20VC: The Metrics That Matter in SaaS Today; Why CaC Payback is Flawed & CAC Ratio is Better, Why You Need to Hire Three Sales Reps at a Time, How to Forecast in 2024 & Biggest Mistakes Made Forecasting & How to Make Customer Success Sell More with Dave K
Jan 31, 2024
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In this discussion, Dave Kellogg, a veteran SaaS executive and former CMO of Business Objects, shares his wisdom on essential metrics for SaaS success. He argues that the CAC payback period is flawed and explains why the CAC ratio is more relevant. Dave emphasizes the importance of hiring three sales reps at once and reveals the biggest forecasting mistakes companies make. He also explores how to align customer success with sales goals to drive more revenue and addresses the evolving strategies that CFOs are adopting in the tech landscape.
Identifying and understanding the ideal customer profile (ICP) helps businesses align their sales and marketing efforts for successful conversions and retention.
Tracking key metrics like CAC payback period, gross retention rate, and sales and marketing efficiency ratio is essential for assessing business health and making informed growth decisions.
Proactive customer success efforts, understanding power dynamics, and effective negotiation strategies are crucial for churn management and successful customer retention.
Deep dives
Importance of Ideal Customer Profile (ICP)
The podcast episode highlights the significance of identifying and understanding the ideal customer profile (ICP). The ICP starts as an aspiration and evolves over time. It helps in determining who the target customers are, what problems they need to solve, and which solutions they are more likely to buy. By focusing on the ICP, businesses can align their sales and marketing efforts to attract customers who fit the profile, increasing the chances of successful conversions and retention.
Metrics that Matter in SaaS
The podcast delves into the importance of tracking metrics in the SaaS industry. It emphasizes the need for key metrics such as CAC payback period, gross retention rate (GRR), net retention rate (NRR), and sales and marketing efficiency ratio (CAC ratio). By closely monitoring these metrics, SaaS companies can gauge the health of their business, assess sales performance, identify areas for improvement, and make informed decisions about growth strategies and resource allocation.
Dealing with Churn and Customer Success
The episode discusses the challenge of churn management and the role of customer success teams. It highlights the need for proactive customer success efforts, emphasizing their responsibility to help customers derive value from the product and ensure a positive experience throughout the customer journey. It also addresses the impact of market dynamics, increasing competition, and budget constraints on customer retention. The importance of understanding power dynamics within organizations and navigating internal stakeholders is also emphasized for successful customer retention.
Effective Sales Forecasting and Negotiations
The podcast explores the art of sales forecasting and effective negotiation strategies. It suggests the importance of triangulating forecasts using multiple data points and exploring a range of potential outcomes. It emphasizes the need for sales leaders to coach their teams and conduct thorough sales reviews to analyze deals in progress, address challenges, and increase the accuracy of sales forecasting. The episode also highlights the significance of value-based selling, positioning the product's unique value proposition, and using reference customers effectively to counter discount requests.
The Importance of Targeted Account Strategy over Outbound Activities
The podcast discusses the importance of having a targeted account strategy instead of relying solely on outbound activities. The speaker highlights the inefficiency of a strategy that involves calling numerous people without a focused approach. The proliferation of outbound tools is mentioned as a common solution implemented by sales teams, but it is noted that the effectiveness of outbound activities has diminished over time due to the saturation of such approaches and the inundation of potential buyers with calls and emails. The speaker emphasizes the need to invest in great content marketing and suggests that outbound strategies may be more suitable for larger deals or when replicating a use case in a specific industry.
Founder Challenges in Expanding into Enterprise and Hiring Sales Teams
The podcast explores the challenges founders face when expanding into the enterprise market. One major mistake highlighted is underestimating the need to tailor the product to enterprise requirements. It is emphasized that enterprises have specific needs and expectations that must be addressed. Additionally, the discussion touches on the hiring of sales teams and warns against hiring sales leaders based solely on pedigree or previous company associations. The importance of finding individuals who have truly driven success and have deep understanding of the industry and buyer needs is emphasized.
Dave Kellogg is one of the OGs of Saas. Among his many accomplishments, Dave was the CMO of Business Objects where he helped scale the business from $30M to $1BN in revenue. Dave has also been a CEO twice, once scaling the business from $0 to $80M and the other business from $8M to $50M before selling it. Dave is also an advisor to some of the best including GainSight, Logickull, MongoDB, Pigment, Recorded Future, and Tableau.
In Today's Episode with Dave Kellogg We Discuss:
1. What are the Metrics That Matter:
Why is CAC payback period such a flawed metric?
What is CAC ratio? Why is it more effective than understanding payback?
Why is gross revenue retention more important than net revenue retention?
What are the single biggest mistakes that founders make when using metrics today?
2. How to Build and Scale the Best Sales Teams:
Why should founders hire three sales reps at one time? What is the benefit?
What are the three different types of sales calls all teams must have?
What should all CEOs and Heads of Sales ask of their sales team in forecasting?
What is the single biggest mistake most companies make in forecasting?
How should a CEO/board member respond to a sales team that lets a deal slip to next quarter?
3. Are CFOs Buying New Tech and How to Win Renewals:
Are CFOs open for business? How has the top down sales process changed in the last year?
Why is the way that startups think about renewals completely broken?
What are the three different types of customer success teams we have today?
What is the core role of customer success? How can we incentivise them to sell more?
4. Mastering Product Marketing, Customer Profiles and Crossing the Chasm:
How can we use product marketing to increase sales velocity?
What is the single biggest risk in product marketing today?
What does Dave mean when he says "an ICP starts as an aspiration and becomes a regression?"
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