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Revenue Builders
Aligning Pipeline to Ideal Customer Profile with Dan Sperring
01:06:57
Dan Sperring, founder and CEO of Align ICP, breaks down why ICP must evolve from a static definition into a dynamic operating system rooted in use cases, lifetime value, and market health. The conversation challenges traditional go-to-market structures, highlights the risks of misaligned incentives, and offers a clear framework for building predictable, durable growth.
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- [00:05]
Podcast Host Intro
Welcome to the Revenue Builders Podcast, a weekly show featuring B2B sales leaders and executives. Hosted by five time CRO John McMahon and Force Management co founder John Kaplan, the show takes guests in the barrel behind the scenes with the people who've been there, done that, and seen the results. Revenue Builders covers best practices for skin scaling and growing your business while sharing the pitfalls to avoid. Enjoy today's episode.
- [00:33]
John Kaplan
Welcome to the Revenue Builders Podcast. I'm John Kaplan. Today you'll hear our conversation with Dan Sparing. He's the founder and CEO of Align icp. Dan started Align to help companies achieve more predictable revenue by improving its ICP target. I got introduced to Dan by a good friend of mine who had been listening to another good friend of mine's podcast, Mark Roberts, and the Science of Scaling podcast where Dan was on and he was killing it, talking about, you know, all the ramifications of having an icp, not having an icp, and, you know, Johnny and I wanted to get him on the pod. So let's talk about a few of the takeaways that I want you to listen in for. So most companies think they have an icp, but in reality it's too broad to be useful. As a matter of fact, some of the data that Dan talks about is that 70% of the business in our pipelines is outside of our ICP without us even knowing it. And the real issue isn't defining your icp, it's getting the entire organization aligned around it. You know, so when marketing and sales and leadership aren't on the same page, everything downstream is gonna break. So if your ICP is vague, your messaging will be too. And in a market where buyers are flooded with noise, you know, good enough targeting, if you will, isn't going to cut it anymore. So everything we're talking about lately has been around AI. And AI is raising the stakes, but it's not solving the problem. So without a clear icp, teams are just using AI to scale bad outreach faster instead of improving results. So, you know, bottom line is the highest performing teams treat ICP as a full operating system. So it was a great conversation. It was a lot of. And I think these themes are, you know, really going to give us a lot of things to think about in our own organization. So, you know, I want you to think about how are you doing with your ICP right now? So here we go. Let's take a listen.
- [02:41]
John McMahon
So, Dan, we're really excited to have you on today. Johnny and I are passionate about the topic of icp. We Heard you on Robert's Science of Scaling podcast. Thought you did such an awesome job talking about that. So welcome to the show. It's a pleasure to have you. And we're going to start off talking about the, you know, the genesis of the thinking. So I'll give you a chance. Won't be. I won't be rude. I'll give you a chance to say hello and then we'll get started.
- [03:11]
Dan Sparing
Yeah, no. Well, first of all, thank you for having me on the show. It's not too often it's. I get an opportunity to talk with two legends that basically help B2B SAs kind of really mature. So this is really a great opportunity for me and a great experience. So thanks.
- [03:27]
John McMahon
Thanks again. You're welcome, buddy. Thank you for joining us. And like, we like to begin with, like, the genesis of the speaker and like the. The how you. How you kind of came to your point of view. I loved your story about the early hustle, how you started in, you know, you know, got some advice from a vc. So tell us the early beginnings and how you, you know, came to your point of view with the company now called Align icp.
- [03:53]
Dan Sparing
Sure. Yeah. I'll give you the Reader's digest version. And so was really fortunate to grow up with two parents that each had their own small businesses. And so from the time, you know, I can remember, I just heard my parents talking about their businesses, the. The trials and tribulations. And my father owned a service station. And so, you know, going back into the 80s, back, back then, they had like, full service, you know, so you could drive in and get your gas pumped and your windows clean and oil checked and tires filled up.
- [04:25]
John 'Johnny' (Co-host, likely John McMahon)
Those days are gone.
- [04:26]
Dan Sparing
Those days are gone. And so, yeah, I used to. I used to hustle. I used to run out there. And the community that we lived in had a lot of what, you know, at the time seemed like kind of older ladies that they would drive their old caddies, you know, 77 caddy. And. And so, yeah, over time you kind of build those relationships and they're happy to see you. And yeah, and so I gush, probably back in like 1983, I was making like 15 bucks a day in tips, which, you know, now is probably more like 45 bucks. And so. So, yeah, on that journey, a lot of the ideas and principles that I just experienced growing up definitely were identical. As I started to work in. In B2B software and started to work with customers and kind of. There was a lot of pattern matching there in terms of the same Ideas and concepts. For me, one of the best experiences like, and I say this, it's not my career, but my life was I had an opportunity in 2013 to go to work at a company that was rapidly scaling. And so back in 2007, the iPhone came out. In 2009 there was a startup here in Portland, Oregon called Urban Airship. And they started to grow really, really fast. And I came in right around $5 million and spent seven years helping scale that to around 70 million. And on that journey there's massive, massive amounts of learning, great experiences, really good leadership team. But what I ended up seeing, and towards the end of the journey, I own the customer base and not only the expansion, but also the retention. And I was asked by our CEO to put together a plan on how are you going to scale the business and understanding I didn't own acquisition, you're left with, you know, finite set of customers. And so when you start to get really deep and looking at revenue and a subscription business, there's a couple things that become very apparent. One is timing is everything. So meaning that if I win like a large expansion or I have churn at the beginning of the year, I pay for it sequentially in every single month remaining in the year. That's like one huge learning. The other learning was because of that timing issue, there's really no way to, to sell out of churn. And so when you look at, for example, you sell, you know, $100,000 deal or let's just say $120,000 deal from a rev rec perspective, chances are you're getting call it 10,000amonth. And so your ability to really grow revenue is really compromised in a 12 month plan. And so as you start to get deep in looking at revenue, what happens is you start to see like hey, bookings, you know, how we are measured and how most go to market teams are measured don't necessarily translate directly into ARR growth and like sequential ARR growth. So on this journey, what eventually happened is I started doing a lot of win loss analysis and then I moved to another company that was growing really fast because of COVID And, and what was pretty fascinating about that story was at the end of every quarter I do win loss analysis. And then I'm not sure if you guys remember, but there was a vaccine that came out and then we had like Delta and then there was a vaccine that came out and then we had Omnicron. And what that did was it allowed, it gave me very clear signal in terms of what was causing our churn and so for example, when the vaccine would come out, our churn would spike. When there's a new variant that came out, then our churn would drop. And so all of a sudden had this very clear picture of what was going on. And what the shocker was on this journey was that in the quarters where we crushed it, like we had 400% year over year growth, we were high fiving and celebrating, not realizing that like 90% of the customers that were close one were outside of ICP. And then we. And so that that period of time created a situation where I had this great signal. And then what it made me realize is that as, and I'm intentionally using the term as revenue leaders, what happens is we tend to optimize for bookings and then revenue is kind of an afterthought. And so eventually had an exit, had about two years where I could just focus on this problem and then eventually stumbled on kind of an early version of science of scaling. And what Mark Robert did that was just absolutely brilliant was he separated the term he uses his product market fit, go to market fit. So he separated those two things. When you separate those two things, all of a sudden everything comes together and you can actually really understand the system which is go to market. And so that is the software that we've built effectively.
- [09:19]
John McMahon
Tell us a little bit about what the software does align icp. And then I want to go back to the splitting of the thought there because I think that's so powerful. So tell us who you guys are, where you are, what do you do, that type of thing.
- [09:35]
Dan Sparing
Sure, yeah. We're early stage software company and really we exist for one reason which is to help revenue leaders create more efficient, more predictable growth. The reality is you can't do that unless you have the entire go to market aligned. And so what like we, as I'd call revenue leaders, we're always talking about alignment, but I'd argue we don't really have like a great way of achieving that. And it's not surprising considering that we all have different tools, different KPIs. We're measured on like what could go wrong. Right. And so the idea around our company is that within every customer base there's a certain type of customer that has really strong product market fit. And if everyone on the go to market team understands who those customers are, what their attributes are in common, there's an opportunity to not only build better product, but do better marketing more effectively. Educate the sales team and as well as the CS organization to make sure that they can do a great job not only supporting, but investing time and energy in the customers that are contributed to our future growth. And so just to kind of take this idea of alignment and kind of nerd out on it. So if you were to think about this idea of we have. I'm going to use a slightly different term than Mark does, but I'm going to refer to as message market fit. And that is defined as where are we the most successful closing new logos? And then you think about this idea of product market fit, like, where do we have happy customers that expand and grow over time? What happens is really two things. One is we tend to define our ICPs by where do we win? And I'd argue that really what we should be doing is defining our icps by where we have the happiest customers that will contribute to the future growth of our business. And then from there, we optimize the message market fit. Like we, we train our sellers, we improve our marketing programs, so then we can improve our win rates. And so in terms of where we are as a business, we have about 12 customers. There's a team of four of us building the product. We've done an angel round. We're in accelerators or we're in a local accelerator, an AI accelerator. And then we're also trying to close a couple more deals before we do like a seed round in terms of company building.
- [12:05]
John 'Johnny' (Co-host, likely John McMahon)
That's good, Dan. Thanks for that. So, but let's back up for the audience a little bit. Let's just talk about what goes into an icp. So we just start from the ground floor, and then from there I'd like to build up to really educate the audience. So let's talk a little bit about what, what do you think goes into creating an icp?
- [12:26]
Dan Sparing
There's a couple different things that maybe if we kind of zoom out for a second and then we can go into the details. And so today, when you think about Go To Market, at the heart of every Go To Market team, you have a CRM. And that CRM has a bunch of data objects in it. And those data objects aren't really structured in the way that we need them. And then what happens from there? And so there's people that refer to that CRM as a system of record. And then there was another gal on your show recently, the founder of six Sense. So she talked about a system of action or a system of engagement that sits on that CRM. And so the problem today is there's. We're missing an intelligence layer between those two pieces and what's happening is this. It's devastating. Not only our teams, but it's creating bad customer experiences. And then it's also, I'd argue, damaging our brand because we end up inadvertently selling to the wrong people. And then finally it drives up, you know, our customer acquisition cost. And so. So really what we need is a. A system of context or a system of intelligence, a revenue intelligence that helps us really understand which segments are really driving the growth and the valuation of our company. So once you get into the system of context, then this is where Mark's models work really well in terms of product market fit. Go to market fit. The other thing that that is foundational is market sizing and health. And so you need these three constructs as the foundations. And so as you start to double click into like, okay, Dan, where product market fit, what's the best way to quantify that? It always starts with use case. And so that construct of use cases and B2B SaaS I'd argue is missing from like 90% of CRMs. And so what's interesting is there's the clients that we worked with that their SDRs capture use case during the qualification process, I think like MQL or sales accepted lead, like in that realm. And then they also capture it when the AE is closing the opportunity. Close one, close, lost. So the use cases is where we typically see the strongest signal. So once you have a use case, then what we do is we take bookings data and use that to create a revenue model. And once we create that revenue model, then we can calculate things like net revenue retention, logo retention, lifetime value. And so those are kind of the core constructs in which we anchor the icp. And it's as Mark talked about this idea of product market fit, you came
- [15:14]
John McMahon
from a background of customer success. I mean, that really is kind of where you started your career. And you had such a great affinity and appreciation for how the customer is using the product. So the fact that you're starting at a point of view of a use case I think is really important and key here. I would argue that most companies are far away from that. And so you had an advantage to start. You're saying, start with use case versus what you call firmographics. And I'd like you to kind of explain what you mean by that. What does it really take to ensure that you have an organization that can actually capture that? Like, what advice would you give people on kind of where to start on this? Because when you say, hey, let's start with use cases. There are many companies listening to this that understand what you mean and but might not have any idea how to go and grab that on a programmatic and data, you know, with integrity of the data to be able to do anything with it. I'd like to throw that to you.
- [16:24]
Dan Sparing
Yeah. So a couple of things to talk about. So when we think about firmographic information, so typically that information comes from like a zoom Info or a Clay.com and the most common attributes you'll see are things like industry sub industry things like revenue band. And so what's really interesting is those are actually often proxies for other things. And so if you, if you really want to get like really nerdy about this topic, really what this idea of quantifying product market fit and go to market fit, really what you're doing is you're measuring the strength of your your company with a value chain. And so it. So there's a couple of books that we could kind of talk about to go deep in the idea, but really what we're doing is we're measuring the strength of a value chain. And under that construct what happens is that the firmographics are a proxy for use cases. And so it meaning that when I say proxy meaning that it's often true but not always. So just to take that idea and get one level deeper. So client we work with, they're $80 million SaaS company, they're in the security industry and their product supports 15 different use cases. So they've spent a huge amount of time doing ICP analysis themselves. And they built a model, they fed the data in the CRM but the model never really had a lot of shrink to it. So we looked at their models and we started testing and then we added use case and the signal became incredibly clear, which was for them. Of the 15, there was two that was driving almost all the revenue. One was that was more focused on acquisition and then the other was more of a maturity model. So first you buy product A and then probably product B later. And so going back to this idea of thermographic data, so it's valuable and there's a lot of things that you can do with it. Of the different types of thermographic data, vertical is very important because typically certain ver verticals buy for the same reason. And so it's a think of as a proxy for use case and then the other one in terms of revenue band. The reason why that is a, it's an area where there is a lot of signal is because as in, this is like rules of thumb. And so as you get into bigger organizations, they typically like to buy solutions with le less layers of the value chain. Whereas if you're like an SMB, you, you don't want to buy 15 different solutions and stitch them together. You, you just want one that does everything really. Ultimately what the revenue bands do is they give you a way to measure which layers are important within the value chain for a specific market. So anyway, I hope I didn't go too deep there.
- [19:15]
John McMahon
I love where you're going, you're nerding out on this, but I want some clarity on the value chain. Cause that might be. Let's clarify that for our customers because when Johnny was talking about the inputs into the icp and I think we've done a pretty good job of identifying what those could be and where we could get misled by some of the proxies, as you said. But for me, the value chain, dig into that a little bit. What do you specifically mean by that?
- [19:44]
Dan Sparing
Yeah, I think a really good analogy to use and something that's common that we all kind of know and have experienced. And so if you were to think about, for example, an iPhone versus an Android device. And so with Apple, they have an app store, they have a place where you can, you know, itunes, you can buy music. It's all, they have all these different layers. You know, they create the operating system, they create the hardware. And what that does is allows them to create a better product because they, they own more layers of the value chain. Now the weakness of that strategy is they tend to be more expensive. Now if you were to think about Google and Android. So Android's a free operating system that Google gives to a lot of different companies that build devices, but then you have to, for example, go to different app stores and it tends to be kind of good enough, but less expensive. And so each one of those models has their, their strategies that work at different points in the evolution of a market. So when you have early stage market, Apple will win every time. And then when you have a more mature market, the Google model will typically play out because they'll typically win because it's less expensive and good enough. And so that, that happens over and over and over again. And all the ideas that I'm citing, they all come from a book called the Innovators Solution, which is the follow up to Innovators Dilemma.
- [21:13]
John McMahon
Yes, I haven't read that one, but that's a, that's a good shout out. What could you, could you followed that same chain of thinking in software when it became about like open source, and so the value chain then was clearly undefined. Could you tell us like where your thinking evolved around that?
- [21:31]
John 'Johnny' (Co-host, likely John McMahon)
Yeah.
- [21:31]
Dan Sparing
And so you nailed it. So with open source it's the same ideas, you know, and I, to be honest, guys, I haven't worked in that environment before, but the little bit I know about it is open source often comes in after you have some incumbents that have like these really well established solutions. And the open source, you know, requires other people to develop onto on top of that kind of operating system and is often, you know, a really good strategy in markets that are more mature.
- [22:03]
John 'Johnny' (Co-host, likely John McMahon)
Where does propensity to buy fit into the icp?
- [22:07]
Dan Sparing
Okay, so guys, this is such a fascinating topic. So, and this will share some of kind of the learnings on our journey. So this idea that when we think about who to target and if we start with this idea of product market fit, and you say, okay, these customers are the highest lifetime value, so these are the ones to go after. So when you start to look at the metrics associated with message market fit, meaning like our win rates, ASPs and velocity, often the ones with the highest lifetime value are the hardest to acquire. So like this idea of like going to a revenue leader and say, hey guys, you need to focus on ones where you have the highest product market fit. And then they say, okay, well you know, what are our win rates, ASPs and Velocity? And you're like, they're 25% smaller deals to start out with. Your win rate is 50% less and you know, the velocity is 25% more. Like that's the recipe to get a sales leader fired. And so, so we've had customers who are, you know, they're in a situation where they got to hit their number to earn the right, you know, they have to deliver a strong quarter turn the right to solve the bigger problem. And we've seen situations where clients, even though they have the data, will still focus on where is it easiest to win. So an ICP segment, from my perspective, it needs to have three things in common. It needs to be high LTV happy customers that drive inbound. It needs to be relatively easy to win in comparison to your other customer segments. And then three, this is a really, really important one because this trips us up all the time as go to market leaders. It needs to be a sizable segment and one that's healthy. And so a real life example, there's a client that we have in more of like the HR space and they sell the B2B SaaS companies. And when Silicon Valley bank imploded, all of a sudden their pipeline started to dry up. Deals weren't closing and they couldn't figure out why. They did a big massive data analysis. And what they realized was that one of their segments they sell to, manufacturing, was strong, but like 80% of their business was coming from B2B SaaS. And that that was just an unhealthy market because the, the dollars from the VCs were drying up. And so if you believe that markets are dynamic and constantly changing, I would say that we need to be thinking about measuring, you know, the health of the, of the market that we're selling into and you know, is it getting worse or better and what are the implications for our business?
- [24:52]
John 'Johnny' (Co-host, likely John McMahon)
Yeah, I've always thought about that part, Dan. It's like the sales complexity part where I would say, okay, I'm a small company, I got, you know, 10 sales people. I don't really want to, even though some of these companies might have been really high. When I looked at the icp, maybe like you said, product market, fit the Persona, the use case, and they came up really high. The next thing I would hit it with was propensity to buy. So let's say I was selling like a cloud database. You know, is the company all in on the cloud? Do they hire the best developers? Do they have many applications? Do they buy the latest development tools? So I'm looking for those type of buy signals that align with it. So that's what I call propensity to buy. Okay, but the third piece is, what you're talking about is sales complexity. So, you know, if I'm a really small company and, you know, the government and insurance and financial services show up at the top, I have to eliminate those people because I'm going to run into a long legal process, long procurement process. It's a multi stakeholder, multi level, multi division, multi division, you know, location sale. They're very bureaucratic. So I have to cross those people off my list to go after, like when I'm a small company because I don't have the time to put in to go after those types of companies.
- [26:15]
Dan Sparing
Yeah, and so, yeah, there's a couple of things you said there. The first one that comes to mind is this propensity to buy. And so a lot, a lot of the attributes that you talked about, for example, like the, the size of the technical team. What's really interesting is our ability to get access to that information has never been easier. So going Back to this idea of the types of data that gives us the propensity to buy it really it's, it's pretty simple in terms of, for us and there's a lot of ways companies can do it. So a Great one is clay.com and so you can use clay to effectively scrape any, any attribute you'd ever want from a website from job descriptions. And so they have over 150 data sources that you can get access to through their product. We use them. And so once you understand or once you have a hypothesis on what those variables are, then you simply run them up against, you know, win rates by segment and then you'll start to see there's a pretty large variation. The other topic that you talked about in terms of, hey, there's some sales cycles that tend to be much, much longer and they're not ones that we necessarily want to play in. I would argue that as part of calculating this idea of velocity, you have great insights into that. And so I think that there's some pretty good ways to kind of back into check.
- [27:48]
John McMahon
So I, I am totally in sync with you guys. I think these are traditional inputs that we are using in the world that. And you just said it, you just said it, Dan. With the world that we're in, the. I feel like the ground is changing under our very feet because of the access to data and what you can do with that data. Johnny talks about propensity to buy. I always talk about as well how they buy because if you don't get to that level, I feel like people can use a lot of tools to understand a lot about customers. They can, based upon that, they can come up with value propositions, they can come up with sales process and how we're going to engage. And they don't have an eye or a signal on how the customer is buying, how they're acquiring. And this leads us to all kinds of questions like around subscription consumption, not just how they acquire products, but actually the things that they do inside their companies, committees that are formed, decision makers, you know, executives of AI now that are caios that, you know, all of this is changing right under our feet. And it's about, I guess I'd ask you for advice on how do you stay on the pulse. Because if you don't have an outside in approach, I think you're going to get mauled. If you don't have an outside in approach versus an inside, inside out approach, you're going to get mauled. And then also things are, there's no like Ice. Your icp, I believe, could be changing and your use cases could be changing under your very feet. What advice do you have for listeners that are like, hey, I locked in on my icp. We started our budgets in October. We've got a great ICP based upon that. We're going to put these many in federal, we're going to put these many in manufacturing, and then the world starts to change under our very feet. I think Silicon Valley bank was an easy one to sniff out anybody that was connected to that was going to get impacted, but that one was so pervasive. How do we not get caught off guard in the future when stuff is changing under our feet?
- [30:12]
Dan Sparing
Yeah, yeah, it's, I mean, a lot of really great constructs are John, and so a couple different things to say. So one of them in terms of thinking about the health of a segment and one of the variables that we grab is the number of employees. So month over month we see within an account, um, is the organization growing or contracting? And then as we group these accounts into segments, then we can look at what the average is. Um, and so that is a really kind of interesting way to start to get ahead of like, is the segment healthy or is it contracting? Now, your point related to like our Personas changing? I've, I've lived that firsthand. And so I used to work at a company called webtrends and they were founded as a organization that sold to more IT developers and over time became a marketing buy. And talk about the implications in terms of how you run your marketing campaigns, how you build your product, how you educate your sellers. And so for things like that, I feel I tend to be a little bit more old school and I think a lot about, hey, our sellers and our account management teams are very active and, you know, servicing and working with customers. And this is where I think those, those frontline employees have a huge amount of kind of tribal knowledge in terms of what's happening within certain accounts. And it feels like the more that we can mine that data and surface it across the organization, the better off we'll be. But I like the inside out approach kind of combined ideally from an outside in an approach.
- [31:55]
John McMahon
Johnny, you know, you and I are talking a lot about this with guests lately and the closest to the pulse of the customer is typically, you know, the customer facing resources, the data and the ease of capturing that data at that workflow level to be able to lead into these insights. We just had a conversation, you and I just had a conversation yesterday about we believe there's going to be people that are on the right side of history on that and people that are on the wrong side of history of that on how you capture that data, how you, how easy you make it to capture that data for people in the organization. And a lot of that is in, a lot of that is in what the AI companies are doing. So how do you differentiate your differentiate yourself, Dan, for like a methodology that you would use at a light ICP with such great tribal knowledge and things that you guys have with people that are doing their DYI with AI on this topic. Could you give us some insight on that?
- [33:05]
John 'Johnny' (Co-host, likely John McMahon)
Yeah.
- [33:05]
Dan Sparing
And so a couple of things to talk about and I know you guys have talked about this on previous shows is so ideally in a lot of our, you know, our opinions and approach to this stems from me working closely with finance leaders. And when you start to think about well, what do we really need to understand our ICPs? I'd argue in most situations just taking like raw CRM data and throwing it into an LLM is probably not going to give you very good results. And ideally what we need is we need to partner with our finance leaders to really understand, you know, what are the KPIs that are driving the business. And, and typically those, those metrics are associated with revenue and not bookings. And so and this is where you know, as a revenue leader I've, you know, sat in company all hands meetings where the CFO is going through all the numbers and talking about net revenue retention, logo retention, gross revenue retention and, and how the company ARR year over year is changing. As an operator, that's great to hear but it's not very helpful because it doesn't help me understand where I need to put my resources and the energy to actually drive the growth in the business. And so if I were attempting to, to kind of look at, at our company and apply these concepts, I would probably start with looking at the install base. And what I would do is I'd probably start by asking like some folks more on the CS Org like whether account managers or csm, I'd start by asking hey, where do we have the most referenceable customers? And so I've seen in organization after organization of like a customer base of like 2000, there's like typically like 10 to 20 that are referenceable and those accounts get hit every time for like analyst calls, for investor calls. And so I start out by trying to understand those. What do they have in common? I'd also want to partner with the finance team and just like look at, hey, what's the net revenue retention for, you know, a couple of different groups of customers. And I would really lean hard into understanding what use cases are they using or buying against. And then from there, once I had a good understanding of that, then I would kind of back into the win rate and I'd say okay, where do were we having the most success closing deals and in which segments? And then as I understood that, what that gives me is kind of two things helps me understand, you know, where can we win more but also where we have cohorts of customers that just keep giving back in terms of expansion and retention throughout the years. And so we as revenue leaders, we're typically measured on sequential ARR growth. And yeah, when we close deals and they don't renew or don't expand our bogey the next year, it just gets that much greater. And so yeah, so thinking about that full life cycles, everything, I like that,
- [36:10]
John 'Johnny' (Co-host, likely John McMahon)
that dollar retention almost by use case, by Persona, by company, by vertical. And that'll start to show a lot of very pertinent information.
- [36:20]
Dan Sparing
Yeah. And John, one thing to add to what you said is typically what we see is the Personas are massively different amongst segments. And so great example is like retail versus one of our clients we work with looked at retail versus media and you have just completely different buying groups and different titles. And so that's another kind of layer is as you start to think about where to put your energy, really think about use case and then tie that to a segment and, and then from there you'll, you'll basically have the rubric to, to start to really figure this out.
- [37:05]
John 'Johnny' (Co-host, likely John McMahon)
All of this is becoming so important because with AI the customers are going to filter out the people that don't really understand their business. So with AI, if you want to put the work in, it's so easy to do some account research. Understand Stan, from your point of view, you know, the use cases, the Persona, the pains. And essentially as I talk about a lot of times leaving the witness, you know, where you know so much about their company, how the, how the Persona is measured, all the pains in their use case. And you basically like a great lawyer leads a witness, never asking a question that they don't know the expected answer. And that's what the great sales people will do should be they do it now and they'll do it again in the future. But there'll be a lot of people, especially these days with all these new SDR tools which are just like bombing customers with emails and calls. But they haven't done their homework. There's no prep. They don't really know anything about the customer, how they're measured, what the use cases are, what the pains are. They haven't at all figured out what the ICP is. They're just bombing these customers. And the customers are going to tighten up and the only people are going to get through that have done their homework.
- [38:19]
Dan Sparing
Yeah, John, I, I could not agree with you more. And so basically all of our, our channels have been polluted through automation. And so because of us getting bombarded by all these different messages, we've learned to effectively tune them out. There's even a saying called the great ignore.
- [38:38]
John McMahon
And one looks like the other. I'm sorry, looks like the other.
- [38:42]
Dan Sparing
Yeah. And what cracks me up is when you see kind of the value props of these automated SDRs. They talk about this idea of personalization and every email looks the same, which is like the first two sentences they show you, you know me. And it's some like random AI slop. That's not, it's not personalized at all. It's this, it's not relevant to what it is I'm doing and what I need to help grow my business. And so coincidentally, we've talked with companies in the automated SDR space, ones that raise, you know, you know, 20, 30, $40 million. And it turns out their automated SDRs don't know their ICPs. And so they can blast 4,000 emails a day. But when you look at the click through rates, when you look at the response rates, they're abysmal. And I know a lot of those companies are struggling and some of them were interested in licensing or software to help out with their, with their SDRs.
- [39:43]
John 'Johnny' (Co-host, likely John McMahon)
Those companies are just making bad, they're just making a bad name for all salespeople, that's all.
- [39:47]
John McMahon
I agree with you.
- [39:49]
John 'Johnny' (Co-host, likely John McMahon)
Really good.
- [39:50]
John McMahon
I've heard you say, Dan, and I'm going to go old school for a second here. I've heard you say if you had 10 minutes to talk to a customer, and again, I think this comes from your great knowledge of understanding use cases, understanding customers, for being responsible for, you know, customer success after customer acquisition. And I know you have both backgrounds, which makes you probably great at leading a company, you, I heard you say it a couple of times in two different podcasts. You know, the 10 minute, it's not like a 10 minute rule, but if you had 10 minutes to talk to a customer, I thought it was really, really valuable.
- [40:28]
Dan Sparing
What you were saying, I'm not a Fan of what know, some of the changes that came from the predictable revenue book, you know, with Aaron Ross. And so I was, you know, I was an account manager before cs and I love the like. I, I believe that what you hunt or what you kill, you need to eat basically. And what we've done in terms of bifurcating the alcohol, the customer journey, I'd argue has not been good for our companies or industry. But so with that said, my belief is we as B2B software organizations, we probably under invest in education of our employees. And through that, when we hire sales teams, you know, very quickly, you know, they're on a ramp, they have a number to hit. And I'd argue a lot of the new business AES don't really get the opportunity to actually work, you know, side by side with clients and really understand how they extract value from your software product. And so what happens is, I think a systemic issue at every company is that the way we structure our pricing and packaging, we allow our sellers to our AES to create deals which without the right services or the right combination of products, our clients buy and they're ultimately set up to fail before they even get out the gate. And so when I think about how we structure our teams, there's, you know, I, I think CS and sales is one function. I don't think it should be two different functions. But I also like, you know, in the old days it's on perpetual licenses. You know, I was used to inside, outside pair and I love that model because what happens is if you kill something, you're going to eat it. And when you eat it, then you start to really understand that, oh, you know, I need to do this slightly differently. And so right now when an AE closes a deal, they throw the fence to cs. There's a loss in understanding that, hey, if you actually started working with customers to begin with, you would be actually probably a much better AE because you'd be able to anticipate what those problems are even before the client knows. You could be more of a trusted advisor. And then also you could structure deals in a way that would help the client be much more successful, which would create, you know, more predictable revenue.
- [42:57]
John McMahon
You know, I couldn't agree with you more. I've, I've always been perplexed on how these organizations kind of silo right at what you're talking about. Somebody owns the acquisition, somebody owns the success. You're talking about the importance of use cases in software. At least it is going from, you know, subscription, from perpetual to subscription to consumption. Just all about use cases and being right at the razor's edge of your, you're going to get information from your customers about how they are utilizing. So your use cases are going to be like right on the laboratory floor, if you will, of what, what these customers are doing and then having a mechanism in place to bring that back into the company, to get it back into the icp, to get it back into the enablement, to get it back into the fold. But so for me, like you just said, it moved away to these silos and I started to see CROs that, you know, the big question was, well, I need customer success. And when they couldn't articulate why this is the articulation when they couldn't articulate why, it was obviously spread across. And when you use traditional financial metrics of retention and long term value and like, do you have advice there on, you know, where is it, where's it going? Like what, what are you seeing as the trends? I, I know what I'm seeing.
- [44:36]
Dan Sparing
You know, the other thing, I mean this is something that I, I love to understand like the history of how organizational structure kind of happens and my understanding and there's a guy in the, in the room who told me this was the case. So when Salesforce created the CSM model, it was done because they were running into a churn problem. And if you really look at what they're doing, they're just throwing people at a problem to help with the value realization piece. And so I'd argue Salesforce was in a very unique place where they could do that given the size of their, of their market and their growth trajectory. But I'd say most companies aren't in that, that situation. And so if you get into like the unit economics of cs, it very quickly falls apart. Meaning that if you're building a software company, you don't want people to make clients to be successful. You want the software to do that. And so what Salesforce did is rather than maybe think about their ICPs more or maybe invest more in their product, they just hire people. And I think that in terms of where this needs to go, my hope is it goes full circle and it goes back to a situation where go to market is a unified function and it's one that spans marketing, sales and customer success. It's one. And you ultimately have one person responsible for that journey and making clients successful. And when you chop it up into all these individual pieces, you're adding complexities into the journey. You have a lot of, I'll Say like incentives issues that don't actually create better companies, better client outcomes. And a lot of those incentives actually create a lot of internal strife within the organization. So I think that AI is going to do a lot to unify, go to market, who knows to what extent. But I dream of the day where this is all sitting under one house.
- [46:40]
John 'Johnny' (Co-host, likely John McMahon)
Well, it has to, it has to be damned in my view too. I mean when Johnny and I used to sell perpetual software, you know, the customer bought the software and then they owned it for life.
- [46:51]
Dan Sparing
Yeah.
- [46:52]
John 'Johnny' (Co-host, likely John McMahon)
So if the, you know, you had a long time to fix their problem, then we sold subscription software and now you essentially had on an annual subscription, you had, you know, nine months to 10 months to make sure the customer really created value with the product. And if they didn't, they were going to churn.
- [47:10]
John McMahon
Yeah.
- [47:10]
John 'Johnny' (Co-host, likely John McMahon)
And now we're selling consumption. So to your point, you could book a million dollar deal but if the customer doesn't consume, you're not, you're not generating any revenue. So now you have a week, two weeks before the customer can click you off and click somebody else on. It's as simple, it's like a light switch, it's sub second billing. So I'm seeing companies like, I was on the board of Snowflake for 10 years, they had no 0cs people. You were the rep, you sold the deal, make it work. Don't sell bad deals that you can't make work. So it stopped the reps from selling bad deals too.
- [47:48]
Dan Sparing
Yeah. John, something you said there, Gosh, I'm trying to remember. There was a book written by the CEO of Snowflake, I'm sure you know him well, that was pretty controversial that talked about the kind of, I'll say, he was challenging CS as a function. And I, so I'm someone who spent 10 years, I'm really an account manager by, by you know, my lineage. But what I can tell you in, in every fiber of my being, I don't believe CS should exist as a function. I think it's causing more problems than it is solving. And I 100% agree with you John, that as we continue to go towards like a consumption based model, the value realization, it has to happen every day. We don't have, you know, we don't have like three months to implement to get it right into your appointment to perpetual license. Once they bought it, they got it. And so you're just 12% of the, you know, the annual support and maintenance costs that you could lose. And so yeah, I couldn't Agree with your more with your observations. They're dead on.
- [48:51]
John McMahon
Wasn't that easy.
- [48:52]
John 'Johnny' (Co-host, likely John McMahon)
That created this thing where there was customer support. Right. And the mentality in customer support was even, you know, perpetual. And subscription software was I have time. So it was more of like this break fix mentality. Let's wait till something's kind of broken at the customer and then we have time to fix it. And now with consumption, you don't. You have to be like what I call concierge mentality. I have to know what Dan and John are doing when they're using my software on Tuesday at 9 o'. Clock. I know what they're doing Tuesday at 5 o'. Clock. And if I don't, I'm not in touch with them. So I have to build telemetry into the software where I get these trigger events that tell me exactly how they're utilizing the software. They usually utilizing the wrong way, the right way. Could be they'd be doing something else. And I'm not just calling Dan and John and say, hey, how's it going over there in my software? I'm calling very specifically to make sure that they're getting value out of my software because I know exactly what they're doing with my software.
- [49:53]
Dan Sparing
So what you're touching on is something that, it's fascinating when you get really deep into this. And so in preparation for our discussion, did some research. Obviously Segment is one of your customers of Force Management. And I started, I've kind of fell in love with Segment and what they're doing back in 2020. And what's fascinating is what Segment did. And obviously I, I'm an outsider looking in, so I don't have all the details, but I have talked to a couple people who work there. But one of the beauties behind Segment was that because they had a PLG motion, I'd argue it gave them a lot more telemetry than most B2B companies. And so going back to this idea that, hey, your CRM is really killing your growth, the reason why it's killing your growth is with like a, with like a PLG motion, you have tools that allow you to understand the cohort, what features they've used, which ones they have not. And then you can actually see the business outcome like they turned or they renewed, they expanded in a more traditional B2B sense where you don't have a PLG, it's just SLG. What happens is the, the product usage and the commercial, you know, the, the growth, the revenue, they're completely bifurcated. And that bifurcation kills us as revenue leaders. Absolutely kills us.
- [51:15]
John McMahon
The other thing that was killing segment was they actually were restarting sales campaigns. So they had the insights and when they had an opportunity to go into the enterprise, it was a different Persona. The buyer was completely different. And so I thought what they did to solve the problem was amazing, is they started to back up and include the Personas even in the product led growth earlier and set the stage for where this was going to go. I thought they did a great job of it. But the reason why we were called is they got stymied from PLG into enterprise and they were stymied. They were like, we are our sales cycles. Like they act like they don't even know us. And when we dug into it, they're like, they don't know you. Do not know you.
- [52:18]
Dan Sparing
Okay. I never knew. And so there was a seller that I know that used to work there, and then there was the CMO who I met once. So I never knew there was that jump in buyer Personas. But my experience as like a revenue owner and one that tries to sell things to new Personas, it's almost like a complete new logo motion.
- [52:37]
John McMahon
It was.
- [52:38]
John 'Johnny' (Co-host, likely John McMahon)
Yeah.
- [52:38]
Dan Sparing
And so, so the fact that, that they were able to jump that hurdle and you know, with your help is, I mean, it's pretty mind blowing. And I mean, I'd argue that they've had the best exit in the last decade. I mean, it's such an incredible story.
- [52:52]
John McMahon
It was a good one. So we're, we're sitting here, we're having a great conversation about changes in icp, how fast that's changing, how to put telemetry to get indicators to help us with Personas and ICP and usage. I want to sit in the seat of a seller for a second when I'm thinking, I'm listening to all of us talk for the last 50 minutes or so and I'm like, one thing is clear for me and this is something, Dan, I think that you really bring to light. And I'm not sure we did it today on the podcast, but I know this is your mantra is like, stay as close as you can to the use case, Stay as close as you can to the use of your product. How people are using it, why they're using it, what problems they're solving, how they're saying that they're solving it differently or better than, than anybody else. And no matter where you sit, whether you're in a traditional, whether you're in a traditional acquisition motion or traditional customer success motion. And by the way, we've had tons of, we've had tons of podcasts. We've had 300 or so since Johnny and I started. We've had people on that would make a great argument on, you know, the customer success people are completely different skills. And this is the Persona of those people and this is the success profile as we're talking about these things potentially coming back together. Advice I'd give to anybody listening. You don't buy anything without really understanding how you're going to use it today. You don't yourself. So you should be curious as all get out with making sure that you're constant no matter where you are in an organization, that you have an outside in mindset that you are understanding how people are using what you're selling and making sure you're as close to the pulse on that. Making sure you can get credit for how they're using it. Make sure you can pivot to new uses no matter what your skill set is. So if you're in acquisition mode and you're throwing something over the fence, I would start peeking over the fence or start bringing that motion closer to the acquisition. If you're over on the other side of the fence and you're receiving bad deals or bad ICP or whatever, I'd start sneaking over to the other side of the fence. And I'm sure leaders and I love what Bro Bears did. Johnny, back in the day, didn't he tell us a story how he took a success person and a salesperson and put them like he put them right across.
- [55:22]
John 'Johnny' (Co-host, likely John McMahon)
He put them desk to desk facing each other.
- [55:24]
John McMahon
I love put him desk to desk facing each other and said, you two birds, you rely on each other for the outcome, for what that customer does. And it totally changed the way that
- [55:34]
John 'Johnny' (Co-host, likely John McMahon)
HubSpot, they changed the comp plan too, for both of them.
- [55:38]
John McMahon
Yeah. Guys, what didn't we talk about today? Dan, I know we had a lot on the, a lot on the table to talk about. Do you have any parting wisdom for us? Like, first of all, we're hitting people in the face or like, hey man, we did our ICP in October and we set up our budgets and we set up our, our comp plans and like, I didn't know we had to look at this thing, you know? You know, times like what, what advice do you have for us?
- [56:05]
John 'Johnny' (Co-host, likely John McMahon)
Yeah.
- [56:06]
Dan Sparing
And so one of the, this is one of the things, John, I, I, this is more of like folklore. I don't know if it's True. I believe it to be true through a conversation with I believe the CMO of Segment years and years ago, I believe segment actually what I was told, and which this is what I wish all of, like the entire industry of SAS would move over to is taking this idea of an LTV by segment and then using that in our comp plans. And so what I was told that segment did was they did a massive amount of analysis. And what they learned was certain customers within certain segments were often worth like two or three times more ltv. And just, you know, as someone that's heard LTV forever but never really operationalize it, LTV gives you the construct of it, factors in retention, thinks about expansion, gross margin. And it's kind of a proxy for profitability and it's an estimate. And so I love the idea of paying sellers more for acquiring customers that are going to contribute to future growth and profitability of our organization and calculating that number, like if you give a, you know, finance team enough time, they can do it. We do it as part of our software. But at the end of the day, I think that does create the right incentives for the sellers to focus on, hey, like we want them to be like, you know, like, I know when I say this like there's, it's not always true, but thematically what we want our sellers to be is a hammer, right? And we want them to get leads that match a very specific profile and we want them to just be machines in terms of closing every deal they can. But I think sellers today, given the fact that we see something like 70% of open pipelines outside of ICP, sellers have a number to hit. And understanding the number that they hit and understanding that we probably haven't trained them to really understand use cases and how clients drive value. What typically happens is they're just trying to survive and hit their number. And what I learned was the years where I felt frustrated with the sales team was probably not. The frustration should be more in the marketing team in the sense that. And when you double click into the why we shouldn't be frustrated with them either. But ultimately the marketing team doesn't have the tools they need to create high quality pipe. I argue how do you even know if a pipe is high quality? So there's different ways you can say, well, what percentage of sales accepted leads, win rates, things like that. But understand that idea of if we have 70% of the open pipe outside of ICP, it's going to create all these downstream problems. And so really what we want is the marketing team to create great quality ICP pipeline. We want our sellers to be focused on the accounts that are gonna generate like a 3 or 4 XLTV because they stick around and grow and then it just, the whole system gets better. So like that would be my dream is LTV becomes the North Star and a comp plan for an ae.
- [59:10]
John McMahon
Johnny, how about you? What are your thoughts? I agree with you. I agree with you.
- [59:14]
John 'Johnny' (Co-host, likely John McMahon)
One is like, you know, we have to narrow the use cases, right? I mean, when I first wanted to tell a story, when I first went into Blade Logic, it was the first day I gathered all the executives around the table and I said, hey, let's walk through the different use cases that we have. And chief technical officer got up to the board with the marker and with participation from Everybody, wrote down 13 use cases. I look at David Achary and I said, guy, you know, I think I need to quit right now. He said, what are you talking about? And I said, because I can't build a salesforce that can sell world class to 13 use cases. I looked at the marketing guy and I said, I don't think you can market world class to 13 use cases. I looked at the development guy and I said, I don't think you could build the product world class the 13 different use cases. I just don't think you can do it. So I need to go, but what should we do? I said, we need to narrow it down to three or four different use cases and then I can educate my sales guys to be able to go after those three or four use cases and you might be able to market to that and you might actually be able to develop a product for that. Now if somebody calls for use case number nine, which it did happen one time, Target wanted to buy for 50,000, you know, cash registers, I'm going to listen to them. But I'm not aiming people to go sell, you know, because we sold server automation, not going to sell to cash registers at Walmart and Target.
- [60:39]
Dan Sparing
Right?
- [60:39]
John 'Johnny' (Co-host, likely John McMahon)
That's just not where I'm going. So it was a really great exercise to get everybody in the on the team on the same page as to, you know, what direction we're going at and where we're going to really spend our money. Second thing is to salespeople like, you have to do your homework. Like Dan said, you have to do your homework before you go into these accounts. Right now your manager, typical manager, is saying, you got to get more meetings. So what do reps do? They run in, they get meetings, they're low in the tree, they can't get up high, they can't get around the guy they just went and spoken to. They're stuck in a bad use case anyway. And you know, they, they put it on the forecast and six months later it falls off the forecast. If you're going to go in to get a meeting, go get a high quality meeting with a high quality use case based upon your ICP and do the homework before you go into the meeting. That, that's my advice. And go to the Persona that's measured on that use case.
- [61:41]
John McMahon
You know who owns the outcome of that use case. Because like what at the end of
- [61:48]
John 'Johnny' (Co-host, likely John McMahon)
the day, no matter what use case it is anywhere in the organization, you can ask whose job is most affected by this use case? Who suffers the most when this thing does not go right? Who's the person? This guy. There's always one person tied to, tied to that measure and that's where you want to go.
- [62:08]
John McMahon
My little piece of advice to add, to add on to the great advice that you guys have added. If you're listening to this, your use case probably has a technical parameter and a business outcome parameter. And typically those aren't the same people inside of an account. And I think the greatest sellers on the planet today are the ones that are positioning themselves right in the middle. They are taking technical capabilities, technical use cases, and turning them into business outcomes. And with that, those dynamics, you can look at a deal right today. You can say, what's the biggest business impact of your solution? And a lot of times people will answer me with a technical answer. I said, that's fantastic. I don't discount it. You have to have that because you're differentiating at the technical required capabilities level. You have to do those things. If you're leaving out the business outcome piece, you're at risk. And even in SaaS today, like we're talking about the great SAS apocalypse that we've been experiencing or whatever that really means. There's just a. I think what it means is that customers are asking questions are if we've got all this AI going on, do I really need this number of, number of licenses to do that if you're going to use AI to extract out of there? And so I think this whole thing for me is being right in the middle of where technical capabilities meet business outcomes. If I could give you any advice, that's pretty good ground to be standing on right there.
- [63:49]
John 'Johnny' (Co-host, likely John McMahon)
Well, you know, you don't even need the numbers like we've been talking about, like Dan and you and me have been talking about LTV and net dollar retention and all that. That's really good for the executives to figure out and how to modify the icp. But if you're a sales rep, you can pretty much figure out where the business outcomes are. Like you talked about in the value realization, who's doing the biggest deals in the company and what are the use cases. I don't need to know much more than that to know that's where I need to go. It's the old Jesse James thing. Why do you rob banks? Because that's where the money is.
- [64:23]
John McMahon
But I don't want to blow over that, Johnny, because we had Steve Waugh on. You've told me a number of times that you went to people like Steve Waugh when you're, when finance is giving you numbers and everybody's giving you numbers your old school way, which I loved was, let's go find out what the most successful reps are telling us. Where are they going? Who are they selling to?
- [64:44]
John 'Johnny' (Co-host, likely John McMahon)
How are they, what's the use case? What's the business outcome? How'd they get a big deal? Why did the customer want to spend that kind of money?
- [64:51]
John McMahon
Great place to start.
- [64:52]
John 'Johnny' (Co-host, likely John McMahon)
Yeah.
- [64:53]
John McMahon
What'd we miss, Dan?
- [64:55]
Dan Sparing
It's funny because I'm sitting here listening to this discussion, and the deeper we go, the more clear that I'm. I'm standing here with greatness. And so, Johnny, some of the things that you talked about just in the last maybe two minutes were pretty. I mean, talk about advice, you know, being worth goals. I mean, I couldn't agree more with you about this idea of, of use cases and Personas and really stitching that together to, to really, you know, grow your book of business and crush your number. And so, yeah, there was so much brilliance under, under what you just said. It was, it was really amazing to
- [65:34]
John McMahon
hear about me, John, not you.
- [65:38]
Dan Sparing
No, I was talking. Johnny. I was talking to Johnny here.
- [65:41]
John 'Johnny' (Co-host, likely John McMahon)
All right, thank you, Dan.
- [65:43]
Dan Sparing
Sorry, Cat.
- [65:43]
John 'Johnny' (Co-host, likely John McMahon)
I'm gonna, I'm gonna clip this part of the video. And there you are, buddy.
- [65:48]
John McMahon
I know you are.
- [65:49]
John 'Johnny' (Co-host, likely John McMahon)
Well, Dan, thanks a lot for joining us. Really appreciate it. And then good luck to align icp. How, how people can just find you by what are you, dot com or dot AI or.
- [66:00]
Dan Sparing
Yeah, and so, so yeah, we're, we can, we are getting picked up by the various LLMs. But yeah, the easiest way to do it would be just alignicp.com and then you can hit me up on my email account, which is this danlinecp.com Perfect.
- [66:18]
John McMahon
Well done buddy. You killed it. Thank you.
- [66:20]
John 'Johnny' (Co-host, likely John McMahon)
Dan Cap Thanks a lot for joining the Revenue Builders Podcast and thanks to everyone else for listening to another episode of the Revenue Builders Podcast.
- [66:32]
Podcast Host Intro
Thanks for listening to today's episode. If you enjoy the content, please please subscribe, rate and review the show to help us reach more people. This show is brought to you by Force Management, where we help companies improve sales performance, executing the growth strategy at the point of sale. Check out forcemanagement.com for more information.