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Every year roughly $2 trillion goes away unnoticed for companies. It's called revenue leakage.
In this episode, we dive deeper into this massive opportunity:
Sources
- (00:00) - Introduction
- (02:38) - Revenue Leakage.. Cool... But what is it?
- (04:32) - How big of a problem is revenue leakage?
- (06:55) - Examples of revenue leakage
- (10:24) - How do you prevent Revenue Leakage?
- (11:49) - Time leakage
- (14:50) - Revenue leakage from cost
- (19:57) - The full revenue engine
- (22:49) - What now?
Sources
- 1-5% of EBITDA flows unnoticed - E&Y
- Sales & marketing efforts could be wasting $2 trillion - BCG
- 14.9% revenue leakage - Clari/Forrester
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.
[00:00:00] Hey everyone, this is Toni Hohlbein. You are listening to the Revenue Formula. In today's episode, we are going to talk about a problem that costs companies two trillion dollars per year.
[00:00:11] And they don't even know about it. It's called revenue leakage. Enjoy.
[00:00:22] Toni: So, um, which, oh, Jacco, he will literally was on.
[00:00:31] Mikkel: Yes, yeah, that was a great conversation actually. That was a great conversation. I mean, it's not that you have a conversation with him more so than him having a conversation at you.
[00:00:42] Toni: Yeah, while playing techno music. Um, no, but I mean, this was, this was a fucking fantastic show with Jacco and I can tell you folks, we are only getting started with this.
[00:00:58] So we obviously pushed some of the bangers out immediately, Udi and Jacco
[00:01:03] Mikkel: we have some others,
[00:01:03] Toni: But it will keep on, what, banging?
[00:01:08] Mikkel: It just,
[00:01:09] Toni: we're probably that,
[00:01:10] Mikkel: coming from you.
[00:01:11] Toni: we will keep on, we will keep on, uh, presenting some insanely awesome folks. Um, really looking forward to that.
[00:01:19] Mikkel: You know there's a saying when the competition is making a mistake, don't get in the way. That was kind of the moment we were having. It's just like, you know, I'm just gonna lean back and enjoy this moment. But you are right. I think, um, I think this is a really nice facet to the show, not just you and I sitting in our little bubble, also hearing perspective
[00:01:35] Toni: do you mean? What do you have against me?
[00:01:36] Mikkel: Nothing, nothing at all. Boss, I respect you and admire you.
[00:01:42] Toni: Paycheck provider.
[00:01:45] Mikkel: But anyway, uh, so that's been cool. We're going to do more of that. Uh, we probably have, uh, at least I will say almost, yeah, about a couple of months booked already. Uh, which is cool and it's just gonna get crazier and crazier. Like I said, at some point maybe we'll get Marc Benioff on the show. But anyway, speaking of having guests on, uh, the other day we were setting up the studio for guests.
[00:02:06] And you might not have noticed, but there's a lot of sand on the floor over here. We basically have this massive light, it's called like a light dome, so you can check it out on YouTube. But to make sure it doesn't fall over, we literally have bags with sand holding it out. Yeah, now, now you're looking for the sand, but there was a leak in one of the bags.
[00:02:25] This is no joke. There is sand on the floor. This is not a setup for the Segway. It's not, but there was leakage. And I just
[00:02:32] Toni: Mikkel, what I would like to understand, why, why are you going out and punching holes into sandbags? Just, just to
[00:02:38] Mikkel: someone had put it on upside down. So apparently then it couldn't contain the sand. But you know, it's a great Segway because we're going to talk about revenue leakage and it's all the rave. At least sometimes on LinkedIn, I see it quite frequently pop up. And I was wondering, what is it? Can you tell us what is Revenue
[00:03:00] Toni: So it has to do with the
[00:03:02] Mikkel: Uh, yeah, yeah, yeah. Thank you. So
[00:03:05] Toni: let's just say traditionally, uh, Revenue Leakage is seen as a finance term, and, really revenue in the sense of, you know, the actual revenue, recognized revenue, not, not ARR stuff that we're sometimes talking about, but in this case, traditionally, this is about, you have booked.
[00:03:26] A deal, a contract is signed. You are sending out invoices. In order to collect that cash, and then you're collecting that cash. Those three numbers should be the exact same. What happens in a lot of cases, a lot of a lot of cases, is that those numbers aren't the same. That you don't actually invoice what you've booked, and they don't collect what you've invoiced, right?
[00:03:49] And in finance terms, this is why E& Y, so Ernst Young, Um, and, and B c G actually did some research around this, uh, but this is what has previously been referred to as revenue leakage. Um, and this is now getting a little bit expanded, right? So because it's, um, it's not only, you know, what you've booked and invoiced and uh, and then collected, it actually goes further out the funnel into both, both directions of the, uh, the bow tie, if you will.
[00:04:18] Mikkel: So it's kind of the opposite of me telling my wife I'm going to go shopping for hunting equipment. I'm only going to spend. A couple of thousand and come back with, okay, great, good. So, um, what I was wondering is how big is this issue actually?
[00:04:32] How big of a problem is it?
[00:04:34] Toni: yeah. so E&Y. They are saying that, and we're talking actual companies, not 10 million stars, we're growing real fast. No, like real companies, um, see between one to 5%
[00:04:49] points on the EBITDA, you know, for everyone that means profit. That's money that you're
[00:04:55] Mikkel: It's a thing we need to know now.
[00:04:57] Toni: Um, and BCG estimates that annually 2 trillion. Uh, literally leaking away. Yeah. Uh, so we're, this is, this is a major problem. It's, it's, I mean, it's a pretty big thing. and then one of our favorite, uh, vendors in the space, Clari, uh, actually did some research and I'm sure they use like a Forrester or like a, like a Gartner.
[00:05:22] and they actually found that north of 14% of your ARR, can be identified as revenue leakage, meaning you could have grown 14% more year over year if you had solved all the revenue leakage issues that might exist in your, you know, your pipeline and so forth.
[00:05:39] Mikkel: forth. Yeah. So it's, I guess, super relevant these days with everything that's happening to maybe look a bit at whether there's some leakage happening at your business.
[00:05:48] Toni: Yeah, for sure. And the, the, the funny thing is, right, when you, when you think about where E and Y and BCG start, you know, and you, you just visualize the bow tie in front of you, uh, where they start is really in the, very much in, in the middle where the bow tie is the little knot, so to speak.
[00:06:06] Mikkel: to speak. This is a great episode.
[00:06:08] Toni: I know. Um, that's, that's a 2 trillion problem right there. Then Clari, which are basically doing, you know, pipe dimension forecasting, both new bids, existing bids. Putting this at, you know, 15% roughly, but if you really go all the way out, uh, you know, meeting, booking, you know, leads, calls, emails, everything that's happening, renewal, signals, activation, you know, implementation done, you know, pre sales, post sales, if you look at all of those different pieces, I think we will need to ask Gartner and Forrester to look at that and tell us how much percentage that be.
[00:06:44] But if, if the, if the core of the bowtie is two trillion, then, you know, looking at the full thing end to end, I mean, can only guess what that number would be.
[00:06:55] Mikkel: So that's a lot of money, potentially. And, so the other thing is also. I'm wondering what.
[00:06:59] What are some examples of revenue leakage, because it can mean a lot of things like you said
[00:07:12] Toni: So current ex, so examples that, you know, come to mind is obviously this whole, uh, CPQ space, if you will, right? You, you sign a deal, you invoice, you get the deal. Um, sure you need, this should be systemized.
[00:07:26] It shouldn't be Excel and all of that stuff. , I think forecasting vendors then, . pushing the problem a bit further out and then becomes deals are slipping, uh, they're under overforecasted, , pipeline management isn't in place, you're spending time on the wrong deals, that kind of stuff. And, um, Uh, really kind of going further out than that though, which is really, you know, all the different conversion rates throughout the funnel, not just opportunity open to close, but everything that happens before, which is even more so a problem for non enterprise.
[00:08:02] B2B, SaaS, everything from mid market down B2C, kind of the whole thing. Right. and then you have, uh, things around, uh, sales engagement, you know, how many calls, how many of this, is this in the right industry? Are they booking the right amount? Uh, are the handovers working well, uh, is performance management in place, uh, on the marketing side and which channels do we deploy cash?
[00:08:25] You know, what are we bidding on? What is coming through? What is working? What is not working? Is the demo request form up?
[00:08:33] Mikkel: It's up, Toni. It's working. It's working, I tell you. So basically the entire revenue architecture, all the moving parts
[00:08:39] Toni: go to the other side. Right. You know, are the activations for the, uh, the, the customers on track? Are the implementations on track?
[00:08:46] Do we have enough people to cover pre-sales? Do we have enough people to cover, you know, our customer base? Do we like all of that stuff? Right. This is just adding to this leakage problem really that exists. Yeah. Right. let's just say some of those aren't, you know, solved yet that well, we're gonna, we're gonna, you know, peel the onion a little bit back and say, Hey, this, you can solve like this, this, you can solve like that.
[00:09:09] but this is really, when you think about examples for this issue, it's really broad, right? And again. I really hope all the, all the people listening here, don't have that problem, but chances are you totally have, like there's, there's, there's very little way around this. and, uh, uh, and again, right?
[00:09:28] So 15% of your revenue, you yourself can decide is this, is this a big problem that I'm having or is it not a big problem, right? But, uh, really kind of this, almost a thousand different, examples here. Uh, and some of them might apply more to SMB folks, to enterprise folks, to B2C folks, to kind of all the whole spectrum.
[00:09:47] Um, but there are lots of those examples out there.
[00:09:49] Mikkel: there.
[00:09:49] So aren't there, I mean, we talked a bit about it obviously beforehand, but you know, aren't there any solutions really that help with this stuff today?
[00:09:58] Toni: so again, right. For the, for the CPQ stuff, you can buy CPQ software.
[00:10:02] Mikkel: software. Yeah.
[00:10:02] Toni: for your forecasting, you can buy forecasting software. for the rest of the bowtie, um, I think, uh, no, I mean, you know, this is where we maybe kind of do the Growblocks plug and everything, but I, I don't think, I don't think there's anything out there that actually, uh, tries and help you spot and prevent revenue leakage across, across your full funnel, across your bowtie.
[00:10:22] I don't think that exists right now, no.
[00:10:24] Mikkel: Okay. So, if you're bought into the problem, you're sitting in revenue operations and think, okay, so revenue leakage, there's a lot of potential money there, uh, that we want to go now and, and salvage, protect, proof, whatever, how do we go about it? How do we fix it?
[00:10:40] Because it's, you know, it seems kind of elusive. It's anything within your revenue architecture, um, you know, revenue, you kind of put it the other day when we were talking, it's like revenue you are owed. Kind of, right? Um, so how do you go about it? How should you think about it if you're at revenue operations?
[00:10:55] Toni: So I think I would try and split it apart into three different areas. One could be obviously revenue itself. Yeah, your revenue engine and the, the revenue generating process. One could be costs. Basically kind of the resources you need to spend in order to generate that revenue.
[00:11:14] and if you're able to cut some of the cost away, that means you can take that money and put it into revenue generating, you know, more revenue generating roles.
[00:11:23] and then the last one, taking the engine even further apart and looking how long some of these steps take and obviously realizing that time...
[00:11:33] is both resource consuming, but it's also revenue delaying, right? So I would kind of, uh, I would suggest to look at those three areas independently. And I think they're also different ways to take them and try and fix them. Right.
[00:11:49] Let me maybe start with time as, as an example, and we have, uh, someone that's going to be in the special episode.
[00:12:01] Mikkel: Uh, this week.
[00:12:02] Toni: this week. Uh, so
[00:12:04] Mikkel: just, we have so many guests. I
[00:12:06] Toni: I don't want to take too much away from that, but, uh, so he is a pretty fantastic guy, uh, working with lots of different portfolio companies. And he actually kind of told us a story, um, about one of them and please listen to the episode, much more golden nuggets in there than this year.
[00:12:21] But he was basically talking about, uh, was either legal or procurement process, something like that. and, uh, basically this took for them six weeks. and had lots of people, seven people working on this, right? Because they're in parallel, they had to kind of, you know, you know, work through those deals together and he applied, uh, lean.
[00:12:39] So lean, the lean methodology to the process. Uh, ran a workshop, blah, blah, blah, all really, really interesting, and basically then was able to break it down, I think, to one week.
[00:12:50] Mikkel: Yeah.
[00:12:51] Toni: Um, and, uh, and then obviously was able to do their job instead of with seven folks with two or three, something like that.
[00:12:59] Mikkel: So they basically congratulated the team and say, Hey, now we can let five of you go. No, just kidding.
[00:13:05] Toni: Yeah. I mean, that, that, that, that, that corner is sometimes hard to, hard to make in the end, but, uh, in a, in a more objective world, that basically means those four, uh, resources, which were a highly paid resource, by the way, they can now be used for other purposes. Right. and again, you know, it has two impacts here.
[00:13:24] One is really on the cost side, obviously, but the other one is really on the time side. Suddenly. it even became a competitive advantage for them to be able to turn around an offer and you know, this, this, this piece so quickly for a potential customer, and go from, Hey, this is the vendor of choice to here's signature basically.
[00:13:41] Right. and, um, and those two things in, in combination are extremely powerful and yes, this is 1000% revenue leakage right there.
[00:13:49] Mikkel: this is 1, that's not the guy I messed up. It's not the guy going out this week, but it'll come. There's another cool guy. We, so just FYI.
[00:13:57] Toni: Oh, that's right.
[00:14:00] Mikkel: Next.
[00:14:01] Toni: Wow. So this was the, you need to figure out how you want to
[00:14:04] Mikkel: Yeah, this is going to be terrible.
[00:14:07] Toni: so this was a time example and I think those kind of analysis, you won't do every day. This is those, you know, you look at the whole thing, you, you single out what's not working and then you try and break it down and, and, and speed it up, right?
[00:14:22] And you can use all kinds of different methodologies in order to achieve this. Um, but that's, that will be an on project basis kind of thing. Uh, this will not be ongoing.
[00:14:30] Mikkel: And I think we even talked about, for example, with stuff like ramp time, it's just a major efficiency driver. People don't see that often. And that is, again, you know, there's a lot of revenue being left on the table when it comes to time, whether it's ramp time or turnover time, uh, on, on deal sales cycle length.
[00:14:46] Right. So, so it is a massive competitive advantage for sure.
[00:14:50] Toni: Moving on to the next one, which is cost.
[00:14:52] Mikkel: Mm.
[00:14:53] Toni: and this can be as simple as, oh, actually we only need that CSM one month later. You know, and every, by the way, as revenue officer CRO, every time you find something like that, that's literally 5, 000 bucks in your pocket, right?
[00:15:10] This could be five more opportunities, could be, you know, whatever. so this can be, this can be pushed out, uh, you know, sometimes, or it might be, you know, other things. Hey, we actually have enough quota coverage. We don't need that AE yet. Or it could be the super aggressive plan for the year. And as you walk through it, you realize shit.
[00:15:29] You know, we're not hitting the plan. That does also mean we actually don't need those folks, right? So this can be one way of kind of thinking about costs in the sense. Another example here, is really from, you know, Chris Walker, and he's been talking about this a lot, um, you know, through, through his channels.
[00:15:47] You should totally follow the guy by the way. and one of his ongoing and, you know, super key examples is this, uh, obsession Uh, of people with MQLs and let's get more MQLs, let's buy more MQLs. We have an MQL target and we need to hit the MQL target, right? Um, and what people obviously do in order to achieve that is they get more and more creative in how to get to that MQL target.
[00:16:11] And really what that means is they're buying shittier and shittier MQLs, right? The quality of that is decreasing. Um, sometimes referred to this as a webinar leads or a white paper leads, which in, in and of themselves is not a. bad things, just what do you do with them then, right? And that actually goes to his point.
[00:16:27] He then talks about, well, what many people are doing is someone signed up for this webinar and then they get a call the next day from this SDR.
[00:16:35] And they not only get one call, they get, you know, plenty of calls. and obviously the conversion rate of those MQLs will be pretty terrible because no one is ready to buy.
[00:16:43] It's like, Hey, I just wanted to watch this thing and now you're in my inbox all day long. And, uh, you know, yes, you call those 100 or 1000 leads and you get maybe one or two deals out of them. And then guess what? You give those deals then to the AE team and they process that stuff and nothing comes out of that either.
[00:17:01] So... Yes, you might have been able to drive down your MQL cost. You still accumulated a lot of money that didn't drive any valuable MQLs there. But that's actually not it. The downstream cost is also pretty significant. You now spend those SDR hours on going through those MQLs and then you wasted AEs hours to go through those MQLs.
[00:17:23] And, you know, if you were to visualize this as a funnel, that whole chunk of the funnel, that is not only MQLs to Opps to Won, But also the cost associated to that, in terms of ad spend, in terms of SDRs, in terms of AEs, you could have basically saved all of that cash and redeployed it either nowhere, in the current time it could go nowhere by the way, or you would have redeployed it into other tactics, other strategies, MQL buying bullshit.
[00:17:53] and again, this is one way. How you can spot and prevent revenue leakage, right? Because it really, uh, once, once you take, once you take that money and redeploy it somewhere else, that's really where then realize, okay, wait a minute, I could have taken this. And very easily, this is a million bucks, by the way, very easily.
[00:18:11] Um, you could have taken this and, and, and put it into other tactics, other strategies. and that then with your. usual CAC Payback, not with this diluted CAC Payback, but with the usual CAC Payback could have resulted in everything between 500k to 1. 5 million additional revenue, you know, that, that year or for that, for that time period.
[00:18:31] and this is basically, you know, the opposite of running a tight ship and, uh, you know, running a precise business. This is allowing revenue leakage to happen. And this is again, right. A thing that, You could have done, should have done that, you know, to a degree you were owed, but you failed to, right? So this is, this is kind of a cost way of thinking about, about revenue leakage.
[00:18:51] It's such
[00:18:51] Mikkel: And it's funny, like, it's such a... powerful thing to, you're basically finding money that are just being burned, that you can use for, for acquiring customers elsewhere.
[00:19:00] And I remember we had, we had the same, we implemented a tool that enabled us to see the efficiency of our paid channels. And we basically saw that a channel we were spending, you know, a six digit amount on quarterly, it was just returning nothing. We could take that money and redeploy it to a way more efficient channel.
[00:19:17] And that is really, uh, just to make the case a little bit more real. One of those, examples.
[00:19:26] Toni: the the marketing world and this stuff, but it's, um, it really just is one
[00:19:29] example,
[00:19:30] right? There's it's, you could take it and say like, Hey, the, the SDRs are calling into this industry and it's just not converting neither for the SDRs nor for the AEs nor, nor for the customer side. Maybe we should take this money, move that somewhere else, right?
[00:19:44] There, there's so many ways where you can say like, Hey, we're not. Doing the right things. We should reallocate or redeploy or refocus those resources. And that, you know, to a degree is cost creep or revenue leakage that's happening there, right?
[00:19:57] So we covered time, we covered cost. Let's go to the revenue engine itself.
[00:20:03] And here I have like one example, of someone in a 150 million business. and this was really, again, marketing team, but this is like a RevOps example. It's all the issues
[00:20:13] Mikkel: all the issues,
[00:20:13] Toni: with Marketing, Mikkel. Um, uh, and basically product team was pushing out a new, a new product. but the way it was bundled and sold, was in a way where you could only buy it in combination with.
[00:20:27] another, another part of, of that offering, marketing didn't know that, or maybe we did know and, and, and just chose to, chose to not know it as marketing does. Um, and, uh, they started bidding fairly aggressively on keywords surrounding that product. Makes kind of total sense. Um, but obviously then people signing up and then running through a demo realized, Oh, wait a minute.
[00:20:50] I can't get this without also buying this other thing that I actually really don't want. Um, and suddenly conversion rates dropped off a cliff. Marketing wakes up one morning, looks at those conversion rates, and is like, what the fuck? What is, you know, these sales
[00:21:08] Mikkel: guys,
[00:21:08] They are lazy
[00:21:09] Toni: sales guys, they're not picking up fast enough, yadda, yadda, yadda, why, why are conversion rates tanking?
[00:21:15] You know, this is messing with the whole model. We would need to have more MQLs or whatever, whatever, whatever. What, what is going on sales? And then obviously this, uh, you know, uh, you know, guy came in to his RevOps leader there to check what's going on. And he realized after quite some digging and we're not talking like, you know, one Excel report and, ah, well, that's what it is, is,
[00:21:36] No, it's, you know, quite some digging, figuring out that, um, Oh, wait a minute. These guys bid on this set of keywords aggressively in order to acquire those MQLs that then didn't convert. That is actually what the problem is, right? This logically doesn't make sense. Um, they stopped that, see their conversion rates bounce back to, uh, where they used to be.
[00:21:57] Um, and this was kind of a, you know, you didn't fully quantify it, but we're talking like half a million, million dollar loss. I mean, this is a big organization. Right. uh, just because of this thing happening and, and not being seen. And this is, this is one of those things where you monitor a conversion rate, it drops, and then you investigate and then you maybe find and so forth.
[00:22:18] And, and think about, think about, how much money was ticking out of this organization per day, you know, think about that for a second. And, uh, and then you can, this is just one example. for like a company is 150, a million, uh, that, that happened there. And, and that is, that is kind of in the, in the revenue realm, if you
[00:22:37] Mikkel: Yeah. It's basically the equivalent of setting a very expensive car on fire and just.
[00:22:42] Watching the flames. This is the equivalent. I don't know why I'm so dark today, by the way. It's crazy.
[00:22:48] Toni: I don't know. It's the Danish thing.
[00:22:49] Mikkel: But so anyway, um, so you're saying cost, time, revenue. Those are the three elements you kind of need to look at as rev ops. But how in practice is that going to work out?
[00:23:05] Toni: So I think the time piece, you know what, look at the funnel look at all the different things. And look at the stuff that that takes really long time and then investigate and try and improve it. This can be things that are general sales cycle topics. Uh, this can be things like onboarding topics. we referred sometimes to this book, What Unicorns Know, there's like an example of Gainsight, they were able to cut this down by quite a lot.
[00:23:31] Um, and, and, you know, look, look for those things that take a lot of time, because that would also then mean lots of resources being deployed, lots of time wasted. and that might be a great spot to jump in, right?
[00:23:44] Um, obviously, you might have some things where you have lots of conversions happening, even in split seconds.
[00:23:49] And there's something there that, you know, process wise isn't, isn't working out. But ideally you want to, you want to have some kind of an idea of what the revenue impact of this is, right? Because every time aspect you can price in to a degree, right? but this could be an analysis. Kind of thing, right?
[00:24:05] Don't get me wrong, this is with thinking and looking at stuff and scratching your chin. This, this is how you can get there. I think on the cost side, this will require a little bit more digging and actually understanding of your whole revenue engine, right? This is, I think, where Chris Walker was successful with that story and that message, because it's not obvious.
[00:24:22] Um, and many people are doing it. It's kind of a, uh, very much a, you know, given practice. but you know, as you inspect your funnel, you might find those things, right? So we've talked about this many times, do a CAC Payback analysis based on the different channels, you know, do it based on the different channels and regions and, and what, whatever, you know, slice and dice your whole thing.
[00:24:42] Understand what's working well, what's not working well. Once you figure out what's not working, we'll figure out why it isn't working well. Um, and then either fix it, um, or redeploy cash, right? Um, so this is what you can do and you should be doing this as much as you can. Um, but you know, surely on an annual quarterly kind of basis, uh, definitely.
[00:25:04] And, and then in a case like this, where you literally hiring and rehiring people, uh, firing and rehiring people,
[00:25:12] Um, I mean, this is a strategic thing, right? And that's why also, this is one of those examples where the revenue operation is kind of a massive strategic impact, right? I think on the revenue thing, it's, less obvious what the solution is.
[00:25:26] Yeah. we, we don't want to go too right hooky and say, Hey, Growblocks. But yes, kind of, we're building in that direction. We have built quite some stuff around it. and, uh, you know what, what I want to do kind of to break apart kind of how we're thinking about these, uh, these different revenue pieces.
[00:25:42] but basically you have. Uh, when you, when you look at your whole, your whole data stack and we're talking everything CRM and you know, your Gainsight and your Marketo, but also your Gong and your Sales Loft and you know, your Google Analytics and whatever, you have so much data floating around. Right. Um, if you take the whole piece together, what you will.
[00:26:04] Find is only five, five, maybe 10% is fully structured and trustworthy, right? that's why data quality is always such a big issue. Everyone is talking about, Oh, my data is shit. And as, as we talked in other episodes, well, not a hundred percent of it. Data needs to be good and to get value out of it. Um, what we are seeing with most of our customers, you know, five to 10%.
[00:26:25] typically is what people are actually kind of okay with. And that might be aggregates or it might be, you know, other, other ways of, uh, uh, of accumulating the data instead of every single piece of data point. Right. And then you have the 95%, which is basically everything else. Um, yeah. And, and the way we actually thinking about this is the.
[00:26:46] The structured data, and this is stuff that you should be looking at from a monitoring perspective. Which means you should be setting targets for how they should perform, and you should be monitoring them daily. you know, in some cases maybe it doesn't make sense daily. I totally agree with that, but generally you kind of, your cadence should be daily around that stuff.
[00:27:10] and then you will see what's going well, what's not going well, right? We talked about this a lot. You need to have a bit of a model behind it. You need to have a direction for that data, right? Because if your leads are flat, that's not good.
[00:27:22] Mikkel: Yeah.
[00:27:22] Toni: It needs to have a direction towards your revenue target, right?
[00:27:25] And if it's not trending towards that, it needs to go red, right? So this is the monitoring piece around that. Number two, you know, this is maturity level one. I'll just say it like that. Maturity level two is really to go from, Hey, here are the top level pieces. And we're looking at them in a regular fashion.
[00:27:44] You actually want to break them down and down and down and down, right? You want to get out of those five to 10% data. You want to squeeze all the juice you can get out of those. which really means combining different dimensions, breaking into additional dimensions, you know, adding different steps and so forth.
[00:27:59] Um, that gets really complicated really fast because you also want to have an expectation for each of these different steps for each of the month. Each of the dimensions and so forth, right. And I think, uh, maturity level one and two, I think this is something that, so one you can do with Excel, period, and, and BI, uh, two, you will need a tool like Growblocks in order to kind of reach that maturity level.
[00:28:19] and then really the, the next step is something that we are referring to sometimes as revenue observability. so when you, when you Google observability right now, so what you will find is folks like. PagerDuty, Datadog, we're talking like, you know, billion dollar revenue companies. Right. And they're like 10 years old or something like this.
[00:28:42] And, uh, what they've been doing, you know, for the longest time and, you know, probably for quite a lot longer is basically creating observability tooling for developers. And to say like, okay, listen, you have all of those servers, you have all of those tools, you have all of those data streams, load time, whatever, telemetry, whatever words come to mind that no one understands.
[00:29:03] But that's what they're basically, you know, observing without anyone in the organization having set necessarily a target for it, right? Because it's all the stuff that's so under the hood. So from a revenue perspective, we would call it the 95%. where you can't trust it. You don't know really what's going on, but when something is suddenly spiking.
[00:29:24] You'd be like, that's probably not good. Right. And, uh, and those companies basically, uh, deploy that for your, for your software stack. And then ping you like, boom, Hey, here's something off. We don't really know why we don't really know how bad the problem is, but something you should probably look at this.
[00:29:41] Right.
[00:29:41] Mikkel: it's like going to the kitchen. I don't know what
[00:29:44] Toni: Yeah. and, That same stuff you actually also want to have for your revenue engine, which is something that, you know, we as grow blogs building towards, right? You want to. You want to be able to understand and see where are things, um, going wrong that you didn't even think about, you know, thinking of basically, right?
[00:30:04] It's the unaware stuff, and you want to have that lifted up, you know, quite quickly for you. And those are the, I think the, the three main buckets, um, and everyone on this planet is in bucket one, by the way, then there are very, very few. And Bucket 2, and then there's no one in Bucket 3, right? Bucket 3 simply doesn't exist yet.
[00:30:27] and, uh, I think this is, this is how that, that problem kind of breaks down.
[00:30:31] Mikkel: And I can tell you just, uh, you know, my experience receiving, Going from getting the first dashboard from revenue operations to then the second going like from level one to level two is a massive difference, massive difference, like sure, we when you go to level one, probably you're just going for from a, let's say a spreadsheet, honestly, to BI.
[00:30:49] And it was just very shallow, you couldn't do anything is like you're getting as well why we have behind on opportunities for marketing is like, I don't know. I don't have the answer here. You see the same as me, right? But then when you went to level two, that's when you started getting dimensions and filters and even additional tools to provide more data such as attribution, right?
[00:31:10] And that's when you can start making smarter decisions. And I just wonder if, you know, if you go from using, let's say, 5% to 10% of your data to using all of it, what kind of crazy things are you going to start to
[00:31:23] Toni: going to start?
[00:31:24] No. And suddenly, suddenly these 15%. Doesn't seem like such a crazy number anymore,
[00:31:30] Mikkel: No, no, no, exactly.
[00:31:31] no, The
[00:31:32] Toni: no, I can, I can see 15% across the Bowtie. I can totally see that stuff that I'm, you know, if I'm, if you, if you think about this iceberg, you know, analogy, um, the 5% is not even the tip of the iceberg is the, it's the tip of the tip of the
[00:31:47] iceberg.
[00:31:49] And then you have. Uh, the rest of the iceberg that sticks out the water, and then you have all the
[00:31:53] Mikkel: rest of it.
[00:31:53] Toni: is below. Right. Um, and, and I think this is, this is where, um, uh, where, um, you know, when you think about, uh, manufacturing, building machines, that's, that's where they have been for the last 20, 30, 40 years.
[00:32:09] I don't know. Right. They've been like really good. And because why? Well. If people use it and it blows up, people die.
[00:32:17] Mikkel: So,
[00:32:18] Toni: you know, they were pretty serious about this. Then this thing went into, into software development because yeah, that also sucks if this, uh, if this service doesn't work out for you anymore and you know, all your customers are affected.
[00:32:32] And I guess what we are heralding here is that the next level of evolution in this direction will be your, your revenue factory line, right? which really needs that, needs that level of sophistication to it in order to make sure it runs as it, as it should.
[00:32:47] Mikkel: intro. You do the outro. It's your turn. We have a strict schedule for this kind of stuff.
[00:32:55] Toni: outro.
[00:32:56] Mikkel: the pressure is
[00:32:57] Toni: So wrapping up. We, we, we talked about revenue leakage today. Uh, we went into the size of the problem. We went into, if you really, if you really apply it, what are the different options to, to fix some of that stuff?
[00:33:14] And then obviously we end up with, the massive issue that is surrounding your revenue engine. And I think every single person listening to this can probably now go off and be like, you know what? I know there's 15% minimum sitting out here.
[00:33:29] Mikkel: Yeah. I'm going to
[00:33:29] Toni: Let's, let's
[00:33:30] Mikkel: fucking
[00:33:30] go.
[00:33:31] Yeah. I'm going to find it. I mean, that's promotion right there. If you go to your CRO like, Hey.
[00:33:36] I've just found 15% of our time wasted in, you know, this function. We can cut it like that. Then it's like, okay, great, let's go.
[00:33:44] Toni: Yeah, that's exactly what it's going to be. No, but, um, no, this is, this is the wrap for the, for the session. Yeah. Mikkel.
[00:33:53] So did you, um,
[00:33:55] so after, after, after the sandbag leaked,
[00:33:58] Mikkel: Yeah.
[00:33:59] Toni: is it still leaking or did you fix it or what
[00:34:01] Mikkel: it? Yeah, I turned it upside down again.
[00:34:02] Toni: You know what?
[00:34:04] Mikkel: Downside up. I don't know. Yeah, I fixed it. It's there. I didn't clean up though.
[00:34:11] Toni: Outro done.
[00:34:12] Mikkel: Yeah. Thank you,
[00:34:13] Toni. I'm Sorry,
[00:34:16] Toni: Lots of stuff in post, I'm sure. Bye bye Mikkel. Thanks everyone for watching, listening. Bye bye.
[00:34:23] Mikkel: Bye.