The Revenue Formula

Having talked with lots of companies, we're still being asked how to make sales work, or at least work better. 

So today, we dive into the top 3 signs that sales is broken - and what you can do to fix it.

Creators & Guests

Host
Mikkel Plaehn
Head of Demand at Growblocks
Host
Toni Hohlbein
CEO & Co-founder at Growblocks

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Mikkel Plaehn, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

[00:00:00] Toni: Hi everyone. This is Toni Holbein from Growbox. You are listening to the Revenue Formula. In today's episode, we are going to talk about the three signs your sales team might be broken. And we are going to talk about a couple of ways you can actually fix and remedy that.
[00:00:18] Enjoy.
[00:00:20] Mikkel: So let's not do that.
[00:00:25] Um. So what do
[00:00:29] Toni: what do you think is broken with the OpenView?
[00:00:31] Mikkel: You know what I don't think necessarily
[00:00:34] it's OpenView that's broken.
[00:00:37] Toni: For, for everyone who hasn't heard the news. So OpenView has wound down like at, at recording last week when this is live, maybe it's two or three weeks ago.
[00:00:47] Mikkel: I don't know if they've, what they've
[00:00:49] Done decided to do with their portfolio and stuff, but they definitely let go of a huge part of their team, which sucks for the team. I think most of them they're going to land on their feet. So that's that's the good part, but it still sucks. And I don't think necessarily something that's wrong with OpenView without knowing the details. I don't know what's happening inside, you know, all those meeting rooms and all that stuff. But when you look at the market, all the startups took a hit.
[00:01:12] We talked about Spotify, the 17 percent they just let go, but a bunch of companies have been doing it.
[00:01:17] Toni: but Spotify, they're just getting profitable. I mean, they're just at that stage now. so I think you had a narrative that resonated with me that there were some structural changes in the top of, um, of OpenView.
[00:01:28] Uh, because they just had the new fund. I mean, they just had almost a billion dollar fund. I don't think they're, oops, spend it all. It's also, you know, venture capital doesn't work like this. Funds need to be released and so forth, but, um, I don't think that suddenly, you know, they ran out of cash or something like that.
[00:01:41] I think there was something structurally changing, which now is triggering a bunch of this because at the end of the day, like an, a venture capital firm is, is very much, um, is a partnership actually. It's like a law firm. and if some of the partner lawyers, you know. Like, eh, don't wanna do this anymore.
[00:01:58] Then, you know, this thing falls apart. And I think apparently there was some, something to that tune that um,
[00:02:05] Mikkel: Probably,
[00:02:05] Toni: was, was part of it.
[00:02:06] Mikkel: And also they hadn't, you know, they hadn't been making many deals probably because there weren't any great deals to be made as well.
[00:02:12] Toni: Oh. So who has made many deals last year? No one, basically.
[00:02:14] Mikkel: So I think, um, I think it, in my head at least, it fits that, you know, the market has been hit and by default. They've also then been hit, and then with the compound of changes and stuff. Yeah,
[00:02:24] Toni: and since they were so heavy in PLG, it's also now proven
[00:02:27] now proven That PLG
[00:02:29] Mikkel: work. You know what? That's my favorite.
[00:02:30] it's
[00:02:30] Toni: out, Lea.
[00:02:31] Mikkel: Correlation. So that is why. And then I saw Elena Verna do like, uh, a meme of a, it was a goose. Basically, so you think it's because of PLG, let me tell you about PLG. It's like, yes,
[00:02:44] Toni: totally works without seeing the visuals, Mikkel. Um, but, so, and since, since PLG is out the window, we need to talk about sales again,
[00:02:53] Mikkel: exactly. Let's do that. That's, it's the only path forward, really, this PLG fad. It's just, it's done. It was here for a couple of years and, you know, no. Um, no, sales is, uh, like I wrote, it's still a thing you need to succeed. It's still a thing. and I think what's been interesting, we've had a couple of conversations around, uh, so it's no secret we talked with a ton of companies in the B2B SaaS space, specifically, and there's often challenges with sales.
[00:03:21] They often have problems either it's not working out, they're not getting enough deals, or the unit economics, or something is just off, right? So what we're going to do today is we're going to hop into some of the signs that your sales team might be broken.
[00:03:35] Toni: Yeah. And, um, and I think sometimes, so what, what I sometimes kind of give people, as a, Oh, what's a, what's a symptom.
[00:03:44] what's a symptom that might point to that there's something broken. It is that, after every quarter that you didn't hit, you basically in one form or another. Blame the salespeople. And what that means, and I've seen this so many times, and usually those, this is kind of the storyline in the board, might be different somewhere else.
[00:04:06] So maybe this is really for the, the CEO that sits on the board and maybe gives that storyline. It's like, uh, um, you know, the team is young, kind of, you know, they're still ramping or, we gave too much discount, or they're forecasting terribly. Or, you know, something, something like that, that they were lazy in effect, basically your realm of pinpointing a problem is confined to the very middle of the bowtie and it's only the sales folks.
[00:04:38] And I think, you know, that, that symptom sometimes leads to like, wait a minute. So if you see that happening too many times, so I then must be a different story. It, you know, all of those salespeople, they are professionals and some, some are not by the way, but most of them are professionals and it can't be that they're just lazy.
[00:04:54] I'm sorry. I don't believe that. Right. and then diving into, um, you know, really if you, if you unfold what's happening in the sales team, we're going to talk about this right now, but usually there are also thousands of the reasons that are simply outside of the sales team that are being forgotten.
[00:05:08] Mikkel: Yeah.
[00:05:09] No.
[00:05:09] And I think, uh, we're definitely going to get into the whole,
[00:05:12] circle back to the bowtie
[00:05:14] in a second, the first one.
[00:05:16] Toni: So, what you usually have is, and it depends a little bit on your, on your stage as well, right? you might have, issues that are festering in the team around, let's just say, we call it trust and accountability basically, right? So one, one part of that is trust in the product, trust in, you know, marketing, doing this stuff, trust in the market, coming back, all kinds of, you know, these things, right?
[00:05:42] And if you If you get to a point, uh, trust to the CS team, um, if you get to the point where, some of that trust is basically lost, what's then happening is, um, it's super demotivating, obviously for the sales team. but it basically kind of then, turns around into, blaming.
[00:06:01] Mikkel: Yeah.
[00:06:02] Toni: Suddenly it's, oh, you know, You know, I don't want to have this quota because, you know, marketing is not going to deliver anything.
[00:06:08] I can't sell this product because it's kind of shit. It doesn't work. Right. Let's be honest. Doesn't work. uh, I don't even want to, you know, what's the point of closing this customer? The CS team is gonna, you know, drive them out the window anyway. So why, why even do it? Right. and what, what really kind of intrinsically happens is that, you kind of, push.
[00:06:30] The agency of you being successful away from you, which is, uh, really, when you kind of look at this psychologically, it's a coping mechanism. It's like, your, your brain cannot deal with, I am not successful.
[00:06:43] Mikkel: Yeah.
[00:06:44] Toni: That just, you know, you cannot, you cannot go to bed with this every night and survive. So what your brain is going to start doing for, you know, the right and the wrong reasons is going to be like, you know what?
[00:06:54] I'm actually great.
[00:06:55] Mikkel: Yeah.
[00:06:58] Toni: The problem are all the other things around me. And, you know, one way to fix or make it worse
[00:07:06] is actually to give different ways to give a sense of control back to the account executive. and this is now very esoteric, and some people might disagree with this, and I'm totally fine with this, but one of the things that we used, I feel successfully, was to make sure that the account executive still has an expectation to prospect him or herself.
[00:07:29] So yes, you can't self prospect and hit your target, forget about it. It's not, it's not going to happen. but this can be a way, an outlet. For you as a manager or for the brain of that AE to be like, well, I could do a bit more prospecting. Yeah. Um, so this is one thing. and I think another thing is
[00:07:47] if you do SDR pairing, what you want to basically kind of achieve is that, SDRs are not just randomly assigned or just assigned by a manager to an AE.
[00:07:58] Because then again, you have this like, you know.
[00:08:00] Mikkel: I got
[00:08:01] Toni: sucks, and you know, he's new, he doesn't know shit, and now he's leaving, and you know, or he's sick. if you turn this around and let the AEs choose, and obviously, by the time we kind of came up with this, we were basically in the US and we kind of developed a draft system, but not a football draft system, but the other way around, kind of the best AE could choose an SDR first, right?
[00:08:23] And, you know, once kind of the round was done, it's like, well Sorry AE, you should be better, you know, otherwise, yeah, anyway, and what then happened was pretty crazy, actually. First of all, the AEs suddenly went for all kinds of SDRs. So some, some really good AE went for like an SDR that was three weeks in the job.
[00:08:39] It was like, Nope, she's going to fucking nail it. She's going to be on my team. Great. but also, they started investing in their development and if they were sick, it's like, well, you know, I kind of.
[00:08:49] Mikkel: of, you know, made the choice myself.
[00:08:51] Toni: So you basically want to find ways to give accountability or a kind of sense of control to the account executive, right?
[00:08:58] I think another thing that, you know, in this trust accountability realm sometimes triggers is, is salary. so this is like, you know, that, that's gonna, that's gonna kill your mood. and I, and my tip to everyone out there is, um, you know, this generation where people didn't talk about their salaries, that was like, that ended 20 years ago.
[00:09:19] It's like everyone who was Grey hair, uh, was still an honorable salary person that was like, no, sorry, that's off. That's off the list. I can't tell. Yeah, that's private. None, none of your business. I mean, in TikTok age, yeah, in TikTok age, everyone is sharing their salary all
[00:09:35] Mikkel: Yeah. It's in the bio description usually. .Yeah,
[00:09:40] Toni: and obviously it's not like every time.
[00:09:42] But if someone asks you like, Oh, well, you make this. and, and you need to be aware that that's the case. So when you have big salary discrepancies, in your, in your sales team, for example, it might be any other team as well, that, that are like non obvious for anyone to kind of realize. you are setting yourself up for like a problem, right?
[00:10:02] and there's so many ways to suddenly explain a salary difference. the most incendiary one kind of these days is, ah, it's because it's a man. And I'm a woman. I mean, it's a thing. and you want to have, uh, you don't want the, the, uh, the mind to go there because that's like, I don't want to work for this fucking company anymore, which totally understand that by the way.
[00:10:23] Um, but what sometimes they're not seen as like, Oh, that person has five more years of experience and you know, all kinds of other things. So you want to, you want to create ways. Where, um, it's extremely obvious if someone finds out, where it's kind of obvious why there's a gap or a difference. Um, that doesn't necessarily go into like the super dark place that I just mentioned, right?
[00:10:45] Mikkel: mean, some of the, some companies, they will have
[00:10:47] distinct ladders
[00:10:48] with clear definitions of what's required to get to the next kind of bucket,
[00:10:52] Toni: Yeah, so I am, I, I gotta say this and, um, I, I know that the chief HR officer of the company I was at, It's not listening to the show. but I gotta say, I really like, uh, salary bands and she was the one convincing me of this, uh, makes it extremely easy to have all of those conversations.
[00:11:10] Um, it's a, it's extreme big pain to pull off and you should only do it once you're like, I don't know, 250 people or something like this, but, uh, makes all of that pain kind of go away. Um, anyway,
[00:11:22] Mikkel: So, that's the trust and accountability. That's one of the signs that something is broken, so basically blaming, oh it's a terrible product, or marketing isn't doing anything.
[00:11:32] Why don't
[00:11:33] Toni: Why don't you enter the next one, next one?
[00:11:35] Mikkel: The commitment. So, um, one of the things we've talked a bit about is uh, quota attainment. And they're down, right? And I think especially right now, if you put forward a quota that you know there's no chance anyone is going to make that quota, do you think they're going to be committed?
[00:11:53] Yeah.
[00:11:54] No.
[00:11:55] Toni: So that's a good question. and we had Chris Orlob on the show with like, well, you know, good times, bad times, you just got to roll with it. I think, I think the, the answer isn't quite that simple, actually. I think, um, uh, in some cases it might be, but usually it's not. I think if. If you simply do not have enough opportunities to feed anyone.
[00:12:14] And even if you say like, Hey, you need to bring yourself 30, 40 percent of your quota by self prospecting,
[00:12:20] It might not work out. Right. So in this case, quota works like any goal, that's out there. If it's unachievable, you will simply not subscribe to it. Yeah. It's like you're, you're,
[00:12:33] Mikkel: And I think this is a big kind of. Thing that happens ever so often. Some people, they will say yes, but that does not mean they're bought in. that does not mean they are committed.
[00:12:43] Right.
[00:12:44] Toni: Yeah if someone says sure boss.
[00:12:46] That
[00:12:48] Mikkel: it.
[00:12:48] Toni: Sure uhh mean then then . You have,
[00:12:52] Mikkel: you have,
[00:12:53] Toni: you can, you can pick up on these things and, and basically, again, what happens for the salesperson, we have a very psychological here today,
[00:13:01] Mikkel: but we also both had, like,
[00:13:02] an elective. so we're basically shrinks.
[00:13:05] Toni: Uh, no, but it's, it's, you know, if, if you don't buy into a goal, the goal loses any point of being there.
[00:13:12] It's not motivating, it's actually demotivating. Uh, you can also go in the opposite direction if something is too easy. It's also kind of doesn't make sense. it should be in the stretch zone.
[00:13:22] Mikkel: Yeah.
[00:13:22] Toni: That's where it needs to be. and, um, this is where you can get someone, committing and pushing for the best, and then you might need to, then you get the best results.
[00:13:31] Um, but I think what is sometimes helpful, and this only works if you have done the math yourself, uh, you can, you can math it out with them. Uh, so we have done this many times with the reps, uh, mathed it out for them and um, basically showed them on a piece of paper that, you know, everything else being equal, it should kind of be possible here, right?
[00:13:53] Uh, which then also led to, you know, we educated the team, which was kind of good, uh, but sometimes when it didn't fit us. It's kind of bad, you know, when there was an SDR leaving or two SDRs were leaving. And then they're like, Toni, I don't, I, I, you know, I just did the same math that you did with me and it's not working out.
[00:14:13] So what are we going to do here? And, and there, then you need to have, it's just a management
[00:14:17] Mikkel: I actually think that's also a positive thing. You want them to tell you that math isn't working out anymore because this happened.
[00:14:23] So I think that also shows a little bit of a commitment still to the goal, which and obviously there's a, you know, money involved.
[00:14:29] in this scenario.
[00:14:30] There's a commission,
[00:14:31] Toni: What, what you can do though is, uh, number one, you know, push back and say, okay, this now happened, you know, shit happens. This is business. What are you going to do about it? I kind of push, uh, accountability agency back to the person. And then the other thing, and this is, I think is a fantastic trick in the mid market and up.
[00:14:49] and maybe it's only in the mid market, um, but have the manager of the person distribute opportunities, distribute inbounds, or distribute, round robin, SDR bookings. So what you do with that is basically you can, you know, be in the session and be like, yup, I know math doesn't work out. You know what, my friend, I'll, I'll tilt you a couple of more opportunities, uh, to, to try and get you there.
[00:15:11] and suddenly you create this, You create this pact between the two, but also, you know, I'm not letting you, uh, out to dry, and also, hey, I'm creating a path, but for that path to work out, you also need to do a bunch of work, right, kind of really trying to kind of get those things together, and then ultimately what once, once someone just doesn't, doesn't at all buy into, you know, what you're kind of trying to achieve, it's, it's going to be very difficult to make that, make that person, make that sales, sales part of the sales team work out.
[00:15:42] Mikkel: So, and maybe this is a silly question, but how do you actually know that you have their buy in, their commitment?
[00:15:49] Toni: So this is, I think this is more of a leadership kind of thing. I think number one, for some reason, sales reps are always smokers. I don't know why. Seems like it. just go out, you know, on a smoke break with them or have, you know, your sales ops guy, you know, be there and kind of hear what they're saying there because That's where they're probably going to like, ah, that ain't happening.
[00:16:07] Um, uh, those will be ways you're going to figure this out. depending on the culture you have, those things will also come up in the one on one with the, with the VP or the, with the manager. And then ultimately, when you're basically. You're getting to the point, someone isn't performing, and then you push a difficult conversation, right, basically a performance conversation from, from the manager to the person, and then the person is shooting back with like, but you know, all of that stuff was impossible to begin with, then you kind of hear it, right?
[00:16:35] Um, and I think, If, I think if your reps are sitting in performance conversations and they are unable to push back on like, well, I couldn't have done this, you know, I can math it out for you, my friend. I think then you actually, um, you don't have a well educated sales team around this. Um, so I would, you know, heavily encourage, you know, teaching people that, it can, you know, when, when, uh, opportunity supply on your side, it can basically kind of.
[00:17:01] Uh, you know, solve a lot of motivation problems when it's not on your side. You have to come up with a solution anyway, right? Kind of, and that's then one. The
[00:17:08] Mikkel: I get that. The, um, the third one is also
[00:17:13] an interesting one. I remember
[00:17:13] I can't remember what the book was called. It's also something on leadership and people management, but it was basically a pyramid. And I think in the, first you needed trust, and then you actually, with trust, you could have conflict. And you actually wanted to have conflict. You didn't want to have a conflict free environment, which was, I was just like, whoa.
[00:17:33] That's, that's kind of interesting. That's the the third.
[00:17:35] kind of thing we're going to hop into now.
[00:17:37] Toni: And, um, this year is really, this talks really into the competitive nature of sales, which is kind of weird. Why, why is sales competitive?
[00:17:46] Mikkel: competitive?
[00:17:47] Toni: what's, what's important here is that think about your sales team and how much do they help each other? And the answer is usually they don't help each other that much.
[00:17:57] Um, there's, uh, you know, you have a lot of lone wolf kind of guys in the sales team, which is, which is usually a bad sign, actually. Um, and what should be happening is that people help each other out. They might do it because they want to become manager. and that's a great way to show already leadership and, you know, uh, basically doing some of the things you would be doing as a manager.
[00:18:20] The other thing is just to do it because that's the company culture, um, or that's the culture in the team, or that's what you're fostering. because again, right, if you help someone close a deal, it's not like that deal could have now belonged to you or something. There's, there's very. There's very little competition in that sense.
[00:18:38] Sure. Sometimes you do some force ranking, like who gets the better opps. And yes, there is some competition. You want to nurture that to a degree, but you also don't want to have it flop over and suddenly become like a super toxic hunger games kind of environment. and, um, and I would kind of try and encourage that as much as possible.
[00:18:57] Right. If it doesn't happen, you probably have a problem. And then on the flip side, and I think this is. this is where you should be thinking about either, splitting a deal or, you know, double bubbling, uh, so double incentivizing people is, I had this situation happen to me a couple of times, like, okay, junior sales rep.
[00:19:18] prospect's own meeting, tiny company, everything's good. Uh, after two calls, it's like, oops. Part of a much bigger company, , and suddenly the VP of the much bigger company that is in ownership from, you know, someone else, you know, shows up. So you have like a rules of engagement kind of issue here. Sure.
[00:19:40] But you also have a, is that junior person really the best one running the deal? Um, and for me, this is kind of the, the, the line in the sand. Once you want someone that's a, not a manager to jump on a deal and work a deal, then, um, Then it starts to become or smell like, Hey, you need to split the deal or we need to kind of figure something else out.
[00:20:03] Right. And that for me is the line in the sand. Everything that's around coaching and so forth is, is straightforward. And the reason why you want to have your folks, collaborate to some degree is simply by the sheer amount of information that is being filtered through the sales team. And therefore should also try, you know, you should try and disseminate that through the sales team as well.
[00:20:23] Right. Hey, this new feature, how are you pitching it? Hey, you know, I was just on a call, those competitors are weak in this area. whatever, you know, industry news, Hey, this is how you can build this into your pitch. Or, Hey, this is a great cold, pitch that I've been in. Whatever it might be, you want those things to be shared across.
[00:20:42] and not being kind of hoarded and held back and so forth.
[00:20:45] Mikkel: So basically this is a means to remove some of the potential conflict that people might fear
[00:20:51] That would hold them from actually taking the necessary steps to bring over a deal.
[00:20:56] Toni: Yeah. I think it's, I think it's also just creating that, Hey, this is, this is what normal looks like. if you have your most successful reps be like, always sit in the corner, not working with anyone, that's a problem.
[00:21:07] You kind of need to find a way out of this. Right. But ultimately, you know, and encouraging that collaboration. I think that's good, you know, sign that your team is broken as you have no one collaborating. Everyone is kind of self optimizing. Um, and then you simply will not have a good team coming out of
[00:21:22] Mikkel: Yeah, I think there's the other side where
[00:21:25] you do want to have some conflicts.
[00:21:28] actually that's that
[00:21:30] Actually, let's maybe hop into that, uh, that one. I don't know if you have maybe a great example, otherwise I can bring some
[00:21:35] Toni: and I'll, I'll add
[00:21:36] Mikkel: So, a couple that come to mind is the classic, hey, to close this deal. We need to discount, right? and that can trigger actually a conflict internally because there's, you know, some negotiation happening.
[00:21:48] The rep has, a monetary incentive. Bringing them closer to a commission check, right? And the company wants, to have, you know, good metrics in the business at the end of the day.
[00:21:59] Toni: So what usually happens on this discounting thing is sure the rep directly is impacted by the discount they give, but for them economically speaking they get either 1, 000 without the discount, or they get 800 with a discount, for them it's still 800, so yeah, I'm gonna do that.
[00:22:16] and, um, the, the thing that you want to create here is, you do want to create a bit of friction. I wouldn't call it conflict, but friction, um, in the process. because what sometimes happens is that the, uh, probably it happens all the time. Like, when the rep is talking to you, they're always taking the side of the customer.
[00:22:34] And when They kind of talk to the customer. They're taking the side of the company, obviously, and there's, they're, they're kind of stuck in this weird spot in between, right? Um, so as, as the customer's making it difficult for the rep saying can't pay that much, um, you kind of need to make it a little bit difficult for the rep as well to kind of get the discount.
[00:22:52] and this is not a, you need to click a thousand buttons here in order to get the discount approved. and so it shouldn't be completely automated. Like I want to have 30 percent and boop, yes, you have it approved. I think there should be some pain. and that's basically the idea of creating those discounting hierarchies.
[00:23:08] Like, well, you know, 20 percent your manager can do without, you know, anything, 30 percent you need to go to the manager of the manager and that's already enough. You can do this once, you can do this twice, but at some point your manager is going to say like, I'm not going to walk up to Bob anymore. I'm sorry.
[00:23:22] You need to get this deal over the line yourself now. Um, and, um, you know, this is, this is a good thing where you want to create a little bit of conflict actually coming up then.
[00:23:30] Mikkel: I think the other could be, um. The whole support layer for sales This is super top of mind for a lot of sales reps. Do they get the right enablement from marketing in terms of material, case studies, et cetera. Do they get the right composition of inbounds as well? And I think that's where you want to make sure that there's A bit of tension as well, right?
[00:23:52] Um, because if, if marketing is delivering the inbounds and sales is not hitting, either, it's because of the composition. Or it's because of the rep. So there has to be some kind of friction or conflict there as well to get to the root of what's actually happening.
[00:24:06] Toni: What, what we did to, to, um, solve this, we basically created a, a, a mini model per rep.
[00:24:14] so what we did was, we looked at all the opportunities that a specific rep got served. Uh, or kind of received, and then we applied, uh, what the class was doing in terms of conversion rate, ACV and sales cycles. And then we basically kind of compared, uh, what, the rep according to the model should be closed or should have closed by now.
[00:24:36] versus what he or she actually did close by now. And what this is basically then creating is Yes, this rep is hitting 100 percent quota, well done, but, he or she did that with way too many opportunities.
[00:24:52] Mikkel: Right.
[00:24:52] Toni: and, and this is then, you know, you shouldn't kind of suddenly pay a lesser commission check.
[00:24:58] I think that doesn't make sense, but you basically kind of need to create a bit of like a, you know what, actually, you're not processing and stuff really well. We actually need to kind of send this somewhere else. Right. And then you create competition around. The processing metrics. Like, the people converting the best, fastest, and has the highest ACV, they should be getting the most opportunities.
[00:25:17] Once they're filled up, kind of the next one gets it. and yes, that is creating a little bit of competition, which I think is a good thing. Um, it just shouldn't keel over, basically, right? and what is, what is super, and we're almost going back to this, um, you know, lack of commitment and trust and stuff.
[00:25:33] What is super demotivating for everyone else on the team, is, they close fairly well, but they don't hit target. They have difficult conversations with their managers. They don't get any quota paid out. And then they look into sales and it's like, well, but he's sitting on a hundred opportunities he got, you know?
[00:25:50] Um, and then it's like, uh, you know what, maybe I need to leave this team now. Um, and I think this is, uh, this is where people just need to kind of have an, have an eye on. to make sure that that doesn't happen. and then when it does happen, the way you then argue around it is a little bit through competitive means.
[00:26:05] It's like, well, you're behind your class in conversion rates. You're behind your class in ACVs. Sorry, I can't keep feeding you. You know, the other people can make more money for me. Uh, so, and I'm, you know, to a degree, yes, I'm also a business person, so I need to funnel the opportunities where I get the most return.
[00:26:21] Mikkel: Yeah, and I think that actually also fosters a bit of trust because if that, if he or she then starts performing according to the class, they also know.
[00:26:29] Toni: It's, no, it's just very transparent rules, right, uh, because the, the opposite is like, well, why is, uh, he or she getting all of those opportunities? Is it because, you know, they go drinking together or is it because he's a man or it's like, what, what is, what is the intransparent reason behind that person being favored?
[00:26:47] Um, if you can make it extremely crystal clear, well, it's because of one, two, and three, then, then it's also much more, uh, operational, so to speak, for the other side to be like, you know what, I'm going to improve one, two, and three, and then I should be getting that stuff.
[00:27:00] Mikkel: So these were kind of the soft sides, almost inspired by the five dysfunctions of a, you know, team. We needed to throw in a bonus. to kind of, You know, gels better with our way of thinking, a bit more numbers, process driven.
[00:27:15] right? So You mentioned the bowtie.
[00:27:18] Toni: So I mentioned the bowtie, obviously that has to do with the supply and demand side of the sales team. Are they getting enough stuff in order to hit quota? I usually say, um, I only serve my reps 80 percent of the opportunities they need versus the 100 percent they need to hit target.
[00:27:34] and I basically say like, well, it's not my job to guarantee your OTE. It's your job. and you can hit OTE by on target earnings. So a hundred percent of your goal, you can hit that by converting better at a higher ACV or faster, or you can just create more opportunities for yourself. And basically kind of, then I'm giving this revenue formula to the rep and say like, I get you to 80%, but you need to, you know, to get to the big payday, you need to kind of do some extraordinary stuff on top.
[00:28:02] Right. and then I think the other thing is that people sometimes miss. Miss out on or over index on, it's a little bit unclear to me. so there is a, you know, Goldilocks ratio of what your on target earnings number should be versus how much money you bring into the company. It's kind of an efficiency metric, right?
[00:28:20] And best in class is a between four and five times. So if, you earn 200, 000 a year, best in class would be that you bring in a million dollars in ARR, right? Kind of, that's kind of the best in class kind of way. And it's usually it's, so this is, you know, I was on a call the other day. It's usually the other way around.
[00:28:40] It's usually that they'd say, Oh, you know, we gave this quota, we gave a million dollars quota to the rep. because, uh, he costs us 200, 000. So, you know,
[00:28:49] Mikkel: has
[00:28:50] Toni: he has, he has to bring in a million, right. and then you kind of do the reverse math and it's like, well, how many opportunities for my, and you, you kind of figure out, well, the, the 1 million is probably the wrong, the wrong target to set.
[00:29:01] on the other day I was on the reverse call actually though. and I basically was like, oh, see. You know, everything looked great in the funnel, like everything was perfect. They're booking meetings like crazy, you know, outbound could, you know, scale that. and those, those opportunities, you know, converted really well.
[00:29:16] and they were like, but something is broken in our sales, you know, process. We don't, we don't get it. So, you know, we're not, we're not getting the returns we want to, because for me, listening to this, like. Guys, you should be like at 6 CAC Payback or something like this. This sounds fantastic what you guys have going It's like just put in more money yet, you know then you know, and I usually don't do this because usually it's not a problem.
[00:29:36] But this is so wait a minute How many AEs do you have? How much do they close on average? And you know, is this roughly what they're getting per year? So I kind of did the quick math on the call and I was like I think that one and a half to 2x of OTE and it's like that's that's your problem guys That's that's your problem and and you actually need to figure out
[00:29:57] Do you need to have this amount of people to run all of those opportunities Or could you have fewer? And then one guy was saying, well, I just opened up, you know, three people's, uh, uh, calendars and they're kind of empty. and, and I also heard now that some of them are, jumping on calls, you know, two at a time.
[00:30:15] So two reps on one opportunity. It's like, maybe there's some opportunity here to improve. Like, yeah, I think there is. I think there is.
[00:30:23] Mikkel: I think there
[00:30:24] is. So, those were the signs. Sales are broken. So, I
[00:30:28] Toni: So, I mean, this is, you know, wrapping this up, right? make sure, you keep a, let's just say you keep agency with a rep, right?
[00:30:36] You need to find ways to kind of reduce, you can say those excuses, but basically what you're trying to achieve is that the rep thinks that they can, and truly so, influence their own destiny. It's really important. Uh, number two, make sure that the targets that you're setting, whether it's quota or goals or whatever, are kind of fair.
[00:30:54] And if they are tilting into the unfair, because sometimes that happens, find ways to kind of remedy that fact, right? Because otherwise people will just, you know, unsubscribe and say, I don't give a shit about this target anymore. and then, you know, the, the fear of conflict, which is basically kind of a bit of friction you know, people should be helping each other.
[00:31:10] There should be in on some areas, a little bit of friction, a little bit of competition because that, you know, in the right balance can be super helpful and healthy for your team. And then lastly, yes, you do need to get the unit economics, right? You need to do use them in the right way. So don't put the cart in front of the horse, do it the other way around.
[00:31:27] Kind of figure out what is my, you know, on target, earnings ratio. and once it's, when it's not good. Don't just go in and change the target, but figure out how they could possibly close more.
[00:31:38] Mikkel: I mean, it had been such an easy fix. If you could just change the target,
[00:31:42] You know,
[00:31:42] Toni: surprised how many people are doing it like this. You would be surprised. Okay. Thank you Mikkel. Thanks everyone. Bye bye.
[00:31:50] Mikkel: Bye.