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No one wants to miss. But it'll happen at some point, so here’s the best way to miss a quarter.
Show Notes
If you’re ever gonna miss a quarter, you should do it the right way.
It’s not a question of if, it’s a question of when. We discuss why companies usually miss, and what can be done to avoid a hard miss.
And if you have a hard miss… What you should consider next.
Creators and Guests
What is The Revenue Formula?
This podcast is about scaling tech startups.
Hosted by Toni Hohlbein & Raul Porojan, 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.
[00:00:41] Mikkel: We are gonna talk about how to gracefully miss a quarter because you know the, So the thing is I never wanna miss. Yeah, right. I don't want to miss, And I think everybody has that clinging onto, you know, never wanting to miss. And we've talked about in the past having hit, you know, 12 quarters in a row and it sounds grand and all that, but it also follows that we've missed.
[00:01:11] The one before the first one, and then number 13, lucky number 13,
[00:01:17] Toni: There you go.
[00:01:17] Mikkel: So, I mean, you are gonna miss, It's not a matter of if, it's a matter of when, and what we want to spend a bit of time on today is, hey, you know, what's actually happening? What can you do about it, as a business at the end of the day.
[00:01:31] Right. So how do you avoid a hard miss?
[00:01:34] Toni: Yeah. And I think that's actually the, the, the point here. You will miss eventually. And I think, the, the time before we started this streak, we missed pretty hard.
[00:01:47] But then the 13th quarter we missed by like 5,000 euros. Which was at that point, like a 1% miss or something like that. I mean, it was, was tiny.
[00:01:56] Obviously it wasn't enough to keep on the, hey, you know, 13 quarters in a row, chant. But it also wasn't like anyone got fired or something like that. Right. Or we were in like chaos and disarray on me to rethink everything that happened all the first time, by the way. Yeah. And, and really the question is not, you know, how do you avoid missing softly?
[00:02:18] It's, it's how do you not miss massively? Right? How don't you have a hard miss that, you know, sends the organization to tailspin that, raises questions like, Oh wow. You know, are we gonna go bankrupt now? And, has terrible conversations in the ballroom and so forth. It's really, that is really what this is about.
[00:02:37] You know, forecasting, planning, projecting, all of those things are still very soft science, sciences and, that means that you sometimes will hit 5% above and sometimes 5% below, and that's okay. What you don't wanna have happen is to fall 40% below. Yeah. You know, something like that, that really is a wow, something is going fundamentally wrong here.
[00:02:59] And, whenever something is going fundamentally wrong, It also requires you to do something fundamentally different, to have a fundamentally better outcome again. Right? So kind of just keep doing the same thing if you're completely off. I mean, it's, that, that's just gonna, you know, result in the same outcome afterwards.
[00:03:16] Mikkel: Yeah.
[00:03:18] So I mean, we, maybe let's dive into first the soft miss you covered, you covered it a bit, right? So if, if you're now sitting in revenue operations or sales, wherever you sit and you have a soft miss, what, what should you actually do? Should you do anything?
[00:03:34] Toni: Yeah, I think, I think, soft miss is a great opportunity to have a serious conversation.
[00:03:42] You should obviously always have an mb qia looking back, trying to understand, you're diagnosing, you're, trying to figure out what, what's right and what's wrong. But it also, ties a little bit into this. Methodology that, that we have, which is, you know, never, never, waste a good crisis. you know, having this soft miss gives you the opportunity to have serious conversations without overblowing them, without making them demotivating.
[00:04:08] But basically it still gives you the, hey, this is, because usually when you're hitting, you can do a lot of singing and dancing and saying like, Hey, problem, problem, problem. But everyone will be but boss. We hit target, What mode do you want? Yeah. Do you care how we hit Target? No, we just hit Target and, and that basically is being removed once there's a little bit of a gap somewhere.
[00:04:29] Right. and totally use that and do diagnosing and try and figure out, where the problem came from. You know, could be all kinds of different reasons. And I think you should, you should do that and then obviously try and fix it, Right? I think.
[00:04:43] You know, strictly speaking for me also constitutes a soft miss is when you hit.
[00:04:50] But we are super lucky doing it. You know, it's the typical, hey, we had this big enterprise deal, they decided to sign this quarter instead of tomorrow. And as see there, see there we basically hit the target, in all honesty. And, and you know what? Those lucky punches will happen and you should celebrate them and they're part of the game.
[00:05:12] You should just not act like you expect them all the time. you should have a conversation or at least a, a discussion on, Okay, let's just act for a second that this thing wouldn't have happened now, How, how, how would, how would the whole thing, developed otherwise? And that for me constitutes a soft miss as well, by the way.
[00:05:31] Right. Kind of basically being the, you know, and there. You know, what is an outlier? And you know, all of those, questions, park them. Just say, Okay, we all agree, we got lucky with this one. not that we won the deal, but that we wanted today instead of next week. And let's just have a conversation how the quarter would've performed without it, because that wasn't part of the conversation to begin with.
[00:05:56] Right. And I think this is how I would, this is how I would structure the. The soft miss. and I think one last point that comes to mind here is, let's just say everything is great. You hit target in the right shape. the, the revenue pieces are there, the opportunity pieces are there.
[00:06:13] All of that is kind of great. What you sometimes won't see are underlying issues below, right? Kind of basically peeling the onion, you know, one or two layers further back. And what you might find is while opportunities kind of hit, but it's because one channel overperformed compared to another. Great. but that might first of all not happen next time around and second time.
[00:06:39] And secondly, that original channel that underperformed, maybe that is your growth channel going forward. We see this quite a lot. hey outbound, that's the thing you're betting on and it needs to triple in, whatever, and it ain tripling. and, and maybe for the first one or two months you can.
[00:06:56] You know, I have a little bit of a lucky punch on the marketing side to cover this, but eventually that problem will come to, to show itself, and you'd rather want to catch it at that point when, when, you know, no alarm bells are going off, than later on. Right. So I think all of these different things, they're kind of constituting soft miss opportunities, and you can catch them right there.
[00:07:17] Mikkel: Yeah. Then there's the hard miss and we, we kind of didn't wanna spend by design. Too much time on the soft miss is, you know, if you're doing your QBs, keep doing them. Do the, analysis like we just talked about, the hard miss. Let's get into that one. Yeah, it's a bit more serious. I don't have like ominous background music I can play, but,
[00:07:36] you.
[00:07:36] Toni: Yeah. So the miss, So number one, and that's really important. The first thing you should do as a CRO revenue leader, you should blame a couple of people.
[00:07:48] Mikkel: Yeah, I mean, if you started like, you okay.
[00:07:51] Toni: I mean, if you ask me,
[00:07:52] Mikkel: Yeah, I'm asking you that was a really bad setup. So you just started Yeah. A new gig.
[00:07:57] Toni: And that's no, of course you know that, that, that's never gonna help.
[00:08:01] I mean, obviously you as the revenue leader, you're gonna, you know, you own the number in the end of the day. I think the. The mechanics fundamentally aren't that much different. I think the level of change is just different. Right. And I think the number one, why, was that hard miss a surprise?
[00:08:23] That should be your number one question. You A, you should ask that yourself honestly, and you should ask the rest of your leadership team, the same thing. And by the way, that goes for revenue ops just as much here. Why the f was that a surprise? Because, if you are SMB, for example, so very short sales cycles.
[00:08:42] You have seen this problem now coming for at least 10 weeks out of the 12 weeks of the quarter. It's not like in the last two weeks you're gonna catch up and fix everything. And if you are enterprise or midmarket, your sales cycles are 3, 6, 9 month long. You, you, you've seen this problem literally coming nine months.
[00:09:03] Right. So kind of being surprised that you didn't hit the revenue number right there. I think, that is probably the biggest issue and might be the fundamental reason something is wrong with your organization. Either you, yourself, because, you know, maybe you are not like, professional enough about this.
[00:09:21] You know, it's like, it's the arrogant doctor here. I'm sorry for that. or, and the other thing is, What is the support organization around you that should have, you know, given early warning signs and so forth, and yeah, that should have been revenue operations by the way, and or, you know, sales operations, marketing operations and so forth.
[00:09:37] Kind of all of those different teams, someone should have said, Hey Mikkel, you know, can I can have a word with you? Those numbers aren't looking that great. Right? And I think this is where it starts actually, kind of not only the, Okay, we have an issue right now, we need to fix, so, But you know, how did, how, how did you not know about this?
[00:09:57] Mikkel: Yeah, and I think we also discussed it in, in a previous episode, the. If you see something going wrong, it is your duty to speak up. If you own a certain number, whether it's in marketing or sales, actually doing that is key because then the organization can do something about it
[00:10:14] at the end of the day.
[00:10:15] Toni: Yeah. And you know, this goes almost back to the soft misses. That's why those soft misses are so interesting because, you can have serious conversations about part of your revenue. to then, you know, try and proactively fix it. Right? Because likely, especially if it's a surprise, likely you were able to hit or somewhat hit the quarters before and now bomb the big hard miss.
[00:10:37] Mikkel: But I think it's, it's probably also gonna be a balance because you wanna create a scenario where people feel comfortable voicing that, Hey, I can see that the number Toni I'm owning. I'm not sure we are gonna hit it. I, I think we're gonna miss by. 20, 30% that, that takes a lot, you know, just fear of repercussions.
[00:10:58] So I think what you're hitting at is almost, you can also use, if you go the right way about it, those soft misses can help you facilitate that. Yeah.
[00:11:06] Toni: And I think we are gonna talk about this in a second, kind of, you know, on the, on the operating model side, how we kind of, you know, recommend. Fixing it.
[00:11:14] Yeah. Basically kind of having a more objective conversation Right. To kind of detach yourself a little bit from you and your performance versus the numbers and so forth. Right. But before we go there, I think the, the other reason why we see hard misses happening is, overreliance on, new tactics, new revenue streams.
[00:11:38] these kind of things, right? So, hey, we've never done outbound. We're gonna do outbound this year, and, you know, q1, q2, it's gonna be soft. Then Q3 and q4, it's gonna be, hey, it's gonna be half of the And what's gonna happen is, Q1 and q2, you're gonna sit there and be like, I, you know, didn't bring in much, but that's what we planned for.
[00:11:59] Now, step change q3, it's gonna be massive, right? And then you walk into Q3 and it's obviously not gonna happen. So that usually then constitutes, a hard miss or leads to a hard miss that even gets further exasperated than in q4 because those expect. Even higher and outbound is, you know, obviously a little bit of a go to example.
[00:12:20] The same goes for plg, the same goes for your marketing campaign. The same goes for your, upsell and churn and so forth, right? All of those tactics. Sometimes it's acv like, Hey, we, we expect ACV to jump from July 31st to August one by 10% points
[00:12:37] I was like, Well, you know, you couldn't even see it not happening.
[00:12:42] Up until the Q3 numbers came in, because basically Q2 it wasn't there and suddenly Q3 was there in full force. Right. So it's kind of, this is usually how, how those, And this is a planning error just as much, by the way, this is how those hard misses are basically being, being constructed.
[00:12:57] Mm. And then begins all the excuses.
[00:13:01] Toni: Mm-hmm. Yeah. Haven't you seen this in the spreadsheet? worksheet worksheet five. Cell C 1031.
[00:13:13] Toni: it's not my problem because it was there and we discussed that spreadsheet for, you know. Yeah.
[00:13:17] Mikkel: I thought it was V7.
[00:13:19] Toni: Yeah, exactly. Yeah. Well in my version v7, final v1,
[00:13:26] Mikkel: well, we can go down this route forever. You know,
[00:13:29] Toni: yeah And then the last thing is kind of the, basically hope
[00:13:35] Toni: you go through the quarter. Everyone, everyone, it's not a surprise. Everyone knows, Hey, this is something's going off here. And then, you know, the sales leader says, But you know, this Hail Mary, this one ticket, basically the reverse of the soft miss here.
[00:13:50] And you know what? It didn't happen. You know what, it didn't come in and came in the next week, and likely it's not even gonna come next quarter. That's my experience, by the way. and now you have a massive hole there in your, in your revenue. and basically gonna say like, Oh, you know, the, the reason why we didn't hit was this deal slipped.
[00:14:08] But that was not the reason, you know, the reason that you missed was that all the other staff didn't perform. And now this deal slipped also. On top of that not helping you out. Right. And I think those are the three most common things that I've, you know, run into myself and that we seeing with, you know, obviously all of our customers hitting their target but, you know, those are some of the common themes that we see across.
[00:14:30] Mikkel: Yeah, so you kind of alluded to it, there is a bit of a hidden problem. You said it's kind of also the planning piece and it is a multifaceted thing. I, I, I think we should, what we should do now is move into, hey, what is then the model for our listeners to make sure it's a soft miss if they're gonna miss in the first place.
[00:14:52] Toni: So, and I think this goes a little bit to, and maybe there's a bit on the nose, but what we are doing here at Growblocks, right? really having an operating model in place that you have, you know, side by side next to your financial model. A financial model will usually be about not running out of money.
[00:15:14] Your operating model is how to make money and mixing those two worlds usually doesn't work really great. You usually end up with this, you know, top down approach that tries to break it into all kinds of MQLs. That's really not helpful. but what you do need to have, and you know, this could be an Excel spread exercise for user CRO or revenue leader and or for the revenue ops team to understand, how many opportunities and leads do we know by what time.
[00:15:42] you know, state cycles included and the distribution of those, some close earlier, some close later, and so forth. and, how are we gonna get more of those opportunities and how those leads, right? So really having a clear understanding in the organization. You know, if I do X that will result in more opportunities and there should happen here.
[00:16:00] And if they don't, then I know we have a problem. Right? So really an operating model. That is, you know, the first piece of the calculation that you would need to do in order to start being able to, hey, it's, Q1 and we have nine month sales cycles on average. something is going off here already and basically that's gonna create a Q4 problem.
[00:16:21] And you know, at least now, you might still miss by the way, but at least now you can, number one, have a good conversation. Number two, you won't be surprised by the Q4, miss. And number three, you can maybe take some, let's just say mitigating action. It's like, okay, we have a gap now of, I don't know, half a million euros.
[00:16:39] What can we do about this? You know, option number one is Lucky Punch Enterprise deal. You know, we're back to number three on the list by the way. and number two is, okay. Maybe we need to, shift resources around, maybe the US is really expensive. Maybe you pull someone to that in EMEA and maybe that gives you more bang for the buck.
[00:17:00] Or maybe a different team needs to pick it up. This is something I see super rarely where don't have a CRO or RevOps. Let's just say, I don't know why, but marketing screws up. and you know, you can, you can already see that there's gonna be a gap by the end of the year. Can another team pick it up?
[00:17:18] Can sales figure something out? Can CS figure something out? and you wanna have that conversation on March and you don't wanna have it in November.
[00:17:24] Mikkel: And I think that's often where the conversation turns into, well, marketing can, you just need to get your stuff together?
[00:17:31] just go hit that number. And the thing is, you can scream or yell as much as you like sometimes of, you know, the players on your team doesn't mean they're gonna go out and score.
[00:17:41] Toni: Yeah. And, and, and just, just because you as a CEO or CFO or COO really wanted, doesn't make it true. No. You know, I'm sorry. And, this is really where if you're able to align your financial model with the operating model, in different words, it's the top down and the bottom up.
[00:18:00] Basically, if you're able to align those, chances are you're going to hit whatever number you're wishing for. Right? And the issue that I've found with, you know, the operating model usually is a bunch of people wanna log into this. A bunch of people wanna understand that. on the finance side, you usually don't have that, right.
[00:18:17] You have like, very sensitive stuff in there and you don't wanna, you don't wanna kinda share this broad, the operating model really needs to be kind of a shared asset of, of the rest of the organization.
[00:18:26] Mikkel: Yeah. And the problem is, if you are inventing a solution yourself in a sheet and you give someone access, you're gonna find all of a sudden some formula somewhere broke or even it's hard to understand. Right. But I think the point we're making is you really need to understand that, you know, $1 you have, where are you gonna put it?
[00:18:46] Where are you gonna invest it? And for what outcome? And so, Sure. We are building a solution. That's great. What are some of the, the structures and things you need in place in order to go and, and actually build that, you know, build that model? I know we've, we've talked a bit about really understanding how revenue is created, really understanding your engine, your model, but what does that entail?
[00:19:09] Toni: Yeah, so I think it has potentially two potentially more different angles to it. I think the, the one is, and especially, you know, for revenue leaders and rev ops, there's a, a human side to it, right?
[00:19:23] It's not just data. There's human side to, to understand how the different roles interact with one another. what the limitations are of those roles, how you can move some of those. Levers around and maybe kind of create more revenue or less cost. I think that's one side. And then I think the other side is really the, the data side behind it.
[00:19:42] Yeah. And the data side, I think in a very simple format, could simply be how many opportunities do we need to create month of a month of a month? And ideally split them into your main, revenue motions. I just say inbound and outbound. Why would you split it? Well, your inbound opportunities are gonna behave very differently from your outbound opportunities.
[00:20:07] Everyone sees it. So usually what you see on the inbound side is lower average contract value because you can't target it so precisely, so you will kind of have more. On the bottom coming in, we'll usually have higher conversion rates, so we'll be loved by your sales reps. We'll have, shorter sales cycle, so we'll be, you know, done quickly.
[00:20:28] And your, upbound opportunities will be the reverse of all of these things. Higher ACVs, because of targeting lower conversion rates, because they're basically cold, longer decision making cycle.
[00:20:38] probably because they're higher ACVs and because they're called at the same time. Right? And if you mix those two things up, you basically kind of create impreciseness and issues.
[00:20:47] You don't wanna do that. You wanna be like very precise, at least on those two levels and create a opportunity based operating model, right? And then the question is, okay, how do I get those opportunities up? And now I have a fantastic conversation. You can say like, Okay. What about the, you know, we hire 10 more SDRs.
[00:21:03] We know from our past that this is how, those opportunities from the SDR team has been performing. We know that they usually bring in between eight and 12 opportunities per month, and there's a ramp up to it, yada, yada, yada. and then on the marketing side, you can have conversations about, okay, we know we get X amount from Google ads all the time.
[00:21:20] We feel we are tapping out because CAC payback there is already in the red. Hey, our direct and branded search is nicely ticking up month over month. We expect that to continue. And then you might add, you know, additional channels on top and you might have an understanding what that means and opportunities coming out of it.
[00:21:37] It's sometimes difficult for marketing kind of to say how many opportunities, but at least now you have an approach, right? Yeah. And what that now enables you to do with, you can see that something is going wrong already on the hiring.
[00:21:51] Oh we plant a five SDRs in their seat on February. They're still not here.
[00:21:55] And it's, you know, April Gap. What do we do about this? Or Oh, oh. we, launched this new campaign on the marketing side working out, Yeah. What, what are we doing about this? Right? And that now enables you to have a really, data driven conversation because those numbers obviously need to tick up. and you can, very, intelligently but also without much thinking actually be like, Hey, wait a minute, we are behind over here and the five reasons are this here.
[00:22:27] What are we gonna do about this? Right? So this is extremely powerful and since I'm on a rant anyway, kind of going a little bit into the marketing side, what we see a lot is MQLs need to tick up. Sure. That makes a bunch of sense. And, I mean, you're a marketing partitioner, you know exactly what happens here.
[00:22:47] You basically know that your, the value traffic or the value MQLs, they're just not tripling by themselves usually. Usually it's much slower growth. Right. And really what you're aiming for, a demo request from direct and branded search, and that has a trajectory to it. And then you do this the first, second or third month and you see like, Hey, this is not growing as I wanted to.
[00:23:10] So what do people do? They mix in other leads that they call, you know, MQLs webinars, place it intense. Yeah. Webinars, white papers,
[00:23:22] Mikkel: Yeah. Yeah.
[00:23:23] Toni: newsletter signups. And by the way, it's totally cool to do that. I don't think there's like, this is a good or bad marketing tactic. I think what is just important, if you then were to expand your model from opportunities to leads, You basically wanna say, Hey, those opportunity are those MQLs that found us through direct and branded traffic.
[00:23:46] Basically, they know you, they know your brand. They basically coming to you to buy, they click the request demo button. Those will be your, your money MQLs and they will convert in a certain way. But then there are those other MQs, you know, Facebook webinar leads. They sign up and it's great and you know, probably great cost per lead and stuff, but really you will sign up thousands of those.
[00:24:10] Potentially you will hit your MQL target. There will be a high five in that room. I've been there. I held my hand up as well, by the way, and I celebrated. But everyone knows those thousands of MQLs from, you know, Facebook webinars, they won't convert as the true hand raisers that you actually wanted to convert.
[00:24:27] Right? And then having a conversation at that point in time and be like, Hey, we missed the MQL target by a bunch. In reality, instead of, shutting up, which most marketers by the way do.
[00:24:41] I'm not gonna, I'm not gonna, you know, walk back that statement. I think a lot of marketers, well now I
[00:24:47] Mikkel: I just stayed quiet to see if I could get you to do it.
[00:24:51] Toni: it. I think a lot of marketers do that. It's like, hey, we had the ther target and then there's like this silly debate about, you know, MQL definitions
[00:24:59] Mikkel: Yeah, yeah, yeah.
[00:25:00] Toni: but we did, the problem will come out three to six months later. And then oh, yeah, no, we don't know why that happened. If you have an operating model in place that, you know, sets targets for all of that stuff, you, you will, you will be able to pinpoint that like immediately.
[00:25:13] Mikkel: I, and I think it's so critical, like you're splitting the opportunities. You wanna do the same on the marketing side with leads. It's, it's totally legitimate to create contacts on existing accounts to help enrich and, and so on and so on. But, The kicker really is you're spending money on both direct demand gen, so getting the demo request and you're also doing it, you know, more top funnel with webinars and so on.
[00:25:37] You cannot expect them to convert on the same rate. But if you're doing it to generate revenue, you do wanna consider how much you're spending and what the yield is, and you might be shocked. In what you find. And, and that's back to if you have a model, it's okay also to have initiatives where you test certain things out, to
[00:25:56] Toni: Yeah,
[00:25:56] Mikkel: validate the hypothesis you have, but you need to pay attention to where, where is, where are you putting your dollars and what is coming out?
[00:26:03] Toni: And this is, so what's really important, This is not an attribution conversation. We're not discussing, Oh, you know, you know, you should really use, I don't know, GA or hubspot or or whoever to do the magic attribution for you.
[00:26:16] It's not about that. what it is about is simply understanding. Whom you're collecting here through what tactics, where they are in the funnel and the buyer journey. You know, flip this around, they're not in a funnel, they're in the buyer journey. And for if they're further away, you can't expect them to close as, as quickly as someone that basically is, Hey, I'm ready to sign, basically.
[00:26:37] Right. That it just won't be like that. And I think that's really important to make sure that, that you differentiate those two things. And by the way, my. super simple trick for everyone out there. MQLs are only the ones that are true hand raisers. Demo request, trial request free trial quote, request Yeah, So yeah, someone that basically says, Hey, I wanna, you know, I wanna see this thing, I wanna try it out. Everything else. Then the true hand raisers, everything else is just a marketing lead.
[00:27:14] You shouldn't throw it away. It has its purpose. You can nurture it and finally, at some point get it to an mql. But don't mix those two concepts and don't, don't start this conversation of like, Well, wait a minute.
[00:27:27] That person clicked on the pricing page five times, therefore it's now an mql. No, don't, Don't do it. Wait until they click the demo request on the pricing page, then it's an MQL, but not until. obviously all of those marketing vendors are trying to tell you a completely different story than I just did. but, you know, the hands down approach that, that will be it for
[00:27:45] Mikkel: So that's, I guess how you soft miss a quarter.
[00:27:50] Toni: That's how you keep soft missing
[00:27:52] No soft
[00:27:53] hit No. What the f you're doing, know it early enough. Cause correct. Cause correct. Cause correct. And that's how you're gonna hit in the end, right? It's not you're gonna guess.
[00:28:04] Mikkel: No.
[00:28:04] Toni: The number, it's, it's execution in no calls
[00:28:07] Mikkel: guess Yeah That's the saying. And I mean, so it is almost you. Five episodes to hash out how you build an actual operating model.
[00:28:17] Yeah, this was just scratching the surface, but it's, it's back to the point. You need to know what you're doing, what effect is it having on the business? It's really obsessing over how revenue is produced at the end of the day.
[00:28:28] Toni: Yeah. Yes, that's absolutely what it is.