Building a $100M Revenue Business in 3 Years with Dan Martell of SaaS Academy

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What I love to teach people is just look at the cost of capital and figure out how can you get to that next stage of growth potentially with the least amount of dilution. Because the further we push it out, the more we're going to be able to retain, the bigger the outcome is going to be for your personal life. I need some traction. You need some traction. Let's get some traction.

Hey, what's up, innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host, Lloyd Lobo. We're a community of over a hundred thousand people just like yourself on a mission to help you get the methods, the the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana, and many more.

Everybody, Lloyd Lobo here, co founder at Boast AI and Traction Conf. Thanks for joining us for another session. Today's webinar is brought to you by Launch Academy. Boast AI in partnership with BCF Ventures, Lazaritis Institute and Founder Institute.

I'm super excited. Today.

The best way I can introduce him is he can fly like a bird, sting like a bee, faster than a speeding bullet. The man, the myth, the legend, Dan Martel. Thanks for joining us, Lloyd.

Thanks for having me, man. I'm super pumped. I appreciate everybody making the time. Promise I'm going to give you guys 110% today. No holding back. Everything's on the table. I'm excited.

Awesome. You're a serial entrepreneur. You've built several multimillion dollar companies starting at the age of 17. You're also a serial angel investor, invested in awesome companies like Intercom, Udemy, Hootsuite, Unbounce. And today you're coaching hundreds of SaaS. Businesses like ClickFunnels, Proposify Carrot to scale their businesses. Give us your backstory. How did you get into all of this?

I appreciate you asking that, man. It's funny when I hear that, it's. People always say you underestimate what you can do in 10, but overestimate what you can do in one year. And I just feel like I've just been doing this for a long time. But software literally saved my life. And the reason why I love reoccurring revenue models is because of the predictability in the nature of it, right? The consistency and the reason why is going all the way back. When I was a kid, I actually grew up in a really tough environment. I was the second oldest of four kids. My mom was an alcoholic, my dad was in sales. Never at home, always traveling. And when I was 11, I got diagnosed with ADHD. And honestly, at that age, I really felt broken. I got put on Ritalin. I started acting out at school and at home. And when I was 12, because of some of the challenges that my parents had, I got taken out of my home and put into, initially a crisis center, eventually a group home where I essentially was in the system for years. Eventually foster care, group homes. And When I was 13, I got introduced to drugs at a pretty young age. And my life sprinkled, spiraled out of control. So right to the point where essentially I'd been to jail prior, But I was 16, and at 15, I went to jail the first time. And at 16, I decided to run away because the police were looking for me, because I just did a break and enter, and I had a handgun in a backpack, and I found the car, broke into the car, put the handbag or the backpack next to me. And I told myself, if the police catch me, I'm going to pull the gun and let them do their job. And I took off. I live on the east coast of Canada, a city called Moncton. I was going to head to Montreal, try to do a new start. And on the way in this city called Sussex, I take the exit of the off ramp and there's a routine roadblock. And the police pull me over and I tell them it's my mom's car and I don't have my license on me. I didn't have a license. And as soon as they asked me to pull over, I gunned it. I took off. I thought if I could just get to, like, the trees or some kind of, like, field or whatever and make my way, I'd get away from the police. And I was in this neighborhood, and I was quite far ahead of them. I. I could hear them, like, I was probably a kilometer ahead. And I came around a turn in this neighborhood, and I saw an open garage door. And I came in going way too fast. Ended up smashing into the side of the house and just stalling the car. And in that moment, I went for the handgun, and I started pulling on it, and it got stuck. And I kept pulling on it, pulling on it. And eventually the police ran over to the car, opened the door, grabbed me out of the car. My feet didn't touch the ground, and threw me in the back of the cop car. And I woke up sober the next day in a jail cell. So my story's kind of crazy because going from that to end up spending six months in an adult prison, eventually getting released to a rehab center for adolescents, like our therapeutic community, literally in the middle of nowhere. It was two hours away from the nearest highway. And they did that in case kids decided to run away. And I tried, but the problem is, after an hour of hitchhike and nobody's picking you up because they all know you lived in that rehab center, that you just turn around. And I spent 11 months reworking what made me tick in my emotions and understanding, like, my story growing up and the anger issues I was dealing with, rebuilding the relationships with my family, building the trust with my brothers and sisters to a point where after 11 months, I was getting released, But I was helping Rick, the maintenance guy. It was an old church camp, this place called Cortage. And the church camp had these cabins on the lot, but nobody could use them because there's a bunch of stuff. And I was helping Rick clear and went out, and in one of the rooms, there was this old 486 computer with a yellow book on Java programming sitting right next to it. And I opened it up, and I always like computer programming. I always thought it was, like, hexadecimal numbers or zeros and ones. Like, I didn't think it would actually read, like, English, right? So Java is just like JavaScript. If anybody's ever looked at code, it's English. And I followed the instructions, booted up the computer, got the terminal started, Java executed and just followed chapter one. And I got the computer to say, hello, world. And I literally. I thought I was a genius. I thought I was the Doogie Howser of computer programming. And maybe this is the story I was telling myself that Mom, I literally thought that the reason I was so challenged growing up is because I just thought differently. And computers was maybe that thing for me. And unfortunately, I was completely wrong. But it didn't matter. It literally became my passion. And what happened for me was software became the ultimate addiction for me. Like writing code. I would stay up till three or four in the morning, I would study everything and entrepreneurship, the ultimate personal development program. And from that point to today, as you mentioned, I've been super blessed to have started five companies, exit the last three, became a multimillionaire at 27 investing companies, and really have the privilege of coaching some of the best and smartest entrepreneurs on the planet. And I share all that because it all started because there was something about product and software development, the reoccurring revenue model that just created a sense of normalcy in my life when I really felt like I had a lot of chaos. And that's what drives me today, man. That's literally I wake up every day asking myself a single question. How do I create more value for my customers than anybody else in the world? And how do I become better so that I have more to give? The more I grow, the more I've got to go, the more I get to give. So I'm always trying to figure out what's that next level?

That's our philosophy here as well. Giving, giving, giving and giving. More and more value. And that's why you're here today. How to help companies build a hundred million dollars worth of revenue in three years. So I'll let you take it away.

First off, I want to tell you guys how much I appreciate you guys being active learners. This is going to be an interactive session, lead flow, gauging the demand people. Jc, John, Steve, Mark, will thank you guys all, Whitney, for posting your answers below. Here's what I'm going to do. I actually created Lloyd just for you. Attraction quadrant. Okay. I have the privilege to coach companies that go from 0 to 100 million in five years, like click Funnels. I've actually invested in companies that have now worth over a billion dollars in valuation. So being able to see what it takes to grow these companies is something I want to share with all of you. And then we can get into some Q and A in a bit. But I've got a few models that I want to share with you. So this is my iPad and I call it the traction quadrant. Because what's really important is understanding what are the four ingredients that are required to scale if you want to build 100 million a year company in three years. I had a client ask me that once and I think I thought at first he was joking, but he was serious. I said, dude, if you're serious, I'll break it down for you. Everything is simple, but it's not easy. Okay, it may be simple, but it's not easy. So I'M going to break those down for you and try to explain them as clear as I can. Number one is PM Fit. What does PM Fit? It means the product is addressing a solution, an unmet need in the market. Let me break it down for you right here. It's a simple Venn diagram. Okay, so PM Fit. Here's the Venn diagram. There's three components to it. What is it? How do you build product market? First, first, it needs to be viable. Viability. A lot of people try to come up with ideas where, honestly, it's just not a viable business model. It might be a vitamin, it's not a painkiller. It's just viability is a big component. Number two is desirability is the solution and the way you want to build it, desirable to the market. I had a client that I'd be working with and he's not even a client, he's just a friend. And I was with him a couple days ago and they've been at it for three, three years trying to figure out product market fit. And after talking for an hour to him and his co founder, I said, hey, man, here's the reality. There could be a chance that you guys have a turd and you keep trying to polish the turd. At the end of the day, it's still going to be a turd. It doesn't matter how great your activation flows are. It doesn't matter how amazing your screens are. It doesn't matter how quick and fast the whole product you built is. If nobody wants it, if they aren't willing to pay for it, then there's something off. And you have to be willing to pivot around the idea. They've just been at the same core problem, thinking the market's going to want it. Did interviews, all this stuff. Literally talked about, I don't know, a hundred people, and they just couldn't find that traction. Desirability is a big thing. The other one is feasibility. Technically feasibility. It's easy. I don't know if you guys have ever done this late on a weekend. You're sitting there talking to your buddies and coming out with these ideas and it's fun. Cause I call it uninformed optimism. Okay? Uninformed optimism. If you look at this curve on here, uninformed optimism happens right around here, where it's essentially, anything is possible. It's super fun conversation. Yes, we can do this, and then we can do this, and then we can do this. But then what happens is you start testing out ideas and trying to Figure out the right way to solve the problem and then you dive into informed pessimism. Right? And if you don't understand the psychology to get yourself through informed pessimism, it's very hard to bounce back. But feasibility is the number one. If you can get viability, okay, if you get a product that the market wants, desirability and feasibility in the center here, that's how we get PM fit. Okay? Product market fit, that's number one. Okay. If we want to build 100 million a year company, build that traction in the first three years, we need a product that the market wants. Step one. Step two Scalable sales motion. Scalable sales motion. A sales motion is how you sell your product. As a coach, I work with a bunch of different B2B SaaS companies and there's really one of three different sales motions. You're either doing SMB sales, which is usually low touch, no touch trials, you're doing mid market demos, or you're doing enterprise proof of concepts and then deployments kind of land and expand. But each one of those has a different structure that needs to be assessed. Right? So if you don't have a scalable sales motion, if you don't know how to actually sell a customer based on the desired outcome that they're after, then it's really hard to scale the model. Here's what I mean by that. Biggest mistake founders make when they're trying to scale is they don't understand before they move into another market. I'll give you a really concrete example. I had a client, they were about 3 million ARR decided they want to go raise some funding, raised 10 million in capital, equity capital, and immediately go to deploy it. So they were SMB a little bit amid and pitched the fact I'm raising all this money because I'm going to go and do enterprise and we're going to do this and that. Build up a big sales team, hired a VP of sales. I think they had about 14 people on their sales team and literally nine months later built out the organization only to fire most of them. Why? Because they didn't have product market fit for the channels and the products. Okay, so sales motion is the channel you use to acquire the customer. The sales motion that you use to sell in that segment of the market. Here's how that looks. All right, so you have a grid and you've got three ways to sell and three segments of the market. So number one, on the left side, you've got inbound, you've got outbound, and you have Partners, I'm generalizing. There's a few other channels, but let's just call it that. Either doing content marketing or paid ads bring people in. You're doing outbound, you're calling, you're sending messages on LinkedIn, you're doing email, or you have partners that are like channel partners, distribution partners, strategic affiliate partners, and they're bringing leads in. On the bottom here you've got S, M and E, small, medium, mid and enterprise. Right. These are the different types of customers you might have in your customer base. There's really three things that we need to make sure that we've got in each one of these segments. I'll put it in a different color. Let me go in purple. But essentially you want to make sure that you test these for each one of the businesses. I'll write it over here. Number one is how much ARR does that segment produce? So if I'm talking in this case, I'm talking outbound and SMB, how much ARR comes through that channel? Not a lot of people do SMB with an outbound model because it's expensive. So that's a weird one. But that's the first number you want to figure out. The second one is percent logo churn. Percent logo churn. What is your percent logo churn for that segment of customers that you're doing outbound channels with and SMB as a customer segment. And then the third is your CAC payback period in months. So in months, what is your CAC payback period? Those. So CAC payback period, just in case you don't know, that equation essentially is if it costs you, let's call it 200 bucks, acquire a customer and you make $100 a month off of them, then your CAC payback period is two months. Does that make sense? You want a low CAC payback period. Cause if it's too long, you're going to need to raise a bunch of capital to fund the growth. Hence why you need an efficient sales motion. Right? So what you do is you analyze your customer base today. If my client would have known this framework before he decided to go raise that capital, he, he might have been able to make better decisions. Let's say he notices that his mid market and partners is a million in ARR and the CAC payback period's 23 months. Right. And there's a 3% logo term, right. So that I would say is yellow. There's opportunity there. Is that green? No, that's just opportunity. We gotta assess the other Ones. Right. And maybe on the left side where we've got inbound and small, we've got 3mil ARR, right annual reoccurring revenue for that segment. We've got a 18 month CAC payback period. And we've got low churn. Right. We've got, let's say on an annual basis, we've got about 20% churn, which is low for SMB. Kind of. Anything below 36%, kind of 20 to 36% is a sweet spot. Analyzing your sales motion using this kind of grid will tell you where the opportunity is. And the reason why you do this is so that you can tell the team maybe for the next six months, these are the only channels that we're going to go after and we're going to stay away from these ones. And maybe we never do this one. Maybe the partner channel never makes sense with our SMB product because we don't have enough revenue to share with them for it to incentivize that level of growth. Okay, so those are the three metrics. No matter where you're at in your business, I want you to measure these numbers. I'm going to ask you guys in the chat, can you commit to me to figuring out what is the ARR per segment, the percentage of logo churn for that segment, and the CAC payback period. Can you write yes below in the chat if you're committed to, to doing that? Boom, boom. Yes, I already know them. Awesome. Yes, yes, yes, yes, yes, yes. These are the three metrics. If we know they're good. Kurt, Darren, Jagar, Gore, Helen, Renee, Richard. Amazing. You guys are awesome. I'm loving this. All right, so that's how we figure out if we have a scalable sales motion. If we got it, we're green. The third is the team funnel. This one's fun. A lot of people don't realize that businesses require us to do two things at the exact same time. We need to build a growth engine for our customers and we need to build a growth engine for our team. One of my rules is we build the people, build the business. Now, when you're 12 to 30 employees, you can be a founder with a bunch of direct reports and be crazy busy. But to really scale 100 million in a year, it's going to require you to have literally dedicated HR person hiring nonstop. Okay. It's just the way that is required to scale. So how do we want to think about the team funnel? All right, so here's what I call the strategic funnels. There's two of them. Strategic. I think I actually wrote it down. Yeah. Strategic funnel. The strategic funnel looks like this. So we have two funnels and there's five stages of the funnels. All right, so here's the first thing is every business follows these five engines. There's core engines in your business. Number one is lead gen. How do I generate opportunities in SaaS, we call that demand generation. So lead gen. The second is. The second core function is lead nurture. If somebody's not ready to buy but we got them in our world, how do we nurture them? A lot of you guys may be on my newsletter. That's how I nurture people in my world. The third engine that we need to perfect and grow is conversion. This is essentially one of the is it low touch, no touch trial. Is it a pocket enterprise proof concept or is it a mid market? So Those are the three conversion processes that most SaaS companies follow. Tech companies. The fourth is delivery. Now that I got a customer, how do I make sure they're activated and get on board? Okay, so we need to deliver the promise we made on our website. That's what I mean by delivery. All businesses fall into those categories. These core functions, lead nurture or lead generation. Lead nurture, conversion and delivery. The fifth engine is retention. Upsell and cross sell. This is about creating what's called expansion revenue. Expansion revenue is the ability to outpace your contraction or canceled revenue. If you create a scenario where you've got expansion revenue, your net revenue retention is above 100%. You're now getting into the land of funness when it comes to scaling a software company. Now, like I said, there's two strategic funnels. This one is for the company. Right. This is the. This is. Oh, sorry. This is for the customer. The other one on the right side is for the team. What do I mean by that? The exact same funnel functions. These core engines need to be developed for your team. Each one. How do we attract top talent? How do we nurture them if they're not ready? Right. Maybe they're working on stuff. There's an earn out, they're not ready to leave. How do we get them into our world? What's our process for selling? Right. A lot of times we think, oh, I'm just gonna put a job posting on and people are gonna apply and I'm gonna pick from people. That's not how it works. When we're talking a players, we need to build a process for selling fourth delivery. Once we got them as a team member, how do we bring them on board. How do we make sure that they get their equipment? How do we make sure that they're productive? How do we make sure that their feet hit the ground running? That's delivery. And the most important that usually goes overlooked from leaders is how do we make sure we build retention, upsell and cross sell. How do we ingraining them into the team? For example, I'll give you guys a very specific strategy. If you're not doing this, it'll change the game for retention. Every new hire you make should be assigned a buddy. They should talk with that buddy every two weeks. Do that for the first three months. It's called the buddy system. Okay, so this is, there's two funnels, strategic funnels. When I talk about the team funnel, we need to figure out how do we attract top talent, convert that top talent, retain that top talent, compensate them and create a compelling offer. Just like you would do for your product. You got to do it for your team. So I want to ask everybody, out of those five core engines on the team side, where do you need to spend the most time right now? What's missing the most? Is it lead, gen, lead, nurturer, conversion, delivery or retention? I want to hear just the one I want you to write in below. What's the number one core function on the team funnel you need most? I see conversion, lead gen, lead, nurture, conversion, retention, conversion, delivery, lead, gen, Amazing. Thanks everybody. Yuri, Moto, Loannis, Steve, Bill, Darren, you guys are awesome. Keep posting your answers below. But that is the strategic funnels. If we get that, which is step three. Okay, if we get that, if we get the team funnel. When I think of people that do this the best, I'll tell you one of my clients, Layla at Allen, she has an AI product that helps people with automated scheduling of a sales process. She's an amazing founder. And they literally went from 0 to 1.4 million ARR in nine months. How did they do that? All team? Literally she built the product market fit because she had experience in the market and and she just started working on the core functions as core engines of the business and use one one scalable sales motion. The one she used was right here. She went mid market pricing so that it had a lot of gross margin with a partner strategy. It's partner playbook that I teach and went all in on one and is now at 1.4 million in MRR after nine months. So when you focus, when you build the team, when you've got product market fit, you figure out your Scalable sales motion. It can scale really quick. The last one I want to talk about is essentially a funding model. Okay. What I've discovered over the years is fast growth, like true growth. I had my first company that finally succeeded. I built five companies in my career. The first two are complete failures. It wasn't until I was 24 that I finally. It's crazy. I've been reading computer books my whole life. A lot of software, architecture, programming. Never occurred to me that maybe I should read a business book. And I started reading at 23. My first business book was called Love is a Killer App. Guy named Tim Sanders wrote it. He was the chief. What was his title? He worked at Yahoo. I think it was cso Chief Solutions Officer. And there's just something about the title that spoke to me as a software guy because he worked at Yahoo. And that book changed everything. And because of that, my third company was an incredible, like rocket ship. We grew over 150% every year, compounded month over month. It was just bananas. But what I discovered doing that is you need a funding model if you're growing quickly. Okay. Even if you have a CAC payback period that is three months, six months. Some SaaS companies that are funded, they'll go 16 months. So anything within 16 months they'll feel is. Is appropriate. And if you're growing really fast, there's this sound of cash being sucked out of the door of your office. Just sucking cash out of your business because you've got a higher head of growth. You need to invest in your marketing channels ahead of revenue. And both of those things, people and team is not cheap. Marketing channels is not cheap. Is going to require you to reinvest. It doesn't matter how great your gross margin is. Just to give you guys some guidance, the average B2B SaaS company, that's my world. It's what I know. It's got about an 87% gross margin. So even if you have great margins, if you're investing in the business and you're growing 3, 4, 5, 7x on an annual basis, you need a funding model. You need to figure out how to capitalize the business. Now I'm going to walk through a few ways to fund the company. Okay. Now, it's a complicated thing. There's five kind of areas. I'm just going to go like cost of capital. So I'm just trying to think the best way to explain this. So there's low cost of capital, which is 3% to 7%. Then there's 12% to 20%. And then you've got 20 to 30%, 35%. And then you've got third 25 to 30%. And then you've got 30% up here now. But then there's also the amount that you're looking to raise. Right. So on the bottom side we've got maybe you want to raise 100k, maybe you want to raise 5 million, maybe you want to raise 10 million and maybe you want to raise 20 million. All right, so I'm just going to show you like the types of funding sources that are typically available at each level. Right. So I'm going to do this and then I'm going to do this and then just do this and then, because there are some really neat ones. And then we got this one which is mezzanine. And then we got growth capital or senior debt. Cool. All right, that's my chart. We've got essentially the percent equity or the cost of the capital. The dollar amount you have to pay back whenever you pay it back. And then there's different types of capital. On the top here we've got equity. This is vc. This is raising fundraising to outside investors. On average, most founders don't realize this annually compounded revenue, the cost of the capital, you're paying 30% a year. Okay. And the cool part is they'll invest at each stage of the funding game. Right? So some people do C rounds at 100k and then you know, series A and series B and series D or whatever. But you can do equity all along. The other option that a lot of people do instead of equity right out of the gate is a convertible note. Okay, convertible note, but it still has 30% cost. Convertible note, it still has a about 30% cost of capital. Underneath that you've got 25 to 30%. It's a new form. It's called a seal. Okay, a seal. Companies like Earnest Capital are doing this. A seal is a shared earnings agreement, okay, which essentially says, I'm going to give you money, you're going to give me some equity, and you're also going to commit to paying it back at this percent over time. Okay, that's a seal. The next level down, 2035%. Now the advertised 12% to 14%. But when you look at the total cost of capital, when you look at the fees they charge, and maybe you do a different payment plan, it usually works out to about 20, 35%. This is called, what's called an RBF, Revenue Based Financing. RBF are companies like lighter capital and many Others a lot in SaaS now because the SaaS model is becoming more predictable. But RBFS is essentially if you have traction, that's why you can't raise right away. You need some level of traction and they're going to use your MRR as a predictor. So you connect them. You're seeing this actually. What is the company? Clearbank out of Canada. They're doing this now with E commerce companies and many others. Right? Then you've got mezzanine debt. Mezzanine is, you know, like investment bankers, et cetera. You have to be way further along. Example of that would have been Wistia raised, I think they raised about 19 million recently. So Wistia is a big software company. They raised 19 million to buy out their early angel investors. They did that through mezzanine debt. You definitely have to be traction and revenue going, you know, but you can give up 12 to 20% usually through some kind of, sometimes private equity folks will do it or investment bankers will help you put the deal together. And then finally senior debt. And these are usually done at the the in partnership with some other kind of sometimes equity. So sometimes you'll raise equity and you'll raise senior debt and the senior debt is protected through the equity, usually through warrants of sorts. So I know I drew a really kind of messy chart, but that's the way you want to think about it. For a lot of companies, if you're starting off, maybe equity and convertible notes is the only option you've got. Others that got traction, that want to raise a little extra growth capital, maybe you go the RBF row, right? And look at revenue based financing. It's a little expensive, but it's cheaper than giving up equity. Some of you guys are looking at these seals. They're fascinating, they're interesting. It's a new alternative funding source. And then obviously if you're way further along, mezzanine and senior debt are an option, but usually not an option for a lot of us. So I want to ask all of you, how have you funded your startup so far? Did you bootstrap? Did you raise on a convertible note, did you raise VCO with equity? Did you use revenue based financing? Right. RBF bootstrap bootstrap bootstrap 3 million funding convertible bootstrap equity. Bootstrap equity funding sold VC 10 million bootstrap friends VC bootstrap equity all over. Man, this is such a diverse group. I love it. I usually coach mostly bootstrap founders, but 70%, but then 30% are funded. I've Raised venture capital twice and I understand how to best stack it. But what I love to teach people is just look at the cost of capital and figure out how can you get to that next stage of growth potentially with the least amount of dilution. Because the further we push it out, the more we're going to be able to retain, the bigger the outcome is going to be for your personal life. So those are the four, these are the four different areas that we need to focus to build traction. Number one is product market fit. We need to build a product that is desirable that the market wants. Number two, scalable sales motion. Do we understand the composition of our revenue that comes from that channel, what the payback period is for that specific channel and then what's the logo churn on it as a percentage? Do we have a strategy for building our team? If we don't have a strategy for building our team, then we don't have a strategy for growth, period, full stop. And then finally, as we fund or as we grow, how are we going to fund that growth? That is. I've literally one of my clients, Darrell, on the funding side, he did one round of rbf, so revenue based financing using a company called Espresso thing, he raised 3 or 4 million and then with that got the company further along and then raised an equity round with traditional VCs. And the beauty was is he was able to get a lot further along than doing the equity round earlier on so he could maintain control of his business. So there's ways to stack it, then just quickly move to essentially diluting yourself or giving up control of your business. So that is the traction quadrant.

I learned a ton, lots of value here and fantastic engagement. I want to dive into some questions that came via email. The first thing around scalability of the sales team, right? Let's maybe go back to that quadrant you had. But as you're taking some of your companies from 0 to 100 million in three years, five years, whatever have you, what are some key things you've seen them do or coach them to do to get to that journey?

Number one is understanding how to build the sales playbook. Okay, so number one is the sales playbook. The sales playbook needs to be built in parallel as you're actually executing sales. Right? So it doesn't matter if you're doing an outbound strategy, inbound demo, doesn't matter what you're selling. The way it works, I'm going to give you a really tactical way is usually most companies are founder led sales, so. So the Founder essentially starts off, they're taking inbound referrals, they're moving it through some demo process, and then hopefully they're kicking it off to somebody else. Right. And what I want you to do is I want you to grab all those assets, those emails, those conversations, record them. Okay, so emails, calls, presentations, and I want you to add them into a Google Doc. Okay. And I call that the sales playbook or the sales program. And even if it's just a bunch of, it's a mess. You just dumped all this stuff over into that playbook in that doc. When you go to hire the next person, you'll have some kind of hit list to train them up. So most people make the mistake of prematurely scaling without a process that can, anybody can follow. They think, I'm going to hire a salesperson. This person should know how to sell. There's a difference in every company. If I know how to sell one product, it doesn't mean that I can just quickly sell the next product. Why? Who's the customer avatar? What are the pain points that they respond to? How should I best demo the product? What are my talk tracks? How do I get to a close? What is the offer? What's the initial investment, do we have a setup, process, et cetera. How's the handoff happen? All of the metadata or the meta information around the sale needs to be written down. A sell person that can do sales can sell, but if he doesn't have the right ingredients coming into it, that has to come from the sales playbook. I guarantee they're going to fail. And you're going to keep an expensive person around for about nine months. You're going to say he doesn't do anything and you're going to let them go. And it's not their fault, it's your fault. So number one is the sales playbook. The second one is the idea of buying back your time. I call it the buyback blueprint. Okay, so here's how in sales, you essentially build out the buyback blueprint as you're doing sales. Okay? There's three core functions in selling. There's number one is qualifying kind of SDR sales development rep. Number two is selling, which is account execs. And number three is onboarding and activation, which is usually your customer success team. If you're doing the founder stuff and you're doing all three, then you're spending time in all three. The easiest thing to do is hire somebody here first on the CS side. Okay, so somebody that can take a deal. Cause here's what I've learned about entrepreneurs.

Okay?

This is you're building a company. It's performance over time. I want to get as high as I can, over a ton, okay, as fast as I can. But this is called pain. This line right here, this is pain. Pain is I sell 15 accounts, I gotta do 15 onboardings. Pain is I sell 15 accounts, I need to set them up in my system, whatever it is, okay? No entrepreneur will grow into pain. They will not grow into pain. What do I mean when I say that? It means that you will sabotage marketing, you will sabotage lead gen, you will sabotage follow up. Because if selling more adds more pain to your life, you won't lean into it. That's why hiring somebody on the CS side, number one, to come in here and take a deal that you closed and move them forward, activate them, train them, all the stuff that's required is one of the highest forming the highest opportunities for you to grow into it. Then you want to go to the SDR side, why you want to retain. That's why I call the buyback blueprint. One of the keys to this is buying back your time so you can do more high value activities out of qualifying and building pipeline versus selling. Selling is always going to be the higher value activity. So you go over here, you hire an SDR and. And then that's number two, right? So you hired them second. And then finally once you build that process, then you hire an ae. Usually what I'll do is I'll promote one of my SDRs to AE. I'll backfill them with the new SDR. Right? So that would be the third hire and. Or this would be the third. Yeah, second hire, third hire. Then I'll have an AE that used to do SDR Account Exec. An AE is an account exec. That's just a fancy word for salesperson. Sometimes I like to call them product specialist as well. Product specialist is a fun one. If I'm like, hey, do you want to get on a call with my product specialist? People are like, for sure. And then once I've got that flow going, that's essentially my pod.

Okay.

So that whole. And look, the pods can look different. Okay. But you'll have an SDR. Maybe you'll have two AES in your pod and you'll have one customer success person. And that pod of people can do X amount of business. That's the way you want to think about it. Throughput. And once I got that, I just stack them. I stack pods on top of Each other. So, Lloyd, does that make sense in regards to, like, how do you scale a sales team? We want to first start off by building the playbook, reverse engineering the different roles, hiring and backfilling, building the linear pod for bandwidth and throughput, and then stacking as you scale up.

Awesome. Yeah, that was perfect. Very detailed.

And I do this quite a bit. I literally help my clients build out sales teams of 5, 600 people. So we talk about this quite a bit, and this is a big one. If people didn't get this, you need to have somebody support you to take the things that create pain off your plate, because you may not even realize it. And the way it shows up is being slow to reply to an email, not following up on a referral, when we know that the more we grow, the more pain shows up in our life when we don't take care of that early. That's the kryptonite to an entrepreneur. Awesome.

Now you've got this pod, sdr, two AES, a CS person. How do you bring qualified leads into that pod here?

Right?

Because you got SDRs.

What is your playbook? It all depends on the sales motion that fits the best for the product. Right? So you might have an outbound. It depends what you're selling. If I look at traditionally across all my clients, if you're selling kind of SMB, it's got to be inbound, right? Or partners. Partners is like, hands down, my favorite. And the reason why it's my favorite is because partners are essentially like bank accounts for your ad budget. What do I mean by that? If I have a partner strategy where I go out to the top 12 companies that. That have relationships with my ideal customer profile, my icp, and I can convince them to market my solution to those communities of people, those potential customers, and I pay them for that activity, meaning I give them 30% of the monthly reoccurring revenue. Depending on the model, you can scale between 40% down to 10% or 5%. So it depends on what you're setting up from a distribution point of view. But if you do that, and if you think about just like pure financial cost, and that's why my client Layla was able to grow Alan to 1.4 million in MRR so quickly, is because she put all of the costs to acquire a customer on the partner, because she only paid after she got the customer paid, and then she paid the partner a percentage of that revenue. All the heavy lifting, it's almost like they act as like a line of credit for your demand gen Right. So I personally I, I, if I was starting today, partner strategy would be the first place I would go because it's the fastest I get introduced to crowds and communities and groups of people that are potential fits for my customers. And so that would be the partner strategy would feed that potentially to my salesperson. The other one obviously is inbound, but inbound through paid acquisition. I like content. I'm a big fan. A lot of you guys may watch my videos on YouTube. I got one of the top YouTube channels for B2B SaaS. But to scale demand, you need to essentially take that content and run ads against it. And that's where you'll see a lot of ebooks, joint webinars, et cetera. That lead gen is what's fed to the SDRs to go see if there's opportunities and qualifying and then feed that to your AES. I could break down each one, but those are, that's the big idea is that if I can build my pod, which is really about taking an opportunity to close, then I need to figure out how do I fill that pipeline. That's sales velocity. I'll actually give you guys the equation sales velocity people talk about all the time, but they don't actually know how to measure it. So sales velocity is SV equals number of deals multiplied times the average deal sides. Multiply the percent win rate divided by the average time to close. That's the sales velocity, Right. That's what the POD does. We're trying to increase the number of opportunities in the pipeline. We're trying to increase the average deal size, we're trying to improve our conversion rates or win rates, and we're trying to increase the speed to close. Right? And when we separate those four variables and assess our sales pipeline accordingly, then it's very clear where we need to spend more time. Right? Do we need to add an SMS notification to get higher show rates? Because a higher show rate will increase our win rates, right? Et cetera, et cetera. Do we need to change our pricing to increase our average deal size? We need to figure out if there's a value metric that we should introduce, et cetera.

In partnerships, how do you motivate partners to keep bringing you leads?

It's the same way we have to do it for even our own sales team, right? So one of the things that's not talked about a whole lot is what's called sales enablement, right? So sales enablement is building a process to make sure that our partners that are selling have the assets that they need to Communicate the value proposition, are trained properly so that they understand how to sell our product and how to. And it all depends if you're doing a reseller program where they're adding your solution into theirs versus an affiliate, versus just a strategic partner that's a marketing partner. They're all different. But the sales enablement all fits the same. It's activity, it's quota, it's measuring the, the production of those partners. One thing I do with my partner is I create a competition, right? And there's something magical that happens with human beings when you put their name on a leaderboard and they're at the bottom. Lloyd, if your name. If there was 15 people and called it like founder referral or whatever, and you're. And there was 15 names and Lloyd is sitting there at the bottom, right? You're going to be like, yo, why am I at the bottom? What do I need to do to get to the top? And there's this natural competitive thing that's going to happen, right? So that's the kind of like strategic thinking. We need to think we have 20 partners and we want them to drive more demand. Run a partner competition, right? Make sure that you have monthly training or quarterly training with their sales reps. So that's another thing is I want permission to market. I want every sales rep in my partner's network. I want their email address. I'll put them on an email list and I'll continuously. What am I going to do, Lloyd? Here's the good one. I'll send them case studies of my other partners that are crushing it. So you almost look at them like their own channel that needs to be marketed to. And that's what sales enablement is. It's all about saying, I've got a channel called the partner channel. I need to recruit partners. I. I need to train them. I need to continuously incentivize them. I need to figure out how to motivate them. And ways we do that is no different than the way we're going to do it for inbound marketing or outbound marketing. Make sense.

Let's dive into your demand gen framework.

I give you guys some of my secret stuff, all right? Because this is the one that applies to everybody. I call it my demo request flow. So when I say the word demo, just change it to trial. It works the same way. Demo request flow. So there's four components to it. Number one is we need an ad. Okay? But here's the deal with the ad has to speak specifically to your icp. Okay? I'LL give you one I just saw, I think yesterday it was the. And this is a lead magnet. The ad was to a webinar by Clearbit's, a data enrichment company, or Clear. Yeah, Clearbit. And they partnered with an agency because maybe the marketing team at Clearbit didn't want to do the webinar. Lloyd, you're a technical guy. I'm pretty sure, like you may not want to do, you may not want to teach, right? On a webinar, no problem. Find a partner that also shares the exact same customer ICP ideal customer profile and partner with them to create a webinar. So Clearbit did that. They ran an ad promoting webinar. Their partner did all of the content generation and then what they missed out on is the backend that really makes this powerful. On the thank you page, you actually prompt the person that just registered for the webinar. So the webinar they were doing was how to add data enrichment to increase your sales velocity, which is a great hook. If I've got a sales team and I'm dealing with sales velocity challenges and you tell me adding data enrichment will help me increase that, I'm going to show up. But it also tells you that I have a sales velocity problem. So if you're clear bit or you have a Sales Velocity SaaS tool, on this thank you page, you literally put something here, little video and a registration to schedule a product demo. So you might do a product hook like so you give them the thing so they're registered and you just do a little green notification here and you say registered, you are registered, but are you looking? And then increase your sales velocity. If so, click the video. You have some logos here for social proof, like a landing page. You have the opt in form to get on schedule a call. So there's a little copy here called schedule a call to get on a call with one of our product specialists to talk about Clearbit to talk about the tool. Okay, so this is the reason why this works so effectively is because most people, when they give a download a lead magnet ebook or whatever, they don't actually have anything on the thank you page. They just give them the e book. Think about just the math behind this. Most email open rates, if we're really generous, we're saying 20% open rates. Click through rates 2%. Okay, so if I get an email and I try to get you back into my world to schedule a demo via email, only 20% are going to open and 2% are going to click, whereas 100% are going to see the thank you page. So all of a sudden, Now I've got 100% of people that downloaded the e book register for the webinar seeing the thank you page. Then I put them through an application and I get them scheduled into the calendar. Okay? So that's the key. So right after they fill out this form that qualifies them a little bit. I call this a funnel filter. Then I'm going to push them into a scheduler to get on a call with one of my product specialists. And that's how we fill up our salesperson calendar. This works. Now, the SDR is going to work those leads and do some qualifying before the AE jumps on the call. So you always want to make sure there's a day or two gap before somebody can schedule in. So there's some qualifying meeting that you just don't want to waste the AES time with unqualified people. But that's why we use this funnel filter to filter people that might not be a fit. So the way it works is if you say, I only got one employee and I'm not even revenue generating, it might just say, unfortunately, our product works best for people that are at this stage. We've linked some trainings below to help you move things along. Hope you're awesome. That kind of thing.

I'm moving back into the traction framework. There any tips for managing where to prioritize growth, Focusing on the customer side, on the team side. When you're a bootstrap company.

Yeah, when you're bootstrapping, I think what you need to figure out is this is what I do, is I'm always looking for the highest gross margin and the fastest sales cycle. Why am I doing that? Because that's going to produce profit that I can reinvest in the team. Right now, the reality of it is that, look, this model, like I said, this is for people that want to grow to 100 million in three to five years. Okay. If you just want to grow 20% a year compound, or 25%, that means you're doubling every three years. That's fine. So that's why you got to. But you're going to build a lot of infrastructure ahead of your growth. Right? But the way. Well, I'll tell you, it all comes back to the buyback blueprint for a lot of the founders on the call. Okay, here's the two myths that people make when they hire. Okay, so this is the buyback blueprint. The myth is that. And there's two ways to do it. One, we hire for capacity. The other one is we hire for. We buy back our time. Okay? So we buy back low value tasks. What does that look like? A lot of people loyal say, I need another developer or I need another customer support person or I need another this. And they keep adding people to their team, but none of those people actually buy back anything out of their calendar. The founders are still working more and more than ever would. My approach and my suggestion is every free dollar should be around freeing the founder's time. Okay? Now if that also produces capacity and bandwidth, great. But the primary focus is 100% on buying back your time, taking the low value task out of your calendar, out of your inbox. The number one hire is an executive assistant. Okay? And I'll tell you why. I don't care if you're bootstrapped, if you are. No, no billion dollar company is built on $5 tasks. Zero never happened. So the way we need to do it is we need to look at saying, okay, I want to write more code or I want to do more sales calls. So I can't be spending time on logistics or, you know, attending certain meetings or taking notes or onboarding customers. So literally what you want to do is you want to look at your calendar and figure out where are you spending all your time. And then wherever you're spending the most of your time, you buy that back by doing that next hire. Okay, so that's the completely different model. So how do I resolve who I should hire next? I use this framework. I do a time study on my calendar pretty much every six months. I do a full time study even in my life, right? Maybe I got to hire somebody, run one of my. I got to build a whole investment team over here to manage my portfolio. I've got to. I've got real estate holdings. I need to hire somebody to manage and fortify my real estate holdings. Whatever it is, you're always just looking at your calendar where you're spending your time, hiring somebody to give you back that time so you can move up and create more value. The higher. Every hour should be doing the highest value activity possible in nothing else. Lloyd, you've interacted with me. I have my assistants. They take care of 99% of everything so that I can show up, do this webinar, show up at as much value, and pretty much, I think I may have a hard stop now. Then I'm going to run on to my next meeting to add as much value as I can there. Does that make sense?

Yeah, definitely. And something I got to learn as well, because after this webinar, at some point today, I'm going to edit this one myself. So I need to buy back some of my time.

But there's a perfect example. You're not hiring somebody to write code or doing thing. You're just saying, hey, where in my calendar am I spending time on things that I can hire people to do? And then you're taking that dollar exchange and you're getting leverage. And that is the reason why companies get better as they grow. See, your company shouldn't get harder, it should get easier. Because as you grow, you're buying back your time. So I remember one of my clients, he woke up one day and he said, dan, I've got everybody in place. I don't even know what I'm supposed to be doing anymore. I said, great vision, people, capital.

What are your approaches or tactics or strategies to ensure you're always hiring the right person?

So that's a whole framework called the Talent Pipeline that I teach. But let me give you the few things that are different in that. And then I just want to give everybody. If you guys are interested in connecting with me, if you're a SaaS founder looking for a coach and you want to see if there's a fit, just go to danmartel.com call so somebody can write that in the chat. But it's just my domain call and you can get on a call with one of my scale specialists and we'll see if it's a fit. But sorry, Lloyd. Oh, hiring. Here's the things I do. Number one, I have this rule. I can't work with you until I work with you. So I call that test projects. So there's never been a hire I've made in the last 15 years where we didn't outline at least 10 hours worth of projects that they work on for that role that is assessed against other candidates. So if I'm hiring an engineer, I'm hiring a marketer, I'm hiring whatever. I give all three candidates the exact same test project, and that's what's being assessed. And that, to me just takes care of so much noise. Right? The other thing is I don't let people apply for a position without submitting a video answering some questions. That takes care of a lot of the noise. So. So video submission on the front end test project. And then finally, personality assessment. I use a software called Predictive Index. You can use whatever you want. The idea is that you want to assess for cognitive intelligence and just default behaviors. It's not good or bad, but it's just another data point. If you do those three things, you add a video part of the submission on the front end, you test project to make sure that the person like the work with you, that the communication style, the way they ask expectations, manage timelines, et cetera is well done. And then third get a personality assessment and benchmark them against other people in your team and say I really like this person on this team and they're a lot like that person based on the profile that's just going to allow you to make better hire decision. The truth is when you make a mistake, you fix it as fast as possible. Like I literally had to let somebody go earlier this week. It sucked. But you know as soon as it's not going to change, create the space for somebody amazing to come in your organization, let that person transition and be a star at some other company because you know it's not going to be at your company. And that's how we try to be as best as we can with people.

That was an absolute goldmine of an hour.

Thank you so much Dan.

Thanks everyone for joining.

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