[00:00:00] Toni: Hi everyone, this is Toni Hohlbein from Growblogs. You are listening to the Revenue Formula. In today's episode, Mikkel and I are welcoming back the one, the only Jacco van der Kooij. He is sharing how a lot of major changes are happening right now at the same time how they're resetting SaaS and what this new phase might mean for you.
[00:00:25] Mikkel: That's it.
[00:00:26] Jacco van der Kooij: That's just a spiel.
[00:00:27] Mikkel: But umm
[00:00:28] I mean, it should be pretty straightforward with the guests we have. I was like, Toni was writing me, shouldn't we prepare something?
[00:00:34] It's like, yeah, we should read the thing. But I mean, Jacco, you ask Jacco one question and then he just. After
[00:00:41] Toni: game. So this is, this is the thing, this is the thing with like you professionals, right? We had also Sangram obviously kind of similar caliber like you, I think especially in this one here. And you know, when I listened to the episode, I was like, wow, Toni, that was a shitty question.
[00:00:53] But the thing is, because you guys, you know, I've done this so many times, you just knocked the answer out of the park anyway, right? It, it's not the quality of the, of the, the reporter anymore. It's, it's the
[00:01:03] Mikkel: queer anyway, the thing is the host talent. It doesn't really matter when the guest is so great, like the one we have today, and that's actually, that's actually pretty amazing.
[00:01:12] So we have, uh, once and again, Jacco with us. Welcome Jacco. Oh, wow. Pleasure. You're just on the phone here. Pleasure to have you , a lot sooner than I kind of thought, but very, very pleased to have you here with us. If you, the listener, don't know Jacco, which probably isn't the case, I hope it's not the case.
[00:01:31] If not, winningbydesign. com, go and read about the bow tie or watch some of his famous videos. There's occasional music in there, which just really lightens the whole, feel of it. Uh, he is known to provide deep and well articulated SaaS insights, also well researched and of course, also known for being a previous guest on this show.
[00:01:50] Toni: And he's very well known across the whole industry for taking off his shirt on our show the last time.
[00:01:55] Mikkel: That's true. So, and I was, I was just going to say, like, we talk about buttering people up. We're buttering up the guests here. Yeah, that's, that's, that's what's happening. That's what's happening. But so I wanted to just start off with a you know, a slow ball and say, uh, welcome.
[00:02:09] What have you been up to the last four, it must be four to six months since we last spoke.
[00:02:14] Jacco van der Kooij: Yeah, you know, like a lot of it has been talking about revenue architecture and I think, uh, a lot of it has been dealing with the things that are going on in the industry, trying to talk people off the ledge and, and, and stuff like that. You know, because many people either have lost, you know, not many, but there's a, there's a group of people who've lost faith in SaaS, misinterpreted and stuff like that.
[00:02:32] So that's where I've been busy with.
[00:02:35] Mikkel: And I think in between you published also a book. It came out, what, January one second.
[00:02:42] Jacco van der Kooij: Yeah, I have no idea what the official publication date is. But yeah, that book Revenue Architecture was a, was a large piece of my work, uh, that I've been, uh, working on over the past, uh, five, six, seven years that, you know, finally got the time to put it together. Um, and the, the, the book Revenue Architecture primarily is about, uh, a, a, a more modern approach to setting up, uh, a rapid growth company, which most cases are either, you know, a subscription or usage based company.
[00:03:08] But, but, but taking away the veil and describing where does it come from? How does it actually work? Um, I think one of the things I found over the past few years, particularly when the market turned South on SaaS, how few people actually know how to operate it. And the best way for me to describe it sometimes is like, people are driving, are sitting in a rocket, but driving it like a car and touching the handles and are touching the paddles.
[00:03:34] They go like, that's how a car drives. Let me see how this, and like, they're steering that rocket ship of growth, uh, sometimes up accidentally and sometimes down accidentally. They just, you know, often don't know due to lack of education, how to operate it. That's what
[00:03:48] revenue architecture is
[00:03:48] Toni: that's why we're here. And, you know, uh, you obviously just kind of to come up and spread the word on the methodology. And we're helping to amplify that as much as we can.
[00:03:56] Jacco van der Kooij: Yeah, that's right. Now, I think that what's also what we're going to see, and I think that also applies in the reason why, you know, like, I like to consider myself a return guest on your show is tooling is a very, plays a very important role in here. I think that we often, you know, misunderstand that. We often think that that's the way a SaaS company starts, which is based on superstar performance, you know, whether that is a founder or a group of founders, um, but once it takes off, you relying on systems and processes, which, in execution ends up being a tooling, you know, like, and that can be a wide range of tooling, but, you know, obviously your folks at Growblocks know everything about this as you, as you provide one of the fundamental tools for this.
[00:04:37] Mikkel: That's it. So last time, Jacco, we spoke, we spoke about a ton of metrics that were basically going sideways. You had just launched the, uh, Solving Underperformance Research. Since then you launched one that was cheekishly titled, Has SaaS lost Go To Market Fit? And what I'm really curious, know, is what are you actually seeing today?
[00:04:57] What is it the SaaS businesses and those GTM teams, they need to know is happening right now?
[00:05:02] Jacco van der Kooij: I think that in many cases SaaS did lose go to market fit and it's sort of primarily on the basis that the pricing no longer is sustainable. For me, pricing is a go to market fit, uh, uh, element. And if you're pricing, not if it's off by 5 or 10 percent and you're competing against it, but if you're off by 20, 30, 40%, Then essentially you got a go to market fit issue.
[00:05:24] that will be felt all the way back into product market fit, where you are going to find that pricing needs to be re established and that may change the profit margins of the product and whatnot. And so you, you may have to go even go back all the way to a product market fit.
[00:05:40] That pricing combined with the increased cost of sales and, you know, like has led to a loss of go to market fit. So pricing pressure up five to ten percent. That's fine. That's you know, you can compete with that But if the pricing starts to drop twenty thirty percent and what I wrote about in that paper Mikkel was that NRR would be next right and this paper was written like six months ago and guess where we are today NRR is next.
[00:06:05] Now good news NRR will be the final the final part of the storm But yeah, we are in that we have embarked We started to open up of that NRR metrics for the next three to six months
[00:06:16] Toni: But the, the reason why you're saying go to market fit is lost, you know, because of ACV pressure is, uh, ultimately because the, you know, the, uh, the CAC Payback, right, where all of this comes together per a specific motion, suddenly is so out of whack. That you basically say like, well, it's, it's, it's too far off.
[00:06:35] You can't scale this. You can't do this sustainably and therefore go to market fit is lost. Right. Kind of, I just want to kind of frame it in that direction.
[00:06:43] Jacco van der Kooij: Yeah, you are absolutely right. Note, uh, Toni, that it is not just CAC Payback, what we are, as we, it is also, uh, what follows next, the payback of that, and whether that is cost to serve, payback, whatever we refer to that, but the, the cost of retention and expansion, is significant too, and it's significant because it takes place over a number of years.
[00:07:06] And so the combination of that, right, a large upfront cost, with a growing cost to retain and expand the customer combined, right, those two combined, that offers the long term sustainability and valuation of companies, that's where they have taken a hit on that, right? Uh, every now and then you see the publication of like, Oh, exceeded a certain growth targets, but stock went down.
[00:07:31] Why? Yeah. You know, your cost of, um, um, maintenance and cost of expansion is way, way, way too high.
[00:07:37] Mikkel: I'm wondering if you want to set the stage for the listener and what we're going to talk about today, because you're such a great narrator. I think I can't do the topic justice. I would love for you to maybe set the stage for us here. Uh, so we can dive into the subject.
[00:07:51] Jacco van der Kooij: Sure. Like what I find is that we're in a great moment of change. A radical moment of change that we all find ourselves in. What I notice is when you're in that moment of change, you often experience it, but not to the extent of that, of the gargantuous nature of that change. This is one of those moments that we're in, that we, it's like, The first week of COVID, we had no idea that within like a few weeks later, all the airports would literally stop flying.
[00:08:22] You could not get a flight any longer. And the high, and I, you know, I've always looked back on that moment that I drove on a, on a highway during traffic jam hour, and I go like, there, there's no car, and I'm calling my wife, like, there's no cars on the road. Today, we are in that first week of COVID. We do not understand yet that what is changing and how big that change is.
[00:08:42] And as a result, we are not taking the right actions right now. We are not, we're, you know, organizations are holding back. Um, and that's fine. You know, I just want to make sure that we have on record that there was once a time when the three of us got together in a room that we predicted what was about to happen.
[00:09:00] And then we go like, okay, here's, here's where we're going. And what I also find is that the future is not that unpredictable. We can predict what is going to happen and we can prepare for that. But we got to take action and we can't sit still. And so that's, I think, a great topic for us to talk about today is like, where do we go with that?
[00:09:20] Toni: So, but let's take this analogy one step further. So you're, you know, what's the, what's the oh shit moment. I'm on the highway in LA, you know, traffic jam hour and there's nothing, no one around, how does that come to be in SaaS right now? Kind of, what are the signs that you're seeing where you say like, Hey, this is what's going on and maybe you're only the, you know, one of the few ones that's actually seeing it.
[00:09:43] Jacco van der Kooij: It comes down to this. SaaS as a business, a subscription and usage based business model. And for all intents and purposes, I will use Zushits as a form of subscription as it is recognized, okay? So subscription and coverage both. That is the best business model. It grows the fastest and it will suit us for a decade or more to come.
[00:10:07] It will, for the next decade, it will be the best business model. The problem is, the oh shit moment as you so refer to it is, it is being not operated as such. Day in, day out, it is being used and operated by, primarily by VPs of sales and CROs who operate it as a rapid growth acquisition strategy. And that is not the case.
[00:10:29] What I'm predicting is that SaaS within like a few years will be under the realm of the CFO more so than under the realm of the CRO, because the CFO understands where this comes from. The reason why I'm saying that and why it is like, I continue to see CROs who often control SaaS. Make, uh, the adverse impact on the business. And just over the past three weeks, I have spoken to CFOs at companies, several of them at a hundred plus million dollars in revenue, and they keep making that mistake. And, and, and, and, you know, I will elaborate a little bit in a second, what it is, but indeed in detail, but what it is about is like. You cannot shift during this moment of downturn your sales resources to start upselling and cross selling customers because the cost of that is way, way, way too high.
[00:11:21] And so this rocket that they're flying and the adverse behavior that they're having is deploying their sales resources at an extreme high cost. To start harvesting customer's revenue. Very dangerous. And not customers as a new customer, right? As an existing customer's revenue. And so that is a very dangerous, uh, uh, yeah, precipice that we're on, that we see many companies, um, uh, make a mistake on.
[00:11:44] Toni: And when you say kind of CRO versus CFO, for me, you know, besides the letters and the background, it's almost kind of a long term versus a short term kind of perspective that those two profiles, you know, how you can differentiate them sometimes, right? CRO is like, I need to hit my quarterly target. And that's in front of me right now.
[00:12:01] CFO thinks about, no, you know, we, we not only need to hit the year, we need to hit the next several years. and having kind of a different perspective is, is that, is that how you're kind of seeing it? Or is it really? The, Hey, these CROs, they don't get it. And the CFOs do. What, what's kind of, how do you, how do you, how do you see that?
[00:12:18] Jacco van der Kooij: Let's give a simple example. I'm selling a million dollar piece of software perpetual. I've sent it to you on disks, right? Like, let's say, let's let me go back. Okay. I sent you a million dollars on disk. Uh, I closed the deal. When does the deal get recognized?
[00:12:30] Toni: Immediately.
[00:12:31] Jacco van der Kooij: Immediately. When do I get paid?
[00:12:34] Toni: I don't know. 30 days later.
[00:12:35] Jacco van der Kooij: 30 days later, let's say 90 percent and we'll hold something back.
[00:12:38] How much profit do I make 60 days later?
[00:12:40] Toni: A lot. A lot profit.
[00:12:42] Jacco van der Kooij: Okay. And I can already subtract my cost of sales and everything from it. Now let's apply that to SaaS sales, a subscription revenue
[00:12:49] Toni: hmm.
[00:12:49] Jacco van der Kooij: that takes place over years, over those years, my costs increase and, and, and some costs amortize and some costs don't amortize, right?
[00:12:58] Like my, my, my things compound, the whole machine is way more complicated. Do you ever see a VP of sales or a CRO acting with that, with that mindset, when they close the deal, they don't. And whether that is, whether they gave too much discount away, whether that is, whether they, uh, construct a deal in the wrong way, whatever it is, it, the CRO doesn't think about this.
[00:13:20] Now, imagine during the 2012, 2021 timeframe when there's so much revenue laying around wherever you go. It's just, you know, grab it, grab it, grab it. Like there's enough of it. And that mindset may work. Now we're in the 2024 mindset. Those deals are no longer around.
[00:13:40] Toni: But let's talk about that, right? So COVID was a virus that, that was. That was the reason why you suddenly were alone on the highway. Um, what's kind of, what's, what's the driver for this change, for this shift in, in SaaS from, from your perspective?
[00:13:54] Jacco van der Kooij: Okay. A more mathematical approach to revenue. And what we currently see that, that most of the times it's all about like still acquire, acquire, acquire growth, right? And, and that is not the case. It's acquiring the right deals. It's acquiring at the right cost. It's acquiring customers that have an expansion opportunity, not just customers that contribute.
[00:14:15] Because in, in many cases it takes, you know, more than 18 to 24 months to recoup a profit on that. So if you, if you bring on a whole bunch of really bad customers that don't grow, you bring on a whole bunch of costs that you, that, you know, like, and there's a saying, the more customers you win, the more money you lose, right?
[00:14:31] Like, like, like that is a bad thing. That means something is going wrong. Um, and if you don't educate people on that, then, you know, like we are going to continue to, uh, to have bad SaaS business. And now they will flush out, right? They will flush out automatically. So from that perspective, there's, there's not that much.
[00:14:48] What I like to say, and if I bring that back is. We're in that moment of change. So that change is occurring, like whether I want it, whether you want it, that, that, that is changing. Do you know that it is only a year ago that SVB went, went, went out of business?
[00:15:06] Toni: What was that again? I don't, I don't actually, SVB. I don't know what that is.
[00:15:09] Jacco van der Kooij: How long was that a topic? Was that a topic for a week?
[00:15:13] Toni: I think two new cycles, two new cycles. Then it
[00:15:15] Jacco van der Kooij: Two news cycles, right? You know, like, you have to understand, like, like, that was a signal that the market, if I would have told you, like, 14, 15 months ago that all this would happen, and how, that what happened to Hopin and to Convoy and, and many more to come, right?
[00:15:30] Companies that are completely, uh, financially out of whack, either go bankrupt, close doors overnight. Billions of dollars based on valuations are, are being, you know, like thrown away. Good companies will succeed. Great product will always work. So now, great product, it will be one out of 10, one out of 20 picker.
[00:15:49] But there's a whole bunch of millions of hundreds, billions of dollars invested in other companies who have a decent product. We primarily have a go to market issue.
[00:15:57] Toni: mean, and then at the same time, right? So this is, this is one change you're describing there. Um, and then we have this whole AI thing landing in the go to market piece that, I mean, how does, how does that fit in? Right? Kind of, that's, that's, that's another thing that's certainly. Fundamentally screwing with all the fundamentals, , that we were like, oh, you know, if you, uh, if you are a rep, you need to have an OTE or four to five x.
[00:16:20] And, you know, that's, that's how that works. Kind of all of these fundamentals there, you know, we haven't seen it yet, but there might be challenged actually by it. Right. So kind of how does, how does that play into the current, uh, to the current situation? Mm-Hmm.
[00:16:32] Jacco van der Kooij: Yeah, first of all, you know, like, um, the reason why we are having this disruption is because the cost is too high, right? And so, we're dealing with the cost of people. I want you to understand, and I'll take you to AI on the road there. I want you to understand there's multiple GTM motions. You have a no touch GTM motion, like a very PLG style.
[00:16:52] You have a, uh, a low touch GTM motion. Think of an inside sales rep or something. You have a high touch motion. Think of like a, an expensive, uh, not an expensive, but, uh, you know, like a, a fielded salesperson who visits customers and, and who carries an expense report and stuff like that. Right. Every time you move up a GTM motion, your cost to acquire a customer and cost to service a customer is somewhere between 5 to 10x.
[00:17:18] So from no touch to low touch, 5 to 10x. From low touch to medium touch, 5 to 10x in cost. The reason why those costs go up is primarily because of human involvement. Now human involvements can do great things, But human involvement also can slow things down. And in many cases, we see more and more that customers up to 20, 000 are being slowed down by salespeople, not increased the velocity.
[00:17:46] It's that, you know, buyers would say, Well, give me a quote quicker, faster. Give me a discovery call this afternoon. Why do I have to wait three days from now? And so on and so forth.
[00:17:54] This cost. Today we see that ai, we see AI as a tool to bring those costs down. We go like, oh, you know what? We can do things faster, we can do this, uh uh, um, uh, we can write more emails and stuff like that.
[00:18:08] And although that is an absolute thought of, and we should consider using AI in that, it's a form of an application. And in the as as we apply AI in that level, it'll help us, but only marginally. So what I'm going to describe to you. There's two key things down here. Number one, those who focus on using AI as an application, do not focus on AI building a machine around it.
[00:18:34] They just focus on like, oh, you know what, my email. Okay, I check I'm doing AI. That's not where AI is the strongest. AI is the strongest where we close loops, where we bring lots of data together. We draw insights from that. If you focus on application level, you're You probably are going to miss the boat in some form or shape, right?
[00:18:54] Because you think you're doing it, but you're not really doing it.
[00:18:56] Toni: Mm-Hmm.
[00:18:58] Jacco van der Kooij: Second thing, AI, the problem with AI, as you refer to it, is why the reason why it's so disrupts. It doesn't disrupt just like, like when, when Manny came out with, with, uh, with Outreach, one of your recent guests. Right? He was the only product in the market combined with SalesLoft, but they were in a small category that impacted a small part of the business, aka lead development.
[00:19:20] Right? And so, uh, when John Miller came out with, uh, uh, ABM, right, it only impacted a part of marketing and part of sales. Tools, when they historically have come out, only impacted a small part of the entire customer journey. AI impacts the entire customer journey. Right? Every part of it. So it touches every product, it touches Gong, it touches Outreach, it touches Gainsight, it touches ProductDev, everything.
[00:19:51] And it does that all at the entire same time. And then it does so all in an, uh, how do you call it, in an egalitarian way. Everybody gets reset. Done. We're all starting all over again. And so now this entire market is starting at the starting line all at the same time. That is why this is such a drastic change, right?
[00:20:14] And then some of it say, Oh, I'm going to use it as an application. I'm going to help me write, you know, like now I have a, you know, Ability to write automatic emails, while the real, uh, uh, goal lies in writing it on an application, on a platform level. Okay,
[00:20:29] Toni: And so, I mean, we have the, the AI piece, we have some of the financing pieces kind of that you kind of mentioned earlier there, and I heard you talk about this, another time, but what about some of the pieces that basically have changed since COVID in a, how employees behave, what employees do, back to the office, not in the office, you know, want to go on a field trip, doesn't want to go on a field trip.
[00:20:50] Kind of how, how do you think kind of that readjustment, you know, come in or at the back of COVID is impacting this whole piece.
[00:20:57] Jacco van der Kooij: so when we say GTM, we have a couple of fundamental elements in GTM. Tooling is a fundamental element, processes is a fundamental element, and human execution of these processes using tools is a fundamental element. If I'm changing the tools, they are becoming AI enabled. And if I'm changing now people, which I'm going to talk about in a second, then you start to understand the GTM as a whole, go to market motions, marketing, sales, customer success, account management, every part of it is under a full blown.
[00:21:31] I don't want to call it attack because that sounds like a negative, but we're under a full blown modernization. This in itself, right, the advent of AI, changing the tools, the change of the financial markets, more cost centric, more towards sustainable growth that we spoke about earlier. By themselves, those two alone would already cause massive disruption.
[00:21:54] But lo and behold, we have a cultural change that you're referring to. That cultural change is the third one that we are at the very same time have a reset on. COVID reset all markets that we care about, right? You know, like I'm not going to be beyond SaaS kind of thinking. I'm just going beyond software. It pushed everybody into the, we were already remote capable, right? We already had Zoom say, but now it pushed everybody out of the office. And if you, you know, like go to San Francisco, I mean, we're here in March 2024. I can tell you, San Francisco is not what it once was. You cannot, and I'm not saying living there.
[00:22:31] That's not what I'm referring to. I'm referring to the buzz in the town, you know, like floors filled with SDRs and AEs, right? Like, like, like that no longer is there, you know, that's gone. And, and where are those people? They're, they're remote. Now, at the same time that, that we push them all remote because of COVID. A cultural change occurred. That cultural change cannot be ignored. We cannot say, oh, you know what, it's the millennials. It's not necessarily an age group, although a particular age group is disproportionately impacted. It is the mindset of, I can work remote and be productive. And this productive versus activity mindset is hindering companies.
[00:23:12] And we have some metrics I can share with you that shows that this productivity is under severe threat. That cultural change of productivity threat because people are working remote, therefore not as productive as they once were, uh, is causing a lot of disruption out there in the market combined with all the other disruptions, right?
[00:23:31] Costs are going up, uh, you know, like there's less deals going around, valuations are down, uh, AI is coming in to replace it, right? All those things combined create like this heap of a storm that we're finding ourselves in the middle of right now.
[00:23:45] Toni: And so we kind of talked about, you know, the, the financing part, we talked about tools being disrupted and basically kind of your go to market motions being disrupted by AI. We talked about, uh, employee behavior changing. The last thing is almost like, what about buyers? You know, are buyers also changing the, the, the, the way of, of, of buying stuff?
[00:24:02] What's, what's, what's happening there?
[00:24:04] Jacco van der Kooij: Let me tell you, you know, like, if you think about it, you gotta see the trend line. When you see the trend line and when you feel the trend line, you go like, Ah,
[00:24:13] do you remember when you bought your first book online or something like that? When you entered for the first time your credit card and bought something, okay? How much were you willing to spend that first time on a credit card online?
[00:24:25] Toni: 20 bucks or something like that.
[00:24:27] Jacco van der Kooij: 20 bucks. Where are you today?
[00:24:30] Toni: So I can tell you, I bought my car using my phone. you know, I'm just saying,
[00:24:36] Jacco van der Kooij: That's your ability to buy a car, you know, like, let's call that a 50, 000, whatever, hamburger kind of thing, right? 15, 000, 50, 000 euros, 50, 000 pounds, whatever it is, like, but you're willing to put it on a credit card because you pros likely the brand that you bought it from, you just trust the brand, you trust the brand that you buy it from.
[00:24:56] They go like, look, you probably trust the brand more, buying from the factory, you probably trust that more than you trusted buying from the dealer. That's 50, 000 for an individual. Where do you think the company, where do you think B2B companies are headed?
[00:25:13] Toni: Yes. so I think that makes absolute sense. Right. But then there's always kind of in this PLG conversation, that's always like, well, well, well, well, but you know, those processes are complex and it's a complex tool and it's not like just buying a Tesla. It's, you know, it's different. I mean, there's, there's a little bit of truth to that also.
[00:25:28] Right.
[00:25:29] Jacco van der Kooij: Of course, you know, like when you buy a system, uh, as a sort of a platform that, that requires deep integration with database, uh, connectors and whatnot. Absolutely the case. And there's. There is a support needed for that. Now, do you still want to talk to the salesperson to explain to you how that works, or do you want to talk to the engineer who explains how that works?
[00:25:48] Toni: Yeah. No. So you're totally right. Yes.
[00:25:51] Jacco van der Kooij: right. And so like, so what we see, and I remember this actually, it was a few years ago, was a story coming out of the German market. I don't know whether it was true or whether it was a thinking that, that, that just aligned, but But that BMW had replaced its salespeople on the floor with car enthusiasts because they found that the car enthusiast had a higher attachment rate, sales rate, than the salesperson had.
[00:26:17] And whether that is true or not, the idea behind it is valid. The idea behind it is a person who's an expert in a particular topic and can explain that to you in a passionate way. Is considered, you know, like modern sales. I don't think that that is a salesperson who enthusiastically twist your arm and negotiate you and have some secret negotiation tactic, right?
[00:26:39] I think that what it is, is a person who understands their, their product very well, and a person who understands how you can apply it very well in your, in your environment. I think that. Those are the professional sales experiences that we're looking for. And today they are very far and few in between.
[00:26:55] Toni: So I think you mentioned earlier, you have some, some numbers, some stats to share around kind of all of these pieces coming together. Do you have like a, like, you know, a couple of high, high impact pieces that, that people get, you know, where people get scared about?
[00:27:06] Jacco van der Kooij: Yes. Top, you know, when we think about the bottom, uh, bottom X percent performance, what historically have we dealt with? What do we call an organization? You fire the bottom X percent. How much are we talking about?
[00:27:19] Toni: Bottom 20.
[00:27:20] Jacco van der Kooij: 20. Today it's 28%
[00:27:24] When we say the top X percent, how much is the top X percent?
[00:27:28] Toni: 10 I would say, actually, not sure.
[00:27:29] Jacco van der Kooij: Today it's 4.4 because now I have to go behind the digit because we're so low. 4. 4. So what we see is top performance has reduced from what you refer to as the 10 percent to 4. 4 percent and the bottom has increased. Although those are valuable numbers, that's not where, where necessarily the big, the big thing is happening.
[00:27:48] The big thing is happening what happens in that, uh, in that next two groups. We see that on, right now, that about 28%, that includes the, the 4. 4, that includes 32%, Is acting, is, is performing at a normal level, as in over 80 percent in the sales performance or over 80 percent in customer success performance.
[00:28:12] So it's about what, give or take, give it that one third. Then let's say that the bottom 20%, which is now 28%. Let's also name that one third. So we kind of like have three groups, right? The top group that is performing normal, the bottom group, which is not performing, and then there's the middle group, that middle group, that one third, that essentially is trending towards the bottom group, not trending towards the upper group, that is a significant setback that we were not necessarily, we were either worst case that they were stabilizing.
[00:28:43] But they are trending downward. The top one third, given the same amount of opportunity measured across 60, 000 records, outproduces that middle group with the same amount of opportunities and generates one and a half times as much revenue in the sales function. Then it does the middle group one and a half times.
[00:29:03] What differs, what is different between the top one third and the middle one third? The top one third actually takes an interest in what the customer wants to do with it. The middle one third is selling what we got on the truck. That is a problem.
[00:29:17] Toni: So this is a problem. This is a skill problem, right? We can also go into like, Hey, is there something on the opportunity distribution, lead distribution, all of that stuff, right? But ultimately what this means, right? So yes, you have, you have issues on the seller level, but all of those issues, they push through to your top line.
[00:29:33] They push through to your bottom line to push through to all the efficiency metrics that an investor cares about, that your CFO cares about, et cetera. Right? I mean, That's basically kind of just one example for, you know, the whole bowtie being under enormous pressure and starting to simply kind of keel in the wrong direction.
[00:29:50] Jacco van der Kooij: Hence the call that we have here today. We're in that moment, right? It's hitting us, uh, it's hitting on those productivity level, which has its roots in cultural. It's hitting us on productivity level. Which is being disrupted by AI. It's hitting us on the cost structure, which is hitting us on sustainability level.
[00:30:08] So we're in the middle of that moment and few people seem to realize and act upon it, right? And, and look, we just come out of a couple of weeks. We see snowflakes, uh, what, what happened to Snowflake. We see, and that they will come back. I don't think that that's the point, but we see a number of changes occur in the market right now, in right in front of us to what we deemed previously to be successful companies.
[00:30:32] And now, as they say, when the waters start to recede, you know, like we see who's naked, suddenly the picture that starts to evolve is like, okay, and it all comes down to metrics. It all comes down to financial, pure financial metrics. Are you creating, are you creating profitable? How much are you spending on marketing and sales?
[00:30:48] If you're spending, and you can look it up, if you see that a huge amount of companies that Spend 60 cents on the dollar of revenue on marketing and sales. That's a lot. You gotta do a lot. That's a long payback period. If you spend, and that's on your, on your public statements, right? Um, if I, if you simply divide for the, for the users who want to take a look, For the listeners who want to take a look, just look at an average SaaS company.
[00:31:15] Go out, pick a popular SaaS company that you go, like, look at their, their quarterly statement. Just Google quarterly statements, right? Like say, Oh, quarterly statement company X last quarter. And then look at the cost of marketing and sales, right? It's a line item and look at the revenue that they bring in.
[00:31:30] Divide those two. If you, if you come to the conclusion that they're spending. 60 cents on the dollars of the total revenue on marketing and sales. That is not of the newly acquired revenue that is of the total revenue. Last time we were on here, I was telling you that the, the cost of acquisition, if I divide those numbers against new revenue, we were in the 150 to one hundred and sixty, one hundred seventy range.
[00:31:55] Today we're at the 260% range.
[00:32:01] Toni: So, I mean, we talked about the background, we talked about the stakes here. The other thing is also who, who shouldn't get shit scared right now, right? I mean, it's like, it's, it's one thing, you know, it can scroll through LinkedIn. You've seen these trends a little. I think many things that you just said, weren't, completely wow.
[00:32:18] I've never heard of this. Uh, actually the problem is putting them all together. Realizing that they're all impacting one another in like, ways that we don't actually have a good way of comprehending this thing. I mean, it's almost like, I mean, who shouldn't get shit scared based on, based on what they're listening to right now?
[00:32:35] Jacco van der Kooij: Okay, if you have great product, great product sells. If you're less than 10 million dollars, 10 million, below 10 million dollars, folks, it's all, like, you should do whatever you get to get to the first 10 million dollars. So anything below 10 million dollars is, I wouldn't call it fair game, but you should just go out, get on an airplane, don't look at costs, and don't look at tools.
[00:32:52] Don't, don't use it. Use AI as you see fit. Whatever gets you there to 10 million dollars. It's fantastic. If you have a fantastic product that people are buying off the shelf right now, Vertical SaaS, for example, has a lot of that. You have less to worry about. Those markets, Vertical SaaS is a fantastic, what is Vertical SaaS?
[00:33:10] Salesforce sells CRM to everybody in the world. IDEC sells a CRM solution to veterinarians, right? Like, and Intep sells a CRM solution to, uh, uh, lawyers and, and, and accountants, right? So there's a lot of companies out there. That's Vertical SaaS. You're focused on a vertical market. Why does that work?
[00:33:29] Veterinarians are not impacted by much of what's going on in the world, like, you know, like Lawyers probably only get improved, right? So vertical SaaS, relatively isolated, unless they get over 400 is million, because then they too no longer are vertical. Like it's, a vertical market is like up 100 vertical, 200 vertical.
[00:33:50] At 400 million dollars revenue, you become a global market, no longer a vertical SaaS market, right? And so, so those are all isolated, uh, there, are, and to some point. Others, you're going to see that companies in which the CFO plays a key role in the decision process and understands how the rocket works.
[00:34:14] Those companies will do well.
[00:34:16] Toni: So, let's, you know, roll in the crystal ball, um, and let's look a little bit, um, with all of these things that you're seeing, What's, what's going to, what's going to happen next year?
[00:34:29] Jacco van der Kooij: First we're going to see NRR continue to, uh, you know, like, uh, create an impact. So that dependent on which vertical. Will take three, six months or take us to summer of two, through the summer after that. As more and more companies have now, um, struggled, have solved it as, as, as fewer companies have, the realities will set in that this company, that SaaS companies adhere to a new business model.
[00:34:59] And that, that people need to understand that business model and that the margins are now so thin that we need to calculate out three, four, five years into the future, how much profit we're going to make out of that, that NRR of next quarter and NRR rate that is being reported for Q4 of 2024 doesn't indicate what NRR will be in 2025, six, seven, that we need to actually know what that is, and that we have to calculate and build our business around that.
[00:35:28] That will be the, the, the trend. And then, and in that, systems and processes. I want you to think of the following. The pendulum swinged all the way to like a free flow style. All the way. Green grass. Where is that pendulum gonna swing? It's gonna swing the other way. What is the other way? If, if I call SaaS in 2015, The, the, the free minds, you know, grabbing, you know, like everything up.
[00:35:54] What is the opposite of that? Where's the pendulum going to swing, Toni?
[00:35:58] Toni: No one buys anything and everyone churns everything.
[00:36:03] Jacco van der Kooij: Yes. Uh, I think that, you know, with 35, 000 SaaS companies, it is correct to assume that we will see a change of how many companies and, and, and, you know, we're just coming out of, uh, Drift was just acquired and Catalyst was just acquired, right? So we're going to see a lot more of that. So we're going to see that merger and acquisition and fewer and fewer are Uh, come out of that.
[00:36:25] But the other thing that is, is like, uh, uh, the opposite of, caring free and doing free systems and processes. And if you see how many car manufacturers there were in the 1920s, and if you see how many there are now, and you see what has happened, it is essentially the industrial revolution that changed.
[00:36:44] If you go through four revolutions that changed it from one, two, three, four. And we're today in the fourth revolution. Note that marketing and sales, the GTM function. Is about 30 years behind manufacture. We often think of it as advanced. We barely over the past decade have touched automation in go to market, right?
[00:37:05] This was something that was already happening in the sixties and seventies in conventional manufacturing.
[00:37:09] Toni: Yep.
[00:37:11] Jacco van der Kooij: Now we are now AI. I believe that AI will help GTM gain foothold. I'll explain that in a second, but we're that, that pendulum is swinging the other way to systems and processes, which benefit from AI, which lowered the cost, which we just addressed is a problem, which increases sustainability, which helps the investor interest.
[00:37:30] All these things are benefiting by that pendulum switching to a systems and processes approach.
[00:37:38] Toni: And I mean, the, um, I mean, I've, I've been talking about this a little bit. I mean, the, you see some of the consolidation they're happening. Um, but some of that is not only, uh, also go to market driven. Some of that is also cap table driven, right? So I don't want to take us kind of off in the wrong path, but to a degree, some of these cap tables with their valuations, there's just no way out, right?
[00:37:58] They cannot grow into those valuations. They cannot actually. Um, you know, deploy the cash or get more cash in order to get there. So there's, you know, I started calling kind of a walking dead situation also. Right. So it's not actually only kind of some of the inability to, you know, to sell and grow, but it's actually the inability to add more venture capital or whatever they need in order to get to some kind of a cash out date.
[00:38:20] Jacco van der Kooij: You're absolutely right. I, you know, like, Imagine that you, well, not imagine, over the past, you know, before, uh, ChatGPT came out and before AI became a more widely available resource is that at a fraction of the cost, right? That's the other thing. AI became available. But the, the cost point that it became available and application that is, that was unheard of, right?
[00:38:41] imagine that you would have, like, I think we spoke about last time, you're, you know, like a company that deployed for three, four years, a whole group of engineers in some, some think tank somewhere to do that. And suddenly overnight, you know, like that one is not only your, not only is it now free, you're behind because that was available for free is better than what you have.
[00:39:03] That's what happened. That will and should have an impact on evaluation, because previously your evaluation was based on you having this advanced development in AI, and you no longer have that.
[00:39:16] Toni: So kind of in connection to this, how do you think people are going to steer those companies differently? Right. Because all of that stuff is happening around them. You know, sometimes they're seeing, sometimes they're not seeing it, but. Uh, CEOs and, you know, people running those things, they need to change stuff around.
[00:39:30] What do you think is
[00:39:31] going to, what do you think is going to happen there?
[00:39:33] Jacco van der Kooij: Let me give you the solution to because I, you know, like, okay, like I got every, we are all like struggling, like, okay, but what, tell us, tell us Jacco, what is the solution to this? Okay.
[00:39:43] Toni: Hey, hope you're enjoying the episode so far. Just a quick word. This show is hosted by Growblocks and it simply wouldn't exist without it. And also without Groblox, Companies such as Superside, Brandwatch, Leapwork and more wouldn't be able to see their entire funnel in one place.
[00:40:02] They use it to easily find problems in their go to market, test solutions with what if scenarios and ensure that they're on track to hit their growth goals. That's it. Back to the episode.
[00:40:13] Jacco van der Kooij: The solution to this, and I use an analogy, the solution to this is to think about your business beyond 10, 20 million with that ear, with that, with that note.
[00:40:24] Beyond 10, 20 million dollars, your business should be treated as a revenue factory. Now, what is the goal of a factory? What's the number one goal? If I build a factory, what is my number one goal of doing with a factory? Like, I'm building a factory for bicycles, skateboards, whatever it is. You pick it, right?
[00:40:41] What is your goal of a factory? Number one thing.
[00:40:44] Toni: You want to churn out bicycles.
[00:40:47] Jacco van der Kooij: More bicycles. and, and and not have them break like mine did the other day.
[00:40:52] Toni: Yeah. And, and you want to, and you want to have it like, you know, run like clockwork, you know, you don't want to have a bike here and then bike there. You want to have bikes all the time.
[00:41:02] Jacco van der Kooij: So you want to produce lots of bikes that don't break quality, right? And what is this whole, what are we doing with this venture? What is, what
[00:41:11] is What
[00:41:12] is extra? What do need to make money. Jacco.
[00:41:14] We need to make money? The three goals of a factory. Production, profit, Quality. Now, quality was a latecomer to this game because they forgot about quality.
[00:41:25] And what happens if you eliminate quality and you want to increase production and you want to lower the cost? Your quality is going to suck, right? So they figured out later on, it's like, which gave rise in the 1950s, 60s to the quality management like, like thing, right? So number one thing, think of your, your, your your machinery as a revenue factory.
[00:41:43] Your SaaS company is a revenue factory beyond 20 million. A factory has production lines. Can you, can you think of me, what's inside this revenue factory we call SaaS, would be a form of a production line,
[00:41:58] Toni: A motion outbound, inbound partners. And then all the wonderful exotic stuff. Uh, like podcast. What is event led? Uh, what do you have? Com community led, you know, all of all of this wonderful new things that we have.
[00:42:12] Jacco van der Kooij: a GTM motion. So if I have a PLG based inbound motion, that is a motion. If I have an enterprise motion, that's a motion, right? And these motions are essentially factory production lines, right? And so if I have, and you'll see this commonly, when, like I said, we obviously at Winning by Design, we see a lot of this, Companies at like 100, 200, 300 million dollars are operating and generally are dependent on two to three factory lines that produce a lion's share of the revenue, right?
[00:42:41] And often, you'll see this. What you see, when a GTM motion aligns really well with the product, companies explode. Inbound and which company?
[00:42:52] Toni: HubSpot
[00:42:53] Jacco van der Kooij: HubSpot, PLG and
[00:42:57] Toni: Uh, Atlassian or Slack?
[00:42:59] Jacco van der Kooij: Slack, Atlassianan. When the the, the Go-to market motion of a company lines up with the product, it skyrockets, right? Like that's, that's where the, now what you'll see here is that these production lines have a capability of producing, we call that scalability. How much do they produce? And they have a cost structure with it, which we nowadays refer to as sustainability.
[00:43:22] Is that production line sustainable and scalable? Here's what you'll see. Lots of people spend too much money on GTM motions, factory production lines, that are not producing enough revenue. That are just like, like that's a common mistake. We are spending like disproportionate amount of cost on a GTM motion that is not producing. Now, what that also means is, we're not spending it on the GTM Motion that is actually generating growth. Why is that? Oh, we just turned over the new VP of Sales or the new VP of, uh, or the new CMO. Who decided that we were going to change XYZ. We decided we're going to change the tools. We're going to change the methodology.
[00:44:04] And so you suddenly railroaded an existing and functioning go to market motion production line. Suddenly somebody stepped in and changed that. So it's number one thing. Think of a factory, realize that the goals of a factory, growth, cost, efficiency, and quality line up perfectly with, with, uh, with our SaaS services and which quality is what we refer to as impact, right?
[00:44:28] Divide that in go to market motions and run the analysis, financial analysis, on these go to market motions. Are they scalable? Are they sustainable? Now here's the tick, the thing that I want you to think about. In year one, is a go to market motion sustainable? And why not?
[00:44:50] Toni: You follow the S curve, you need to figure this out. It's going to be shitty in the beginning. At some point you're going to hit the acceleration and then it might be great. I
[00:44:58] Jacco van der Kooij: but if, if I launch a GTM motion in year one, let's say that, that, that enterprise motion brings me two million dollars in sales. Why is that not sustainable in year one? What is the major cost that I incur in year one?
[00:45:10] Toni: the boot up costs, right? And you also don't know if, you know, what you have been doing is that repeatable even, right? Kind of there. There's a couple of questions still that early on in a motion need to be answered.
[00:45:19] Jacco van der Kooij: And at the same, your answer comes to the client acquisition cost is really. So now you amortize the client acquisition costs over the revenue that comes in the future years, right?
[00:45:30] Toni: Yeah.
[00:45:30] Jacco van der Kooij: Now, remember when you said earlier, Hey, Jacco, when we sell perpetual software, I get profit 30 days later. But right now I need to amortize the client acquisition costs over the next years.
[00:45:41] How many years, Toni or Mikkel? How many, how many years?
[00:45:46] Toni: So enterprise, I mean, I don't know. I mean, this is accounting, right? It needs to be over the lifetime of the customer actually that you acquired them with. If you, I mean, if, if that's the bookkeeping question here, Jacco,
[00:45:56] Jacco van der Kooij: How do we calculate lifetime? Follow my thinking here. How do we calculate lifetime?
[00:45:59] Toni: The quality, right? Kind of that's, that's, you know, how, uh, how long did you have the impact? Is it multiple years? Is it one year and so forth, right?
[00:46:05] Jacco van der Kooij: And, and what is lifetime? How long is that average?
[00:46:09] Toni: For enterprise, what, three years, maybe? No, no, no. Enterprise is kind of high as like five plus, but I mean, who knows in the beginning of a motion, right? It's kind of, it's very difficult to know that in the beginning.
[00:46:18] Jacco van der Kooij: Okay, you say, who knows? That's what I'm going to pull on. If I buy a product, if I buy a router from Cisco or something like that, right? I don't say, when I buy it, I don't say, well, who knows how long it's going to go? No, the finance department has a word to say about that.
[00:46:35] Toni: Yeah.
[00:46:36] Jacco van der Kooij: The finance department amortizes that and says like, okay, we're going to do that over three to five years.
[00:46:42] Here's my take. We need to, we need to think about SaaS platforms as we amortize. We cannot live with a variable lifetime horizon value of some sort. We can't say, well, some product is five years, the other is seven years. We simply need to say a product, if we sell a SaaS product on an annual license, as a platform, CRM and ERP, market automation system, we do that. Then we need to look at it over five years, how much profit that brings us. And that profit needs to be at a certain rate, 20%. 30%. On an application, it's shorter. Like think of a Calendly, it's not as sticky as if I installed a HubSpot. HubSpot should do easily five years. Calendly should do three years, but then, you know, like it may be integrated in some product and stuff like that.
[00:47:35] Toni: this whole analogy is really centered around the go to market piece, right? Because if you, if you go really profit, profit, then a couple of other things also need to be considered here. Right. But, you know, to kind of bring it a little bit down to earth, isn't what we're kind of talking here about, CAC to CLTV.
[00:47:50] So customer acquisition cost ratio over customer lifetime value. Isn't, isn't that part of the, the equation that you're thinking of?
[00:47:58] Jacco van der Kooij: Okay, I want you to think of following layers. At the bottom layer, I'm looking at volume metrics, how much MQLs did I get in? Right. How much revenue do I generate and conversion metrics? What's my win rate? What's my churn and so on and so forth. At the top level of that, I create, you know, like performance metrics out of that performance.
[00:48:14] Metrics is where I say, well, I paid that salesperson X and they generate a deal. So now I can hold the two of them and say, okay, on average, we generate X revenue. That's in this case, I use that as layer two, layer one. Layer 1, pure metrics. Layer 2, we're calling performance metrics. Layer 3, finance metrics.
[00:48:32] How much was the lifetime value of the customer? How much was the client acquisition cost? And layer 4, Investor metrics. What's the CAC to LTV ratio? How long do you think before the metric at layer one achieves a metric at layer four, what is the time frame between?
[00:48:53] Toni: So it's basically kind of between the operational stuff that someone is doing and something is happening and the delay and lag kind of all the way through. Right. Kind of, that's, that's a question. I don't know. Like, uh, I mean, so for example, that retention rate, if, if you take that one, that's going to take at least a year until the next renewal point.
[00:49:10] Right. So if you're selling enterprise, uh, you know, software, you're kind of going to wait a year before you have that updated metric, basically that impacts then, you know, the CAC to CLTV, for example,
[00:49:20] Jacco van der Kooij: Driving, you know, how it's harder to drive a car, uh, backwards than forward, right? Because the, the wheels are at the back, right? If I attach a truck to it, it's harder to drive a truck backwards with a load because my steering is opposite, right? Because there's a delay in response, so to speak. Okay. I want you to think.
[00:49:37] If we're going to continue to fly the business on an operational level, using investor metrics like CAC to LTV ratio is like driving a truck backwards on a highway and trying to reach 80 to 90 miles an hour. You won't get to speed because that thing, you're driving it the wrong way around. We need to drive it on the operational level, meaning we need to drive it on the metrics that take place on the lower level.
[00:50:00] That lower level metrics is the reason, now that doesn't mean that, that, that, that the investors are causing a problem down here. No, they're not. They're doing what they're doing and what they're supposed to be doing. We should just stop driving the business like that. We should drive the business operational metrics.
[00:50:16] How is the manufacturing line performing? Like the CAC to LTV ratio, whether that is the right ratio beyond, like LTV is undefined, CAC is applied to the entire company over all marketing and sales. You can't run the business like that. I need to know whether my enterprise motion in Europe is working. I need to know whether my PLG motion is growing fast enough that it will become a viable option in 18 months, right?
[00:50:39] Like those metrics are operational metrics. They are falling under LTV. Nowadays what I hear, the popularity about whatever the rule of 40, like come on people. The only thing that those two factors have that contribute to a rule of 40 is the percentage point.
[00:50:54] Toni: But, but so
[00:50:56] Jacco van der Kooij: That was a joke by
[00:50:56] Toni: yeah,
[00:50:57] Jacco van der Kooij: I didn't see you laugh.
[00:50:58] Toni: we skipped over that one. No, but so I think you also label them in the right way though. Uh, they're investor metrics, right? And what do investors really like? They like to have, you know, a set of numbers that, you know, fit on, you know, a hand, uh, that they can compare companies between, you know, between them basically, right?
[00:51:14] It's like, Oh, there's a good company and there's a bad company. But if you take those, those metrics, and try and steer the business through that. That's, that just doesn't work. That simply doesn't work, right? You have to do it from the bottom up. You have to do it where stuff actually happens and then what you have to do.
[00:51:29] And this is what, you know, and this is where I almost would challenge you on the CFO thing. Instead of seeing this as a, Oh, we, we know we need to hit this metric because, Hey, this is benchmark. Let's, you know, let's top down, calculate how everything needs to look, look like below. That's also the wrong way to go about it, right?
[00:51:46] That might give you a directional idea of what needs to happen in the bottom here. But ultimately it's, what are we going to do here in the operational mud in order to drive the metric that we want to achieve and then have an outcome in order to go in the right direction, right? Kind of that, that needs to be the way you think about this.
[00:52:03] Jacco van der Kooij: Okay. I, I like everything you said, except the analogy. I want you to think it is the investor mud and the operational clarity, right? Like, like, because the, the operations is pretty clear, right? Like, like, and that's the reason why I believe so much in companies like, like Gong, because they're even further to the, the real, they go, they can go into a call metric, right?
[00:52:27] They can see like, it's like even further out there. Anyway, point being here. Is that this level of insight, like look at where we're going from. We're going from the growth at all costs pendulum on one side, and we are now swinging to the other side, systems and processes. Now, here's the good news and fantastic news about that over well, the bad news is eventually we'll over swing to the systems and processes side, right?
[00:52:51] Five years, 10 years from now. But for the next two years, we'll be in the right in the sweet spot, that pendulum as it comes swinging back for the next couple of years, we'll be in the right mix of. A mindset of growth and all costs with an implementation in systems and processes. Powered by AI in a market that is more suitable for SaaS companies, most likely that are not going to try to tackle the entire world as a whole, but more vertically focused.
[00:53:19] That, that metric is on that momentum we're in. Over the next 12 to 24 months.
[00:53:26] Toni: And, and this is a Growblocks, plug here. Now, if you want to do all of that stuff in a spreadsheet to go from your bowtie model to the, you know, other metrics, to the investor metrics, you can also come to us and request a demo and kind of, you know, see how we're solving that for you.
[00:53:40] Jacco van der Kooij: Look, and we did not set that up this way, right? And I wanted to make sure.
[00:53:45] Toni: We didn't. No, exactly.
[00:53:47] Jacco van der Kooij: Oh, but you know, the reason why we, you know, like, look, there's a group of people that are grouping up and they're starting to understand that this is, this is how it goes. Look, I've been, I've worked with so many companies over the past, over a thousand companies.
[00:54:00] You know how many companies, like when I calculate them and say like, Hey, you know, like what you do technically shouldn't work and they just hire another hundred salespeople and they go like, see, it works, right? I go like, it doesn't work. You just got more revenue. Your valuation went up significantly.
[00:54:14] You went public. And then I see these sales leaders, CEOs on stage. I grew this company and I go like, but dude, like. You grew like, and you know, like I know the stories nowadays, we're talking about companies that are raising, like, have, having raised 80 to 50 to a hundred million dollars, bringing in like four, five, 6 million in revenue, like folks bringing in four to five, 6 million in revenue against 50 to a hundred million dollar raise.
[00:54:40] Yeah. Like, like, I don't know what, what that is, but it's not a scalable or sustainable business. I know that for sure. Right.
[00:54:46] Toni: I think, you know, we had like a section here where we talked about, ah, you know, those sales guys, then, you know, some of them are better, some of them are worse. And, you know, that has changed and there's a skill gap, right. Kind of this one thing, but then the other thing, right. When you go one level up, which is kind of a, uh, a skill gap on the leadership.
[00:55:01] level on the how to operate the business kind of level, right? Uh, I mean, I also got to say, let's just be, let's just cut everyone here some slack. I mean, there's a bunch of stuff happening at the same time. And I don't think that, you know, the three of us know exactly, you know, what needs to be done and how everything is to change.
[00:55:19] I think what we have an idea of is like, Hey, there are a couple of methodologies, couple of tools, couple of ways of thinking. thinking how you might be cracking that nut. But I don't think, I mean, maybe Jacco, you have like a better answer for this. I don't think we have cracked the nut either yet, right?
[00:55:34] Jacco van der Kooij: I don't think any of us have. What I can tell you is if we look at history and how other markets dealt with that, we're not the first to run in an issue like this, right? We're not the first. And like I said, there's a reason why there was a first industrial revolution, a second, a third and a fourth, right?
[00:55:48] By the way, there's no fifth. Google it. There's no, so I, I assume we're coming to the end of existence because, you know, the industrial revolution has no fifth. I have, um, also, um, I just saw the movie Dune. This is a complete sidebar, but,
[00:56:02] um, if you go back. No if you go back, I won't spoil it. If you go back, uh, and you an, and you listen to where June comes from, and when, uh, Frank Herbert wrote that story, it was at some point in time, AI ruined the world and therefore they forbid technology.
[00:56:17] And so anyway,
[00:56:18] Toni: so Dune went back to religion basically. Kind of this tech stuff was forbidden and then, you know, religion instead.
[00:56:24] Jacco van der Kooij: Yes. And anyway, and, but the, the, the point is that, um, we can look at other industries and see how they've dealt with it and you know, like we're in, we are following that same trajectory. We're just delayed.
[00:56:36] Toni: So, and I think this is a really great hook in here, because the, the way I've been thinking about this, right, I think there are really prominent voices out there that talk about the golden age of SaaS is over, and you know, we're all doomed, and you know, let's, let's all be grumpy. But I think actually what happened is the convenient age of SaaS is over, right?
[00:56:54] The boom time of SaaS maybe is over. And really what's happening is the same that has happened to, you called, you know, car manufacturers, aircraft manufacturing, you know, you don't want to be Boing either, right? It's kind of, it's the same thing that's happening again and again.
[00:57:08] It's a maturity curve. It's a maturity curve of an industry. SaaS is one. And now we kind of need to understand not only how to better, uh, Manage that thing that we are calling SaaS, uh, but you know what will come with it will be more tooling, more understanding, more guideline, more intelligence in order to make better decisions because you're operating on a different margin now.
[00:57:28] The margin of error is decreasing just as it has been decreasing for car manufacturers, just as it's been increasing for pharmaceuticals, just as it's been increasing for all the other industries that came before.
[00:57:39] Jacco van der Kooij: And like that, all those other industries eventually became a factory. It is time for SaaS to become a factory. And that, and again, with the earmark here. That up to 10 to 20 million dollars, it's not. It needs to be like entrepreneurial spirit. It needs to be like, you know, like going into the jungle with like, uh, like cutting through red tape, red tape with a machete, right?
[00:58:01] Like all that is up to 10 to 20 million. And by the way, every new GTM motion
[00:58:08] starts over at zero. So every new GTM motion until it reaches 10 to 20 million dollars is starting with that entrepreneurial spirit, which is a fantastic application. Of your entrepreneurial founder, right? Like, Hey, we may run a business at 120 million.
[00:58:25] That may not be much to the, to the skill set of the founder any longer, but we're launching a new business unit that starts at zero, redeploy your founder in that because they are the ones who can cut through the red tape of a machete and get it going again. Right. And they start zero, 10 and so on. And that, that, that, uh, that adds up. Like if you bring back every growth follows the S curve, right? The S curve is a summation of all the independent GTM motions that you have in your factory lines. Each GTM motion follows a form of that S curve. That S curve, when we look at that GTM motion, each function in that, in that production line has a conversion rate somewhere.
[00:59:10] That conversion rate can be translated to a trendline. That trendline is either going up, more sales are being, that could be a, win rate could be a trendline, discount could be a trendline, uh, churn could be a trendline, uh, the conversion rate from lead to opportunity. All those need to be optimized. When you look at the business like that, you're running a 200 to 300 million dollar revenue factory.
[00:59:31] If you do that at 10 million, you run it into the ground,
[00:59:35] Toni: Yeah. Mm-Hmm.
[00:59:37] Jacco van der Kooij: Now that switch, if you see today, where is the mindset? The mindset never switches from that one to the other. When you go to school and you come out of like, like college and you go to the next school, right? University or whatever it is. You clearly have an earmark, like, okay, clearly have a marker.
[00:59:54] This stage ended, this stage started. We don't have that in SaaS. We don't have that clear marker other than IPO, which in many cases is too late, right? But like, we don't have that clear marker. So we never feel like, oh, we're out of the 20 million, You know, startup phase and we're into the, the, the 200 million scale up phase.
[01:00:15] Companies historically, today it's changing. They kept operating in the startup phase. They kept operating in the growth at all costs to 200 , 300, 400 billion, 2 billion. And there's numbers that it goes above that, right? 5 billion. They keep operating in that. Those days are over. And you call that the days of convenience.
[01:00:33] I think that it's appropriate. I don't think it's the days of, um, of what you, uh, the, the days of rapid growth are still here. And they are still coming. It's just for a new generation of company. We have a CFO, uh, more in control and a CRO that has a CFO mindset. Rather than a CRO who has a CMO mindset.
[01:00:51] And I don't wanna cut the CMO short down here, by the way, because if there's one role that is going across the entire customer journey these days, it's, it's the CMO. They, they do see the complete impact of the customer more and more.
[01:01:03] Toni: You know what Jeko, I
[01:01:04] think.
[01:01:05] Jacco van der Kooij: When, what, tell me
[01:01:07] Toni: I think this was okay, interesting, you know, um, Was
[01:01:12] Mikkel: it because we buttered him up so much in the beginning, now you just want to bring him
[01:01:15] Toni: back down? So we are missing the music from Jacco, you know, that's not here. He hasn't taken off his evenest sweater yet. No, no. I mean, look at that, right?
[01:01:24] Mikkel: Um, I, I can do one for the team and just
[01:01:26] Toni: button one up. It's fine, it's fine, it's fine, it's fine. Um, Jacco, this was fantastic. Uh, I hope not everyone is, you know, looking out the window and then thinking about whether, not they should jump now, but, uh, I think there's a way out, right? I think it's really important to understand this is the stuff that's happening.
[01:01:41] but there is a, there's a very clear way to a way out and kind of managing throughout that change.
[01:01:46] Jacco van der Kooij: look, I pick up something from you, which to me is, is, is, uh, not necessarily the wrong conclusion, but it's, it's a, you interpret this as a, as a, like, Hey, it's the, the, the doom day. I interpret this as a, this is a fantastic day. Because here's my problem. Over the past years, my ability to forecast who is successful and who is not successful had more to do with which VC was behind it and if their pockets were deep enough to keep funding the losses. The future that I'm seeing is the right products that are bought by customers who want it, who end up being profitable are going to succeed. So to me, this is like a, the Phoenix rising from the ashes kind of moment. This is the moment where we're in, I go like, finally, because this makes sense to me where we're going.
[01:02:34] Where previously I was going like, I sit there with founders. I go like, I have no idea. But they just pulled up in the Lamborghini and they got like, but I have no idea how they got this this far. And it was primarily on some VC backing that was unlimited funds to see that those days are coming to an end and that the days of reason and production and whatnot are up is exactly where I believe.
[01:02:57] Like that excites me more than, than the previous phase.
[01:03:01] Toni: That's it. Wonderful. You know, Mikkel is kind of giving the sign like, Hey, hey, it's Toni shut now. Shut up
[01:03:07] Mikkel: now. I mean. So this was a really wonderful episode. Jacco, thank you so much for joining us once again. And, uh, I mean, we can always offer you a standing slot on the show because, uh, you tend to have a lot of great insights for our audience at least. And we definitely appreciate being able to amplify some of the important insights that you
[01:03:26] Toni: share. So Jacco, this was great.
[01:03:28] Thanks so much, man.
[01:03:30] Jacco van der Kooij: It was a pleasure and a pleasure. to all the listeners for being with us today.
