David Maxey – Head of Revenue Operations, US at XM Cyber – Execute a Sound Revenue Model
Quote of the Show
When you over index on one particular metric, you end up looking at a system and thinking you’ve improved it but that's not true
- A sound revenue model connects leads to revenue transparently and comprehensively, addressing diverse stakeholder needs.
- Understanding market nuances, adjusting conversion rates, sales cycles, and pricing is crucial for go-to-market success.
- Focus on key KPIs like payback period, lifetime value, customer acquisition costs, retention, and expansion rates for revenue model health.
- Accurately attribute marketing efforts to revenue, with a clear lead capture process and ROI reporting for budget justification.
- Utilize tools like SaaSGrid, Segment, Heap, Growblocks, and BurnRate for streamlined data collection, integration, visualization, and optimization.
- A sound revenue model aligns your teams around generating revenue and value for your customers.
- Track and improve your average selling price, conversion rates, sales cycle, and ramp time to increase your revenue performance.
- Socialize and align your revenue model with your organization by presenting, communicating, and building relationships with the people involved.
In this episode of Revenue Today, Jared Robin and David Maxey, a GTM leader and the Head of Rev Ops US at XM Cyber, talk about the importance of having a transparent and comprehensive revenue model that connects leads to revenue. David explains how to avoid overhiring, over indexing on the wrong metrics, and wasting money on ineffective marketing programs. He also shares his favorite tools and resources for building and analyzing revenue models, such as SaaSGrid, Segment, and Heap.
David shares his wisdom and expertise on how to measure and improve your revenue performance using key metrics and KPIs. He also gives practical advice on how to socialize and align your revenue model with your entire organization, and how to deal with the challenges of change management. You will learn how to create a profitable and scalable SaaS business that delivers value to your customers and stakeholders.
Tune in to hear David’s tips and tricks for creating a sound revenue model that works for your company.
[00:00:40] Friends, welcome to another episode of Revenue Today. He’s somebody I’ve grown close to in both RevRoom and RevGenius and learned quite a bit. He is a GTM leader and has held many key positions in worldwide sales, customer success, GTM ops, marketing, and finance.
[00:01:06] He’s been a part of several acquisitions from scaling down to scaling up, leading teams of various sizes through transitions and into success. Right now he’s currently the Head of RevOps of the Americas at XM Cyber. And he just put out an incredible piece that’ll be releasing soon for RevGenius on planning.
[00:01:26] Welcome David Maxey.
[00:01:29] David Maxey: Jared, thank you so much. I’m very, very happy to be here. And it was, it was great to meet you in real life last week
[00:01:36] Jared Robin: On the heels of meeting in person. This has been quite exceptional meeting you in real life, alongside some of the other folks that you’re working with and, really intrigued to jump into today, because you’re doing some stuff that I don’t think you realize how important.
[00:01:56] Thank you. And we’ll get into that, but, you know, wanted to dive into your head. Debunk a myth about GTM.
[00:02:10] David Maxey: Yes. I I’d say one of the more common, if I had to put my finger on one of them is, is that, you hire people and they’ll solve the problem.
[00:02:19] I’ll give you an example of what I mean by that. And the specific principle I’m saying is you can’t just throw people at a go to market problem and expect it to be solved. A common example that you see is you might have a bit of success in a particular region or industry or a particular ICP, and you want to translate that out into a different area.
[00:02:38] So you want to start hiring a team and you want to start creating revenue in that area, but you expect the same productivity that you do from the area that you’re having success too quickly. And so a lot of times what you see is you and you saw a lot of this last year when a lot of companies were having a hard time hitting goals.
[00:02:57] What do we do? We went on a hiring frenzy and we just kept hiring people and hiring people and hiring people, only to find out that our attainment kept dropping and dropping and dropping, because throwing people at a problem that we don’t understand is not going to solve the problem. I’m trying to understand what happened in the market, trying to understand what those conversion rates are.
[00:03:15] It’s really important because overhiring causes risks, which is what we’ve all seen in technology. And that’s, you know, you don’t hit attainment and you’ve got, you gotta be staffed up. But the other piece that doesn’t commonly get talked about is when you’re out testing a new market, if you’re not having success in that market, you’re touching prospects that haven’t heard of you before, you know, your reputation and you’re failing.
[00:03:36] So it’s really important to start small, make sure you’ve got that success penned and then grow on that success when you’re ready and you’ve got a defined playbook, stable conversion rates and things that you can fork. I think it was a hard lesson we all learned in the go to market side. And unfortunately, the ones that are listening, then we’re part of those risks.
[00:03:54] I feel for you because the companies were, they threw people at the problem and, when it didn’t solve it, they unfortunately had to make some hard financial decisions.
[00:04:05] Jared Robin: It’s it’s certainly been a trying time. Are you seeing more people operate the way you’re preaching or are they still doing the same thing?
[00:04:18] Well, it’s interesting. One of the things that they pointed out that I thought was really interesting was the way that even VCs are prioritizing growth over profitability. Um, used to be at a six to one ratio.
[00:04:37] They used to, you know, if you, it was increase in growth, um, you, you could increase your growth by one point and get the, the same valuation as if you had increased your profitability by six points. Um, and that’s now dropped. Uh, so, so what that really mean, you know, massive basically burn all cash to grow.
[00:04:55] Don’t worry about profitability. And they, they said recently, uh, you know, in the past six months, that’s dropped from one, one to two. Um, so, so that quite, quite a magnitude change of even the way VCs are looking at it, because what they’re seeing is if you’re not sound from a revenue standpoint, then you’re going to burn cash faster than you need to.
[00:05:13] Um, and when there are unforeseen things that happen. You’re not going to have as much control over what you need to change in order to remain profitable. And that’s what, when you grow at all costs, you’re not really taking the time to understand how it all fits together, you’re creating, and we call this, why do we call them growing pains?
[00:05:31] Because we move so fast. Uh, but you end up making things that aren’t as sound and I, and I would say to answer your question very specifically hearing it from the VCs, the sound revenue model is what we’re, we’re leaning towards. And I think it’s what every founder has always wanted, wanted to move to profitability, but it’s nice to see that the VCs are kind of coming in line as well and saying it’s not just growth at all cost.
[00:05:52] It really does need to be a sound revenue model. It does need to make sense. And at the end of the day, you know, profitability, payback period, lifetime value. Thank you. customer acquisition costs, all these things are important. And this is why.
[00:06:06] Jared Robin: And ultimately, uh, folks that take VC money have to follow VC expectations. So it starts, it starts with them,
[00:06:16] David Maxey: right? Yeah, that will be the old saying of they respect what you. If you look at the VC side of things, if they were valuing growth at six to ones of profitability, you know, a year and a half ago, of course everybody’s gonna be focused on growth, growth, growth, multiples, multiples, multiples.
[00:06:33] Um, but, but as now things are shifting, to your point, uh, they are paying attention to those sound revenue models. So I do think it’s gonna be a, a, a, a very strong push from the VC side. Yeah. And
[00:06:44] Jared Robin: what fascinated me as, as we dove into, you know, you socializing around strategic planning and creating sound revenue models, there isn’t really.
[00:06:56] A uniformed way to do it. Is that right?
[00:07:01] David Maxey: Yeah, that’s, that’s exactly right. And I think that’s, you know, one of the, the exciting things that I saw, and this isn’t a plug, nobody’s paying me for this. And, uh, but, but they announced a product called SAS grid. Um, and, and what’s interesting about, you’re seeing a lot of these products that grow blocks and burn rate, um, that, that are coming out and what they’re, they’re, they’re endeavoring to.
[00:07:22] Make the revenue model itself transparent. And what I mean by transparent is not just to see through it, but you can speak the language that makes sense for your department. And it translates into a financial outcome that the finance team shakes their head and says, that’s great. Let’s do it. Rather than that doesn’t make sense.
[00:07:38] You don’t need that amount of investment in order to get there. And I think that’s, it’s just becoming, um. It’s very, very increasingly important to make it standard. But I can tell you in my experience, one of the things that I did do as a revenue operations leader is I come into a company and I own the annual operating plan from the go to market side.
[00:07:55] Um, and that’s so, uh, you know, I can’t have my hands wrapped around it, but I think it’s become increasingly important. Yeah.
[00:08:02] Jared Robin: Well, I mean. They’re the same levers company to company. Why do they differ?
[00:08:08] David Maxey: Well, yeah, great question. From a mathematical standpoint, they
[00:08:11] Jared Robin: pay taxes the same way you have profit and loss the same way.
[00:08:14] Why, why does this
[00:08:15] David Maxey: different? Well, when you talk about the KPIs, you know, every company has an average selling price. Every company has conversion rates. Every company has a sales cycle. Um, but when you talk about how you apply those things to different markets, um, you, you know, in a particular company I’ve worked with in the past, just to keep confidentiality.
[00:08:32] Protect names, but, um, you know, when you’re looking at some of those things, you can take the exact same product and launch it in a, let’s call it a mature market versus a not mature market. And I’ll, I’ll define that specifically as lots of competition versus very little competition. And you can see a drastic change and what happens in, in those particular, in what like your sales cycle in a mature market is going to be so much longer.
[00:08:59] You’re going to have a full buying committee. That’s going to be involved. You’re not going to be able to get to a decision maker very quickly. Um, so your conversion rates are going to be lower because you’re going to have to find more people. Um, your average selling price probably is going to be a bit higher if you’re going that further up the organization, but you can see.
[00:09:15] Even though the levers are quite the same when you’re talking about an average selling price going from 50, 000 to 125, 000. I mean, you’re talking about a 125 percent increase or more. And, and then you sit there and you extrapolate that out of her. Well, we’re going to, we’re, we’re going to get 50 customers this, this year.
[00:09:33] That’s huge. And so that’s where the levers are all the same, but it’s a small nuances that when they’re baked back into the model, it, you know, makes companies either great or. Mediocre or bad.
[00:09:45] Jared Robin: Yeah, I mean, it’s super interesting. Like, what are some of, what are the most common failures? Like, or failings for folks, uh, annual planning?
[00:09:54] David Maxey: Yeah, I, I think it’s, um, over indexing on some of the, the, the wrong metrics. And I’ll, I’ll touch on what I mean by that is a lot of times you’ll see a go to market organization. Focus more on customer acquisition costs and maybe not on the full payback period. And I’ll define those full payback period includes your average cost of service, which is the cost of your customer success folks, your general administration that’s needed to invoice them.
[00:10:19] And the R and D that’s needed for bug fixes, whereas customer acquisition costs, as everyone knows, is just. Everything new, uh, new from sales and marketing when you overindex on just customer acquisition costs, what is ends up happening is you end up focusing on trying to classify cost in the wrong way versus actually improving the system.
[00:10:39] And I’ll give you an example of that. A lot of companies will jump up at it down and say. a great, we’ve started our expansion program and every sales leader that is looking at customer acquisition cost is going to want all of the expansion class, regardless of when it’s expanded throughout the contract, whether it’s three months or six months, they want it all classed as new because that drives customer acquisition costs down.
[00:11:00] But in that example, let’s say that it’s six months into the contract and it’s actually your customer success, people that are doing that expansion and doing that work. But it’s classifying everything as customer acquisition costs. You’re having to hire more customer success people to keep that up.
[00:11:13] What’s actually happening is you are driving your customer acquisition costs down, but you’re bringing your payback period, your complete payback period, up to the extent that you actually need your customers to stay with you longer to be profitable. So… Succinctly, what I’d say to wrap all that up is when you over index on one particular metric, you end up looking at a system and thinking you’ve improved it when it’s not.
[00:11:34] And I’ll steal this from Dale. Dale says it’s all, it’s like a toothpaste tube is you squeeze one side. And if you’re only looking at one for the other one side to see if it squeezes out and not the other, it could be squeezing out the other side. And that’s a great example. How
[00:11:49] Jared Robin: can, how could folks, uh, best prepare, you know, like, like Best fix this.
[00:11:55] David Maxey: Yeah. So what I always use, use a model that, you know, is fully baked. What, and what I mean by a fully baked revenue model, when I’m building one, and you, you’ve seen me do walk through the ones that I’ve used a couple of times, uh, is you start with a hiring plans for every department, customer success, sales, pre sales marketing.
[00:12:13] And you build all of the hiring plans out. Those should all produce numbers, bookings, pipeline, and then eventually produce financial statements from an income statement or cashflow statement. And when you do that, when you build that comprehensive of a model, what it does is it allows you to speak those different languages to provide that transparency and notice, I didn’t say speak the same language I said, speak different, the different languages.
[00:12:34] Cause you’re not going to get sales to speak finance language. You’re not going to get finance to speak marketing language. But what that model does real specifically is it. It very, very concretely and discreetly takes your leads and ties them directly to revenue. So when you’re making decisions like I need to increase R and D cost, what marketing programs do I need to cut in order to do that?
[00:12:55] You can go back into the model and say, okay, this program is attached to these leads. You know, if we were looking at increasing R and D by 50, 000, but those leads are tied to 1. 2 million in revenue. And when you start having that, that conversation, you’re saying, you know, by cutting this marketing program, we’re really going to be killing this amount of pipeline, which is going to turn into this resulting amount of deals.
[00:13:15] It helps the finance people see how the systems are all connected. Uh, and the reason I pick on marketing all the time is it’s very common that marketing gets cut because programs and events are not. Technically butts and seats producing their, their, there’s a lot of that. That’s where it gets looked at to, to, in order to cut costs.
[00:13:32] But when you have a fully transparent plan that has that all laid out to say, this event produces these leads in the pipeline. Then when you go to cut it, it’s a very easy conversation to say, is this small savings here worth putting this amount of revenue at risk? Most of the time, the financial people say, no, that’s an easy decision.
[00:13:49] Jared Robin: Oh my gosh. It’s, it brings up a bigger conversation with marketing. Um, because. There’s not always direct line attribution event by event by event. How, how do you, how do you create some wiggle room there?
[00:14:05] David Maxey: Yes. I, I talked about this in the white paper a little bit and I’ve got this, this principle and what, what I say is, um, attribution over execution when it comes to events and, and it’s so, that’s so hard for everyone to swallow because events are fun, right?
[00:14:19] Like we’re out, we’re meeting people, we’re shaking hands. Uh, you know, we see someone that we just saw on LinkedIn. We want to run over and shake their hands. But when it really comes down to quantifying a really good event, um, and I know everyone’s heard this is you’re real, the, the, the two things that you’re doing at the event is you’re creating opportunities or you’re.
[00:14:39] Finding the customers that are currently in opportunities and you’re accelerating that velocity. Those are really the two valuable pieces. So being able to find your ICP and starting sales processes from those, and being able to prove that really boils down to making sure that you are talking to the right people.
[00:14:54] And I know, uh, Zaster and all the other conferences will hate me for saying this, but every single person that goes to a conference that’s running a booth is better off scanning. 13 badges of people that they’ll start sales process with six, six of them, then scanning 300 badges and getting two out of it.
[00:15:09] And that’s typically the approach is, is you see, you know, Oh, if you come by the booth, let’s just scan, scan, and that’s fine to scan it. I just wouldn’t call them. Qualified. And I think that’s where the, that’s where I say attribution over execution. Um, a lot of times when, when, when I would, when someone comes up to the booth and they are being scanned, great.
[00:15:27] Capture their information, but see, do they fit in the icp? Are they ready for the a, a sales process to start? Do you have a, a correct entry point into the organization? And if you don’t, and you haven’t explained all those things when you go and what the white paper kind of details out is when you get funding for a big event, like Dreamforce or something like that, your first year, you should put together an event ROI report that goes through the different stages and says, okay, three months after the event, these are all the leads that turned in the opportunities.
[00:15:52] And if your sales cycle is eight months, eight months after that event, you should be doing a full financial report to the finance team saying, these are the leads that flowed the opportunities that closed into deals. If your events aren’t doing that. Don’t be surprised when your event budget gets cut, regardless of what you’re doing when sales suffers.
[00:16:10] And that’s why I always say attribution over execution, because if you miss your sales targets, marketing is going to suffer. And that’s not, they’re not connected. Not always.
[00:16:19] Jared Robin: Uh, understood. It’s a little more direct line there, but, um, in something like community, you know, all of the relationships you’ve built, the pipeline you’ve generated.
[00:16:31] And none of that is attributable. How do you, how, I mean, I’m sure it can be this. This is a great example, right? Like, um, how can you quantify that on budgeting as a place to spend time and money? Because a lot of it’s happening through conversation, word of mouth in, um, um, an organized dark funnel type of situation.
[00:17:01] David Maxey: Yeah. I, I, I mean, I. I agree with that notion in some instances, but I would also say it’s almost become it when a proper playbook is used and the expectations are laid out. It doesn’t necessarily need to be that way. You know, if you, if you know, in your head, when you finished a conversation that you need to take.
[00:17:20] The 15 seconds, jot the notes down and move to the next one. And you’ve laid that expectation out in your head and you’ve practiced the governance because it, and that’s what I mean by attribution or execution, like get all this stuff planned out before you go out and just start doing it. Cause if you start doing it, Willy nilly, you are, you’re going to have a lot of these things that end up in a dark area that you’re not going to be able to capture, but if you’ve got it, and when I, and I’ll, I’ll quantify this and lay it out, what I mean by attribution or execution is know that when you’re going in, I need to get this information from.
[00:17:49] This person, these are the things. So just like if you’re on a call, you have a call input form that you’re going to grab all the information. You should have a live one in your head. And when you’re done talking with the person, you should jot those notes down and then you should go on to the next one.
[00:18:01] That’s why we’re there going back and just saying, Hey, I talked to 12 people. These are the things that I remember. Sure. That’s going to be directionally. Okay. But if you really want to extract the full value, just like anything else, you have to, you’re going to have to put in a process. You’re going to have to follow the process.
[00:18:16] You’re going to have to be disciplined about following that process.
[00:18:19] Jared Robin: Yeah. I think it comes down to when people are talking and you’re not involved about you, like in a positive sentiment, um, that’s going to
[00:18:27] David Maxey: be tough. Yeah. That’s a hard measurement. I mean, the, the only thing that I’ve even seen quantified that way is when you’re talking about marketing, share a voice, going and going and getting a marketing firm to try to see what share voices.
[00:18:37] But to your point, yeah, that’s, I don’t even, I don’t have a good answer to that one. That is a dark, dark funnel to your point.
[00:18:44] Jared Robin: Yeah, we’re, we’re, we’re, we’re getting to a point where, um, um, we, we all know word of mouth is the most potent, um, form of marketing, or at least that’s, what’s been said for years and years and, and, and network effects and all of that.
[00:18:58] And, and, um, what you do like releasing a white paper, sure, you could get a list of everybody that has signed up for it. That’s very attributable. Um, another list of everyone that’s read it with a certain, um, but at a certain point, um. You can’t get a list of everyone has told somebody else about it unless they sign up or, or, or shared it.
[00:19:23] Sure. There’s some tools better than others with that, but no, it’s, it’s, it’s just interesting food for thought as we’re going towards, um, a time when, when, when marketing and sales are getting shaken up, right? Like people are posting on social and stuff’s coming in and yes, you could have them direct.
[00:19:45] Yeah. Um, you know, self, self identify attribution and things to that effect. And those are all great practices, but there’s also becoming more and more otherwise. So I’ve just, it’s just a fascinating conversation. Yeah.
[00:19:57] David Maxey: Well, I mean, touching on that, going from one end of the spectrum to the other, meaning in real life to.
[00:20:03] Purely digital. Um, I like to touch on the digital side of things because the digital side of things is very much in our control, but it depends on the technology we implement. You know, when you’re looking, when you’re talking about capturing sessions and UTM parameters and social touches and all of these things that are in place, it really is important about, you know, you can use a product like heap or use a product like segment, uh, make sure all of those things are kind of stitched together, but it does take, I mean, and I helped implement.
[00:20:30] Um, the segment pieces for the front, uh, front of house for, I guess, uh, the top of the funnel for deputy. And when we were looking at that, it was unbelievable, um, that when the data, and I won’t give the exact numbers, but the data that Google told us that was converting versus what we actually were able to analyze, um.
[00:20:50] Was significantly less and Google takes credit for anything that’s influenced. And what, what segment was able to do was tell us if it was influenced before or after we touched them. And that’s so important in marketing when it comes to digital ad spin, when you’re trying to figure out which channels, um, from.
[00:21:06] If you’ve got a digital ad spend and when you’re running it, I have a company that has a digital ad spend. That’s over a couple hundred K a month. Um, that’s something that you definitely want dialed in
[00:21:15] Jared Robin: now. Let’s let’s go to KPIs. Like, like, what are the most important KPIs as you’re managing, uh, you know, for planning or making sure that you’re, you’re not overhiring or hiring too fast.
[00:21:27] What are you looking for?
[00:21:29] David Maxey: Yeah, I would say that the main ones that you look at, uh, and I touched on some of these earlier, but I’ll touch on 1 more is, you know, your, your average selling price, um, your conversion rates and typically your conversion rates, the, that, that can go down a rabbit hole, but where I’ll cut that rabbit hole out is your conversion rate should be broken into 3 stages.
[00:21:46] Your top of funnel, your middle funnel and bottle funnel. If you don’t know how to do that, uh, do a little research. There is, there are articles on how to do that or ping me. I’m happy to walk you through it, but don’t use every single stage in your funnel. You’ll kill yourself doing that. Um, the sales cycle.
[00:22:00] Um, and the reason I bring sales cycle up as a KPI to watch is there’s easy ways to improve things like that. Um, and I can give an example of each one in a bit, but then also ramp time. You know, how fast can you get an employee productive that makes sense to put them out on the front lines? You know, you don’t want them out there sounding silly in front of prospects, but at the same time, you don’t want them sitting for nine months, totaling their thumbs.
[00:22:22] If they can be productive in three. Um, and so those, I would say those are kind of the four B four ones that you really have a ton of control over. Um, and we can dive into each, each one if you’d like. Yeah, I
[00:22:33] Jared Robin: would love to.
[00:22:35] David Maxey: So when we talk about average selling price, um, I, you know, there’s, there’s a couple of ways to, that you can touch on that is you can have price increases, uh, but that’s a big challenge for go to market.
[00:22:47] It can create a lot of issues. The easiest way to increase your average selling price is what nobody wants to hear is to have another product, um, or to have an ideal, uh, way to expand your customers. So I, we talk a lot about ideal customer profile, but we don’t talk about ideal expansion profile. It’s a great way to increase your selling price, your average selling price by figuring out which customers you can expand the most.
[00:23:08] with, um, or which customers you could sell multi products to. Those are the two fastest average selling price levers. Your price increases are going to give you a couple of percent, a couple of points here and there. They’re not a lever that’s going to significantly impact. And you’re not going to get a better term sheet because you’ve got a price increase go through that.
[00:23:23] That’s. That’s not going to happen. Um, but then when you, when you touch over on conversion rates, uh, when I break those into those three pieces, when I talk about top of funnel, middle funnel, bottom funnel, when you’re talking about industry class standard, um, best, best of class, uh, top 80 percent of companies, um, you’re usually talking about your top of funnel that you need to talk to 20 or less people.
[00:23:44] Um, so. 5 percent or more conversion is usually what you’re talking about. And you’re very, very top of funnel where you’re going look at your entire total addressable market. And you’re just, you’re, you’re trying to figure out who’s going to talk to the salespeople right now. When you drop down into that, that selected ICP group and you’re, you know, you’re at 5%, you started, you started with, uh, you know, a hundred.
[00:24:05] And now you’re down a five. Okay, great. Now, how, how many of those are actually gonna move to the middle of the demo or, or the middle of the funnel? And that can be a demo, maybe a proof of value, maybe it’s a two step, doesn’t really, doesn’t really matter. But industry standard, top class, uh, you know, one out of four, one out of five.
[00:24:21] So 20 to 25%. So we started at five where at demo. Now we’re at one. Uh, is that, is that feasible? Yeah,
[00:24:29] Jared Robin: is, is that to, to close the client? Cause that, that’s what I thought that the rate was, but you’re saying middle of the funnel.
[00:24:37] David Maxey: Yeah. We’re not quite there yet. Yeah. So, um, well, if we started with a hundred, a hundred in the, and we went down to five and then we had a 20 percent conversion rate on our demos.
[00:24:47] Uh, to demo now, now we’re down to 1 and if best of class in companies, you’re going to have anywhere. If you’ve got proof of value, you might have a 75 to 60 percent closing rate. If you don’t, you’re probably going to have best probably 30 to 35 percent to 25 percent closing rate. So it turns into about a quarter of a customer.
[00:25:05] So what that translates into. Okay. I need 400 leads in the top of the funnel to get a customer down at the bottom. And that’s where you want to kind of back into it and make sure, because as I went through this with a consultant, most companies don’t truly know what their conversion rates are as an aggregate.
[00:25:21] They might know what their conversion rates are per channel. They might know their best converting one, but when they really back in, they don’t know that the aggregate and the easiest way to do that is to really just go backward and see. In a given time period and use your sales cycle, look at your closed one.
[00:25:36] How many leads came in during that same period? How many opportunities came in during that period? And then how many of those want those, those actually want, and those will give you some very, very hard numbers. And if your numbers are looking at, you know, 1 percent for your top of funnel, 10 percent for your middle of funnel and 10 percent for your bottom of funnel, you’re going to see that the amount of leads that you need at the very top of the funnel is going to be ridiculously high, much larger than what your total addressable market will be.
[00:26:03] That’s conversion rates before I move on
[00:26:09] Jared Robin: super, super illuminating. Um, the, the, the breakdown and different parts of the funnel and by channel and all of that. How can folks best find a template or direction? You mentioned Googling. Uh, I, I, is this, is this also in the white paper that you put out? I
[00:26:28] David Maxey: was actually going to say, look, I would look at the white paper as well.
[00:26:31] The white, white paper walks through, um. Yeah. This decently. Well, not not as much detail. Um, you’re also always welcome to reach out. I’m I love to jump on the calls and help help explain these things. And it’s, uh, it’s really a joy for me to do that. But I, um, I don’t know if it’s broken down exactly that way.
[00:26:48] And the reason reason that being is, uh, it’s different for every company. You know, you run into companies that have 8 stages in their sales cycle in a 2 meetings before that. And. Um, but I, I, I, I have never in my career ran into a particular situation in SAS or otherwise, that I wasn’t able to break it down into three, a three stage conversion process.
[00:27:11] Jared Robin: Moving on to, um, the next KPI.
[00:27:15] David Maxey: Yeah. So sales cycle is one to touch on. And the reason I like to touch on this one is there’s a couple of quick wins on this, um, that if you’ve already got them in place, they’re not quick, obviously. But if you’re, if you’re not making it easy for your client to pay. And what I mean by that is can they digitally sign digitally, put it.
[00:27:31] Put in their credit card number, uh, put in their bank account number, whatever it is. Can they do all that online without your sales rep? Or do they, are you, are you still sending contracts back and forth and processing? Um, that’s one area that you can quickly save yourself on an enterprise sales cycle.
[00:27:45] You can save yourself a couple of weeks. S and B, you can typically save yourself a couple of days. But the, the real point I want to make with the sales cycle is. It’s important to make sure that when you have your sales process identified, laid out that the stages correspond to actual milestones that occur in, in the sales process, that as those milestones occur, you’re getting closer to the, the business actually closing.
[00:28:10] And I’ll give you an example of both is a lot of times you’ll see things that will say, like, uh, maybe we’ll give a demo. And then maybe we’ll do a proof of value from that and then we’ll go into negotiation and then sometimes you might see proposal and then you might see close 1 and then you get in there and you say, well, what’s the difference in negotiation and proposal and which 1 comes 1st?
[00:28:28] And does it always come 1st? And maybe maybe those can be combined. And that’s what you see. A lot of times you start seeing that. You really need to tie things to those milestones, uh, to specific things that can happen in the sales process. Cause the reason that’s so important is once you have that engineered, you create timestamps, so you don’t have to use history reports in Salesforce, um, or, or you create, however you replicate that in HubSpot, but timestamps in Salesforce, and that way you can measure.
[00:28:52] In, uh, between each individual stage and any activity before that, exactly how much time it took from that lead creation to the time that that lead maybe was converted to the time that that contact was converted to an opportunity to the time that opportunity moved across all of its stages. And that stage was finally closed.
[00:29:09] Um, knowing all of those will let you. Break down the areas that seem like they’re too long. You know, if you got a 200 day sales cycle, you want to know where the a hundred days are sitting rather than the, well, they’re only three days here or four days here. When you figured that out, now it’s time to examine and say, does it make sense to compress the sales cycle here without negatively impacting our prospect experience?
[00:29:34] Jared Robin: always was curious how much of the sales cycle is just chasing around your prospect. Verse actual things you need to do. Yeah. I mean, in a SAS product, we’re not at on prem bring a big piece of let’s assume, uh, equipment in need to get heavy duty people in to set it up. Like. It’s a SAS product.
[00:29:59] David Maxey: Yeah. And that’s, that’s, I was actually gonna push back and say, I don’t know if, uh, you know, the idea is to overcome those objections and figure out how to, uh, how to get it moving as quickly as possible.
[00:30:10] And that’s why it’s great when you have, you know, when you have one salesperson, it’s really hard to nail these things and get good, a good sense of what the product is really going to do long term. But when you have a sales team of six or eight, you’re processing a couple of hundred. Prospects a month and you know, you’re closing some deals.
[00:30:24] You start to see that these things will start averaging out. And to your point, let’s say you’ve got a couple of sales reps that are chasing a lot more than others. You should be able to look and go figure out. I got what are you doing different that everyone else is not doing. And I think that’s why it’s so important to have those timestamps.
[00:30:38] Because not only will you get your average you’ll get from your team who’s driving your average up versus who’s bringing your average down, which should allow you to figure out what the feedback and the mechanism is between those people to see what’s not being closed in the loop. Or is it luck of the draw?
[00:30:52] It typically is not luck of the draw. Typically it’s a skill set.
[00:30:56] Jared Robin: Right. Or, or activities. Yeah. Um, yeah. Were there any other KPIs you wanted to go through? Yeah. So really
[00:31:03] David Maxey: the last one is ramp, ramp time. And the reason that I focus on ramp time is I think this one is just, it’s overlooked, uh, so much in enablement.
[00:31:11] I am such a big proponent of having a full time enablement person. If you have even a small team of three or four, maybe even five people. Um, and the reason I say that is when you think about ramp time of an employee, if you can take ramp time and split and improve it by 33 percent for a team of four people, you’ve not only paid for your enablement person, you’ve bettered your prospect experience at the same time.
[00:31:36] And I think that’s why it’s such a quick lever that I see is most of the time when I go into an org, it’s either, you know, Hey, we’re using this company or we, they set up our LMS, you know, we’re not going to worry about having somebody full time until we get to X, Y, Z million, whatever it is. And yeah, there’s no stake in the ground.
[00:31:51] I’ve heard all kinds of different numbers, but the real, the point of what I’m saying is if your ramp time is. Is if you don’t have a full time enablement person, you have a team of four to five people, and you have a ramp time that is longer than three months. You have a massive opportunity in your annual operating plan to increase your productivity and have it immediately pay for itself.
[00:32:10] I say immediately within a quarter or two pay for itself.
[00:32:14] Jared Robin: Incredible. Um, now these KPIs, how do we keep it front and center for your whole organization?
[00:32:21] David Maxey: So, for me, um, I, I build an annual operating plan. I’m going through this process with my company now. Um, and we start socializing that and be ready. What I can tell, um, the, the, the things that I like to tell operations folks as they’re coming to their careers is be ready as you’re building these complex models that you have to present the model.
[00:32:39] Sometimes 4 or 5 different ways. You might have to build a model in Excel and then go build a slide deck and then go. Thank you. Write an executive summary. And I can tell you that’s typically what I have to go through is I have to go through an executive summary. I have to go through a full calc, calc, calculable model.
[00:32:53] And then I put together a slides and then the slides typically have different versions. This is the version we’re going to show to sales. This is the version we’re going to show to marketing. And when I say show, I don’t mean hide things from the other one. The deck is the same. What you’re doing is you’re making some of the slides transparent.
[00:33:08] So if the team says, well, how is sales going to do it? You just pop over to the sales slide. But you’re not making everybody sit through portions that aren’t important to them and things that they can’t affect. So I think to answer your question is make sure that what’s important to them is front and center by slide deck, by executive summary and overall by expectation and making sure that’s aligned.
[00:33:28] If that’s not, then you know, it’s kind of hard to keep these front and center.
[00:33:34] Jared Robin: What are some of the biggest challenges you have in your new role that’s keeping you up at night? Is it creating this plan? Is it socializing it? Is it something completely else?
[00:33:45] David Maxey: Um, yes, I wouldn’t say it’s specific to the company on that now at all.
[00:33:50] What I would, what I would say that it’s typical is the change management is the hardest piece because. People truly getting behind a sound revenue model, all speaking the same language is not an easy thing to do. And it is somewhat of a challenge in all of the words that I’ve ever worked in, in the sense that what it does is.
[00:34:13] There’s nobody that’s disconnected from revenue and a true revenue model, a sound revenue model. And what I mean is they’re all held accountable. So if you have 0 in a particular area, nobody’s getting credit. And I’ve had it happen in many companies, um, that, that, that I’ve worked with in the past and that I’ve consulted with.
[00:34:30] And the, it’s hard sometimes that when you’re going, when you’re going in and you’re, you’re really trying hard, you’re doing all the right things, but you’re not being successful. Um, that’s why it’s hard to try to socialize and get those things moving. But at the same time, I think it’s just part of growing as a SAS business.
[00:34:49] It’s part, being able to pivot, understanding different nuances and the way because technology and the markets change so fast, I think that’s why it’s so hard for everybody to stay on the same page all the time. So it’s, it’s really. Keeping everyone on the stage page and making sure that social, everything’s socialized in a way that, that every, that the level of comfort is at a place that everybody feels, uh, okay about it.
[00:35:10] Jared Robin: what’s a piece of advice you could offer for, for somebody else going through the same thing?
[00:35:16] David Maxey: For me, what I would always say, spend the time, spend the time socializing. What I always think is in, you will be able to execute so much faster. If you socialize first and make sure that you get a general okay from everybody and you reason I, the reason I left that somewhat nebulous is I didn’t want to use the word consensus because that is not what transformational leaders do.
[00:35:38] Do not need consensus to move forward because commonly not every. Consensus is going to be the lowest common denominator that everybody accepts. That’s not how you change organizations. So going in and I guess making sure that expectation is there, um, and indexing on those relationships, uh, is probably the most important thing when you’re making a transformational pivot inside of a company.
[00:35:59] If you don’t, what ends up happening is. You may have the executive sponsorship for that project, but you’ll burn a lot of your political capital up and you’ll find it hard to continually execute, uh, over and over again. So that’s why my advice always is spend the extra time with the people, make sure that everyone is as comfortable as they possibly can be as they move forward and make yourself available and be ready to be asked hard questions.
[00:36:23] I could say, I, I create office hours and I kind of feel like sometimes when I go to office hours, I’m like holding up a target at myself. But that’s what it takes sometimes to really say, no, I’m here to, I’m here to add, be, be asked the hard questions and answer those. Um, and it does it, I think it helps build credibility because when I don’t know the answer, I say, I don’t know.
[00:36:42] I’ve only been here this amount of time. Let me go figure this out. Um, but it allows me to make that connection and make sure that everyone understands I’m, I’m not here just to change the processes in the system. I’m here to develop relationships with the people because without that, with the change management goes to nowhere.
[00:36:58] Jared Robin: What excites you the most about the future?
[00:37:02] David Maxey: I’d say the announcement and the focus on sound revenue models. I’ve been preaching this since I started my corporate career in my thirties, um, and I just turned 40. So I, I would say to me, it’s, what were you doing before that in your twenties? I was running restaurants where you had to be profitable, or you went out of business.
[00:37:20] So it was, it was, you know, we ran off a very, very thin, thin margins in the restaurant business. You know, if we were if we were dropping 7 to 8 points down to the bottom line, we were great. So the whole notion of a, you know, an 80 percent gross margin was extremely exciting to me. So I think that watching companies be able to grow the way that they are and multiples be more aligned with long term value rather than You.
[00:37:41] Bubbles as we’re calling them. Um, that’s extremely exciting because it allows the things that I’m very passionate about that you could see that I’m passionate about. It makes them important. And we like talking about the things where that we feel we’re passionate about. And, and I guess, you know, having been in and around the area, I was, I was just chatting with a friend yesterday.
[00:37:59] It kind of feels like we’re in the right place at the right time because the. Entire industry is very much looking at this focus on how do you remain profitable? How do you create sound revenue models? And it’s not just, you know, growth at all costs, dead bodies laying everywhere. Don’t worry about free cashflow.
[00:38:15] It really is. You know, what, what is it costing you a good customer? How are you building this and how are you scaling it appropriately?
[00:38:21] Jared Robin: It’s it’s. A trying time right now. And it’s a time with opportunity laced in, in, in that, in the difficulty. And, um, you know, every downturn or every negative in any space provides opportunity to correct it.
[00:38:40] So like, this is, this is pretty cool now. Okay. You let out a little bit about your restaurant background. You know, we, we, it was awesome learning from you. I want to learn a bit about you. Um, Who, who is David Maxey restaurant superhero in his twenties? Um, . What else?
[00:39:01] David Maxey: Ah, so I, I, I mean, I, so I, I would say I started, I did start my career in the restaurant business.
[00:39:06] Um, I, I guess a little bit of background. I, I was going through college and I was the only person in my family to go to college and, uh, and it was one of those things I really didn’t know what to do. Um, my dad was in construction and, uh, and selling doors and windows, and that wasn’t anything I was interested in.
[00:39:22] Um, so I, I, I liked computers and, uh, did a lot of computer work and work at a computer shop going through high school and in college, but somehow floated into the restaurant business. And to be quite honest, a lot of it had to do with. Just that style, that lifestyle and, and being in your twenties, you know, partying in restaurants and enjoying food and, and, and all that.
[00:39:41] It was very attractive at the time. And, and so I, I was working at one and they asked me to become a manager. Um, and I start, I went down that path and, and I will tell you that the interesting part about that is I had this FOMO in my early thirties that I was like, what did I do in my twenties? How did I.
[00:39:57] I’m like 10 years behind all my peers as I’m getting into the corporate America and corporate America. And, you know, what, what did I do? How have I done this? I can’t believe I took this fork in the road. And now 10 years later, having spent more than a decade now in corporate America and served in various leadership roles, um.
[00:40:13] I would actually say I’m more nostalgic and appreciative of it now. And I’ll tell you specifically why I mean that is what the restaurant business does a couple of things for you. Um, the first thing it does is if you mistreat your employees in the restaurant business, they will steal from you. And it’s just a natural part of human nature.
[00:40:32] I’m not calling it good, bad or indifferent. It’s just part of it. Uh, and they train you. It’s a bit bad. It is. It is. But it’s not everybody. It’s not everybody. The whole point is any restaurant. You’re all, if you have, if you mistreat someone enough, you make them bitter enough. They will always take from you.
[00:40:48] And the reason that’s so important and the reason that it sounds so callous, but let me tell you why it’s important. And they won’t
[00:40:53] Jared Robin: leave. They’ll Stay and take from you because if you mistreat them and sass, they’ll leave.
[00:40:57] David Maxey: Yeah, that’s, yeah, that’s, that’s exactly right. And what the effect that has in the restaurant business is that little bit, because our margins were so thin, a very small bit of theft would turn around and we, we, we wouldn’t hit our bonuses.
[00:41:09] So the way that we were trained to manage people was to manage people with dignity, respect, a good approach. Don’t raise your voice, no yelling, all of these things that you’ve heard about these horror stories and these SAS companies, I felt so lucky. Cause I went through the school of hard knocks where I was told you don’t ever act that way at all.
[00:41:28] And you do that because financially it’s for the better, but really the reason the restaurant business did that is if you didn’t have the respect of the people around you enough. Then your whole restaurant didn’t work really well. And I would say I took that into corporate where I don’t mistreat people.
[00:41:43] I don’t jump up and down. You’re never going to find an employee that had any kind of issue with me like that. And I think the restaurant business really, it dives into the people component. Nothing in your restaurant will be sold if your people aren’t happy and they’re not, they’re not moving along. So I, looking back on that, I’d say that I’m really, really fortunate in my experience to just to be exposed to that from, from a leadership standpoint.
[00:42:05] Overall, but the other piece I would say is operationally and technically a restaurant to me is very much I can turn, you know, a to go station, a kitchen, your, your sales staff and your host staff will pre sales, sales, marketing, customer success. It’s a closed loop system, and it teaches you how that closed loop system works.
[00:42:22] It teaches you how each individual piece when the host misquote somebody, and they’re waiting for 45 minutes more. Now you’re going to have to give away an appetizer. That’s going to be breaking to your profitability. It’s the same thing as when you turn around and you mess up your ICP and. You end up burning a prospect entirely.
[00:42:37] And that person doesn’t get into the pipeline. Understanding those intricacies of those operations started in the restaurant business for me. Um, and so I felt really fortunate. And then when I finally got into corporate, I was extraordinarily fortunate that believed in me and saw things I didn’t see at the time and was able to put me in leadership positions where I was able to exercise some of these things.
[00:42:58] Jared Robin: That’s so cool. I, I’m a strong believer that everything happens for a reason. I, I worked in logistics for seven years personally. Um, talk about slim margins. I worked for a company called FedEx. They reported a 10 percent operating margins and you know, they were beefing that number up. Like that’s what they’re reporting.
[00:43:20] It’s like, well, like there, there, there’s a lot in there. Um, And that’s why I, I, I, you know, selling there, I wanted to go into something with bigger margins so I can make more money. But, you know, the funny thing is before that time I worked for a startup called seamless. com, which is the food ordering space.
[00:43:45] I don’t know if you’re familiar. They were acquired twice. I was the first 50 employee, but, um, needed to go on my journey for validation. And at the time thought that, uh, medical sales Was the path for me and that this technology mumbo jumbo in 2005, um, wouldn’t pay as much and wouldn’t be as viable of a career path.
[00:44:10] Boy, was I, uh, thinking incorrectly, but you know, we all have, we all have, um, our journeys and, uh, A lot more volatile of a path, I will say it’s technology thing. Well, it’s
[00:44:24] David Maxey: interesting because I think both of us having come from lower margin businesses and then moving into higher margin businesses, and they touched on this and Sastr is, I think part of the reason we all struggle with this in our industry is because our margins are so high.
[00:44:37] We have so much room to mess up, but when you go into the restaurant business and the logistic business, if you mess up, Just a little bit. You can go out of business, whereas, you know, sash, you can raise a little bit more money, maybe extend your runway. You’ve got a vision you can, and they made that very clear.
[00:44:51] I thought that was a very, I hadn’t thought of it that way. Um, so I don’t want to steal that. It’s not my thought. I heard about it at Sasser, but I thought it was an interesting way to look at the industries that you, you want to gravitate towards a high margin, but understand that you’re still going to have this level of people that understand how to squeeze the most out of that high margin business versus those that squeeze the least.
[00:45:07] And which side do you want to be on?
[00:45:09] Jared Robin: I, and I will say this. Um, I just realized the commonality. I don’t know if this holds true in, in 10 out of 10 cases, but it does an hour, two out of two, um, in the lower margin businesses, there’s a lot more relationship driven, everything, um, selling, certainly, certainly selling.
[00:45:31] Um, Customer successing, et cetera, like, like out of control, closeness, um, where everybody is servicing. And certainly the person that’s selling is servicing the waiter or assuming a restaurant is also doing the CS. It’s not, they drop it and then somebody else comes in. Right. Yeah. Um, if that person, if that is the case, that’s the GM that comes in, uh, to, to help, but like they don’t want to, unless something goes awry.
[00:46:08] So it’s, it’s super interesting, the lower margin businesses and then you, you have agencies, you have other things. Um, Yeah. I wonder if there’s something there, uh, that, that SAS could learn?
[00:46:21] David Maxey: I, I definitely, I it, now that I’ve kind of framed that, I would say that that’s probably part of my appreciation for the restaurant business was it, it is kind of the, the hard knocks of, you know, you gotta run a tight operation.
[00:46:32] So it, I I would definitely say that, uh, a move towards that and an examination on how to produce the most from what you have. Without as much pretending, you don’t have as much wiggle room as we have, , I think would serve us all better.
[00:46:44] Jared Robin: What, what would you teach the young kids today?
[00:46:50] David Maxey: Uh, don’t give up on math statistics in Excel as much as the thing that I would definitely definitely say all the time is, uh, understand where those numbers come from and really understand that the math behind it. I kind of get picked on because I’m the, I’m the person at the table that when the check comes, they’re like, David, what’s 20%?
[00:47:06] You know, but it is the useful. It really is incredibly useful to be able to apply those mathematical concepts. And I’ll. Yeah. Don’t mean to jump on a mathematical, uh, soapbox, but I can tell you in my, in my career, um, it has served me better than just about any other skill that I’ve had is having a very, very good foundation in mathematics.
[00:47:28] And no, I did not minor in it, but I took all the way up to calculus and in high school and, um, and yeah, and took calculus in college and did quite well. So it’s 1 of those things that I would say, if you’re, if you’re ever trying to get better, and if you’re not a math person, don’t try to be. Uh, you know, some people are just not, and that’s okay.
[00:47:46] Um, you know, you can lean on analysts for those kinds of things, but if math is one of those things that you tend to be okay at, and you can sharpen that, that skill, I would tell you, go down that path because it, uh, provide returns in that you’ll be able to calculate once you learn it.
[00:48:02] Jared Robin: I love that. How, how could people get in touch with you, David?
[00:48:06] David Maxey: Uh, y you can look, uh, look for me on LinkedIn, or if you Google David David Maxey Rev Genius, you’ll see the, uh, you’ll see all the articles that, that, uh, that we’ve partnered up to write. So there’s, there’s plenty of ways I’m on the RevGen, um, slack community as well. Or you could reach me at my email at, uh, Maxey, m a x e y d a V i D M at gmail dot.
[00:48:26] Jared Robin: thank you so much for coming on today.
[00:48:29] David Maxey: I really appreciate the time, Jared. Uh, love the questions and, and really, really thank you so much for what you do for the community. We, uh, I’ve met so many people and have had so many business opportunities come up, uh, just because the community has put together.
[00:48:42] So hats off to you for, for putting together such a great community. And thank you for having me. Uh,
[00:48:47] Jared Robin: that means the world to me. And, uh, if, if you all loved what you heard today, um, we’re releasing a white paper, um, Featuring David’s work, um, and his thoughts. It’s super amazing. Uh, it’s available for free, which is incredible.
[00:49:03] And that’s, that’s David’s contribution to the community. Um, and really, really excited about it. Tell somebody, uh, about this podcast. If you liked it, um, come back next week as well. This has been another episode of revenue today. And thank you so much, uh, David Maxey for joining us.
[00:49:23] David Maxey: Thanks for having me, Jared.
[00:49:24] I appreciate it.
[00:49:29] Jared Robin: Thank you friends for joining me. That was another great episode of Revenue Today. If you’re looking to listen to more episodes or for the show notes, go to revgen.com. For all my friends in the RevGen community, it was awesome to spend this time with you. Please dmm me any feedback or ideas for future podcasts in our Slack channel or on LinkedIn if you’re not in Rev, genius.
[00:49:49] Join us. It’s RevGenius. com. It’s free and it’s fast to join and really for all levels of revenue professionals. For senior leaders, we just launched a private community just for you called RevRoom. We know it gets lonely out there and we’ve built a tight knit group of senior leaders collaborating on the future B2B go to market.
[00:50:08] Looking forward to seeing you all there.