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Our friends over at winning by design is about to drop new research - suggesting that we might just have lost GTM fit.
In todays episode, we discuss the research, and as usual what companies can do about it.
You can find the research here.
Also check out David Spitz
In todays episode, we discuss the research, and as usual what companies can do about it.
- (00:00) - Introduction
- (03:49) - Loss of go-to-market fit?
- (06:25) - Why did we lose it?
- (15:52) - What do we do now?
- (17:11) - Cut strategically
- (22:30) - Run a GTM diagnostic
- (27:12) - Improve in increments
You can find the research here.
Also check out David Spitz
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: Hey, everyone. This is Toni Holbein from GrowBlocks. You are listening to the revenue formula. In today's episode, we are discussing research that just has been dropped by winning by design, And their thesis is that SaaS has lost their go to market fit, Gonna discuss that and how to get it back. Enjoy. Yeah. So my wife finally started listening. So hello, wife.
[00:00:30] Really?
[00:00:31] Mikkel: Yeah. I told her, you can just listen to the first five minutes. Just all the intro BS You can skip the rest and you're just like, well, I actually listened to the other stuff and it was it was kinda interesting.
[00:00:41] It
[00:00:42] was so funny this morning, um, so I'm on,
[00:00:44] Toni: listening to the guest shows or to to
[00:00:47] Mikkel: think every I think she just started Sipping through. So no idea. But then, um, this morning, I basically, uh, got a snap. So I'm on Snapchat. You know?
[00:00:56] Um, Still. Um, And, uh, my wife's best friend, and I, we snap occasionally.
[00:01:03] And she snapped a, video and the caption went, I just said mom's getting a coffee okay?
[00:01:09] And daughter went, Yeah. I just have to find something. And then she walks from the kitchen with the video into, you know, her child's room, And everything has just been turned upside down. We are talking everything. All the boxes with toys, all the clothes,
[00:01:27] Toni: Everything
[00:01:28] Mikkel: just in a big pile of the floor in a matter of, like, two minutes.
[00:01:32] So it's like, yeah. There you go. We are back to kids intros. That's what it is.
[00:01:38] Toni: I'm like, loss of go to market fit? Or
[00:01:40] Mikkel: blew your mind now with all this
[00:01:42] Toni: I just I just don't get it. I mean So but she was in the thing,
[00:01:47] Mikkel: she was in the kitchen, made a coffee
[00:01:49] Toni: came back
[00:01:50] Mikkel: Had the coffee.
[00:01:51] Toni: But this net was basically, hey. I just walked out for five seconds or
[00:01:54] Mikkel: Yeah. Yeah. Exactly. Because,
[00:01:55] Toni: otherwise, like, it was planned,
[00:01:56] Mikkel: I'm a storyteller. You know? It's comes natural to me.
[00:02:01] Toni: Yeah.
[00:02:01] Everyone follows along. You take the audience where it is.
[00:02:04] Mikkel: I mean, if you're gonna write a review, please cite my amazing storytelling slash segue skills Would highly appreciate it. It Will go in uh, the performance review
[00:02:13] Toni: is any of this here is is any of this here, uh, intro
[00:02:17] Mikkel: Yeah. All of it. of it. We're keeping it in. So, anyway, we got I'm holding
[00:02:22] in my hand
[00:02:23] Toni: Oh, wow.
[00:02:24] Mikkel: Uh, a report. So just for I don't know if Bart can zoom on this for the folks watching, but we got, uh, or you got, I should say, early access to a report that winning by design,
[00:02:35] and Jacco van der Kooij, our friends over there have been working
[00:02:38] Toni: Yes. Very special.
[00:02:40] Mikkel: And, uh, when we
[00:02:41] Toni: gonna it's gonna, uh, get published later today.
[00:02:45] Mikkel: Yes.
[00:02:46] Toni: Basically, uh, Tuesday morning West Coast time when this airs, basically, when this episode airs.
[00:02:53] Mikkel: And I asked, is it okay for us to publish it? And you said, well, he replied with dot dot dot wink emoji. So I guess yes. I guess that's a yes.
[00:03:03] Toni: Um, consent.
[00:03:04] Mikkel: But in any case, uh, we instantly read this report over the weekend. Yeah. I was like, Okay.
[00:03:11] Yeah. We we probably need to talk about this because it is pretty darn interesting. So the title is, has SaaS lost go to market fit? It Probably will fit with the title of this episode you kinda clicked on. Right?
[00:03:23] So we're not fooling anyone here. we're basically gonna run a run through, Uh, this report, before you have a chance to give it a read, and you should definitely check it out. You can find it on winning by design's website, uh, where it will be published and we'll update the show notes after the fact once it's
[00:03:38] Toni: Yeah. And I think also, um, I'll update my LinkedIn post
[00:03:41] featuring
[00:03:42] Mikkel: gonna post on LinkedIn.
[00:03:44] Toni: I know. Wow. Passive aggressive marketing person here.
[00:03:49] Mikkel: Well, you'll we'll get into why once we see How terrible things are. We need to do Everything to justify our work now. So Yes. So loss of go to market fit. I think, first off, you know, in the report, they say, what is go to market fit and what is product market fit? Let's Just clear this out of the way. Product market fit is what To sell, go to market fit is how to sell it. And I think maybe another point to position the report is a lot of the data in here is from, uh, a wonderful gentleman called David Spitz. Uh, he basically ran a series of LinkedIn posts analyzing the what do you call them? The the filings, the quarterly results of Publicly traded companies?
[00:04:32] Toni: Yeah. I've I forgot. So, basically, the the the earning calls Yes.
[00:04:35] But the the transcript of those.
[00:04:38] Mikkel: And basically created, uh, the stats that are the foundation of this report. Uh, so it's publicly available data. Uh, anyone can can find it, but it also means it's It's IPO level companies.
[00:04:50] Toni: Mhmm. So, maybe quick quick refresh. Right? So you have those different stages. Product market fit is usually the First one, you need to figure out, you know, what's the product and is their market and can you sell it and do those things fit.
[00:05:02] Right? Then the next stage, this is usually up until a million. Now some people say maybe up until two million. Uh, go to market fit is then what it takes you from to go from two to ten, usually. Uh, really figuring out how to sell this product in a scalable way, in a repeatable way, and so forth without the founders involved, yada yada yada.
[00:05:21] Um, and then once you get out of that, you know, you have go to market fit, then you get into, like, scale up stage. It's like all kinds of funky other ways of, uh, trying to, um, describe what this is. And the really interesting piece here is obviously
[00:05:36] that, uh, especially with the data that used from, you know, post IPO. We're talking hundreds of millions of dollars of ARR. and, uh, Jacco and winning by design by extension, basically kind of questioning, well, have they all lost their, um, go to market fit.
[00:05:52] Are they basically all back to square two? Not square one. They have pro market fit, but they're all back to square Two, after going product market fit, go to market fit, scale ups, sustainable scale, IPO, fireworks, and let's go. And all of them, like, whoop. Back to go to market fit.
[00:06:13] So and the the interesting thing is obviously how the f, Does, you know, Jacco, um, and, actually, I'm just seeing as also Dave Boyce, um, kind of coauthored this
[00:06:24] Mikkel: Oh, yeah. How do
[00:06:25] Toni: they get to the conclusion that, um, that all of those companies have lost their go to market
[00:06:31] Mikkel: Yeah. Well, they use data. They use
[00:06:33] Toni: a bunch of data.
[00:06:34] Um, do you have do you have some nuggets for us maybe?
[00:06:37] Mikkel: Well, I think, um, They so they've first off, they run us through the backstory. we came from this period of growth at all cost. means that, you know, we ended up with a lot of motions that Some were sustainable, some probably weren't. Now it's the efficiency craze.
[00:06:51] A lot of folks have been cut, but we are still seeing a lot of things unwind
[00:06:56] at the moment. And some of the things they get
[00:06:57] at the moment. And some of the things they get into here is first off, that the growth rates have decreased. I don't think there's anything New there, we saw OpenView, uh, and I think this was also the catalyst for some of the layoffs we saw twelve months ago and kind of resurfacing a little bit at the moment. Um, but growth rates have decreased.
[00:07:14] I can't remember the exact stat. We can kind of, you know, open it up here and have a look.
[00:07:19] Toni: you know, You at home can open it up while you're driving the car, the metro.
[00:07:22] Mikkel: Download the report. Take a look. Growth rates, they're down.
[00:07:24] It was the same we saw with, uh, OpenView's report, Which, by the way, is for private companies. Yep.
[00:07:30] So, you know, it's kind of across the board thing. It's not just the big behemoths who went public. It's it's across the board. Right? So that was the first sign that probably something is not, you know, right.
[00:07:41] Toni: The next sign is net retention rate is down.
[00:07:44] Right. So across the public companies, I think it was pre this period, and we're talking late twenty one. So we're talking recession. It's not recession, but kind of, You know, actually, b2b SaaS recession.
[00:07:57] Mikkel: Yeah.
[00:07:58] Yeah. That's
[00:07:58] Toni: what we're talking about.
[00:07:59] Mikkel: Yeah.
[00:07:59] In our little bubble.
[00:08:00] Toni: Yeah. So that that's the problem.
[00:08:03] Uh, but, basically, since then, net retention rate declined from, you know, the mid hundred and twenties to hundred and ten Yeah. Basically, plus minus a percent. there was even, like, a a a nice little nugget in there despite price increases Yeah. Across the board. And, you know, this is where they're taking it over.
[00:08:19] This is anecdotal. You know, we don't have this, you know, in data data. But, basically, kind of all of those companies have increased prices by a couple of percentage points. So, really, you were to take the net of that, you probably kind of land someone, what, hundred and five Or something like this, net retention?
[00:08:33] Mikkel: I think that's also what winning by design.
[00:08:35] I believe, uh, at least at what's, uh, David mentioned around one zero five, that's
[00:08:41] probably gonna end up being the benchmark Going forward. And in the open view report, we talked about this in a previous episode.
[00:08:46] It's no longer land and
[00:08:48] expand. It's land and maintain.
[00:08:50] Toni: it's it's land and hold on for dear life.
[00:08:52] Mikkel: Yeah. Please don't.
[00:08:53] leave. Um,
[00:08:55] so that's kinda terrible.
[00:08:56] Toni: Yes. Um, and, That in combination leads to pretty terrible unit economics. Right? So, basically, uh, CAC payback is up fifty percent, which two years ago, everyone was like, oh, now efficiency and, you know, net retention and all of these things. And despite everyone focusing on them, all of them just got worse.
[00:09:18] Uh, and, obviously, I mean, it makes total sense. Right? I mean, we've seen what Spotify did lay offs again this month. this whole layoff thing isn't over. No.
[00:09:27] Right? This has been now going on for two years, and it's ongoing. Yeah. Um, and, um, pretty much the same is also happening with vendors. People are not they're not laying off vendors.
[00:09:37] They're just firing them. Yeah. Um, and, uh, that's basically what's driving number one, the net retention piece. Right? And then number two makes it so much harder to sell these days, which is then driving the customer acquisition cost as well.
[00:09:48] Right? It's kind of those two things coming together.
[00:09:51] Mikkel: mean, there's no doubt folks have gotten more cost conscious. Uh, I saw someone mentioning, hey.
[00:09:54] We used to have ZoomInfo. We replaced them with someone who delivers eighty percent of what they do at twenty percent of the cost. And that's just one example. Then you have we talked about DocuSign. this morning and,
[00:10:05] Toni: Honestly, I so I had a had a very interesting call with a very interesting gentleman, and it's a fairly large organization. I'm not I'm gonna mention any names. Fair large organization. they just ripped out Jiminy.
[00:10:16] It's like a a cheaper version of Gong. But, like, you know, I think for three hundred thousand euros, four hundred thousand euros, or something like this, they just ripped out SalesLoft.
[00:10:27] Mikkel: Wow.
[00:10:28] Toni: And and we're
[00:10:28] talking a hundred and fifty reps and
[00:10:30] Mikkel: stuff.
[00:10:30] Yeah.
[00:10:30] Toni: and I think they ripped out Calendly. Calendly, probably the kind of the cheapest ticket here.
[00:10:35] Mikkel: so they've
[00:10:35] Toni: they just kind of cut half a million in spend.
[00:10:38] And this company is growing eighty, ninety percent, by the way Yeah. At, you know, very, very large size. they just ripped all of that stuff out and replaced it with, um, you know, some HubSpot tooling,
[00:10:48] Mikkel: Yeah. Yeah. Yeah.
[00:10:50] Toni: Oh, sorry.
[00:10:50] Included in the contract. And it's so this is this is just one example. Right? I mean, let's just say two, three years ago, someone, you know, just ripping out SalesLoft would be like, what?
[00:11:02] Mikkel: Yeah. You're mental? Yeah. Yeah.
[00:11:03] Toni: And, uh, no. You know, first of all, you know, it kinda works also using this other stuff. Right? I think so I changed him on the Jiminy, the call recorder. It's like, yeah.
[00:11:13] We just use the, um, the Zoom recorder.
[00:11:17] Mikkel: Uh, yeah. Okay.
[00:11:18] Toni: No. But no.
[00:11:18] No. No. No. No. But the thing is so when you have the Zoom enterprise, we're making lots of
[00:11:23] Mikkel: Yeah. if
[00:11:23] Toni: it's Zoom enterprise package, I think you basically kind of get the transcript automatically pushed into the deal that is from. Right? And it's really about the trend.
[00:11:31] Of a hundred and fifty reps, no one is listening to the yesterday's call. Right?
[00:11:34] It's kind of it doesn't happen. Um, it's really about the intelligence that happens there, also the competitive stuff. And they transcribe all of that just as much as Jiminy and Gong does.
[00:11:43] Mikkel: Yeah. Yeah.
[00:11:44] Toni: So, um, anyhoo, uh,
[00:11:46] Mikkel: uh,
[00:11:46] Toni: rough rough fucking times out there, um, uh, which is based kind of creating this whole situation.
[00:11:51] Right? So, Um, my my whole question actually and, you know, not not quite sure this kind of fits the story line here that we've neatly laid out. But it's like so first of all, they kind of talk about, well, you need to brace for the next six months being just as terrible Yeah. As the last two years. And I'm like, shit.
[00:12:13] Mikkel: This
[00:12:13] Toni: that's not in my Excel spreadsheet. You know? Um, so I think there's some newness there. I think, Uh, you know, they're they're foreseeing the start of twenty four also being rough.
[00:12:23] Mikkel: I think there's, uh, one point which is All this in our conversation is a lacking indicator.
[00:12:30] And folks are gonna have multiyear deals. mean, you and I, we talked about a company where, you're like, Yeah. We don't have much up for renewal this
[00:12:36] Toni: Yeah. That's Right?
[00:12:37] Mikkel: This is gonna hit next year. and It's gonna be the same with a lot of companies. They're gonna have that lagging effect that's gonna keep, you know, putting a cap on how much you can essentially grow. And so, no, it's I don't think it's, uh, it's fully over.
[00:12:50] I think, you know, Sure. If You look at things like the stock market if you're into that, Sure they are bouncing a little bit because they're looking forward. They're looking for forward to the end. Yeah.
[00:12:58] Yeah. From From nothing to, Like, you know
[00:13:01] Toni: twenty three has been at least, uh, kind of we're getting back up to the green kind of year. Yeah. Um, Nasdaq is up, like, more than it used to, you know, back then before it imploded.
[00:13:11] Yeah. So I think there are a couple of the people in in the Wall Street Journal talk about a soft landing. I'm not gonna explain what a fucking soft landing is, but they has nothing to do with the airplane, by
[00:13:20] Mikkel: Finance with Toni and Mikkel
[00:13:22] Toni: Yeah.
[00:13:22] But, um, uh, that's what's that's what's, you know, people are kind of talking I think I I believe, um, twenty four is gonna get a little bit better. Um, I I think so.
[00:13:32] Mikkel: I think for a couple of reasons. Number one, you're gonna see some of the fringe tools kind of dying.
[00:13:36] Honestly, those who latched on in this frothy market, you know, where it's, a, hey, we we kinda like it, but Do we need it? So it's a question mark on product market fit. And sure, for some of these bigger companies, they're not gonna go and lose product market fit. They're, you know, they're too Well established.
[00:13:52] You know, there's a reason they got this far. But for the ones who aren't there there yet on the growth trajectory, I think they might even reset to product market fit issues. Right? And The other thing is there's gonna be some companies who decide to take the wrong course corrections Yeah. In this environment and die.
[00:14:09] Right? You're gonna see a lot of death spiraling happening for some companies. And that's what's gonna create, you know, a fertile ground for some of those folks who's left. standing.
[00:14:18] Toni: Yeah.
[00:14:18] I think Carta came out with Two and a half thousand venture funded companies died this year. So I I saw another stat, like, in total, Fifteen or sixteen thousand b2b SaaS in the world. Yeah. And I'm not saying that two and a half thousand are all b two b SaaS, but let's just say it's a good chunk b two b SaaS in there. Two and a half thousand companies just, you know, stopped stopped existing, kind of ran out of cash.
[00:14:43] Right? Um, Ay, ay, ay, good news here today on the show. Wonderful. Um, so, basically, kind of Taking all of this stuff together, right, you basically arrive at a, you know, loss of go to market fit, which to a degree is a it's kind of a two sided thing, though. Um, because, Um, it could also be that some of the market is bouncing back because it's a ratio, basically.
[00:15:04] Right? We're talking ratios here. And if, Um, if the income side of the plus side is suddenly coming back a little bit, then voila, we have go to market fit again, which is already counterintuitive when you kind of start thinking about the concept. Or the alternative is true. It's gonna you know, this is the new normal, or it's gonna stay like this for another six months, uh, and then get better.
[00:15:25] Um, and we've been we've been saying this. It's gonna be another six months now for, like, two
[00:15:29] Mikkel: Yeah. Since we started the
[00:15:31] Toni: It's like a rolling it's a rolling thing now. Um, so let's see about
[00:15:35] Mikkel: Well, New information presents itself.
[00:15:37] every day And then we have to reassess. That's just how it works.
[00:15:40] Toni: That's just how Um, that's that's how we get ourselves out of the, uh, liability here.
[00:15:44] No. But, um, uh, no. Generally speaking, right, this could come from both ends. But based kind of the assumptions, it it won't. Um, and won't.
[00:15:52] Mikkel: I think at the end of the day, uh, you need to assess whether you still have go to market fit. Right? That's that's at the end of the day what you need to do. Uh, because if you don't if you don't know how to sell anymore, or how you're selling doesn't apply, work out, isn't sustainable then you need to change.
[00:16:07] Toni: So what are the winning by design folks, uh, Jacco and Dave specifically, suggesting we do about that?
[00:16:13] Mikkel: Well, when I read it, I was like, I was thinking, have they have been hot desking in our office, to be honest?
[00:16:19] Toni: I was just I don't know. Listening to the show.
[00:16:22] Mikkel: Could be. Could be. Could be. I don't know.
[00:16:24] Toni: Little bit more plausible. Yeah.
[00:16:25] Little bit more plausible. But then
[00:16:27] Mikkel: I think you would yeah. Anyway, so what are they proposing Toni?
[00:16:30] Toni: So I'm not saying that, you know, they got the ideas from us, by the
[00:16:33] Mikkel: way. No.
[00:16:35] No. No. No.
[00:16:36] No. No. It's just a way to say We agree.
[00:16:38] Toni: Yeah.
[00:16:38] That's
[00:16:39] well, that's true. Yeah. Yeah. Exactly. so they basically have, um, three Three steps.
[00:16:44] Uh,
[00:16:45] Mikkel: Yeah,
[00:16:45] Toni: one is shocker, cut costs, uh, but strategically. Don't do it don't do it the the dumb way. Uh, we're gonna talk about this in a little bit.
[00:16:56] Go Go to market diagnostics, uh, really emphasizing unit economics.
[00:17:01] And then lastly, basically fixing your go to market efficiency by way of, you know, sprints and and and reviews and so forth. Right? let's let's go through them one by one. Yes.
[00:17:11] So they start out with, you know, cutting costs, and I think they have, like, one very kind of straightforward example there.
[00:17:16] There are plenty of other examples, and I feel it also fits into the second bucket a little bit. Um, but the one, you know, cutting cost first was like, hey. Just have fewer reps.
[00:17:28] Mikkel: Well if they aren't making quota, That's, you know No.
[00:17:32] Toni: I'll so what I like about the winning by design folks is, um, they're they're kind of high up there in the academic, uh, ivory tower kind of
[00:17:40] Mikkel: Mhmm.
[00:17:40] Toni: But then they're they're they're breaking it down, making it ultra tangible for everyone reading the stuff that is like, well, I'm busy. I need to, you know, not get fired. Uh, can you please simplify this for me? And
[00:17:51] Mikkel: Make it dumber.
[00:17:52] Toni: uh, and and one of these, um, one of the examples is, like, well, if you reduce the amount of reps, you spend less money in general on sales. That's good. number two, uh, the remaining reps will have more stuff to close and quota will go up, uh, meaning that, uh, you not only will kind of decrease cost, but, you know, some of your metrics will improve. Right? Kind of quota per rep will go up, which is an important metrics for a couple of reasons.
[00:18:19] Um, but generally speaking, that's that's kind of the approach to this. Right? Can I just fire or At least one example is kind of let go some, uh, sales reps, and then, you know, our overlay on this would be, well, um, Apparently, the reason why you close less and less and less is not only, that maybe your reps aren't as skilled, which is kind of Usually, a thing that winning by design is kind of, uh, very strong on, which I think they're totally right with. But also, probably, you have few opportunities to work with. That's probably also the case.
[00:18:48] you probably cut a lot of, you know, marketing and top funnel initiatives, and, uh, that is now seeping through to your reps. Uh, and and guess what? Uh, those those reps don't have enough opportunities anymore. If you kind of decrease the amount of reps, you have enough Again, good enough, uh, amount of, uh, opportunities for those remaining reps.
[00:19:07] Mikkel: Jason Lemkin, he put it pretty well. It's like, Cut sales and you have a problem this year. Cut marketing and you have a problem next year. It's complicated.
[00:19:14] So, yeah, it is complicated. But I was also thinking, like so we had this conversation around, Hey. Who would you rather lose? An AE or an SDR?
[00:19:22] And we're like, Well, an AE because SDRs produce opps you can you can make it work and maybe some over perform on quota completion and stuff. Right? But if what we're seeing now is also happening on SDR level, their efficiency in booking meetings. So we discussed on this show The number of touches required, they've increased.
[00:19:40] Uh, you know, there's so much more work required to book a meeting with AI exacerbating some of the channels. Google, Yahoo cracking down on spam. Like, uh, how
[00:19:50] Toni: then uncracking down the
[00:19:51] Mikkel: uncracking down on. it. Yeah. That's true. So, um, Like, how do you go about then balancing those two when you cut? Like, how do you do that strategically the best way?
[00:19:59] Toni: Yeah. It's really difficult.
[00:20:01] Mikkel: Yeah. It's complicated.
[00:20:03] Yeah.
[00:20:03] Good.
[00:20:04] Toni: it's it is complicated. I could say, hey.
[00:20:06] Maybe use a tool that helps you with some of these things and stuff. Uh, but but generally speaking, I think, what many people haven't done, and that's kind of seeps a little bit in number two, kind of you, you know, really kind of going through the go to market diagnostics. What many people haven't done is to actually consider the full funnel impact of your of your, um, of your cutting. But that's that's basically what I would say is, you cut the stuff first where you feel kind of you have a very low confidence that there's a strong there's there's a connection between doing it and then revenue coming out of this. Right?
[00:20:40] Kind of this is the attribution game. And see there, there was a connection. Um, and, uh, either you didn't you didn't think about how that then would result in few opportunities, Or, um, you thought about it, but you got it wrong. Um, and then, basically, kind of, uh, you know, less stuff going through the pipeline. And then, um, you know, teams that are further down funnel, they're not having enough to work.
[00:21:06] Right? Um, so it's a it's a all of this you know, I think another way to look at this also is just a supply chain problem. So funny enough, I was, uh, with a very, very, very big pharmaceutical company, um, here in Copenhagen. Not gonna say who. and, uh, they were looking at, uh, our software for, uh, supply chain purposes, actually.
[00:21:27] Mikkel: Okay. And
[00:21:29] Toni: I was like, guys, we're not we're not a supply chain company. You know? It's it's not about that. But it's it's super closely related.
[00:21:37] Kind of the supply chain between factories and, you know, trucks driving and then pallets falling off the truck
[00:21:44] Mikkel: Yeah.
[00:21:45] Toni: It's very much the same thing as, um, you know, stuff being worked in, you know, one team and then, you know, some You know, you have a conversion that is in and so forth. Right? It's very
[00:21:55] Mikkel: a revenue
[00:21:55] Toni: um, and, exactly, it's a revenue factory.
[00:21:58] Mikkel: And,
[00:21:58] Toni: uh, you know, not not having that mindset, not realizing that all of these things are connected. And if I take something down here, then I don't need as much capacity over there.
[00:22:08] Um, or if I do that, then, you know, there's spare capacity, and I just need to be aware. And, you know, maybe this maybe this spare capacity that I'm building up with my sales team is more expensive than the cut that I did, uh, on the top end. Right? Kind of and realizing that stuff, I think that's, uh, that's sometimes, uh, pretty difficult and always kind of winning by design guys are pushing that out, uh, quite a lot. Right?
[00:22:30] What they then basically, they're what they're talking about when they mean the go to market diagnostic or go to market diagnostics, they actually talk about roughly what we would call just just CAC payback, basically. Yeah. But segmented CAC payback. Right? and, again, super great how they're doing is they're basically like, hey.
[00:22:47] Listen. all of those different, things that you're doing in your in your business, treat all of them as their own business unit. Yeah. And then judge them by the, profit margins or whatever that that business unit is generating for you. Right?
[00:23:01] So if you have an SDR function, Look at okay. SDRs are producing stuff, uh, and for that business to work out, well, you need some AEs to work through those opportunities. Right? and then, you know, that whole, how much does that does it cost you and how much comes out of it? and then the same with, you know, different marketing strategies.
[00:23:19] Okay. Treat that as a business unit. and also they need some AEs that work through those opportunities, so they need to be included in that business unit. Um, and the same with different markets, different segments, different all kinds of stuff. Right?
[00:23:32] Kind of really trying slice and dice and split and cut and whatever we're gonna call it, your, uh, your your revenue engine, and try and figure out which pieces, are actually not helping you in your efficiency. Right? and then and this is this is absolutely one thousand percent aligned with our thinking. as you do this analysis, uh, you will find parts of your of your business that are, underperforming.
[00:23:55] Mikkel: Mhmm. And
[00:23:56] Toni: guess what?
[00:23:57] If you take those out, the rest the the whole sum of your business will then be better performing suddenly. Right? and And you can you can do it in two ways. You can take the underperforming business units out and put the money into your pocket and, you know, be a okay with that, or you take that money out and Put it into the higher performing parts of your business and then actually even gain additional efficiencies here. Right?
[00:24:20] And in order to do that can be sometimes pretty complicated, data heavy and so forth. winning by design is uh, recommending to use an outside, consultant for that, which I'm sure, you know, you guys should just be calling up Jacco, um, and give the code word, uh, revenue formula. Um, maybe
[00:24:38] Mikkel: get a t shirt or
[00:24:39] Toni: you get a teacher or discount. I'm not sure.
[00:24:41] Mikkel: will send you
[00:24:41] Toni: at this.
[00:24:42] We will
[00:24:42] Mikkel: least. Yeah.
[00:24:43] Toni: exactly. Um, and, you know, uh, I think this is this is something that you should be considering. I haven't done this already. I think there's one or two episodes where we talk through how that would actually work. Yeah.
[00:24:53] so listen to that if you want
[00:24:55] Mikkel: to. I mean, we so we recently talked about a couple of examples of the power of running this analysis. Right? And I think what's really key to understand is one thing is looking at
[00:25:03] the CAC payback.
[00:25:04] Another is, you have the entire bow tie to consider as well. Right?
[00:25:09] And when we talk about unit economics, we had an example actually of sales, touching trials.
[00:25:14] And
[00:25:16] they were effectively closing them at a high ACV. So on paper. it looked great. Let's do that. But when you ran the entire analysis, actually, it was a net loss.
[00:25:25] Comparatively.
[00:25:26] Toni: Yeah. So we're probably not gonna go into the details of that story, But you're right. Actually, if you if you do say, hey. This is a business unit, you can't cut it at at New Biz.
[00:25:38] You actually have to include the, uh, what is it, the east side of the bow tie. and and then maybe the the the metric you should be using suddenly becomes, you know, lifetime value, instead of just, you know, CAC payback. All kinds of things to consider. and, you know, again, once you kind of go through this whole motion, that can then help you to understand, you know, where to cut and where not. And The the thing is also lifetime value is great, but it's also, it also takes a while to kind of capture that.
[00:26:04] So you might even if you have a cash crunch, you might even be preferring to have, you know, more revenue now, but maybe not so super sustainable versus, uh, less revenue but super sustainable. Right? There's, like, all kinds of things to consider in terms of cash and so forth, but it's like it's it's complicated, man.
[00:26:22] Mikkel: Yeah. Yeah. But complicated.
[00:26:23] But that's why It starts with analysis. You need to base it off of real numbers, not just in isolation of one team or one department. This is a go to market problem. It's not a sales problem or marketing problem. It's across the bow tie. Yes.
[00:26:35] Toni: And, ultimately, this might, again, just as number one, lead to cuts.
[00:26:38] You might be cutting, um, marketing initiatives. You might be cutting geographies. You might be closing offices. They're even talking about, uh, firing customers.
[00:26:47] Mikkel: Yeah.
[00:26:48] Toni: Like, hey. You know, just get, you know, rid of those because that's apparently not really working for you, um, for whatever reason. Right? it's so fairly drastic stuff. They are they're pulling out all the stops. There's like, hey.
[00:27:00] All you know, all of these things you need to consider if you haven't already. Right? And it's like, we're at the end of twenty three. A lot of people have considered pretty drastic things already, and now now we're kind of just going to the next level, I feel. Right?
[00:27:12] so going to number three here, uh, which really then is, okay, you have, uh, done cost cutting in a smart way. You have analyzed your business, uh, with a go to market diagnostic, consider the full bow tie, understand what's expensive, what's not, you know, throw away what's too expensive. And then ultimately, you know, in the end, it's also then, okay, then what is left, um, what can you what can you do in order to improve it? Right?
[00:27:39] And it's it's pretty straightforward, actually. And I always wanna reemphasize how how much everyone is not caring about, um, you know, incremental improvements, continuous improve. It's crazy to me. So, starting to look at, you know, some of the analytics we can do in the software and kind of across the customer board. Right?
[00:28:01] There's you have two reasons why you're not hitting target. and maybe we're gonna do a study on this or something, But, uh, the biggest buckets are you're not hitting your processing metrics. Like, your conversion rate is dropping, generating, revenue loss for you. Your ACV is dropping, generating revenue loss for you.
[00:28:18] Right? Because all of that stuff compounds and adds up. Yeah. and when you look at this, like, bridge, uh, chart, kind of you can clearly see how much money is sitting in those processing metrics, right, versus in the volume metrics. Anyhoo, Uh, people are across the board always on emphasizing that.
[00:28:35] and, uh, number one, you can take better care of those and, you know, just run a tighter ship. Right? And number two, you can, uh, know, potentially work with folks like Winning by Design and, um, and basically kind of figure out, you know, which part of the funnel, which part of the bow tie needs improvement, and then do specific coaching around it. Yeah. Yeah?
[00:28:56] And, um, uh, I think, uh, one thing that we discussed actually kind of also kind of from winning by design in that sense, they basically deploy, coaching for, I don't know, your discovery
[00:29:07] Mikkel: Yeah.
[00:29:07] Yeah.
[00:29:08] Toni: like that. Right? And then, uh, you know, you get better there, and you do that again and again, and then compounds and so forth. Right? So all of those little tweaks can be extremely impactful, um, and that's kind of one way to do it.
[00:29:21] I think another way to do it, run monthly or quarterly business reviews just to see how you how how the engine is working, get aware, become aware that actually some of the you know, your your processing steps are sliding. Become aware that that is probably a big reason for why you're not hitting target and figure out why that actually is. Kind of start digging in. Right? And especially when you're thinking about you're reducing staff, you would actually expect some conversion rates to improve.
[00:29:49] Yeah? Um, simply, hey. If if you take out the bottom thirty, forty percent of your sales reps and you only have the sixty top performers in there, well the conversion rate should be better, your ACV should be better now, sales cycles should be better. Conversely, um, there might be things like, hey. You're taking out some top funnel resources and suddenly your MQL to opportunity conversion drops, For example.
[00:30:10] Right? There might be those things, but generally speaking, when you reduce, actually, your your conversion rate should go up. Um, and you have the same Law also the other way around. If you scale up, conversion rates come down. Right?
[00:30:22] Um, so you should be actually almost expecting and then seeing it. Um, and if you don't see it or if you don't see it enough, you should consider, uh, you know, doing specific sprints and, you know, whatever, uh, on improving those over time.
[00:30:35] Mikkel: I Think it's also like the it seems kinda silly that it takes such a catalyst of loss of go to market fit to run this diagnostic and really truly understand how your business operates. Because how can you make optimal decisions if you don't know how it truly operates? Like
[00:30:50] Toni: Yeah.
[00:30:51] But the thing is you just, um, and, you know, I I was myself part of that whole game. Right? And it's like, um, you know, why?
[00:30:59] Mikkel: Yeah. Yeah. Yeah. Why?
[00:31:00] Toni: It's hey. Okay. The only metric that's being measured is ARR. Okay. Let's optimize that metric.
[00:31:06] Um, and then once once it's high up, I can go back to the to the well Yeah. And get some get some more cash. Um, and suddenly and we kind of skipped over that part here, suddenly that well went dry. Uh, you know, going out of business, or just, you know, unwilling to fund those kind of businesses anymore. Right?
[00:31:26] and suddenly you need to realize, oh, shit. You know? I need to become a very different company really fast. Um, and that's what's what's underlying here as well. Right?
[00:31:34] Um, and I think it's just a new, you know,
[00:31:39] Mikkel: kind
[00:31:39] Toni: of grown grown up moment that's happening now. That's that's actually what I think. It's it's the industry, you know, albeit, what, fifteen years old or something like this. I think there's just a new, know, stage now for us to be a bit smarter about how we spend cash and how we grow, there's new learnings. There's new ways of understanding how SaaS works, basically.
[00:32:03] And those learnings have become, you know, good and bad. It's like, oh, not everything is worth 40 x. Something is only worth 5 to 10 x, is, you know, not necessarily bad either. Um, and, um, and and some of those those are the, uh, you know, learnings on the, uh, on the capital side, And then now need to be matched with learnings on the operation operating side as well and kind of I think this is what we're kind of discovering, uncovering, and what we are what we are pushing towards. Right?
[00:32:30] And And I think Jacco and Dave kinda did a fantastic job in, like, bringing this here into a piece of, uh, piece of content, a document that everyone should be downloading and studying,
[00:32:40] Mikkel: Yeah. Um,
[00:32:41] Toni: And, uh, and helping us understand, you know, what what is really why is why is all of this chaos happening, in my company and, you know, what could be a root cause that I then can start working on.
[00:32:53] Mikkel: Yeah.
[00:32:54] Toni: Wonderful. So maybe wrapping this here, the thesis is, hey. You know, we've all lost, uh, go to market fit.
[00:33:01] We've all lost how to actually sell. Um, the solution is, number one, cut costs in a strategic way, not across the board. And maybe you've done that recently, so that kind of might suck to do that again. Number two, do a go to market diagnostic and emphasize the unit economics around it. And number three, iteratively, uh, improve prove your go to market efficiency.
[00:33:20] Right? You run sprints, run QBRs, talk to winning by design, whatever it's necessary. Um, those three things in order to get back to go to market fit.
[00:33:28] Mikkel: That's it.
[00:33:30] Toni: Thanks, Mikkel.
[00:33:32] Mikkel: That was an abrupt ending. So check it out. You can find it on winning by design. If you're listening early, early, early as we've published, you have to wait probably a little bit for them to, you know, wake up, have their coffee, and push a button or something.
[00:33:46] Check it
[00:33:46] out, have
[00:33:47] Toni: otherwise, leave a review to, uh, to to help the cause.
[00:33:52] Mikkel: Back to this.
[00:33:53] Thank you. Toni. Bye.