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We all want to grow faster, but there's a pretty important team to work with to do that - finance.
We get into how finance looks at the GTM and much much more
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We get into how finance looks at the GTM and much much more
- (00:00) - Introduction
- (02:32) - Look at the cash being burned
- (07:26) - Asset or liability
- (11:29) - What it means for the GTM team
- (13:32) - Not running out of money
- (22:43) - What finance looks at
- (27:08) - What does it mean for growth?
***
This episode is brought to you by Growblocks. Finding and fixing problems in your GTM shouldn't take weeks. It should happen instantly.
That's why Growblocks built the first RevOps platform that shows you your entire funnel, split by motions, segments and more - so you can find problems, the root-cause and identify solutions fast, all in the same platform.
***
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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 Hohlbein from Growblocks. You are listening to the Revenue Formula. In today's episode, Mikkel and I are talking about the one team you have to talk to today to grow your business and spoiler, it's finance. Enjoy
[00:00:17] Mikkel: So actually, you know what I was up to? Yeah. Okay,
[00:00:25] good.
[00:00:25] Toni: up
[00:00:26] Mikkel: know what I was up to this weekend? I, for once, did some work, some hard manual
[00:00:34] Toni: stop. That seems something that also is surprising, you know, in the week,
[00:00:41] Mikkel: yeah, yeah, that's true,
[00:00:42] Toni: true. You did some
[00:00:43] Mikkel: But I did hard manual labor. Basically, you know, taking off a roof from a house at my parents in law. Doesn't really matter. And then I was sitting, uh, last night with my wife. As we, you know, had put the kids to bed and we're gonna watch a movie.
[00:00:58] And I was just like, oh, my leg really hurts. My back. And then the movie we watched is, uh, Nyad. And basically this is the story about, uh, I think she's 61 year old. And she want to complete a swim she never got to complete. From Cuba to Florida and did it in six attempts, did it in the sixth attempt or something like this, it was, yeah, spoiler.
[00:01:23] Well, it's a, anyway, so don't listen any further if you don't want any more spoilers, but it was like 50 hours swimming. in open ocean to do that. And then you sit there and it's like, oh my leg.
[00:01:38] Toni: Wait, wait, 50 hours?
[00:01:39] Mikkel: Yes, 50 hours.
[00:01:41] Toni: In the open ocean? Yep.
[00:01:42] Mikkel: And in one of the attempts, she, uh, had a, what do you call it?
[00:01:46] Toni: heart attack?
[00:01:47] Mikkel: No, no. Well, actually maybe, but she was dead for like 15 seconds. She got hit by a, what's it called? A Portuguese something, the gobble? The, what is
[00:01:58] Toni: Oh yeah.
[00:01:59] Mikkel: Uh, an er. Sea
[00:02:01] Toni: No, the, the, no, it's the, this Portuguese galley, galley man.
[00:02:07] Mikkel: Galloway.
[00:02:07] Toni: know what you mean. I know what you mean though.
[00:02:09] Mikkel: You know what,
[00:02:10] Toni: Man at arms or something like that.
[00:02:11] It's like, I know.
[00:02:12] Mikkel: Those jelly things that swim in the ocean that are
[00:02:15] Toni: super long,
[00:02:16] Mikkel: We know a lot about biology.
[00:02:18] Toni: as much
[00:02:19] Mikkel: Is it biology? I don't know.
[00:02:21] Toni: don't
[00:02:22] Mikkel: Wow. You know what we're going to do? We're going to go back, check what it's actually called and just record that and throw it in and look really, really smart.
[00:02:30] Really, really smart.
[00:02:31] Toni: just like we usually do
[00:02:32] Mikkel: Yeah, exactly. So the thing we kind of wanted to talk about today. Is actually, if you want to grow faster, especially today, there is one team you really want to talk with. And that team is
[00:02:46] Toni: Yeah, It's finance
[00:02:49] Mikkel: office management, you know, if you don't have any coffee left, you know, that could be a thing, but yeah, it's finance actually quite surprising.
[00:02:58] But why is that? Why are we talking about finance in this episode? You and I have been spending a great deal of airtime. Talking about all the terrible metrics, all the layoffs, and you need to be efficient. And I actually think the last keyword is the operative keyword in all of this stuff. It's the efficiency piece.
[00:03:19] You need to be way more efficient as a business today, and you still need to grow. So it's, you know, what do you do while you maybe talk with someone who knows how that stuff really works?
[00:03:29] Toni: Well,
[00:03:30] so the thing is, right, I think it's, it's dangerous to say that finance knows how the stuff actually works. I don't think they do in all cases. But what they do have a pretty strong, you know, view on is what does efficiency mean, right? So what is it we need to optimize for? And number one, and this isn't, you know, everyone is talking about this right now is, well, it needs to be the ARR per FTE needs to go up.
[00:03:56] So the annual recurring revenue per full time equivalent of an employee, you know, needs to basically kind of improve, right? And I think we are, 400, 000 or something like that now, in public companies and obviously growing business, it's different. Uh, I forgot those, um, those benchmarks, but it's basically almost the ultimate way to measure, profitability, right?
[00:04:20] Because you have, it's not about, Ooh, CAC, which is sales and marketing and new business. It's like, well, you're kind of forgetting about everything else here. it's really all encompassing and makes it super simple, right? It's like every single head that's walking around. How much money is that, you know, costing me or bringing me, right?
[00:04:35] And if, if the equation is positive per head, guess what? Likely, because your cost base is 80, 80 percent people anyway, likely you're going to be, you know, in, in really good shape. Right. and then, I think as a CFO, you walk around the office, if you, if you're lucky enough to have one and, and, and look at every person's like, is she cashflow positive for me? Is he profitable for me? I don't think his EBITDA is good, you know? Um, so that's, that's how you might be walking around and thinking about this, right? And, um, And today we want to unpack this just a little bit more, right, to kind of, because the thing is, you know, you as a, as a CRO, as a, as a, um, as a leader, um, in the, in the go to market side, you will need to talk to the CFO many times anyway, um, and they currently have the last word anyway, so why not understand him or her better speak their language, right?
[00:05:35] Thank you. Um, and by that, you know, get more of the stuff that you want or, um, both of you end up building a more successful, more profitable, more wonderful business
[00:05:46] Mikkel: and I think it's also like, I think what was really eye opening for me is when you start, when you start looking through the lens of a CFO, a lot of things fundamentally change with how you look at just operational metrics, which we'll get into in a second.
[00:06:00] But I think one of the big ones for me was especially around how efficient SaaS companies are at burning cash. It's actually pretty insane. Because it's just how the model is created. And I think I heard David Scott talk about, well, when he met with the board and they saw the amount of burn just increasing every year because they were growing faster, he had to kind of explain how it worked. So in simple terms, there is a customer acquisition cost, the amount of cost you to acquire a customer. And then at some point you're going to break even. So that's usually the CAC Payback. But in all that time in between the investment and get reaching CAC Payback, you're effectively burning money, right?
[00:06:43] You're losing money in that period of time. And that's for one customer. And if you're adding 100 customers a quarter and next year, that number becomes 200 a quarter and then 400 a quarter. Guess what? You're burning more and more and more and more all the time.
[00:06:57] Toni: Yeah, but also it starts even earlier than that, right?
[00:06:59] So if you're, if you're really as a CFO looking at this thing, you're like, um, so we are having all of those engineers, all of those product people. And we're selling this whole thing for 6k a pop. Are you fucking joking me? It's like, um, how does that ever work out? Right. Um, well it does work out because SaaS has this specific business model and it's, it's great for so many reasons and so forth, but that's, that's kind of the other cash burn you have in the beginning, right?
[00:07:26] Where you need to hire all of those people that built this product
[00:07:31] to
[00:07:31] then get it to market. and then you need to recoup some of that stuff. Right. And it's, um, and, and, and I think this is how, how CFOs actually also look at you on the, on the sales and marketing side. Right. So think about it like this.
[00:07:46] So how do you as a go to market leader really kind of look at, the, the product and the engineering team or whatever you're going to call it. really, you're looking at this as a, as a, as a bunch of people. that are, uh, building or making the product better. So you can sell it easier or faster, whatever it might be, right?
[00:08:04] And it's really, you have 10 people in there and they can improve the product by that much every quarter, right? And you build this, this pile of a product and it gets higher and higher. Some of those, some of the decisions were wrong. So they kind of fall off eventually, you know, some of those resources need to be used in order to maintain that pile that you're building.
[00:08:23] And guess what? The bigger the pile is, the more maintenance you will have. but that's how you look at the development team, right? And when you then make the call to like, Hey, let's hire some more developers. Really what you're saying is like, Hey, let's build this pile faster and higher.
[00:08:38] Well, guess what?
[00:08:39] The CFO is looking at you, the go to market team, in exactly the same way, right? There's like, well, this is a pretty expensive team here. 100 people, 200 people that are adding stuff to the pile. I'm not interested in the team that's doing the adding. I'm interested in the pile. I want to know, you know, how, how many customers, how much money is this?
[00:09:03] and because we're doing all of this upfront investment in product, in customer acquisition costs, all of that stuff, the, the only way I can, you know, reason myself to, to talk about profitability and building an actual business here, that's not just a hole in the ground, is that that pile of, you know, that pile of customers and cash and ARR needs to not only increase, but needs to be there for a while.
[00:09:24] It needs to be of good quality. It needs to be of, you know, good value. So number one, they're going to, they're going to look at your team, your go to market team and be like, okay, let's, let's measure the efficiency of how that team is adding stuff to the pile. That's one piece. But what they're really interested in is how long does, do those.
[00:09:44] Pieces actually stay there, right? So if you are a go to market leader or go to market team that, you know, adds customers that churn immediately, you have, you added zero value,
[00:09:57] Mikkel: And
[00:09:57] Toni: And that's how the CFO looks at it. The CFO basically kind of, just as you would look at the product team, If the product team is creating features after feature after feature that no one is using, or that they're deprecating, you know, six months later, or, you know, creating more bugs than they're solving, then you think like, oh, wow, that's a pretty useless
[00:10:16] product and engineering team I have here.
[00:10:18] Those are useless people. They're just, they're just consuming air and my money that we could spend on somewhere else. That's exactly how the CFO looks at
[00:10:27] Mikkel: you
[00:10:27] Yeah.
[00:10:28] Toni: If you are a go to market team that creates a bunch of churning customers.
[00:10:31] Mikkel: So they're trained to look at things as an either an asset or liability. And you're really describing
[00:10:37] Toni: on your mind for like five minutes. I could see that. You're like, I
[00:10:40] Mikkel: like, and it's like, and it's like, you know, if everything churns, then it becomes more of a liability, really. That's, that's at the end of the day, they're looking at things as an asset. And it's not that we're saying, by the way, the product is a pile.
[00:10:50] It's, you know, a valuable thing.
[00:10:52] Toni: Yeah. Also your customer is not a pile of customers. It's a valuable thing.
[00:10:56] Mikkel: other thing that was, uh, that also just struck me is, you know, if you, if you go back, let's just say you watch SaaStr, a presentation 10 years ago, or SaaStock talk or whatever, you're going to hear a few folks talk about, well, to build a great business has to be scalable and has to be repeatable and has to be profitable and really folks, they didn't hear the last part.
[00:11:15] Profitable. So this is like funny little,
[00:11:18] Toni: chose to forget about it,
[00:11:19] Mikkel: to forget about it probably. So ultimately, I think that's, that's, um, you know, that's, that's probably how they look at finance. So what does that mean for the go to market team?
[00:11:29] Toni: So for the go to market team, it means that, I think one thing is, and this is probably good advice for CROs in general, it's about the healthy customers you add. It's not about that you add customers. It's about them being healthy once they add it. Right. I think this is, this is one realization that CFO really looks at that.
[00:11:50] Yes, you know, they also liked and, you know, growth is coming in and so forth, but ultimately that's what this is about. That's what makes the whole upfront investment work out. This is what makes the whole, You know, the massive commission checks kind of work out that, that's, that's the reason, right? And, and what they ultimately need to see, is this 4 to 5X on money spent to acquire a customer and the customer lifetime value of it, right?
[00:12:14] Kind of, that's, that's the ratio kind of always talking about. And if you, and this is kind of funny, if you kind of go in, you will find this 4 to 5X so many different places. it's always the same thing, right? You will find it in, OTE, to how many customers or how many, how much value one AE brought in.
[00:12:31] You will find it in the CSM that needs to bring, sometimes it's more like 10X kind of value, you know, back to the business. Um, you will find it in the gross margin, which is 20%. So, you know, the value that you need to bring is five times more than the money that you're spending on this whole thing, right?
[00:12:50] There's so many different places and the same actually also goes for your, cost per FTE. So if someone has 450, 500k of like, uh, you know, revenue ARR per head,
[00:13:02] You know, depends. but that might be three to four X of what you on average pay per head. Right. so, that then also translates every single person in the business through connected means.
[00:13:14] actually needs to provide four to five times of what they're bringing in. Kind of, that's how you almost need to think about it fundamentally, right? Otherwise, you just simply don't get to those numbers. And yes, you will have some people that do way more, and then there's some people that do, you know, a little bit less.
[00:13:27] But that's kind of important to kind of keep in mind. That's how they're thinking about this. So this is the one thing.
[00:13:32] And then the other thing is, They are in charge of not running out of cash. Well, actually, it's a CEO that's in charge of not running out of cash But the CFO is kind of the, the, the, you know, officer next in line to make sure that that doesn't happen. So what's really important to them is sure funding, but since that VC, PE source has dried up, well Mikkel, where else do you get the money?
[00:13:55] Mikkel: You can take a venture debt loan or, you know, fire people.
[00:13:59] Toni: Or the crazy thought that You get it from your customers
[00:14:02] Mikkel: Yeah.
[00:14:04] Toni: Crazy
[00:14:04] Mikkel: Did not see that coming.
[00:14:07] Toni: so it's really, it's like, where is your, where are your alternative funding sources? And one of them is like, obviously that's your customer base, right? And then it's like, well, how can you get And we're talking money. We're not talking net retention rate and upsell and all of those things like the, the money itself.
[00:14:22] How can you kind of get this from them? And this is suddenly about cashflow. It's um, yes, it matters if it's upfront versus monthly. Uh, it matters a whole bunch by the way, right? And, uh, making sure that the investments that you make in people and tools and whatever you're buying and building,
[00:14:40] generates cash fairly quickly.
[00:14:42] So it pays for itself again, right? Because, ultimately if you are a cashflow positive company. What it actually means is you have a perfect cash cycle. You're getting cash in, uh, you're spending it and you're getting cash in again, right? Kind of that's, that's the perfect cycle. If you're growing a lot and you know, wonderful, if you do, what's going to happen is your, your cash cycle isn't going to be perfect anymore.
[00:15:04] You're going to be more on the negative. That's cash trough, basically. Right. Um, but as a CFO, you basically kind of always want to go back to Ideally, the stuff that we're getting in is paying for all of our bills, right? Kind of, that's actually kind of where you want to end up being. and that's how it, that's how they're looking at the whole thing.
[00:15:22] Right. And that's why CAC Payback is kind of a cool metric for them, right? Because it tells them in imperfect terms, what your cash cycle actually looks like. Right. And the way a CFO actually looks at CAC Payback, uh, is sometimes like, Um, yeah, it's kind of a nice efficiency metric. Yeah. Please get better at that mate.
[00:15:45] Um, but what's really important to them as well. When do I get the money back actually? And, and that might be so that the, your, your cash CAC payback might be completely different. Think about, you having, let's just say a perfect 12 month. CAC Payback. I'll just say that. Right. if you manage to get all of that up front, then really your cash CAC Payback is 30 days.
[00:16:10] Mikkel: yeah, yeah. It's not 12
[00:16:13] Toni: It's not 12, it's 30. And that means you can take that money and reinvest that immediately. Right. You kind of get closer to the perfect cash, uh, cashflow here. if your, uh, CAC Payback is only 13, It now takes not 30 days, but 12 months to get the money back because it takes then, you know, you need to service them a full year
[00:16:34] Mikkel: Yeah, before.
[00:16:35] Toni: before you kind of can send the next invoice.
[00:16:37] You know, it's a kind of completely, completely, you know, break even if you will. Right. If you have 12 month CAC Payback and you have monthly payments, it will take you a year as well. So for a CFO, it almost, and you know, probably a lot of people are going to disagree, but almost in theory. It's almost the same thing.
[00:16:56] you know, monthly, uh, monthly billing. is very close to having 13 month cash, uh, CAC Payback.
[00:17:03] Mikkel: Yeah. It's almost
[00:17:04] Toni: the same thing. Right. and, um, that is how, you know, CFOs predominantly right now are thinking about it and then obviously, and, you know, all the strategic FP& A and like, Oh, you know, you know, we need to build the equity story and we need to be the custodian and all of that jazz.
[00:17:21] Um, that's the equivalent of, you having a good quarter and talking about, you know, motivation and leadership and all that
[00:17:28] Mikkel: at the
[00:17:28] Toni: But at the end of the day, what's really important is, you know, how this cash thing circles, uh, you know, throughout your company. And for you to understand that will help you to have a good conversation with the CFO.
[00:17:39] Mikkel: Yeah. I also always found it funny. Like when you look at CAC Payback as a metric and say, you want to go to a trade show that costs you 50K, 100K. You're going to have to pay for that like eight months in advance. So already now the clock is kind of ticking for finance at least they see that kind of money flow out as like a when are we going to return on that and it's like oh it's an accrued cost it happens you know september next year whatever so so it's definitely i think it's impactful and it also just makes me think about even when you go and If you're still buying software in today's environment, you know, thinking a bit about the payment terms, all of a sudden matters a great deal.
[00:18:16] I remember when I ran a business and we knew six months from now, the tax bill is going to come up and it's going to be roughly this ballpark. So we need to make sure we have enough cushion in terms of cash to actually pay it to operate. And, you know, so it's just a very different mindset that the CFO comes with, to your point.
[00:18:32] Toni: Yes, and I think this is where some that stuff is a little bit dangerous, right? Because to a degree. it's kind of an attribution thing suddenly, and then when you want to go to the trade show and the CFO says, Oh, when are we going to get that recouped? It's kind of difficult to answer that. and again, it might be the right thing to do it, um, for so many different reasons, but the link between going there and getting money, um, it's It's kind of wobbly, right?
[00:19:06] And I think this is where, for better and for worse, don't get me wrong, lots of CFOs are currently stepping in and saying, I don't buy it. I don't see the connection. Go, you know, slashed.
[00:19:16] Same with
[00:19:16] tooling, right? If you have an ROI calculator on your tool that tells them, Hey, you know, we're gonna, we're gonna improve the, taste of the coffee.
[00:19:27] and that is going to improve, how many people are showing up. So that's going to help your productivity and it's going to help you with people retention. And if it helps you with people retention, it's going to help you, you know, for your recruiting costs. And that then is your ROI. So the further these two things are apart, the, the quicker, the more often the CFO will call BS on it because he, you know, he needs to believe in every single kind of step of the way.
[00:19:50] Um, and that makes it harder for a CFO to kind of believe. That there's a clear input output, you know, coming out of those two different things. Right. So really this doesn't only go into the specific investments that are happening in the business, but also for, you know, buying a new tool is part of that potentially.
[00:20:08] Right. and, uh, creating that connection, I think is extremely important for them by now.
[00:20:12] Mikkel: So I guess it's really back to understanding the business case of the different things you want to invest in as a revenue leader, to be honest.
[00:20:19] Toni: but the thing is, I think, uh, I think we do. I think we as revenue leaders understand the business case. It's not like we're running around and just buying random shit all the time. I don't, I just don't think it's true. But I think what, what is different here, and this is kind of why we're doing this episode is for people to realize how the CFO is actually thinking about it.
[00:20:38] the CFO is thinking about, again, you know, walking throughout the sales floor and wondering, Hmm, are all of those people EBITDA positive for me? Um, you know, just wondering out loud.
[00:20:48] Mikkel: see all the expense reports, but not much else.
[00:20:51] Toni: And, And that doesn't mean that that CFO understands the bowtie and that they're booking those meetings. I mean, I had this, I had this, uh, when we were running Falcon after the acquisition, we had this, uh, incredibly skillful CFO who, unfortunately had a corner office where, where the majority of our SDRs, Salesforce guys were sitting.
[00:21:13] And every time I saw him walking back and forth, I looked at him and was like, he must be wondering like, this is, this cannot be working
[00:21:23] Mikkel: be right.
[00:21:25] Toni: all need to be gone. I think that's, that's what's, that, that's exactly what went through his head. Um, was that the most efficient thing that in his 1 billion business that he was managing?
[00:21:37] Yes, it was. It was. Kind of that, that group of people was the most efficient way for him to kind of add to the billion dollars. and, uh, he didn't, he didn't get that, by the way. He eventually did, but he didn't fully get that. And especially when he was on the floor looking at that stuff, he was like, I don't see that.
[00:21:53] So it's, it's not like the CFO is like the, um, superpower that understands everything. Uh, so this is where we as, as commercial leaders need to come in and explain and kind of, you know, use those metrics that we're talking about, but ultimately that's how a CFO is thinking about it. And, and if that is true, you need to figure out how to speak that language, where, where to take him or her from in order to deliver them then to kind of the, um, the, the outcome that you want to do, right?
[00:22:21] Mikkel: So you kind of mentioned, uh, so that's kind of the, the.
[00:22:24] Really the acquisition side, CAC Payback. And you mentioned in the beginning what the CFO wants to see is that you build up an asset of customers that helps you grow. That's also like when you reach a certain point on the S curves, the majority of your growth, that's on the right hand side of the bowtie so from your customers.
[00:22:41] What do they look at there?
[00:22:43] Toni: so a couple of things right, they kind of look at all the things that your investors might look at
[00:22:47] the fundamental reason why CFOs are so interested in some of the more operational metrics is because VCs are interested in some of the operational metrics. That's the main reason. Yes, they're also interested because they're generally interested, but that's the main reason. Um, and that will be different ways of assessing how, of how high quality is this asset here, right?
[00:23:14] This, this, this customer asset, right? This is a little bit diluted. It's like, um, did they cut some other stuff in here? You know, what's going on, right? Um, and the way they're going to assess the quality is by gross retention rate. Net retention rate. probably, probably they're going to ask for the NPS.
[00:23:30] We all know it's BS, but they're probably going to ask for the NPS. and, um, and then ultimately, you know, once you have the gross retention rate or a net retention rate, everyone can do the customer lifetime value and you do all of those kinds of things. Um, they will want to look at the different cohorts because maybe you've been getting worse in acquiring good quality.
[00:23:49] So therefore it's a trend in the wrong direction. They're going to look at. All kinds of different ways of slicing and dicing this asset in order to kind of see. where they see, um, uh, you know, bad quality basically, and then that's what they probably will be calling out from a VC perspective, right?
[00:24:05] And that's why the CFO wants to know all of these things. And then ultimately what they want to know is, um,
[00:24:13] how much profit are we going to make on that one customer? That's ultimately what they want to know because, um, that's kind of the smallest unit. again, you spend a million dollars to acquire a set of customers.
[00:24:28] Really for your SaaS business to work out, you need to get 5 million off that, of that cohort over time. Um, it doesn't mean that you need to do it. In a year or so, kind of that can take some time, but ultimately you want to, you want to make four to five times of what you spend in order to kind of get that.
[00:24:46] And that then, you know, makes the whole equation go green because that then paid for the product development that paid for the salespeople, obviously the paid for, um, the gross margin of what you need to kind of do. That suddenly makes it the whole thing actually work out. Right. Um, and then suddenly If you look at this business that way, instead of a profit and loss, which is skewed, in SaaS it doesn't work, then suddenly you have a profitable business.
[00:25:13] And that's actually what they want to have, right? And every time there's stuff happening that, you know, leads them to believe that they're not going to get to the 4 to 5, Because of poor quality being pushed in, because of people churning out, because of people not upselling, whatever it might be, kind of, that's, that's the ultimate P& L.
[00:25:32] So profit and loss that they're looking at, right? Kind of, what's my profit and loss per freaking customer over time? and this is what good SaaS CFOs actually look like. Because, again, right, and maybe that doesn't make sense, but if you look at the profit and loss statement, That, you know, historically speaking, made a bunch of sense for finance because you spend 10 million to acquire customers and, um, you then send those chairs and pens and tables, whatever you, you sold them and you made, 15 million or 12 million from it. That all happened in this year and that's great and done. And you can, you can see a very clear, are we green? Are we red? It's clear there, but in our business model, um, that doesn't work anymore. You need a profit and loss per customer cohort over time, not this year, over time, and, um, and only once you look at the business like that, which SaaS CFOs do basically, then you see, okay.
[00:26:30] In which vintage, in which year. Are we profitable? Right? That's, that's basically what they're doing. and, um, if, if you as a go to market leader, you, you know, help them generate bigger and bigger cohorts and vintages, that's great. But each of them is getting worse and worse over time. They basically seeing, okay, we're building a shit business.
[00:26:52] That's not gonna work out
[00:26:53] Mikkel: yeah. I think it's also when you see the classic, I think if you plot out those cohorts based on net retention, if it's up a hundred, then it plateaus. And if it's above, then it's a hockey stick, right?
[00:27:06] Um, so that's kind of what they're gunning for.
[00:27:08] But so what does this mean actually to the growth? If, if you take this view of the CFO, And really start understanding, hey, they care about the cash flow. They care about, you know, when will we recoup the money? We care about the lifetime values. We talked about, uh, CAC to LTV, basically now.
[00:27:23] How does, how does this basically help you grow as a business?
[00:27:27] Toni: Well, ultimately they, they care about the, the full life cycle of the customer.
[00:27:32] They don't care about only the acquisition or that you, you know, acquired a hundred. They care about that those hundred ultimately turn profitable, right? So I think if you juxtapose CFO and CRO, the CFO has the longer term goggles on. They, they want to, they will want to see further into the future. for them, it's not, it's obviously important for operational reasons, but it's not important whether you hit the target that you're hitting now.
[00:27:57] It's really more, it's like, are you hitting them with the right quality? Are you hitting the targets by delivering the right quality? Right. it's a little bit, you know, They're looking at you as a CRO, as you as a CRO look at an SDR
[00:28:08] Mikkel: Yeah, yeah, yeah.
[00:28:10] Toni: And this is, this is not demeaning in any way, but what it basically means is like this SDR might come to you and is like, Hey boss, I can, uh, uh, book 20 meetings, but the quality is going to be poor.
[00:28:20] And you're going to be saying like, no, F that. I want to have, you know, maybe 15 meetings, but same quality. And the CFO is looking at you the same way. It's like, Hey, you know, I can book 20, I can book 20 more deals, but with less quality. It's like, no. I want to have the same quality because otherwise this whole thing doesn't make sense for me.
[00:28:40] and then ultimately I think what, um, what CFOs might also be a little bit more interested in. It's this whole incremental improvement thing, right? And I, I actually think that you as a CRO, you don't need to be learning all the financial stuff. I think that's, that's wasted energy, but I think if you as a CRO and, you know, revenue operations leader, talk more and more and more about where can you find incremental improvements, where can you find, you know, compounding efficiencies.
[00:29:15] I think that's the language that the CFO really, really appreciates, right? Because he or she knows that those are basically things that they're getting for free, right? Kind of, if you improve your ACV by 10%, uh, they didn't have to go out and buy a vendor or do something. It's like, you kind of get this for free and the chances are you will get that for free for a long time, ideally for five years, long time.
[00:29:39] and, uh, that's what they really like, right? And the ACV is such a simple and super powerful one, but Then they add conversion rates and so forth and so forth and so forth. And I think, and I think talking to the CFO, trying to angle, uh, those kinds of improvements, I think they might have a much more open ear towards that than, than you currently as a CRO, listening to the RevOps, QBRs like, ah, this is boring, this is boring, this is boring.
[00:30:08] No, those things might not be boring. Right. So, and I think. Changing your mindset there and kind of figuring out how you can be more efficient, how you can make sure that the quality that you're delivering is also really up there. I think this will align you on the CFO more and more.
[00:30:25] Mikkel: That's it. That was a lot of finance talk for once. For once we talked about the money.
[00:30:31] Toni: People people don't know that I started my career in finance.
[00:30:34] Mikkel: finance. Well, we maybe mentioned in one episode, uh, Mr. Spreadsheets. I think that was, that was the nickname. Yeah, finance was
[00:30:41] Toni: Anna Tighe, by the
[00:30:43] Mikkel: That was never my thing. That was never my thing. But I'm also marketing, you know, numbers. It's like, yeah, exactly.
[00:30:50] Toni: what it is.
[00:30:51] Mikkel: That's it. Okay.
[00:30:53] So we really went through how finance looks at the business. We went through the cash trough, how, you know, the CAC Payback, went through CAC TLTV. I'm really nailing it now. CAC TLTV. You can really hear it in my episode. You can really hear it, but at least I hope you enjoyed listening to it. I hope it was helpful and educational at the same time.
[00:31:13] And, uh, definitely this mindset is going to be an important one to have in the years to come. So,
[00:31:17] Toni: And if you liked and you haven't already, hit subscribe. Uh, helps the cause a lot. Thanks a bunch, everyone. bye. Bye.