Top Down GTM Trouble Shooting - CAC's Method

Live from Schenectady, New York, it's SaaS Talk with the Metrics Brothers, Growth and CAC.

And I'm Growth, better known as Ray Reich, founder and CEO of Benchmarkit.

And I'm CAC, better known as Dave Kellogg, independent consultant, EIR at Balderson Capital, and the author of Kellogg.

And together we are the Metrix Brothers.

And we go together like Felix and Oscar.

Okay, one of my favorite shows as a child. I'm not sure anyone under 50 will know who they are unless they caught the 2015 through 2017 remake of The Odd Couple with Matthew Perry of Friends fame, God rest his soul.

That's a good find, Ray. I didn't know you'd find that when I wrote the script. He snuck that in at the last minute, and when I wrote it, I was like, there was that thing. So Very good, very good.

Yeah, but you know, the hard part is, Dave, who's who? Because I think we both might be neat freaks like Felix.

I think we are, Ray. In fact, I know we're both neat freaks, but, but, but in fact, only one of us is grumpy.

And that would be you, right, Cack?

Well, you know, I was kind of thinking the other way there, Growth. But before we resolve that conflict, let's hear a brief word from our sponsor.

The Metrics Brothers is proudly sponsored by Benchmarkit, the B2B AI and software industry's largest, broadest, and most contextualized benchmarking index. Dave Kellogg and Ray Groth Wright have put the Metrics Brothers podcast on hiatus for the remainder of 2026. All episodes we have ever recorded are still available on your favorite podcasting app. You can reach Dave @Kellogg and Ray on LinkedIn @RayReich. Thank you so much for listening to the Metrics Brothers podcast. Okay, Dave, today's topic is go-to-market troubleshooting, but didn't we cover this once before?

Yes and no, Ray.

So, so look, our podcast, as you well know, is the Metrics Brothers, where we kind of go back and forth, ideally bicker a little bit, and generate interesting conversations about SaaS metrics and topics related to SaaS metrics. When we hit GTM troubleshooting, we hit more of what I'd call a methodology thing, which is, you know, you're a consultant, I'm a consultant, we walk in with companies, we work with them, and we each have our own way of looking at this problem. So I think the right answer is what we decided to do is to say, hey, let's do one episode. I think it was on June 18th, saying here's Ray's way that Ray approaches troubleshooting, and Ray comes from a sales background.

Right.

And then today we're going to do Dave's way. And Dave comes from a marketing and CEO background.

Really, Oscar?

Well, that's CAC to you. And yes, yes. Look, if you— the episode title on June 18th is going to be confusing because we call it GTM Troubleshooting Growth's Way, using your nickname as Growth. And this, this one, if you're symmetric, you're going to call it GTM Troubleshooting CAC's Way, which would be phenomenally confusing. But in any case, today's episode is going to be GTM Troubleshooting Dave's Way.

Okay, and for the fans out there who don't have the player roster, you're going to be Dave today, CAC, or Oscar?

Uh, you can call me Dave, or you can call me CAC, right? But the troubleshooting methodology is Dave's. Let's do that to keep it clear. Certainly not Oscar. That would really confuse you.

Okay, okay, Dave, why don't we kick it off? Because I know you actually did a recent Kellogg post on this, so take it away.

Yeah, I did that post in, in preparation for this episode. It's a topic I wanted to blog about for a really long time. I actually tried at some point to make like a little flowchart of GTM troubleshooter, but in any case, that post is out there and we'll cover the material in that post. First, I'd say, Ray, a lot of people need to troubleshoot GTM these days, so I'm glad we've dedicated 2 episodes to it. You know, maybe it's cold out there, people are having trouble hitting plan. And when I say hit plan, what I'm going to talk about today is new biz ARR. I know people are also having trouble hitting the overall new ARR plan, right? I want to say new ARR has 2 components: new business ARR, called new biz, uh, and expansion ARR. And you add those together and you get new ARR. And before we dive in, I just want to say the thing that I think most people are having trouble with is new biz ARR. Is that consistent with what you're seeing?

Uh, new biz ARR is very hard. However, I'm also seeing, since they've increased expansion ARR so much, That they're allocating a lot more resources, that some people are— have increased the expansion more than they can do, and they've definitely increased the cost to get a dollar of expansion ARR. Those are 2 things I've seen.

And look, for those concerned about expansion ARR, you can, you can follow the exact same methodology in that post and in this episode and just apply it to the expansion funnel instead of the new biz funnel. But today, by default, we'll be talking about new biz. Now, Ray, as a former sales leader, I'd like to ask you, what's your first thing to do when you miss plan? Not that that ever happened. So, imagine that you miss plan, Ray. What would be the first thing you would do?

Well, there had to be something with the pipeline that marketing was generating. So, I'd have to go investigate that.

I thought you're going to blame the plan. Normally, step 1 is blame plan. Step 2 is blame marketing. But okay, Ray advanced directly.

I did. I do not pass go, do not collect $200. But of course, The plan is always in question, especially if you miss it 2 quarters in a row, Dave.

Indeed, Ray, indeed. So look, for many, the first instinct is to blame plan. And that's a bad instinct. So the first thing I want CROs and CEOs to do is not— and CMOs— is not blame the plan. And there's 2 reasons why. One, you signed up for it. You may not think of it that way. But when you're on the E-staff of a company and you submit a plan to the board of directors for approval, you are signing up for that plan. So, you shouldn't go blame the thing that you signed up for. And if you think you signed up for an unattainable plan, maybe next time you think twice before signing up. Okay? First. Second, in my approach today, if you follow the numbers and follow the kind of the funnel and follow the data, it's going to directly say whether the plan is achievable or not. So, you don't have to start by blaming the plan. We can just dive into the numbers. And if the plan is not achievable, that will pop out.

And when you say that, do you start with pipeline coverage ratio, Dave?

Well, as always, Brother Ray is leaping ahead, but that's good. So, the first thing I say, I start first by what we don't do, which is we don't go blame the operating plan. And then, we say, okay, we've got a plan. Our job is to make that plan. So, let's just break that into 2 questions. One, are we giving sales a chance to make the plan? Every quarter, are we giving sales a chance One question. Second question, is sales converting enough of the pipeline to make plan? And I'm going to argue that virtually any problem you have will be exposed between these 2 questions. Now, the question about giving sales a chance to make plan, that, Ray, comes to pipeline coverage, which is in my mind the way we give sales a chance to make the plan is by ensuring that sales has enough opportunities at the start of every quarter so that they have a realistic chance of making plan. They don't have to pull miracles. Look, every once in a while, we've all pulled miracles, accelerated a big deal, won more deals than we're supposed to, right? That's what we do here in GTM. But we can't rely on miracles to make plan, right? So, the first question is, are we giving sales a chance to make plan as measured by pipeline coverage, specifically starting pipeline coverage? And we'll get even more specific in a minute. But are we starting every quarter? Right. How do you make 12 quarters in a row, Ray?

By having the ability to convert that pipeline at the right rate 12 quarters in a row.

Yeah, I was giving you a softer ball question, which is one at a time. I thought you'd get that one. Sorry. Yeah. How do you make 12 quarters in a row? One at a time. And that's the answer, folks. And that's— I think too many people, when they look at rolling 4-quarter pipeline, Or they look at, you know, stage 2 to close rates. They're forgetting that you've got to make quarters. And how do you make quarters? One at a time. So, the question isn't on a rolling 4-quarter pipeline basis or on an annual pipeline basis. The question is every quarter. Do we give sales a chance to make the number by starting with 3x pipeline coverage? And then second, provided we've given sales a chance, are they then kind of receiving the ball, taking that adequate pipeline, and and converting enough of it to hit the numbers.

Hey Dave, we've talked about pipeline coverage before and it's amazing, but there's a debate on what pipeline coverage really is and when do you calculate that. So is that something you think we can go into before we get into the other details?

Yeah, I think we have to, Ray, 'cause I always say, let's worry about starting pipeline coverage and I do the 12 in a row speech and I do the let's give sales a chance every quarter. And then people say, great, we're doing that. Here's our annual pipeline. And it's like, ah, no, no, no. Or they'll say, great, here's our rolling 4-quarter pipeline. Or more subtly, yeah, we meet our pipe gen targets last quarter. Go marketing. We were supposed to generate $10 million in pipe and we generated $10 million. Does that tell me anything about starting next quarter coverage? No.

Not a thing.

Virtually almost nothing because you didn't tell me what quarter it's in. Is it all in next quarter pipe or the quarter after that or 4 quarters out? Right. You didn't tell me if it has dollar values on it yet. Is it far enough in to get dollar valued? You haven't really told me anything. So people think— that's the hardest part about this, Ray, is people think they understand what I'm saying here and they're missing it. That when I say starting quarter pipeline, I mean starting quarter, current quarter pipeline. I don't mean anything rolling. I don't mean pipe gen. And yes, if you miss your pipe gen targets, it's hard to start with enough coverage.

It could happen.

Maybe alliances found some deals. Maybe sales found some deals, right? Marketing can miss the marketing pipe gen target and we can still start with enough starting pipeline.

But Dave, I've talked to a lot of, I'll say, less experienced heads of sales. And we know that day 1 current quarter pipeline is not that trustworthy. So you've got a different strategy of how to make sure we start with the right current quarter pipeline, right?

Yes. So I'm going to follow your lead here, Ray. So the first thing I'm saying is starting pipeline coverage is not the same thing as pipe gen or rolling 4-quarter pipeline or anything else. Starting pipeline coverage is starting pipeline coverage. And then Ray's question is, what does starting mean? Because day one, it can be pretty dirty, right? Like, oh, people tend to dump or slip opportunities into the next quarter. They don't focus on them. They let the close date or the stage or the value get out of whack from reality because they're really focused on closing this quarter. And then when they hit this quarter, let's hope they do, they go party for a week and say, go me, I'm wonderful. And then only kind of in week 2 do they start in earnest, usually working and cleaning up their current quarter pipeline. So that's why I like to do what I call week 3 pipeline, which is technically right before the start of week 3, i.e., specifically Sunday night before week 3. So you can call it ending week 2 if you want to. The pipeline right then, and you take a snapshot of it. And that's what I'm going to call starting quarter pipeline.

Yeah, I don't want to take us down a rat hole here, but if you wait till the beginning of week 3 in a quarter, a lot of the CEOs and CFOs I worked for wanted me to give a forecast on during week 1.

Yeah. So look, Ray, a lot of this is a CEO decision. I picked week 3 as a CMO because I had to negotiate a truce because sales would always say, well, we can't be cleaned up by week 1. That's crazy. Everybody's off or whatever. And look, if you're the CEO, you can kind of declare when it needs to be done by. I might do week 2, but I find that week 3 is impossible to disagree with. Like, there's no good argument against week 3. And even there, I'm cheating because week 3 is really the end of week 2, right? It's the start of week 3. So I think it's a reasonable compromise. I think it's very hard for anybody to argue it should be longer. And in enterprise, where I grew up, if you have long sales cycles, it's still relatively early in the quarter. So, so you're correct, Ray. I don't disagree with what you're saying. But, but if I only got to pick one snapshot on which to base my pipeline in conversion analytics, I think neither one of us would take day 1. We know it's too much junk. So the question then becomes, well, what day do you want to pick? And look, day 10 is better than day 15. I picked day 15 because you don't always have the power to make it day 10. Certainly CROs and CEOs have more power, so maybe they can. So The question then, Ray, is say we have this metric and we're tracking it over time. And just to make the math simple, we notice that we consistently convert, i.e., close 33% of our starting pipeline, i.e., our week 3 pipeline. So that means our average pipeline conversion rate is 33%. And I'm going to argue therefore that you should want to start quarters with 3x coverage. If your rate was 20%, You would want to start with 5x, which is a big red flag in my mind because it's— if your rate's 20%, you probably have a rate problem. We'll come back to that in a minute. And bear in mind, Ray, we're not talking about win rate. We're not talking about stage 2 to close rate. We'll come back in a minute to those. We're talking about week 3 pipeline conversion rate because you might go 33%, that's high.

Right.

And it is because, you know, typical stage 2 to close rate might be 15% to 25%. But the issue is week 3 pipeline is composed of a lot of different opportunities in different phases. Some are very mature and very close to closing. Some are relatively new. But they all are slated to close this quarter because a seller, and hopefully you scrub this, put a current quarter close date associated with the opportunity.

Okay. So I get the pipeline coverage ratio and the conversion rate. Because you and I have talked a lot about it in a couple other episodes, but I'm not sure that everyone defines pipeline coverage rate the same way. Some people use the inverse of win rate, Dave.

Yeah, so there's 2 different things there, Ray. One, I'd say people try to get what I'll call a pipeline coverage target, and it will sound like 2x, 3x, 2.5x, 4x, right? That's what a pipeline coverage target sounds like to me. Sounds like to me a week 3 pipeline conversion rate is the inverse of that. Right? So 1 over 2.5 is 40%. 1 over 3 is 33%. The question is, what do you invert? And I've already told you why you should invert week 3 pipeline conversion to get target pipeline coverage. A lot of people think you should invert win rate, which is wrong, or they think you should invert stage 2 close rate, which is also wrong. And without getting too deep, the reason both those metrics are wrong is they have the wrong timeframe associated with them. Right? Your win rate is about all the opportunities that come to a terminal state, i.e., the opportunity stops living in the given quarter. And how do opportunities terminate? Either they're won, they're lost, or they're no decision in many systems. Um, so that's not what we're trying to measure when we're trying to make a prediction based on early quarter pipeline. I don't care about win rate. Win rate is about all the opties that close this quarter. It, it doesn't even put week 3 pipelines nowhere in there. It's not about week 3 pipeline opties, right? Same thing is true of stage 2 to close rate. In enterprise, from stage 2 to close could take 6 to 12 months, right? So again, when I'm starting that quarter, I don't know what my mix is of my opties, right? I might know that my stage 2 close rate is 20%, but it doesn't mean I need 5x pipeline coverage. Because when I start a quarter, I'm not just starting with a bunch of stage 2 opties that are exactly precisely aged to close this quarter. I'm starting with the mids. Yeah.

And one of the things I always got a little confused with was week 3 pipeline conversion. And how do you factor in those opportunities that you bring in from the next quarter, or even that rare, you just created it this quarter and it closes quickly? How does that factor in, Dave?

Yeah. So, so like most of my metrics, right, I start at the top. I always take a macro approach and I don't try to correct for everything. I try to just understand the limitations of what I'm looking at. So, for me, the biggest part, to be honest, Ray, most people get lost in this stuff because they start in the wrong place. And when I bump into people, they've got 12 different dashboard fragments from different systems and 3 different spreadsheets, and they're just lost. And they're lost in the weeds. And I just say, hey, have we got our week 3 pipeline conversion for the last 10 quarters? What do we normally convert? And most people can't answer. So, I say, why don't we start there? And let's just look at that. And you're correct, Ray, that, you know, wait a minute, if this quarter we just pulled in a massive deal from next quarter that wasn't even in the pipeline in week 3, should I kind of correct that out? My answer is no. Now look, in this specific case, it's one massive deal. The answer is maybe. But my first question will be what normally happens? And if normally we're pulling forward 20% of the quarter from optees that had an out-close date, out-quarter close date, Then I'd say that's not correct for it. Let's assume ceteris paribus. Let's assume that always happens. Ditto for slips. If we slip 25% of our opportunities the next quarter, right? Well, I assume we slip 25% every quarter. If we have some reason to believe that's wrong, or we have some reason to believe we're in an exception condition, maybe we try and correct the metric for that. But it's really not the intent of the metric. This is more like a smoke detector. It's not trying to tell you what's burning. It's trying to tell you what room to go to. And we're trying to find out, do we have enough pipeline coverage? So, so I accept that all those things can happen. Opportunities can shrink, opportunities could expand, they could accelerate or slip on close date. All these things can happen, but they can always happen. So unless we think they're happening more frequently than our historical norms, then I can kind of just ignore them.

So the key is understand your standard pipeline coverage, right? And then What if it's going down? What if it changed over the last quarter or 2? This is a troubleshooting episode. What do we do?

Yeah. So look, if your pipe— and we're not going to get into all this because I want to switch to the next topic, but let's just say pipeline coverage is your problem and you used to start with 3x and now you're starting with 2x. Your conversion rate is constant. There's no reason to believe it's a conversion rate problem. We just aren't starting with enough. First, that's a massive insight because now we know what to go fix. And second, I have a blog post called literally What to Do If You Need Pipeline in a Hurry. And I would go read that pipeline. There's 2 things I'd say. One, make sure you're allocating targets to all of the various pipeline sources, aka horsemen, because you want to make sure it's not just marketing's problem. If sales is on the hook for 10% and SDRs are 20% and alliances are 10% and marketing is 60%, let's make sure that everybody has targets and everybody's hitting their targets. And by the way, if we're chronically short on pipeline, I would overallocate those targets. I would overallocate and say, let's make sure we're covering 120% of the pipeline or 120% of the OptiCount, which I prefer to measure, to get us back on track. Right? Because I'm not trying to optimize sales efficiency right now. I'm trying to make plan. And when I'm trying to make plan, I'll spend a little too much money to kind of belt and suspenders my insurance policy.

And how do you know if sales is converting enough?

So, the The next thing here, Ray, is say we start with enough pipeline coverage. This one's actually pretty easy. You just look at your historical conversion rates, which you've already done to set the pipeline targets. And if you notice that you've been running at 30, 30, let's just say you've been running at 33% every quarter and you dropped to 16% to make the math simple. And we're starting with constant pipeline coverage of 3x. Then I'd say, hmm, I think we've got a conversion rate problem because our conversion rate has fallen in half. So, you know, then I want to know why. So, so I, rather than focus on generating pipeline in a hurry, I go, first place I start, right, is shortlists. Tell me about our shortlists, because if our shortlist typically is 1-to-1 competition, that's how you end up with a 33% close rate, right? Because some are slipping, some are shrinking, but of the ones that are real that you're a finalist in, you're winning half, and you count the other ones, that pulls you down to like a 33% rate. Now, if there's 2 new competitors in town and all the shortlists are 4 vendors, right? So, they cut from 12 to 4. Ooh, well, wait a minute. So, did something change on shortlists? Do we have bad close date discipline? So, are they slipping lost or slipping slipping? Or not slipping lost. Are they lost or are they slipping? And that might just be a sales management problem. So, we're kind of getting a false sense of security because a bunch of 3Q opties are in the 2Q pipeline and they really never were 2Q opties anyway. Somebody was just kind of hoping that they would be. Um, are we getting lots of no decisions? Very common in new categories. People do nothing. Sure, you've seen this one a lot, Ray. Uh, you want to talk about no decision at all?

Yeah, I have. And actually, that trend has been even bigger over the last 2 years. So often it happened when maybe I went to a new ICP or a new segment and I generated opportunities for the first time. They looked like they were stage 2, stage 3. But they ended up with not a purchase, not a loss, but either a deferral or no decision. And that now almost 54% of stage 2 opportunities and above over the last 12 months are resulting in no decisions, which to me is a chronic issue that has arisen.

Yeah, so I agree it's going up in this environment. The first thing I would do is ask customers why they bothered to do an evaluation and not buy. I really want to understand that because it takes their time as well. particularly in enterprise, but it's real. I also want to push sales management to say, hey, wait a minute. Were these ever really optees in the first place? Was this just a wink in your eye and a smile and you were hoping it was going to be one? Or was it really an optee? And why'd you believe that? And should we revise our criteria for what an optee is if we find a systemic problem? So, to wrap up this line of diagnosis, Ray, we go look at what's going on. Why is the conversion rate dropping? Here are some other common reasons. New competitor, someone new in the market. Pricing pressure. You've got a competitor who's slashing price. This happened to me at Host Analytics. I would be winning a deal at $40K. My competitor would come in at $25K and I could still win it, but I'd win it at $30K. I wouldn't win it at $40K. Cost me $10K in the last week of the deal due to competitive pricing pressure. A more subtle thing is what I call pipeline composition, where if you have multiple products or multiple industry segments or multiple size segments, you end up kind of converting less nutritious pipeline that substitutes for more nutritious pipeline. So, say we do really well in SMB and just okay in enterprise and the aggregate pipeline is covered at 3x. But we've got this low nutrition pipeline at the high end, which gives us this false sense of security. Other factors, Ray, where you see that drive lower conversion rates?

Oh, I cannot tell you how important it is to segment this analysis because a lot of times, I will see when there's a pipeline challenge, That we just start creating pipeline even outside of the ICP. The sales rep says, I don't have enough opportunities. So they accept it as a stage 2 oppy and they think that they're working on something and it makes their sales managers happy. But then they've spent 2 or 3 sales calls, they moved to stage 3 and it's total bullshit.

I think that's one of the biggest issues. We're going to do an episode on ICP. I now realize. So we need to do an episode on ICP and I'm going to add a new metric in advance, which I know you'll agree with. Which is percent of pipeline within ICP target or ICP definition. And that will show you this problem. What Ray just talked about, if you're tracking that, you're going to say, oh, it's still 3x, but it used to be 1/3 outside of ICP. Now it's 2/3 outside of ICP. And no big surprise, it's not converting at the same rate.

And then the other big issue I see is sales managers who aren't doing their job, that they're not sitting— the frontline sales manager is not sitting down with their AE Really looking at what stage it's in, what is that gate to move it to the next stage so that we don't have premature stage inflation where it should have never went to a stage 3. In fact, it probably should have been closed, lost as a stage 2 because it was not qualified.

Agreed. Agreed. Now, finally, Ray, I want to encourage our kind of founder CEO types out there and small company executives, but even bigger ones, to get more data in these situations. Go listen to Gong calls. Go call customers. I want to ask customers if my slip rate's gone up. or my no decision rate has gone up. I want to either run formal market research or get the SDRs to make calls or make a survey instrument or just call them myself if there's only 10 of them and just say, I'm Dave from FriendlyCo. And we noticed you put all this time into an eval and it looks like to us you didn't buy us. Did you buy anybody? Oh no, you didn't. Or they say, yes, we did. And you go, shit, my loss reporting says they didn't. Right. But okay, did you buy anybody? Why did you buy them or why didn't you buy? And what happened? Because ultimately, Ray, we're just trying to understand what's happening. And particularly for the startups in our audience, you can get on the phone and talk to customers. You're the founder of a company. You have every right to call up a customer and just go, hey, what happened with our eval? How'd my team do? And what did you guys end up doing?

I cannot overemphasize how important what you just said is. Do not take the AE at their word for why they didn't buy or why they bought something else. Have a process that whether it's product management, the CEO, a third party, they should be making those outbound calls to deals that didn't close.

I can do the AE-driven win-loss analysis in summary real quickly. Why do we win?

Me.

Why do we lose? Product. Thanks so much. I'm here all week.

Exactly. I might throw one more thing in there, Dave. Product or price.

Ah, okay, fair enough, fair enough.

The veteran.

Um, true, true. So look, in my approach, we're gonna wrap it up here. My kind of take it from the top GTM analysis says if you're in trouble on GTM, if you're not making plan, let's go break this thing into 2 questions. One, are we giving sales a chance to make the plan? And we do that by letting them start quarters with sufficient pipeline coverage. We talked a lot about how to determine if we're doing that. And then we said, okay, wait a minute, If we are starting quarters with sufficient pipeline coverage, are we converting enough? Or is the problem that we have enough pipeline, but we're not converting it? And we talked about a bunch of reasons why that might be happening.

And for those GTM executives out there listening, 2 things not to do, Dave. One, don't blame the plan. And number 2, don't blame the other function. Do the analysis.

Awesome.

Okay. Thank you so much, Kaq. I appreciate it.

Thanks, Growth.

Okay, bye-bye now.

See ya.

The Metrics Brothers AI, SaaS, and More is a production of the Metrics Brothers Growth and CAC and a member of the Benchmarket Podcast Network. By accessing this podcast, you acknowledge that the Metrics Brothers make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided or the humor content of the jokes told. Ray, information, opinions, and recommendations presented are, according to our spouses, probably wrong and provided for information purposes only. This podcast should not be considered professional or for that matter, unprofessional advice. We disclaim any and all liability for any direct, indirect, indirect, misdirect, incidental, special, ordinary, consequential, inconsequential, or other damages arising out of any use of, or God help you, reliance upon the information presented here. Ray Grothreich is based in New York City and available on X @rayreich. Dave Kellogg is based in Silicon Valley and available on X Kellogg. Schadecity, which is French for unspellable, is not our actual production location. Thanks for listening.