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Can you clearly explain to your team how you can hit your target? If not, then you might want to listen to this episode. We discuss how to balance targets that are realistic and ambitious. We'll also cover how to close the gaps, what you can do to shift the conversation and ensure you have what's needed to hit.
Creators and Guests
What is The Revenue Formula?
This podcast is about scaling tech startups.
Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.
With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.
If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.
[00:00:39] Mikkel: Today we're gonna talk about targets.
[00:00:51] I mean, we love targets, especially when we hit them. And when we worked together last time, we were really good at it. Actually it was 14 quarters in a row, 12, 12. Ah, but it was counting. Yeah. yeah, exactly. I think there was a, a gig or board that was counting. Yeah. But you know, then it's really fun as a team, you hit your targets.
[00:01:09] Everything is moving, motivation, builds momentum builds, but I think we've also seen, it can be really hard to actually set our target. and set a target that the team believes in that you can actually reach. And I wanna peel the onion a little bit on the issue with, with target setting, right. Because there's kind of a, a little bit of a scale that either it's unambitious and then people get too comfy and relaxed because oh yeah.
[00:01:39] We're we're gonna hit that goal easy. It's it's not gonna be an issue. Right. So just, just relax. Mm-hmm and then there's the other side where. You're sitting at a town hall, big numbers presented, everybody looks around and say, yeah, we're never gonna hit that. Where, how on earth is that gonna materialize?
[00:01:58] And I think we should. Talk a bit about this conundrum here, this, this specific problem, what it does to a team.
[00:02:07] Toni: Yep. So let's jump into that. Uh, I think goals and targets, they have a couple of different purposes actually. Uh, one of them is certainly to motivate Hmm it's to motivate the team. Hey, now we can, we can go to the moon, let's shoot for it.
[00:02:23] And yada, yada, and kind of go there. And, in order to get the team behind you, you will need to. You will need to have them believe in it just a little bit. If you, if you put something out there that no one can see their path towards, then it's very difficult to have it as a motivating thing versus a crushing thing.
[00:02:42] And you as a revenue leader, even as CEO, you know what, whatever function you have in order to say targets and goals, you really need to find the balance between setting it just right. Right. You can almost say it, it needs to be a bit of a stretch target in there. It needs to. People need to be feeling like, Hey, this is not gonna be easy.
[00:03:02] but if we all pull together and evolved push, we can maybe get there. Right. And I think the, the, the conundrum that many people are facing is that the board one's one number and the organization can only deliver another one. Oh yeah. And the, and the question really is then sometimes as a, as a CRO, as a CEO, Where, you know, what, what do you do here now?
[00:03:27] Do you just take the, the board number blindly that maybe is written into your comp plan and just, throw it into the work and, and see what happens, or do you take a different approach?, do you take a number that maybe is lower than the, what, you know, you're told you're gonna hit the Bo uh, hit to the board, which obviously is difficult, right.
[00:03:44] To kind of, almost admit defeat in this session, uh, on that, that second, but the, you know, the upside here then would be that you actually, instead. Only you are being demotivated and not the rest of the organization. Right. And then you basically delay the figuring out how to close that gap for just a little bit longer until you maybe do, or you don't.
[00:04:04] Mikkel: I think it's also crucial that you are transparent with the numbers that are put in front of you and don't just accept, accept them and take them on the chin. Right. Because if you can say. So looks at the plan. Q2, we have an issue we're, we're not gonna be able to actually deliver what is in the plan.
[00:04:21] Cause then usually what will happen is a conversation follows then what is needed in order to hit that plan. And that's, that's very different. Mm-hmm
[00:04:28] Toni: right. So what I did in the past, and, and sometimes was good. Sometimes was bad. I basically, forced myself to be able to explain, to even account executive.
[00:04:42] How they're gonna hit their target. Mm. and, and then sometimes that was great, uh, because it all worked out and sometimes it wasn't so great. And, and obviously that's difficult, right. But the, if you are as a CRO, as a rev op leader, the revenue leader, if you are asked by someone in your organization, how we're actually gonna hit this target and you are unable to give any kind of answer.
[00:05:05] And, and by the way, I think. I think having a gap where you say, oh, we will need to figure this out in an annual plan. Is something very different than in a quarterly plan, in a quarterly plan? You can't have this, oh, you know, this 10, 15% gap. No, we will figure this out that no, you won't and, and no one will believe you.
[00:05:27] Right. And uh, if you, if you basically, uh, have to use the, we will figure this out phrase. Let's just say once or even more than once then I think that's a great indicator that you probably set the wrong target. Yeah. And, and this is usually what, uh, CEOs do or, or other people that kind of just hand down the problem and are kind of crossing their fingers and hoping that, Hey, you know, I'm paying all of these people so much money.
[00:05:51] I'm, uh, they, they're doing so much equity. They have all more experience than I do. Uh, summer will figure this out and then fingers crossed and waiting and waiting and, you know, usually. Usually they don't because they're, by the way, also busy with all the day to day stuff and the already ambitious targets that are going on.
[00:06:09] Mikkel: it's a it's, it's always a difficult conversation. Right. And I think, again, it's about finding the balance between not being too ambitious as in, is not gonna be able to hit and you know, not being ambitious enough. And how, how do you find that sweet spot basically? Yeah,
[00:06:26] Toni: I think the way you find that sweet spot.
[00:06:29] Is, by having a good feeling for what is achievable. I think that's where it starts. You need to kind of know where will we be able to go if things keep going as they are right now, because that's is usually is a good baseline or benchmark for your organization going forward. Yeah. and then there will be the ambitious number that you discussed in the board.
[00:06:50] You know, your CFO said, well, If we wanna keep that valuation up, we will have to triple there's no way around it, and we will need to do it according to those metrics. And then, you know, the, the company needs to, basically be fantastic. Right. And, uh, that's your ambitious plan. And then you have your, uh, Hey, this is what we think we can achieve right now plan.
[00:07:11] And, uh, you and the executive team at that point, you will need to figure out how to close that gap and you can close that gap in two ways. Uh, one is you're able to find ways to move the reality plan up. And the other one is to move the ambitious plan down. Yeah. And my, my advice would actually be to rather have that conversation in the beginning of the year, actually at the end of the last year, maybe even where you have, strength from a good year end, and then rather kind of push some of the board stuff down.
[00:07:43] Yeah. Instead of. You, uh, you know, sitting in the boardroom, having missed two quarters in a row and begging for pulling the, the, the planned out that will, that will be a terrible conversation to have. Yeah.
[00:07:57] Mikkel: Yeah, totally. And I think it's also, you, we talked a lot about how you go about actually getting to the numbers, right?
[00:08:03] So there's a, there is some cases where it's very much top down and they, they go, here's your number. Mm-hmm, go, go figure it out. But actually, if you. Take an approach where it's also bottom up mm-hmm and go in and say, okay, marketing. This is how we perform so far this year. What are your take, what's your take on next year?
[00:08:24] Then you will start figuring out that there are certain things that can be scaled to a limit up to a point mm-hmm. And there are some things where it's, Hey, if we want to grow the organic inbound we get, because we have a strong brand presence. That's gonna take us, maybe eight months to make an impact or, or half a year.
[00:08:42] And it's hard for us to predict, right? Yeah. It, it kind of changes the understanding of what can the different teams do and what do they need and how much time, like resources as well, do they need?
[00:08:52] Toni: Yeah. So I think there is merit and necessity in both approaches the top down and the bottom up. I think the top down approach really has the advantage of sure.
[00:09:02] It's it's fast. But it also gives the ability for sea level to. Communicate a strategy in numbers, if you will, right. Hey, we wanna, two and a half X. we wanna see, uh, revenue be 40% from the us next year. And we wanna, uh, build this outbound channel. Yeah. That is, that is, that should be the strategy in, in a plan, if you will.
[00:09:29] And then. That then needs to be matched up by a bottom up plan. And that bottom up plan really needs to start at the bottom. Right? And the bottom is not revenue numbers or something like that. The bottom is way deeper than this. and, uh, which, which then. Which then really, we haven't even touched on the, the whole target goal conversation further down, because really, at the end of Q1, let's just say you hit the revenue target, which you usually will, by the way, uh, because it's basically baked already when you create the plan.
[00:10:00] So you're gonna have high five moments. Everyone is happy, but the, the real, the real measure at the end of QAN should be, did you hit all the other things further down the funnel? To then put you in a position to hit Q2. That should really be the conversation. And what I see many, many times is, and you know, of obviously celebration culture, and you need to, you need to celebrate the good stuff and revenue is really important.
[00:10:23] And when you hit that, that's a good thing. So you should celebrate that. But at the same time, at least you as a rev op leader or person, or, uh, you know, revenue leader, while you may be on the facade are happy that you hit the revenue number. I think there needs to be a very, clear conversation going on behind the facade, behind the curtain, if you will.
[00:10:41] Okay. Did we actually hit all the other numbers that we needed? Did the, did the funnel move in a way?, as we, as we said, it should in order for us to be able to hit the Q2 number, for example, right. A top down plan, first of all, won't, won't give you that opportunity. And, and second of all, if you, if you don't in your execution track all the different things, all the leading indicators, then basically, you know, Q1 will look good.
[00:11:05] Maybe Q2 will already look terrible Q3 it's dense seasonality, and then you all put it, into Q4 and, you know, Q4, we sometimes see it's like a it's the whiplash quarter. you know, It's like, uh, the, the very end of the whip kind of accelerates really fast. Yeah. And suddenly you kind of close, obviously your record quarter in Q4 all the time.
[00:11:27] Some people call it back loaded and so forth. And, uh, and it's basically a hail Mary and everyone in the organization knows it's not gonna happen. Hmm.
[00:11:36] Mikkel: Okay. So let's maybe talk a bit about, the other dimension, right? So in many, many, many cases, you're, you're gonna have this push and pull happening in the organization. You're gonna have a board and the executive leadership where they do in fact, have a number. We are gonna need to hit this number.
[00:11:54] And then you have the organization that needs to go and deliver it saying well, with what we have today, we, we will have a Delta that will be a gap in the plan. And I think in, in most organizations that's gonna happen. Almost every time. So how do you go about that ? And, and, and, you know, you're gonna have revenue operations sitting right there in the middle, potentially working with finance.
[00:12:21] How do you go on solving that issue?
[00:12:23] Toni: So I think really again, setting goals and targets is kind of two purposes. One is obviously to, you know, try and hit that number. And the other one is to be motivational.
[00:12:32] And the cool piece here about every company is everyone can set their own targets and their own goals. Right? So this is really the flexibility we're not talking about. And I think, and it's, you know, sure. It's a bit UN unconventional if you will, but I think you should have a, clear plan. That is executable for the large part of the organization.
[00:12:58] So let's just call that the reality plan or the action plan or something like that. And that will inevitably change a little bit, you know, you will tweak it a little bit. You will have some bets that land well, and you have some bets that won't land so well. and, uh, and really the, the importance is that, quarter over quarter, these, these things are super clear to the organization, but at the same time, you should have, the ambitious plan somewhere in a draw and.
[00:13:24] If either you're the CEO or the COO, but you should basically hold your departmental leaders, your revenue leaders, and actually also your revenue, operations leaders. You should hold them accountable to, that desired plan. That doesn't mean necessarily, you know, comp them or something like that. But basically in your one on ones in your monthly business reviews, in your QBs, you wanna see the ambitious plan overlaid on top of it.
[00:13:52] And you wanna ask questions, Hey Jack, how, how are we gonna get there? Mm-hmm, you know, this is, you know, sure. We have the, the easy plan and so forth, but the easy plan is not gonna. Help us, you know, survive and be successful as a company. It's kind of leading us in the wrong direction. you know, you as a VP of marketing, uh, you as a VP of sales, you as a VP of CS, What are the things that you are doing and thinking about to move us in that direction?
[00:14:19] Yeah. And these things, I think, I think on that level can be high friction. I think there can be high pressure and stress and all of that. At the end of the day, it is their job to figure this out. But you don't wanna what you, what you don't wanna do. Is to take that pressure and, you know, spray it across the whole organization.
[00:14:39] Mm. That, that, that is the absolute wrong thing to do. And I think this is what many people are struggling with by, harping too much on the ambitious plan. And just not wanting to accept the, the, the alternative plan. And you kind of need to, use those two things at the same time for different parts of the organization in order to try and move the reality piece up.
[00:15:00] Mikkel: I also remember at some point. We had the same conundrum of, of a Delta. Right. And we knew we could deliver up to a point, but then what was I I found was what was pretty smart is then we had, I think, four strategic initiatives and we knew not all of them were gonna succeed. We, we knew that from the beginning mm-hmm, but if one of them would succeed or two of them would succeed up to a point, then we would be home.
[00:15:25] Right. So I think there's also something with the mentality and how you bring it to the organization and say, Hey. These are some of the things we're gonna do. And we know they're all, not all gonna be successful. It creates a bit of safety, which is gonna be important as well, especially when you have that ambitious plan.
[00:15:40] Otherwise it's easy to default back to the oh, but this is what we can hit. This is safe. we told you, yeah,
[00:15:46] Toni: I think, you know, it sounded great at the time. I'm not sure if I'm still such a big fan. So basically the idea was, Hey, let's have four different bet. You know, it's a typical thing.
[00:15:54] Everyone calls it, fricking bet. Uh, let's say four BES. All of them need to be of a size to close the gap that we have. And we know that not all of them are gonna, you know, turn out as, as we hope they would be, but maybe in some they will. Mm-hmm I think this can be a good way to address the gap.
[00:16:17] I think there's also a flip side to it and the flip side is, well, you're kind of diluting your resources. Mm. Yeah. And, and, and that approach, that approach kind of works in venture capital on, you know, stocks or something. Let's just spread my capital across those four assets here, but in organizations, it doesn't work like that.
[00:16:36] The focus of an organization, you know, the focus of everyone, even though you kind of try and compartmentalize it and oh, no, this sits with partnerships and this sits with over there. it still takes up mental space and, and people's heads. And because of that, I think it's, it's a little bit dangerous to go into it.
[00:16:52] in that, in that kind of way,
[00:16:55] Mikkel: it's too, too much of a hail Mary.
[00:16:58] Toni: It's it's too much of a hail Mary bed. And, and also in addition, it's, uh, why not make it five? Why not make it 10? You know, why not? Uh, why not say, Hey, we have four of those beds for that part of the gap and four of those beds for this part of the gap.
[00:17:12] And you kind of, you know, you kind of build a methodology that has you end up in the same conundrum as before, honestly. Right? And also by saying all of those bats, maybe have a 20, 25% chance of, of hitting. you kind of tell everyone it's really fine too, you know, if it doesn't work out, it's fine.
[00:17:30] And so, so, and I think, that, that's why also this target setting goal setting is so difficult because you wanna find the right balance. I would probably advise to keep it to, one, maybe two, uh, two of those beds and, and I would keep it to. You know, bats like figuring out this new channel, figuring out this new market and really think deeply about what, what are the resources we know mean to stack behind those two Bess in order for them to have even a, a slight chance of, of, of getting where you want to go.
[00:18:02] Mikkel: You don't just wanna send people out there with a broom when they need, a camera and a laptop or something, right. It
[00:18:08] Toni: yeah. Needs to be with resource. No, it happens all the time. And, And sometimes I also simply see that executives, uh, just accept targets, you know, it's basically the, oh yeah.
[00:18:18] We had buy-in from the whole organization and we walked around and put a gun to their hat, kind of approach. And, first of all, I think it's the best way to get fired, take those targets, you know, eat them and then try and make it another 12 months. Yeah. And then, you know, you know, things will come out and that obviously trickles all the way up to the CEO and the board and all that stuff.
[00:18:37] and the, and the other thing is also once you take some of those targets on, you know, sit, sit back, think deeply about how you're gonna fix that. Uh, maybe some of that can come from your existing funnel. Maybe some, some areas you need to be more creative, but then you need to, you know, I sometimes say you need to price it in.
[00:18:54] You make it, you need to make it cost something. Yeah. You need to come back a week later and be like, okay, well, the CFO, if you want me to take this, it's gonna cost another X. And do you still wanna have it? Yeah. Right. And now you have a conversation now there's a balancing happening. Yeah. Which, which you otherwise wouldn't have.
[00:19:12] If, if someone just said, you know, yes, to a, you know, an PL target or whatever it's gonna be.
[00:19:16] Mikkel: And I think that's why it's so critical when you go about the plan. It has to be a conversation. There has to be a pusher pressure coming from the top, right. Saying, Hey, can we achieve this? Mm-hmm please. But then there also has to be a push from the bottom.
[00:19:29] Well, we can, but then we're gonna need these things that are not in budget or yeah. Are not yet planned for. And, uh, and that's where the good stuff happens.
[00:19:39] Toni: And I also think all of this bad stuff, try and keep it as little as possible because the, the problem here is. You will have very little data driven arguments to, push in one or the other direction.
[00:19:51] So whenever you will come with pushing it lower, it will seem like it's your opinion. And then someone else has an opinion and wants to push it higher. So that's why I keep those to one or two. And keep them almost at the, Hey, they are as important as an experiment so they can fail. So don't make them 50% of your plan or something like that.
[00:20:09] And instead, uh, I believe 80 to 90% of your plan should be coming from staff that's proven already. Yeah. And for these things, you have data, you have staff to back it up with, you can say, well, you know, last time we did X and you know, we have this conversion rate. And, the CFO will say, Hey, you know, 10% that's below benchmark where they gets a benchmark from, yeah, it should really be 15%.
[00:20:32] And you might even agree, but the problem is you just increase it by 50%, five, zero. Right. and, and that is by the way also whiplash effect, you know, once you build it all the way out, yeah. You will see how that's gonna look like. So, uh, having data driven conversations and saying like, well, we can maybe get it from 10 to 11 realistically, but jumping from 10 to 50 is, uh, 15 is just not gonna be possible.
[00:20:53] Mikkel: Yeah. But everybody wants to speed up so fast all the time. And there's it's
[00:20:59] Toni: it is not gonna happen. No, that's. Yeah. And, and on top of that C CFOs. Really like conversion rates because it basically keeps the input the same, but increases the output. So there's the efficiency stuff. And I think as a CFO, uh, you will probably always talk about conversion rates and ACVs.
[00:21:16] Yeah. And, and these kind of things. And I think it's a good talking point. You should just make sure to keep it actionable. Kind of, you know, who, who in the organization can actually do something about it, but, yeah, whole, whole different topic,
[00:21:28] Mikkel: but I think it's getting back to, and maybe we're getting too deep.
[00:21:31] Right. But as part of this bottom up. Uh, exercise, right? You'll actually learn that revenue is not created the same way. And you'll start to see some of the thing, things we discussed in the previous episodes, where are the ceilings? Right? Because there are gonna be ceilings. You can't just get on SDR to call, you know, book 20 meetings when they're used to being at 14 or something like that.
[00:21:51] Right. There's just a natural limit. To how much can be done and the same goes for marketing. Right? And I think understanding those nuances as you try and close the Delta, they're gonna be critical. And that's, that's where, again, if you're sitting in revenue, operations, or actually if you sit in sales or marketing, doesn't matter, then you want to collaborate with someone who can help you uncover where is the revenue being produced?
[00:22:15] Toni: I think the missing superpower in many commercial organizations. Is in fact revenue operations, because really who sits on the other side of the table, it's the finance guy or lady and, and yeah, they will, they will come prepared to that meeting and they will evolve the data. You know, all the stuff and then, you know, how do you look, right?
[00:22:36] Yeah. And who's, who's, who's gonna back up your case and it's really gonna be revenue operations. That's gonna be the quant team of the commercial side, and you really wanna have them sitting next to you and be able to, you know, pull up, pull up the data if, if you need it in order to really drive that conversation.
[00:22:52] Mikkel: I mean, it's not fully seasoned for target setting for next year yet, but it's a good time maybe to start thinking about it. Actually,
[00:22:59] Toni: I think a lot of teams are starting to think about it a lot. Yeah. Right now. And I think it's not only an annual thing. I think even this annual thing is by the way, completely flawed.
[00:23:07] Why. Why do you do, why do you do annual targets? I mean, I'm sorry. It just doesn't make any, any freaking sense. It should be rolling at least. Should it be a three month rolling. A 12 month rolling. I don't know, but it shouldn't be annualized. Right. You shouldn't come to December and be like, oh, uh, well next year's completely different.
[00:23:25] So yeah. Let's have 25 hires 1st of January. And you're like, oh, wait a minute. So that should have happened actually in October, right guys. And, uh, anyway, so it's, I, I feel, I feel there should be some kind of a planning motion happening continuously. Yeah. Probably more on the quality level. But yeah, don't, don't wait, don't wait for this, uh, legacy.
[00:23:46] Piece of budgeting, uh, to drive your planning.
[00:23:50] Mikkel: But I guess actually the key takeaway here is it's totally fine to set an annual plan, but you definitely wanna look, does it need to be revised, right? Because things change. Yes. And, and there needs to be a process for that, because just speaking for myself when you've been in marketing and, and done that for a while, you get very laser focused.
[00:24:09] Delivering the projects and initiatives, that's gonna drive the leading indicators leading to revenue. So you might not necessarily have the time to stop for a moment and think, Hey, there's something happening in the industry right now that is gonna have an effect in the coming quarters. Right? Yeah. And, and I think we've talked about rev op, how do they become a strategic business partner?
[00:24:28] This is exactly where they can go in and help and say, Hey, are you aware that this is happening right now? I've run a scenario on the numbers. We should run through them and discuss what changes needs to happen. And then internally align with the stakeholders we
[00:24:40] Toni: have. Yeah. And suddenly you as a rev ops, professional, uh, grow up and be an actual advisor to that person.
[00:24:46] Yeah. Instead of, uh, Hey, your reps are not checking that field in Salesforce all the time. So, uh, I'm gonna have a serious conversation with you now,
[00:24:54] Mikkel: but you know, it's also what it is is I, I, I read this at some point that, you know, your job is to make your boss look. Right. For rev ops. It's a little bit different.
[00:25:04] It's making all the revenue leaders look good. If they can achieve that, then they've succeeded.
[00:25:09] Toni: Yeah. I think that's a great way, actually. The great way to putting it. We should put it on a sticker. Yeah. Well, on a cardboard or something like that. Wonderful. Michael, I think that was fun.