Oh This is one of the sessions I was really looking forward to and it's because it's two people that I admire so much I've been a big follow along for many years.  David Spitz, he really started the entire benchmarking trend in the B2B SaaS. I’m blushing, Keep going. Ah You know, I followed you at Pacific Crest and Key Bank I'm really excited about what you're doing at BenchSights and also a founding member to SaaS Metrics standards board and then Jacco van der Kooij that every time I actually listen to him present I feel like I just had a Red Bull with a couple shots of vodka So with that I'm gonna get off stage and let Jacco and David take it away. Thanks guys. Ah Thank you for having us. Yes, that Red Bull is completely warranted. I am the unofficial red world record Holder of Red Bull consecutive Red Bull drinking. That's 14 in 4 hours. Do not do it. You know, your heart will not sustain it It's not a race And unless you really want to go and to the other part of the world's David. How are you? I'm doing good my friends. Hey guys looking forward to this from sunny, San Francisco. Yes okay, well we are excited to have you today to share a few of the Incredible moments that we're finding ourselves in today and I want to take you through what that is And then you know as David comes in and he's gonna help us understand more based on data But I want to start with this. I want you to come back with me for a brief moment in time Let's go back to 2019 we live in an age where SaaS Still by many will be questions if it can actually Do what it's supposed to do is SaaS actually an enterprise-grade solution. Can it do wall-to-wall? Full enterprise of form and this is 2019. Will it work in 2019? We're still in this mindset. Obviously. We have already a number of fantastic companies, but that's where we're at then 2020 occurs and in 2020 we are witnessing a miracle We are experiencing a miracle and because of the crash that follow which we're motivated to talk about we have forgotten We have completely forgotten about the miracle that took place in 2020 because in 2020 what we notice is that the world was completely connected the phones live through the internet and it worked right? We all were on that and as that occurs on top of that infrastructure of the internet We have built a cloud infrastructure and on top of the cloud infrastructure We have built the applications infrastructure and on top of the applications We have built a recurring revenue in infrastructure and all that all that During the pandemic came to life It came to life suddenly overnight over a billion people extra were added to the SaaS infrastructure worldwide global Everybody and I mean everybody I mean student teachers schools districts governments Everybody jumps on the SaaS cloud Everybody sits on top of a zoo session. Everybody sits as signing documents with Dr. Stein. It was a fantastic period It was a miracle And we've forgotten about We've forgotten about it because what happened next that entire Infrastructure held suit all through the pandemic and as the economic market collapsed as the funding so as money got Expensive suddenly things didn't work any longer now that people stop using zoo sessions No, they didn't it's people suddenly stop signing documents of Dr. Stein now they didn't and so at the start of 2021 or at the end of 2021 a Record year of IPOs 290 plus IPOs almost an IPO every day. I mean like the market crashed what happens? What happened? How can that I mean, we're still the users are still there students are no longer stopping to use zoom sessions No, they're still using so what happened? What happened is the following on top of all that infrastructure internet worked cloud worked apps infrastructure worked Recurring revenue model we're giving ubiquitous access to billions of people around the world But what didn't work was to go to market that model that set on top this growth at any and all cost and it marked The end of 2021 marked the end of an era and I marked that at dr Sign being the first domino that fell early December later late November That was the first domino that fell and it marked the end of a golden era that started if we pick it with Marc Andres's article and in late 2011 about you know, like software eating the world now What we're what David and I are going to show you today that we knew all this was going to happen It's not like like like we didn't notice we knew this in 2018 and 19 this was impending right? We were aware of it in 2018-19 we were already talking about sustainable growth efficient growth was in the requirement But 2020 due to the pandemic that was all postponed and we went back to the growth at any and all costs We threw more oil on the fire That fire that swallowing fire from growth and all costs was already happening in this in the in the years preceding 2019 but during 2020 and 21 that became an all-out Gigantic fire more people were hired more tools were bought reinvested much. We all were invested in that growth Well, we're going to point out to you today and we're going to show you evidence That the cost-cutting has not Extinguished a fire it is still there. The problem has not been solved We are also going to offer you a solution on how to offer how to solve that problem What you can do what you can prepare how you can look for it That's what we're going to talk about today. And that is everything to do with GTM metrics now David you created this slide. We you and I were speaking about it talk is a little bit What are we seeing down here? I couldn't I just could we just stay in 2019? I was so enjoying that Thanks for that introduction. Yeah, so this was a few months ago You said David we need to we need to kind of level set on where the world is right now And so I put the chart together not knowing exactly what you were gonna do with it But essentially this very simple chart It looks at on the one hand on the x-axis growth for a bunch of public companies on the y-axis the cost Specifically the go-to-market cost the sales and marketing costs and of course we Pretty did up with the size of the bubbles like Adobe's really big because it's the big one of the biggest companies on here And then you got some small ones But this is basically kind of the starting point of where we sit right now in terms of how much people are spending As a as a function of how big they are and how much they're growing and you can see it's all over the map Some are fairly efficient many are not Yeah, and this is what you know the dot the Olic and David and I were struggling with the size of the dot because if We make the size it's not representative and sales force at 38 million dollars. Everybody else will just be a mind like Dot on this chart right if they go and so we have to you know, like a size the little bit up properly But all those smaller dots are there about 300 400 million dollar revenue companies They're all public SaaS companies about 80 was it 85 87 companies something like that Yeah, 80 is right there so you see snowflake on right now Let's think bill calm all the way to the right for example bill that calm over 100% growth fantastic But if you look at the left axis, you'll see that they spend about 40 cents on the dollar in order to acquire that now note Public marketing and sales numbers split up customer success Retention goes under cogs and expansion goes on the marketing and sales cost Expansion goes on the marketing and sales cost. So this really is what what is starting to to fuel that growth, right? Now what we're trying to say what you see down here is like you can be a winner anywhere drop box on the left lower Corner, I mean like you may not grow that fast But also you're not spending that much right and so and so you could see is that that may be a very y'all like a mean It will area to be at what you want to avoid as your company grows in size You're supposed to move further to the left, right? As a company grows in size, you should see your costs of marketing and sales start to In percentage of revenue start to come down. There's a lot of companies that have do not have the ability to do that there's a lot of companies who are struggling to get that cost down and there's a quite a reason for that and that reason primarily is is because They are spending too much money on people cause they're using their salespeople in order for expansion sales This all drives up cost significantly But also because marketing and sales campaigns no longer work SEO no longer works away that email campaigns no longer work And so what you'll see here is a snapshot We're going to see that a year to year for a two year from now that growth at the bottom and that cost that needs To change this tells us something is wrong in the market now Some people may say talk with a lifetime value of these companies is more than is more than enough It ain't as we see today and as we see in the nr Data dog for example had an nr of one hundred to sixty plus percent and just came down to one hundred and twenty percent These numbers are changing so radically that we need to be very that these numbers are unsustainable now Where does this unsustainable come from and where does this problem is all about efficiency many of you will look at SaaSer many of You will see the best of our talk and somebody talks to you here It's like this is all about efficient growth and that is true But it's not going to solve the problem What I'm going to do what I'm depicting here is the idea of a revenue factory what I want to Simplify it to is like if you are running a 10 million dollar business and more 50 million 30 million 100 million 200 million you essentially are running a Recurring revenue factory the output of the factory is productivity in other words Give me more growth growth growth growth like any factory goal of the factory is drive more output I'll put in this case growth the second thing that a factory does is that it delivers does more efficiently it uses tools like AI or Robots in case of a real factory make it cheaper make the cost per product go down Efficiency and then the third thing that the quad that the that the factories is doing it ensures quality quality of the output because if you start ramping down the cost Eventually you need to make sure that the quality stays in line Now what you'll see is that there's three stages of growth maturity Stage number one which we have been in the past is scalable growth. We focus primarily on productivity We are not looking at costs growth at all costs. We're not looking at quality Anytime you see all these folks talking about growth You generally never hear about how good their product is or how they're making the product better primarily this how much funding I landed how much revenue I have or which funding round I am in something like that all scalable towards growth growth growth as We are currently seeing we're talking about efficient growth Make sure that the cost structure is in line with what we're doing Make sure that what we're doing is can be repeated that at an efficiency that we can sustain over a longer point in time hence sustainable growth, but notice that Nobody is talking about the quality of the product Now if we are group moving up productivity if we do it more and more and more and we're not looking at the cost We end up at growth at all costs problem, right big problem. We just came out of that if we are gonna grow and We're gonna lower the cost. We're not gonna end up at a much better space We're just gonna end up at a very cheap product and a very low quality product because quality of the product is Not anywhere locked in it's not part of our thinking we're in a factory it should be now what you'll see productivity is doing more efficiency is doing a cheaper and Quality base is doing it better. Now. How do we do things better when you're selling software product better? Is not the product looks better or no, it could be it essentially There's a little better but better primarily is focused on Does it deliver the outcome that the customer was suspect expecting does it deliver the impact? Impact is our form of looking at the quality of a product Therefore there's three stages of maturity stage. Number one. You're able to skill your revenue You're able to grow it faster more stage maturity Number two, you're able to bring the cost of that down so that it's sustainable and maturity stage Number three, you're able to to to create durable growth of your customer and deliver that impact There's a key thing that happens with the third part if you deliver good products and you're going to see good product generate something David tell us what are we seeing down here because it y'all like we've seen over the past year past years We go to efficient growth. There is a problem lying on the knees right talk to us about this Yeah, yeah So, you know first of all We saw that earlier chart that just laid out very simple view of sales and marketing expense on the one side and growth on the other This is kind of the counterpoint to it that Synthesizes it and tells you what's going on. The bottom line here is that things in go-to-market are getting worse They're getting worse every single quarter what we what we're looking at here is those same 80 companies But now we're synthesizing them into one number, which is the the median Percentage if you look at that blue line on the top that's looking on the one hand on the numerator of that 228% is Basically the amount of dollars that's being spent on go-to-market on sales and marketing It's it's missing a little bit of that customer success number But it's basically the go-to-market number the expense what you're spending in that factory in the denominator What you're getting? What are you getting? What's the goal for go-to-market? It's to increase AR and so what this is saying everybody tends to by the way focus on that black line on the bottom That was what was on the earlier chart. Yeah, people are spending 45% Sales and marketing to total revenues. That's a very convenient number But when you're really trying to figure out yeah, but how is it going how how much are we spending in that factory? And what are we getting for it? It's the blue line on the top and that is an ugly number right now It's gotten worse each quarter over the last two years. It's not working right now now granted There's a lot of things going on in the world But at some point that needs to change that needs to come down We either need to be spending less on sales and marketing getting more AR are or a combination of the two Getting it more efficiently Yeah, and if you think about it like like why is it going less and less look? We're not opening more emails like there's more more spam emails being sent. I mean like and they're They're they're creeping through the filters left and right you're not picking up a phone call if you don't recognize the number You're not clicking on an SMS link that has the UPS clicker. Y'all like your package is delayed any longer Everything is y'all like so that is why it's 200 to 28 percent the current go-to market model that Companies are using in volume are no longer using add to that that SEO has changed add to that that the chat GPT will make an overwhelming amount of content Be flushed into the market like this thing is does not look look any better if we keep going this route, right? Like let's all be honest that means and what we were going to see is we're going to separate the thought And this is the first part we're going to do I'm going to show you how we're going to separate this by going back to the origins We need to go back to the basics. Okay now going back to the basic I'm showing and demonstrating down here. The blue line is the total growth line This is like the start of the s-curve you're growing up on that s-curve and you're you're you're see that accelerated growth But we're looking at here that there's three elements of growth that support that growth There's three things that boost that engine number one acquisition If you look all the way on the left down here on the left You're going to see in the early years growth comes from acquisition soon after year two in year three growth from attention starts to to contribute But and this is important to realize if you look at which line Shadows the total AR are the closest it will be retention It will be retention that keeps mirroring and keeps shadowing that total AR line Eventually expansion comes in and as you see to the right acquisition goes down Why if you're McKinsey in the world, you know, like there's not many new fortune 500 companies that are coming up every year Right, like so eventually you have spoken to every fortune 2000 company There is in the world that you don't acquire new sales. You only expand new sales of your Adobe Yeah, you only have such a huge market share You'll see that acquisition going down eventually over time but retention keeps going and going and going in other words There's three elements of growth There is the growth of retention the growth of acquisition and the growth of expansion now historically what we have done is we have used a marketing and sales funnel and Using that funnel historically we focus primarily on the acquisition of revenue That's the problem. That is where growth at all costs comes from That's where more comes from more deals more leads more business more sales people on the right is where growth actually occurs as I just demonstrated to you growth primarily comes from retention and later on from Expansion and that you'll see there on the right that there that impacts that in the middle there That's where it happens. And as we said earlier Durable growth comes from impact from a customer looking at the top. What does it say? Recurring revenue takes place outside the purview of the funnel that what drives our growth is no longer covered by the funnel And marketing and sales teams executive teams that are sitting in offices using that marketing and sales funnel But the recurring revenue is not part of it We need a new model a new approach that extends that marketing and sales funnel That's where we come in with the bowtie The bowtie says hey what happens behind in recurring revenue is so important when we did perpetual sale All that was important was on the left Now let's take a look at what that impact means That impact can be drawn back all the way across the bowtie all the way to buy on impact select an impact ICP on impact and whatnot in essence impact is the universal language That marketing sales and customer success team that unites marketing and sales and customer success team what we have now demonstrated is that recurring revenue if you is the result of Recurring impact if you want to drive recurring revenue and focus on delivering recurring impact and recurring revenue shall be yours Therefore we need to expand the marketing and sales funnel to cover the bowtie Now David we did something exciting talk to us about what happened here Great setup. Thank you. Jacco. So He's done an amazing job kind of laying out the theory the strategy What it means? He's handed it to me at a point where it's sort of like, okay if I'm an operator What do I do? Like what do I do with that? So he talks about a data model the bowtie model I'm gonna call that a framework. It's a tool. It's a tool that you can specifically use Once you translate the framework to Metrics to data. So what we've done together is sort of synthesize this framework into very specific Metrics that you can look at you can see there's a dozen metrics on this page And by the way, as it says on the top, this is from this would have been a live demo It's more convenient to do it this way. I think Ray was a little more comfortable probably me, too but ultimately this is what's coming from our page so you can visit this right now and What do you have you can see there's a code there on the top left. It's free by the way But let's just talk about how you use this. So the first thing you'll see here are these little numbers in blue So let's just focus across the top because it's easier. Everybody understands lead to opportunity Opportunity to close and are these are three very commonly used metrics if you're really drilling in though You're gonna go down into the bowtie and look at the CR metrics How many prospects did you get how many of them converted to marketing qualified lead to sales qualified leads all the way through? You know the the drill through a win rate Ultimately renewals on the right side and expansions on all the way on the right side This is what's critical. But so what so what that you know, let's look at that 10% number for lead to opportunity What does that mean? Well for you you have to back up before you're even consuming this and figure out your own metrics, right? That's the first thing you need to do a lot's been written on this certainly Jacco and his team Have done a lot on this front a lot of people know how to do this but what even if you know what your lead to opportunity of 10% is or you know, you're 100% of Conversion into marketing qualified leads at the 20% that you see there. What do you do with that? Well, that's the origins of why we've put this together this resource where because nobody really knows What good and bad and mediocre is the only way to know that of course is to have a view across the population as a whole and to have a view of that over time and To have a view of that in such a way that you can drill it out and understand. Yeah, but I sell $5,000 products. I don't sell $500,000 products and so yeah, my churn is gonna be higher and we live with that we get that But of course we have other metrics that need to change as well And so what's needed is an understanding a of the framework how it works Be what your metrics are and then see like how do you know? What whether what you're doing is good bad mediocre Really good. So let's drill in let's go to the next page and look at NRR just to give you a sense about how this Exercise works. So this is again just a snapshot from our our joint site and on the left side What you see here is the NRR median. It's cost about 250 different data points 250 different companies people are putting numbers in every day For for their you know for their metrics for the quarter for the year even by the month if they want so that 105% Is the median across 250 companies approximately you get that broader view as a starting point? That dark blue is just telling you. Hey half the companies In the population are between 96% and around or 14% interesting But of course any thinking person's gonna say yeah, but how do I compare and so that's what the right side is here That's the my NRR and this particular company has 115 percent NRR That's obviously pretty good relative to 105 In fact, we have a rating of that of 80 80th percentile And then you see as well the opportunity to look at this each quarter or even right now We're looking at enterprise But you know this particular company also has an SMB number as well that they could look at but let's let's you know Let's drill down. So if you go to the next page, what you'll see here is hey I'm curious. Like what did that look like last year last year was very different than this year Well last year it turns out that a hundred and five percent that you state you're seeing now was actually a hundred and fifteen percent So it was ten points higher That's actually in the numbers here And then the end you get that broader view if you're really interested you can go look at a histogram view of this We're not going to show that here, but on the next page you have to go back to that Yes, so here the other thing is Let's say this wasn't the case for this particular company But let's say you're curious about that company selling $5,000 or less products. What is their NRR look like? Well, their NRR looks lower than the hundred five percent. Not surprisingly. It's a hundred percent again It's across the population now I'm just gonna double back very quickly here and make a plug for the SaaS metric standards board Which Ray and I among others are on if you have questions about how to measure this particular metric This is a pretty universal metric not just to go to market But any CFO worth their salt or equity analyst is going to want to understand how this is being calculated You go to the SaaS metric standards board. You'll get a really good view of how this is done We could just click to the next slide, you know where where this gets Really interesting, of course as you can mix and match and so this was just playing around with the filters and saying hey Let's look at the really big companies essentially the public companies That are north of 250 million dollars in ARR and let's look at folks selling Higher price products and lo and behold. It's the highest NRR that we've seen at 116% and that includes for this year By the way, that is for this year. You can see that Finally one other quick view and we could spend a lot of time on this, but this is just looking at another metric so we spent most of the time in NRR, but Obviously sales cycle is a big issue that people are very focused on It's all interrelated. And so this is more of a bar graph view that just basically says what I think we all Intuitively understand which is larger deals take longer to close The metric here is months and we can see not only do we get that answer, but we get it with specifics So I don't think necessarily people understand that Hey It's actually about a month for these lower price products and it's about six months right now for the for the higher price products So it puts very specific metrics on here that are backed up by by data So I'll hand it back to you Jacco Well, thank you, let's summarize for a second what we've seen Okay, what we know is that we're dealing with a revenue factory The factory originally was all about productivity and it started produced a lot, but it was very costly We built way too we use way too many too expensive machineries. We move to efficiency We are currently in the state and we're moving to efficient growth Now what we are going to expect that if you keep producing and you're trying to lower cost You're gonna have bad quality of product bad impact as we call so the quality is going to down That means that we need to focus on impact today Recurring revenue is based on a different first impact that a first step principle that first principle is Recurring revenue is the result of recurring impact That means that we need to focus on impact then we then we get quality we get efficient growth and we get productivity Because good impact customer starts to contribute to your growth Impact is currently not covered in the marketing and sales funnel It does not that means that currently marketing and sales teams are not covering that in the executive boardroom as a part of a conversation often only having churn and NPS as the two primary metrics in order to To indicate what success is happening after the customer success Both I we are now expanding not replacing we're expanding the marketing and sales funnel to an equally form and Depth on the backside of the of the customer journey to cover the complete journey acquisition retention and expansion Now as we expand the funnel we need certain metrics We're now going to do we have standardized the metrics in conversion rate win rate discount and swan that allows us to use real-time data Segmented allowing our people such as yourself to compare where their metrics stack up and what they can do with that That is the goal of GTM metrics from marketing and sales to bowtie to full benchmark data Ray That is what we have in store for you today Wow, there's so much energy and so much information in the same session But I'm gonna ask you a couple questions if that's okay Go over it as you know, you know, David I we both do benchmark as kind of our life And we recently conducted some benchmarking about what percentage of b2b size companies actually are major measuring Business impact you can call verified outcomes. That's what GTM is Verified outcomes. That's what game site calls it. Usually it's a customer success initiative and it was less than 25% of companies are verifying the outcomes the business impact or incenting their customer success managers to have that as a Objective. How do you think we get that to change Jacco and David? Yeah, the best way to change first and foremost is to make sure that customer impact is a priority for the exec at the Entire executive team and not just for a customer success team Meaning we need to make sure that marketing targets the right customers that customer success that salespeople are selling the customers on actually delivering The selling on the impact that we can deliver Impact is something that all of us are Certified outcome is something that all of us need to be concerned about by not only customer success and I could go further Ray I could say you can bring this all the way back to product product team engineering R&D making sure that the entire Organization is you are here because you are here for your customers Marketing teams today are not like that rate marketing teams today deliver mql's and SQL's and sales teams today cover deal They're they're their mindset is not an impact. Their mindset is on growth growth growth Yeah, you'll you'll like this answer Ray, which is you need to have I mean, we don't want to have too many benchmarks We don't have too many metrics that are measured but you if if business impact is important and it clearly is you need to have a Benchmark or their system to figure out like what was it last quarter? What was the last year and what what is it for your peers? So getting that data out there getting a good view into it so that you have targets and you can measure That's that's the way anything that you that you can measure and that you compensate people on you're going to get results Yeah, it's another question and I don't know if this is to you David or Jacco I want to make sure I get each of you to kind of respond though. A lot of people look at things like net promoter score or CSAT score or customer health score and Honestly, I found that even NPS has a very low correlation to gross revenue retention Because maybe they're just measuring NPS with the users not with the economic buyer So, do you think we as an industry we need to come up with some better standard metrics for that business impact or is it too Situational I'll give you a quick answer on my side and I think David Kellogg said this best. I think he said it at SaaStr It's like it depends whether you're asking for the NPS score at you know the bar at the end of the conference where there's free drinks or whether you're asking it right after you're using the Product and I think it's gonna be very difficult to get standardization across companies But I think doing our best to deal with that. I think it's it's a super important metric Just custom CSAT in general and there's a lot of great tools out there like ball tricks and others That give you an opportunity to do that But I think I think the industry has to kind of narrow into like how and when it's being measured So you get more apples-to-apples measurements Look if you're a mom and pop shop you measure your success in two things It's my business growing and am I making more profit? Those are the ways are a success and if you do that, right, then you do the right something right by your customers I think NPS I don't want to poopoo on NPS because I think it got us to where we are We should always stand on the shoulders of those who got us here. So I definitely want to pay respect I think there's room for NPS. Let's not burn it down to the ground to throw the baby away with bathwater Any form of customer response is fantastic But let's put it in perspective of what it is combine it with data such as and our combined of if data such as my you know, like more my new data such as what is upsell cross sell and so on and so forth and To get and that gives us a basis for the future, right? Makes a lot of sense in fact in an earlier set session Mark Roberge. I'll talk also talked about these Sean Ellis test which is how Frustrated would you be if their product got taken away? That seems like a real good for the user population, too Yes, and it we're going to see that over the next couple of months how that is being put into play as more and more companies are firing apps Perfect. Okay Jacco David, thank you for just a highly inspirational and energetic on session Thank you so much as David Spitz at BenchSights Jacco van der Kooij at Winning By Design. Thank you everyone Thank you. Bye. Bye. Thank you for having us