SaaStr AMA: "Growth, Sales & Funding" w/ SaaStr CEO Jason Lemkin & Predictable Revenue's Aaron Ross

Ask me anything. We've got a great lineup of speakers for you today and they are here to answer all of your burning questions about SAS and growth and funding and sales and pretty much anything else. A few housekeeping items for us to cover before we get started. Go ahead and tweet your questions using the hashtag sasterana. That's right below me there. And the video for this will be available right after the webcast. And don't forget to buy your tickets to the Saster Annual prices go up July 1st. And thank you to our sponsor, Lidar Capital. So without further ado, I would like to introduce you to the CEO of Lighter Capital to tell you a little bit more and then to introduce our other speakers today. Please join me in welcoming BJ Laughlin.

Thanks Gretchen and listen, we're really happy to be here, involved in this and putting this on today. We think it would be really helpful. I know a lot of the companies that we fund love to read the Saster blog and like Aaron's book on predictable revenue as well. So really happy to be involved in this and hope it educates a lot of people. So let me give you a quick background on Aaron and Jason and myself. Aaron is the author of Predictable Revenue, a book that's all about building up your mrr, your ACV and such. It's the number one best selling book on Amazon, I believe, in the telemarketing category and it's overall a great read for companies trying to figure out how to put together your sales organization. Aaron consults to a lot of businesses doing these types of things and is really a good proponent for sort of a new era of outbound calling. We'll get some into that later. I think we've got a lot of questions about that. Jason Lemkin Jason's both the author of the Saastr blog that I think a lot of people read as well as a managing director at Storm Ventures and a former entrepreneur who's built up and sold two successful SaaS businesses, does a great job of sharing his lessons and such on the Saster blog that I know a lot of the companies that we fund read quite religiously frankly, and has great help particularly in again, how to organize their sales and things like that. So I'm BJ Lachlan and I'm the CEO of Lighter Capital. My background, actually I was a venture capitalist before at a group called Summit Energy Ventures and been at Lighter Capital for three years. And a little bit about us, we focus on funding, frankly a lot of SaaS businesses. At this point in time, I think we funded over 30 SaaS businesses. We fund them a little different way. We're not a venture capitalist. We don't take equity. We take what we call a revenue based loan. Essentially. We take a royalty on the business and it works really well for a lot of nascent SaaS businesses. Anyway, with that, why don't we head into some of the different questions? So it seems like the questions we fielded them kind of broke into two different categories. One around sort of financial type matters and raising money and the other one more around sales and sales organizations and things like that. That I think is where a lot of the companies that we talk to find a lot of the writings that Aaron and Jason do to be extremely helpful. So why don't we start with some that we actually got off of Twitter and such. The first one is from POIA at HackerRank. What are some of the fundamental sales practices that are really crucial to a sales rep as they go through their experience? And obviously it's particularly focused on SaaS, predictable revenue types of companies as they sort of go through their career. What do you see as the evolution? Frequently. And Aaron or Jason, whoever wants to jump in on that one, go for it.

Yeah, I got one. I got something. And I'm actually going to speak more towards the. Because someone asked me a question like this. It's sort of what's something that really helps differentiate a sales rep or salesperson? There's lots of techniques, but one thing I've really found to be incredibly helpful to making anyone successful who's selling, whether you're a CEO or a salesperson, is having been in lots of sales cycles where you've seen when it works well and when it doesn't. And what happens is then you build up that confidence to know when you're talking to a great prospect who's hesitating, you have that confidence to say you need to buy it for these reasons. Basically get off your ass and do this. And if it's not a fit, you have the confidence to say, you know what, you probably shouldn't do this with us. You might need to look at a competitor or not do this at all. But it puts you in the position of having an expertise to give them truly useful advice for themselves, which sometimes should include them buying your product and using it the right way.

Well, asking for the po, right. A lot of salespeople are salespeople, but they forget to ask for the po.

Yeah, it helps take away some of the nervousness, anxiety and fear of Are they, are they not going to like me because I'm, you know, there's a lot of. Even in sales, a lot of people have fear of rejection.

I think it's good. Let me add a thought onto the question. If I'm understanding it right, even if I'm not, we'll have some fun answering a repurposed version question. A version of that question is if I'm a sales rep, what's my career path? How do I get to the next level? And I'll tell you one thing, I've learned a lot over the last 18 months. And let me give you the one bit of advice to aggressive sales reps that want to get to the next level. There's really two career paths for a sales rep, right? You can be an individual contributor forever and make millions of dollars. Then the typical career path is go more enterprise, right?

Aaron?

Learn how to sell bigger deals. And once you start selling million dollar deals, you can start taking on million dollar commission checks. It takes a while. So decide if you want to be on the IC track or the manager track and figure that out. Look inside yourself because VP of Sales sounds glamorous, but it's a very different job than an ic. And let's talk about that and know yourself. Know yourself. And there are folks in the. The classic analogy is blackjack dealers. I don't gamble, I don't do Vegas. But as I understand it, if you do the big stakes tables in Vegas, you can make a lot more money in tips than the guy that ever manages you, right?

Yep.

And the same can be true for cash and sales, right? The greatest rep can make more for a long time than the VP of Sales. But the VP of Sales can get 1% of the company. So what's your play? And so first figure that out. And then I say if you really want to be a VP of sales, here's the number one mistake I see reps make. Number one mistake, I'm at hackerrank, which is a great company, like our questionnaire asked, or I'm at wherever some great company. And I've never actually been a manager. I've never hired any reps, I've never led any reps. But I've killed my number. And some hot but green startup hires me as the VP of Sales. You will fail. You will fail. Not 100%, 95 times out of 100. Because the number one job for a VP of Sales, as Aaron and I have both written on different ways, is recruiting a team. And in sales, if you've never recruited anybody, you will fail quickly, at least in a high growth environment. If you're in a slow growth environment, you may be able to stub your toe, but if you go somewhere hot, you will die. So my number one bit of advice is one, figure out which track you're on. I see your manager and two, don't make the jump to VP until you're ready. You've got to be at least a team manager or a director or something and you've got to report to a great one. And the greatest VPs of sales and SaaS, if you look out there, they're they all reported to someone great at least for a year and built at least a very small team under them and then went on to the next best thing.

Recruiting is like such a different skill and building a sales team is like such a different skill than actually selling itself. I mean you're selling when you're trying to recruit somebody. Obviously it's a totally different process than people do. I totally agree.

You've seen so many great sales reps who kill the top 10% and they go out and they skip the steps and six months later they're out of a VP of sales job. It wasn't worth it. I don't believe you can skip. You can skip a bunch of steps, but I think it takes you about five to six years to become a VP of sales. Best case, you go from SDR to SMB rep to enterprise rep to team lead to director of sales to vp. If you accelerate everything and you work at a zenefets or a talk desk or a Slack. Maybe not Slack has sales reps, a Zenefits or a talk desk. Maybe you can go from SDR to VP in 6 years but faster than that I don't think Aaron, I don't know if you disagree. I don't think it's possible to be.

I would say a real VP of sales.

A real VP, right. Not a Salesforce SVP today, but a real VP for a fast growing SaaS company. You've got to hire three reps and you've got to close the logo deals and you've got to save them from. And you've got to know what the difference between outbound and inbound is. You have to have done both, right? And you just can't. There's only so many hours in the air you can skip to be a pilot.

Hey, that brings up, I think a good related point and it's a blog post I know of yours Jason, on hiring a VP of sales. You Talk a lot about that. And I know it's one that a lot of the companies that we fund look at a lot. What are some of the biggest mistakes you see in hiring a VP of sales? You talk a lot about stage appropriateness and things like that. Like you were mentioning Salesforce and such. Maybe you can go through some of those. Because a lot of times it's tempting to make your top salesperson your VP of sales. And that is a classic mistake.

Yeah, we could spend the rest of our time on that. Let me throw out the one and then Aaron, you throw out one right to me. Making your best guy your VP of sales. Maybe around number eight, we could chat about that. That usually doesn't work out, but it's not fatal. If he doesn't work out but he's a great leader or ic you just top him in six months or three months or six days. Sometimes it's fatal. But I think the number one mistake is excessive logo affinity. I'm going to hire someone from Box or Dropbox or Salesforce or pick your company and I let everything else kind of slide. Hasn't really recruited a great team. Didn't really blow out his number. Doesn't actually understand how we sell because I just want someone from Salesforce or Box, especially first time founders. But really all of them, I see it again and again and again and again. Right. It's over. And what you really want. Better to have hired someone from Ignite than Box. It was harder to be number two. Right. You learned more. Rather than the guy that joined box at 87 million in ARR.

He may.

Be ascribing too much to that logo. So I don't know what yours is, Eric. My number one is logo infatuation.

Yeah, no, it's so true. And I would say actually something you said, Jason is so dead on is if you really want to be a great something, whatever that is, VP of sales, like find a great. Find someone to work for. Because that's the fastest way to learn, is to work for that person who's already an expert. Yeah.

Yeah, definitely. All right, well listen, that was great. And that was only one question. So we've got tons more and I'm sure we won't make it to all of them, but so be it. Yeah. And we could go on with that topic like you said, forever. Making the transition from traditional software sales to SaaS based model. This is something we see a lot or we also got a bunch of questions also on making a transition from a services business to a product business or SaaS product business. I'm kind of combining a couple of people's different questions here, so I want to identify them specifically. But basically, what are some of the common issues and problems that we all see with companies that are making that transition? Some of those are bootstrapped. You see a lot of services companies that are bootstrapped making that transition. And what we find is that that is a far more difficult transition than anybody anticipates.

So hard. Yeah. And Aaron, I'll give you my learning. So I just invested in a company that did it. I wrote a blog post about it called Logical. Logical bootstrapped the services business in eDiscovery for 10 years that was making a lot of money and then poured that all into turning into a SaaS business. Right. Investing in something that's been a services business for 10 years into SaaS that violates like every tenant of what VCs are supposed to do. Like that one just doesn't work. Right. But they're killing it. And I'll tell you, and Andy wrote a great blog post people could read. But I'll tell you the number one learning from it, and I've worked with other companies that have done it. The number one learning is you got to go all in, all in. The temptation is to go 50% in, 80% in, maintain the services business, put my buddy Linda in charge of the services while I go do the cess. I mean, we see that again and again.

Right, Aaron?

And I don't know any of those that really kill it. And these guys at Logical, bless their souls, they moved the entire Co. From D.C. to the Bay Area to be where it is. They took a $4 million services business that had good margins and just put every nickel into building the SaaS business, which is a little bit irrational when you think about how much money went in their pockets and they went all in. And it is not from a short term dollars and cents perspective. That made no sense what they did. Logical. They sacrifice big six figure into seven figure draws to make almost nothing, to build something, to build a unicorn. But if you don't do it, it never works. You've always got one foot in the other land. And those guys down the street that are all in, they're going to kill you. They're going to eat you for lunch today.

The ones that are all in.

That seems pretty interesting that they actually moved offices. I wonder how much that actually helped make that break.

I think it was important.

Yeah, yeah. You got to change your environment.

Yeah, yeah. I mean, you got to change your mentality. Changing the environment certainly helps with that. That's pretty interesting. Sorry, go ahead.

So first, Jason's right, but I think the other thing is that people, especially on business changes, but I think too in terms of someone learning a skill, vastly underestimate the amount of time and energy and maybe money, but the effort. So they put together this six months and two years later, they're still ironing, working through the transition. I think people do this in their lives as well. But Jason had a great post that after a year, if you're starting a SaaS company, it doesn't take a year, it takes two. The principle is the same. It takes as long as it takes, like, you know, expectation around success. And when that happens now I will say we're turning from a services business into a SaaS business as well. Plus we merge two companies and we're probably violating even not only Jason's prior rules. But it's starting to take off really quickly and we have a very special case with, you know, what we're doing. But it's like when you really go, That's how people break rules is by really going all. Especially because that's how you get unicorn is you do something that everyone thought was impossible or is different. Yeah.

All right.

Is that you, Jason?

That is lightning guitar in our hip 120 year old new contrera office.

Yeah.

I need something that automatically turns off all alarms in San Francisco. All right, keep going.

Yep.

Let's stay with the sales stuff. I think it's great. We had a question and I think it really relates to actually a lot of Aaron's writings on predictable revenue and such. So one of the questions we got was try to summarize here a little bit. Really how important is it to have a customer success team or what? Aaron Lund, you're writing to call customer success account management as distinct from the actual account executives or SDRs and things like that. I think the further add on that a lot of the companies that we fund are pretty early stage. They're looking at hiring their first BB in sales, their first two or three salespeople. The CEO is doing that transition away from being the salesperson into hiring some people. You have a great framework, Erin, in your book for how to set that up with SDRs, account execs and account management and then either further segmenting the outbound and inbound. But maybe you can talk a little bit to when it's important to do all those different pieces in the development of business, like at what Stages. Should people really be looking at developing all those different groups?

Sure. Question. In fact, in the next book when Jason has this question comes up so much. But no matter what size you are, you have to have a focus on customer success. So when you're one person, you're focused on it. You might block out time for it. When you've got two salespeople, typically one might be a prospect or one a closer or one inbound lead response, one closer. The next person you hire could be customer success. It depends on how many customers you have. Are they staying, are they going? But it's very easy for a small company, assuming you're small, to get so focused on new customers that you forget about the current ones and take them for granted. And you don't really switch your attention until you start losing them. And you're like, I'm having 5 or 10%, well, say 5% attrition per month, which is more than half my customers are leaving per year. I gotta fix this. So I've seen companies, I mean, by the time they're 10 or 15 people usually have someone dedicated to customer success who can really just focus on it. Because if you're doing it part time, it's just not going to be as you're not going to really nail the solution that you need to when you're doing it in bits and pieces.

Yep. My rule of thumb is it's a single digit higher.

Yeah, that's a fair one.

Before you get into the double digits of employees, it may vary based on who you are. It's a single digit higher. That's my rule. My simple, overly simple rule and the larger learning. And I wrote about this in the second timer series. When you see folks that have done it again, they're hiring customer success people even before they have sales people because they understand the power of word of mouth. Viral referrals, upsells, resells, left sells, right sells land. And expand. Expand and land. That's where the money is. 80% of the revenue in SaaS is after. You echo sign the deal. 80% of the revenue is after. So you're kind of a fool if you wait to invest in the 80% of the customer lifetime value that's after the deal right now. That's easy for me and Aaron to say, going into the lighter capital space. Here's the thing, especially if you're a first timer and you're lean, the ROI on this customer success rep is probably eight or nine months. They've got to pay their salary and then they've got to either save a deal or get an upsell and it just doesn't happen in a week. And in fact, in the early days, the only customers you have are those that absolutely love you because otherwise they'll just go use Salesforce or Netsuite or whatever big vendor is already in your space. So the truth is you never ever have real churn in the first year. You have lots of seeming churn, but those are customers you should never have had because it was a tough trade off. And so what I've learned is you need like 12 months of Runway to comfortably hire a customer success team at.

The eight month period.

Payback is there. Let's talk about financing later. Let's get to your questions. But one interesting thing about alternative things like lighter capital or even angellist or the 11th safe note in your company, which the latter is kind of kooky. But if it gets you that extra three or four months of Runway so you can hire your csm, I would argue that's the single biggest best investment you can make when you have 10 or more customers. So get those extra couple of months of Runway. Even if you did some deal with Lidar or whatever it is, you got another 100 grand into the company. Think about it for a moment. If you hire a csm for 100 grand and that saves you an $80,000 customer and gets you an 80k upgrade, ROI positive, right?

Oh yeah.

So find a way. But if you have three months of Runway, it's going to seem like the most expensive hire because none of them really churn in the beginning. And the ones that churn, you never really had. You never were supposed to have them. They thought that you had some integration with SAP R3 and it doesn't. And so they never really had it. It was on the website, but you never really had it.

Yeah, that brings up another good point though too is do you see a difference with that? You guys in companies that are selling to SMBs versus truly larger enterprise solutions and things like that. Because a lot of SaaS businesses we're seeing are starting to get smaller and smaller ASPs essentially while they start break the scale to single digits and millions of revenue. Certainly harder to get up to 10 plus or 20 or 30 or 50 million when you're selling a $300 a year tool. In a way.

You need focus. By the way, the first funny thing is as much as Jason says single digit hire and it has to be first 10 or 15, our company has like 20 people and we don't have one yet. But like you said, it's other things like cash flow and focus and there's other things going on.

We're sacrificing the future.

But we will. Everyone look, ultimately you're the judge of your business, so you got to use your own damn brain and not listen to people like us when it matters. But I will say also that if you do have a small, high volume, small business kind of business or enterprise, the kind of person you have dedicated and what they do can vary for sure. So this is like, know your business, you need it regardless. And it's still also a bit different if you have five enterprise customers and they're all on three year contracts. It's a bit different than you have 10,000 small business customers who are paying month to month. So they're more urgent.

Both important.

One's more urgent than the other.

No, no, absolutely, absolutely. Actually, staying with the theme, a little bit of selling to SMBs and larger price items and such. Jason, you had a good post recently on how it's really hard for companies to scale. Kind of like I was just mentioning, it's really hard for companies to scale up to 100 million in sales when you're doing $300 a year and such. And I feel like we're seeing a lot more companies like that that have got a really cool little tool. It's very easy to buy. So I'm sure their adoption rates are reasonably high, don't have a ton of salespeople out there and things like that. They're able to scale up to a certain level quickly. But I really wonder about the longer term. And you probably see a lot of that companies doing that stuff.

And I think one of the points.

In your blog post was as a vc, you're hesitant to dive into companies that have such low price points.

Yeah. So let's talk about what we know today. And then there's also the future, because everything we know today is sort of backwards looking. Here's what we know today. So Vox started off all as a premium product. It's doing over 250 million revenue and today less than 1% of its revenue is premium. That was a strategic retreat from a market. But I'm sure they wouldn't mind if they got more than 1% of their revenue for free. Right? 1%. So Box went from 100% premium to 1% premium in its decade in business. Dropbox. Just for some fun examples that are sort of tangible, Dropbox did an amazing job on freemium, better than anybody else in our current generation of SaaS has done better than survey, might be far better than Evernote, which has hit a huge ceiling with the freemium model. But even Dropbox today reorg their whole team to go more enterprise because whatever the revenues are today, 300 million from self service, 400 million, I mean, fucking amazing company, but even they hit that ceiling at that point. So for me, at a more granular level, I just see lots of companies with small price points that hit a couple million in revenue like you are, and then the revenue decelerates to 5 or 6% a month. And that's not fundable for a VC, certainly. Having said all that, let's go back in time. I mean, Adobe did it, Intuit did it, Microsoft did it. Some of the biggest software companies of all time were built on the back of a floppy disk or a CD ROM. That basically costs the equivalent of five bucks a month. To say that it's impossible is being like kind of a dumb DC on a Monday afternoon partner pitch. Oh, it's not possible, it can't be done. It will be done. There will be another Adobe and an Intuit and a Microsoft that builds a billion dollar business at five bucks a month. But I haven't got that one yet. But I've met 200 SaaS companies that I believe can get to 100 million on a mix of small, medium and large customers. A mix that doesn't mean being like Viva and being all enterprise. It means a heterogeneous mix of small, medium and large.

It can all be complementary, by the way. I think I'm assuming for a lot of the startup audience, especially in the Bay Area, there's this dream that's still there, which is, hey, if I build it, they'll come. If I put up this app on the store on the web and Google or whatever the Exchange play, I'm going to get a bunch of downloads and people are going to buy my stuff and I won't have to do any selling. There's a lot of discomfort with the idea of I don't want to have to go out and sell people because I don't like when I was young, I got sold a used car that didn't work. There's a lot of negative association with the idea of going out and selling. Yes. So small deals can be a great way to start. Big deals are going to drive revenue. And you look at people like who Jason introduced me to, David Ulovich of OpenDNS and actually even Aaron Levy of Box, where they started out as engineers who are Like I'm just going to build this cool thing. And then they get some freemium, they get some traction, small stuff. But then at some point they decide to grow the company. They realize they need to themselves learn how to sell and build a sales team and market and grow, which includes usually going to bigger deals, bigger companies, other markets, and sort of not just sit around behind your computer waiting for stuff to come in, but to go out and make it happen. And there they go. That's what it takes to get past the small deals and small deals mindset. I'm going to wait around for stuff to come to me and just go build the company. All right.

Hey, let's go back to some of the questions on Twitter. That's a great back to it. We've got one that is when should you start building an outside field sales team that are veteran field reps in a SaaS environment and adding onto that right? I got an MBA and in business school they taught you this sort of stupid rule of thumb, which was if your ASP was $50,000 or more, you could do field cells and make it economical. Does that really hold in SaaS?

Well, the definition of field, and I want to hear Aaron's thoughts too, the definition of field sales will change by absolute number as you get bigger. So 50k may be an acceptable number for field sales in your first 18 months. And then at box, I'm assuming today field sales is 500k deals and up. And Aaron, even maybe way back when you were at Salesforce, field sales was probably still trying to do seven figure deals and up. Certainly that's the definition. Now at Salesforce it's probably nine figure deals. So the numbers will change. But I'll tell you my rule. Assuming you have capital in the bank, it's n equals 1. As soon as you have one 50k deal, you will get another 9, you will get 10. So if capital was not a constraint and you could identify the right resource that is a mix for your crazy startup in the early days, as soon as you have one, you're sort of a fool if you don't hire your first. Now, whether that's field sales means they're out literally in a remote office in New York, or whether it just means it's an enterprise rep in your office that handles big deals. We could talk about the nuances, but the answer turns out is 1, not 10. If you wait until you have 10 of these deals, you've wasted a year in bringing that expertise in house. Do you disagree, Aaron?

I don't disagree. I think too that there's this sense of because so much can be done over the web and phone these days, it has changed, but sometimes you still gotta meet with people. And so I think too there's. Whether it's a partnerships or sales and once you've got some sort of. I find there's a lot of risk in hiring if you haven't done it before. There's a lot more risk in hiring field sales.

Especially if you want, you have to do it yourself first. Just like inside sales, right?

Yeah. So especially if you're a founder CEO and you've helped close a big deal or especially two and you're saying, okay, you've got that confidence, there's more out there and you've seen what it does, but it requires it to close it help you hire, know when you need someone and also to hire the right person. Yeah, it's a high failure. High risk. High risk if you haven't done it before.

I'll just give you a fun anecdote. I invested last week in a company hasn't been announced yet, a SaaS company that just really got started at the end of December and it went from zero in January to about a million two in revenue now and probably hit 4 million this year. So great early rocket ship. We'll see how it goes. But first time, not first time founders, but truly first time in the enterprise. Never done anything remotely like enterprise sales. And I had dinner with him last night and he's like, well, I just got back from this meeting face to face with a Fortune 500 company and they're going to pay me $400,000. But if I did it on the phone, I would have gotten $30,000. So that's a 13x improvement by getting on. It wasn't really a jet, it was getting on an Uber. But as soon as you have that, you have to do it yourself. Like Aaron says, you have to go in and realize that 30k to 300k delta from field sales. But as soon as you've closed one or two, if you can find someone that works with you that isn't dilutive and you can rock it and understand it, you're ready the next day. Even though they've only been selling for five months, he's actually ready to build a field sales team tomorrow. It's just they have to institutionally understand how to do it first.

To Aaron's point, it seems like we're seeing a lot more sort of hybrid where the real focus is more inside sales. But Then they're going out and doing milk runs and they're going to see the major customers. So instead of doing five steak dinners and every time they have to go close a sale, they're doing one or two or just visiting at the office. So it's like they put a face to things. It makes it a lot more real. They're doing mostly in the office.

Yeah. I think that people do that often as an interim until they ignore people who actually live in a locale and they know the area and there's enough concentration of business, there's lots of ways to do it.

My number one pit of advice there, and I think Aaron said this in some different fashion and I might have learned it from Aaron. When you're doing this and you're moving from inside to outside or figuring this stuff out and you have some customers, my number one bit of advice in sales is get uncomfortable once you're comfortable. So first get comfortable. Right. Which means do it yourself. Don't hire people to do sales until you know how it works. That's like rookie error number one. Right. But then rookie error number five might actually be figuring out yourself, hiring those first two reps. Right. Getting an engine going and staying in your comfort zone. Like, I'm not going to go do the steak dinner. I'm not going to get on a jet and go to Topeka. I mean, man, I could do so much more value staying in the office. And if you heard what David Ulovich, who Aaron talked about at the Sasser annual, he's like, I had to get out of my comfort zone and go do steak dinners to close seven figure deals. And it's not just the evolution. It's get out of once you're comfortable, then you've always got to get uncomfortable in startups. Right. And I found a lot of founders and I was guilty of it myself. Once you get in a groove in sales, you want to stay in the groove. Don't at least spend 10 or 15% of your time getting fracking uncomfortable in sales. Then you'll do better.

Yep. I said comfort is the enemy of growth.

Yeah. Right. At least it's the enemy of the maximum per lead. Comfort is the enemy of maximum revenue per lead. This is clear, right?

Yeah.

Maybe that's a good segue a little bit to one of the questions we got, which was specifically for Aaron. What tactics did Brendan Cassidy and team use to close deals faster when they joined Echo side for Jason?

You mean maybe more for me. But Aaron can give his own version. I did write about the magic of how VP of Sales can double sales in 60 days. But Aaron and I see this again and again and again, right? And I wrote a lot of the so called secrets. But the real learning is there was no secret, right? The simple answer is, here, let me distill it all down because we could chat about this the whole time. You will know in 60 days if you hired a real VP of Sales or not. Because if a real VP of Sales will come in at Trajectory X and if he or she does not increase that to new X plus X percent within half to one sales cycle, they're.

Not a VP of sales.

Whether they'll double sales like in my case in 60 days, or whether they'll increase some 15% from whatever track you are on. But if you don't see any improvement quickly, there's no answer. And it can vary case by case, right? In my case, because we have a lot of leads, it was just talking to them more and actually doing traditional sales. It was just having better sales IQ and more importantly, immediately bringing in better talent. Because the number one thing that every great VP of sales does in their first week is they upgrade the talent pool literally before they even understand the product. Brendan came into Talkdesk, which will end up going 1 to 20 million in 18 months. And he had a great ride there. And I don't even. It turns out to be a complicated product. But within the first week the sales team was up. Sam Blonde did the same thing at Zenefits. I'm not sure he understood insurance his first week there. I understand how to sell, how the industry works, but within two weeks, total upgrade on the sales team. That works like magic. And if you don't see that upgrade, if you don't see that sort of qualitative, you've just got the wrong guy. Fire him tomorrow and apologize if it's your fault for hiring him.

You can know right away if they're really adding value.

I certainly want to check.

Top right of my screen says off air. So I don't know if there's a way to check to make sure this is actually even working.

Yeah. Can you hear you?

Yeah. Well, you can, but I don't have to.

I can see. Let's check on the Twitter.

I meant the whole. Yeah, I meant the whole thing. That'd be funny if it wasn't for you. That's great. Where are you going? Meanwhile, is there some Twitter chatter?

Yep, we're all good.

We can hear you at least.

Yep.

What do you got Next, bj.

Next.

We've got, I think a good question for Aaron. Thoughts on setting up a framework for integrating sales and marketing and customer success. A lot of your book is around setting up these different groups. So maybe give the quick one minute overview because I think if you haven't read it, it's really interesting that and then of course a little bit on how to do sort of outbound sales 2.0 or whatever you want to call it, because it's a great piece and something that we see a lot of the companies that we're funding struggling with, trying to figure out.

Well, I will say that even though I still get every day or regularly people who come in and say I love your book or I love this idea of specializing sales roles. Prospectors who prospect closers do close. Of course you have account managers, customer success and so on. But my CEO or my executive team doesn't. They don't buy into it, they don't believe it and so on. Even in Silicon Valley I think it's more of a standard way to do it. But a lot of the world doesn't specialize. So I think again a lot of it comes down to make sure the management team executives understand why it's important. And to me there's probably an example out there, I don't know what it is of a sports team that doesn't specialize to people on the team or in a company. You'd be front end, dba, back end in every part of a company you specialize. But why not sales? It's just a cultural, it's a legacy of how it was done for the last couple hundred years. But the best, I mean, so the idea is there's these four common roles. You might have three, you might have two, you might have six. But in general there's prospect, there's business development or prospectors are doing all the outbound prospecting or at least most of it, separate from new business closers, separate from usually market response reps for basically a junior sales role that responds to all the inbound leads, those three and then on the back end you'll have multiple types of roles of people who service customers, professional services, customer success, customer support. But you do need one person who is the at your company who is the quarterback for whatever is going on out to customers, typically to the customer. It sucks to be a customer. And you have like three people you don't know. Do I talk to Jim, Bob or Jane? I have seen again some companies have three roles, like the way that ideas focus people need to do Fewer things, better. So the way you implement it may be different, but to do something like outbound prospecting, well, you need someone really to do it full time. There's rare exceptions where someone can juggle and do things, but really you need someone to do it full time to do it really well. And that's probably the number one step in order to get a prospecting program off the ground, which is again, what our business helps others do. It's like we'll say, okay, when you're ready to have someone start prospecting 80% of the time or full time, let us know. That's when we can do xyz. The first step is having that dedicated person.

The thing that people don't understand if they haven't done it, is you do have to kind of model it out. And why do you specialize? There's two reasons to spec. I mean, you specialize because you're going to grow faster. Aaron's got the same point, right? It doesn't make any sense. What you have to do is understand though that once you specialize and you nail it, it will pay for itself. You're a founder first time, so you're trying to explain, I got to pay for all these SDRs. Like these 80s are so expensive as it is. Those guys got to pick up the yellow pages. But really you have to realize that let's say the OT for the SDRs is 80k and make up a number, raise the quota on the 80k or 80k and $1, it's going to work out. It will be accretive. If it's not accretive, something's wrong in this puzzle. Because what should happen is if you get the SDR thing nailed and It's SDRs to AES, the AE should be.

Able to do this.

More demos, take more calls and close more. And they've got to be able to close, increase their quota, right? If it doesn't pay for itself, this specialization, something is just wrong.

You know what happens is they'll say, I've got 20 salespeople and 2/3 of them aren't making quota. But how do I pay for these SDRs?

Yeah, how do I pay for it?

See, your people aren't, they're all failing. So really instead of 20 salespeople, you need six cross vectors and maybe half as many closers. And this is, you know, it's like funny how people just the way people believe and try to get to the point of how do you make it work? You have to have specialization. You can't grow very well. It's almost impossible. It's a struggle to grow without specialized sales roles. It actually turns your team into more of a building like a Lego block system makes it a lot easier to hire plus the best long term benefit. And I'm probably preaching to the choir here but if you're going to relate to your bosses now you have a farm team system and so your sale the way you hire and grow salespeople becomes much much more effective and a lot less risky. So you can try to drop Lots of companies have sales team churn of 30 to 40% per year really needs to be under I would say under 10%. Jason said 0% voluntary churn. That's one of the best ways to get it down low.

For those companies that are out there bootstrapping right now. I'm sure one of the things that's going through their minds though is hey, I don't have VC money to go do that with. What are the different alternatives? I think like Jason on your blog you mentioned hey, I need 3 million bucks to build a sales team. So they well okay, I don't have 3 million bucks. I'm bootstrapping or I'm making that transition from services to product or any of those combinations of things. Thoughts and advice on what they do?

Well my one so even if you're one person, you can start by specializing in your time. So you block something out on your calendar. It's important that you need to get to if it's prospecting, you probably need blocks of two hours. This works for anything for me. I block out Wednesdays to write which maybe works 70% of the time. Didn't get anything done yesterday, but you got to block it on your calendar if you for the important things. So that's how you can start to do this early even if you're one person.

Yep, You do need 3 million to build a team. I did the math on the Google spreadsheet on the blog. You can see it to hire the VP of Sales, the VP of Demand gen, the AES, the SDRs, you need, you may need more the faster you're growing. Right. And I guess you could need a little bit less. But when you add up everyone's OTEs, that's what it's going to cost, plus or minus. And I meant that to kind of shock people into thinking through the question you asked. BJ but stating the obvious, first of all, it's not 3 million in one day. You can fund it through cash flow, you can fund it through Revenue. The real thing that you need to make that 3 million work is you need enough time, you need enough Runway. If you're. First of all, if you're on the bubble, you're doing a million in revenue or something like that, a million and a half. And you're not ready to raise venture capital or you hate VCs or whatever. Different topic for a different conversation. Find some other way to get more money in the bank. Do something on Angellist, do some lighter capital, do some debt, get some money from your great aunt, whatever. Have the confidence to fund that. Because it's your job as a CEO or founder to get that money to make the company grow fast. Like I don't care. Like it's your problem, that's your job. And go make it happen. And whatever you do, don't do it half assed, right? Don't hire the team lead instead of the vp or don't ask the sales reps to do outbound from 8 to 12 and then inbound from 1 to 5. That just never. It just never works. Find a friggin way. But you may have to. If you can't access capital and you don't have the numbers, you're going to have to hack it until you can get that 3 million. But know that date. Come up with a hacking plan, because we're all hacking it. Aaron's hacking it himself right now. But know that date. Say look on November 12, 2015. We're going to go for it. The business will be big enough. It grew a little slower than we like, but we'll be big enough. And I'm going to go get this debt or this financing from ar or I'm going to borrow money from Uncle Linda or whatever it is, or I'll do it from Cash Flow or I'll take a zero dollar salary like I did. I was venture backed. And then when there was this little drama around Lehman Brothers, I don't know if anyone remembers, I just threw my salary into the sales kitty because I knew it would pay off and I got a little bit equity of it and I made like 18x on it so it turned out to be a decent investment. But that's one way I threw a few extra nickels into the machine. Just go find a way. Stop complaining, find a way.

I want to chime in.

Plan for it. You can't do it if you have 6 customers and you're doing 5k in MRR. You can't spend 3 million on a sales team tomorrow unless you're a second timer and you exited for a billion last time. Then you're Josh James at Domo and they'll give you 80 million and it doesn't matter.

There you go. Have fun. So I will say, because I think we're getting close on time. Is that related to this? I don't really hear people talk about it much, but there's a reason why a lot of you who are listening, including us, feel sometimes like, okay, you're failing, like you're struggling, it's just not working. And there's a reason why it's getting worse. A lot of it is just because. Just stop back and think about it. When you post something on Facebook, what do you post about? Do you post about when you're just having a crummy day? No, you don't, because you want to hide and eat ice cream. No, you post when you won the Big deal, you post when your kid won the trophy. That's the stuff you get excited about sharing. But it's pretty. It's create this reality distortion field where all you see is everyone succeeding around you and you're stuck with this. Like, God, I had this fucked up day. It was so frustrating. Someone else I saw on TechCrunch, I saw Sasta, someone closed a million dollars. My buddy closed a million dollar deal. My ex girlfriend lost 30 pounds and won Miss America. It creates this false sense of you're struggling when the reality is, yeah, of course you're going to struggle and things are going to not work. But when you start to beat yourself up unnecessarily, then you start to create, you get dispirited. I can't do this. I'm going to go search. I'm going to go watch Instagram for an hour. I'm going to spend a day on Netflix. I'm going to avoid the reality versus. It's just like finding a way. You're not struggling, you're just doing what everyone else is doing. Everybody's struggling together. We're all figuring it out together. Even today, we're all still figuring it out. Just keep going.

No, definitely. Actually, maybe that is. We're kind of hitting time here. And on those sort of inspirational thoughts, maybe that's a good way to end it here. Unless either one of you have any sort of closing thoughts. But I think, Aaron, you did a good summation of what we're living. We're all living every day a bit.

Yeah. Trust me, these days, every day I'm like, God damn it, this is frustrating. Well, I think that'll change to a different kind of frustration once the book manuscript is done in about two months. But every day like this sucks. This is not going to work. It will. I'll figure it out.

But hey, listen, I mean, I've been investing and operating like early stage businesses my entire life, my entire career. I have never seen anything go 100% up and to the right. There's always fears, there's always risks, even the ones that really do actually do a lot of up into the right. There are a lot of sleepless nights. A lot of entrepreneurs have when they're doing that.

People don't realize that the faster you grow, the more problems you have. Just different. They're usually just better problems.

Yeah, more growth, more problems. More money, more problems. All right, well, listen, thanks, everybody. Thanks, Jason and Aaron. This is great. I know a lot of the companies that we talk to love to learn this kind of stuff and love this kind of advice and live it every day like we're talking about. So really appreciate you guys time. And I think we will then sign out now. So thanks everyone who's listening in. Hopefully it was educational for you.

All right, thanks, everyone. Thanks, dj.

Thanks, guys.