Subscribe
Share
Share
Embed
What does it take to build a succesful salesteam? And what does it take to replicate it? That's what we talk with Collin Cadmus about.
- (00:00) - Introduction
- (04:08) - Sales Success and Product Quality
- (09:28) - Identifying a Great Product
- (14:54) - Building a Strong Sales Team
- (20:55) - Replicating Successful Sales Teams
- (21:36) - Setting Attainable Quotas
- (22:12) - Incentivizing High Performance
- (23:39) - Scaling Sales Teams Efficiently
- (32:39) - Aligning Strategy with CFOs and Investors
- (42:02) - Adapting to Market Conditions
***
Connect with us
✉️ Newsletter: https://www.revletter.io/
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: are you scaling sales wrong?
[00:00:01] From hiring too early to setting wrong quotas,
[00:00:05] too many companies are killing their own sales strategy.
[00:00:08] Collin: We're sort of relearning and rewriting the playbook because the playbook historically has been build a repeatable process and then just hire hire hire hire hire train, train, train, and just keep growing, growing, growing in that way.
[00:00:20] The one thing that we constantly see going wrong in SaaS is that they hire salespeople to grow revenue, when really what they need to do is have a plan for growing pipeline and growing demand, and then you add salespeople as you need them.
[00:00:35] Toni: That's Collin Cadmus, a veteran of sales leadership. And if you've ever wondered what it takes to build a sustainable, efficient, and high performing sales team, then you really don't want to miss this episode.
[00:00:49] Collin: Really what's working today we're looking at sort of maybe having a smaller, more elite team and figuring out how we can focus our attention instead of on recruiting and hiring and training new people, but instead how can we keep refining our process so that our existing team can just do more.
[00:01:05] Toni: In today's episode of the Revenue Formula, we talk with Collin about how to scale sales right, align that strategy with your CFO, and build a flagship sales team. Enjoy!
[00:01:17] randomly in all different directions and needs to reel me back in and like, that's, that's usually what happens. So
[00:01:22] Mikkel: The thing is, I gave, just for you to know Collin, I gave Toni one task today and it was to make sure we have a good story for the intro. And I don't think he's got anything for us today.
[00:01:32] I do actually. Oh, you do.
[00:01:34] Toni: Yeah.
[00:01:36] Mikkel: And you're not just going to throw it over to Collin. No, it's a trap. It's a
[00:01:39] Toni: trap actually. I don't know. So the story today here kind of for the intro is actually that Mikkel had a really cool story to tell this morning. Ah, you're so rude. So
[00:01:51] Mikkel: now I can
[00:01:52] Toni: throw it to Collin.
[00:01:52] Mikkel: But
[00:01:54] Toni: no, I mean, I heard you were like on a biking thing yesterday. What happened there, Mikkel? So
[00:01:59] Mikkel: the, so I don't know. I mean, I'm riding my mountain bike. I picked this hobby up like three months ago or something like this. Got a mountain bike. We have a forest nearby. Cadmusand initially, I don't know, have you been, have you tried mountain biking, Collin?
[00:02:14] Collin: I have, yeah. I mean, I don't know what you consider mountain
[00:02:17] Mikkel: Yeah.
[00:02:18] Collin: I've been off, I've been off road on a bike before. Yeah.
[00:02:22] Mikkel: So let's just say it's very different than just riding a normal bike on regular road, where you know, there's no bumps, no bushes, no stones, no nothing. And there's a learning curve to it, like anything in life. And initially, I was like, okay, I need to be really careful, because I learned if you if you Don't pay attention for just one second.
[00:02:40] That's when accidents happen basically, because the road will just turn very quickly. And so I've been kind of going through that learning curve and I've been feeling lately, like now, now I can do it. Now I can pick up the speed. I can go a bit more crazy, but the day I was out, it was the first time I'd been out when it was raining, like everything, the entire track was wet.
[00:03:00] And what happens, you know, I kind of, lose connection with my bike. And then the bike just slams down to the road and because I land down back on the seat, I just bounce off and fly off. And you know, when you're like midair in that, you have that second to kind of go, okay, will I die now? Am I going to hit anything fatal?
[00:03:20] Fortunately enough, there wasn't anything. There were these weeds that kind of sting you kind of like, I don't know, it was called
[00:03:26] Toni: bear claw Yeah, I don't know. It wasn't a bear claw. It was a great intro, by the way. But no, but the thing is, this is how I feel VP of sales in CRO sometimes feel like when they're trying to execute this plan, right?
[00:03:37] Kind of, they're kind of, Hey, go faster, faster, faster. It needs to be downhill. It's raining. The road is shitty. It takes a turn and then boom, you're fired. Right? And that's the reason why I have Collin Cadmus today on the show, actually, to talk a little bit about some of those scenarios. Which is why I actually felt like this biking analogy, I think, was totally spot on.
[00:03:56] Yeah,
[00:03:56] Mikkel: great, great segue. Thanks for doing that. There you go. So I could bongo the story part and you can do the segue. But we obviously have Collin with us. Collin, thanks so much for joining us on the show today.
[00:04:06] Collin: Thanks for having me.
[00:04:08] Mikkel: So recently, You've talked a bit about where sales success come from. You talk about a lot of things, sales on LinkedIn.
[00:04:14] If you haven't checked Collin out, obviously go there, search for Collin Cadmus. But to your kind of knowledge, where exactly does sales success actually come from? I think this is especially important right now when there's so much struggle out there.
[00:04:26] Collin: Yeah, so, I mean, there's obviously a lot that goes into sales success. I mean, we could go down the list of all of the criteria and sort of the skill sets that a salesperson needs to have. But I think, For the most part the world's pretty well aligned on what it takes to actually just become a good salesperson whether it's you know Charisma, whether it's your ability to work hard or stay focused or persuade.
[00:04:50] These are the the basics These are the fundamentals and not much has really changed in that regard since the the dawn of time but if we talk more specifically about Today, particularly in B2B SaaS or tech, a lot of it comes down to the one thing that often people don't talk much about, which is actually the quality of the product.
[00:05:08] And I had a great conversation the other day on, on one of my podcasts with Howard Lerman, who is the founder, formerly founder of Yext, now the founder of Roam. And he's sort of taking a very different angle and I'll use this as an example here, cause it, it ties in perfectly to what I'm describing, which That when you are selling a great product, sales success becomes pretty natural.
[00:05:31] It sort of just happens, so to speak. It doesn't mean it doesn't take a great group of salespeople to sell great products, and it doesn't mean that anyone can sell a great product. Now, they probably could close some sales, but if you add skill on top of a great product, You're going to get even better results, right?
[00:05:47] And so all of this works together. But, we're working in an industry, assuming we're talking about B2B SaaS here for the most part, we're working in an industry that's become completely oversaturated with competition. Right? And so, that means by By nature, there's going to be a lot of products that are just not nearly as good as the rest.
[00:06:07] We've also, the barrier to entry has been reduced significantly, right? Almost anyone can just go build an MVP today if they have some coding skills, and they can get onto the market, maybe raise a little bit of money, hire a couple salespeople. But at the end of the day, if the product you're selling isn't great, it's going to be very hard to have great sales results.
[00:06:27] And so this is something that I think people skip over way too often. And part of the reason we see it happen is that it's sort of easy to put lipstick on a pig, so to speak, in the SaaS world, especially when you're dealing with lots of venture capital. Right? So someone may be a very talented founder.
[00:06:43] They may even have a really great world changing idea. And they might even build a really great MVP to start to display that idea. And then they raise a few million dollars, and what happens is, now the Webflow website that they're using gets spruced up by a professional designer, all the marketing collateral gets polished up by a marketing agency, and all of a sudden, this MVP, or maybe it's a few iterations after it, But starts to look like a world class product.
[00:07:10] And now they start doing world class recruiting, bringing in tons of people and sort of not doing the best job managing expectations on what they're actually going to be selling. And oftentimes you get in the door on your first week of sales, you start to realize the product's not quite as advanced the website led you to believe that it is.
[00:07:29] Now. On one hand, this is because we're selling the dream, right? That's what running a startup and building a company is all about is sort of painting this picture of a future vision of where we're headed. However, when you're actually selling it, you're in present time and you're actually selling what's here today.
[00:07:46] You're not selling. The founder's vision of what they pitched in the VC meeting or the board meeting, etc. And so I think this is something that's often overlooked, especially today. It's really just gotten worse and worse because the concept of faking it till you make it has sort of been overplayed, you could say, in B2B SaaS.
[00:08:05] And so I put that down as the first piece because without a great product, it's going to be really hard to sell. And you're going to be up against a ton of competition no matter what you're selling today. So you really need to have something that's great. And if it's not great, at least it needs to be good, but you're not going to be successful in sales, especially in B2B SaaS.
[00:08:24] If you're just selling junk
[00:08:26] Toni: Sorry, I had a great quote from, I think the Gong CEO, and he was asked like, Hey, what does it take to build a billion dollar company? And he said, you need to have a great product that sells even with a shitty, he didn't say that, but let's just say shitty sales team. And then you need to build a great sales team that could sell any shitty product.
[00:08:47] Right. Kind of that, that was kind of his answer to this. So I think, I think kind of that, that matches extremely well. I think kind of to make it a little bit more real for some other folks here. Do you have some tips on like, how do you identify that you have a bad product kind of, because it's, it's so easy.
[00:09:04] It's so easy for a struggling sales rep, for a struggling CRO, for a struggling commercial person to just say like, sorry, not my fault. I I'm the best. But it's just, you know, the material I have to work with, that's just the problem here. And obviously the CEO will see it the other way around. Do you have like any way to kind of bridge that gap or kind of create some objectivity around this?
[00:09:28] Collin: Yeah, so as assume, to make sure I got the question right, you understand, how do we identify what is a great product when we're a salesperson? We're picking an employer to go to. Okay. So it's actually easier than it seems. The first thing is don't ask the CEO. Okay? I mean, you can have that conversation.
[00:09:44] You know what answer you're going to get. Ideally they will share with you some of the downsides, right? And sometimes they'll wait till later in the process. You know, when I went to. To work at Aircall. This was a good example of, you know, he did what a CEO is supposed to do throughout the recruitment process.
[00:10:01] He painted a positive picture. He shared the upsides, but before it came time to like actually finally sign on the dotted line to accept the job as VP of sales, he did sit me down one last time and said, now I'm going to air out the dirty laundry. I can't remember the exact words he used, but it was essentially like, let me give you the dark stuff that you're going to find out, you know, in your first month on the job.
[00:10:24] To make sure it doesn't scare you away, essentially. I don't think he used those words per se, but that was essentially the conversation we had. And so you might get lucky and you might have situations where a CEO is just going to be very honest with you. But also if you're an account executive or an SDR, you might not be talking directly to the CEO, right?
[00:10:40] And so in either regard, the CEO should just be a tiny piece of data that goes into your brain. You need to talk to customers. You need to talk to people who are actually currently selling the product And ideally, if you can, maybe try to find some people who used to work there selling the product who are no longer there.
[00:10:59] And you'd be surprised how you get a very different narrative from these different groups of people whether they're happy customers that are currently using the product today, or customers who did use it and you saw they wrote some bad reviews somewhere, so you try to find them on LinkedIn and ask them about their experience or salespeople who are currently at the company or some who have formerly been there.
[00:11:18] Ideally, you try to talk to some people from each of these different groups, because you're going to get different feedback, and you're going to be able to start to piece together what's true, what's not true. Maybe some of what you're hearing is outdated, right? You're talking to someone who was there a year ago.
[00:11:32] These problems have maybe been solved since then. So you have to sort of take all this stuff into consideration. But another thing you can do is become a user of the product yourself. Now, this is not always possible, depending on what you're selling, but if they have a free trial on the website, and you're applying for the job, well, you better have a free trial.
[00:11:49] You better be using it. You better be trying to understand what you're going to be selling, because otherwise you have no idea what you're signing up for. And there's really no worse feeling Then, well, they're probably our worst feelings, but a pretty bad feeling is going through an entire sales process, getting super excited about a job, and then sort of getting your feet wet and realizing that the product's really not that great.
[00:12:10] And there's a tons, you know, a ton of objections that are just, Basic that we can't even overcome because the product's just kind of weak or or has feature gaps or whatever So, you know long winded answer there but the the short answer is you need to talk to a lot of people and And not just one group of biased people who are going to give you all the same answer
[00:12:30] Toni: Would you, would you ask for gross retention rate, net retention rate, kind of those kind of metrics actually in the process? I mean, maybe you have done this at Aircall and maybe at later points as well, but like, and yes, super early on in the company's you know, lifetime, this won't be so super indicative of, of, you know, the success and kind of how customers would be or happy they would be.
[00:12:50] But are those questions you would, you would recommend folks to ask?
[00:12:54] Collin: So I would I think it also depends a little bit upon the role that you're applying to, what metrics you're going to ask for. I mean, me coming in as a VP of sales or a CRO, I'm going to pretty much ask to see all of their SaaS metrics. I, I would ideally not want them to just tell them to me. I would ideally want to see the plan, right?
[00:13:12] I want to see it. I want to see the tracking. I want to dig through the spreadsheets, but not everyone really knows how to make sense of this stuff on one hand. And on the other hand, a lot of these numbers Sometimes just BS, right? They're sometimes just rigged up to appear a certain way and there's a lot of ways you can play games with data, and it doesn't even mean that what they're necessarily putting in there is false, it could just be the way they're tracking it specifically is different than what you're used to, and it sort of has a way of looking better than it is, or you don't really know how to compare it, and so, on one hand, yes, it makes sense to ask these questions, on the other hand, take it with a grain of salt, Because you really don't know until you get inside, and that's why I say talking to people and just getting their candid feedback is probably going to be the most directional.
[00:13:57] You know, if you speak to 10 people, an arrangement of customers, former employees, and current employees, you're going to have a pretty good sense of what's going on. Is it positive or is it negative? Whereas if you start digging into numbers, You're probably going to just not really know what to make of them.
[00:14:13] And now it doesn't mean that if you have the skill to know how to really dive into those numbers, that you can't make some sense of them. You can but I would caution people who think that sort of just asking those questions is enough. And they're going to be like, well, they have great retention and then there's low churn.
[00:14:27] So it's going to be great. Cause I'll tell you all the startups that suck, they all have somehow buttered up their numbers to not look like they suck. So you just have to know that.
[00:14:37] Mikkel: So that's kind of the, I guess the product side, which I, I totally agree. Like you can't really sell a, you can sell a shitty product, but it's going to be hard to kind of at least scale super fast. It's going to be hard to sell. But you also said it's also important to have a strong sales team on top, back to this Gong kind of quote.
[00:14:54] What would you kind of look at there to see is this actually, do we actually have a strong sales motion running?
[00:15:01] Collin: Yeah, so it depends where you're talking about. So we'll kind of divide this into two pieces. So the first piece is, Early stage startups, you're bringing on founding AEs, as I call them. Your founding AEs are the first salespeople besides the founders, right? So you go through a transition where you build an MVP and the founders are out there doing what I call founder led sales or not what I call.
[00:15:24] That's what it's called. Founder led sales means the founder is closing all the deals. Maybe there's a group of founders. Maybe there's one founder who focuses on sales. Maybe one focuses on the product, whatever, but that's the early days, right? Your founders are selling the product. And then in order to get to the next phase, the founders need to hire a few account executives, or sometimes they don't even have a clear title.
[00:15:45] Sometimes they're like business developer, and they're sort of wearing many hats, right? And so that's your first group of AEs, and they're very different than what will come later. Your founding AEs sort of have a, a deep entrepreneurial spirit. They are the type who are going to roll up their sleeves.
[00:16:01] They are the type who want to work the late nights. They probably aspire to be a founder themselves someday, and that's why they're attracted to sort of that early stage scrappy startup mode. And they like solving lots of problems. They like being a part of sitting in a small little, you know, WeWork room or wherever you're at with your founder.
[00:16:20] Hearing all the problems he or she is dealing with, helping them to, you know, solve these problems while also wearing, you know, five other hats, doing different things. This is a very different role. It's a very necessary role, and certain people are cut out for it, and certain people definitely are not.
[00:16:36] And if you like being a founding AE, you probably won't like being an AE on a scaled team later and vice versa. Unless you really just love the particular company so much that you don't want to leave. Oftentimes, they're just very different profiles of people. So, that's the first phase, is that the founders sell the product and then they need to hire reps and be able to replicate their process.
[00:16:58] Now, What happens here is that replicating the founder's process is usually not possible because the way the founder sells is very different than the way someone else is going to sell. It's just a different conversation, right? There's different trust factors. There's sort of different tactics that they'll use where they, you know, are sort of iterating their product to the needs of their prospects as they sell it.
[00:17:20] And this is a huge advantage. If I can just tell you, yeah, we can do that, and then I can go figure out how to build it after I close the deal, an AE can't do that, right? And so part of that transition, which is super critical, is not only teaching AEs how to close deals, but it's also sort of redefining what that process looks like.
[00:17:38] Because the AEs can't do the same things the founders can do. If they were out there just promising we're gonna build new features, that doesn't scale very well, right? Whereas a founder can, can do that. So, so that's the first piece, is first they have to go through and, and get to this phase of, okay, we now have these founding AEs, they are closing deals without our involvement as founders, and now we've sort of taken, you know, the backseat into
[00:18:03] closing deals.
[00:18:04] The next phase after that is where they need to be able to bring in leadership to manage those AEs, right? Because the founders are going to manage maybe up to five AEs on their own. Sometimes they'll go bigger, but they really shouldn't. Unless, unless they have multiple founders and one of them plans to be the head of sales for a long time, right?
[00:18:23] Then, then that makes sense. But the next phase is basically you have to, so founders sell the product, then they teach someone else how to sell it. Now they need to teach someone else how to manage those people so they can become essentially completely hands off to to that process. And so that's where they might look to promote one of those AEs.
[00:18:43] Maybe they brought someone in who had some management chops before and now they know how to sell the product and they're sort of the perfect natural fit to to run into that role. I tend to think that's the best way to do it. That way when you're recruiting those founding AEs, you get to tell them like, look.
[00:18:57] If you do really well and you show potential, like, you can build a team under yourself eventually, right? And that makes it a lot easier to attract the right people into that role, but sometimes it's just not the case. Sometimes you need to bring someone in from the outside. And so, in either regard, that next step is putting leadership in place for that team.
[00:19:15] And ideally, it's gonna be probably a, sort of a manager level. Probably not director. Maybe director if you're planning to grow fast. Maybe you go VP if you're, you know, really raised a bunch of money and you need to move fast, but probably a manager's is fine at that first phase because it allows the founders to sort of still Have some level of involvement, right?
[00:19:35] Whereas once you bring in that VP, the founders really need to get out of the picture and only have meetings with the VP and, and that's their liaison through to the team. Whereas if there's just sort of a younger, newer manager in place, the founders sort of still have a level of involvement and, and authority there, which I think is actually valuable, particularly if you're still sort of.
[00:19:56] Easing out of that founder led sales. But those are really the three steps, right? So the founder learns how to sell the product. Then they teach someone else how to sell the product and manage those people. Then they bring in people to manage them for them. And then at that phase, you know, you're really ready to start scaling and build a replicable model.
[00:20:15] And so the goal should be to get to probably about, usually about anywhere from seven to 10 AEs under one manager. And then you want to see how you can replicate that process. Usually if you can do it once with one AE team, it's pretty easy to do the second time. It's when you get upwards of multiple teams that now you need that next layer of leadership, who knows how to actually manage multiple managers and how to, you know, sort of lead a team that's a, or a multi, a multi team sales org.
[00:20:43] And that's something that the founders usually don't know how to do. And so that's when you're going to need your VP sales, your CRO. I might've gone off a little bit on a tangent there. Not sure if I addressed your exact question. So let me know if you need me to.
[00:20:55] To backtrack, but those are the general phases to follow when, when building out a team.
[00:21:01] Mikkel: No, I think it's good I'm also just thinking for, for our audience, probably what's really interesting is this. They've, a lot of folks have tried to just hire more AEs, not seen it work out, right? And there might be someone thinking, gosh, this Collin Cadmus guy, he sounds great. Let's, let's hire him and get him to kind of grow the team.
[00:21:20] But how do you, how do you basically replicate Those teams, right? You got to start with one that's successful. So maybe take us through some of the mechanics of how would you actually do that? How would you land that first team where you have something you can replicate? What does that look like exactly?
[00:21:36] Collin: So it's, I'm going to start with, with the quota topic, right? So first you need to figure out what an attainable quota is, and this is, It's not a simple subject, especially when you're starting with founding AEs, you don't know what the quota should be, and that's part of the reason you need a different profile of person to own that job.
[00:21:56] Part of the incentive model that you should put in place there, by the way, is to incentivize them to keep pushing as high, as high, as high as possible as they can. You almost want to tell them that, hey, every time you prove you can beat your own record, I'm going to give you more stock options in the company.
[00:22:12] Right, I'm going to give you some sort of milestone bonus and the reason you want to do that is It's because when you're trying to prove what the quota can be, you want the incentive to be for the person who's trying to prove how high it can be for them to actually go as high as they can. Whereas they might be thinking, well, I don't really want to jack this quota up too high.
[00:22:29] I'm going to have to hit this number every month, right? So you really need to make sure that they have this very strong incentive. To push that number as high as possible. And you want to sort of repeat that for the first few founding AEs and really until you're at a place where you feel like it really is as high as it can be.
[00:22:47] And the unit economics make a bunch of sense. And this is one of the small details that so many companies gloss over is that they don't really figure out how to set quota. And instead what they do is they just set it based on whatever the CFO thinks needs to be in the plan. And that's what helps them, you know, pitch to VCs, get the valuation up and make some sort of crazy forecast or whatnot.
[00:23:08] But if it's not based in reality, you're really just kicking a ball down a road and you're going to have a lot of problems later. So, so start with setting the right quota, make sure it's achievable. And also make sure there's enough incentive, you know, so that people want to try to blast past that and break the record.
[00:23:24] And that may even be something that you want to have ongoing, where when people break a record, that they get some sort of a spot bonus or an equity grant or something, even as you're scaling, because you want to keep pushing the needle, right? You want to keep pushing it farther.
[00:23:39] But to get to your question specifically, You're asking how to make it repeatable, is that correct?
[00:23:45] How to, how to basically go from
[00:23:47] Mikkel: Oh, how do
[00:23:48] Collin: are you asking how to repeat hiring multiple reps, or scaling multiple teams, or both?
[00:23:53] Mikkel: No, I think there's two steps, right? You need to first establish the one team. that you know, okay, now it's working. Now let's replicate that. That's kind of what I'm curious about. Maybe some listeners, they, they think they have that first team and are ready to replicate. So how do, how do we know it's time now,
[00:24:09] Collin: Okay, so, it's only time to hire salespeople when you have enough pipeline for them. Generally speaking, and this is something that startups very often get wrong, particularly over the last 10 years, because they're very often hiring salespeople to create pipeline. Right? And so, this just comes from financial modeling, this comes from what I call the VC narrative game, which is basically, for those who don't know, you raise a round of funding, and you bring in some investors, they get some equity in your company, and now, the goal is to spend their money to grow the valuation of the company, and then you're going to raise more money, ideally, at a higher valuation.
[00:24:47] This has created an arrangement of strange incentives, because the incentive is not necessarily profit, the incentive is essentially to just grow the valuation of the business, and you can do that by hacking certain things, by making crazy forecasts and revenue projections that we're going to hire 50 salespeople next year, and you know, we already have 5, and so if we do multiply their output by the next 50, Here's this magic, you know, hockey stick growth that we say we're going to do.
[00:25:17] And so a lot of it comes from that which is a very big problem because again, Well, I should say it's a problem if you're actually trying to build a sustainable, profitable company. If you're trying to raise the valuation of the business, cash out your equity and get rich, it might not be a problem.
[00:25:32] Right? So it depends what your objective is. But, I'm assuming we're on the same page here, we want to build sustainable sales teams, right? That, that are, that become profitable and they provide long standing employment for the people involved and You know, great experiences for the customers who, who sign on board.
[00:25:47] So really you want to look at it in one specific way, although I will say that there's an exception. If you have a very repeatable outbound sales motion, that's the exception to saying we're going to add headcount to add pipeline or to actually grow top line revenue. Now that does exist, but there's breaking points in that as well.
[00:26:07] There's diminishing returns at a certain point. If you have 10 SDRs or 10 full cycle account executives who are. hitting a certain, you know, connect rate, or they're able to produce a certain number of meetings each month, you can't assume that just hiring 50 more of them is going to multiply the same results.
[00:26:25] It doesn't work that way. And I won't waste our time getting into all of the details here, but there's diminishing returns that happen for a variety of reasons, like going after the same leads or just saturating the market or internal efficiencies that change at scale that, you know, there's, there's tons of those things.
[00:26:42] I won't get into, it's well documented out there that you could find, but I will rewind back to if you really want to grow an efficient sales team, which is what now. Present day time seems to be about, it's about efficiency. It's less about burning capital because cash is expensive now, right? That'll probably flip flop back when, you know, interest rates go down and money's cheap again.
[00:27:04] But in the meantime, what you want to focus on is making your team as efficient as possible. And sometimes this means actually lowering quota because maybe your quota is too high and your team never feels like they can even hit it. So the morale on the team is bad. The level of. Confidence is really low, and so actually you have a quota that's too high, it's actually holding your team back because the mental advantage is not there.
[00:27:28] And I talked about this with Kevin Dorsey on, on one of the couple episodes ago on my podcast, and we both agreed that, you know, we've both, in practice, have lowered quota and watched average revenue go up. And that's just a mental game. That's what it is. You know, when people are getting beat up by a tough quota, month after month after month, you lose confidence, and that spreads to being sort of a cancer throughout the whole team, but you can actually have the opposite impact by lowering the quota.
[00:27:57] And instead of saying, well, maybe we want to have an average, you know, quota attainment of 80%, Well, maybe you want to just lower that quota, have an average quota of attainment above a hundred percent, and it just becomes the norm. And now the finance person will tell you, well, we can't afford to do that.
[00:28:12] Well, yes, you can. Go back into your spreadsheet and rework the math, and make it so that they're earning the same amount of money. But the only thing that's different is they're walking away with 120 percent to quota as a success benchmark, rather than 70 or 60%. But you could literally be paying them the same.
[00:28:29] Just tune down your OTE, which was never real to begin with, because no one hits that. They're, they're quota, right? And so you're playing games. It's like, I call it mathematical gymnastics that they like to do with all of these numbers to create these illusions of, you know, we're going to have this, this big growth period.
[00:28:47] And you know, this, the finance, you get a little bit upset. Well, we can't play with those numbers because that's what we use for our forecasting. And we need to be able to show this growth. And my answer to them is you're just using the wrong line item in your spreadsheet to forecast your growth. Stop using the quota as that line item and instead use your forecast for average revenue or average quota attainment, right?
[00:29:10] And you can just change the way you're doing these things in your spreadsheet and all of the sudden you can unlock human potential by giving them the general feeling of I can do this. And that's a big difference than walking into work every day or logging into your Zoom meeting knowing that no one on your team has hit this quota all year.
[00:29:31] And you're not going to hit it either because you're not, you don't think you're better than everyone, right? Most people don't, even though a few people do. And it's a good thing to have that level of confidence. If most people see everyone around them failing, they believe they're probably going to fail as well.
[00:29:45] That's the unfortunate reality of it. And so this to me drives me nuts. Cause it's just basic human psychology. And we're literally setting up all of these salespeople for mental failure by giving them this target that you can't hit. Right, or that you haven't proven many people can hit. And so you have to fix that first.
[00:30:04] And if you start with an achievable quota, all of a sudden, you're going to get that mental advantage. And now you're going to have people who are crushing their quota. And now what you can do to get back to your question, I was sort of leading into it here, is now you can create a hyper efficient team, because what would you rather have?
[00:30:23] Would you rather have a team of, you know, 10 salespeople who are, you know, working X number of leads and having, you know, why you know closing percentage, or would you rather achieve those same benchmarks with fewer people? You're going to run the same amount of demos, maybe close them at the same rate or better.
[00:30:43] But you do it with fewer people, right? And ideally when you narrow down the team with fewer people and they're better, you're actually going to increase your closing percentage, your win rates, all of that sort of stuff. And so, when it comes down to your question, right, how do we know when to scale the team, how do we know how to scale the team, how do we repeat this and you might have follow ups, I might not be hitting on specifically what you want here.
[00:31:03] But I start with the quota piece because that's the determining factor for how you know when to add more sales reps, because it all comes down to quota capacity when you want to make sure that your team is at quota capacity, that they're crushing quota capacity. And then, and only then does it make sense to start adding salespeople, assuming that you have a plan for how you're going to grow that pipeline.
[00:31:26] And that's the one mistake. That's the, the, the one thing that. What we constantly see going wrong in SaaS is that they hire salespeople to grow revenue when really what they need to do is have a plan for growing pipeline and growing demand, and then you add salespeople as you need them.
[00:31:43] And if you want a simple smell test for this, just look at your salespeople's calendars. Look at how busy they are. How often are they on calls? Now, when you're working in an office, this is relatively easy because you can hear the buzz of 50 salespeople on the phones or 10 salespeople on the phones all day versus the difference of when they're sort of walking around to the kitchen refilling their kombucha and, you know, not necessarily on calls all day.
[00:32:08] And so, one of the mistakes that we see quite often is that you have a bunch of salespeople who don't have full calendars They're not like complaining yet that they're too busy, but then we're bringing in more salespeople. And this is only going to add to the problem because you don't have the pipeline for them.
[00:32:24] And now what you're doing is you're going to spread all of your resources out across all of these people, whether it's training, management, pipeline, et cetera, and you just, the inefficiencies start to compound, whereas you want to do the opposite.
[00:32:39] Toni: to a degree, the, and I'm not going to put words in your mouth here, but a little bit, the villain here at this, you know, the, the next stage, like saying like, maybe you have a, a team or two, so it's not only the CEO you're kind of talking about here, the villain is kind of the VP finance CFO kind of type sometimes.
[00:32:58] how do you handle. That guy or girl in the organization because the, okay, we have the financial modeling, you know, the VC narrative, the CFO knows exactly how to talk the VC game. And they're doing the top down planning. They're figuring out how many, you know, heads they need. And then they're super sophisticated and adding attrition, you know, to, to that calculation.
[00:33:19] But like, how do you actually manage that conversation with a CFO who arguably for the VP of sales CEO kind of sets the plan. And then there's, you know, some parameters in between. How do you do that?
[00:33:30] Collin: Yeah, so you really have to align on strategy, and this is something that ideally you align on before you take the job, and you know, that's not helpful for people who are already stuck in their job today, but you have to open that can of worms, and you have to sit down and talk with the CEO, with the CFO, with whoever's deeply involved, usually it's those two people and maybe some investors who are on the board, and you need to just sit down and go, you know, Toe to toe with them a little bit and challenge them and you need to fully understand what their objectives are And then you need to make sure that you and the team are aligned to those objectives Okay, so you may have a conversation with them and they may be frank with you and say listen, you know We actually don't care about profitability.
[00:34:10] We're actually striving to increase the valuation of the business and That's the game that we're looking to play. And so, you know, you need to get on board with that now they're probably not going to be that transparent with you, but they might and hopefully they will because At the end of the day, if you're not aligned on what the strategy is, you're going to have lots of problems, right?
[00:34:29] And so, if that is the strategy, if we're saying, Hey, we really don't care about making this thing super efficient or effective long term, we are literally trying to exit this company and earn a lot of money. Okay, well then hire people who agree with that, and then give them an incentive that aligns to your incentive.
[00:34:49] So that they actually care about building the business the same way that you do, which means they should be able to sell their equity secondary at every round of funding, the same way that you are as a founder, and probably you're letting your CFO do the same thing, the same way that the investors are.
[00:35:04] And now at least you can build a team of people that are all aligned on the same strategy. Now, I'm not saying I agree with that strategy, because long term, it's not super sustainable, It does make sense in certain areas where you're trying to capture the entire market and you have a, you know, a very competitive market or whatever and you just want the market share.
[00:35:24] It can make sense. I'm not going to say that it doesn't. Sometimes you just have to move that fast. You need to keep pouring money onto these ideas. But I tend to much prefer to build a long term sustainable company that is not so heavily dependable on VC capital. You get to keep control of these things. But If you align with them on a strategy, then you don't have problems, right?
[00:35:47] But the problems happen when you have a sort of a leadership team that wants to go in one direction, but you have an executive team or a board group that wants to go in another, and they just don't have a conversation about this very clear difference in strategic views. And if you have that conversation, like I said, just you can actually align their compensation To incentivize the behavior that you want.
[00:36:11] But otherwise, if you don't do that, most sales leaders are going to be aiming for doing things that are to the advantage of the sales team and the customers, which is long term sustainability, right? Whereas if you're just trying to raise the valuation of the business, like you're going to make different decisions along the way.
[00:36:27] So it really starts with having that conversation. And if there is no alignment on strategy, I mean, I don't want to tell people to just walk out on their jobs if they don't have another place to work, but it's going to be really hard to find any sort of success if the way that you're defining success is different than the way that they are.
[00:36:45] Toni: So I think this is an absolutely great advice even for people that are in their jobs, because I think the difference between what success, you know, looks like for the different parties. I think everyone is like, Hey, let's be successful and grow the business. But they're, you know, very different facets to that, you know, one way of thinking about.
[00:37:02] So I think it's great to kind of point this out for folks and kind of double click on what is it actually that, you know, those two parties want to achieve. But in, in your, from your perspective, does it make, you know, would you actually over prioritize to educate the, the CFO on, I don't know, sales math, right?
[00:37:20] I mean, you kind of, to a degree, you started talking about, well, you know, quota capacity versus quota completion and, you know, all of that stuff. You also mentioned, Hey, listen, it's really actually about, you know, demand gen and pipeline. That's actually a growth indicator, maybe with a carve out for outbound sales.
[00:37:36] And let's see, you know, how that goes, but would you actually would you recommend folks to try and approach the CFO and in simple terms, try and teach them how this, this revenue formula, you know, side joke how the revenue formula kind of actually works.
[00:37:56] Collin: And I say maybe because there's no one size fits all. Every CFO or VP of finance is completely different. They all have a different relationship with the CEO and the board. They all have a different level of autonomy over their role. And they all make decisions for different reasons. Some of them are making decisions because it's just the way that they saw it done by their boss at their last company.
[00:38:17] Others are making decisions because they have very deep and passionate beliefs about why things are done a certain way. And so a lot of it starts with understanding not only their position in the company and really how much, you know, authority they have to make strategic decisions, but also understanding the why behind those strategic decisions.
[00:38:37] Where do their beliefs come from? Do they actually have beliefs or are they just repeating something that they've seen done before? A lot of times it's just that, and they don't really have beliefs about, about this stuff. But they may also just not be open to change. And so you might just be completely wasting your time.
[00:38:54] In fact, you might be digging yourself, you know, the fastest way out the door by, by pushing too hard. And so A lot of this should start before you take the job, right? Because you need to understand who you're dealing with. But obviously that's not good advice for people who are already in the job. If you're already in the job, I strongly suggest you trying to feel things out for some time and get an understanding for where their beliefs come from, why they choose to strategize the way that they do, and get a sense for who else is involved in this conversation.
[00:39:25] Because if your leading investors have a very specific bias, and they own a certain percentage of the company, You need to know that before you start going opening up this can of worms because you just may be fighting a battle that you have zero chance in ever being able to win. So, before you figure that stuff out, probably keep your mouth shut, do a lot of listening, ask a lot of questions, and figure out what the politics are around this stuff in the company because otherwise you might just be screwing yourself.
[00:39:56] Now, if you're a person like me, And I don't recommend this, by the way, unless you want to keep, you know, losing jobs or whatnot. But for me, I don't really care about any of those reasons. I care about what I think is right, and that's the end of the day. And I'm gonna push in the direction that I think is right.
[00:40:12] And whatever the consequences are that come of that, that's sort of just that's the cloth that I'm cut from. But, you know, I also, I don't have a family, I don't have kids to feed, I don't have a wife to take care of, so, like, I can be a little bit reckless, for lack of a better word, in expressing my opinions throughout my career.
[00:40:32] Toni: That's why, that's why Collin still has hair, by the way. Oh, right. That's the reason. Oh, right. But the, I think the, the other thing is also especially VP Sales CRO. I feel whenever you push back on some of the stuff from the CFO or CEO. It's like, you're just trying to lower your targets, right?
[00:40:50] Kind of, it's, you, you always have this, there's always this like, Hey, you're self optimizing and you're actually not really thinking for the better of the company, really thinking for the better of your, your own pocketbook. And I think that's like, That is always kind of screwing at least the believability, I would say, kind of, of, of, you know, sales leaders honestly, and it kind of, this, this happened to me plenty of times but anyway, so, this was just a comment.
[00:41:17] I think you had a question, actually.
[00:41:19] Mikkel: No, I, and I think We probably have time for one last question, and that's going to be it now. I mean, I was going to say, you know, now we've blamed the product, we've blamed the quotas, and we've blamed finance. It's never the sales feed. And I'm not going to take it to marketing now, though, but I was actually just going to end on a final question for you here, which is you've hired a bunch of reps.
[00:41:39] You've trained a bunch of reps. You've also built obviously the sales team at Aircall and so on. There's probably a few folks now that are in planning. planning to scale the sales teams. What would be your advice? What are some of the watchouts where they need to be a bit careful and some contingencies they need to have in place as they look to then go and actually scale the team over the next 6 12 months?
[00:42:02] Collin: so the first one is one we kind of touched on, which is don't overhire. Don't think that hiring more salespeople is going to be You know, the pathway to success. It can be. And if you have something that's repeatable and scalable, then that's often, you know, what you should be focused on. But I tend to think particularly nowadays as we're dealing with sort of two converging forces, one which is, You know, AI coming into the, into the scene here to add efficiency and take away a lot of the monotonous work that, that salespeople do.
[00:42:34] And the other is the, the finance side of things, which is that money's real expensive, you know, VCs aren't just throwing around cash in the same way that they were before. You're not able to get loans at the same rates and all that stuff. When you have these two. Forces coming together. They're both pushing us in one direction, which is efficiency, right?
[00:42:51] It's maximizing what you can do. It's doing more with less. And so I think sales leaders today are really, we're, we're sort of relearning and rewriting the playbook because the playbook historically has been build a repeatable process and then just hire, hire, hire, hire, hire, train, train, train, and just keep growing, growing, growing in that way.
[00:43:11] But really what's working today. Or at least starting to show early signs of working is a bunch of these things where we're looking at sort of maybe having a smaller, more elite team and figuring out how we can focus our attention instead of on recruiting and hiring and training new people, but instead how can we keep refining our process so that our existing team can just do more.
[00:43:33] Right? And if we can, you know, I think what was it, Gartner or Forrester, who said it's like almost 30 percent of time that reps are spending on admin work. So that, it's like, okay, if we want to grow by 30%, we could hire 30 percent more people, spend 30 percent more money, or maybe we could figure out how to reduce that 30 percent admin work so that our salespeople are actually able to just run more demos.
[00:43:57] And the nice thing about making your existing AEs more efficient. Is that, you know, remember what I mentioned earlier is you want to make sure you create pipeline before you bring on new salespeople by making salespeople more efficient, meaning you're increasing their capacity to run more demos because they're managing their time more effectively.
[00:44:16] If you don't get more demos, you're not losing money now because you didn't just hire a bunch of salespeople that are now sitting with empty schedules. And so the fact that we have this need to spend less money today, and also this Desire to implement all of this new AI. And start to increase efficiency.
[00:44:35] That's really where people should be focused today. And it doesn't mean there's not exceptions to this. Doesn't mean there's not companies that make a ton of sense to just scale. I'll throw a good example in there is Rippling. Rippling is in a market, you know, they're competing against Trinet and Justworks and, or, and Zenefits and this stuff is a lot of money in that space.
[00:44:57] And it's one of those spaces that you want to move fast and get that market share and become a dominant player. And they have a very strong value prop and their total addressable market is massive. So in that case, that's why you're seeing them hiring a bunch of people. Cause that playbook still makes sense for them, right?
[00:45:13] But that's not the case for most SaaS companies. Most SaaS companies can't just email someone and say, Hey, we can save you X percent on your employee benefits. And we're this hot new company. And by the way, our CEO also built the one that you're using today. Zenefits, right? Like, like, so we literally know this business inside and out.
[00:45:31] So that's an example of like, when it makes sense, but what makes most sense for most startups today is to be figuring out how to be hyper efficient and sort of reconfiguring their entire model before they kind of go back to maybe scaling.
[00:45:48] Mikkel: Amazing. Collin, thank you so much for, you know, enlightening us and all our listeners. This was really a pleasure. And yeah. Thanks, man.
[00:45:58] Toni: I think this was good. I mean, honestly, it's like, this is, those are things and you know, some of those themes we touched up on in previous episodes, but just hearing also kind of from your perspective and the way you're kind of telling the story, I think, I think a lot of folks are taking a bunch, a bunch away from today.
[00:46:13] So thanks so much for enlightening us here, Collin, and have a, have a great day.
[00:46:18] Collin: Likewise. Thanks for having me.
[00:46:19] Toni: Bye.