How to Scale Your SaaS - A Q&A with Aaron Ross

Please welcome Aaron Ross, PredictableRevenue.com co-CEO. All right! Hey, morning everybody. Oh good, we got sound. 'Cause I just cannot yell loudly enough to fill a room. And we're gonna do some Q&A, but before we get to the Q&A, I'm sorry, there's supposed to be some instructions. On how to submit questions. Does every— anyone know how to submit questions? Me neither. That's OK. I'm gonna talk for 10 or 15 minutes first. This is called Slido. They said there'd be instructions. Anyway, so you could submit some questions. Oh, there we go. So go to slido.com, and then there's a hashtag, and then you can put them in. So before that, though, because, You know, yesterday I was asking people, "Hey, if I did a talk, what would you want to know about?" We're doing Q&A. And everyone says, "Oh, you know what I'd love to know about is how to grow revenue." It's the same question every time. So, I'll have some tips for that. Now, if you don't know much about me, I wrote Predictable Revenue, the book, and then did a book with Jason called From Impossible to Inevitable. It came out a couple years ago. Interesting enough, that book, The Impossible Book, is being updated right now, and the new edition's coming out in June. So I'll share a few tips from that new, the update. So if you've read both books, you get a sneak preview of what's coming next. Another fun fact. I've got 9 kids, going on 10. You know, why not? People ask why. My question is, why not? And likewise, we're moving to Scotland this year. Why? Well, I don't know. Why not? We just want to. So it's a pretty amazing place. And we want to be sort of closer to nature. But again, why not? It's a big project, but we just feel it's right. Now to have a big family and to move to Scotland, you need a lot of money. So how do you make more money? All right. That's why people are here at the conference, isn't it? Whether you call it revenue or money. So here's some of these 4, it's not 4 tips, it's like these 4 areas that I find I go back to again and again and again. But each area I'll have a couple tips for you before we get to the questions. So, let's start. One of the new things in the, a new topic in the new book is called the 4 Phases of Building a Sales Team. Now a lot of you, who here has 0, 1, or 2 salespeople? All right, there's probably a lot. Let's call it half. So if you have a sales team already, not a big deal. But for you, if you don't, there's so many mistakes people make. Usually you hire a senior person too fast and they fail out. But anyway, I think if you break it down to these 4 steps, it's a much lower risk way to build a successful team. So that's where we'll start. So usually the start, you're a CEO selling. Okay, the first, so that's phase 1. There's a phase 0 if you're outsourcing, but let's start with phase 1. You're the CEO selling, or founder. The next hire you should make is a junior salesperson, an SDR. Alright, don't hire a senior person. It's too risky. If you hire an SDR, whether they're doing outbound for you or handling inbound, you have a junior person to help you focus on the more important activities. You get that working, then the next hire could be a closer. Or you could promote that SDR. So phase 2 is you have the, you know, a leader who's selling, you've got a junior person, and you've got a closer. That's phase 2. Once you get that working, and each step could be months or 6 months, the phase 3 is you get 2 of each. So you still have your, you know, your leader is the entrepreneur, then you have a couple junior people and a couple senior people closing. Alright, so now you got something working. Then phase 4, it makes more sense to hire a leader. Alright, so that's the first area of topic. It's that, how do you build, what are the smaller steps to build a sales team, that initial sales team, in a way that's a lot lower risk? Because sales hires are, especially if you haven't sold before, you know, people make bad hires, and the wrong hires at the wrong time. Alright, the second area is in nailing a niche. Sorry, niche. In Canada, it's niche. Here, it's niche. I don't know. Can't keep track. Now, there's a reason why nailing a niche was the first part of the book, The Impossible Book, right? 'Cause that was the most common reason companies struggle to grow. Hadn't nailed a niche. What does that mean? It really means you know exactly who your ideal customer is. You know who needs you. You understand their pains. You can empathize with them. Ooh, look at that. Hello. And you know how to communicate with them in a way that they understand. Because, let's be honest, if you go to your website, you're gonna have a lot of confusing jargon that's not gonna make sense to people who don't know you. And one, we call it maybe a pro tip or power tip. So we interviewed Twilio, Jeff Lawson of Twilio. Jason M. Lemkin, again for the book update. And I love something he said. With Twilio, one of the things that made them so successful is this habit of really getting into the brains of their customers. One of their values is to walk in the shoes of the customer. They actually literally have pairs of customer shoes hanging around the offices as a reminder. 'Cause there's this deal, they're like, "If you give us your shoes, we'll give you a pair of Converse Twilios." "Right, yeah, they can be as dirty and stinky as you want. We'll take 'em and we'll give you these new pair." And so customers do that. But the way they do this in practice, and one of my favorite practices is every new hire at Twilio has to create or code a Twilio app. The lawyers, the HR people, they have a lot of their engineers volunteer to help every employee when they start learn how to code a Twilio app. That's a way to literally go through the experience of a customer to know them better and be able to serve them, whether you're selling, marketing, or in any role you are, be more connected to the customer. I love that. That's— how do you nail a niche? The best way you can do it is to really find ways to get into the mind of your customer. If you can't do that, a practical way People don't do enough interviews. Jason was a big proponent of this for a long time. More customer interviews. Even doing, even if you get 1 or 2 great interviews, it can be so useful. Third area is sales specialization. One of the things that made Predictable Revenue famous in our little internet famous world, my kids will ask me, "Hey, Dad, are you famous?" I'll say, "Mm, no, there's like this little slice of the world where people know me, but no, I'm not famous, right?" 'Cause they're looking at Kim Kardashian, they're looking at these people who are really famous. I'm like, "I'm not famous in my little slice." But in this little slice of the world where predictable revenue is popular, sales specialization. Now, in here, it's more common for people to be following the idea of sales specialization. Prospectors who prospect, closers who close. Inbound lead, inbound SDRs responding to website leads, if you have them. Most companies still don't do this. But even if you are following this idea, people don't go far enough. So here's an example. Incredibly commonly, I think the study shows that 75% of companies that have SDR teams, they still blend inbound lead response and outbound prospecting. The same people have some version of doing both jobs. Don't do that. Unless, if you have one person, okay, right? They gotta juggle. But you will not have a successful outbound prospecting team if that team and those people are doing less than 90% of their time dedicated to prospecting. If some other job is filling up more than 5 or 10 or maybe 15% of their time, it is going to mess with them. It's just, they just, they have to focus on that. So, you have to split those up. That's the, my main, the thing I see most commonly people get wrong on sales specialization. "Well, we got junior people and we got closers." No, you gotta, you gotta create more roles and keep specializing people so, the principle is people doing fewer things better. You know, when I do, You know, most keynotes, there's this uber trend, right? It's a world of overwhelm. There's more channels, more content, more stuff. So not only do your customers get overwhelmed, but also your people, your salespeople. There's too many things to juggle. So how do you counter that overwhelm? Well, that's why sales specialization works so well, because people can do fewer things better. It's easier to focus. That's why nailing a niche, or niche for the Canadians here, because I know there's a few. There's one. Mina. Is so important because it's about focusing on the right customers and the right messaging. Okay, so the last one before we get to questions and answers. The idea of how to focus on creating revenue, a revenue team approach. And in fact, Mina, Jason M. Lemkin, who's our VP of Marketing and Growth at PredictableRevenue.com, wrote a section that's going into the book update. One of these emphasis on how— there's always a sales and marketing divide. Sales is trying to generate— marketing trying to generate leads, sales is trying to close them. They complain. They work at odds. It's this never-ending sibling rivalry. Trust me, in our house, we have enough of that. How do you reduce that? Well, having SDRs can be— is probably the simplest step to make sure there's a bridge between sales and marketing. There's no better way to get better— to improve results from marketing leads than to have people dedicated to responding to them and getting the most out of them. It doesn't really matter if those SDRs work for marketing or work for sales, as long as they're working for the team and the leader that cares the most about them. That's how you know where they should be. Over time, they end up in the sales path, 'cause really more usually it's a sales career. But in the early days, the first couple years, the most important thing is that the leader who's most passionate about them manages them. So, I think the number one tip that, in the Impossible book that Jason M. Lemkin and I had for marketing is that the marketing leader needs to quota. I don't know if any— I'm not sure how many people here are in marketing, how many people have quotas, but I think pretty commonly companies measure marketing on number of leads created, whether it's comped or not. Okay, it's better. What you really need is what sales cares about. This is where you can work together, is the number of qualified leads being created a month, or the dollar value pipeline being created. That's what marketing has to be measured on. That's the main metric of marketing, unless you can measure them on revenue. But when you measure marketing on qualified leads and qualified pipeline, which is what sales cares about, then you have a metric that both people can get behind, and it becomes a lot easier. That's when the magic can happen. One more example on how you can have a revenue team approach is, you know, Mark Roberge from HubSpot. Jason M. Lemkin says one of the things he sees too commonly, he really wants to help change, is the fact that salespeople get paid on deals that get signed. So at HubSpot, what they did is half of the commission of a salesperson got paid when a customer signed, and the other half was paid out, you know, a couple months, 2 or 3 months later, once there was a success metric that the customer hit. Now, for HubSpot, they saw once a customer used 20 out of these 25 key features, they were gonna stay. I know there's, if you haven't heard, Slack has this famous metric that once a team sends 2,000 messages, they're more likely to be successful and stay. It can be really tricky to identify that kind of early success metric that indicates this is gonna be a customer who's successful. But if it's at all possible to tie some of your sales compensation to that, it changes people's behavior to focus on, hey, is this customer not only gonna sign today, but actually be successful with us? And the more you can focus people on that, everything gets better. Right around lead generation, sales, or customer success. So, one last tip on, this is like a practical tip. Who here actually has an outbound prospecting team today? Okay. All right, that's about what I expected at this kind of session. Who here use, say if you use salesforce.com or something equivalent, How many people use the Leads tab for outbound prospecting? Oh, you're fired. Sorry. Leads are— is for marketing and inbound leads. Okay? Again, inbound and outbound, completely different. The process, the metrics, the expectations. So, again, another key mistake. The inbound sort of lead generation metrics and SDR metrics are often lumped together into the same reports and dashboards as the outbound SDRs. Right? They're very different. An inbound SDR making 10 calls or sending 50 emails is completely different than an outbound SDR making the same number of calls and emails. Yeah, those have to be separate in the metrics and the dashboards and in Salesforce or your whatever CRM you use. So the leads tab is for leads coming in through, you know, your filtering. It's like a bucket. Prospecting should be done in almost every case, 'cause there's an exception, through the accounts and contacts area of Salesforce. Because you're targeting companies who have multiple people. If you're targeting businesses so small there's really one person, leads is great, sure. But that's not gonna be most of you. So, however you get there, It might be simple, it might be complicated to make that switch, but you will be shooting yourself in the foot over time if you don't make that switch to that account-based outbound model. Okay, so we got questions. Hope people submitted them. We've got some votes, and I know that— sorry, we— okay, you ready? So the top— okay, we've got some voted here. What are some sales efficiency metrics you'd like to use? I better not do this because— brrp, brrp, brrp. My favorite, really the best leading indicator of revenue is the amount of qualified pipeline being created per month. I'm saying this, I'm like, "God, this is a really boring topic sometimes to people." Anyone here who wasn't in sales came in, they're like, "Oh my God." But the excitement is when you can track the amount of qualified, the number of qualified leads or the dollar value of that pipeline. And that's, you can trust it, which is a different story, that's your best leading indicator. So that really is often your number one metric. Revenue is a lagging indicator. Revenue is not what you should be excited about. Revenue is, if you do the right things, you will see revenue. You're trying to figure out what are the right things to do. So, if you're focused on what's gonna generate that pipeline, and you can measure it either as new, there's sort of new business qualified pipeline, and there could be add-on or follow-on business. Either one or both of those versions, but that's the number one metric. Again, when you can tie teams together, so for example, if you have customer success, sales and customer success can have a joint kind of follow-on or new add-on pipeline goal. On the new business side, it could be a joint goal between marketing and SDRs or sales for the new business pipeline. But that's number one. The other thing I mentioned is make sure that the inbound lead generation SDR metrics are separate from the outbound lead gen, STR metrics. I do assessments of companies, and I think that's one of the most common. 80% of companies don't split those out. Come on, guys. If you don't know what you're— it's saying, I've got fruit. No, you got apples and you got dragon fruit, and they're completely different. All right, so the next one. Since you wrote your books, how would you update it? Oh wait, I think I already answered that question. Twilio, so actually the update's coming out. The Twilio case study about like, I love the example of them making all their, every employee code an app. You know, at our company, predictablerevenue.com, we do outbound, outbound success, right? Whether you want outsourcing help, or whether you want us to show you how to build a team. We try to get as many employees as we can to do outbound. In some way. We're not as successful as Twilio. We'd love to see that. But how do you— you need to get people to walk in the shoes of the customer. I think that going in the future, that's probably one of the number one most important principles that you have to come back to time and again. 'Cause the world's only gonna get busier. There's only gonna be more content, more email, more calls, more social. So when you're trying to either educate or train your people, or connect with the prospect, how do you cut through the noise? And you know, there's always going to be tips or tricks, like you send a handwritten note, or you do that, but none of that's going to be as successful as it should be unless you can read the minds of your prospects. And how do you do that? You walk in their shoes. You interview them. You do what they do. You get your new hires— like, if you hire SDRs or salespeople, Make sure that they're going to visit— like, how can you get them to visit customers in person? Don't keep them in a box in the back of the room, like on the phone. Like, get them out meeting customers for the first few years of their career. 'Cause there's really no better way to make sure that when you are creating your messaging, it's actually relevant and not boring jargony. We're the leading network scaling architecture social media platform for the digital age with artificial intelligence. People laugh, but that's what a lot of your websites look like. Just have a friend next to you look at your website and say, "Hey, does this make sense?" Like, "Mm." Okay. Oh, so one more thing is someone asked me, I think it was Gorov, I saw here someplace, "What would be your next book? Beyond Predictable Revenue and Impossible to Inevitable." And I think that the book I keep thinking about is called "Forcing Functions." Now, if you read the Impossible book, it's— there's a small chapter in the back about it. Essentially, this is, there's all kinds of things we know we need to do, but we don't wanna do them. Maybe it's eat better, or maybe it's exercise. So, for me, I know that I'm not as inherently motivated as like an Elon Musk. Not that any of us are, but to go out and just like do everything. I'm not even as motivated as my wife that way. Who's here, but I'm not supposed to say that. Hi, honey. She's gonna kill me later. It's alright. It's worth it. So how do you motivate yourself to do things that you need to do but don't want to necessarily? Or maybe you're so busy, because look, again, I have a huge family. I mean, how do you cut through the clutter, right? There's more clutter, to actually get things done that are important but not urgent? How would I write another book? My day is completely full. With whether it's work or family, kids. I actually started exercising again a few months ago after taking 4 or 5 or 6 years off. So how do you cut through the clutter and get these things done? So for me, I call them forcing functions. The best example I can say is, if you wanna get into shape, do you A, sign up for a gym, or B, sign up for a marathon and tell all your friends you're gonna do it? Then you have to do it. So this example of making a public commitment, and then it forces you to follow through on it. Brandon here wrote a book the same way. He told people, set up interviews, and then he had to do it. If you have a business and you don't have investors and you want to grow, if you take investors, that's a forcing function. Now you have a boss. Now you have to make the changes you need to, to grow. 'Cause I guarantee a lot of you resist the changes you need to make. We all do. So that for me could be like the next book, that whole topic, just how to, you know, as in everyone's so busy and overwhelmed, there's just so much stuff. How do you cut through that kind of busyness clutter for yourself to get those important things done? So, all right. How many, here we go. People will always love that. How many leads should an average SDR generate in a week? How long to ramp? Okay, well, let's do, so how many leads in a week? Now, the amount of, you know, the thing is that there's, you can claim anything on the internet, right? You can write anything you want. We did $1 trillion last year. And I see all these case studies on, we have SDR, outbound SDRs, we do these campaigns, we get 40 qualified opportunities a month. I'm like, that's, I don't believe that. I've never seen that. I've seen it claimed. Maybe someone, I'm sure someone has. I've seen people get 40 meetings a month, but usually what happens is most of those are junk. And you still end up with like 10 to 15, maybe 20 actually good ones. So in most SaaS companies, the monthly goal that I feel balances quality and quantity and is achievable is 6 to 8 qualified opportunities a month. You might get 15 meetings or 20 meetings or 40 meetings. And again, if you have a more transactional sale, it could be a lot more than that. If you go kind of enterprise or super enterprise or custom, it could be a lot less. You might get 1 or 2 or 3 a quarter for certain kinds of specialty opportunities. But for, I think, like general mid-market SaaS products, 8, 6 to 10 is this kind of area we like to start with. For qualified opportunities. Now, don't comp on meetings. I'm not gonna ask how many people comp on meetings. Don't comp on meetings. Don't comp on meetings. Because you just get more meetings. However good you think your team is, I guarantee that if you change the comp to accepted meetings, or even better, qualified opportunities, because a good meeting doesn't mean it's an opportunity. It will change the behavior so they will focus on fewer things that are actually better. Rather than just trying to get any meeting. Plus, if you don't have a deal size minimum— now we're getting a bit into the weeds of people who have outbound teams— but if you don't have a deal size minimum, you have to have a deal size minimum. Because, you know, what I saw at Salesforce, and I've seen this time and again, is, okay, I'm a prospector. I need to get 10 qualified opportunities a month. And if I can get, you know, 4 of them that are kind of simple, these little ones, I'll get those, and 6 that are bigger. But all the little ones, it's just an opportunity cost. I can't, we don't make money on the little opportunities. And the exact amount will vary company to company. It's probably somewhere in the $5,000 or $10,000 or less you should ignore in lifetime value. Maybe $20,000 or less. But again, if you do multi-hundred thousand dollar deals, maybe you wanna ignore things under $50,000. But those little ones are just, it's just a waste of your time. It's a distraction. It makes them feel, and you feel like, hmm, you're creating something, but you're not. So, are they bad? Here's the problem is, I get someone who's interested. I feel like if I stop with them, I'm wasting an opportunity. It's this sunk cost. But, so it takes that discipline to say, hey, when it's too small, if it's a small deal at a big company, great. Get it started. When it grows up to be bigger, then you get credit. If it's just a small deal at a small company, just say, "Hey, thanks. If you want to come back to us at some point," and move on. That's when you have to have some version of that. "Love your email engagement strategy. However, so do most SaaS companies. The outcome's flooded inboxes." Suggested. Okay, hold on here. Suggestions to improve and not get lost in the mix. What's interesting is that, yeah, I've had a lot of people say, "Hey, Aaron, thanks a lot for flooding my inbox with these damn emails. Everyone's doing this thing." All right. Funny enough, I don't get that many of them, but I do get some. Does email still work? There's a lot more email. Do these referral emails, cold emails, still even work today? 'Cause I get a whole bunch of 'em. I ignore 'em. I'll say that the email for sure still works. It drops. It's been dropping over the years little by little, but I think that's true of anything that becomes successful. Content marketing. Content marketing, what a pain in the ass. 10 years ago, In fact, again, John Miller from Engagio, another section from the book update, he said, you know, 10 years ago when he started Marketo, he could put a post, a blog post up and immediately be ranked on the first page of Google. And he said today, with Engagio, his company, he's been working for like 3 years, he still can't get on the first page for some terms. It's just more competitive. Same thing with email. So, what do you do? We send a lot of email at our company. I don't know if it's millions and millions of emails a year. And this still works. And we tell companies, it's email plus phone and so on, how to do it. But what works? Okay, let's go back to nailing a niche. Do you know your ideal customer? Do you understand what they care about? Do you understand how they think? I'll give you an example. 'Cause this is one of the practices. I mean, besides being creative with email and personalization, blah, blah, blah. Okay, but how do you do that well? Is by knowing your customer. There's a company called Camberton that we helped them build an SDR team. And when they first started out— so Camberton sells financial services to hospitals to help them collect more money from patients. When Camberton first started, they would prospect to a hospital and say, hey, who's in charge of receivables? And they didn't get a lot of response. I think for two reasons. First, hospitals are complicated. I mean, there's all kinds of receivables, vendors and patients and who knows what else. And they just would sound like everyone else. Same thing, if you ask, hey, who's in charge of marketing? It's just like another generic, there's a lot of people sending the exact same email or some version of it. But when they changed their question, they did some interviews, they talked to some customers, and they changed their question to, hey, who's in charge of patient cash? Boom. It was like a different, it stood out, it resonated. That was like this internal lingo that those customers used, and they got immediately better results. Know your customer. That will enable you to stand out from the crowd. Whether it's an email, whether it's in blog post, video, or whatever kind of medium, because it's a crowded world, it's only gonna get more crowded. The trend of overwhelm is gonna happen, so how do you fight it? Specialization, nailing a niche, it's like that. How do you get people focused? If I had to say predictable revenue in one word, it would be focus. How do you do fewer things better? Forcing functions, that helps you really focus on something and just do it, that important thing you're putting off. Um, hmm, let's see here. What's your favorite most revealing interview question for sales reps? That one, I don't think I have a great answer for it. I would say that we at predictablerevenue.com follow the WHO process. So it's not so much about one question, 'cause one question doesn't really tell you much. I think it's, the key thing is how do you take some of the impulsivity out of hiring decisions? So you have some steps and you have some ways to balance out that impulsive, hey, I like this person, with some, I don't know if it's left brain or right brain, the analytical side to really step back and look at who's the right fit. I think that's more important. I think we got time for one last question here. I already answered the, should SDR sit with sales or marketing? Isn't outbound dead nowadays? Ah, ah, ah, who asked that? No. No, outbound is more alive than ever because account-based marketing, all that is, is outbound marketing plus outbound prospecting. Outbound is gonna be bigger than ever because don't you wanna take control over your growth? Proactive growth, that's really what outbound means. However you define it, could be prospecting, could be marketing. It means, hey, I wanna grow faster and I'm gonna make it happen. There's this myth of inbound. I'm just, I'm gonna wait for things to come to me. All right, let's see how that works out. You can always layer outbound on to get more, right? Outbound, inbound, it's like peanut butter and jelly. They taste great together. Outbound's not dead. Who asked that? You're fired! All right, I wanna say thank you very much. I'll be at our booth right after in the middle of the expo there. And I just really appreciate you coming out here and having a, asking the question, so thank you very much.