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B2B SaaS Metrics and Prioities with the Alexander Group - Ted Grossman and Davis Giedt
00:38:26
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- [00:01]
A
Hello, I'm Ray Reich, founder and CEO of RevOps Squared and your host of the Metrics that Measure up podcast. We talk to a wide variety of B2B SaaS and Cloud Thought leaders, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics informed decisions. Now, on to today's show. Welcome to today's episode of the Metrics that Measure up podcast. Today we are joined by Ted Grossman, principal, and Davis Skeet, the director of analytics and research at the Alexander Group. Today we're going to be covering three main areas with Ted and Davis. First, the top performance metrics that B2B SaaS companies are focused on in 2023. Second, the trend of performance in benchmarks in 2023. And third, how are companies of many different sizes actually using benchmarks to support their growth? And specifically, how investors like PE companies are using benchmarks to help support their portfolio companies. With that, Ted Davis, please take a moment to give a brief overview of your journey to becoming a guest on the Metrics MeasureUp podcast.
- [01:27]
B
Sounds good and we're so glad to be here. Ray, thank you so much. This is Ted Grossman. You and I met a couple years ago, Ray. I think you reached out and we have a shared interest. We both love benchmarks, we both love industry trends, and I think we're both very passionate about what's been going on in the SaaS world. I co lead our tech industry practice here at the Alexander Group, our management consulting firm. And so through various conversations with you, you've been kind enough to introduce us to some of your community and you asked us recently if we would join this call. So I'm very pleased to be here. And I'll let Davis introduce himself.
- [02:03]
C
Yeah, no thanks, Ted and Ray, Davis Skeet here, leader of our analytics and research practice. I also lead our executive access subscription program and very happy to be here. I've worked with, you know, hundreds of B2B SaaS companies in terms of benchmarking, which is a major part of the way that we do consulting work at Alexander Group. And Ray, you know, we've spoken before and we've. I've been part of some of your events in the past and, and just looking forward to having a great conversation today about metrics.
- [02:32]
A
Great, Davis, Ted, really appreciate it. And anybody who wants to listen to another kind of insights that Ted and Davis have provided, go to the SaaS metrics Palooza page on our website and you can see their presentation from last October. But let's get into it because I was first introduced to the Alexander Group when I was doing a metrics and benchmarking assessment at a large company. They said they had standardized on the Alexander Group's sales compensation benchmarks. As I got to know you, I realized that, wow, the work that you do is much broader than sales compensation. So here's my first question and topic. I'd like to dig into you guys with. How have you seen the use of SaaS performance metrics in their benchmarks evolve over the last few years in B2B tech companies?
- [03:22]
B
Yeah, no, that's a great question. And I think if you think about what's been going on in tech and specifically in software companies over the last 10, 20 years, it's been the move to cloud and it's been the move to as a service, getting away from the perpetual license, getting into subscription and now getting into consumption oriented models. Now what do companies care about? What do boards care about? They care about getting the highest valuation they can, whether they're pre IPO or even if they're in the public markets. And there's a lot of talk and has been a lot of talk about rule of 40, which is let's take your growth rate and let's add it to your EBITDA or your free cash flow rate and if that's over 40, you get a higher valuation than those that don't. I will tell you that almost all the metrics and this doesn't change over time are going to be about either growth or they're going to be about efficiency. How efficiently, if I put a dollar into the company, into the go to market, what am I getting back for it? And I'm being overly simplistic at a high level, but those metrics probably don't change. The key is sort of the waiting and what's been happening lately. How much emphasis do I put on growth, how much emphasis do I put on efficiency and what kind of efficiency am I looking for? So I think, you know, up until six months ago, eight months ago, it was a, it was a growth market out there and pretty much across all companies growth was trumping profitability. But right now we're looking at a variety of different profitability metrics. I'll turn it over to Davis to talk through several of these that are probably more front and center to most companies, regardless whether you're big or small. Right now, frankly, I'm going to double.
- [05:01]
A
Click with Davis in just a minute, but let me follow up on something you said. We conduct a kind of r squared analysis on the correlation of certain SaaS performance metrics to enterprise value next 12 month revenue multiples. And what's interesting is Rule 4012 months ago ago, like you said, it only had about a 0.14 r squared and r squared can be anywhere from 0.00 to 1.0. And just in the last couple days I noticed it's at 0.52. So it's tripled in its correlation to enterprise value to revenue multiples. While some other metrics have decreased, including growth rate. Just like you said, Ted. So here's my question to Davis, if you wouldn't mind kind of double clicking on this. And that is have you seen other trends on certain metrics have become more important either from your customer's perspective or in enterprise valuations that you've identified?
- [05:55]
C
Yeah, that's a good question, Ray. And absolutely the question is yes, we have seen some changes. I think, I think going further on what Ted was talking about, this notion of efficient growth and efficiency is just so important right now. It's all about making investments and ensuring that you're making the right investments. It's sort of a way of assessing how, how effective your go to market is given a certain dollar investment. And you have to figure out what your goal is. Is it, is it just pure growth? Is it viability? Are you early stage, just trying to test your product? Are you going for margin? Are you seeing more diversity in terms of the motions that you're going to market? And are you trying to improve your land, your adopt, your expand, your renewal or multiples of those? Ultimately, what we're seeing today is that the shift has happened where companies are moving away from pure growth that they saw in the past, more towards a mix of margin and growth. And investors are demanding margin in today's environment. And there's a few metrics that organizations are focusing on that help them sort of grow and measure themselves as they move along. Before we get to those, it's probably helpful to talk about some of the approaches that we see organizations take. We tend to work with slightly larger organizations. So organizations that are $50 million and up and those are the ones that we benchmark. And so you'll see that reflected in a lot of the conversation that we have today around the metrics that matter. But that's not to say that these metrics aren't super important for organizations under $50 million in revenue, SaaS organizations, there's really no one size fits all measure that paints the full picture of the company. When we work with Clients, we recommend a balanced and tailored approach that uses like kind of a combination of unit economics, company level metrics, et cetera, to track profitable and efficient growth across multiple lenses. In some cases, one metric might look good where another doesn't, and that's okay. Not all successful companies. In our research we found that not all successful companies execute at the top of market across all of these different metrics, if that makes sense.
- [07:56]
A
Yeah, I'm going to put you in Ted on the spot a little bit here because we are the metrics that measure up. So we try to be as granular and specific as possible. So we're talking about efficient revenue growth. That's kind of the mantra of 2023. So if I'm looking at I still want to acquire new customers and yeah, we'll talk about the blend of new customer revenue growth versus existing customer expansion. But what are the two or three efficiency metrics that you recommend and use with your clients to measure the efficiency of new customer acquisition?
- [08:28]
B
Yeah, I think even before you get into acquisition, the most high level efficiency metric you can get to is something around expense to revenue or expensive bookings. Like just how are we doing at the most simple level. And let's not worry about what kind of revenue it is or whether it's existing rev or new revenue or so forth. But how are we doing there? That's important one within a company just to baseline that and see if we're getting better or worse. And as they make investments, is that number getting better or worse? It's also a good chance to say, well, how are we doing compared to our competitors or similar cohort in the market? There are very defined benchmarks around that that have been around a while. I think, you know, I'll let Davis, you know, talk about what some of the numbers might be around that, but that's the, the top line. I think once you understand though what your E2B and your E2R is, you can start diving into things that tie very much to efficient growth. You can start and I'm just going to throw out some things. You can look at the profitability per rep, okay? Take all your sales costs, how many reps you have divided to. That's a really important efficiency metric because usually in B2B SaaS companies it all comes down to you have a certain amount of reps bringing in a certain amount of revenue and are you efficiently making that, that number as high as possible per rep. But we also look at things like with your payback period on things like on your cac for example. So this is an efficiency metric around, hey, when I bring on a new account, how long does it take me for to make the money back I put in? We also look at things around, you know, expansion and if I have an existing account, how profitable am I on that and how easy am I able to grow that? So you look at things like net retention rate for existing accounts or growth retention rates, which is just looking at the churn. I'm just throwing out a number of these types of metrics which sort of dissect in a little bit more detail the type of revenue that might be causing you to have better opportunity or be a challenge for you.
- [10:24]
A
It's interesting, Ted, because you're talking about taking a more balanced and blended approach which senior executives are going to do, right? It's not just don't be a slave to a particular metric. But I monitor a lot of social media buzz, right? And in 2023, one of the buzz points is focus on existing customer retention and existing customer expansion. It's like the mantra. So do you actually go into organizations and benchmark like what percentage of their total growth revenue comes from new versus existing and make recommendations on maybe shifting that mix?
- [11:03]
B
It's a great question. We have something we. One of the very, I wouldn't call it a benchmarking exercise, it's just an analytical exercise is do what we call organic growth analysis. We look at new versus existing versus churn and we just waterfall it to see, you know, year over year, you know, how much revenue from net new customers is coming in, how much did you lose through retention and how much did you have to make back to get at your, your expansion. The story will vary across companies. I don't think there's a single right answer. It has a lot to do with how competitive your product is, how you price that product where it is in the marketplace. Some companies have a lot more opportunity to take advantage of net new customers and it doesn't cost them as much to do that. It's easier for them to do it. Other companies, they need to hunker down and look at the low hanging fruit which might be, hey, it's just reducing churn for right now. To say one size fits all would be a misnomer for sure. But you need to look at each of those components very, very carefully and look at that in terms of how competitive are your offerings and products compared to the marketplace. That will tell you a lot of where you want to start to think about investing.
- [12:05]
A
It's interesting you said that TED because when I hear just the buzz lines of well, focus on expansion of your existing customers. Well, if you're a single product company and you're only a single function and you've got everyone in the function, that's kind of hard to do.
- [12:20]
B
Exactly.
- [12:22]
A
We were talking before the show about like five metrics that you really like to focus on. I know Ted said a little bit about gross dollar retention, net dollar retention, CAC payback period. But are there five kind of more SaaS specific metrics that you really like to look at?
- [12:40]
C
DAVIS yeah, I mean we've touched we touched on on one of them already, which is the sales and marketing or sales expense to revenue or bookings. We look at it two different ways and I'll move off it in just a minute because there's some other interesting ones, but it's a very important metric to test sort of for every dollar that you put in historically, what did you get back in the organization? And we look at it a couple of different ways on total revenue. So all ARR associated with SaaS business on the denominator and separately on the booking side in terms of the new bookings that you're bringing in from the business. So gives you two different views. A lot of times organizations will argue that, well, you know, sales and marketing don't have a heavy impact on renewals for certain organization and that's fine. So in that perspective, we look at it on a new bookings basis and it gives you a more comprehensive view. You know, leading typical organizations and SaaS businesses that are at scale, you're going to see a sales and marketing E to r around 35 to 40%. If you're in growth mode, you're going to see sales and marketing expense to new bookings on an ACV basis, probably more at the 1 to 1 or 0.9 to 1 ratio. And that sort of helps people give a get a get a barometer for where they should be at just depending on where they're investing. Another one that we look at is this cost of growth or magic number figure, which is the effectiveness of sales and marketing investments over a specific time period. There's different ways that people people look at it, but it's typically taking looking at sort of revenue ARR over prior quarter and current quarter and then and then looking at your costs associated with that as well. When you're interpreting the SaaS magic number or the cost we call also sort of call it cost of growth, it's important to know what it means and what it doesn't mean. So it gives you an understanding of profitability at the unit. At the unit level. But it's important to sort of look at the business from all angles. Right. Typically in the market for SaaS companies, the general rule of thumb is that a 0.5 number is poor, indicating that the company is not ready to invest, is not really investing in sales and marketing 3/4 to 1. So 0.75 to 1 is pretty good. And then 1.0 is considered, you know, best practice or top of market. It's gotten pretty popular as an efficiency metric over the last few years, mostly because the data's available and it's pretty, it's pretty efficient and simple to calculate. It's generally pretty popular for companies that are large enough to benchmark against public as the. Again, the data is available and there's pretty quality information that you can go out there and compare yourself to. We've seen a lot of our companies use this. We have it in our dashboards. We use it for benchmark purposes as well.
- [15:26]
A
Hey Davis, I'm going to give you a hot take on here. This could be for either you or Ted, because personally I don't like the SaaS magic number. Because when you say 0.5, I'm like, okay, 0.5. What? Why is it bad? And then I got to do the math that says, well, that means that for every dollar of sales and marketing that I invest, I only get 0.$5 of growth. But then when I think about growth, growth comes from at least two different things. New customer growth versus existing customer expansion growth. And they have very different unit economics. So I flip it and I use the CAC ratio, which says how much sales and marketing investment does it take me to get $1 of new customer revenue or to get $1 of expansion revenue for a customer. So what do you think about that as kind of a different way? Or is it just tomato or tomato that I'm talking about?
- [16:20]
B
Yeah, I'll throw in. I think all of these are very nuanced. You really can do a thought exercise to think through these care very, very carefully. So what I will say about this is Davis is right. You can use publicly available information to get to benchmark, which makes the magic number useful. A lot of companies, especially VCs and PEs, will use it because it tells you, look, I want to make sure that these companies can grow. And if I'm putting dollars in, I'm going to get growth out on the back end. I have to get growth. So if growth is at A premium. Okay. Then the magic number becomes really important. And if I have a product or a set of offerings at a company that can't grow very fast and I have to put a ton of money in to do it, maybe I want to put my money someplace else because I have choices as an investor. And so this idea of 0.5, 0.71, it's a simple guideline I think for is the products and offerings of this company. Forget about the go to market for a second. The products and offerings of this company, really viable for, for scaling. Okay. However, to your point, if you're looking at companies in general and you want, you want to look across all growth and yeah, you're right, the models are different. The growth can come from different parts of the thing. I think it's something that looks like, like LTV to CAC or something like that is a much better ratio.
- [17:39]
C
Yeah. Which is another number that we look at quite often.
- [17:43]
A
Well, let's tell the audience, if they're not familiar with customer lifetime value to CAC ratio, tell them a little bit about what it is and what are some of the insights that you can glean from that.
- [17:53]
C
Sure, absolutely. Yeah. So this is a metric that we look at quite frequently across organizations. Again, it's not a one all be all perfect metric, but it's pretty effective. We think of it as a long term measure of roi. And what it does is it compares the estimated lifetime value of a customer to the initial cost of acquiring that customer. And so if you, if you're able to calculate customer acquisition cost, you're already halfway there. The next step is you have to figure out a way to calculate estimated lifetime value. And there's a few different ways of doing this in, in the market. I won't go into the specifics of the, the calculation, but there's many sort of methodologies out there. The key is to be consistent and ideally to follow sort of a methodology that, that works best within for the data that you have available in your organization to track Right. On a regular basis. Most sources we read tell us that looking at an LTV to CAC ratio of at least 3.0 or higher is considered healthy. But results really sort of vary by growth stage, customer segment, company maturity. And the other thing to keep in mind is that early stage companies typically struggle with calculating this metric. It's usually easier to calculate as you get larger and you've got more of a historical view of actually what the lifetime of a customer is on a time period basis, how much you can Expand that customer on a year over year basis. So can you expand them 5%, 10%, 20% on a net dollar retention and net expansion basis? And then sort of also you'll see as you grow as an organization, your customer acquisition cost tends to smooth out year over year to a greater extent and be more consistent within a specific customer segment, which again, allows you greater ease of calculating a metric like this.
- [19:41]
A
Davis, you just said something that was like fingernails across the chalkboard to me. And what you said was, there's many different ways to calculate customer lifetime value, and it doesn't really matter how you calculate it, just be consistent and document it. But that kind of begs the question, how do you, when you have so many different customers? And they may say, well, how do I benchmark customer lifetime value to CAC when there's inconsistent calculation models? It seems incongruent to me that you can benchmark and have a goal when everybody's calculating it differently. So help me out there.
- [20:18]
C
Yeah, no, I think it's a little bit more of a nuanced answer there in terms of what I meant. So, Ray, I'm glad you called that out. We have a very specific way that we instruct our clients to calculate it when we collect information and store it in our database. We're very specific about how we do it. It has to do with taking the average revenue per account, dividing it by the average monthly logo churn, and multiplying it by a churn constant to account for nonlinear churn. Right. So that's specifically how we do it. Very, very specifically. There's other ways that companies do it. Obviously not everybody has the information to provide us to do that on a. On a regular basis. But it's as you said, if you're trying to benchmark specifically against external sources, you're trying to be consistent. It is important that you learn the sort of best practice, which I know is an initiat of your guys, is to sort of establish what is the most important way to calculate this in the market and how should we be thinking about it?
- [21:13]
B
Right, yeah.
- [21:14]
A
Let me pivot this over to Ted, because, Ted, you and I have talked a lot about benchmarks and metrics that measure up. The name of the podcast is really about how do companies use benchmarks to help inform their decision making. So, Ted, any advice to the listening audience out there of how best to use benchmarks and some of those cautions that you have about.
- [21:36]
B
Yeah, yeah. Well, I mean, the very first caution you just were just talking about with Davis, which is make sure. That you're, whoever you're benchmarking with or if you're benchmarking, marking with the Alexander, great. We have a consistent way of doing it. Make sure you understand what it is. So just make sure the numbers are, are understandable, that you appreciate the logic and, and so forth that goes in. Just to come back to that point, take something like customer acquisition cost, just something we can all understand what that is. Right. Well, how do you actually get that? Because the major sales and marketing expense that you have is people. And people don't generally just spend their time bringing in new customers. There might be some roles that do that, but most sales reps and most people in sales and marketing are working across existing and new customers. So you almost need an activity based model to say, well, how do people spend their time if you're going to properly allocate the dollars that are there? I'm telling you this stuff is really important because then when you interpret, okay, what do these benchmarks mean on the back end? You have to understand what went into them. Okay, oh, if we want to improve our attack. Okay, well I can either do that by increasing revenue for new customers or I have to figure out about how giving back time to, to the sales teams and specifically the part of their jobs that is, you know, that might be in bringing in a net new account. So anyway, that's where I would start. The second thing I would say is to us, benchmarks are one leg of stool. You have to look at what is your company strategy in terms of why you think you're better or worse and where your, your, your strengths and weaknesses are compared to your competition. You have to look at how are we doing versus all these benchmarks. Okay. And then there are some just general best practice, go to market things that you can be evaluating yourself. I, I look at a benchmark as a way of self evaluation. Right. How are we doing? But it's not, the numbers are so contextual based upon your, where you are in terms of your, your mature, your growth maturity, where you are in terms of how competitive you are, where you are in terms of your overall cost structure, the price of your products. They will vary a lot. So you'll get a benchmark, let's say something as simple as E to R. And we can tell you what the average is, but we can also tell you that there's a wide distribution curve that goes around that. And there are some very good companies that are doing very, very well that might not be as efficient, but they're doing great. Within their specific market. So I think the caution there is, you need to use it just as one tool, not as something that just tells you whether you're good or bad by itself.
- [24:15]
A
I love the word that you use, the context because you work with a wide variety of customers. 50 million 1 billion private equity based public base. So when you walk into a client, it's probably really hard for you to say here's a general benchmark. You try to be much more contextual basis based upon your profile, your strategic positioning, your product portfolio, etc. Here's what we want to look at and here's some general benchmarks. Is that accurate, Ted?
- [24:49]
B
It is, it is. In fact, forget about what us, what we do, our customers demand it. They don't want to be compared against somebody that doesn't look like them. They're always asking. And it's a, it's a thorn in Davis's side because we have a lot of companies so he can, he can always respond to it. But every company thinks they're unique.
- [25:08]
C
Okay, well and then, and then within each company you've got different go to market models, you've got different customer segments and then you've also got this idea of your current state and your future state where you want to go in the future with your model. And that's something that we typically look at with organizations because it's very important to think about three years from now, are you going to become a $300 million company that operates across the globe as opposed to a $80 million US based organization with a single product.
- [25:39]
B
But back to your question, Ray, and I don't know if I answered it completely. I think when you look at, let's just talk about the size of the company and where they are in their maturity curve, you're going to find that all the metrics we've been talking about are probably useful to everybody. But the weighting of those metrics and how much effort and thought you put into certain metrics is going to, you know, if you're earlier stage growth is going to be more important and yes, efficiency is important for everybody. But if you can't grow, then you're not going to be viable. So hence things like, you know, the, the magic number is important and customer acquisition cost is important and so forth. These are things you need to know to say that you're viable as you, as you start scaling up in general, even when, as you go from, you know, a late stage VC firm to a PE firm to now you're in the public Markets. Now you're a really large scale company like a, like a Salesforce. There's going to be a lot more scrutiny on your margin and on all those efficiency metrics that impact margin directly.
- [26:40]
A
And it's interesting you say that because here we are in February 2023 and a lot of those big names have had significant expense reduction programs. You know, Ted, I was just analyzing the Salesforce FY23 10K and I was looking at their fiscal spending and what jumped out at me regarding Salesforce, who you know, I respect as one of the best operated companies in industry. And their sales and marketing expenses were 46% of revenue for their fiscal year 23 that just ended on January 31, while their top line revenue grew by 17.7%. And by the way, that sales and marketing expense was actually down from FY22 when it was at 48% of revenue. So what I was thinking about was when I asked you about the efficiency metrics that SaaS companies can use to maximize return on investment and you said, you know, kind of 30 to 40% of revenue is a good benchmark. So the question is, what advice do you have for SaaS companies to better understand and manage the efficiency of their sales and marketing investments?
- [27:52]
B
Yeah, no, that's, that's interesting, Ray. A couple things. So if you just go back to things like rule of 40, companies care about getting the highest valuation they can. That means they have to care about growth to some extent and they have to care about profitability. The question is how much do they care about each one of those things? Because as the economy changes and we're in a tight market right now, there's going to be a shift towards more, more of a focus on profitability. So that's, that's one thing to think about. And I think whether we're talking about Salesforce or other companies, everybody is starting to put more emphasis on that than just pure growth. The other thing that you have to think about is as your growth starts to slow, generally speaking, that means you necessarily have to have more emphasis on the profitability and the efficiency metrics that are there. So you have to keep a really, really keen eye on where your growth is really going and be very realistic with yourself. If you see the growth opportunity dropping this year, you have to make a shift pretty quickly to your expense line and you have to really think about your income statement so that you can, you can get the profitability you want. What the problem with a lot of companies is, they lag. They're not really on top of it. And so they continue growing. And then when they have to then put on the brakes, they put on the brakes a little too hard, a little too fast, a lot of baby gets thrown out with the bathwater. And then they have trouble, you know, getting back to whatever sort of stabilized growth would happen over time. So hopefully that answers your question. I think it's just a matter of really being attuned to all the metrics. So your growth metrics and your efficiency metrics and making sure they're constantly aligned.
- [29:26]
A
Well, I love the fact that you started with Rule 40 because that truly is the harbinger of balanced growth. And if your EBITDA and operating profits are starting to decrease, you really need to understand what those highly correlated leading indicators are impacting. That maybe it's your CAC payback period for new customers, or maybe it's your gross dollar retention. But that's really good advice to Rule 40 and just always moving quickly on the revenue growth efficiency.
- [29:53]
B
Absolutely.
- [29:54]
A
Well, that brings up a really good point. Because you work with so many different companies, of course we can't share any proprietary information, but do you see a normalization of growth rate expectations in 2023 plans? Have they ratcheted back kind of to be more market reality based?
- [30:12]
B
Yeah, I mean, there's certainly more scrutiny on that and everybody's trying to figure out the right target that they legitimately can hit. And then they're trying to say, well, based upon that, how much do I have to spend? And because the other thing you don't want to do is turn the gas off too much. Oh, okay. I let too many people go. I let too many things go off. All of a sudden, now I can't recover. And maybe it's not as bad as it was we thought it was going to be. So, yeah, I think there's just a general scrutiny on all these numbers. You know, when people are growing and you're, you know, wow, we were growing at 25 or 30 or 35, all those are really good numbers. So maybe the scrutiny on getting an exact number isn't as important as when you start to see the, you know, the trends start to reverse itself a little bit.
- [30:54]
A
Yeah, totally agree, Davis. Anything to add to that?
- [30:57]
C
Yeah, I mean, it just goes back to a comment that we were making earlier about the shift away from pure growth mode and sort of the rewarding pure growth mode more towards growth and profitability we're seeing. We just ran a, a study on this across many industries and, you know, in tech as well it's called the Sales Pulse Survey. We do it every year. It's it surveys about 200 different CROs across the globe. And we found that there's still pretty strong interest in investment in 2023. There are still reasonably strong growth expectations, not as strong as 2022, but the investments are going to be more targeted in things that organizations know or, or strongly believe will drive growth in 2023 and margin. So some of them are revenue operations roles and, and tools and processes. Other ones are customer success, headcount and capabilities and again programs, tools, et cetera. You know, other ones would be sort of in, in your overlay specialists and whatnot. A little bit less of an interest in inside sales, a little bit less of an interest in just core field sales is what we've typically which is sort of more of an indication of thinking about alternative investments in the go to market model as opposed to just focusing on expanding by reaching new markets, hiring account executives or field people to go out and find new customers or grow existing customers.
- [32:26]
A
Got you. Well, I can't believe it. 30 minutes already up. We talked to you guys for hours, but I got a couple of questions. I always ask our guests to kind of help our listening audience kind of get to know you a little bit better on a personal basis, not just around metrics and benchmarks. So the first question is, it's a tough question sometimes, but is there a CEO or company that you're recommending or that you follow, especially in the B2B tech space?
- [32:52]
B
I follow a lot of companies because, you know, this is a typical consultant answer. It so depends. All these companies have different challenges. And so if I'm looking at companies that are, you know, selling more into mid market, they might have great mid market or great product led growth models. Okay. If I'm looking at people who are selling into enterprise, I'm looking at people who have these wonderful sales forces that can retain top talent. So I really don't want to throw names out, but I think the answer is there are different types of best practices that you see across the industries and that focus on different parts of the market, different types of models. And you know, that's what I sort of keep my eye on a lot of companies because of that. I know it's, I'm avoiding the question and throwing out a name, but yeah, so.
- [33:37]
A
Well, I'm going to try again. Maybe I'll go with Davis here. Ted Davis. And by the way, the answer to this cannot be chat, GPT or regenerative AI. And that Is, is there a category of tools or technology that you think every B2B SaaS company should really think about using sooner rather than later?
- [33:57]
C
Yeah, it, I mean it sounds pedestrian, but data visualization tools are just, just a huge, huge game changer for anything related to building commercial dashboards and managing your operation on a regular basis. We've seen it internally, we've seen it with our clients. It's not that difficult to get up and running, but it's difficult to get up and running and adopted across the entire organization and used properly. And so I always recommend to people that they try and move as much of their reporting to that as possible and just watch it take off.
- [34:32]
B
If I can throw something on top of Davis, just because I see it as a major trend, you know, I think we actually do. I know you brought up chat gbt, but we do see AI here and it's here with things that are actually working. And so companies have always. One of the ways you get to efficiency is you target the right customers and you target the right buyers. So knowing account propensity and knowing who your ideal customer or profile is and then having that backed up with a deep analysis of your own data and so forth. There are these great tools right now that can help you identify who you should be going after and how you should be going after them versus, you know, those where you can be spending a lot of time and not getting much, much of a win rate out of it. So I would tell you that anything that has to do with that kind of data analytics, supporting things like account and contact propensity is super, super important.
- [35:27]
C
Yeah, and I would add to that just real quick, is is before you invest in tools like that, or in data visualization for that matter, you have to figure out your data flows and be able to efficiently move information from marketing to sales to service and then back in a sort of virtuous cycle. Because without that, the tools just are not terribly useful to an organization.
- [35:51]
A
Yeah, it's interesting. We held an event last week and one of the categories we focused on was just SaaS metrics and reporting. And we had about 700 VPs of finance and CEOs from B2B SaaS companies there. And it was interesting. 70%, which was the highest number, expressed real interest in having better visibility and visualization of not only their company level SaaS metrics, but the leading indicators and the data that had a causal relationship to those lagging indicators. That is taking data from your sales, your marketing, your customer success organizations and seeing how those Trend lines are going to impact your top line revenue and your top line profitability. So that's a great one, David, but we've got to go. Anything that I didn't ask you that you would leave our listening audience with.
- [36:39]
B
They should listen to you more. Ray, you're on the right track with all this stuff. Look, I think there are sometimes people look at the analytics and the data and so forth as it's finance that looks at that. But actually what I would say is this stuff is super important for sales leaders and for revenue leaders, the people who are impacting it. This information, the kinds of benchmarks we're talking about, the kinds of analytics we're talking about can really have a major impact on your ability to, you know, outcompete the market. And you know, not that you where I'm telling every CRO to become a data scientist, but they needed start to develop that, that kind of ethos in what they do and in engender the discipline into their own teams.
- [37:24]
A
I love that. Efficient revenue growth is not the CFO's job. It's everyone's job to understand it.
- [37:30]
B
Absolutely.
- [37:32]
A
Well, I think that's a great place to end this episode of the Metrics Measure up podcast. Ted Grossman, Davis Keat from the Alexander Group, thank you so much for being my guest.
- [37:42]
B
Thank you.
- [37:42]
C
Thank you Ray.
- [37:43]
A
And to the listening audience, if you're enjoying the guest and the content that we cover here, it would mean the world to us. Go ahead and subscribe to the Metrics to Measure up podcast on your favorite podcasting app. Go ahead and give us that five star rating and provide your review and recommendation how we can make the show even better. Davis. Ted, thank you to our listening audience. Talk to you next week. Thank you for listening to today's metrics measureup podcast. If you would like to learn more about B2B SAS metrics and benchmarks, please visit revopsquared.com.