, I think it's worth $300,000. It can't come from my budget, but I think that we should. We could pay up to $300,000 to fix that problem. And the CEO jumps into the conversation and says, if you could do it twice as Fast, I'll pay $500,000. Same company. Are you talking to the right person that can make the decision and transform the company, or are you not? And all of a sudden our 20k a month contract that looks too expensive to the SVP of Rev Ops is half the price of what the CEO is willing to pay. And so That's a clear illustration that if you want to fix the problem, you need to be working at the right level of the organization and for any whatever product that you have. So for me it's the CEO, but it doesn't have to be for me now it's the CEO. For my previous org it was the CMO can change. So that's a very interesting learning for me as well. I was actually blown away by that. But most when you just think about like why is the situation like that? Like most Rev ops people don't come from an FP and a background. They might do a little bit of modeling in a spreadsheet but they don't understand finance that well and it's not a knock on them. They are great at their job. We just have to ask them to do their job under their skill sets and not the other hundred things that we ask them to do that's outside of their skill set and expertise. Long story short, get the CEO on board with a no brainer business case and 90% of the time it's literally a no brainer 100x ROI.
- [49:23]
Chris Walker
Thank you.
- [49:24]
Unknown Speaker
Appreciate that. Cool. I just saw the clock hit one so we will wrap up on time here. Appreciate you all being here. We'll be back again next Tuesday and can't wait to see you then. Bye everyone.