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How’d You Get That Number?! is the show that asks B2B SaaS leaders one simple question: where did that goal actually come from?
Hosted by Daren Ladua and brought to you by Outset, each episode unpacks how career-defining KPIs, revenue targets, and growth goals were set in the first place and what happened next.
If you're building go-to-market teams or chasing big numbers, this is the real story behind the metrics.
[00:00:00] Daren Lauda: Somebody's gonna come to you with an idea that seems so off the wall, that seems so counterintuitive, that seems so expensive that you want to say, the heck with this. I'm outta here. I quit. This can't be done. But if you take a step back in and say, you know what, I'm gonna lean in and go for it. Some really cool things can happen.
[00:00:22] Daren Lauda: You are listening to How'd You Get That Number brought to you by Outset. This is the show where B2B SaaS leaders break down the real stories behind the goals, KPIs, and revenue targets that shaped their careers, and how those numbers were set in the first place. I'm your host, Daren Lauda.
[00:00:42] Daren Lauda: Well, hey, this should be a fun show. This is my first host episode, meaning it's just me today. Uh, the format will be a little bit shorter than usual, and I want to share some thoughts or the founding ideas of the How'd You Get That Number podcast? You know, the idea is always to talk about a wild or crazy number that we've been assigned and to talk about how we went about achieving it before going into a more realistic number or realistic problem that we had the chase.
[00:01:09] Daren Lauda: So I thought I'd talk about two of mine. First, kinda my outrageous number that I had to go chase, and then something that's more realistic and substantial. The crazy number that I had to chase, I'll never forget it. I'm going way back in time. I was selling a product that was a client side application.
[00:01:25] Daren Lauda: This was before the cloud client server, and it was a $695 XML editing tool, XML. We all know for data interchange, XML is also used for content creation at times, creating complex content for things like aircraft documentation heavy in the aerospace and defense world. We sold military applications, those sorts of things.
[00:01:49] Daren Lauda: We sold that product, as I said, for $695 one year at sales kickoff. Our CRO at the time John Ford came in and said. Hey everyone, guess what? We've ripped the UI off our client site application. It's now server based and we're willing to sell it for $50,000 for a single CPU server and a hundred thousand dollars for a dual CPU server.
[00:02:15] Daren Lauda: So you can imagine what the sales team thought we went, you've gotta be kidding me. We've taken a $695 client side application, and now we're gonna sell it for $50,000 or more. We all kind of thought, frankly, that John was on drugs. This is not gonna work. This is absolute insanity. But we dug into it. We rolled up our sleeves.
[00:02:36] Daren Lauda: We started pushing the notion that we could automate outputs. So now we're getting into a spot where you're writing content using the editor, but the outputs are being automated more heavily. So imagine all of a sudden being able to build an interactive technical manual where. An aircraft is approaching the gate and you can start saying, we have these air codes.
[00:02:58] Daren Lauda: The as built bomb for this aircraft is bomb, by the way, is bill of materials. This is not a TSA reference. I don't want to be in trouble with my friends at transportation security. How do you build a procedure then to affect a repair on that aircraft as quickly as possible? So what happened was the dialogue changed.
[00:03:15] Daren Lauda: We moved from people just writing content. Or producing paper-based manuals. They're dynamically assembling snippets of content from a server-based repository and delivering on the fly to the folks who needed them, when the needed of them. And when the conversation became about repairing an aircraft faster or changing its configuration more quickly, the types of deals changed dramatically.
[00:03:42] Daren Lauda: Ultimately we went from selling this $695 editor to selling multimillion dollar projects in a and d, as I mentioned, or also into automotive and other key applications, and ultimately the, the companys acquired because of this shift. So when I think about a wild and crazy number that I got, that really threw me for a loop.
[00:04:00] Daren Lauda: Hey guys, it's not $695 anymore. It's now $50,000 minimum. And by the way, there's a bunch of pros served to set it up. If we hadn't leaned in, if we hadn't run the experiment and taken the leap, that company would've never been sold. That company would've never been acquired for a very nice multiple, and we wouldn't have had this great exit and built something really amazing.
[00:04:23] Daren Lauda: The other moral of the story for me is at times somebody's gonna come to you with an idea that seems so off the wall, that seems so counterintuitive, that seems so expensive that you want to say, the heck with this. I'm outta here. I quit. This can't be done. But if you take a step back and say, you know what, I'm gonna lean in and go for it.
[00:04:43] Daren Lauda: Some really cool things can happen. Now, if you've heard me talk before, I do say when you're gonna run an experiment like this, it's important to fail fast. If it doesn't work, you have to realize it, you have to acknowledge it, and you have to move on. But in this case, it worked and we built something awesome, and I think probably my largest customer over time and got through $10 million in lifetime revenue, a big change.
[00:05:07] Daren Lauda: From 695 bucks. So that's a fun story for me and that's why. Wanna talk about, how'd you get that number? I wanna talk about the crazy numbers that we get first. A second one that's more practical was a big change for me after being focused on selling software for a long time. High margins. We managed proser projects pretty well too, and had high margins on those.
[00:05:28] Daren Lauda: I moved into more of a, a private equity like world where the metric that I was being measured on was called operating margin expansion, OMX. That was new for me. I'd always been about growth bookings, A ECV, how high, how fast can we grow them? Maybe profitability to an extent, but that was more about cash.
[00:05:49] Daren Lauda: Don't run out, make sure we can keep the lights on with cash. So it was suddenly being measured on operating margin expansion had me. Take a step back and look at things that vary very differently than I had before. And I'll give you some examples of what we did. Number one, in this particular entity, it was an IO OT play.
[00:06:09] Daren Lauda: And when I arrived, we were measuring rep performance based on number of units sold, how many IOT devices could be sold. And what was interesting was when he paid by the unit, the reps loved it because it didn't matter if it was a $10 unit or a hundred dollars unit. Or a 500 unit. The commission was the same.
[00:06:27] Daren Lauda: So there was an incentive to sell the lesser expensive units because you could sell more of them and make more commission. We saw unitary volume as a way to grow the business, but it was actually working against us. So we had to change the compensation models to something more akin to a CV. What was the value of the contract?
[00:06:46] Daren Lauda: But then, because we were trying to expand margin, we had to build in a contract value, and we actually came up with a metric we called contract margin. So when the seller was in the CRM system and they were making a quote for a contract. They would actually see the contract margin be calculated along the way, and they could see if it was in the red, yellow, or green range in terms of approvals, and they could see how a holding margin would impact their commissions.
[00:07:14] Daren Lauda: This was a big deal. You could now have the rep in complete and total control of what to quote and how to quote to maximize the chance of winning the deal. To see that margin was critical and how they get paid for that margin. So that was a big switch for me. I went from growth at all costs, get as many dollars in the door as bookings as you can in terms of a CV to moving into a model.
[00:07:38] Daren Lauda: We're very thoughtful at each and every transaction. What was the margin of the. Individual transaction to make sure they all rolled up in aggregate to the margin levels we wanted. It slowed things down. It was the first time that I lived in a world where you'd talk about, we're happy with high single digit growth or low double digit growth.
[00:07:57] Daren Lauda: From SaaS that was wildly different than, you know, we want 20, 30, 40, 50%. We want triple, triple, double, double, double, grow, grow, grow. And I kind of came to like the profitability model, creating free cash flow to be used for acquisitions and other things and, and growing in that manner. So that was super different for me when I think about how did you get that number and the stories I wanna work through the stories I wanna talk through with people.
[00:08:20] Daren Lauda: It's stories like that. What was your $695 number that was thrown at you by A-A-C-R-O who has taken a flyer on changing the game for a company? What was the number you got the first time you walked into a new gig that was maybe private equity instead of vc, and all of a sudden you realized you had a shift and managed to margin and do those kinds of things, one, as a CRO, perhaps all of a sudden you found yourself knee deep in marketing trying to figure out which channels were giving you the best.
[00:08:51] Daren Lauda: Turn on investment because your bonus at the end of the year wasn't about bookings or revenue. It was heavily weighted towards margin first. In that model of a sudden, I, as the GM was very concerned about how we spent dollars on marketing, how we spent dollars on real estate. I. Concern about every penny we were spending to make sure that we could create the margin we needed to create the profile that was desired.
[00:09:17] Daren Lauda: And we had a lot of success with that along the way. We had some challenges. We had a couple challenging years, so if I'm honest, I could talk about those in a future life and a future podcast that is, you know, we had to make some big changes to the business, so we had to relocate call centers and change support models to respond to some challenges we had.
[00:09:34] Daren Lauda: But overall, it was a really wonderful learning experience for me to experience that new number. And that new metric called operating margin expansion. So hopefully if you ever wanna be a guest on the show or spend some time talking to me, I'd love to talk about that craziest number that you've ever had assigned.
[00:09:51] Daren Lauda: I'd love to talk about that one that you're trying to win right now and kind of what strategy and tactics you're deploying to make sure you're doing it efficiently and effectively and so that you and your teams can be successful. That's the genesis of the podcast. Like I said, this would be quick and easy.
[00:10:06] Daren Lauda: I hope you enjoyed it and I hope it inspires you to reach out and to be a guest on the show. That's it for this episode of How'd You Get That Number? Make sure to follow or subscribe wherever you get your podcasts, and if you want to keep the conversation going, connect with me on LinkedIn. I'm Daren Lauda.
[00:10:24] Daren Lauda: Thanks for listening. See you next time.