And now, on to the show.
Welcome to FP&A Today.
I'm your host, Glenn Hopper.
Our guest today is Eddie Reynolds.
Eddie is the CEO of Union Square Consulting, a GTM strategy and operations firm that helps high growth SaaS companies build predictable, data-driven revenue engines.
Eddie spent more than 20 years across sales, customer success, marketing and systems architecture, including roles as an AE at Salesforce and VP of Revenue Operations at Trumid, a unicorn fintech.
Prior to these roles, Eddie spent 10 years in banking and private equity.
Through those experiences he saw firsthand that the real differentiator for scaling companies isn't software.
It's the underlying processes, metrics, and data discipline that allow teams to execute.
Today, Eddie and his firm work with companies ranging from 50 to 500 million ARR to improve their go-to-market strategy, system performance and revenue insights.
He also hosts the GTM Science Podcast, where he talks with operators and investors about what drives efficient, sustainable growth.
Eddie, welcome to the show.
Thanks for having me.
We were talking before the show.
I'm not in my normal office and studio.
So it's not every day that my podcast guest has a way better rig than I do.
So if you notice how smooth Eddie sounds, he's got a great setup on his end there.
Well, I appreciate it.
My right-hand guy, Jerry, who runs our delivery team, went to music school.
So he's constantly pushing me to buy a better microphone.
Nice.
Well, it sounds fantastic.
Yeah.
Well, we got a lot to get through here.
And I was telling you I have a hard time not talking all day, you know, going that sort of Joe Rogan seven-hour podcast method.
So we'll try to keep this tight.
But so we better dive in here.
I guess to kick things off, Can you just walk us through your background?
I know you know, majoring in finance, working in banking and private equity, then to Salesforce and ultimately founding Union Square Consulting.
Tell me about that path and how that kind of shaped how you think about go to market today.
Yeah, so I'll start with saying I always wanted to start my own business.
And the first thing that I always ask people that had successfully built their own businesses would be like what do I need to learn?
And they would always say, go learn to sell, right?
And then secondarily, learn finance.
And so I started in sales even before I started in college.
I mean, I started my own business when I was 14.
I was selling knickknacks door to door.
I had like a I guess it was supposed to be a dropship business, but I didn't know how to dropship.
So I was just knocking on doors.
It wasn't super successful, but it was a great experience.
And I went on to study entrepreneurship in college, but I also studied.
I studied marketing, but dropped it and then picked up finance.
Mostly just because and this might be relevant for our podcast I was taking a couple of marketing classes and I thought this is all going to change by the time I'm actually working in sales and marketing and finances.
A lot of this stuff is really foundational and it's a little bit harder and I wanna make sure that I really learn it.
And so I studied finance in college and I came out and I wanted to find a job combining these things and somebody suggested I go into commercial banking.
So I thought this is great.
I'm going to work with business owners, I'm gonna sell to them by being a commercial banker and trying to drive deposits and lending.
So I'm gonna get some more sales experience.
And then I'm also gonna understand how these businesses operate, as we underwrite loans to those businesses.
And my plan was to just quit banking after two years.
Hopefully I'll have seen something really interesting and I'll have quit my job and gone and started that.
And instead I kind of fell in love with finance and ended up spending almost 10 years in the industry.
I went through the financial crisis, was desperate for a job and got a job as a first AE at a FinTech startup selling into private equity.
Then went back into private or not back and went into private equity from commercial banking after that stint.
And then Salesforce sort of kept literally knocking on my door.
I implemented Salesforce in a few companies that I worked at.
That FinTech startup was built on Salesforce.
And I started thinking wow, you know I'm really enjoying sales and finance, but I don't feel like I'm operating on the cutting edge.
I was always looking at Salesforce and thinking, how are these guys selling?
How are they marketing?
Like this is, by some measures, especially at that point in time, one of the best run software companies on earth, especially from a go to market perspective.
What are they doing?
And I ended up drinking the Kool-Aid so much that I wanted to go work there.
And when I walked in the door it was really eye-opening because it definitely met and exceeded my expectations, where everything was just served up to me as an account executive on a silver platter.
They had this operation built out in a repeatable, predictable manner, to the extent that they were forecasting within 5 to Wall Street, despite plus 30 year-over-year growth.
And I was just blown away at how efficiently Salesforce operated.
I was also tasked with selling to a lot of high-growth software companies, and some of them were even more advanced than Salesforce.
They were able to move faster because they were smaller, but many were further behind.
And I spent the bulk of my time over three years there just comparing notes.
Learning how we operated internally at Salesforce and then going to my customers and learning how they were operating and looking at how they were ahead of us and how they were behind us and having conversations with executive leadership teams, from CEOs to CFOs to CROs, CMOs et cetera, about how they were trying to grow revenue, profitability and just build a better go to market engine.
And I saw a lot of common themes and that's what inspired me to want to start this company, so that I could move into a consulting role and truly roll up my sleeves and help these companies implement those strategies and processes that I saw in my time at Salesforce.
That's so interesting because you're at a company that has a great operating model, which I can understand learning from that.
But I didn't think about the aspect where you're talking to so many clients and potential clients that you're learning from them as well.
So what an interesting sort of playground where you can be exposed to so many different businesses and see what's working and what's not.
So that's a pretty unique opportunity there if you capitalize on it, which it sounds like you did.
And then you go, like you said, into marketing. private equity.
So you've spent a lot of time around institutional investors and PE funds.
So I'm wondering how then that perspective ties in where they have the?
You know they've got to grow.
Valuations show predictability.
They've got a timeline for their exit.
How did that then factor in, or did it factor into influence the way you think about go to market and kind of the expectations of CFOs and CROs that they should have for the revenue end?
Well, I think I just spent years reading financial statements and learning about finance, both from the perspective of investing.
I skipped over the part where I worked for four different angel investing groups early in my career, as well as helping to raise multiple billions of dollars of private equity and venture capital funds.
I worked for a placement agent.
We were a small shop that was hired by the PE fund to help sell their funds to institutional investors.
And many of the funds that we worked on were anywhere from 500 million to multiple billions of dollars that we helped to successfully raise.
And in doing that and I'll preface this by saying I was fairly junior at this time, like I was not, you know personally raising 3 billion of capital all on my own.
But I studied for my certified alternative investment analyst certification.
I learned a lot about how investors both private equity investors, venture capital investors and the institutional investors that invest in their funds think about how they allocate capital.
How a company can get a successful exit that can then pay off for the PE fund.
How the PE fund is successful or unsuccessful.
And because we were a third party, I wasn't beholden to one particular private equity fund.
We were going and calling on private equity funds and selling to them and also having them sell to us, because if we took a PE fund on as a client and they weren't successful investors then we would have an impossible mission in trying to raise capital for them.
So we were evaluating them as much as they were evaluating us.
And I looked at dozens, if not hundreds, of private equity funds and looked at their success rates and how they were succeeding.
And one of the things that I will say that really struck me, that partially inspired me to start this business, is I was always blown away by the private equity funds that had operating partners.
So this was 15 years ago at this point.
You see this a lot more today.
But I was always perplexed at the PE funds that are going out and you think about this from like a go-to-market perspective.
Do they have a proprietary model for sourcing deals?
Do they have a way to add value to a company's operations?
So if I'm running a private equity fund and all I'm doing is just like getting the same deals from an investment banker that all my competitors are getting, I'm then paying more for that company than any other private equity firm that gets the same deal as willing to pay.
I then lever up a bunch of debt with the banks and then I hope that that company becomes more valuable and I can just flip the company in five to seven years.
How am I adding any value?
One way to do this is I've got to go uncover opportunities that my competitors are not uncovering, which is basically a go to market process.
The other way is to add value to the actual operations of the company.
I can bring in experts and I can work with the leadership of that company to try to help them build a more profitable, efficient business model.
And those are the primary folks that we work with today.
So I haven't really exited this industry from that respect.
We work with some of the largest private equity firms on earth, and we work specifically with their operating partners.
And even more specific than that.
These days, 15 years later, many of these shops now have dedicated go-to-market specialists and advisors.
And these are not junior people.
These are people that were CROs and multi-billion dollar companies.
It used to be, or at least from my perspective.
From what I saw 15 years ago, it seemed like a lot of the folks were like former CEOs, CFOs and COOs.
And now I'm seeing it hyper-specific.
I think I saw a VC fund that hired an SDR.
It was like 25 years old and you're thinking like how do you go from SDR to private equity?
And then you think, well, actually, sorry, VC.
Well, if I'm a VC firm and I'm investing in an early stage startup and the founder has no idea how to build out an SDR team, and here's this SDR that just came from some hot company that learned all the best practices and I can pay them 100 grand a year, or whatever it costs, to have them coach my early stage founders.
That can add value.
And so I'm just fascinated by this concept that these PE firms are going in and adding so much value specifically to go to market.
And then we're, of course, partnering with them in hopes that they will tap us on the shoulder to come in and roll our sleeves up when they are at the limit of what they can do with the time and resources they have.
And so I think I've kind of forgotten the question you've asked at this point in time, but I'm just really fascinated with this entire space.
Yeah, and it's um, as you were talking, i was thinking back through some of the exits that i'd had, where private equity comes in, acquires the company and actually destroys value, where you see, you know after you get through if you survive the post-merger integration and all that or whatever, whatever the timeline for the exit is, but you can see your ebitda margin has gone down and you can.
If you look at the other companies in the roll up, they're all on different systems And it's, you know, there's always that sort of hope and promise that you're going to get everybody on the same ERP CRM, whatever the systems are.
And so many times that a lot of those plan synergies just just don't come to be.
If you only have analysts looking at a deal, it's easy on paper to come up with with those synergies and how you're going to add value.
But without operators and experienced people and, you know, maybe the, the company that's at the top of the roll-up, that's sort of the model for operational excellence, maybe they, you know, their team can help.
But that's a that's a big part of acquiring and adding values to companies is being able to actually add value to them.
Well, I think you bring up a really important point.
So I was coming into this podcast thinking how am I going to tie our work in go-to-market efficiency to FPA and finance right?
One of the things that I've instructed my team with is like, don't talk to bankers.
So if we call on a private equity firm and we're trying to build a partnership and I see somebody that you know has their harvard mba and they're an analyst at goldman and then they went to a private equity firm, i'm thinking this person may be the world's best investor, but they don't understand go to market, they're not going to understand what we do, the problems we solve, the problems that we see, etc.
And so when i think about it from that perspective, If I'm going into a company with that background, there's an incredible challenge in terms of go-to-market, because if I'm saying look, I need to get EBITDA at 30 okay, how do we do that?
Well, the simplest way to do that is just start cutting costs, right?
But am I cutting costs in the wrong ways?
Am I cutting costs that are driving revenue because I don't understand go-to-market?
And I think that we have seen, especially over the last 10 years, massive inefficiencies and waste of capital in go-to-market.
But if you don't know what you're looking for and don't know what to cut, the answer to that isn't let's just cut the marketing budget, let's cut the sales budget.
We're seeing companies that have gone from spending 40 of revenue on sales and marketing to spending 30.
However, at the same time that they've cut those costs, the amount of revenue growth that they're driving with that spend has also gone down.
So we're spending less money and we're also getting less bang for our buck.
So we're seeing lower revenue growth.
Now that's also a macroeconomic issue.
But you can't just run around cutting costs if you don't understand what you're cutting, what the downstream impact of that is going to be.
And I think that that's a massive gap if somebody has a purely finance background and doesn't understand go to market, when they try to make really big decisions on where we're investing our capital and go to market.
Yeah, really, really well said.
And actually when you mentioned for an FPA audience, I thought oh, I would be remiss or I would be in trouble if I just glossed over the fact that when you were talking about at Salesforce, you know, going from whatever the five to 10 billion, that 30 year over year growth, keeping that forecast within about 5 accuracy.
And so obviously FPA brain, more than go-to-market brain, is going to be like well, how did you do that?
And I guess the question out of all that would be what did you see inside their forecasting and pipeline process?
Maybe, like a mid-market SaaS company, could realistically learn from and apply because, especially when you're in that hypergrowth phase, it's very hard to have a forecast that gets that close to what actually happens.
There's a lot of very simple reasons that Salesforce was able to forecast with 5 accuracy, even at 30 year-over-year growth from 5 to 10 billion.
So I'll break down all the things that I saw there.
Also just to plug our content, we've kind of captured this in our go-to-market efficiency pyramid and specifically our pipeline efficiency pyramid, which is just a derivation of that.
And so the first thing is they had clear process, right?
So Salesforce standardized their sales process.
It was very, very clear what qualification criteria is for a deal that goes into pipeline and what the entry and exit criteria is for a deal to go from stage zero to one to two, to three, to four to five, et cetera.
So that, combined with having really clear metrics and reporting, my team that I was on, of six people had a dashboard that we all looked at quite literally 50 times a day.
It tracked everything from our call activity to how many deals we closed which we couldn't physically close our own deals that had to go through the deal desk.
So like if you're trying to close a deal, you're like refreshing the dashboard maniacally trying to see if the deal went through.
So we're looking at this all day, every day.
In addition to this, we had a culture of real time all the time.
So there was never like oh, I'll update my pipeline on Friday.
You could and would get called out for not having your deal in the right stage, with the right next steps, et cetera, at any point in time, any day.
And the first time that your boss's boss's boss's boss pings you about this and it rolls downhill.
And then your boss is like hey, what's going on here?
I just got pinged by four levels of management.
Why are you not on top of your pipeline?
You learn really, really quickly that like this is a key priority for the job.
And this sounds really punitive, but it's really not like you get that.
You learn that lesson once or twice and then you don't have to learn it again.
And what it results in is a really clean pipeline that everybody in the organization can trust.
And most of the time when we are talking to the mid-market companies that we work with, they can't say that they're there.
Not only that, but it also ensures that reps are spending their time on the right deals, so you still have more time to go on prospect and find more deals, and that we ensure that we don't skip key steps and lose deals that we could have otherwise won.
So there's a lot of impact from having this really well-structured operation.
We had a process for forecasting.
So once you have a clean pipeline, we would go into a forecast call and everybody was on the same page.
Okay, like these are the deals that we think can close in this month or this quarter.
Here's the red flags.
We would discuss it.
So it wasn't just a weighted forecast.
We were taking all this data and putting it into Salesforce accurately, first and foremost, and then we were calling our shot.
That would cascade from the rep to the manager, from the manager to their AVP, from the AVP to the SVP and on all the way up to the CFO of the organization to forecast a Wall Street.
And so you have all of that, and now Salesforce is able to get real visibility to what's going on.
In addition, you have the same rigor with the marketing leads, with the cold calls, et cetera.
And so then I will say What is the CEO and the CFO do if they think that they're not going to hit the number that they reported to Wall Street?
Well, they have some levers they can pull.
They can start to spend more money on marketing.
They can provide bigger discounts to bring customers in faster.
They can have spiffs.
And of course, Salesforce did a lot of acquisitions.
But you can't do that if you don't have visibility into your entire end-to-end go-to-market process.
Salesforce knows.
Okay, if we spend this much money on marketing, this is what we can expect in terms of leads.
These are how the leads are converting through the engine, et cetera.
And when we talk to mid-market companies, both CROs and CFOs, a lot of them will complain like they don't have this visibility.
They don't know what's gonna happen next month and next quarter with that level of granularity.
And so it's really hard to place bets and make decisions.
As you're going through all this, I'm picturing go-to-market and FPA are sitting at the same table, probably right next to each other at the same table.
There's a lot of crossover and commonality, but I guess I do also want to maybe take a minute here and let for our FPA audience, who maybe doesn't work with a GTM team when you say go-to-market and go-to-market efficiency, what do you mean by that?
And how do you define efficiency?
GTM in practical terms?
And I guess even more importantly, what is efficient go to market look like?
Sure.
So two separate questions there.
So what does go to market mean?
Go to market is everything that we do to attract, retain and grow our customers.
So it's sales, it's marketing, it's customer success could be partnerships PLG, anything to attract, retain or grow a customer right.
Go-to-market efficiency is how profitably and sustainably we are doing that.
So we think about common metrics that you can use to measure go-to-market efficiency.
CAC payback is a great one on the new business side.
On the existing business side, we have net revenue retention and LTV to CAC.
I've got some issues with LTV to CAC, but we can talk about that if you want.
And then there are some new metrics out there, like the go-to-market efficiency ratio that I've seen from David Spitz.
And then we made a little tweak to it and called it the go-to-market efficiency margin, which is essentially these two metrics are asking how much does it cost us to grow revenue or gross margin by 1 across the entire organization?
And David Spitz has put out a lot of really great benchmark data from this that I really love and looking at public SaaS companies and showing that they're spending.
I forget I wanna say it's over 2 right now to grow ARR by 1, and then I think it's like 250 I can't remember the exact figure to grow gross margin by 1.
So this goes back to what I was saying earlier.
We look at the entire go-to-market engine and we're cutting costs from 40 to 30 of revenue, but we're seeing less impact from that spend across the board in B2B SaaS right now.
Now there are macro forces at play here, of course, And I will not say that like go to market is the end.
All be all, answer to business.
Like you have to think about the value of the product and the fit with your market.
That is crucial.
But, you know, there's two aspects to business.
One is having a really, really great product that your market wants.
And the other is having a really great distribution model to attract, retain and grow your customers profitably and efficiently.
The latter part is the thing that I spend all day thinking about.
But to answer your question, what is go to market efficiency?
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I think we should just, you know, our FP&A, we're big metrics people as well.
So I do think I want to give you a moment.
Was it LTV to CAC, the one that you had issue with?
Which measurement?
Yeah, I'd love to hear your thoughts on that.
And then maybe we look at, you know, CAC payback and other metrics that are important to you.
But I'd love to hear your thoughts on that first.
Yeah, I might want yours as well because I maybe don't have the history here.
But let's just think about LTV.
So how is LTV defined?
Actually, I forget the formula off the top of my head, but it's basically the revenue that you get from a customer per year divided by the churn rate, right?
So if we say that our churn is 5 per year, then what we're basically saying is on average, we're going to get 20 years of business out of a customer.
Right?
So let's say a customer sends $100,000 contract or turn rates 5%.
We're essentially saying that customer is worth $2 million.
It's going to take 20 years to get that $2 million.
However, that is oversimplifying the math.
This is an exponential decay.
So in 20 years, you don't have $2 million, you have something like $2 million times 66%.
So let's call it $1.2 million, right?
The other $800,000 is going to be spread out over infinity.
It will literally take you a million years plus to get that $2 million, right?
Because it's an exponential decay.
Whatever.
I'm kind of geeking out here right now.
The problem that I have here is that that 5% churn rate is a metric for a moment in time.
If you think that you're still going to have 5 churn in 10 years, 15 years, 20 years, you're just like Insane, right.
So that's problem number one.
Problem number two is we're not factoring for the time value of money.
There's a pretty big difference between getting 2 million from a customer over 20 plus years and getting 2 million from a customer in two plus years, right?
Or two minus years.
Let's say we're churning 50% of our customers every month.
And so you land a customer for 10000 a month, and then you lose half of them the next month and half the following month, et cetera.
And we scale this out and we're a year in and we're looking at our revenue from a year.
I'm like, okay, I'm okay with that.
I can get comfortable with that.
But trying to forecast 20 years out for a B2B SaaS company that's been in existence for 10 or 15 years is insane to me.
So I think it would be a lot more accurate to say let's measure out maybe three to five years and cap it there, and then we can look at how much is it costing us today to win a customer and how much do we realistically think we might be able to earn from them in the next three to five years.
If we want to really geek out, we might want to discount that value to factor in the time value of money.
But I think to say okay, we've got a 10 churn rate, so we're going to just multiply revenue by 10 and divide by our CAC, and we have a 3 to 1 LTV to CAC ratio.
That's great.
It seems a little crazy to me.
Yeah, I get that.
It's funny, as you're talking about that, and I haven't really...
I've never gone deep into the definition of the calculation of it because, it being hardcore, finance my whole career is just like oh, those are marketing numbers, whatever.
Let them define or whatever.
And we're going to do our own thing with it in finance anyway.
But that's very well said.
And that is thinking in any business, thinking lifetime value of a chat GPT customer right now.
I mean, or you pick your platform, but with everything changing the way it does.
But I mean, I understand the simple math to get there.
But to your point, the fundamental math doesn't make a lot of sense.
That formula doesn't really give you an actual number that means anything.
So with that, What are your favorite metrics?
What do you like to look at?
What makes sense to you?
And where would you advise businesses to be looking on their go-to-market metrics?
So I think, like the overall go-to-market efficiency ratio, or go-to-market efficiency margin, is a nice place to start.
If you just want to have one single metric to measure how efficiently are we growing ARR, right?
And then the only thing you can really do with that is you could potentially benchmark against public SaaS companies and or benchmark against last year.
Hey, did it cost us more money or less money to grow gross margin this year?
Right now, of course, you have to consider the fact that you have macro uh trends that are going to impact that.
Then the next layer down is you think about okay, let's look at new business versus existing business, right?
So a new business?
I think cac payback is perfectly fine.
I don't love the fact that it's like measured in months.
I would prefer to think about it if like How much does it cost us to grow gross margin by a dollar?
But, you know, I'm just splitting hairs here.
CAC payback is fine.
You can benchmark against it.
It tells you a lot about how efficient or how much it costs you to bring in a customer.
On the, you know, existing customer side, I think we have NRR and LTV to CAC.
I wish I had a better metric than that, because you're thinking about it from like, the same perspective of like, what does it cost us to retain x dollars of business from our existing customers?
Right, i might have to think through that a little bit more, but those metrics are common nrr and ltv to cac and they give us some sense of how efficient we are at retaining and growing our customers right then.
From there, i think, where we kind of like miss the boat is in not drilling down further.
So let's say our cac payback is good or bad whatever, i don't really care.
How does that break down across different channels?
Like how, what's our CAC payback for inbound?
What's our CAC payback for outbound?
What is it for SMB versus enterprise?
And I think this is really where the rubber meets the road.
If I'm a CFO and I've got limited resources and I'm trying to place bets for next year, maybe I'm under pressure to cut costs, to get EBITDA margin up to a certain point, et cetera, et cetera.
I want to go in and like, how do I say this?
Right.
I want to go in with a scalpel, not with an ax.
I want to cut very carefully.
And I want to see that.
Oh wow, we spent this incredible amount of money on conference booths last year.
What was the CAC payback on that?
How much revenue did we actually bring in?
Now, we all know that marketing attribution is a pseudoscience by definition.
We have lots of different variables that we can't control for.
But we take our best guess when we say wow, we spent a half a million dollars sponsoring booths at conferences last year.
Was that a good spend or not?
What about the podcast?
What about ads?
What about this, that, and the other?
How do we accurately measure that to the best of our ability with the data that we have?
And then let's place some bets.
Here's a major problem with this though, and this is where finance and go-to-market start to overlap.
Why is that number good or bad?
If you spend a boatload of money buying ads so that you can generate MQLs and then you hand those over to your sales team and then the sales team doesn't follow up with those leads and then you come to the conclusion that we have like a poor ROI on that spend.
What do you do with that conclusion?
This is a real problem that we see every single day because this isn't simply a math problem.
If the salespeople aren't following up on the leads and they say all the leads are junk, it doesn't tell us anything.
We can't validate that.
So let me give you a concrete example from a real customer that we worked with that had this exact problem.
We had this classic case of sales and marketing pointing the finger at each other and we went in to try to solve for it.
This particular company didn't have SDRs, so we worked with them to build an SDR team.
And we said, we're going to sit down and define the process.
How are leads routed?
How are they qualified?
How many times do we need to follow up?
How quickly do we need to follow up?
We mapped out the entire process to respond to inbound leads.
And then, working alongside their team, they built an SDR team, hired the folks, trained them, et cetera, and we put them in front of these leads.
They followed up X number of times, followed the process perfectly, and these leads didn't convert.
We then took that same team and we moved them over to pure cold outbound prospecting.
They generated hundreds of thousands of dollars of pipeline within like three weeks.
So we looked at this and we said, okay, we've got a team that's working.
They're executing a process.
The process in outbound seems to actually work to generate real pipeline, but that process doesn't work on these marketing leads.
We can now confidently say that, at least with the qualification criteria for the leads that we are feeding the sales team, this play is not working.
This is not a good investment of resources.
And now we can start to tweak things.
We can change the qualification criteria.
Or if all of these leads are truly junk, we can cut spend and stop trying to generate these leads in the first place.
But you have to have an objective way to look at this and you can't do this purely from a spreadsheet.
If the go-to-market team is not executing the human process correctly, then you have junk data and it's really hard to come to any really meaningful conclusions.
Yeah, it's funny.
The whole time you were talking through that I went full Glenn Gary, Glenn Ross and I was like I want the Glenn Gary leads.
I want the good leads.
It's that, what is it, the Wanamaker dilemma where...
I'm certain that half the money I spend on advertising is wasted.
I just don't know which half.
I mean, that's the hard science of trying to figure out where you're effective in that marketing spend.
And I think that that's one thing that our FP&A listeners would be there.
Yeah well, I mean we'll look at it during budget season or whatever, but we turn that over to the go-to-market guys.
And honestly, we deal with enough uncertainty, sometimes on our own, that it can seem like what's happening on the GTM side is like black magic and we don't understand it.
And I think it's interesting that there's not more crossover.
Maybe it differs by companies, but I was in smaller companies and a lot of times if they were an older sort of a flat company that wasn't growing much, there really wasn't much focus on it.
It was just whatever the marketing team was putting together, without a lot of go-to-market science behind it.
Well, so let's dig into this for a second.
Let's talk about this problem.
So let's say we have a company with 100 million in revenue and you have a 30 or 40 million budget for sales and marketing, right?
I'm actually curious, like you're the CFO in this situation.
How do you look at that?
Like it seems crazy to me to just say well, I don't know what marketing's working or not working, but here's a 40 million check.
I know I'm like oversimplifying this, because a lot of that goes to sales too.
But and CS, but how do you spend 40 million without looking more closely at it?
Yeah.
And that's I mean.
There were huge arguments over that because it would be on the flip side of that.
I never believed a single pipeline I got from the sales and marketing team.
And it's because there wasn't that sort of rigor around it and it would felt like a lot more gut feel of uh well, you know this, our pipeline shows this and it was always.
The pipeline was always over inflated to my mind and you know, especially if you compare it to what, what it actually closed in the last quarter or six months or whatever.
So it was very difficult and it was always a a negotiation around understanding.
You know it's easy to throw the goals out there based on time series, analysis and whatever, and this is the expectation of what you continue to drew, but throwing the science in behind it and then the CRO conflict and just the different math that we have, like your estimate on the lifetime value it was.
There was always conflict around that.
So historically, a difficult, difficult conversation to have.
And it seemed like a lot of times like CRO and CFO speaking two completely different languages.
Yeah, you had a question in the doc you sent me about the CFO CRO relationship.
And I had a specific story to share with you.
So we worked with a CRO that I can't name because this is obviously sensitive share.
And CRO came into the new organization and told us like, my CFO doesn't trust me.
Because the previous CRO was doing exactly what you're saying.
They were promising these big things.
They kept missing forecasts, missing their target.
They had inflated pipeline.
And so this CRO that we worked with actually hired us like the day he started.
Literally.
I remember communicating with him and haggling over the not haggling but hashing out the contract over his Gmail account.
And the reason for that is because he wanted to bring in this process that we're talking about here.
He wanted to make sure that we dialed in.
What does it mean for a deal to be qualified and to enter pipeline?
What is the entry and exit criteria from stage one to two to three to four?
How do we maintain a clean pipeline?
How do we forecast accurately to the CFO?
And what this ultimately results in is how do we earn trust from the CFO that, when we say that we think we can hit this number, that the CFO actually believes that, that the CFO can actually work with that information?
And because I'm CEO of my own company, which I've bootstrapped with my own money, I live and breathe this every single day.
I'm literally like turning the seat from CRO to CFO when I make bets in my own business, and it all starts with the forecast.
Like, if I have no idea what we're gonna sell next quarter, it's really hard for me to make decisions on where we place bets from a financial perspective, right.
And so I think that the problem we're talking about with the CFO-CRO relationship is that if you don't have a go-to-market process in place, then you don't have accurate data and you don't know why things are working or not working.
Is it working or not working because?
Or I should say, is it not working because we're not executing?
I can't tell you how many companies I talk to that say well, the leads aren't converting because sales doesn't follow up.
We can't get our salespeople to make cold calls.
Our salespeople don't follow any kind of process to close deals.
Each rep does things in their own way, and we've got a couple reps that are crushing it, and everybody else is floundering right.
We have an onboarding process that's completely broken.
We don't monitor customer health.
Like we don't find out that the customer is going to churn until 30 days before the renewal.
We have a lack of process that results in inaccurate and incomplete data.
And then, if you're the CFO, you're looking at your financial statements, because that's all you have to go by.
You know, I mean, I even remember talking about this with one of the people that I hired for my own team that came from a traditional accounting background.
And it's like they gave me some forecast based on like, previous numbers from last year, the year before, and i'm like where do you like, where do you get that from?
Like we're not gonna like close deals next quarter based on what we closed last quarter.
Like that's not how this business works.
Like we're not selling, like uh, i don't know, this isn't a vending machine.
Like it's more complex than that.
And if you don't have any other data to go by, i honestly don't understand, like how you make decisions as a cfo.
Yeah okay, so this goes into something that we talked about before the show and i do want to.
I'd like to cover that too.
So i think where the conversation would usually end up with me and i think it's because of the nature of the types of companies where i was cfo was that we'd hit an impasse and i would ultimately tell the cro or whoever had the you know multiple hats that they had in that job.
That's great.
Put that in the crm, use that for your sales forecast.
I'm not giving that to the bankers, because I don't understand it.
And then I would do what your accountant did and I would take time series analysis and I would get I would you know, draw it out and do my voodoo math with a, you know, seasonal auto regressive, integrated moving average or whatever sort of a time series tricks I was going to do on it and say, you know what, this continues the trend and this is what we're giving to the bankers.
Because I can explain this
I can't explain that.
But when we were talking before the show, one of the things you hit and I think that I'll be very curious to hear this
You said many companies between, say, 50 and 100 million hit a brick wall in growth.
And if I was coming into a company where I typically would get placed, it was a stagnant company that was.
You know PE had been in five to seven years.
They were like, we need to do something with this.
So I think I was living in that world that you're talking about here.
So I'd love to hear from I mean, I know in the cases of companies where I was but what actually breaks in your mind or in your experience at that stage in the GTM motion.
And are there patterns that you see across companies in that?
Because, unless you know, we all want to hit that elbow and rocket into hyper growth, but that's not the reality for most companies.
And if you've got a company that's doing over 50 million and you've been flat for five years but you're still Running that margin it's, you know, especially if you're in a, you know it doesn't really add a lot if you are looking at a PE exit on it.
But you know, by a lot of measures that's a successful business and you've just kind of stalled out.
So I'd love to hear your insights on on that.
What happens in that in that revenue range?
Well, okay.
So there's a couple things that go into this.
I'll sidebar this just for a second.
This is my favorite story from my time raising private equity funds.
So, as I mentioned, a big part of my job was going to private equity funds, pitching them on our services and then also vetting them to see if we felt like we wanted to invest our time trying to help them raise their fund, if we thought we could be successful.
And I just spent so much time talking to private equity fund managers about their views on the world.
And I remember one of them and I'm sitting in this fancy conference room in Manhattan and I remember one of them just saying man, you fly out to some small town in Iowa and you see this business.
And we're not talking about software companies.
It's a bit of a sidebar, but I just find this fascinating.
It's like and you see this business And you're looking at it and you're like this guy's doing like 5 million a year.
And you see all these inefficiencies across the business.
And you're like, oh, my God, we could go in here and we could turn this knob.
We could turn this knob.
We could make so much money.
Why isn't this guy doing this?
And the thing you forget is this guy goes to his local country club and he's the richest guy he knows.
He's got nothing to prove to anybody, right?
And this isn't a direct correlation to what we're talking about, but I do think to your point.
If I owned a 50 million company where I owned 100 of it, and 100 of that cash went into my pocket and we're just printing millions of dollars year over year,
Do you think I care about anything we're talking about today?
Absolutely not.
But the second.
The PE firm writes a check and they need to flip that company for a multiple.
All bets are off.
Now the game has changed, right?
And to a lesser extent, I see this happening as well.
I see like with the early stage VCs, They want to see top line revenue growth.
They want to see certain metrics and certain things happening.
But there's less scrutiny on some of the stuff we're talking about.
And obviously with VC, less scrutiny on EBITDA.
And the game has really changed a lot, especially with AI and AI native companies.
So when I say companies stall at 50 to 100 million, some of them are stalling way before that.
We were starting to see AI native companies that are at 300 million 500 million in revenue and, like they, barely have a sales team.
But what I oftentimes see happening in a traditional SaaS business is that you have a stage where a CRO has, let's say, five sales reps.
That CRO isn't really managing marketing.
They're not really managing customer success.
They got the five reps.
They've got the 10 reps.
They've got the 15 reps.
And it's just small enough that they can still wrap their head around each and every deal that they're working and each and every rep and coach them.
If they're doing enterprise deals, it's not hard to remember every half a million dollar deal they're trying to close.
It's all in their head and they're just rolling their sleeves up, trying to like get their folks to make more calls and help close those half a million dollar deals.
If they're doing smaller deals and every deal is like 25000 and it's like okay, like we we, we generated this many leads and we've got this much pipeline and they're just like constantly working with their reps to like make more calls and close these deals.
And it's all something they can kind of manage with their own hands.
And then it gets to a breaking point.
Like, you start to get to a point where you have too many reps and you have to introduce a layer of management.
And now each manager is doing the thing that I just described.
And they're doing it in their own way.
And they're less experienced than the CRO.
And now all of a sudden the CRO is flying blind.
Now the company's too big for the CRO to get their hands into each and every deal and each and every rep's process.
Now they're telling their managers, you need to go and manage in this way.
They can't get any visibility.
They open up the CRM and they see a pipeline report and they're like, I don't trust this.
I've had conversational CROs where I'm like, hey, your close rate's 10%.
That's not very good.
And they go, ah, yeah, but that's because our reps just throw deals in there.
They don't mean anything.
That number's not right.
I'm like, okay, how do you manage your business that way?
And this is the wall that they hit.
It starts to go beyond a capacity where the CRO can personally manage everything.
And this is where you start to see things fall apart.
This is where marketing starts to say we generated all these leads, but nobody followed up with them.
This is where you're starting to see wow, we could have won that deal, but the reps skipped these crucial steps.
Because there's no repeatable process in place.
And it was just all in the CRO's head.
And as we grew beyond a certain point, it all fell apart.
It's so interesting hearing you say this, because that's what you're describing is what I would walk into.
And it was like, I talked, I've talked to so many people and go to market now.
And it's like, wow, that sounds amazing.
That sounds really smart.
And I just, I didn't have, have that advantage.
And I, the other big thing that it was always like, I wouldn't even open the CRM.
I don't like to be a great implementation of Salesforce that was horribly used or you know, whatever the, whatever the system we were using.
So I imagine when you come into a company, maybe you're saying something completely different than I am, but I would expect that when you come in that you're a lot of times dealing with really messy go-to-market data.
And so I'm wondering are there diagnostics you run like pipeline aging or close rates or something that helps you sort of cut through that bad data?
Because I think a lot of times, especially if a company doesn't have a really strong GTM process that they're going to be, you know that the data is just not going to be great.
So I wonder, do you have like an assessment or eval or something you do to kind of cut through that and see where the revenue engine's leaking?
I guess, for lack of a better term
We do.
We have a 150 plus point go to market diagnostic that we could do.
We never go through all 150 points of that though.
So I'll preface this with a few things, right?
We need to focus where the pain is most, right?
So I like to talk to CROs and, assuming they're covering all of go to market understand like, what's the priority here?
If you could only fix one thing.
Would it be your new business acquisition or would it be net revenue retention?
Now, everybody always says new business.
I push back on that sometimes and I'm like look, if you're not retaining your customers, then maybe you're attracting the wrong customers and maybe we need to fix that first.
But it's not necessarily the hill that I'm going to die on, especially if the CRO doesn't oversee customer success.
We now get into new business and I ask do we want to do a better job of closing the deals that we're already generating or generating more pipelines?
Almost always CROs tell me I want to generate more pipeline.
I'll push back a little bit more on that and I'll ask, well, what's your close rate?
They say, well, my close rate's 5%, 10%.
I've got some questions there.
Another thing I might look at is what percentage of deals are at 15x or 2x than average sales cycle.
So let's say we've got $50,000 deals and they close on average in 60 days.
Well, if two thirds of my pipeline is 200 days plus and I've seen this then we have a real problem.
Now, I don't even need to look at that stuff though.
I can ask much simpler questions like, hey, do you trust your pipeline?
Do all of your reps follow the same process?
If I asked five reps like what a qualified deal means, will I get the same answer?
Will I get five different answers?
And a lot of times, like a CRO will tell me yeah, you know, I know we have a problem with that, but we've got to generate more pipeline.
And I might push back on that and say why would you spend time and resources to generate more pipeline when you're not even winning deals that you already are working?
Like, why don't we focus on like, stopping the bleeding there first and then go to new business?
We usually kind of split the difference with them and we'll say okay, in the first 90 days, maybe what we could do is tighten up your pipeline management.
Just get the very basics in place so you're not chasing deals you shouldn't be chasing and not losing deals, you should be winning.
And then let's say, like we want to focus in on outbound, all right, let's dial in that outbound process and then within 90 days we've got a really tight outbound process, we've got a really tight pipeline management or it could be inbound and pipeline and then where we want to be after that 90 days is we've got some, some clear metrics And some trustworthy reports that show what our team is doing to either convert cold prospects or inbound leads into meetings and pipeline and to convert that pipeline into closed one business.
That really sets the foundation for us to start to work on other areas of the business and build upon that.
And you know, not only report back to the CFO much more accurate information, but also identify what's working, what's not working, double down on the things that are working and cut back on the things that are not.
This all sounds so smart and organized.
As I'm thinking, I guess to kind of land the plane of our story here, if you could paint a picture, what do you think a truly mature, high efficiency go-to-market organization looks like?
And what would you love every CFO and CRO pair to do differently at their annual planning cycle to see where there's not that disconnect between the two groups and they're actually speaking each other's language and it's understood as we head into planning.
All right, so there's a lot here.
Let's start with annual planning.
So we build an annual plan and we start or we don't start.
We start with tops down, but then we get to bottoms up and we have all the things that we discussed in this podcast, and so we have some reliable processes and metrics and we can look back and we can see okay, this is how many inbound leads we generated.
This is how many outbound uh, you know sales meetings we we booked.
This is the conversion rate into pipeline.
This is our close rate sales cycle asp.
This is how much revenue we generated new business.
This is our renewal rate.
This is our expansion rate and for next year, we're going to add this headcount and this marketing spend, et cetera, and we can expect these results in terms of our total revenue throughout the year.
That's kind of step one, right?
So we're starting our annual planning with some foundational process and metrics that took us a long time to get to.
That's best in class.
The next piece is that, as we work our annual plan throughout the year, we have the ability to track and iterate throughout the year.
So we have something like a pipeline council where the CRO, the VP of RevOps, the CFO, head of marketing, head of CS, possibly product, would come to the table and we would discuss what we are learning from those metrics what's working, what's not working.
We would make tangible decisions about action plans we're going to take moving forward.
Are we going to double down on marketing spend?
Are we going to cut back here?
Are we going to train our team on how to follow up with our leads better?
And we're iterating throughout the year.
In addition to this, if we want to experiment and try new channels, new tactics, etc., we have that foundational stuff in place where we can test and iterate lightning fast, right?
Because we know exactly where we want to build the process out.
We're going to measure, we're going to see if this works, if it doesn't work, and we know how to approach that.
That to me is best in class.
And then everybody's obsessed with AI.
So now we look at like AI and other tools and we layer that on and we say we've got a foundation that's working.
Now we can start to ask really thoughtful questions about where and how could we use AI in this process, instead of saying like oh, like we can't figure out how to do outbound.
Maybe if we get an AI SDR, it'll just magically work for us.
That, to me, is best in class, when you have that foundational operating model and you're able to just operate at like a regular cadence and say okay, we can trust our metrics and we can make decisions, we can take bets and we can iterate fast.
Yeah, what you said around AI, It's like you can't automate chaos.
You can't just sprinkle some AI on a bad system.
So what you talked about building the foundation first that's 100 in alignment with my approach to it as well.
And I don't know.
As we've been talking here, I feel like I don't know if I'm ever going to sit in the CFO seat again, but if I do, you're the first person I'm calling so we can align FPA and GTM.
This has been great.
We have a couple of questions that we... that we run by everybody.
So it has come to the time of the show where I need to ask those.
So as we wrap up, what is something that most people don't know about you?
A lot of people don't know that I quit my job in banking when I was 25 and moved to India for a year.
Oh, wow.
Okay.
Very cool.
Anything that you learned on your year abroad that you brought back with you and applied in the rest of your work life.
Well, this is right after Bear Stearns went under.
And my goal was to break into Wall Street and investment banking.
And I thought maybe India is far enough away to do that.
And they speak English, so I won't have an issue there.
And the day that I started in my new investment banking job was the day that Lehman Brothers crashed.
Oh, wow.
Wow.
All right.
Good experience nonetheless, I'm sure there are being being abroad anyway.
It was it was a great experience.
All right.
Everybody's favorite question.
What is your favorite Excel function and why?
I have no idea because I don't spend that much time in Excel.
I will tell you, my favorite Excel function is uploading it to Google Sheets.
I really love Google Sheets.
I love sharing that across my team.
If I had to pick a function, it would probably be the color scheme in either one.
I really love having things like neatly organized and color coded.
And when my finance team sends stuff to me, I'm very anal about having it in exactly the right format, because it helps me read and understand things and get to the questions really quickly.
And I try not to spend a lot of time like messing around with Excel functions because thankfully I have other people to do that for me.
100%.
And that's, uh, I was a guest on the show before I was the host.
And I realized it was when that question was asked, I thought, I haven't thought about that.
And if you'd asked me that in my early 30s, man, I'd had you know, 200 different answers for you.
But yeah, after you get out of it, it's hard to answer it.
But that, yeah, color coding is a good one.
Well, I think that might be a first.
I need to be logging these.
I consider myself a data-driven guy.
I ask these questions.
I never put down what's what the responses are.
Well, i'm a sales and marketing guy, so i'll just say like, when some finance person gives me this giant spreadsheet and it's all black and white and like i can't read this, like make this like more presentable?
Yeah um, and so like i'm a big, big like fan of presentation um, but yeah, i'm not the guy that like is ripping keys off my keyboard so i can like work through excel faster.
Like i admire those folks, but i was never one of them.
Yeah, i hear you.
I hear you So.
Well Eddie, this has been fantastic.
And I really do.
I feel like I've gotten a peek on the other side of the curtain with GTM.
So I really appreciate you coming on and sharing your insights with us today.
