Ray Rike- 00:00
You know, one of the most fun parts of putting on Saas Metrics Palooza is the opportunity to develop relationships like my next guest. Now, I've known of Bill ever since he was the founding CRO at Marketo, then founding CRO at Pendo, and now an operating partner at Battery Ventures. And every time I interact with Bill, I just, I learn so much. So Bill, thank you so much for being a featured speaker at Saas Metrics Palooza 23.
Bill Binch- 00:32
Thanks, Ray. It's always enjoyable to spend a little bit of time with you, and I'm looking forward to diving in to a session today that will cover around the topic of uncharted metrics, go-to-market secrets that every leader should uncover. Now, I want to preface this by first saying that this is just not a go-to-market only metric session. This is a session that is go-to-market focused, but it's something that I think CEOs, CFOs, and then obviously any go-to-market leaders would benefit from paying attention to. Thanks for the intro there, Ray. The one thing I'd add is I'm an operating partner at Battery. I've been here for about two years, but prior to that, I did spend 29 years, or as I like to quantify it, 116 quarters of my life on a quota. So I'm speaking from a perspective of a lot of years of experience, a lot of brick walls that I've run into on learning some of the things that I'm hoping to share today. So let's dive in with that. So first things first, before I get into any specific metrics, I'll set a framework for how I think about metrics, and that's from a forward-looking or leading indicator basis or a backward-looking lagging indicator type of basis. And I'd like to quantify any type of dashboards I build or any type of dashboard, or I apologize, a board slide that I build. And the importance of these things to delineate that way is so I know what I'm looking at. And I'll give you an example here, like a backward-looking type of metric would be, what's my pipeline? That tells me what I've built up to date. A forward-looking version of that would be if I looked at something like, this week, how many demos did my team do, multiplied by what's my typical conversion rate of demos that turn into opportunities, multiplied by what's my average sale price. That gives me a view into what next week or the next couple of weeks may look like. And so that I can be predictive on it. That's the difference of leading and lagging to me. So that's the first place I start. I always try to break that down.
Bill Binch- 02:52
Moving forward, I'll dive into one of my favorite concepts. Now, if you look at this left column along the Y-axis, don't focus on what's in those columns there. What I want to focus on is what's across the X-axis, the five-quarter view. This is a viewpoint that I think every executive team should take for talking amongst themselves, for what they track, as well as for certainly presenting what they do to their board. The reason being is we've all been in that situation where we're like, wait, what was our ACV last quarter? And it just, it sucks to have to go back and find last quarter's board deck and find that file and take the time to do it. And so I'm a big advocate of when you present any key metrics, present it in a five-quarter view so I can see the trailing four quarters. And then importantly, can see year over year what we perform because this is a great place to call out where you see trends emerging. It also just, like I said, saves a lot of time for the viewer of whoever's trying to absorb information from the dashboard or board side that you're showing. All right, so let's dive into one of the ones that I really do like to look at. The gorilla in the room, as I'd call it, the ape, the average revenue per employee. Look, there's a lot of great metrics out there that measure efficiency. People use like CAC, people use rule of 40. Those are all good metrics to use. One that's a little less frequently used, but it seems to be coming up right now is the ape metric. And the reason that this one's really valuable to me is because it can really help you understand the efficiency of your business regardless of what role you're in. If you think about a typical person that's looking at the metric, like the rule of 40, that really looks at both your growth rate plus your profitability rate. Those two things are good to look at, but if I'm the head of marketing, I may not be that interested in the profitability element. I mean, I am as an executive, if you know what I'm saying, but in helping me run my business, does it really help me think about that? It may not. And that's where ape really does help. I think all the executives in a company get galvanized around a single metric. The reason being is personnel, head costs tends to be 65, 70% of all expenses out of a SaaS company. You have your real estate, you have your hosting fees after that, but personnel is the most expensive thing that you have. And so I think looking at revenue to understand what you're producing by an employee basis, not only just the revenue, but also the break-even. What do we need to do if I'm not at break-even right now of what I'm producing? So you can see there's a range here, unlike rule of 40, where there's just a simple rule of 40, with the average revenue per employee metric, there tends to be a range of what you're doing. And these aren't exacts. These are just some data that Battery has been able to collect, but I put a link here at the bottom to a much more thorough overview of this, I think, really important metric that all companies should be tracking. So feel free to go and read the blog at a future time.
Bill Binch- 06:06
Next one, another backward-looking metric here. I didn't state, but my first couple of metrics here are really what I'd consider to be revert or the lagging indicator type of metrics. My last few will be the forward-looking ones. So team health, another really important metric, I think, for all organizations. Again, you'll note, I didn't say just the head of revenue, but for an organization to look at. Because you could have a company that's making its quota, but you only have 25% of your team making quote, and that's probably not a healthy organization. So this one double-clicked down into the business. So there's two charts I have here. One is attainment. One is participation. Attainment, to me, is I like to look at my organization through a number of different viewpoints. It could be by the segments, like enterprise, mid-market, S&B. It could be by a geographic type of segmentation. I like to look at it every quarter and look back and see what percentage of the sales team, the on-quota carriers, made quota versus the total number of quota carriers. And so that's where I want to see, did five out of six reps make quota last quarter? So that team's pretty healthy. The psychology of a positive locker is probably really resonating with that team. And then I want to look at that with the quarter before, and this is in a five-quarter view back. You can push it out there. But I want to at least see of how did I do last quarter or how did I do two quarters ago against attainment. Participation is a slightly different metric. This is how many of the team members actually contributed by closing a deal. Again, an example here would be if an enterprise team made its quota, but you had one out of five of the AEs did a deal, that would tell you that, wow, we probably closed a monster whale of a deal to go achieve the number. Does that mean that my team is healthy? Does that mean we're performing at our peak? Does that mean that all my people are participating? And again, I like to look at this backwards of how many achieved last quarter and how many did the quarter before. So good health metric. All right. This is one of my favorite ones. I had a CEO who always used to challenge his executive team to speak executive, to raise our level of conversation. And this pipeline times conversion metric is a great way to speak executive. Let me tell you what that is and why I think it's important. When you think about a board meeting, you don't often see the head of revenue come in and talk to their team of, well, I have X amount of dollars in discovery stage. I have Y amount of dollars in solution evaluation stage. I have Z amount in solution acceptance stage. Those might be things that the CRO tracks, but when you're trying to think about metrics that really are shaping your business, that you're trying to get a viewpoint on, that's very granular. It's bringing the listener into the engine room of your business. Now I submit on the marketing side, the same thing, a marketer coming in and speaking about anonymous visitors to known visitors, to MQLs, to SQLs, those are all perfectly good metrics to track, but it doesn't elevate up to the level of what I think a board and importantly an executive team should be speaking about, which is pipeline times conversion. I love seeing board meetings. I love seeing executive teams work together where the marketer walks in and talks about pipeline. They say, that's what I'm responsible for, whether I own it, meaning was it sales created? Was it SDR created? Was it marketing created? Was it partner created? The head of marketing tends to own all the messaging that was used to enable any one of those teams. So I like a marketer that raises hands and says, look, pipeline is my Northstar metric. This is the thing that I pay attention to. And likewise, I like the head of revenue that talks about conversion. That's what I own. I'm responsible for converting the pipeline that's created regardless of where it comes from.
Bill Binch- 10:16
So this slide, I think is a really, really useful and important metric inside of a business because you can break it out by, like I said, again, you can do a lot of different slices. You can do it by status of your pipeline, which I did here in this example of commit best case in pipeline. You can do it by segment, enterprise, mid-market, S and B. You can do it by geographic regions, by industries. You can do it by combined combinations of those things. But what I like to do there is I like to look at some early stage pipe that I brought in to the quarter. I don't like to do it on day one because as we know, sales reps are still often cleaning up their pipeline. So I like to give my reps a couple of days. I'm very clear on setting expectations, it's got to be done. But by day three, have the pipeline cleansed. Then the next column here is dollars closed. So if I had a million dollars of day three pipeline, I want to see from last quarter, how many of those dollars did I actually close? $300,000 in the commit stage perhaps. Okay. I know my close rate is 30%. I like to look at that two quarters ago as well, because that's where I can go and start seeing some pattern. Is my close rate starting to dip? Is my pipeline starting to grow? And importantly, this is one of those slides that actually looks backwards, but that I use to start looking forward. So this is my transition to my forward looking slides. But what I look at here is I will now come into my new quarter with what my pipeline is and I will start looking at some assumed rates of what I'm going to close of my pipeline. And that's important for me being able to give my forecast. This is a traditional top-down forecasting model. The other element that I sometimes think gets lost in the pipe times conversion element here is just the direction of how I'm thinking about growing my business. And that could be from a headcount perspective of if my pipeline's growing, if my close rate's going up, do I want to start thinking about what my business is going to do? Now bring all this together. Bring a CMO and CRO into a board meeting, into a Monday morning executive staff meeting and talking about this. I think you're talking executive. So I want to reinforce, I do think you want to track all those more detailed things, but I think the lead off batter in your conversation is right here. The pipeline times the conversion, because these are the two metrics that really tell the tale of the tape. Last element I'll talk about on this is after a quarter's done, I do also like to go back and look at what was the culprit of the quarter if we made or missed the number. If we blew out the number, did we go in with a super high level of pipeline? And if so, what did we do prior to that quarter starting that maybe generated that pipeline? Likewise, did our close rate go up? What happened that made it go up? Was it a big deal? Was it a lot of transactions? Was it that we brought out a new product? Was our messaging getting sharpened? What was it? And vice versa for if I missed the quarter, I want to be able to go and explain to my executive team, to my board about why it happened. And to me, it boils down to two important things. What was my pipeline? What was my conversion? And how did those two work together?
All right, next slide. Now we're moving into the forward looking one. The Monday morning meeting, well, let me take a minute to explain this one. It's on a chart or a format I know, but this is one that has been helpful for me for a number of reasons. Number one, I'm able to predict where my business is going. And number two, being able to help enable my reps. So let me break those two things down. First of all, the Monday morning meeting rule to me is this. When I walk into the office, when I walk into the start of a week, 8 a.m. on Monday, each of my AEs should have a bunch of calendars scheduled, a bunch of meetings calendared on their schedule for the fall, for the upcoming week. And the reality is, is that meetings multiply. So what I'm looking for is to see that a rep has a bunch of fall calls. They have maybe some demo calls. They have some value calls where maybe they're going to deliver pricing. They have some negotiation calls. And what I'm going to look is that those advance to the week. So first thing I do is look at the number of calls by AE. And then number two, I look at where that finishes, because like I said, they multiply. And here's where the value lies inside of this metric. I like to look forward at where my pipeline's going. And I know that activity leads to pipeline. I know that specific activities lead to pipeline, like having fall calls that turn into demos, that turn into pricing calls, and going through that process. And so I've learned this rule through an interesting way. When I was heading sales at Marketo, I had a candidate, a job candidate ask me, what are the traits of your best performing sales reps? And you know, my answer was a bit underwhelmed. The answer was that they have grit, that they're competitors. Some truths, but not very helpful for that candidate who's seeking some knowledge. And I asked my ops team after that interview, is there anything from a data perspective that's out there that we track that can maybe be an indicator to how our reps perform? And they went and did a pretty good analysis and they came back and they said, Bill, you know what? Our reps that make their numbers consistently start the week with nine meetings, nine customer facing meetings. These are all prospect or customer facing meetings. They start the week with nine meetings on their calendar. And then through the week, it multiplies up to 15 or 16 meetings before the end of the week. I thought that was really helpful. And so it changed the way that number one, when an interview was happening, we would answer that question. But number two, it changed the way we enabled a new sales rep coming into the business. Because now if you ask that question of what was a good looking, a successful rep look like, we would answer, well, this is what they have on their calendar that leads to success for them. And what we would say is, as you started in the company, welcome aboard. Here's your territory. Look, the next four weeks, we're going to enable you. We're going to train you on our message, on our demo, on how to price, our competition, all these different things. But when you start prospecting, when you get your territory, we're going to look and measure you on some forward looking things. In the first month, we're going to look for you to finish the month having an average of three meetings a week on your calendar. By the end of your second month, we want that to look like six meetings per week on your calendar. And by the end of your third month of RAMP, we're looking for you to be at the nine meetings per week on your calendar as you start the week. Again, a really good forward looking one. It's similar to what I talked about with the pipeline one a few slides ago. This is just really helpful for me to number one measure, are we working towards the right things to achieve our quota? So the money morning meeting rule is one of my favorite forward looking metrics to share. All right, quote on the street.
Bill Binch- 17:11
This is a really interesting one and an underserved one, in my opinion. I often get asked by CEOs to come help take a look at their business and that ask comes when maybe they've missed a quarter. And first thing I do when I get in there is say, give me the details of how the quarter played out and what you think the culprit was. A lot of times they'll say, Bill, we don't have enough pipeline. And oftentimes they're right. Oftentimes it is a pipeline issue. But before I get to that, I say, well, wait, let's first understand what your quota on the street is. And they'll be like, okay, what do you got? I'll say like, what's your bookings plan for the quarter? And let's just use a round number. It's $10 million. Okay, great. What's your planned AE quota capacity for the same quarter? And here, I'm looking for someone to come and ask me, I'm sorry, I'm looking for someone to come and answer that the answer should be somewhere north of $10 million. You should be $10 million and one dollars or more. Realistically, I'm looking for someone to come and say, look, we have $11 million or $12 million assigned out. And then the third thing I'll ask is what was the company actual AE capacity? And this is the oops moment a lot of times in this conversation. A lot of times the answer is, I don't know. And that is the importance of this data point. This is a slide that probably in most companies doesn't get updated more than monthly. Some companies get it down to a weekly basis. But realistically, you typically have a current quarter bookings plan, and you might break that down by some month type of ramp up. You have your planned AE capacity, and that's based on when reps started, when they got onto their ramp, when they came off their ramp. And that's the plan level of what you bill. And again, if you have $10 million for your bookings plan, it should be more than $10 million for your capacity plan. And then the actual, and this is like I said, the oops moment, because a lot of times that CEO will say, I have $10 million bookings plan. We have $11 million of actual capacity planned. The actual capacity on the street is $9 million. Really hard to hit a $10 million bookings plan when you only have $9 million of quota deploy. That means that you're expecting all of your reps to hit your quota and then some, or you're counting on a monster deal. Really hard, hard thing to be able to achieve if it's below. And I'm surprised at how many companies don't track this, like I said, on a monthly basis. So this is one of my top metrics that I think is in the uncharted category of something that should be on a Monday morning dashboard and something that should be on a board slide.
Bill Binch- 19:45
So let's go to the mojo metric. This is something that if you ever talk to me, it's probably always going to come up. There's a famous story. I won't say it's famous, an infamous story of my wife woke up next to me in bed one day and I had my iPhone up and I was looking at something and she said, what are you looking at? I said, I'm looking at the mojo metric. And it just tells you how important it was to me. It was the thing that when I woke up and grabbed my phone, the first thing that I looked at to measure my business was how was my pipeline actually progressing? So the mojo metrics made up of six things inside of the pipeline. Number one are the net new additive things, the new business created, the new business, the new expansion business created, and then deals pulled in from a future quarter. And I look at this on a daily basis. I sometimes present it to like executive teams on a weekly basis because that has a little bit more context. But for me as a revenue owner, this is a critical metric for me and it's something that's really critical. I think that the company should be looking at. In fact, my last CEO one time saw me looking at this dashboard on my computer and he said, what is that slide? And I share it with him and he said, can we add that to our Monday morning exec staff meeting? Because I think that is a really good metric to look at. I'll tell you why in a second. So the first three are the additive, new business created, expansion business created, and then deals that are pulled in from future quarters. And then I net those off by how much business did we kill yesterday? How much expansion business did we reduce or kill off? And then how many deals did we push out of the current period, the current quarter? And what that gives me is my net pipeline add or subtraction. And this is where I said this is really helpful on a weekly basis. I've literally had situations where I wake up on Tuesday morning and Monday was a negative pipeline bill day. I wake up on Wednesday and the day prior Tuesday was a negative pipeline day. And I get into Thursday and it's a negative pipeline day at that point, as opposed to waiting till the next Monday's meeting to go and try and answer what happened, I'm going into action. I'm calling the head of marketing to say, what are you seeing inside your organization? Are we not creating enough leads for our sales teams? I'm going to my sales team. I'm going to my sales management. And I'm asking them, what is happening out there in the world that is causing us to kill off so many pipelines? The last thing I'll say about the slide is I do this both in dollars, as well as in the number of deals, because you can have that weird scenario where you moved backwards for a day in pipeline. And it could be that you pushed one single really big deal out to a future quarter or killed it off. In which case it skews the numbers if you don't look at it from that perspective. So I want to see, did one deal throw us off? So the Mojo metric is one of my favorite ones out there to use. So I want to close with this. Metrics are super critical to me. As I mentioned earlier, 116 quarter VAT of being in the go-to-market world. I've seen the world evolve during that time. I've seen it go from where a sales leader has been this gut driven, you know, kind of shoot from the hip type of player to now where they're very data driven. And so I'm a big advocate that number one is a modern day sales leader. You have to use data and have to use metrics to be able to understand your business and see where it's going. And number two, as a top level leader inside of an organization, regardless of the role, CEO, CFO, you have to be able to collaborate well with your other team members, which means I need to seek and have them understand what business, what my business is and how I track it. And so I think metrics like this really help out. In closing, the last thing I'll say is this, at Battery, we do do a tremendous amount of analysis inside of here. We also produce a lot of content. We did just release a brand new ebook that you can download from our site here. So feel free to go and and get that ebook. It's a ebook focused on both forward looking slides as well as backward looking dashboards. So something that can help you in your business. Hopefully you can go take from it, download it and steal some ideas. Meanwhile, thanks for having me again, Ray. Looking forward to the questions.
Ray Rike- 24:07
All right, Bill. Wonderful as always. But I do have a couple double click questions for you, if that's OK. The first is these are the metrics that you really like to use and you recommend. But being an operating partner now at Battery Ventures, I'm sure you walk into a lot of board meetings and you see metrics that you think are maybe not as useful, vanity metrics, maybe even misleading. So are there any metrics that you would recommend don't use or cautions about how they're being used?
Bill Binch- 24:40
Yeah, the caution part is where I'll go to look at. They say feedback is a gift, which means data is a gift. I do see some board decks that have so many slides in them that it's confusing to get what the narrative is. So that's the caution there. I like a nice, sharp, tight deck that, you know, has 25, 30 slides and a board team that comes in and speaks about, you know, what happened, certainly. But most of the time is what we're doing next. And so I like a board deck that has that core narrative in the main part of the deck and then an appendix with a bunch of other things. Like I mentioned earlier, the CMO, should a CMO track their visitors and the conversion rate of that to known visitors, of course they should. To me, is that a board level discussion? No way. If you're at that level, it means you're probably defending something that happened, in which case having that data is useful. But is that the place where you go and lead off a conversation? Not at all. The question is around metrics. Don't overwhelm people with metrics. You want to go and have metrics tell a story, tell a tale of where you're going. Then the second question, talking about that alignment or even integration between the CRO and the CMO, especially around pipeline.
Ray Rike- 26:01
So Bill, how do you ensure that there was one vision for a pipeline and the status of the pipeline versus the marketing version and the sales version?
Bill Binch- 26:13
So going back to what I said, I think the best performing companies, the best performing executive teams that I see are teams where the sales and market are aligned on a couple key things. I like that pipeline and conversion element because I think it elevates the conversation to a board level discussion. I remember I missed my number one time in a quarter and I did 88% of the quota. I got into the board meeting and one of the members asked, hey, I see all the data. Why? What's the narrative of what you asked? I started talking about competitive win rates and things like that. He asked for a timeout and he said, wait a second, did you come into the quarter with enough pipeline? I know we have to say we want more pipeline, but he was asking a very specific question. Did you have the right coverage level? And then secondly, did you close at the normal rate? And I couldn't answer the questions really well. So after the meeting, I went back and did the analysis and I found of the 12% miss, 7% of the miss was made up of lower than normal conversions and 5% of the miss was made up of too low pipe coming into the quarter. And so that really helped formulate this thought process of pipeline and conversion. So that to me, I think is a really key metric. And when I talk with CMOs, a lot of times I'll ask pencils down. If there's one desert island metric, what do you track? And I got to tell you almost all the time it's pipeline. So I think marketers get that. And then with salespeople, they'll look at different things, but I think the conversion rate is really critical. So I think if you start there, that's a great place. And then there's a few other metrics that I do want to track, obviously as a peer to my marketer and as a peer of marketing and making sure that that relationship is really positive. So that's where I do drop down below the pipeline and the conversion rate that I'm going to look at. Like I'm going to look at things like opportunity. I think opportunities are a really good indicator. Am I going to make my quota by volume of deals or am I going to make it by doing big monster deals? That type of thing. So I think the opportunity creation rate, the freshness of that's really critical. So that's one thing that helps tie together the teams further. Great. I'm going to ask you one last question and then we're going to wrap it up. And I talk about segmentation of all metrics, whether it's your gross revenue retention or net revenue retention, because you want to know for SMBs versus enterprise customers. What is your opinion on the importance of understanding your pipeline by source and the conversion rate by source? Because if the pipeline mix changes quarter over quarter, that conversion rate and thus your pipeline coverage ratio may change. Is that too advanced, Bill? No, not at all. And I'm a believer like you, you saw me talk about segmentation of size of customer at a stage of your pipeline by the geo. So I like all that data again, unless it tells a tale, I'm going to push that to the back or to the appendix of something that I'm trying to talk about. And I'll use it as supporting documentation later. But I am a big fan like you of being able to look at the source of that. One thing I'm careful to not over-rotate into is I have seen some companies that essentially sign quotas to like sales is responsible for creating this much pipeline, marketing is responsible for creating this much. And that's good. You do want to have goals that you measure against, but you don't necessarily have to like, go this way. If you met the quarter, if you met the goals at the end of the quarter and you didn't do it in the next shift that you were hoping for, that's okay. Because you can now go back and say, Hey, what is going on? That's driving us. We still may never. Likewise, same thing. If you, if you missed your quarter and you identify the G's, our marketing contribution went way down from what it was previously. What did we change? What did we stop? We can go and start looking at the source of that. And so to me, I think being able to leave a breadcrumb back, a trail of breadcrumbs back to what you think might've caused something is helpful. So anything that you can track a detail level, I'm a, excuse me. I am a big fan of.
Ray Rike- 30:42
Well, Bill, thank you for your time. Thank you for the benefit of all your very unique experience and insights and can't wait to have you back at SaaS Metrics Palooza 24. Have a good one. Let's give a hand to Bill Binch. Awesome. Thanks Ray.