The fastest growing companies use growth models. You probably already have one - but is it fully built out? Does it really work?
In this episode, we talk with Anthony who's build quite a few.
In this episode, we talk with Anthony who's build quite a few.
- (00:00) - Introduction
- (02:43) - Diving into Growth Modeling
- (11:39) - Challenges and Pitfalls in Growth Modeling
- (16:08) - Understanding Pipeline Needs
- (17:35) - Challenges in Planning and Execution
- (19:49) - Involving the Right People in Growth Planning
- (23:49) - Building a Comprehensive Growth Model
- (27:01) - From Planning to Execution: OKRs and KPIs
- (28:56) - Real-World Growth Model Case Studies
- (39:41) - Final Thoughts and Takeaways
***
Connect with us
✉️ Newsletter: https://www.revletter.io/
Creators & Guests
What is The Revenue Formula?
This podcast is about scaling tech startups.
Hosted by Toni Hohlbein & Mikkel Plaehn, together they look at the full funnel.
With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.
If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.
[00:00:00] Toni: Do you want to grow 2X or more next year? Raise another round, IPO, or get acquired? Then you're going to need a solid growth model.
[00:00:10] Anthony: We had doubled every year before that. Now we have to find a way to grow by 16 million. And we're not going to be able to do this by one big account coming in. We're going to have to really engineer our way there.
[00:00:22] Toni: That's Anthony Enrico, the founder and CEO at Leanscale. And he will be the first to tell you that those models are not easy to build, but you for sure won't hit your targets without them.
[00:00:34] Anthony: You have the data and you can prove that you can plan and execute against that plan. Multiples that could add for your exit, the multiples that could add for your next round of investment and the confidence that it can give investors is going to be far and above what you would achieve without it.
[00:00:48] Toni: In today's episode of the Revenue Formula, We talk with Anthony about how to create an effective growth model for SaaS startups and the problems most companies face doing it. Enjoy.
[00:01:05] Mikkel: Now I got fooled because there was show notes on here, but it was for Collin Cadmus.
[00:01:11] Toni: That was why. So I was like, Oh, you brought
[00:01:13] Mikkel: mine. What a good friend. What a good friend you are to bring my show notes as well. And then it's just like, everyone watches out
[00:01:21] Toni: for themselves. Everyone is being thought of.
[00:01:24] And I can tell you by the way we've both been a bit on holidays and you can see it from my tan. Yeah. red. The red, the red, the vibrant red color
[00:01:34] Anthony: I get the same one. I get the same tans.
[00:01:37] Mikkel: the lobster tan or the dane, the dane tan.
[00:01:40] Before that I was down sick and one of the days, you know, I was completely wiped out. The man flu the man. Yeah, definitely. The man flu and I got a call from the bank. Asking me about a mysterious transaction. Oh, wow, you saved this one up until now? There's so many stories I haven't told you yet.
[00:01:57] And I was just like trying to imagine paying attention to a conversation that is actually kind of important, but you're just not there at all, like sweating and just haze. And someone abused my credit card for you know, 12, 000. Really? In France, buying something on Blizzard. You
[00:02:15] Toni: can spend 12, 000
[00:02:16] Mikkel: euros
[00:02:17] Toni: on Blizzard?
[00:02:17] Mikkel: I was like, did they upgrade their Diablo character with some nice outfits or whatever? So, okay, how
[00:02:23] Toni: are you gonna Shanghai this back to our wonderful guests? We don't have to Shanghai everything back to
[00:02:27] Mikkel: it. Okay. We don't have
[00:02:28] Toni: to. You know what, it's fine.
[00:02:29] Mikkel: It's fine. I was just sharing here.
[00:02:31] Toni: Yeah. So, as everyone obviously know, we have Anthony here with us today.
[00:02:35] Hey, Anthony, really nice to have you.
[00:02:37] Anthony: Hey, hey, good to be here, guys. Thank you.
[00:02:39] Mikkel: And you're joining us out of California. And really excited to be chatting with you.
[00:02:43] We're going to talk a bit about growth modeling today. Very topical, especially as we're heading into planning season. So that's going to be pretty exciting. And yeah.
[00:02:52] I mean, you have done quite a bit of content around this. We've also talked about it from, you know, our point is probably calling it a, I guess, a revenue model a bit more. So hopefully this is going to be a really interesting conversation and really excited to get your perspective on it. I think maybe just to kick us off, can you even just share what is a growth model and why do we need it?
[00:03:13] Anthony: Yeah, yeah, absolutely. And one, I'm gonna, I'm gonna correct. I wish I was in California because the weather there I'm sure is much better than where I'm at, but I'm actually in the desert of Arizona right now. So, I'm
[00:03:24] yeah. So growth, growth modeling, and I think, I think everybody has a slightly different definition or does this in their own way, but the way we do it at lean scale and the way I've always done it when I was leading rev ops for companies is simply reverse engineering a growth target.
[00:03:40] So typically you raise capital. Those come with growth expectations. And how are you going to get to those growth expectations? And I think the big difference between maybe a typical model that a finance team would put together or a bigger company would have, most of those models, you have a lot of known data and you're simply just modeling out in the future, what past performance look like.
[00:04:06] But when you're a startup, when, when, when a lot of this is new, you don't have a lot of data. So when you're doing a growth model, you're going to have to put in placeholders, assumptions, things you don't have data on, or things you don't know quite yet to show how you can get to that next stage of growth.
[00:04:22] So that's how we think of growth model.
[00:04:25] Toni: Yeah. And the and maybe kind of, a bit of background now for, for one second here, I mean, you with Leanscale basically kind of doing this also as an, as an agency, kind of you doing this for companies, what are usually companies that You know, that look like that they actually do need a growth model, kind of, what are, what are ICPs for you guys for that specific service?
[00:04:43] I know you kind of, you have, you have quite a few kind of around that, but for that specific service, what are companies that are usually really are in need of, of such a thing?
[00:04:52] Anthony: Yeah, so we, we focus mainly on early stage B2B SaaS startups. Typically we'll come in around series A or series B. And then we'll hang there with them through Series C, Series D, and that tends to be a time where maybe we phase out. The earlier, the less infrastructure they have for growth modeling.
[00:05:12] So they tend to need it the most. They raise some fresh capital and they have no infrastructure. They may not even be tracking a lot of the data that you would need to put into a growth model. So that's a really good time for us to come in and help set up the framework and, and build them something that they can start to work with.
[00:05:28] As they march towards their growth goals.
[00:05:30] Mikkel: And what, what does it help the companies achieve? Like, I think that, that was almost the second part of the question, right? Why do we need a growth model? I think that's also important to position for the, the listeners out there. Yeah.
[00:05:41] Anthony: I like to think of it as planning. It's never going to follow your plan, but you always need to be planning in order to continue to progress and proceed with where you're going. So having a growth model gives you the best chance of achieving those growth goals and having a plan to get there.
[00:06:00] I'll tell you right now I have with 100 percent certainty, your company will not follow the growth model or growth plan that you put in place. But what it's there to do is get you one step closer to the truth and one step closer to what you need to do tactically to get to that growth target that you're aiming for.
[00:06:21] Mikkel: How is it different from, because many companies will say, well, we have finance and they do a bit of that work, right? They run some of the numbers, they, they reverse engineered and we end up with a budget. How is, how is it different from, from that?
[00:06:36] Anthony: I think a big thing, and this is where, this is where I'm hoping RevOps actually starts to blend a little bit more into finance, because I think that'll tie everything off, but it does feel like there's this bifurcation between finance Analytics and finance data and go to market data and go to market analytics and how they view the world.
[00:06:57] In general, I think finance tends to take this regression approach where they say, here's what we've done. So let me forecast what we've done into the future where go to market teams have to think about, well, if we introduce new tactics, if we introduce new ways of doing things. How can we have performance that we've never even seen before?
[00:07:24] So a couple of things that you might throw in there that might, you know, completely change your model is, okay, now we're going to open up partnership channels and we never had partnership channels before, not going to have data on that. We may be entering into a brand new market that we've never been in, or we created a new product that we're going to sell to our existing customer base.
[00:07:42] Now, finance would have a very tough time modeling that because you don't have data on that yet. And I I'd say. It's a little bit more like fuzzy math over on the go to market analytics side, and maybe a little bit more concrete on the finance side.
[00:07:56] Toni: Would you say that they, that the finance side sometimes uses assumptions in order to kind of try and achieve some of the things that you just mentioned, right? It's kind of, I know from, from fact of, you know, having built some of these things myself, seeing that with customers is there's always a big spreadsheet with like at least one, you know, One sheet being called Assumptions.
[00:08:14] And then there's all kinds of stuff in there for the finance folks. Do you see this, this is the remedy to trying to achieve those hate, you know, working through those unknowns, maybe kind of trying to put in tactics that you wanted to deploy, or do you see it more as potential trap that might kind of hit the go to market teams afterwards?
[00:08:31] Anthony: I think it's a big trap if you don't collect them properly. So the finance teams, usually, I'm not speaking for everyone, there are some startups with really involved CFOs that I think can thread the needle of this pretty well. But in general, they're missing a lot of the context. And the go to market leadership teams are missing the operational and analytical capability to convert what they're seeing in the market into the math that finance needs to build the rest of their model.
[00:09:05] So when you get that big list of assumptions, you ask a CFO, Hey, what should we put in here for our conversion rate? Or what should we put in here for our sales cycle? Or what should we put in here for our pipeline generation from these channels? They're missing tons of context. They're not in the field usually.
[00:09:21] They're not with the teams to be able to have an educated assumption and make a sound judgment on some factors in that model that dramatically change the performance. So they have a tough time with the context. Most go to market leadership, if you're talking about your VP of sales, your VP of marketing, they will have a tough time pulling that context into something that can be used into a model.
[00:09:49] That's really where they need to lean on their RevOps team to be able to connect the dots. And I'm hoping in the future, your RevOps team can connect the dots fully into the financial model as well.
[00:10:01] Toni: And it's funny, right? Kind of, you're talking about, hey, this would actually be great for RevOps to do but RevOps isn't there yet. What is it that you're seeing out there that keeps them from, from achieving that? Kind of, what's, what's the disconnect? Where, where, where does the, the chain fall off, so to speak, for those RevOps folks, sometimes RevOps leaders?
[00:10:21] To kind of start really to connect those you know, I, I think the commercial reality that you mentioned, right. That they do understand. And then some of the financial stuff that they actually also sometimes understand because maybe they even have had that background, right. Well, what do you think is kind of, is leading to this issue that you're pointing out there where RevOps can't really fully step in and actually kind of take this off?
[00:10:44] Anthony: Well, I think two things. One, it's new. So the talent pool for RevOps is limited right now. Give another 5 10 years, I think there's going to be a lot more people who practice the business function and are familiar with the value RevOps can bring. Two, I think people hire very junior people and people with skill sets that are not aligned with the planning and modeling process, but more aligned with The systems engineering side of RevOps.
[00:11:16] So if I were to use an analogy on the finance side, people are hiring a lot of accountants in RevOps, but they're not investing a lot in FP& A.
[00:11:28] Mikkel: Yeah. So, what I'm hearing basically is the growth model helps you get one step closer to the truth. Basically getting a more realistic plan for you to kind of realize the ambitions you have.
[00:11:39] Then I just wonder why isn't everyone building one? What's the, what's preventing people from actually going and building such a model?
[00:11:46] I mean, you, you obviously riffed on a couple of points here with maybe it's to junior folks and so on, but what's preventing the companies from going and building this stuff out?
[00:11:54] Anthony: I know it would seem like just give me the
[00:11:56] treasure map
[00:11:56] to,make our dreams come true. Like, why can't we go do this? I, I think there's three main reasons. One is time. So this takes time. And for an early stage startup, you have a major opportunity cost if you spend time doing this. So if let's say you're a VP of sales.
[00:12:19] And if you're going to spend time modeling things out versus just going out in the field and selling more, maybe selling more is going to help you achieve your goals, even if you don't know where you're going quite yet, but just the sheer activity might help. So I think a lot of teams don't have the bandwidth to do it.
[00:12:34] Then if they do have the bandwidth, they likely don't have the expertise. So they don't know exactly how everything should be connected. And they may have some major assumptions or major gaps or missing holes in their model. You know, I think a famous one people tend to never account for is attrition.
[00:12:54] People like say, okay, here's how many people I have. We need to hire this many people, make sure we have capacity. Nobody's going to leave. This is a great company. Why would anybody leave? So they don't plan for certain things like that. And then, and then the last one, which is the biggest one. And I think the main reason people don't even have an opportunity to start Is they don't even have the data to use for planning.
[00:13:19] So they, they're sitting on a CRM. That's an absolute mess. They haven't been tracking conversion rates and sales cycles. They haven't been tracking their lead source attributions. So they have no clue where their leads are coming in from, and they have no meaningful way to even start to benchmark things.
[00:13:35] To give them the foundation to build a model. So I think that's the main one. So if you don't get your house in order first, it's pretty tough to do any modeling and I'll bring it back to that finance analogy. It would be like somebody who hasn't closed their books in months because they don't even know how to classify expenses.
[00:13:55] And then you bring in an FP& A analyst to come do a forecast for you. Like, we don't even have clean books to work with. How do you expect me to do any financial analysis on this data?
[00:14:05] Mikkel: but I think it also creates a bunch of issues actually, because if basically what you're left with is then, well, then finance created a plan. Are you going to commit to that? Or do you have an alternative we can discuss? It's like, okay, let's, yeah, let's commit to that plan. And then you're screwed.
[00:14:18] Toni: Yeah, there's, there's no, there's no way of assessing that or pushing back from the commercial side.
[00:14:22] Right. And then yes, we do end up in this scenario where the VP of finance or the CFO is creating the plan. Right. That fits his or her agenda in terms of getting them to the next milestone, or cashflow positivity or whatever it might be. But that is kind of divorced from the commercial reality, right?
[00:14:36] So to a degree, if you as a commercial leader in that situation, but you haven't, you haven't even invested in building your own plan, you almost, you almost can't complain actually. Because someone needs to do the plan in the first place. And, and what's probably also true whatever the VP of finance came up with, is still closer to the truth versus what you didn't do in the first place.
[00:15:01] Right. So it's like, I really love this the, the, this point you had the Anthony around. Well, you, I can guarantee you will not hit your growth plan, like no matter what you, it will just simply not happen, but that is actually not a good enough reason not to do it in the first place, right? So, I kind of really like, really kind of, like the kind of, the, the way you're thinking about this.
[00:15:20] If you were to kind of think one step further, right, we talked about why not everyone is doing it, but, You know, let's just say people are gathering the motivation, you know, they're setting up the time, they're kind of maybe, you know, have their books in order, so to speak in Salesforce. What are like common pitfalls you would say that, that people run into when they're trying to create their first growth model?
[00:15:40] Anthony: I think, I think the biggest one is missing components. So, they're, they're missing a few key data points or key things they should have assumptions on that are not accounted for. Attrition, like I mentioned, is one. They may not have their pipeline broken out by channel. That's a big one that people miss.
[00:16:01] Like, okay, we need to close 5 million. Our conversion rate is this. And so we need, you know, 20 million in pipeline. So we're good to go.
[00:16:08] No, you may need more pipeline from one channel and less pipeline from another. And when you start to break it down that way, it gets starts to reveal that your total pipeline needs might be totally different.
[00:16:20] Then segmenting. So depending on how complex your business is, sometimes you don't have too many growth motions, but you may have a product led growth motion, sales assist, sales led, eco led, you know, you have a velocity motion, you have an enterprise motion. So all of those are going to have very, very, very different go to market mechanics that if you don't, if you don't model for those specific segments and you just blend everything.
[00:16:52] And then you use that to assign goals and targets. It's, it's not going to make any sense. So I think that's the missing components piece is, is a big thing. And then the other one, which potentially is even more concerning is a lot of teams do this once in September and then they don't revisit it again for another year.
[00:17:13] So they write it, they set it, they forget it, and then they don't refresh it. When we're talking about companies. You know, the average length between funding rounds is 12 to 18 months. So you don't have the luxury of sitting down to do planning once a year. You need to be continuously planning. Ideally, you should be doing it monthly.
[00:17:33] Very least, you should be doing it quarterly.
[00:17:35] Toni: With, with the pitfalls and the segmentation piece there, what I experienced myself is. When you're in this planning mode, when it is September and you're coming up with this model and you're figuring out, Hey, you need 20 million pipeline to close those 5 million, you know, I, I still remember how, you know, a bunch of my go to market leaders were basically focused on what is that end of Q3 or, you know, basically kind of working on Q4, whatever it might be.
[00:18:02] And then they glance over the plan. It's like, yeah, that looks good. 20 million is fine. I think it's good. Let's go. And then, you know, next year, and then obviously you, you don't, you don't get, you know, to the 20 million that you wanted to produce. Right. And then suddenly the scrutiny begins. It's like, well, but actually my channel doesn't need to produce that much.
[00:18:25] My channel converts much higher. Right. So actually my target is wrong and so forth. Right. So what I've seen a lot is actually you know, what, what sounds super theoretical in September is suddenly extremely crucial in, in April, you know, when, when, when suddenly reality hits and and some people's compensations or kind of their jobs depend on those numbers.
[00:18:46] And then they're obviously going to, you know, drill into this thing and find all those holes that you, you basically missed. And, and then going to tear the, the, the plan apart. And then the next step after what that is. Okay, this plan is useless. We either need to do a new one or, or, or kind of, you know, screw this plan.
[00:19:02] Mikkel: That's why my default reaction to the plan is always, are you crazy? There's no way. Mikkel,
[00:19:08] Toni: Mikkel, you haven't seen the numbers yet. Oh, oh, sorry. Yeah. Yeah,
[00:19:15] Anthony: a little bit of showmanship in the planning process too, of course,
[00:19:18] Mikkel: Yeah, but it is, I also got to say, it's also difficult. One of the other challenges I've seen is you also end up in almost compartmentalized planning where marketing will create their plan with their numbers.
[00:19:28] And then once the execution begins, because it's so hard to factor in things like time, like you mentioned the limitations, right? So how long is the sales cycle length? You sit there in May and go like, so I delivered all the MQLs, but I'm missing target. Oh, I needed to deliver those MQLs three months ago.
[00:19:45] Great. That's why, right? So it is a tricky one.
[00:19:49] Who who do you usually want to involve actually in the process of creating the growth model? I think that's, that's a natural next question. Just thinking about this compartmentalized planning versus we talked a bit about finance and then the go to market.
[00:20:01] Who should be involved and who should potentially be leading this?
[00:20:05] Anthony: It's a lot of people, which also makes it difficult because it almost feels like you're mediating, you know, the division of an estate or something, and everybody has their opinions and their factions and. And it's really, really tough to get everybody on the same page. So ideal state, ideal state would be, you have a senior RevOps leader, somebody who can think across the whole go to market lifecycle, understand how to connect the dots, they can be your mediator.
[00:20:34] They're going to come with the first version of the plan. They'll go meet individually with everybody gather the context, gather the components that they need and put together v1 of the plan. And then bring everybody in the room. Now, everybody in the room, it's, it's a big audience. So you're going to want sales leadership for sure.
[00:20:51] You're going to want your marketing leadership. Now, let me go back to sales. Depending on how big and complex your team is, you may want. If you have regional leaders or product leaders, however your sales leadership team is broken out, you may want representation one, one level down. And then on marketing, if you have a head of demand gen, you'll want your demand gen team in the room.
[00:21:12] And then if you have any other significant channels, like, Hey, events is huge for us, then you probably have an events leader or content is massive for us. Okay. Maybe bring your content leader in the room. You're going to want customer success or customer support, and you're going to want finance. And then if you have a COO, and then you're definitely going to want your CEO involved as well.
[00:21:34] And probably, most of this comes down to a hiring plan. So if you have a head of people people operations or HR, whoever is responsible for that should be there too.
[00:21:47] Mikkel: And I think one of the, the things we almost compared this to is passing a bill through Congress. And you're kind of the whip, need to whip up the votes. What, because when you, so when you have this amount of people involved, I can also see a few challenges arising. What are some of the things you've seen happen once you go from, you know, just a few people involved to, okay, now we have the entire go to market leadership plus CO, CO, CFO involved here.
[00:22:13] What, what are some of the challenges you're faced with?
[00:22:17] Anthony: So I'm not kidding when I say this, I've seen this turn into physical altercations. So, that's,
[00:22:25] Mikkel: take it seriously.
[00:22:27] Anthony: people take it seriously, you're sitting there, your job is on the line, people are suggesting that you should be taking on bigger numbers than maybe you think you should, it feels like maybe other people aren't pulling their weight, I mean, there is so much at stake in that room, and it's people's livelihoods and jobs that are at stake.
[00:22:47] So you can expect that the tensions are going to be high, emotions are going to be high. And if you're a head of RevOps in that room, you better be unbelievably ready to defend any assumptions that you're making about anybody's area of business. And you should have done this, like you mentioned in, in a WIP type of methodology where you go do all the pre meetings before.
[00:23:14] There shouldn't be any surprises once you get into that bigger room. So everybody already knows what you're thinking. Everybody already knows what you're going to put together. When you get in the room, it's maybe more ceremonial. If you go in there and surprise a bunch of people, it can turn into a disaster.
[00:23:29] Mikkel: I mean, it's almost also makes me, makes me think about the, the saying, like if a strategy doesn't create tension, then it's not a great strategy. It's the same with a plan. I guess there has to be some tension in there to push people because everything, you know, if there's no tension, it's easy. And then it's a BS plan.
[00:23:44] I also just wonder before we get super practical and maybe hear about a real story.
[00:23:49] I also just wonder, what are some of the components of the growth model? What, what actually gets built in there once you're building that, that plan?
[00:23:58] Anthony: Yeah, and we, so we have a good video of this on our YouTube channel as well. So if you check out LeanScale on YouTube, we have a full walkthrough of how we approach it and the components that we would put in. But in general, the way we do it is a little bit top down. So we say current ARR is X, goal ARR is Y.
[00:24:21] We're gonna use that to anchor the plan. And then reverse engineer how to get there. Because normally that's already baked. Normally your investors, your CEO, they already have an idea of where the company needs to go. It's not, where can it go? It's, this is where it needs to go. So you better go figure out how to get it there.
[00:24:40] Then maybe they'll change their mind. If you show them that it's not possible or too expensive to get there. But again, you better have data to back it up. So start from X to Y ARR, and then we go backwards from revenue, bookings, pipeline, leads, awareness, and then segment that all the way along. So, okay, if we want to get there, we're going to have to book X amount, but we expect X amount of churns.
[00:25:09] We're actually going to have to book even more. And then if we want to book that amount, we need to create this amount of pipeline. And if we need that amount of pipeline, we need this amount of leads. And this is the conversion, the sales cycle that we're going to need to do that. And then in general when you look at it by marketing channel, this is how much we're going to have to fund each of these channels, because this is our cost per dollar of pipeline.
[00:25:33] So we have those ratios. We know about how much it should take. So this is how much we're going to have to invest there. And then it becomes a headcount plan. Okay. Well, we're going to have this amount of customers, so we need this amount of CSMs. This amount of support in order to book that we need this amount of sales capacity.
[00:25:49] Oh, we have attrition in these let's assume 10 percent are going to leave, get fired. The people we hire aren't going to work out. So we're going to have to do it again. So we're going to need some buffer in the hiring plan. So let's account for that. And then you just fine tune the assumptions. So you bring as much data as you can, but like I said, a lot of these are going to While we're hiring a sales team.
[00:26:11] In EMEA, and we've never gone to market there.
[00:26:14] Toni: Yeah.
[00:26:16] Anthony: make assumptions on some of the things and use our current data as a reference, if we can. Those are some of the general components that we would put into a plan.
[00:26:24] Toni: you mentioned this earlier. Yeah. The the, the frame is really 12 to 18 months between fundraisers and so forth. You can't just plan annually. I think that's just not, not good enough for this, but how do you turn this from a planning exercise or even more scary kind of a continuous planning exercise, but how do you take it from that to I think what you guys would also kind of call an operating model, actually, right?
[00:26:48] Kind of, how do you, how do you kind of execute this flip? You know, one, there's a plan or a growth plan or growth model, and the other one, you know, becomes more operational and connects a little bit closer to to the reality of things.
[00:27:01] Anthony: Well, let's assume you all make it out of a live from those meetings and everybody agrees on the plan. And now you, now you have it locked in. The next step would be to convert that into OKRs for the team or KPIs, whatever system you use. It turns into quotas for the sales team. It turns into pipeline quotas for the marketing team.
[00:27:26] And it becomes departmental goals and then, you know, segmented goals. And then all the way down to an individual's goal. Like I know exactly how my quota is tied into this overall go to market growth plan. And then from there, I would say. I like to think of it similar to a finance process. I like to close the go to market books at the end of the month.
[00:27:56] I like to refresh all of the assumptions that we made. So, Hey, are we converting how we said we would? Does sales cycle feel like what we said it would be? Are we seeing the performance we expected in each of these categories? Yes or no? And let's monitor it formally every month. So I would do a, what seemed to work was having a monthly business review internally, where you go over the results.
[00:28:23] It's very objective. And if something feels very off, like, Hey, we expected that to me, it seemed really, really You know, sell really well, they're not doing it. Or we're very surprised that this partnership channel just took off. Okay, this might be a good moment to say, should we adjust the plan, index more of our plan on this partnership channel, and then de risk how much investment we're making on this and be a sales team, and then, you know, keep marching towards our goals, but shift where our assumptions are.
[00:28:55] Mikkel: Okay, so one of the things I was also really hoping that we had time for, fortunately, we do, is also to hear a bit of a story on how you've worked with a growth model, like a real case, we're probably not going to mention the company, we're probably going to keep that under wraps, I think is the way to say it.
[00:29:14] But I would really love to hear like a real story with some of maybe some of the challenges and how it was overcome just to give it Some real inspiration as well to the audience as they might go through this exercise of building their own growth model.
[00:29:27] Anthony: Yeah, I can, I can share two, I think that might help. One, I can share, I can say the name and give you all the details because I was there and the company doesn't exist anymore because it got acquired. So I think I'm, I'm legally good. So when I was head of RevOps for a company called E mailage fraud prevention company, I, I got into that company around 4 million in revenue that ended up growing to around 50 million in revenue and it exited for half a billion.
[00:29:54] Thanks So it's a very good, like quick, fast run. And it had, it had amazing go to market complexity. Because, because we had product led and sales led and also like in offices and regions all around the world we got a chance to really, See a complicated go to market machine, but also see it done well and be successful.
[00:30:19] So, when I was the head of RevOps there, I, I can bring it back to a little bit post our series B and we were doing roughly 16 million in ARR and then we were looking to double, it was very important for us to, to double, keep that growth rate very high. We had doubled every year before that. So two, four, eight, 16, and that eight to 16, we were, it was tough.
[00:30:50] It was very tough, but we did it and we did it just barely. So now to sit in a room and think, okay, now we have to find a way to grow by 16 million and we're not going to be able to do this by one big account coming in. We're not going to be able to do this by. You know, some good economic tailwind leading us there.
[00:31:11] We're going to have to really engineer our way there. And this is the first time that I think I took the growth model to the level that, that we're talking about now. Cause before maybe we could get by without doing it, but this is the first time we really had to do it. And we had to, luckily we had a lot of data but we had to reverse engineer going from 16 to 32.
[00:31:37] And then also segmented by a North America team, Latin America team, EMEA team, APAC team. We had two products in market. We had product led, SMB, Velocity Sales, and Enterprise. And then we also had referral partnerships, reseller partnerships, and affiliate partnerships. And the partnerships channel was roughly 40 percent of our revenue.
[00:32:00] So we had to come up with a very, very, very complex plan. And segment every single little one of those go to market assumptions by each one and then decide where we were going to invest to inorganically create 16 million in revenue or in annual recurring revenue. So that was A really, really big problem to try to solve for, and it took us a really long time.
[00:32:27] So I would say we kicked off the process maybe around late August. I mean, we were being proactive. Okay, late August, you got plenty of time to build this in. And we didn't finish that plan until mid end January. And we were on a calendar year, so like, teams were already out there selling. We didn't have the plan ready until then.
[00:32:47] Because the, the politics of it was just very difficult to navigate through. And where people thought we should invest and the bets people were willing to make was really, really, really difficult to get on paper and to get alignment and agreement on. So, it took we were doing maybe a session every other week we had an off site, so we all went out to Sedona to you know, Kumbaya, get in the same room for a few days and try to figure it out.
[00:33:21] Our investors even flu out. For some of those sessions, we hired a consultant to help like mediate some of it. And then eventually we ended up instrumenting all together and then we did it. So we, we achieved it. So we put it on paper and then, and then we made it happen, but it was difficult to do.
[00:33:41] Toni: Fantastic. So this was, this was also kind of, you were part of the whole journey itself, right? This is not a lean scale kind of conversation. This is kind of part of your journey and kind of going through this firsthand in this pain. And I think kind of the planning piece is always just one and then the execution following up and so forth.
[00:33:57] The other, did you then actually back then already kind of do those monthly or quarterly business reviews with those folks in order to make sure that you kind of keep everyone on track? Or how did, how did that work?
[00:34:07] Anthony: We did, we did, we had a we call it our monthly go to market reporting pack, so it was probably a hundred slides of all the things that we talked about in the plan and we'd refresh it every single month and then we shared it with our executive team, we'd meet about it, we'd go through each one. I would tee up any issues or opportunities that we're seeing on the RevUp side.
[00:34:27] And that pack would also go out to our investors as well. So the benefit of that was actually a side side benefit is it made for pretty boring board meetings, which was good. You know, you know, the exciting ones are never fun. So they already knew all the numbers. And by the time we're walking into a board meeting, they've already seen all the data and we already have an idea of what we want to adjust and what we need to do.
[00:34:51] So that really helped with that rhythm of a company too.
[00:34:56] Toni: And then you teased another story that you had that maybe, maybe where you can't mention the, the, the name necessarily would obviously love to, love to hear that as well.
[00:35:05] Anthony: Sure. Yeah. So that was me as an operator inside a company. And that was kind of like my first real complex full planning experience. Now we've done it tons of times. We, we've had over 50 engagements that have somehow involved growth planning and modeling and we've learned quite a bit since then.
[00:35:23] So I think one of. One of the most exciting ones, I can't share the name, but I'll, I'll share. It's B2B SaaS company. They had raised a Series A and they had grown quite a bit. So this is one of those other scenarios. Usually people are worried about how they can achieve a goal. This one felt more like how can they capture the opportunity that they're really experiencing in the market because they were growing faster than they even expected.
[00:35:55] So their actual growth is way beyond their expectations, and they weren't building into their growth, which could be a huge miss and, and a huge, you could miss a huge opportunity if you're not really capturing all the potential that you have. So we came in, they had they had goals to triple their growth, and, That seemed unbelievably ambitious.
[00:36:22] And, you know, we, we don't normally sit down for a planning process and hear somebody wants to triple and think like, yeah, you can definitely do that. No problem. Normally it's going to be a tough thing to do. But we, we lay the infrastructure to start tracking their go to market data because they didn't, they didn't have a good infrastructure for that.
[00:36:41] So we didn't have a lot of data to work with in the first quarter, but after a quarter, we were seeing, they had a very, very clear path to triple their growth. Their pipeline was unbelievably consistent. Their conversion rates were extraordinarily healthy. They had channels that were really working well and we could tie back their investment to their channels and they could paint a clear picture to tripling.
[00:37:07] So they used that on top of modeling. Well, what would we do if we could add more resource here? If we know we can do it with kind of current status quo, what if we injected more capital in this company? And, and really, really poured fuel on the fire. How aggressive could we get? They used this way of thinking.
[00:37:29] I'm not going to only take credit for this, but, but this definitely helped. They used this way of thinking to get another large injection of capital and even increase their growth rates even more. So they're on track to more than triple by the end of the year and, and beat the original plan. And we adjusted mid plan.
[00:37:48] Hey, no, we have opportunities. Let's double down right here, right now. This is how we can kick it off even harder.
[00:37:54] Toni: Crazy. So this is kind of a good example of how, how that way of thinking also helped them not only to prepare and, and make sure that they, supporting the opportunity that's coming at them, but also to create a really interesting investment proposition, right? To kind of really kind of say, Hey, listen, this is what we can do without additional capital.
[00:38:18] If we get X more, we can get to, to Y actually, you know, or, you know, using, using this modeling approach. And this really, I would say is, is really, I think the more powerful message, the more powerful way to think about it. Really in a bottom up way, kind of, if I ingested here, this is coming out of this versus what you usually would see from the finance perspective is kind of the, the, the other way around, right?
[00:38:42] Kind of really going first principles. And saying like, well, if, if we can dial this up here, actually, X, Y, and Z is going to happen on the, on the flip side of this, right? Extremely powerful, also way more believable for, for a potential investor actually to come around. Anthony, this was really cool that you shared those, shared those stories.
[00:38:58] I just want to make sure that Mikkel didn't have like a, a follow up question that I'm killing here now. No,
[00:39:03] Mikkel: I think it was good to hear. I think especially the bit around how long it actually takes. So some of the folks who might be in this exercise early, like right now, Just feel a bit more comfortable when it's take or logger than they wanted to because it also like to your point, I think for many companies, it is going to be a complex exercise and I was literally wondering how do you stay, you know, keep sane in that process when you realize, Oh, we forgot about partners.
[00:39:29] Now we need to basically add a ton of more information to this whole thing, right? So it is a highly complex exercise and I think it was just great to hear some real stories on that.
[00:39:39] Anthony: Yeah. Happy to share. Happy to share.
[00:39:41] And, and I want to leave with just one comment. Most, most of the companies that we're working with and most of the companies that you work with as well, They're either looking to raise another round or have a strategic exit or march towards an IPO. And you can't do that without telling the growth story that you expect your business to achieve.
[00:40:04] And if you have the data and you can prove that you can plan and execute against that plan, the multiples that could add for your exit, the multiples that could add for your next round of investment, and the confidence that it can give investors is, is going to be far and above what you would achieve without it.
[00:40:22] So it's unbelievably important to have this practice done really well.
[00:40:26] Toni: Absolutely. Anthony, thank you so much for spending some time. Thank you so much for sharing some of the stories. And thanks everyone for listening. Hit, what is it? Like, subscribe, follow, follow, enjoy, you know, support, save, download, you know, and check out Leanscale. I think Anthony will kind of look very much forward to that.
[00:40:45] And otherwise, thanks everyone for listening and have a good day. Bye bye.
[00:40:48] Mikkel: Bye.