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- [00:00]
Tony
You're listening to Revenue Vitals with Chris walker.
- [00:18]
Unknown
We have Mr. Chris Walker here on the show again, kind of returning guest star here. Hi, Chris.
- [00:24]
Chris Walker
What's up, y'all? I wasn't sure if you were gonna have me back, but then like two months later here we are talking predictions and things like that. So appreciate you having me back and forward to talking through it with you.
- [00:33]
Unknown
Definitely, yeah.
- [00:34]
Tony
I was saying to Tony, so last time we had you on, it was just around the time when some people call it the Sash crash or the end of the golden era in Sass. Now we have you on to how.
- [00:45]
Chris Walker
Long ago was it?
- [00:46]
Unknown
I think this was. This was. That felt. Feels like a year ago.
- [00:48]
Chris Walker
Okay.
- [00:48]
Tony
Yeah.
- [00:48]
Chris Walker
Okay.
- [00:49]
Unknown
Yeah.
- [00:49]
Tony
I just.
- [00:50]
Unknown
A little bit longer.
- [00:51]
Tony
My story is just better that way because now that you're back, hopefully then it's a signal that things are improving. Right? Things are going to be better.
- [00:58]
Unknown
But also you just mix it up with someone, it's like they're enough like white dudes kind of talking about this, you know, like that's, that's. This is coming.
- [01:05]
Chris Walker
Whoa.
- [01:05]
Unknown
Okay, nice. Good.
- [01:07]
Tony
Thanks for the intro, Tony.
- [01:07]
Unknown
There you go. There you go. It was also maybe a little bit funny. Let's see about it.
- [01:11]
Tony
So, Chris, it feels like so much has happened these last, I want to say year and a half actually since we last spoke. We can rehash a bunch of it, but let's just say it's difficult to sell out in this environment. It's also been difficult to raise for a lot of companies. So we felt like talking about what's going to happen the next year or so would be super interesting to get your take on. Obviously you're advising and working with a bunch of companies. So super curious to hear what kind of predictions you have for us today, Chris.
- [01:38]
Chris Walker
I mean, first off, if you think about it from a metrics standpoint, overall there hasn't been that much that has changed in the past 18 months. SaaS companies, the public median SaaS company continues to see slower growth rate down up 50%, slower growth than two or three years ago and cost of acquisition or go to market efficiency double what it used to be two or three years ago, which some could venture would have some impact around 5x revenue on overall enterprise value. So you're talking publicly traded company. We're talking billions of dollars in shareholder value that has been lost due to this go to market problem and the overall environment change and the lack of adaptation to how the world works. Now. I think that companies and I want to talk through this because I start to understand the problem very uniquely. I think I have a differentiated perspective on where the actual problem lies. So happy to talk through that and then obviously happy to talk through predictions. Generally my predictions are 50% right. And then the other 50% are more what people should be doing in B2B but just don't for the next three years. So my predictions end up being right but just late for some things.
- [02:48]
Unknown
Yeah, that's an easy idea.
- [02:50]
Tony
So eventually it will come true is what we're hearing. That's cool. No, but I'd love to go back.
- [02:53]
Chris Walker
By the way, and go to my. Because I did all these annual predictions from 2019 all the way through. So I'd love to go back and look at some of those and see how I'll have my team do that.
- [03:01]
Tony
There you go. Unfortunately, I'm not prepared that either for this episode, but we can always get you back on and do that. But I think actually to your point, what would be really great would be for you to maybe set the scene on what are some of the problems you've seen, because I think that also informs what is then your take on what's going to happen and what companies should do. So maybe walk us through some of the problems you're seeing for this audience.
- [03:21]
Chris Walker
Here when you truly isolate the problem. My two cents. My belief is that the six most important executives in a B2B company don't have the data that they need structured in the right way, with the right context and perspective to be able to make what should be easy, smart aligned strategic decisions across their first team of executives, which should be CEO, cfo, cmo, CRO, Rev Ops, and then potentially one other talented executive on your team depending on your structure that those six people struggle to get alignment. Do not use a data structure that has any type of thought around the top level metrics that we want to measure. It's kind of some of the stuff that growblocks have been working on, believe it or not. Yeah, but when you actually look at the root of the issue, it is a unit economics problem and executives do not calculate or have visibility into unit economics. Specifically at the top of the funnel they can calculate per rep performance and quota attainment, but they really struggle to look at what is the ROI on the $15 million a year we spend to create Pipeline. We spend it on events and advertising and SDRs and marketing, headcount agencies and all this different stuff. And the degrading ROI of that investment then fucks up the rest of the factory Downstream sales doesn't have as much pipeline, you have lower PRP quota attainment, you have to lower costs, you send less customers into your 110% NRR machine, you slow growth on the other side. And it all starts with lack of visibility data and alignment at the executive team on how we create pipeline at a proper unit. Economics.
- [04:51]
Unknown
I mean I think you have been preaching the unblend your funnel or split your funnel. I think, I don't know, was it like five years or something like this? Chris by now and obviously growblox has been picking some of those pieces up and helping folks with the go to market and the xps. Why do you think people still don't get it done? This isn't a well hidden secret anymore. People understand the split funnel, they understand the. I think sometimes you also call it kind of the four MQL funnels. People are starting to understand the concept but it's still not getting done in organizations. What do you think that is?
- [05:21]
Chris Walker
This is a incredibly complex problem that requires a deep understanding of what the actual issue is along with the understanding of all of the cross functional jobs in the executive team. Sales, marketing, rev ops, finance and FP&A and what it's like to be a CFO and a board. I have that perspective unlike very few people which allows me to connect the dots between finance and go to market and rev ops in ways that most people are unable to do. And so when you think about one individual executive in your company trying to align these six core executives, the only person that can do it is the CEO. And many times the CEO should have an advisor or somebody from the outside to come and help them do that. Just like they bring in challenger for their sales team and they bring in some account million dollar account management training for all their CSMs and meanwhile they do nothing around their pipeline. They Pay forced or 50 grand to put them in a quadrant and give them shitty advice. The second part of it is that I would say basically every company I haven't encountered one that doesn't do it this way. That the primary way that they scrutinize investments is around which department spent the money and then they use some type of attribution model to divide the credit between departments. And it is the fundamental flaw in go to market that people have grown up with for more than a decade. The MQL models were built around it. The analysts relations were built around it. The technology vendors, the CRM architecture, everything is built around. How do we run this either 1 funnel MQL model inbound or outbound or up to a 4 funnel MQL model that has an overly simplistic finance calculation on top of it. That leaves the six executives that deploy millions, tens of millions, potentially hundreds of millions of dollars in go to market investments and they have no proper data on how to make decisions. No data. It's all about which SDR booked the meeting, how many meetings did SDRs book, what's our cost per qualified opportunity through our website. None of the data connects together and it doesn't match up with the financial model. So how are we going to make decisions around it? And then lastly, I'll say that the technology ecosystem that is built around this is built for a specific department always. So you build an attribution tool for marketing, you build a sales development tool for SDRs. You build an AVM platform that tries to get a lot of people to use it, but you integrate these tactical point solutions into your shitty CRM data. They pull out bad CRM data and they give you tactical level reports that then your managers and directors use that have no financial data. Then they build bottoms up manual reports to give executive insights and the insights are useless. Yeah, that's the problem.
- [07:57]
Unknown
So and, and I think the problems exasperated by kind of the tools that you just mentioned, they're being sold to, you know, the VP market, VP sales. And it makes sense for them to buy these tools. Right? But I think the responsibility for the overall piece, it's quite murky.
- [08:11]
Chris Walker
Right.
- [08:12]
Unknown
And I think you're kind of pointing out it should be the CEO and to see putting the CFO into this team also to kind of, you know, manage or oversee the go to market. Taking this back to predictions, do you think that's going to get solved in 25 or is this one of the. Chris walker maybe by 2030 we will have a solution here.
- [08:30]
Chris Walker
Solve how, you know what I mean, what a solved mean? I think that you'll have first movers that start to do things differently and see some success by it. But even the advice that I've been talking about for marketing for five years that a lot of people see as common knowledge now is probably only at 2% market penetration. While there's AI and product and all this stuff, B2B moves incredibly slow, incredibly, incredibly slow when you think about actual transformation. Sure they can duct tape a new tool into their shitty like the bad CRM setup, they can like put AI as a bell and a whistle into their product. But when it comes to go to market, it's not innovative. And so when you Think about who is the person that can see into the future three years and see what the company looks like. And deploy strategic investments across the go to market to accelerate enterprise value, to maximize growth and to coordinate the entire factory. Only the CEO has the authorization to deploy those investments and then the confidence to communicate them back to the board as you execute against them. And so if you ever try to make this change through the marketing department through a CRO, I talk to a lot of RevOps people that try that. It needs to be championed and led by the CEO because it involves the entire first team being aligned on something. If you try to fix it and go to market, you won't fix it. Revops with the CRO, if you do not have finance integrated and you do not have a process and a methodology to integrate the finance data with your CRM data, you will not get the result that you need. It's a complete lack of accountability at the top of the funnel to unit economics. So when you think about, I have some data to show on this, but I'll give you an example. Right. So in Q4 of 22 there's a company, they're at like 40 million ARR. At that point. When we go back and measure their data, we have create pipeline efficiency at 46% which is below the target for of 50%, which means that you spend $2 on marketing or a dollar on marketing SDRs and you get $2 in revenue. Okay, so you have that type of calculation then over the past six quarters, their primary KPI for marketing was demo requests and their primary KPI for SDRs was number of meetings booked. And it inflated pipeline creation. So pipeline looked like it was going up, the data looks like it's going up. And then they're measuring marketing on website demo requests. So website demo requests are going up and so they're like, everything's going well. And in the meantime, this metric on the ROI is actually degrading because win rates have been dropping during that time. So on their dashboards they're like, this strategy is working. And meanwhile, for the past six quarters that number has gone from 46% to 146% a 3x decline in productivity that has up their whole revenue factory and very difficult to fix. So when you track the wrong KPI, which was website demo requests against all the marketing spend and they have a cost per MQL that they can come up with and things like that, and then marketing's driven to that number and then slowly over time that number degrades. Then all of a sudden you have a third of the pipeline. You spend the same amount of money or more and you have a third of the pipeline that you used to get for your sales team. Now what do you have to do with sales headcount? If they were tracking the right data, they would have seen the problem in Q1 of 23, that the number went from 46% to 56% in the next quarter to 62% and could have had the ability to stop it in the middle of 23. But instead they hired my company four quarters later when the problem had almost tripled. And so the wrong KPI can, especially at that stage, 20 to 50 million. Because at 20 million your metrics look good and you just raised a big round and you're going to pour gasoline on it and you don't have the visibility, your CAC doubles. Then all of a sudden instead of being profitable or break Even, you're burning 6 million a year and you're in big trouble. That's an example of like how the wrong North Star metric that doesn't account for unit economics can really mess up your go to market.
- [12:17]
Tony
Maybe to hop into a couple of things you mentioned here. Basically it's the CEO CFO now deciding a bunch of things. And we've also seen CFOs reign in spend cut costs. Basically, efficiency has been the switch we now flicked on after growth at all costs.
- [12:31]
Chris Walker
But efficiency. Sorry to interrupt you, but efficiency has gotten worse. So that was a question.
- [12:37]
Tony
Do you think we've gotten more efficient now or no? Do we just still have the broken engine and just smaller?
- [12:43]
Chris Walker
When you look at both private companies that we assess with a standardized data model along with 80 public SaaS, companies that they have been cutting costs and they have been improving ebitda, but go to market, efficiency continues to get worse, which means that they are not cutting costs at the same rate that net new ARR is declining. And what that tells you is that the cost cutting isn't strategic, is that they're cutting random stuff. Because if you are cutting the right lowest ROI things and leaving or amplifying and reallocating to the highest ROI things, you would see improvement in that number. We've been tracking that number for more than six quarters and it continues to get worse. And so the idea of efficiency is not cost cutting, it is strategically finding your lowest performing investments and then reallocating to the highest performing ones. And it's as simple as allocating a stock portfolio of 50 million bucks. You need to be able to have the Visibility into every single individual investment. You need to be able to estimate the ROI of each individual investment, identify the lowest performers and reallocate them to highest performers as quickly as possible and get a better blended return on investment across your whole portfolio. It's really as simple as that. I don't. But Go to market has become so over complicated. The marketing reports are ridiculously over complicated, have no connection to the actual financial data that comes out of the system. It does not input the right costs, it does not pull out the right actual revenue data. And when you only rely on the CRM and then manager level insights, you're gonna get bad stuff, bad insights. And so I think one of the predictions, and this is something that people should just move to, I think in five years, is that historically Go to market has been about distributed decentralized control, which you take the CEO that you distribute it down and then the leaders of the go to market, however many you have that lead those different functions, then distribute it down to sub functions to distribute it down. And then it's just like in the military, these field reports come back up from the lowest level people and come all the way back to the executives, which is an insight that you want, you do want that to happen, but it can't be the way that you decide on your fucking strategy. And so the move to centralized standardized analytics and decision making for strategy, I think is what companies will move to, which is that the executive team has a stream of data, finance and CRM data that's properly processed and properly visualized for their level and then contextualized through AI and other things to actually help them make decisions or at least see the view at the level that they deserve to compare against the field reports they get from their managers and agencies and be able to blend that together and make a true strategic decision that you need both of those use. If you think about the command center for the Pentagon or something like that, they're not only relying on what they hear from the person that's on the battle zone, they have intelligence and a lot of other things that help them make true decisions. They have advisors. And when we're talking about some of these companies, these are high stakes decisions. A 200 million ARR company, the difference between growing at 20% and 30% is a massive difference. For investors, it's a huge difference. It's a massive difference in enterprise value multiple, it lowers cost of acquisition. We grow SaaS businesses because of the enterprise value that it just can't be replicated in almost any other business. Model. And so why don't we start start aligning our go to market to the most important thing, which is create value for shareholders. Obviously we need to make an impact for customers, deliver a differentiated product, have a great culture. I don't want to diminish any of those really important things. But when it comes down to it, if you simplify it, we need to drive enterprise value growth. And so the lowering of cost is just a response to the fact that performance is declining and we've increased costs. So now all of a sudden we just have to adjust to the reality of the situation so that we don't keep losing a ton of money.
- [16:24]
Unknown
There's a couple of points in here that I try and tap on now. So you mentioned AI a couple of times. You mentioned efficiency and cost cutting. A lot of people in the market right now hope that one is the solution to the other. Especially on we've seen those AI SDRs, we see it in our marketing teams being like, hey, you know, someone can just write this copy. And from a reaction already, I think the audience can judge what you think about this. But not from a insights driven use case which you referred to with AI previously, but from a, hey, you know, now we have this new technology, this new magic wand and we have this CAC problem over there, those two together and kind of dream our way out of this. What do you think prediction wise is actually going to happen with this AI trend that we're seeing right now?
- [17:07]
Chris Walker
Large companies are having AI be a bell and a whistle in their product and it is fundamentally different to build your company AI native. And when you do that, you truly understand that bad inputs equals bad outputs and that all we have in go to market is a ton of bad inputs. It's not collected properly, the data's not tracked, sales doesn't attach right the right contacts to the opportunities. We have all these campaign members that some of UTM, some don't. We don't track any of our third party tools. SDRs are randomly doing shit. You could have a hundred humans look at your CRM data and nobody would be able to tell you the right answer. There's not a clear right answer. And so how do we expect a robot to go through that and make sense of it? It's not going to happen. And so AI native companies will understand that the actual architecture of the data is required so that I can know what to do with it, that that a robot and people could equally understand. And so I think that generally, especially when you comes down to operational tools like the AI sdr, just have a robot do more volume of the bullshit outbound that you're doing with a human right now that's automated with software. It's just moving the spam cannon from a human that costs 80 grand a year to an AI that costs a dollar an email or something like that. Especially when there are major, major technology shifts. Companies apply the old world and the old thinking to the new situation. And when you have this type of shift, it fundamentally requires an entirely new way of thinking. It's interesting the combination between AI and the economic shifts in the market, the decreased revenue multiples, harder to raise money. IPOs are generally way down. A lot of VCs paid a ton of money for overvalued companies in 2021 and have unrealized losses on the balance sheet and can't raise another fund and are probably going to be underwater. There's just so many things that are happening at the same time that I think people should that really need to rethink the overall strategy around how do I build a software company. I think that the trends, the number one competitive moat is having a deep direct connection with your customer and that will feed you the product insights that you need. It'll feed you the market insights that you need. It'll be able to allow you to communicate with the customer properly. Because at this point it's not about who can build software the fastest, it's about who can build the right software the fastest, who can build the stuff that actually solves the problem. Anyone can go into Versal or VO today, hook it up with Bolt use. Claude, even I can. I'm not a dev and I can make an app in 30 minutes. It's not to say that that app is going to solve a business problem and deliver a business outcome so you have closest to your customer. Next you have your product delivers a repeatable, consistent business outcome to customers that you can measure and report on. And the idea of just buying a quarter million dollar ABM tool and seeing growth go down, ROI growth stagnate, ROI go down and not getting any type of business result of those people promise it is now the software vendor's responsibility to make the customer successful. That requires a different level. Most software companies don't want to have a professional services arm because that's been the common secondary wisdom all over the past years. We don't want professional services. It's going to lower gross margin, it's hard to scale. We'll just build a product company and outsource it to agencies and then all of a sudden five years later none of your customers can operationalize your product and Your NRR is 88%. You're fucked. There's a lot of software tools that are getting purchased right now that are shelfware, that do not get used properly, that are very it. It's an insignificant cost relative to the whole company. Right. So if you actually look at the tech budget inside of the new logo or the overall go to market budget, we're talking 2, 3%. It's not like the cost of technology are ruining go to market but the undelivered promise of software where companies buy it, think that they're going to get a different result and then they don't, is a very very expensive problem that costs a lot more than the software. You spend 250 grand on the software but then you spend 30 million on go to market and you don't grow faster. And so you have all these people, resources, programs, things like that. That is the actual cost, that cost and the time delay. Yeah. And then lastly I think the successful companies moving forward will be AI native and truly understand what that means in their business. Not only around product and features, but how they run go to market, how they scale sales and marketing, how they collect invoices, how many headcount they have, what their headcount scaling model is. I think many companies will be a million dollars per employee these days and like only Google is like that right now. Another prediction for 25. It probably won't happen in 25 but we'll see winners paving the way is that we'll have less than 10 person marketing teams for almost any size company. Forget the enterprise, they're like they're going to do what they want. But when you look lower market, especially sub 150 million, that we'll see a decrease in team size and an increase in productivity and effectiveness and that what companies actually need is a lot less money tied up in fixed manager or middle manager level headcount to lower all those barriers in marketing, to have true expert strategists that own a function, understand how to use AI and understand how to use external consultants that are far better at whatever they're trying to do and have a process to do it. And that will be the new way that companies scale. Not only marketing sdr, you could handle the exact same way.
- [22:32]
Unknown
I was talking with Kyle Coleman about this.
- [22:33]
Chris Walker
I mean he's also leading and paving the way on this. But I'm now finding other CMOs aligned to this thinking and coming into a new job. A CMO back in the day would say, I'm expecting a 50 person team and now they're getting a 12 person team and they're like, this is amazing. I might actually bring it down to eight. And I'm just seeing a very different approach when it comes to marketing for a small subset of marketing leadership.
- [22:58]
Unknown
But it seems like this is one of the use cases. So the thing is, right, AI is just some freaking new technology whatever, right? I mean it's like SQL was new 20 years ago and now AI is new and everyone obviously tries it to apply it to everything, to kind of buying Musli and kind of whatever, doing ABM and so forth, right? But I also do believe there are a couple of legitimate use cases for generative AI right now. And I actually think some of the points you're making in terms of hey, you know, the marketing team might actually be smaller and we might have like a couple of outsourced experts and a couple of things are going to take over. The question is there's a lot of gen AI stuff that I think could be promising, but right now it seems like it's very few people, very few marketing teams that are able to actually kind of adopt this. Do you think that this will be an actual trend and more and more will be able to jump on this and then ultimately are able to cut costs and increase efficiency off of those marketing teams?
- [23:50]
Chris Walker
As you move down in the organization and you move down through department into sub function and department into the breakdown of the managers and things like that to do the tactical work inside of that department, you force and you incentivize micro optimization and micro application of AI. So how do we use AI to like report on our Google Ads 30 minutes faster than we did before? How do we like buy this tool that claims that they can optimize our performance marketing? That doesn't work. But we can now use AI to optimize our performance marketing. So our cost per lead is $5 less, but the full model still doesn't work. And so you get that breakdown when you think about it. And so the strategy around AI, if you want it to run be the brain of your go to market long term, you need to think about it at the top and then bring it down, not at the bottom and then try to build it up. And so that's the fundamental difference right now is that I think that the executive team, while excited about AI, is not taking seriously the business transformation that is required to be ready for it, to actually use it, to actually take the full capability of it. I know companies that are running the AI SDR experiment, but they don't even track their outbound. They have data to know which emails get opened and things like that, but they're never going to know how to scale it. They're never going to know whether they should actually get rid of the humans or not. They're never going to know. They just don't have the data. And so they don't know why the bot is reaching out. They don't track that. They don't track why the humans reach out. They don't track what message gets sent when it converts into meetings. So there's a lot of missing data that you need for a robot to do something that you want it to do. There's been so much quote unquote black magic, particularly in prospecting black magic where Jimmy just happens to get nine meetings that month and Jimmy is the best sdr and then we give him a gold star and we pump it up and we have a little party in the office for Jimmy. But why did he get nine meetings and the other people got four? What is this person doing that is different than all the other people? Oh, we don't know. We just know Jimmy's great. We need to get more people like Jimmy. Let's change our hiring profile. And that's like the fundamental. It's just the fundamental gap when it comes to date. Whether you want to use AI as an insights engine or as the brain for operational automation through AI. Either way the data ends up being the thing that is the reason that you can't implement it. And you all know this very well, right? You all were trying to solve this problem at least in the CRM and maybe you hadn't positioned it for that. But it's like a secondary use case, right? The way that you've seen this many times, whether you're 5 million ARR or 100 million arrows, 95% of companies have this very messy, incomplete, overwritten fields. Fields that aren't used anymore but are still used in this, in the software marketing stuff is tracked 50% of the time and outbound stuff is almost 0% of the time, maybe 5%. And basically the only thing they have real visibility on is opportunity creation to closed one, which is why they can run that part clearly and they can manage a sales team because they have all the data they need to manage that. But then when you look pre opportunity created all the way up to we want to sell to this account, we've decided they're a Target and look at that part of the pipeline process. They got nothing. They got nothing.
- [27:05]
Tony
So, I mean, you've covered a bit, I think, the setup of the problem and we've had a few predictions. They only have more. If you have more, you want to drop because. Because otherwise my. Oh, you have. Okay, great. Because after your predictions, let's talk a bit about what opportunities lie ahead, what are the archetypes of those who will succeed and those who won't. But I'll just let you throw in if you have a few more trends you want to drop before we progress to that stage.
- [27:27]
Chris Walker
So what have we talked through so far? The move from decentralized distributed reporting and decision making to a centralized command center. So there's like a change happening there to deliver strategic insights. There is the lowering of marketing team sizes, I think across the board, up to hundreds of millions in ARR that the org complexity. Many jobs could be done 80% by AI. And that the fact that we have so much fixed cost tied up in this function and we don't have a lot of money for programs, we don't have money to hire any experts just does it. It feels like a poor allocation of resources for that big amount of money. Obviously, I think many companies are going to try AI as an operational tool and realize that it hurts their brand, it diminishes customer experience. There are negative drawbacks to what they're trying to do, particularly around the idea that they do not have the data to programmatically have AI do things that are relevant to the customer and helpful to the customer. And so you just have a robot going around doing random outbound. That's what it's going to be. And so I think that people will try it and then walk back on that. I think we'll have a trend. Oh, like we're going to get rid of all our SDRs and move to AI. And then I imagine that, which I think is for most companies, like a really terrible decision to just stop doing one thing and move it all over to something else, I think is a very risky, unnecessary decision that shouldn't need to be discussed unless you're literally not going to make payroll in a month, which is almost nobody. That hard shift of forget this thing, we're going to move to this thing completely is super risky to the business. You're decimating 20 people that collect all the meetings that you use to get revenue. And you're going to move that to a robot and hope that it gets similar performance. So there'll be mistakes made There I think that generally 2025 will be slightly stronger than 24. But if you just read the tea leaves and look at what companies are doing, many companies are still lowering budgets this quarter for next year. We are not at the end of this. We aren't companies decreasing their budget by another 30% going into next year. And we're talking $100 million companies here. So this is 10, $20 million less than go to market investment. It's a big chunk of money to change in one year because CAC needs to go down and EBITDA needs to go up for investors and it just needs to change. And so I think that companies will continue to struggle with unit economics that we'll see potentially some tailwinds in the market that all and all market tailwinds do is hide the real problem from you. That's what 2021 and 2022 did, don't you remember? And so if you do start getting market tailwinds, maybe use last time as a little bit of a learning. Because last time what happened is that the market was pushing buyers to your solution and then you were wasting a million dollars a month on Google Ads and advertising and you were attributing the advertising to the success, which the advertising had nothing to do with it. And then all of a sudden the market demand slows and your million dollar a month Google Ad strategy is exposed. And so this time maybe we should put together a better model that accounts for those things so that if we are growing fast and our marketing investments aren't moving the needle, that we know just to be smart and have a fiduciary responsibility to our company and our shareholders.
- [30:42]
Tony
I almost can't help but ask because there's always also this debate on how much of it is then art versus science.
- [30:48]
Unknown
We really want to market versus operations. Yeah, but it's like what you know.
- [30:52]
Chris Walker
Yeah. So I made this distinction today. I think it's really important for people to consider. So you have go to market strategy, which is almost purely art, right? You use some data to understand TAM and things like that. But the strategy is the product strategy. Understanding the competitive landscape, picking your market or markets, picking your Personas, understanding what motions you're going to run, how you're going to price. There's a huge strategy component there which is almost purely art. You need FP and A to do some validation, but it's almost purely art. Then you have go to market optimization, which is investment allocation and optimization. Measuring the right data overall, building the right data architecture, basically improving the Efficiency, growth rate and enterprise value of your company. Sometimes that gets offloaded to a chief of staff or something like that. That's the place where I want to play. And then you have go to market operations which runs the entire data set across the whole factory, which was what growblocks was trying to do. And then inside of that you can have marketing operations and sales operations and CS operations that operate and optimize specific processes within the department. And so the one thing that I think has been a mistake is the all or nothing of rev ops that people have been pursuing where, oh, it can't have marketing ops in marketing. If we want to have a centralized rev ops team, we can't do that. Well, actually, yeah, you can. And they have totally different mandates. It's go to market operations that wraps around the whole thing, installs the architecture and manages the data set that executives use to make full strategic decisions. And then inside of that you have somebody that's in marketing ops that is tagging campaigns under the architecture that's been set by go to market operations and sending emails the right way and building different plans for marketing. And then we should just call rev ops sales ops. This is what it belongs. And we make comp plans and do geo territories and we build ad hoc reports for the CRO and we measure conversion and we do all this random. The it's not random, it's strategic and important sales operation stuff. But let's stop kidding ourselves that it's rev Ops. It's not. And then you have a CS fun CSAM operations that's going to. And maybe we should talk about CSAM too. Maybe that'll be one of my predictions. But that's running that actual ongoing process that happens. And so if you look at how a factory runs, factories have larger data sets that then get broken down into a big system that gets broken down into subsystems. And those subsystems have people process technology and operations resources need to run those sub processes. And the sub processes are not marketing, sales and csam. It's create pipeline, close new logos, renewal customers and expand accounts.
- [33:30]
Unknown
I mean everyone listening is like, oh, what does Chris have to say about cs? And am? So I don't want to stop you there. You know, thinking about this right now.
- [33:38]
Chris Walker
If you buy into the concept that the core measure of overall efficiency is the total cost of go to market including post sale compared to the net new ARR that has been added across all that stuff, new logo and expansion combined, there becomes a lot of pressure in not only the economics around the customer Success function, but also the effectiveness. And that when you think about what that function needs to do today, which is not babysit the customer, help them make an integration and make sure they checked five boxes and then come back for the renewal in a year. That customer success is in no man's land. It's a thing that we build in for free to the customer. We try to build it into our SaaS subscription fee. It's a man, typically a manager level person and we're selling a transformational solution to a C level executive. They are not equipped and we don't run the operation for that person to help the customer truly be successful. And so I think you have on one side you have professional services which are built to help customers be successful, drive up NRR and also make profit. And you can make a significant gross margin on professional services when they deliver a result. And so you have professional services that would hit gross margin, they would hit cogs and it would impact gross margin. And then the other side you have account management which is a sales and marketing thing that is accountable and has a revenue, a renewal and expansion target. And those are salespeople that help the customer see the business result and close them on the vision and the next stuff. Customer success sits in the middle of that and doesn't do either of them well. And so I think we'll see, just frankly think we'll see a compression where companies realize hey, we need to help our customers be successful. Our GRR is 88% our CSA. It's a combination CSAM product strategy. There's a lot of different things happening for some reason a ton of like companies that were so ahead in their category and market feels like they did no product development for like three years. Like a lot of those products that 100 million ARR companies, brands that you know about just haven't changed in three years. And so people are like asleep at the wheel on product. The customer success team isn't helping people be successful. They don't provide the appropriate documentation to operationalize their product across the company. I think that we will see a different structure for how companies run their post sale function that is more aligned to customer results.
- [35:57]
Tony
So we don't have many minutes of tape left. I kind of wanted to maybe just ask the last question for you to take us home with this episode. Obviously we have a lot of go to market leaders listening. You happen to talk with a lot of go to market leaders leaders as well, the best ones who are really nailing it right now heading into this next year. And seizing the opportunities on these trends and predictions. What are they doing? What can you tell us about those leaders and those teams right now to wrap it up and give some guidance to the listeners?
- [36:26]
Chris Walker
Key ingredients for success that I'm seeing people use. And people have used these for a while. I think in many ways they're tried and true. Number one is that go to market on its own is not going to fix this problem. So if you're the CRO and think, oh, I just need to build my comp plan better, I just need to hire that agency to fix my pipeline problem or something like that, you will be sadly disappointed. If finance is not deeply ingrained in this process, you will not be successful because you don't have the visibility. And so the combination, the integration between finance and go to market and that connection point is something that all successful people will need to do moving forward. Because go to market now. Like the number one thing that holds companies back is actually unit economics. Slow growth and high CAC are a function of poor unit economics. So you have that component. I think that successful sales leaders are going to be looking like. I watch how people plan, right? They're like, we had a 500k per rep productivity last year. We're going to scale reps by six heads and it's going to be 520 next year, right? So they like increase headcount, increase productivity incrementally, like 2% or whatever. Strong CROs are going to try and figure out how they get that PRP from 500k to a million and have every rep being so much more productive, making more money, staying for a long time and having half as many reps that are twice as productive. That is the secret weapon to retention, cohesion, lack of sales, out of territory and things like that. The way that we've scaled sales I think is not good for the company or the customer. I think that marketing leaders and executive teams that are not using external people to contextualize their performance and help them make good decisions I think is just foolish. I was talking to somebody a couple of weeks ago, a rev ops leader, right? And she comes in, there's 60 million ARR. And she comes and says, we're trying to get to a hundred million ARR in two years. Right now we're only growing 20% like we need to. This needs to change. And I was like, okay, how? What's your new logo? CAC. And then she said it was like 3.6 years or something like that. And then I was like, so I'm doing The math in my head and things like that. And I'm like, okay, so you want to. Is it revenue to grow 40 million in two years and you want efficiency at that level to that improve from three year, 3.6 year CAC payback to less than two years. That's probably gonna add $600 million in value for this company. And then she goes, so how much is it gonna cost? I was like, it's. It's 20k a month to get started. She was like, whoa, that is way too expensive. We don't have the budget for that. We don't have the budget for that. And I was like, if you look at the $30 million that you already spend on go to market, the current return you get on the 30 million is 12 or like 10 or 8. It's somewhere down in that range. So the return on the existing investment is so low. The lack of financial acumen from some people, not just revops. I think that some CMOs struggle with this too. And frankly CROs too. Like, it's different to build a model for PRP than understand your financial model and unit economics. It's a different skill. Yeah, but understanding that level is super important. And I think that great leaders will understand that. Having the right data to make calculated and oftentimes automated decisions decisions is one of the core features of their go to market and we'll figure out how to fix it. I think that we will see a decrease in overall tech stack. I think we'll continue to see companies lowering the tech. Like I analyze companies, they have 13 data providers. If you look at the data provider industry, it all comes from the. The data all comes from the same place. All of those platforms have the almost the exact same data. They all buy it from the same company. Why are you paid 13 of them? Because they have different workflows at a different SaaS ui. Like, oh my.
- [40:04]
Tony
But it's also like marketing has one project management tool, product has another project management tool. You can keep going. You can keep going on that route.
- [40:12]
Unknown
Chris, this was fantastic. I think you spilled a lot of really interesting gold nuggets for people to pick up. I think we kind of went really broad. We could have also kind of gone super deep in some of those different areas. But really kind of your insights in like 2025, really insightful. And also what you think, like a winning recipe might look like a winning kind of setup of the go to market going forward. Chris, thank you so much.
- [40:37]
Chris Walker
Thanks y'all for having me. Always a pleasure to talk to you. You all have been doing awesome things for the industry and sharing a great lot of great knowledge. So I appreciate you having me on and having such a detailed discussion. Thank you. That.