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You don't need to double your budget to double revenue. Try improving 7 things 10% across your customer journey. That'll lead to a 100% increase.
Show Notes
Did you know that 10x7 is not 70? It’s 100 - because of compounding interest. Rather than going for radical improvements or big projects, consider improving in increments across your funnel. This will reduce risk and your CFO will love you for it.
Creators and Guests
What is The Revenue Formula?
This podcast is about scaling tech startups.
Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.
With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.
If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.
[00:01:09] Mikkel: Today we're gonna talk about why 10 times seven is not 70. It's a hundred. And I'm obviously not great at math. We know that. Yes. So we are gonna talk a bit about that and maybe before we give the answer, I think it's always a funny conversation on how you double revenue mm-hmm and especially now, you know, we talked a bit about budgets are being reduced, but targets they remain the same. And that's, that's a really tall order.
[00:01:46] Toni: No. A lot of, a lot of investors are basically expecting you to suddenly snap to efficient growth.
[00:01:53] So you've been operating for the last two, three years on very inefficient growth. And now you have a quarter to go from that to, Hey, you know, you should really be hitting this 12 month payback thing we told you about. So, and I think that is the expectation out there. Right. And basically, you know, how that's being translated is growth roughly remains the same.
[00:02:11] Let's just say there's a bit of a haircut. But budgets for sure, like minus 50% or something like.
[00:02:17] Mikkel: Yeah. And we, so we're, I'm a fan of winning by design.
[00:02:22] I know you also really love, those guys in the work they're doing in Jacco. Over there, he talked about actually this, this 10% rule that we're gonna get into, which is really, if you can improve just seven things, 10% throughout your funnel, that will equal to 100.
[00:02:41] Toni: Yeah, I think the math is not exactly 100, but basically now the, the, the, you know, math avid, you know, listener will realize, oh, there's a compounding thing in here. And that's obviously what this is about. Right. You basically kind of look at your funnel, and you need to find seven spots that you can increase by 10%.
[00:02:58] And if you do that, you know, you'll get to roughly 100%, over the course of that year or that, that time period. Yeah.
[00:03:05] Mikkel: And I mean, we've, we've both. Benefited from this kind of, let's say incremental improvement versus radical change. Right. And I think we've talked a couple of times that it's always interesting to look at those big bangs you can do. Because it's, it's a massive bet rallies. A lot of people, there's a lot of things that needs to happen, but there's just a big risk associated with that.
[00:03:28] Toni: that. No, for sure. And I think a lot of executives get, you know, fall really in love with the, the big shiny object kind of thing. and I think. The rev op approach to that problem is really much more about, instead of releasing a big new product or doing something bold in the us, or, you know, jumping into the enterprise, it's really much more focused about the incremental improvements over time, you know, where can we tweak?
[00:03:55] And if we just tweak off enough, just even a little bit, you know, the whole thing will compound and you will have a lot of growth suddenly coming out of this.
[00:04:02] Mikkel: Yeah. And I think we also, I recall when, when I looked into implementing, for example, scrum, which is agile framework where you really wanna release, fast and iterate and improve.
[00:04:12] I think the big takeaway there was when I looked at some of the bigger projects we had run, usually they would go over time. Because it's really hard to estimate how long will this project really take? And the same actually goes for the result. It's hard to estimate the results. So not only were we late, but we also didn't get the results we wanted.
[00:04:31] And that's, you know, there's a lot of risk on one item, which is why this 10% rule is a really clever way of going about growth.
[00:04:39] Toni: Yeah, indeed. I mean, the, I think especially the, the bigger bets, you know, there's something that's called desirability bias that kicks in, simply because you want it to be successful, you then plan it to be successful.
[00:04:51] But none of this really means that it's going to be successful actually. Right. And I think, some of the smaller bits that you can understand much better, you can time box it and you will still go over for sure. And sometimes you will hit the improvement and sometimes you won't, but instead of having one big thing, you might actually having, you know, you might have end up having 10 or 20 of those things, right.
[00:05:13] In this case, you know, specifically seven. And I think to, you know, come back to the whole budget. Conundrum here. The reason why seven times 10 is a hundred is, interesting, is that the usual way around how people think about growth and think about doubling is basically by doubling all the inputs, which basically means they're double all the cost, right?
[00:05:36] Meaning you need to, hire the double amount of, you know, outbound reps that you. Yyou need to double your ad budgets. You need to double the amount of people in your marketing team, and that will result in you needing to double the amount of, account executives that you have on your team as well.
[00:05:50] And by doubling those inputs, you hopefully ideally, and many scale apps, that's actually the case. And that's, by the way, a good thing, you will double the output, but in this current unique situation, just doubling the input, maybe isn't even a possibility. So you need to find other ways to actually achieve that doubling of outputs or, you know, maybe you want to even go further than two X, right? It's it, it, it's always a mix of those things.
[00:06:15] Mikkel: I think. So we got a bit of feedback that it's very no BS what we're talking about here. So what we should do now is actually transition the conversation. So we've, now we've talked about this concept. Let's actually bring a couple of examples from basically our funnel.
[00:06:31] And I know you've, you've mentioned one thing, you did with, with a form actually.
[00:06:37] Toni: Yeah. So again, right, going kind of one step back here, really what we are talking about now is seven different things that we have actually done in our past that increased our funnel at that step by 10%.
[00:06:53] And I think the purpose here is to get you guys, thinking and going on, Hey, what else could we actually be doing? and it's not only hiring more people. There's a bunch of other things actually out there in the funnel that we could do. Right. And I think some of these examples that we gonna go through there a bit, you might say they're hacky, right?
[00:07:14] Mikkel: could be dated
[00:07:15] Toni: Even, so yeah, probably some of them are probably dated and like, maybe yawning, but let's, but let's see about that.
[00:07:22] Mikkel: go over them fast if they're
[00:07:23] Toni: so you mentioned, you mentioned demo form fields. Yeah. So that's, that's a classic again, this is only a thing that the smaller the customer and the, the larger, the volume, the higher, the impact will be.
[00:07:37] So really, if you have an enterprise motion with 10 solid inbounds a month, this is probably not useful for you, but if you are a SMB mid-market and especially obviously if you're almost, you know, scratching on the B2C side, then something like that is really, really useful. We actually hired an agency to help us with, with CRO in that case, it's not the chief revenue officer.
[00:08:01] It's a conversion rate optimization and. They went about this in a highly professional and, academic way. I'm more than happy to maybe share, share the link somewhere, journey further, actually, that's what they're called, whatever. And, one of the things that they started looking into is basically kind of our, demo form field.
[00:08:20] And this was at planday and, and planday and the beginning, we had a, and for some reason we also still needed that. I think. Seven or 10 different fields of information that had to be entered in order to jump into the trial environment. Some, you know, limitations requirements for product, whatever. And basically, you know, we did a couple of experiments and see there.
[00:08:44] If you split those 10 fields up, not in, instead of having in one long form, you know, think about it, scrolling on your iPhone to fill this in, to basically have it split in different steps. Right. And then the couple of psychology pieces kick in, like the first three is like, oh, that's not so difficult.
[00:09:00] Let's put in, you know, my name and my email and so forth, then click to the next one. And then you realize there's an next one. but now you're already three fields. It, so how bad can it be to add another three or four? And, you know, Then once they, at seven you're either frustrated, or you you're gonna, you know, give us the last two fields.
[00:09:17] And actually what it, what it resulted in was I think actually more than a 10% lift at that specific stage. Yeah. Right. Let's just, you know, recap, this is not for, oh now, you know, revenue increased 10% necessarily, but at that specific stage, 10% more of, people that wanted to go into the trial environment were actually, you know, went through that step of the.
[00:09:38] Mikkel: Yeah. And I mean, it's, it's funny. So we did, another piece just like this. We would never have done it, with all the bigger projects, because it's a small problem.
[00:09:48] It's only gonna improve, you know, a fraction of a fraction almost. Right. But because you do multiple of those, it is gonna compound. And one of the things. We had learned, was we got a lot of internal feedback from like employees not being able to find our blog on our website. And we had a team writing on that block.
[00:10:07] We were, you know, highly invested in building it out and there were other pieces they couldn't find. And we basically saw in the data that the navigation was just not working it like it made no sense. Even on mobile, there were problems. And again, if we had, taken another route to build, you know, redesign the blog or do another bigger thing, we would never have gotten into it.
[00:10:30] So we had, we addressed the problem and actually, you know, also increased at a very high funnel. This was not even at elite level, but at a very higher step in our funnel, improved the clickthrough rates to our blocked, to our case studies. And that also has an impact because it, it helps build a relationship with, with those people who want to get to understand you.
[00:10:47] Toni: Yeah. And by the way, all of these. All of these conversion rate optimizations. And you know, when, when the, the word is CRO, it's really usually website based, but you have a lot of different conversion points also later in your funnel.
[00:11:03] And so this is actually what we are seeing today when we are talking to some of our customers or prospects, and then there's a CFO on the call. It's, it's all about increasing conversion rates for, for those kind of types. Because they know 1000% that, focusing on conversion rates equals efficiency equals, increased CAC payback equals more growth with less money.
[00:11:24] Right? So the, the whole, the whole, talking point always is around conversion rates, everywhere across the funnel. So really, you know, starting a conversation, you know, on that topic, in your executive team or kind of bringing it up to executive team will be. You know, very welcome right now.
[00:11:42] Mikkel: and I mean, you can look at it like a store, right? You can bring more people through the. Then have the same amount of average basket value or average, order value.
[00:11:51] But then you can also, at the same time increase the amount of purchases being made, meaning kind of what we're doing here. You both wanna work at getting more volume, but also converting more of that volume. Yeah. Right. I think the, the, the feedback you will get internally is super powerful in this, in this kind of approach with increments.
[00:12:10] And that's, again, you know, one of the others was highly driven by, by feedback. The other nuggets we found, we could not see it in the data. By the way, but the only way you could contact us was request a demo. Mm-hmm. That was the only way you could get in touch with us. And that's not really great if you wanna just figure out does this product support this software I'm using or whatever it really is.
[00:12:33] So what we did was we, we basically implemented drift. So web chat, a lot of companies have done it by now, but I think the difference is we didn't make it into a big project. We implemented it in two weeks, because basically we just needed someone on the chat and we needed a simple way to figure out, Hey, if someone then wants an actual demo, how do we do it?
[00:12:55] And we had a spreadsheet and at this stage, you know, we, we had a big tech stack. We had a lot of reporting, but we decided to keep it simple just to validate whether it actually had an impact. And you know what we produced, I think 20 opportunities more a month that was, a significant volume for us at that
[00:13:12] Toni: So that is obviously the, the first question you're gonna get from anyone in sales is like, well, wouldn't have, you know, wouldn't these guys have signed up anyway.
[00:13:20] Mikkel: Yeah. And I, I think no is actually the answer because you, you get such a short amount of time to convince people to talk with you.
[00:13:28] Toni: with you.
[00:13:29] Mikkel: And especially if you're in a highly competitive industry where there are substitutes, well, then they're just gonna go elsewhere and see whether there's an answer and then a fit there.
[00:13:37] Right. And I think that opened up an opportunity for us to talk with someone who said, Hey, do you integrate with software X? And we are going to, yes. What are you trying to solve? And then they said, well, I need to do this and that. And you could do some more value on top,
[00:13:50] Toni: no, a thousand percent. And I think, you know, to really put this into perspective. So this was with Falcon, we were selling social media management software and we were kind of in the midmarket and we had a couple of competitors that were basically SMB self-service full on product, led growth edging into our area.
[00:14:06] And, everyone that, you know, came to us because they felt like, oh, this, those are the right guys. But then they couldn't find pricing. They only could request a demo. It's like, oh no, this is gonna be expensive. And I actually don't wanna talk to a sales guy, let me go somewhere else. Right. So I think this whole, hey, let's have a chat bot in place really helped to catch some of those people.
[00:14:25] And actually on that point, it's, you know, it's not on our list here, but, putting pricing online
[00:14:31] Mikkel: okay. Left turn
[00:14:33] Toni: and, and, you know, you know, maybe this is a whole episode by itself, but actually one quick piece of advice, If all of your competitors are putting pricing online, you should be thinking about putting pricing online.
[00:14:46] And this is really, you know, Hey, there are thousand other reasons by the way, but the problem is if people are coming to your website and they're comparing you against those two, three others,
[00:14:55] Mikkel: you're not gonna be considered.
[00:14:56] Toni: and, you know, sometimes, you know, funny enough they have some intern researching this and, and they don't wanna reach out and kind of ask you for a price and stuff.
[00:15:04] And then you're basically kind of being removed from the list basically. Right. so maybe that's another 10 percenter, but that's gonna be a fun executive conversation like that.
[00:15:12] Mikkel: That's I, I, I feel like that's maybe two episodes on how to navigate that. that, that whole thing. I mean, so that was really the marketing side.
[00:15:20] Yeah. Right. And that's just one step in the funnel. There's also then, you generate some leads and some opportunities that's when it passes over to sales. I know you've, you've spent a lot of time obsessing over sales. No, so I'm curious to see, you know, what you've experienced there.
[00:15:41] Toni: Yeah, let's go. so obviously we at Growblocks we look at the whole spectrum, actually, we're not only looking at marketing or, you know, sales, we look at the whole thing.
[00:15:48] So really kind of the next three items here dedicated to, to sales predominantly and, one easy one and, I think a lot of thought has gone into that over the years, basically, we had an outbound team that was consistently, and we are talking 50, 60 people at this point in time consistently got to on average 10 meetings held yeah.
[00:16:16] 10 meetings held per month per outbound rep. And then we kicked off a, a whole effort to try and get to 11 of. Yeah. And that was, an effort across, increasing, commissions, buying some more tooling for researching, adding some more management headcount to make sure we don't. We have the right ratios and so forth.
[00:16:39] And it worked out to a little bit of an extent, not fully by the way. But if you get this done, if you get from 10 to 11 or get from nine to 10 or whatever, this is, this is a 10% gain. That's pretty massive. When you, when you think about the scale we had at that point, right. And also it was. Really a massive gain in terms of K payback improvement, because suddenly with the exact same amount of resources, you were able to generate 10% more business.
[00:17:07] Right. And by the way, I think this is one of the things that many.
[00:17:11] Mikkel: CFOs tend
[00:17:13] Toni: to miss is not only looking at the conversion rate, but also the per unit. So this is very technical, but the per unit production, right. And in this case, S STS going from 10 to 11, that is just as much of a conversion rate gain, or efficiency gain rather, than only focusing on a 10%, conversion rate improvement.
[00:17:31] Right. So this video on the outbound SDR side, not sure if everyone is having something like that in, in your team, but really trying to get them up from where they are. And right now to one more a month is actually a massive improvement.
[00:17:45] Mikkel: Mm.
[00:17:45] Toni: Another one is, and, and I'm not sure how much this is now a standard by now.
[00:17:52] It's actually to, in a world of recurring revenues, you really wanna steer away from recurring discount. Yeah. What does that mean? Well, you obviously have, you know, monthly recurring or any recurring revenues, and that's what you're really proud of your investors looking into that. But sometimes your sales team will ask you to, you know, approve a discount.
[00:18:15] And instead of making this an infinite discount, you know, 10%, 20% for forever, basically put in place something that limits that discount to the first. Hey, I can only give you, you know, the 10% discount, 20% discount for the first year. And then we need to go up to the normal rate. Or you can even say like, Hey the, let me start calling it.
[00:18:37] The introduction. Period. So basically the first two, three months of onboarding, so we usually did it in a month, but it doesn't matter. We basically said like, Hey, for the first couple of months, we basically give you the, software for free. So we give you the first two month off of first three month off, it's basically then an accounted for a, what is that?
[00:18:56] A 20, 25% discount, for the year. Right. But then resulted also in capping that discount to that point in time.
[00:19:07] Toni: You won't feel the impact on day one, you will feel the impact a little bit later on, but depending on how you account for it also, you might see a natural upsell. So net retention rate actually hopping happening from that.
[00:19:19] Right. So it's really powerful. And then maybe the last one here on, on the sales side, and again, right, this is around ACV. So the same with the one off discount, but this one now is implement a discount hierarchy and. Sounds super boring. I know, I know. I know
[00:19:38] Mikkel: we lost the listeners.
[00:19:39] Toni: Yeah. Yeah, there you go.
[00:19:40] But really what this means is instead of the first point of, you know, prospect as sales rep, Hey, can you give me a discount? Ooh, this is really expensive and you know, my budget and whatever, instead of the discount, instead of the rep going to okay. 20.
[00:19:56] Introduce a discount hierarchy, introduce different steps in here.
[00:20:00] And the first step could be, well, I can give you, the first two month off, the next step could be, well, I could give you 10% or the first year, or Hey, if you sign up for two years, I can give you this kind of discount, blah, blah, blah, blah, blah, create like five or six or seven different steps. And then only the bottom rung should be. Okay, 20% in perpetuity, forever for you. And the psychology here is everyone will always ask you for a discount. There's nowhere. Everyone will ask you that will expect a discount. And, instead of jumping to, you know, the, the best thing that you can offer, you kind of go through the list and.
[00:20:39] Prospects will basically, you know, not have the mental stamina in this negotiation to keep asking again and again and again and again and again, right. They will ask once, twice, three times, and then this will feel very awkward at that point. And then they usually stop.
[00:20:54] Mikkel: I think it's also important to note usually when you start talking price it's because someone actually wants to buy it. Yeah. And, and I recall when, when I've, you know, went out and purchased software and collaborated with you to, to kind of land it at the right level, there's always the final push where it hurts a little bit on, on you as the potential buyer to go and ask again.
[00:21:14] but it is a thing and some, they plan it out extensively. Some they will. Buy it and you're lucky. But I think it makes total sense to have that plan in place. So you also don't get stuck in the conversations over and over again internally, right? It provides a lot of clarity for everyone.
[00:21:28] Toni: And then there's, you know, on this one, then there's reality sometimes hitting with someone's like: mate, my budget is this, and it's a real budget. I'm not joking and it needs to be this number. And obviously then jumping through those, you know, five, six steps of discounts. It's kind of awkward. So you need to, you need to find a way to, you know, reality, check it. But it's a, it's a really good way to make sure that, your reps are, not just dishing out the 10, 20, 30% on the first question.
[00:21:54] Mikkel: So I think that kind of fits nicely into one of the last, the last piece is, so I recall, We started introducing annual price increases. And I felt like, well, you know, sure, that's an easy way to increase revenue, but I didn't really get the purpose of why. And then I heard this thing. Well, the smart thing is not the first year you increase the price because you have existing customers paying at a certain level next year.
[00:22:17] Is when it gets interesting, because if you had just raised the price 5% and you do it again, it's compounding for you. And that's, that's the way to look at it, which is really, really clever. And there's all kinds of other benefits of actually increasing your price. but that's something, you know, you, you started introducing as well, as a way to kind of lift, and improve.
[00:22:37] Toni: So this was, this was not at Falcon. This was actually also a plan day thing. And the. The thing here is if you have a formal process with an order form, and there's a negotiation and the discount, you know, sneaking in a 2, 3, 4, 5% increase every year, it's kind of awkward. So I think in the upper midmarket enterprise, the, annual increase in price is a little bit difficult to push through.
[00:23:00] I think you need to be more. Intelligent about it and have like actual products or, Hey, the whole baseline now is increasing halfs spot, for example, is excellent at that. But in this case, you know, SMB maybe lower, mid-market having a, a piece in your contract that says, you know, there may be a price increase up to 7% a year or something like that.
[00:23:22] That can, you know, it's very easy to slip in, and basically then opens the door for you to, you know, potentially do it. Right. And, when we did this at, in this case on plan day, it was really successful. And it, it helped us, it was almost. You know, was Corona. We weren't growing that that much at that time, you know, SMB hospitality.
[00:23:43] It wasn't, wasn't a soft market at that point, but, it basically helped, I think it got us like a full worth of a quarter basically, of, you know, additional revenue coming from our existing customer base, right. By just doing, you know, one incremental price increase. And obviously yes, that totally compounds next year.
[00:24:01] And, that, that can be a nice source of growth for you that. Very very cheap in many cases.
[00:24:08] Mikkel: I think it's also pretty common these days to actually increase the price. And it is not that you have to be rude about it.
[00:24:14] The reality is you're gonna have an RD team that keeps on developing the product so you can justify that increases. Well, it's just a matter of how you,
[00:24:22] Toni: and, and now everyone will say, well, inflation. True. No, really. I mean, I'm just waiting for that to roll through the market. Everyone is just gonna hike prices by five to 8% and why well inflation. and, and it makes perfect, you know, sadly it makes perfect sense for everyone, you know, not your fuel, or your groceries go up, but your SaaS product as well.
[00:24:42] Right. and, and they're you go, So this is, this is probably gonna be one of the easier ones to, to achieve probably this year. Yeah.
[00:24:50] Mikkel: Then we have the. Last and final.
[00:24:52] Toni: Yes. The last one here is on the list is really, you know, run QBs, not internally, but with your customer. Again, this is something that you probably won't be able to do with, SMB folks. In that sense, I think this is more of a upper midmarket enterprise play. And really the idea is to, put together a quarterly business review, sit down with your customer and it doesn't need to be.
[00:25:17] Toni: as the leader or something like that, that can be a CSM set up as well. Take them through the things that are obviously important to them and are important to you, right. That needs to be kind of a shared space and then simply ask them, you know, what else can we do for you? What, what other problems do you have that me, we maybe can solve for you?
[00:25:36] And don't pose it as the account manager that, needs to target next week, but pose it as the CSM. Curious and really wants to help. You will be surprised about the honest answers you get back. Solve those problems for those customers, and upselling them and retaining them will be less of a problem afterwards.
[00:25:56] Right. And, you know, that can probably take you a gross churn, down by a couple of points that might accumulate to 10% increase, in total, but it also opens up the opportunity to basically push, you know, potential other pieces of product to them. And yes, sure. Do an upsell on top.
[00:26:15] Mikkel: that. Yeah. I mean, I've only experienced one SaaS company for me who did it, but I was always looking forward to it because there were so great insights to make more leverage of that solution. And you're actually interested in that because you're paying money for it. I didn't know that you were a gro blocks customer before.
[00:26:32] so it's, it's getting to be planning season. Yeah. I really hope this is a helpful way to frame how you're gonna grow. If budgets are coming down more focused on CAC payback. And, and even if they're not right, I still think, switching the mindset a bit and looking at the funnel, where can you actually make a concerted effort?
[00:26:53] And, and I think a lot of teams are actually gonna be very happy with, with that approach.
[00:26:57] Toni: And, and in reality, it's gonna be a mix of those two things, right? Our seven items here have a very much conversion rate or ACV focused. I think the mix will be, will increase your marketing team in a sales team by a couple of percent points.
[00:27:10] And you will find a couple of those projects. And in combination that might get you to a hundred percent, right. It's not only conversion rate or, more, more resource. It's the combination of both. Yeah. have fun with planning. It's gonna come up probably in the next few months. your CFO will love you for all of these things that we just kind of walked through.
[00:27:32] And, I hope that this got you going and got you to the point of, Hey, wait a minute. Shouldn't shouldn't we be doing this instead? Should we, you know, invest in that piece of, you know, increasing our conversion rate and whatsoever and, yeah. Good, good luck growing and have fun growing.