Return on Sales Investment Part 2

Welcome to the Rethink Sales podcast. I'm Mark Danolo.

And I'm Michelle Seeger.

And Michelle, today we're going to be talking about a really cool topic, one of my favorites, which is Rosie return on Sales investment. And we're going to be getting into the details of what drives Rosie and the components.

Yeah, I'm very excited about our podcast today. And Mark, we're going to have two very special guests joining us today.

That's right. Roberto Malmon and Zach Rosenbloom on our team. And we're going to get into the how tos and the details to really make Rosie work this.

Okay. So today we're going to conduct a deep dive on return on sales investment, or as we call it at Sales Globe, Rosie. We're going to be talking about what it means to your business, what it is, what it means to your business and why it's so important.

Right. And it starts, Michelle, with a baseline understanding of where you are and then getting into, well, why am I here and what's behind it and how do we, how do we move ahead and improve our Rosie?

That's right. So before we dive into return on sales investment, I would like to introduce our guest today. So I'm very privileged and really excited that we have actually two of our own consultants here. And to my right we have Zach Rosenbloom, who is the our business operations and market intelligence team leader here at Sales Globe. That is a mouthful. Who came up with that title anyway?

I think you did.

Okay. And he's also a part time actor. So, Zach, welcome.

Thank you.

Thank you for having me.

And to his right we have Roberto Malmond, one of our directors of consulting services, who is a go to market expert. So thank you so much for being here today with us, Roberto. Okay, and then to my far right, or I guess to my left, of course, you've got Marc Danolo and me here. So we're going to have a great lively conversation today around return on sales investment. So, Mark, the first thing that we thought we would do would be just to really level set a little bit around. You know, you mentioned where you are today and that would be, you know, looking at our revenue and cost and then getting into why we're there and how we'll drive Rosie. So you developed with our team a great graphic that really describes that and I'd like you to kind of take everyone through that, if you would.

Yeah, so, so I think the thing to understand about return on Sales investment, or Rosie's, we're calling it is that it's not just about the calculation itself. So if you look at it at its first level, it's return or your sales divided by your investment or your cost, right? And, and you could take it at that at face value. And I think that's, you know, a lot of, A lot of people, a lot of companies do that. They just look at that number, look at the inverse of that number, which is your cost of sales. So, you know, your cost divided by sales, and they go, okay, that's it. How do you know? What does that mean? How do we compare with everybody else? But I think the key on this, it's kind of like getting your cholesterol reading, right? You got your HDL and your ldl, right? So you got your good cholesterol and you got your bad cholesterol. And the doctor tells you, first thing you do is you get a little mad. And the next thing you do is you go into denial. And then you go, and then you go, okay, well, what do I do about that? Well, you got your HDL on the top, which is the good cholesterol.

That's.

That's your, that's your revenue, right? That's your return. That's what you're getting. And then you get your bad cholesterol on the bottom, which is your cost, right? We don't want as much of that, right? So it's kind of like that. It's like, okay, doctor, here's where I am now. What does it mean? How. What does that mean for the kind of industry I'm in, the kind of business I'm in? And then what is. What do we do about it? So when you start to dig down to the next level of it, that's where you get into the driver's question. So what are your revenue drivers or your Dr. Return and what are your cost drivers? And that explains why you're there. And then you can get down finally to the next level, which we'll dig into, which is, well, what are the components of that? So what are the components of those revenue drivers around the markets we're lining up to and our capacity, et cetera? What are the cost drivers in terms of our sales costs and our headcount and other things, technology, sales enablement, that are feeding into that? And by understanding that, that's kind of like going to the gym. So we figured out our cholesterol. Now I'm going to go to the gym. I'm not going to have those egg shakes every. Every morning anymore. Give me the shakes. But But I'm going to do something about that. And, and rather than just cutting cost, rather than just trying to lose weight, we're going to build muscle. And that's the idea. We see too many companies right now just cutting cost. And so now let's figure out how to go to the gym and how to fix it, how to get strong.

Gosh. Okay. I really, I love that analogy. And what we have found is that there's just a pattern every single time that, you know, times are tough. What we find is that companies are really facing. They're looking at just cutting costs. Right, Right. So they're focused on that one thing. Or you're saying the ldl, they're focusing on, like, what do I do about that? But they're not really looking at the hdl, which helps you really far surpass anything that lowering that LDL can do. Right. So I actually love that. That's a really good thing. So I was thinking about a couple of examples, and the first one I thought about, because I was thinking about some clients who we work with, and I was. When we're talking about that HDL or those revenue drivers, if we think about, you know, we're in a market today and a lot of our clients are saying we've got weakened demand, you know, like, there's just not the demand for our products. So rather than just looking at, which is the immediate how do we cut costs? And I was just talking to one of our global partners this morning, and they said that they're looking at massive layoffs right now in addition to no travel at all. And if there is any direct client facing travel, that's going to be required, it's going to require, like, a very high level of approval. Okay. So they're focused on that ldl. But let's say they, they were focusing. And this is what we were discussing was their margin. Right. So how do we improve margin? So if you have lower demand, they're not going to do anything to increase the demand for their product. So if you got weakened demand and instead of just cutting costs, you're focusing on bringing up your margin. Well, doesn't that help level the playing field and make you healthier all around?

Yep. Yep. You know, another client I was talking to this morning kind of said a similar thing, Michelle. He said, you know, and this is an old adage, you can't. You can't, you know, cut your costs to prosperity. I'm paraphrasing. So you can't cut cost on your way to prosperity. I mean, You've got to do something to grow that top line. You got to grow your product and productivity.

I think we're going to hear some of that from Roberto in a few minutes as well. So, Mark, I just wanted to take a minute and recap our last podcast. So it was a pretty fast introduction and what I really wanted to do today was get into the revenue drivers, the costs, how companies can look at this for their own business to really drive growth in times like we're facing today, and why it's really important.

Yeah. So let's take a look and just recap on those big pieces of the Rosie equation. Like so what we said basically is that Rosie equals your return on sales investment return, meaning your revenue, or you could even look at it as other indicators of growth divided by whatever you're putting into that to get that your investment. When we break it down on those components, Michelle, we're looking at five big pieces on the numerator and five big pieces on the denominator. Now, these are not, you know, mece mutually exclusive, collectively exhaustive, meaning that there are other ways to combine these and other other components you can certainly add on, but these are indicating some of the major ones.

That's great. So now let's take a look at the big picture of why looking at return on sales investment is so important. And then we'll get into some of the revenue drivers and levers that you can pull. We'll talk about the costs and, and then finally we'll even get into how you can measure your own baseline. So, Roberto, let's get your perspective a little bit on what return on sales investment really means and some of the experiences that you have had in working with companies on growth in times of weakening demand.

You know, I think that's a, it's a perfect time to talk about Rosie, especially because we are in this time of crisis and inflation coming up. And in the environment that I came from, that I grew up, inflation means opportunity. That's a time that in the market you have a smoke screen. Everybody's talking about price increase. And you can make real big adjustments in your organization, but you kind of can take two approaches. You can hide inside your shell, cut some costs and wait for the storm to go over, or you can plan for it, make the adjustments, invest in the markets or segments that it's more profitable, more strategic for you, cut the costs that are bad costs and be ready because the storm is going to pass. And when it's passed, instead of being a B player now, because you made these adjustments, you can be an A player. So it's a great time to make decisions about this and think about how do you want to position for the future.

Yeah, it's a great point. I mean, that is the immediate reaction. Hunker down and wait till the storm is over. And I forget who said it, some nefarious person, but never let a crisis go to waste. Right. So there's opportunity in this time. And I think, Roberto, to that point, I think that's probably why we're seeing so many layoffs with companies as well. It's like, okay, there's a storm, there's cover for us to do that kind of stuff, but there's also cover for us to make other adjustments.

Well, it's not for. If you think about the stock markets, the record profits that the organizations are taking, big part of it is driven by the factor of price that companies are taking. That's very obvious.

I think to piggyback off that in these times of uncertainty and downward economic trends, a lot of companies look at the most typical cookie cutter approaches and just slash in costs or pinpoint in one or two things. And I think the beautiful thing about Rosie is that it goes quite a bit deeper than just revenue and driver and it really is a look under the hood, as you mentioned before, of all the different levers that they can pull and how each of these variables and factors affects one another. And also obviously the, the top line number there. So the companies that, that do elect to go the more courageous, brave route and, and try to take a more competitive approach to really understanding their business and, and envisioning how can they come up on top out of this time. Those are the ones that are, that are going to do well and bode well in the future. So there's opportunity here outside of the standard approach here and it's really necessitates a deeper look under the hood and we'll speak a little bit to some of our projects and experiences in that realm in a little bit.

So Zach, you did some research that I thought was really interesting from DraftKings and tell us share a little bit of what the CEO's position is in these tumultuous times. I was impressed with what he had to say.

Right, right. So I came across, I was reviewing some of Giraffe King's annual reports and their reporting based on the end of the year, looking back on 2022 and you get a lot of good information outside of companies filings that they're required to do with the SEC so of course there's your 10k, your proxy, your investor presentations, press releases, all that. But I came across the CEO share letter and typically when I view one of these share letters, they're once again kind of cookie cutter and have some sort of typical standard language in it that's recapping the year end and you know, positive look on the, the future here. But the CEO of DraftKings put in a little opinion piece within it that I thought was interesting. And he mentioned, as we kind of just discussed the, you know, turbulent times that we're in, especially compared to maybe the prior decade or so of, of a, you know, of a bull market versus the bear market some may say we're in right now. And he mentioned that there are different types of companies currently right now and kind of describing where he believes the top companies that will emerge great versus the ones that will fall or stay where they are. And one of the key differences he described in comparing two types of companies, he mentioned that, you know, a lot of companies realize that they have to cut costs, realize that they have to be profitable in order to, you know, keep their, their capital state. And the ones that, that are going to come out at the end, which he believes DraftKings is, is one of these, are not the ones that are going to take cost cut in and use a hatchet approach of just slacking and slashing, some, some big, you know, typical areas of cost, but the ones that are going to use a scalpel he mentioned and be very methodical in terms of how they cut costs to stay competitive. And I think that aligns very well with Rosie and really kind of doing the deep dive under the hood to understand all these different drivers and costs that go into it, in which areas you could pull levers, you could change, you can adjust how they impact each other and ultimately how they impact the bottom line at the end of the day. So I found that to be very interesting and we'll see if they do come out on top in the future here.

So I think that we are building the case for why return on sales investment is a more holistic and a better way to, to look at your business when times are tough. Right. So instead of just looking at costs, really look at the revenue drivers. And I think it would be great for us to just take those revenue drivers one at a time. And I'd like to kind of round robin it with us here and talk about what each one of those mean for you and in your own experience, you know, what is it that companies can look for. And one of the things that we know is not every company will do all of them. Some will be more relevant to one company than another. It just really depends on your industry, the factors that are impacting your business, your maturity level, whatever that might be. We know that. So let's talk about market, which we would classify, or we call market and offer alignment. And Mark, I'll just start with you and ask you to kind of define what that means to market and offer alignment.

So you've got a few pieces in there, you've got the market itself. And you can say, well, our market is of a certain size, large, small, what is the addressable part of that market? And then what are the segments? And then how do we look at that market? Right. So you've got your market, your playing field, and then you've got the alignment of the organization to the market and also to the offers that we're going to bring to market. So where you may look at the market and say, well, there's plenty of opportunity here. You have to. The action step is to get into what's addressable and how are the decisions. How do the decisions we make drive our ability to get more of that market? And a lot of that is around how we're lining up to it, what offers are bringing to market, how we're looking at the market in terms of current customer retention, penetration, new customer acquisition. So a lot of moving parts there. But you could think of this as the big piece of how does our organization, how does our coverage model match up to the market? And so as we're coming post Covid now and then we're going into this whole new environment. We've had so many changes in that alignment situation coming out of COVID in terms of hybrid roles, use of different types of channels, omnichannel. So things have been evolving there and now it's, I think, pushing further to get even more efficient in terms of how we're doing that and putting it together.

Yeah. And you know, as you're saying this and explain this in a higher level, what come to my mind is an example. So I had a customer like 18 months ago, and what we decided was to do an approach, like a CPG approach on these brick and mortar. And this was like the PETA model. So we try to understand what is the population. Yes.

PETA like bread.

Like the bread. Like the bread.

Okay.

That stands for population, incidence, transactions and amounts. So that was like a market, I think the supermarket. I cannot give away the name of the customer. And we understood what is the population that he was trying to address. And there was 10,000 residents around him. We also understood the incidents that we had. So let's say that they had 10% of incidents of that residence.

An incident would be visits to the. What would that be?

How many customers were visiting them. And then we also understood the amount of transactions, how often they would be going to that store. So let's say twice a month, right? So now you have 10,000 of stores of residents. 10% of them are customers. So you're talking about 1,000. And they're coming twice a month. So it's 20,000. And they were spending around, let's say $20. So that's become $400,000 as revenue. And they had initially, they want to grow that business. And as we start to understand the pros and cons of each one of these elements that drive the revenue of that specific location, we try to map this. So we put cameras in the parking lot to understand where it's coming from. Consumers. And we understood that in certain neighborhoods they had a penetration of 30%, 40%, but other neighborhoods they had a penetration of less than 5%. So that start to design to us some strategies on how do I communicate. Also the tickets, the average tickets, that's the transaction, the amount, right. They want to grow that. So we design combinations, the combos for that specific location. So come together also part of the marketing piece. So if you think about this association, how to multiply the numbers, understanding the segments that build your revenue, right. That help you to understand how to drive the growth that you need further. And of course, when you associate these for the roles that you understand the kind of the ABC cost that you have for each one of these segments, it become not a bet anymore, right? That it's become a very clear option on where to invest in the moments that you. You need to invest to grow so you can come out of the storm in a better position.

So what I'm hearing you say too is it's important to look at your segments when we're looking at market and offer alignment, not just like one size fits all.

You're breaking down. You're kind of breaking down your revenue in a way that's very commercial. You understand, in the point of view of marketing, of commercialization, on the way that you sell, you're breaking down your revenue on these segments on or initiatives that you need to have in the market. You can apply this kind of model and other models that we have here in different ways in different markets, different Industries.

You know, this reminds me of when I think about market and offer alignment. Another easy thing that companies always seem to jump to, it's pricing innovation. And pricing innovation actually can be, that are new ways to go to market. You know, it was subscription services and things like that. But in times like this, what we find is pricing innovation. It's still given the same name. It, it's really just a price increase. And I mean we've seen everything from, you know, what's the gap, you know, here's the goal, here's the revenue, here's the gap and a peanut butter spread of whatever that differential is across all the business. And I think what we're saying is dig a little deeper than that, right? And look at something a little different than that. So yeah, pretty good conversation. What about. Let's, let's talk about sales capacity a little bit. So this is an area that we really focus deeply with our clients on, on just about every project. Good times are bad, right? Whenever we look at their go to market or their sales structure or their sales process, we end up looking at sales capacity. So let's describe a little bit of what sales capacity is and then you know what, what the average is on what sales capacity looks like in the market and then a little bit on, you know, how we think you can drive sales capacity and our approach to that.

So sales capacity, it can get a little tricky because I think so many other drivers touch on it. And even as we were just talking about market and offer alignment, that certainly connects with sales capacity and you might see sometimes it kind of grouped within there. But to me, one of the biggest things of sales capacity is certainly sales time, how sellers are spending their time. And the way here at Sales globe that we typically define that or illustrate that is, is by classifying different buckets of items, different tasks they have, whether they're true selling time, their value added time, meaning that they're needed components that help kind of support the selling time. Or maybe they're non value added time such as kind of internal meetings or other items that hey, you know, the sales folks probably shouldn't be the ones doing this and it's taken away from their selling time. So to me that's kind of the biggest component of sales capacity. The way that we measure it here is we utilize a product called Sales Time Optimizer where essentially we'll do a, a study on sellers over the course of usually a week or two and have them kind of input their time daily in terms of the different activities that they're doing. And then we'll code those activities to the buckets that I just mentioned in terms of being selling time, value added time, non selling time. And what's always amazing is the results that come back and how many companies, and probably sellers themselves think that they're selling a lot of their time. And you'll be surprised that a lot of times under 50% of their time is actually not spent selling. And that's just a big opportunity there to change kind of some of the behaviors, change some of the processes, change management styles, things that can be done to kind of improve selling time and ultimately increase sales capacity. So that's one of the, the big components and I think probably the, the most significant one under that bucket. But there's, there's certainly a couple others as well.

Yeah, and I think you're right on about that, Zach. That's probably one of the biggest overlooked areas of increasing productivity, increasing return on sales investment is simply what are people doing with their time. So you could pretty much increase your headcount without having to hire anybody by increasing the amount of time people are spending on selling. Well, how do you do that? Well, first you recognize, you understand what you're doing, and then you can pull some of these other levers in terms of your market and product alignment. So what kind of roles are we using that could increase the sales time of the field? Sales organization as an example. And then the other side of capacity that we'll delve into a little bit further is, well, what are they doing with that time in terms of the amount of effort or workload it takes them to manage current accounts or to sell to new customers, win new deals? And so when we get into looking at some of the other components, we can look at how to make that more efficient.

So when we talk about sales capacity, I always. And we talk about sales time, I, you know, I always go back to job role decontamination. So something else that we think about here at Sales Globe and an example that I like to bring up, a healthcare company that we worked with. We do a lot of work with, with healthcare, but a healthcare company we were working with, what we identified is I, it's roughly, it was between 32 and 38% of their time was spent on sales activity, but another 30% of their time was spent on prospecting activity. And these people, do you remember that company was spending a lot of money on lead lists and they were sifting through them and they thought they were pretty good, but they really weren't. And what we determined is they were spending so much time just trying to identify what was actually a good lead. And what we did was we ended up setting up this little velocity to just a little team that their whole job was to qualify all of those leads. It was more entry level, that would lead to an inside sales position, and they would then hand these leads over to sales. But they had a method, a repeatable method, and that was all that they did. And they were able to identify even patterns, right? And they started to ask really good questions to identify good and not so good leads. And what we were able to do was increase their selling time of the key sales rep significantly, say better leads. They weren't spending any time on that activity, and they were really able to focus on demos and the other things that were required for that healthcare software that they were selling to the market.

You know what's great about that example too, Michelle? Is it it's a subtlety that a lot of times you might not recognize. So when you say, well, they're spending their time on going through, looking at leads, that type of thing, you might say, well, that's what a salesperson does, right? Well, when you see what they were actually doing, it was really something that was massively inefficient. They were the wrong job to be doing that. Their skills were really about being able to go out and convert new customers. It wasn't about doing the administration work of that lead culling. You mentioned demos as well. That was another area in that sales organization where they had a huge demo bottleneck because salespeople were doing demos and they were getting caught up in that. Well, you come up with a demo team that's much faster and much more efficient at that. You free up more sales time. So there's some subtle examples like that. And then there's one we ran into recently, which was just a not so subtle example. It was an organization that when we did the sales time optimizer, we found that they were spending about four hours a week on average in customer contact time. In person customer contact time, which is crazy. That's half a day a week they're spending actually in front of customers. And we dug into that and it was just really blatant. They said, well, we're a collaborative culture. And collaborative culture meant that they have a lot of internal meetings, they talk a lot, right? And the CEO took a look at this and she said, this is not going to happen. We're done with this because all we're doing is we're just talking to Each other, not talking to the customer. So she said, basically, we're not going to have meetings anytime during the week other than Fridays. All internal meetings happen on Fridays and you can turn down any meeting that doesn't happen on a Friday. They made that change and that was a blatant dramatic one. But it really increased the capacity of the organization just through that massive shift. But everybody knew it was happening. They sort of knew it was happening. But until you actually called it out, you quantified it, you couldn't see how impactful it was.

Yeah, that's pretty interesting. So let's talk about pipeline now. This will be interesting to get everyone's definition of this. So when I think about pipeline and I think about it being a revenue driver, I'm thinking about the size of your pipeline, right? Is it a good pipeline or is there a lot of junk there? So how good is it? Sales process efficiencies and where the bottlenecks might be in certain steps of the sales process, like where you get stuck. I mean, that's what I think of when I'm thinking about pipeline. I don't know what, what anyone might have to add to that or I.

Think that it's always about the process that we establish. So when you think about pipeline, people think on this big pipe. Maybe they have in their mind and reality that you need to break down these in multiple pipes. What is the pipeline of your enterprise customers, the ones that are more profitable and you understand clearly that's the one that you need to invest more time. What is the pipeline of the small customers that are really a bet? What is the pipeline of specific channels A, B or C that you understand in your specific market and they have certain returns of investments that you kind of understand because you kind of develop a ABC cost that's common in supply chain. When you do, Rosie, you're thinking about ABC cost for sales because you kind of understand the activity based cost of each one of these segments. So the pipeline become an exercise of very clear how many people you're putting on that pipe. And you know that it's a bet for a big customer you need to make for a small customer. Maybe I need to redirect resources where it's more profitable.

So when we think about levers that we can pull to have a healthier pipeline, you know, it's like what I was saying, Roberto. I always tend to like look at the sales process because I'm always thinking about the steps in a CRM and I'm always thinking about where does stuff get stuck. Where might we be spending too much time? Where are their bottlenecks? But what, you know, what else could people be doing to have a healthier pipe?

Well, I think pipeline management eats or consumes capacity, right? So the more stuff you have to manage in your pipeline, the more it consumes capacity. And so I think of the idea of the bulky pipeline versus the lean pipeline. Not a lean pipeline, like thin.

I have a lean pipeline and you're the bulky one of six, Michel.

I think of this movie called Pumping Iron. I don't know if you remember Pumping iron from the 1970s with Arnold, but they would bulk up, right? These guys would bulk up for the bodybuilding contest and they would get huge.

Right?

And. And people, they like to bulk up in their pipeline. They like a huge pipeline because when their sales manager comes asking, you know, how are things going? If I can show you more stuff, I feel a lot better about it. Right. Salespeople are inherently optimistic as well. So they'll keep stuff in the pipeline that is really not going to close. Right. So what we have to do is we have to create a leaner pipeline and we have to get a pipeline that's healthier.

Right?

And we have to do that sooner. So we don't want to bulk up. What we want to do is we want to be lean. Well, how do we do that? We do a better job of qualification criteria early, so we get stuff out earlier in the pipeline. And we're tougher as we go through each step. And we have triggers, we have criteria, we're effective at managing as a sales team to know when to pull things out. So we have to get beyond the subjectivity and become more objective about that. So moving from a bulky pipeline to a lean pipeline, if you think when you look at capacity, the amount of workload it takes for me to close a new customer account is not just the number of hours it takes me to close a new customer account. It's the number of hours it takes me to manage every potential new customer through that pipeline that's going to result in one new customer. Right. So it's my attrition rate all the way down. So if I can thin that out further up, then I have few hours, fewer hours I have to spend to close that one customer that's going to actually close.

You know, it's interesting because this idea of the pipeline is something kind of new. It was created when CRM was implemented, and CRM was something that really adds a lot of value in terms of process. And how do we do sales nowadays, however, also brought some issues on the way that we do business today. We don't really are looking at how we are managing the time of our sales organization or really thinking about is that the best way to have the steps, the sales steps that I built in the pipeline? People are managing their sales organizations based on some KPIs that are just generic and they're not thinking about the customer experience. So every time that I look at pipeline and some of these big KPIs and the big screens, I kind of think, stop thinking. How are we managing our people? Is the customer taking the best experience and having the smallest amount of steps that's possible? Do I have a product or I present my product in a way that I need to be to stay calling the customer or I present my products in a way that the customer wants to talk to me. Is the difference between the inbounds and the outbound. And in the end of the day, I take inbounds over outbound any time of the day because it's much easier. Right?

Yeah, that's a great point that you bring up. So CRM has caused some companies to really get more mechanical, process oriented, SLA oriented, but often at the expense of the customer experience. Yeah, we can't forget about that one. All right, so let's talk now about velocity. Now again, I'm thinking about like time to revenue. That would be one of the things. What. How would we kind of define velocity? I'm thinking about increasing win rates. But what do we think about velocity and then some of those levers, what they could look like.

If the pipeline is a picture of where we are at any given time. The velocity is defining how quickly we're able to move things through the pipeline, our speed to revenue. The velocity is also defining not just the pipeline, but also the velocity of our sales operation, our sales movement, how quickly and nimbly we work as well. Right. So as an organization, it's not just about managing things through the pipeline, but it's how we team, how we work together. So it's increasing the speed of the organization and increasing the speed of the pipeline.

So when we think about then velocity, like I'm thinking about it, teaming models that we've put in place. I'm going to bring up an example of a national, a sports apparel and equipment provider, right? To colleges and high schools, a company that we've consulted with and they had salespeople that would go out and visit, which took quite a bit of time, visiting these coaches of schools, visiting the the DA's. And I think that's what they were. Right. Am I saying the right.

I think it was the ADS athletic directors.

I knew I was saying it right.

They didn't want to run into the DA though.

They did not. Nobody wants that. But anyway, so the. The athletic directors and it took a lot of time. They were spending a lot of time driving. And what we put together was a teaming model for them. Because one of the things that we discovered was, yeah, you want these custom uniforms, that's one thing. But if I just need bats or I need hats or I just need some standard things and elbow pads, whatever that might be, there is a better way than waiting for these, these salespeople to show up. And we implemented an inside sales team that partnered with the field rep. And boy, those orders were faster, they were efficient. You know, things were flowing a lot easier, a lot better. And they were able to batch orders together easier. It was just. It made a big difference. So when I think about velocity, to the point that you made, it's about your sales structure in your organization and how your people work together.

You know, when you think about velocity, there is kind of two velocities. One is internal velocity inside the organization, and another one is a market organization. The internal organization, if you think about the internal velocity, is all the things that we have been talking about. Zach spoke a little bit about this idea of sales capacity. You are talking about this decontamination of the sales role, Right. And Mark, you mentioned a few minutes ago some examples of companies that spend 4, 8 hours in terms of administrative work, internal meetings and all that. That's one day of the week. And if you remove these and kind of move to more activities that really help the customer, you are gaining a lot of time. You put more four hours, remove four hours of administrative tasks, you're talking about 10% additional time. It's big. And then when you go to the market, the velocity in the market, the customer, they have their own velocity, they have their own speed to do the activities should take their time. But the salesperson has a big role on that because most of the time the customers do not know how to buy. And the role of the salesperson is it's helped them to make a decision. Here is the difference between the different products in the market. Here is the price. How are we going to save money? Here's the return of investment as you make these investments on these products and all these things that help your buyer to get approved through procurement, through senior leadership team or whatever is but they need to have this extra time to focus on the market speeds. So you associate these two, you can really accelerate your pipeline.

That's really interesting. Last thing we want to touch on is the. When we talk about revenue drivers is your sales talent. That's good insight, Roberto. So when we look at the sales talent, we're thinking about the requirements across sales roles. Maybe your customer segments. You have different requirements around talent with that as well. What else do we think about? If we think about it as a lever that we can pull, what would we think about around sales?

Well, I think about the idea that we're not trying to just fill a seat or fill out a job description and kind of meet the requirements of that job description. What we're trying to do is we're trying to understand the inventory that we have and we're trying to understand what the requirements of each of those jobs are. You really want to break it into a few areas. One is going to be the intellectual problem solving capabilities that that person has. The other is going to be how they work behaviorally. Right. So we're looking for things like certain attributes around drive and motivation and things that are kind of inherent. And we're also, and I mentioned problem solving. We're also looking at their ability to do that higher level problem solving in most sales roles because that's becoming a differentiator. So everybody's talking about the idea of AI, and of course we've had offshoring and everything. Well, the one thing that's not going to be AI'd or offshored is the ability to solve problems. And that's the big differentiator for people in sales roles. You have to have an inventory of those things and you've got to have a way to assess them. Right. Looking for, and use the term loosely, a certain DNA profile for each of those roles. And I think one of the issues is we end up, in a lot of companies end up filling roles with the people that we have or the people that we can get, and they are truly not the right people. So if you've defined your whole model correctly, but you haven't gotten the right talent, that model's not going to work as well as you need it to. So we got to be very discerning around talent.

So the lever that we're pulling is we're looking for a different. It could be a different DNA or different type of salesperson with different attributes than maybe we've looked for in the past.

Yeah, you know, I go back to that old hunter farmer Adage and you know, the idea that hunter farmer is too binary. And we really, that's why we use the canine model here at salesglobe with the, with the, you know, the lap dogs. Lap dogs or the collies or the retrievers, the Dobermans. And the reason we do that kind of jokingly is because those are different DNA pools. Right. And so you can't take a retriever and stick them into a Doberman role and say, okay, this person's going to go out and get new business because it's just not there. Right. You can't train to that. You can't really push that. You're just going to push that person into adaptive behaviors that are not natural for them. So how do we find that core DNA that we're looking for?

I think that to me, the assessment part is always the one that scares me. There are multiple techniques to assess the kind of skills that are necessary for roles in certain products and things like this. The part that scares me that normally most of the companies, they will say, segregate the goods from the bads based on the quotas and the metrics that they have internally. And most of the time we know that there are problems in the quotas. Quotas are defined as what I like to say. That's the peanut butter spreads technique. Yeah, let's put 3% to everybody. In reality, that quota should be based on market opportunities, on things that you see in the markets, new products and a series of other things that can make very different opportunities. Depends on the geography, the channels that we are serving and new opportunities, new products that are bringing up and other things. And when we look just as quota, pure and simple, it's become very hard to segregate who are the good salespeople versus the bad one. And we create a culture around that and people behave based on all the things that we drive on the previous years.

That is such a great point and an excellent segue to talk about how we address cost. So I think that we have looked at all the different levers and that we believe the revenue drivers and the levers that can be pulled to improve the health and the performance of your company. Now we'll talk about the costs. Roberto, building on your thought, when we look at sales talent and staffing and using logic around that, so use it as a lever instead of just a cost cutting measure. It's reminding me of a couple of companies that, that were put in a tough spot. And the first one was an organization that said that they used the accounting term that lifo, fifo. But they used to cut the staff. It was the last people hired, last in, were the first out because they wanted to use something that was, they believed objective and not subjective and that they could just say, sorry guys, anyone hired after this date, that's it. And yet they were missing out on a really good talent pool. They let some really good people go because they did a massive layoff, like 20%. So that reminded me of that. And it reminds me of like, think about it a little bit differently. And when I think about our approach at Sales Globe, when we're looking at restructuring or reorganization, we actually conduct a draft day. And draft day it has what we call those three legs of a stool. Right. And we do include some of the quantitative, but then it gets very qualitative. So quantitative is, you know, did they hit their number? Right. Which you know, is, can be just too, it may not be the objective, the objectivity that you're looking for. So we also look at putting them through an assessment that talks about the qualitative attributes that are required for that job, problem solving capabilities. We do a customer scorecard type of thing, get some real time feedback from management as well and do a more well rounded approach to understand Draft day says, do we place someone in a certain role? Do we redeploy them into another one? Or is there just no place within this particular organization?

Yeah, I think that's certainly, I think a more enlightened approach versus LIFO or fifo because there's really not a lot of logic to that. So we are going to take the people out that we brought in last, even though some of them may be more talented than some of the people that we actually had first. So we're kind of perpetuating mediocrity at that point. And I also find it fascinating out of all these different components that we have in this Rosie model, that this one component, staffing is the one lever that everybody's pulling right now. Let's just reduce staff. And when you, and you go, wow, they're just, everybody's doing one thing out of this entire model and that's the practice.

Right.

So that was the practice when the economy was hot and it was the war for talent. Let's increase staff and let's pay more now let's just use that same lever. So you can see that it's such a more multi dimensional answer to the problem.

Yep. So you talked about, we just discussed staffing and that that is the. When we look at cost, what everybody looks at, I'd like to talk a little bit about the other factors there and the one is sales comp. Because this is a real juicy one. It's a really good one. Mark and team, when we talk about that because some of the things that we saw in the war for talent and some of the things that we believed companies could do instead of just paying more would be to really put that more, if you will, in some incentive and build some pay for performance plans. Right. So instead of just increasing pay, Mark, we were talking about a company that increased pay, what was it, 40 and 50% over what the market price was. And now they've got this glut of people that they believe they're overpaying for.

Yeah, I mean we saw this coming what, a year ago. I mean if you look at our 2022 predictions, we were seeing these things coming and that's exactly what happened in the war for talent. It was well, 40 to 50% of companies. The first thing they did or the biggest thing they did to keep the people they have or to acquire new people was to increase base pay. It was not incentive pay. The second thing they did was to increase incentive pay. And then I think you had like 24, 25% of companies that did both simultaneously. But back then we were saying this is a short run problem that we're addressing because we've got too much demand relative to the supply. So there's a, you know, it's the, the market's out of equilibrium, you have a disequilibrium. That's a short run kind of issue.

Right.

We're going to come to a new equilibrium. But if it's a short run issue and you're making a long term decision by raise, raising fixed costs, then you're putting yourself in a corner. And back then we said, okay, you got a few things you can do. You can either raise the price of your product, you can make people more productive, you can find place other places to cut costs or you're going to reduce your margins. Well, what did we do? We're just cutting people back off again. So it's almost like, you know, a Neanderthal approach to business management here when we look at this. So yeah, sales, sales comp. It was really the base salary that became the big lever and we didn't. But you know, the companies that did it well actually leveraged good sales compensation principles around what's the base versus what's the variable, what's the upside, what's the, the quota I need to see in terms of actually Being able to justify that increased cost. And they did it in an intelligent way.

We just had about two weeks ago our future of Sales comp think tank and we asked a poll question and we asked them how many of you believe your leadership believes that they have overpaid in 2022 for underperformance? It was 100%. We didn't expect it to be 100%. We thought it would be about 60 or 70%. But everyone had at least one major sales role that they or segment of people that they believe they were overpaying for. Now interesting, in that same study that you referenced that had about 600. Was it 600 companies that were in it? That's a study we did with World at Work last year. Interestingly is where we saw the greater pay mix. So leverage plans, meaning that it was lower base pay and a lot more in incentive than the pay mix, they were really aggressive, like even 30% base, 70% incentive, were in brand new roles. So that hybrid sales role, do you remember that?

Right.

So we're starting to see more. We are starting to see for some companies that they are beginning to create highly leveraged plans and that means that there's less fixed costs and you've got to actually do something to earn that pay.

Yeah. So we saw the emergence of the hybrid role, which is the fastest growing role that surpassed inside sales. What we also saw, as you mentioned, Michelle, is more incentive pay being used. A lot of that was because we saw an increase in Hunter or Doberman roles as well. So that's one of the faster growing roles.

Yeah, and I think that's the, the things are changing. So what we saw in that survey versus the current situation is very different. So I'm working with an animal health care company and the idea that we have is exactly to make all these increases that it's coming from inflation, that's necessary at this point in time. But everything in the variable piece, but at the same time that we are doing these changes is plan to the storm. You need to plan to the storm because it's a cycle always, you're going to always have these cycles of I have too much talent and I need to make changes or I lack of challenge and I need to attract people. If you plan for the cycles and you need to have the variable piece because you can play with that versus the base, you really cannot play with that. If you plan for the storm, you're ready for any kind of situation.

The other thing about comp and we just connected it to performance which makes Sense and as you should. But it, it obviously also connects majorly to behavior which can play into some of the drivers and costs we, we talked about. So I think about a client that you and I, Roberto, worked on together, going back to kind of the pipeline revenue driver here, where their Legion team wasn't really qualifying, doing a good job of qualifying prospects. And if you digged into why they weren't doing that, it was because it was their comp plan that was, you know, paying them on, just opening up an opportunity, opening up a prospect. So of course the comp plans connect to performance and measure in a pay per performance plan. But it also drives a good bit of behavior which could have, you know, obviously connections and factor into some of these other costs and revenue drivers that we've touched on here.

They were taking only one year and a half to qualify a customer. I don't see the problem.

Okay, another hot area, because everyone's saying like if they were going to make again, this came out of that survey, any investments they were making, it was in technology. And you know, let's talk about the tech stack. Like what, what is it that a tech stack really does? I mean, I think about it as, you know, something that could also help add to capacity. But what do we think about, you know, when we, when we think about cutting costs or investing or whatever, what the tech stack has to do with any of this?

Well, I think the, the tech stack, as you mentioned, Michelle, can be an enabler, right? So that can, that can actually increase our. Anyway, do it the right way. I think the trap is that it becomes a panacea, particularly things like CRM where it's going to solve our problems. Yet it doesn't because we haven't fixed those other areas, many of them in the numerator of our equation here or a fraction. We haven't fixed those things in terms of pipeline management, coverage model, that type of thing. So our CRM and our tech stack ends up kind of making that even worse. Tech stack can also decontaminate sales roles. So when you find out that a role is spending too much time, which we've seen a number of times on things like pricing and quotes, you can actually justify putting in a pricing system to decontaminate the job and make that much more efficient. So it can be a huge enabler.

So then when we think about enablement, we think about anything else as well as expense. So the reason we have, you know, these five cost areas, these five drivers, is because every company we know, when they look at their costs for example, we know everybody has staffing, they have some kind of a tech stack, they've got, you know, incentive compensation that they're paying. But then when we look at other expenses, whatever they might be, that can be really custom by company as well as other enablement, whether they're prioritizing training or not, or whatever that looks like. So that's, that's pretty much where we are on return on sales investment. And now what I wanted to shift over and talk about was how people can, how companies can create a baseline. So we've talked about these revenue drivers and we talked about cost. But then it's like, how do I know what it looks like today? And I know that's a code that we've been trying to crack here at Sales Globe. And we really decided to take a step back and simplify it because it doesn't have to be that complicated. And once you create a baseline and then you pull levers, you can go back and measure again, something simple. And Zach, you helped us on identifying how we can actually look at a baseline from which people can begin to measure their return on sales investment. I'd like you to share a little bit about that.

Right. So the, of course, as we just discussed, Rosie, is far more complex than it looks on the surface. But in terms of getting to a baseline and utilizing that as a good gauge, we thought it's best to kind of simplify it, to be able to easily measure, find and just keep consistency across the board. So the approach we're taking here at salesglobe is we've gone back into our database, we're looking at our previous clients and really simply taken the total operating revenue for either the wholesales org and the whole company. Or if we only have certain divisions or segments of data, we're taking the operating revenue associated with that division or segment and we're putting that over a simple sales cost, which is their base plus their incentive to get their total target incentive. And that is kind of what we're utilizing as a top line rosy number. And like I said, the reason we, we made it that simple is to be able to keep it consistent, easily measurable and you know, understandable across the board. But it's, it's a high level gauge. Right. So you know, what's, what's important to know is the, the drivers and the costs that really go into that. To be able to understand kind of the characteristics of the company, the, you know, their go to market structure, their, their strategy, everything. All those factors kind of play into, you Know why Rosie for one company might be different than another company? So that's the value there. That's kind of the, I guess consultant value is really understanding the insides there to be able to tell a company why their Rosie looks this way versus that way, what they can do to change it, how it compares to others. So that's kind of our approach here.

You know, as you describe that, Zach, I think about a comparison of another metric in real estate which is called a cap rate or a capitalization rate, which is basically your net operating income divided by the value of the property.

Right.

So we can look at cap rates across markets. It's a very simple number. Maybe it's a 7, maybe it's a 10, maybe it's a 4.

Right.

And that's useful to know. But then it becomes valuable when you say, okay, well let's look at a cap rate for Brooklyn, New York in a certain area, a certain type of property, whether it's commercial, I'm sorry, it's commercial, or it could be residential. And so you have to break down to the characteristics to really understand why that's meaningful. So when you look at the Rosie across companies, it gets really meaningful. When you break it down, you say okay by industry. This is why it looks that way. So when we look at one for a client that's say in the beverage distribution industry, their return on sales investment is going to be much higher than say a company in the software industry. But it doesn't necessarily mean they're healthier or in better shape. Their margins are thinner, they're lower, they have huge operational costs and beverage distribution that software simply doesn't have. So their cost of sale is going to be higher and their return on sales investment is going to be lower. So compare software to software, compare beverage distribution to beverage distribution, but then look for ideas across industries that you can apply to your industry to maybe improve your return on sales investment.

I agree, I think that these are become like good reference points for us to compare. But the value that you really create, especially for our customers, is to go down this detail on their own house and understand what do you really need to do to increase the value of this house. To use your reference, do we need to invest on the plumbing? Do we need to make knock down a wall so you have a better flow. We need to paint a few walls, have professional pictures and etc, etc. That's the value that you can drive. Once you understand the elements of the revenue, the elements of the, the way that I describe as a ABC cost of your Sales organization, how much money you really make in each one of the segments, considering the time allocated of the sales organization in each one of these drill downs that become very clear on our dashboards and so on, so forth. So it should get these references and then compare with the ways that you can improve and drive these improvements in the customer.

Yeah, I think it's brilliant, but of course we came up with it. But in all seriousness, the beauty of the simplicity of just looking at your baseline. So forget about the cross industry. That's something that we are trying to figure out and it's a bit more complex. But if we think about that individual organization, if we can look at their operating revenue and their sales expense and then to the point that you all made, we go in there and conduct, we call it a revenue roadmap assessment. But we look at what's happening in the business and, and we look across those different lever opportunities to identify the ones that will have the greatest impact for that company. Then when you go back and you look at the operating revenue compared to the sales expense, you should see a healthier number if you've actually implemented those changes. So I think that's a great point to drive home there. So as we wrap up this segment that I think has been really informative, I want to think about, you know, I'd like you each to give a takeaway or something that you want people to remember. You know, I, I like to think about just don't cut costs, people. I mean, to me the immediate, one of the big immediate messages that comes out is just don't focus on cutting costs. You're going to shortcut your business in more ways and give up opportunity. And I love the analogy that you made, Roberto, that's so true about you can go in your shell and you can protect or those courageous companies will actually invest during these times where they need to invest is right. So I would say, you know, look more holistically at your business.

Yeah, I would agree. I think there's, you know, you can only cut your costs so far, but there are no real limits on your ability to increase productivity and increase your top line. So you're playing kind of a finite game when you're just doing cost cutting.

Yeah, and I think that's, I agree with that. One element that comes to my mind is that we kind of give away a little bit of the management functions to KPIs, dashboards, CRMs and things like this. And we are losing the benefits of the creativity of the management team to think on the way that they look at the sales team and perceive the value of the work that they did. Michelle, you said just so well that sales is not a cost, sales is an investment. How to invest this in a better way in the right segment, with the right amount of time, with the right process, so the pipeline can really fit well. And that flows so fast. We don't take one year and a half to qualify a customer and so on so forth. We gave away a lot of these to dashboards and metrics and things that look good in the wall. And we need to go back to this to be creative, to have really quality manager. And I think that this kind of tool, Rosie, can help you to visualize this and give to your team a different way to see the business and the opportunities.

Right? Yeah. I think it's a combination of what everybody said. You know, have a sound strategy, think about your strategy. And if that's sound and you believe in that, maybe the results aren't there right now. But it's not a simple answer as cost cut. And it's not a simple answer to pin the issues or the lack of performance on one area or group. It's really understanding and kind of tinkering with the different variables and factors that all are connected and all talk to each other and all, you know, overlap and overflow. So it's a. It's a complex thing to think about, but it's. There's not. There's not one simple answer here.

All right, well, thank you so much, everyone, and we hope that this was a really exciting segment. If you, any of our audience, you'd like to learn more about return on sales and investment, Please go to salesglobe.com and, you know, refer us to your friends. If you enjoyed this podcast, please ask them to subscribe. And we also have a Rosie assessment that we can conduct for you. So, anyway, we hope you enjoyed this as much as I enjoyed it, and we'll see you all the next time.

Awesome.

Thank you.

Thank you.