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Practical Go-to-Market guidance specifically for B2B software and service companies between $5MM-$50MM in revenue.
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#47: Optimizing Sales with Precision and Insight
Can freemium models still shine in a crowded marketplace? Join us as we unravel customer acquisition, exploring how to stand out amidst an overwhelming array of choices. We emphasize the importance of understanding and meeting customers where they are, leveraging in-app messaging, and interpreting signals beyond mere product usage. Learn from our hands-on experience with a client, where refining the sales process and structuring initial calls made a significant impact on closing deals. In a competitive landscape, precision and efficiency are key. With the Smartsheet acquisition setting the stage, we bring insights into maximizing go-to-market efficiency in a world where market valuations are shifting.
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Welcome to the GTM Pro Podcast, your essential audio resource for mastering go-to-market discussions in the boardroom. Here we share insights for revenue leaders at B2B software and services companies, especially those with less than $50 million in revenue. Why? Because the challenges faced by companies of this size are unique. They are too big to be small and too small to be big. This dynamic pushes revenue leaders into executive leadership without a lot of help or support. We are here to provide that support. Your journey to boardroom excellence starts now.
Gary:Now, welcome back to GTM Pro. We just had to hit record because we got ahead of ourselves once again and started riffing on this. So let me catch you guys up because we've been on this for a while. Backdrop so I've seen a lot of posts floating around and some data points and let's just kind of talk about where we are in the market. So one data point Smartsheet just got taken private by Vista.
Gary:Big transaction, big company been around a long time, kind of high single digits, low double digits growth, obviously cashflow positive, producing. I don't remember what the EBITDA margin is, but you know a good, solid business but went private for 4.2 times. I believe the multiple was and you're seeing public multiples the medians for for the SaaS space being four to five times. So all right is there, is there. Do we see a time when we're back at 10, 15, 20 times? Maybe, but I think we would all agree that that's not likely, at least in what we can see in the foreseeable future. Are there companies smaller than that that are trading for 10, 15, 20 more? Yes, of course, but as we think generally about where a non-rocket ship software company is trading, I think five-ish plus or minus a few points is where we see that.
Gary:So what are the implications for that? Well, why is that, I guess? Well, it's because the realization that growth is really hard in this market. And why is that growth hard? Well, there are more options. First of all, demand is just down, are being very prudent about they themselves getting to profitability and are scrutinizing every expense, every tool. There's fewer. There's less headcount growth. Therefore there's less need for additional seats. So some of the NRR tailwinds that were there before are no longer there. There's a new solution popping up in every category seemingly every single day, and that creates a lot of downward pressure on pricing, which makes growth even harder, both in terms of keeping your existing base as well as holding up your ACVs on new business.
Gary:Um, the uh paid channels we've talked about this before are are excruciatingly expensive and hard to crack. Uh outbound you have to be really, really good and focused at it. Uh to to make it work at all, if at all. Inbound uh is is because of the volume of content out there is getting harder and harder to maintain an advantage if you had it, and certainly to to build an advantage if you don't have it, so that you just look at all of these things and everything is wind in the face of growth, which is why we have multiples where we have them. So then the implication is well, what do we do with that?
Gary:And that's why we're hearing a lot about GTM efficiency and the rigor with which we need to re-evaluate our processes. We just can't afford to be average in anything that we're doing anymore, afford to be average in anything that we're doing anymore. And because it's so hard to get the attention of a company, of a person who is actually in a buying cycle or even before they get into a buying cycle, maintain that attention, get them through the process and have them select us. We can't afford to miss. And so we're seeing a renewed focus on just the rigor of process, about getting good at doing go-to-market.
Andy:And who's doing it and what you're paying to have it done. Right. So that's the promise of automation and AI, even although I hate to use that term, so use it sparingly and use it in context. But you can't have SDRs doing a whole bunch of stuff anymore. You can't have your AEs prospecting those traditional revenue model processes, including outbound to your point in general, you need to be super efficient about, especially if your ACVs are what we typically see, which are sub 10,000. Right.
Gary:Well, I would say we, you know, you see that. But then, at the other extreme, you see much higher ACVs, more enterprise type, but and I think, andy, we were starting to go there when we were talking about, okay, well, how do you, how do you adapt to that? And, and you know, the the recovering banker in me likes to look at the spreadsheet and think about what is the ideal model from a go-to-market perspective that drives the economic outcomes Well, ideally, and aligns with how the buyers are buying. And that is that we want to try to match our entry point, ie the starting ACV, to where our ideal customer is and their ability to adopt the tool and get to a moment of impact very quickly, such that they can quickly see that, wow, this is kind of a no brainer I'm, if I can get there and I'm willing to. You know, test this out. It's makes it relatively low risk If, if your product or solution is actually able to do that.
Gary:In some cases that's not possible because it's either on or off. Right, you think about we can. Necessarily there's some mission critical. You know ERP, like systems, right, Financial systems. You know things that require a huge amount of integrations to actually work, like, you have to make that decision and therefore it's very hard to create a test piece, although I would continue to challenge you to find, like, what are wedges or ways that we can get into that environment to create the relationship. And that's where you know that basically, what you're trying to do is bring down the cognitive load required and the risk that they need to take to require to get to a decision and get to a moment of impact and then create a vehicle that allows them to pull in more capabilities, realize more value and capture some of that value in pricing and packaging. That is a really efficient way to grow. So you may have a low starting ACV, but you're actually. Your model creates 120 plus percent NRR because they're growing with you, like they're pulling you in.
Andy:But if we think about go ahead, andy, sorry, you just described to me what we often refer to as product-led growth, although it's not the typical model people think of, which is it's all like this virtual onboarding, automated total, like hands-off, self-serve DIY type tool, hands-off self-serve DIY type tool. Right, there are so many elements of product-led in terms of motions that you can contemplate and I think you just described it that people you know they are being forced into thinking about, but the only issue is knowing what those should be and how long they take to implement, and so on, changing your model essentially, fundamentally. But what you are describing to me, is product-led growth.
Gary:Well, and that's actually where I was going to go is that the problem when you say product-led growth is, people are thinking freemium, or 99 bucks a month, or $29 a month or whatever, and that's not necessarily the case. It's just it's the concept of it or finding ways to get them to a moment of impact that significantly reduces the risk. And now they are pulling you into their organization versus you pushing your way into the organization far more efficient. But I was actually going to go there with product led, which is that you know you, as we think about that as potentially an option. We hear a lot about make you know, having a freemium offer or reverse free trial or whatever the vehicle is.
Gary:I think even that is getting harder because I still have work to do. Right, yes, it's free. I mean we run into that all the time, like get started for free. I'm like, well, that means that I got to go in and figure it out. I just want the answers to my questions. I don't really want to spend time doing a setup, running through a process, regardless of how easy you make it. I just want to know can you do this or can you not in my particular use case? And I think that because even now it's like anything the more options we have, the harder it is to really discern. I'm only going to spend time with a handful and.
Gary:I don't even know where to start, and so, even though all 20 of these offer some form of a free trial, I'm not going to trial all 20. Nope, I don't have the time for that. I don't even really want to do it with one. And so I think that, unless you are truly product led ie you have a, you have an entire customer base that's only paying you $29 a month and you're perfectly okay with that. You know, if, if, you're, if, if you, if it really is more of a free trial that has a timeline and it's like, yep, you got to pay for it. Now I think that is becoming an increasingly challenging way to acquire customers, because it's not unique anymore and there's so much work and lack of time to go do that work?
Andy:Work's the key, and you say this all the time. Meeting them where they are is critical. What does that all boil down to? It's understanding, and it's understanding the buyer, it's understanding your customers and understanding what gets them to that.
Andy:And we've said this a million times what gets them to that moment of value? Right, and meeting them where they are and not giving them a bunch of work to do. Yeah, but again, those PLG motions if you contemplate those properly in the context of your business, in the context of meeting the buyer where they are, they can come in some pretty subtle forms. I mean, we talk about the in-app messaging all the time, which is like it's great, I mean. But again, it requires you to really understand your customers, what different signs of usage mean, what their situation is, how you can detect that, how you can then boil that down to their.
Andy:This bucket of people that I can see through this data and possibly through interaction, certainly through product are are probably doing this thing, they're probably in this situation and they're ready for this next step. It's not just hey, you've used the product in the last six months. Do this thing come, expand, or, instead of being on a monthly join, an annual plan or what have you. It shouldn't be willy-nilly right. It should be well thought out, based on knowing them, knowing what they're doing.
Gary:Well, I think you bring up a great point, which is that we tend to look at the signals that we see within our own product and ignore those that are the real drivers of retention and expansion capability, which is what's going on in their organization.
Gary:And in some products, where you have an ACV that will support this, you have some human interaction that you can actually go and understand that. But there's a whole swath of software companies, even with ACVs of 20K or less, that don't have that luxury and therefore need to try to discern that, not just with their own data. But how do you, now more than ever we have access to a lot of third party signals or external signals that, even as their proxies, which can kind of come together to do that? I think that's the next wave of this. Is that it really we've talked about this before, even last week is this theme of rethinking about go to market is outside in? What can we know about what's going on in our buyer's world, our customer's world, and how do we meet them where they are and give them what they need in the moment that they are and being able to discern that?
Andy:I feel like we forget where a lot of our customers even started on that front right, like we even get our own customers from some starting point to a more active user, a bigger user. We forget the process of getting them there and we want to get new customers at that higher level and it, quite frankly, probably doesn't work that way and won't work that way. And I think it's something as simple as I mean. We talk about this dissecting that that user's experience from getting from you know, point A to whatever point G to the atom, break it down, really understand that and then give them those tools to understand what that looks like for them, and then you know start that process.
Gary:Know, start that process. And that's such a good point, andy, because I think the other thing that we we would all recognize is that we we live in an attention deficit era. It is really really hard to get somebody's attention, even if they're a customer, and so when we have their attention, when we have their engagement, when we have them on a call or reading our email or whatever, we can't afford to be average, and so, because we may not get another chance, so your point about you know you start, I think, back. This goes back to the rigor with which we evaluate our process, and this is a live situation where we're working through this with a client right now, where we have significantly, using our discovery playbook process, significantly changed the initial sales call, and this is a, this is a sub 10k software product. Therefore it's a one to two call close. So that first call is literally everything. It's so critical and we have changed it in such a way that we get a depth of information that we've never had before, like we really understand the conditions, we understand the pain, the impact, the critical event, their decision process, what they're looking at, how they're looking at it. Done right, we have all this knowledge coming out of the first call and then, ideally, we get to a close.
Gary:The challenge is that at the moment, none of that flows downstream, then into onboarding, like we should know, we should be able to grade the churn risk on a customer before they even start with us, based on their conditions, based on the use case. It may be a fit now, but, excuse me, we know, based on our analysis of our portfolio, that you know that best clients are using it in this way, across these departments or what have you. And even then I think that's part of the problem is we don't know that and and so the. But the place that you can begin to do that starts literally right now, today, you, you, when you land a new customer today, take all that information that you learned from your discovery process and make it the jump off point for how you're going to get started. And so often it's like, well, we closed the deal and we know a couple of headlines about what they want to do, and then we just go right into our. Well, here's how you use the product.
Andy:Good luck. Yeah Well, giving them only one path to do that, giving them one set of information. Everybody gets the same onboarding materials. That alone is an indicator that you're not doing it right.
Gary:Right.
Andy:Just by virtue, I mean you're virtually guaranteed to have a, you know, a spectrum of customers that require something different and to your point. If you've been diligent and worked along with them through that discovery process to get them to the point where they're buying the right thing discovery process to get them to the point where they're buying the right thing then that should be the jumping off point for knowing where they should go to get to that moment of value. Then you're putting the right thing in front of them to get them there.
Andy:If it's one size, and here's a laundry list of things which we often see, ironically, in the sales process, which is feature vomit. If you're doing that on onboarding, that's the wrong answer as well.
Gary:Yep, absolutely, and, and so, as we, as we okay, great, we'd say you need more rigor in the process. Um, so that's why we believe that a fantastic place to start is in your discovery process, because it forces you to start with a really solid definition of your ICP. We just got off of a call with a rapidly growing software company that is doing some really cool stuff in a space that's growing. The tide is rising, but the number of competitors that have crept in over the last 12 months and are making a lot of noise in that space has gone up exponentially. So it's gotten really hard to get attention and differentiate yourself, and they've got a different approach to it, and one of the challenges that they have is that they appeal to a lot of different companies of a lot of different sizes theoretically And've literally got to go out to the world and tell them that I'm that specific.
Andy:Yes, yeah, that's tough. It's so tough for for founders especially, to think like am I going to exclude others?
Gary:Maybe, and maybe you ought to and and I the, the, and this goes back to that. That rigor then right, which is because if you don't do that, it starts there. If you don't do that, then everything you do upstream from that, well, everything you do from this point forward is harder. Everything you do from this point forward is harder. Everything, all, all marketing, all attention, all awareness, all demand capture, all conversion, pricing and packaging. It's all more difficult because we have too many, too many variables to try to manage too. So that's the first step in the rigor is you know, you're, you're basically that this is why go to market has gotten so difficult and why it's become a team sport. Is that you're, you are, am making a business model decision.
Gary:That we are going to go do this, and everything we do from this point forward for now is going to be around this thing, and so you almost need to simultaneously be thinking about, if we do this now, where do we believe the puck's going to be in two or three years? Yeah, and what would be the next jump off point from there to make sure that we don't inadvertently box ourselves into a corner? Yeah Right, it's not. This is not easy, but it's, it's required.
Andy:But what is required and what will always facilitate that, is a more intimate understanding of your buyers, and it's gotta be more than you know what vertical they're in, how big they are, how it's got to be, those all the conditions around where proxies for that when you're going out in the world and targeting lookalikes, if you want to call it that. That all is simpler, if not easier, when you really understand them.
Gary:Right, well, and that's so. That's that. That first step in terms of rigor is is honing in on that ICP, which allows you to hone in on the buyer and the roles and the committees and the shadow buyers and what's going on under the hood and their level of capabilities and all of the things that you now need to know about the buyer to enable them to buy. Before we could sell, now we actually it's gotten harder. I think that's probably the biggest thing of all is that gone are the days when we don't really have to understand their business that well. We're like as long as I could, as long as you had a problem, you said you had and we had a solution. Like here you go, right, and you figure out how you're going to do it. Those days are gone. I actually need to know and I saw the post on this, I can't remember who did this the other day. That was you need to know your buyer almost better than they know themselves.
Andy:Well, in that sense, for sure you do, because a lot of times they don't know what the downstream processes are going to be, especially in larger organizations.
Gary:And we as organizations are not designed for that, we do not train for that, we do not extract that, we don't go find it. It's tribal knowledge, it exists different places, we do not democratize it and so we have varying degrees of that level of understanding. So it's that level of rigor which, by the way, gets harder and harder if you have three, four, five ICPs. Right, if you have one ICP, you have one, but you have one type of buyer that you can now go in and go deep on and understand. That which allows you to predict the conditions that they're experiencing, the typical procurement, buying decision processes that they use, the pain that they're experiencing, which makes it much more powerful for you to connect impact to pain if you do all of those things. So that's where the rigor starts right Now.
Gary:If I have that now, how do I push that into my GTM engine? And that's why we say it starts with discovery, because ideally it's the feedback loop that reinforces on itself. I learn more about that as I go and I'm able now. These are deals that are coming into us right now, today, and we have an opportunity to materially change the buyer's perspective by helping them, enabling them to buy through that process, which means it gets much easier, especially if it's a one or two call close, where I am now anticipating what you're going to need in order to make a decision and I'm getting you to confidence to be able to make that decision that you feel good about choosing us as that solution.
Gary:Now think about how that helps us upstream, when we start thinking about okay, well, before I get to the discovery call, what information do I need? What am I looking for? What questions do I have? How would I find it? What would I find credible? From whom do I want to hear it and see it? It literally informs your bottom of funnel, middle of funnel content strategy, coming straight from what you've learned there.
Andy:Yeah, I think with discovery too, it's really coming to light. For me is it's not always what, what? The answer is directly it. It often is an interpretation of that and pattern matching um, to say this is really the problem.
Andy:What they just described are their symptoms. And then the beauty of that is, you can always get better at that, right, you can listen to those things, you can synthesize that data and then you can come up with a slightly different way of asking the question that gets to the answer a little bit more directly and keep that feedback loop loop running on that.
Andy:But um, yeah, that that's the thing that I was. You know, I've I've been surprised by consistently is it's in there and you're probably getting to it. It's just, it's just not that direct answer.
Gary:Yeah Well, that's actually a fantastic point, which is why that bar has gone up Even again.
Gary:We typically ascribe this to more enterprise sellers who are talking to you know a champion, and have to converse with the CXO or whatever the case.
Gary:But it is just as true today in the one or two call close situations, and that is that part of getting to decision.
Gary:Confidence is that the buyer properly articulates the problem, that they understand the problem, that they understand the capabilities that they need, they understand the landscape of alternatives to solve the problem available to them right, the ability to compare and contrast them. And one of the ways that you can bring them to confidence to do that is through the Socratic method, and you can only do that if you have an idea, you're able to anticipate what you think is going on under the hood and you're helping them wrestle with what is it I'm feeling, what am I seeing? And the best way to do that is to ask them the questions, the leading questions that force them to articulate it, because it is in that process they're like yeah, I can see that now, versus just giving them the script to the answers to the test questions that, if you have a, haven't done the discovery up front and B don't don't have the context by which to be able to have an idea of what that's going to look like.
Andy:So, yeah, and thinking about it from a systems perspective, which is which is always tricky when, when people are involved, right Is is and this is no easy answer to this but figuring out how to make your sales process and your sales people fall in love with what you just described, fall in love with figuring that out on behalf of the buyer, as opposed to simply figuring out things that are going to raise the selling price of a of a product to that buyer price of a product to that buyer. There's a huge, huge difference, right, but from a systems thinking perspective, if you can align incentives to that, you are very likely to possibly lower your ACV up front, but increase your expansion dramatically and increase your retention dramatically, so that overall equation is better.
Gary:Right, right. Well, that and that goes to where we started the conversation, which is really thinking about pricing and packaging, and where we're going to. Where we're going, where we are required to meet the buyer, where we can, like legitimately. There are situations where there's a price of admission, like the complexity of the solution is such that you can't kind of do it. You know you're either doing it or you're not, like you're not going to rip and replace accounting package one module at a time. You're either going to do it or you're not, as an example. So, in fairness, there is definitely situations where that doesn't apply. Do you have any exercise that you would suggest, like for pricing and packaging? Like if we know that we don't have it very correctly defined, like.
Andy:How would you go deeper on that, considering the ICP and?
Gary:everything. That's such a great question. It is really really hard to admittedly, I mean, there's entire consulting practices that make millions and millions and millions of dollars on this very topic. You know, again, as we think about the companies that we serve in the, in a market, and they're all priced the same way, you kind of have to work inside of those confines because otherwise, you know, it gets very difficult to show a completely different way to do it.
Gary:Um, that's just reality. Um, but I think when you go back to the, a lot, of, a lot of models are a good, better, best. Or, you know, we it's very common that we had a set of features, requests that we built over time that came from certain clients where we kind of frankly hodgepodge to, you know, duct tape them together and call it a package, and that's what we're going to. We're going to charge you versus what? What are the? The? Either the uh, the step function requirements that you start to experience as you expand the use of our tool, or as you grow in size, or you move from this tier to one department, to three departments, new problems and challenges get created that only exist when that dynamic occurs. That is a great way to think about pricing and packaging.
Andy:Yeah, I was just going to say Now it's tied to the business impact.
Gary:It's tied to impact. It's like I'm solving a problem for you.
Andy:If you can meet them where they are. So the the prerequisite to all of that to your point, gary, is is really understanding the conditions around when an ideal customer occurs Like that we've we've solved this before and they look like this and really understanding that, and if you, if you, if you can figure out when you've met them properly and what was the configuration, what was the configuration of the product at that moment?
Gary:That's a great place to start. Yeah, and I think the other side of it too, andy, this kind of this kind of comes back to where why pricing and packaging is now more than ever a go-to-market. I mean, it's always been, but but now more than ever it is is like we may have a point of view that you're going to get a ton of value out of our platform and it does all of these things, but some of it you might be able to implement in 90 days. Some of it you may have to do a little bit of work and it takes you six months. Other pieces of it, you have to have all that in place first and actually get some volume in there, and then, and then you realize this value Right, and so we tend to like think of it as uh well, it, on or off, like you have, you're going to need all these capabilities.
Gary:So we give it to you now versus what do you need today, andy?
Gary:You said this earlier what do you need today, right now, and can I package this and price it in such a way that I'm only solving that thing today, but you see a path to well, when and when you implement those things, then you're going to.
Gary:You're going to, you're going to run into another set of challenges and it's at that moment that you need the next set of capabilities, right. And then it's like, okay, now I'm going to pull those capabilities in and I'm willing to pay more for it, because, especially if you can show me how you solve for it before I have to pay for it Right, it's this concept of pulling in as I reach those milestones versus okay, it's all here, because a lot of times what happens is companies never move as fast as we want them to, they don't get as far in the products as we want them to, and they're paying for 80% of the stuff they don't use. And they get to the end of the year and they're like, yeah, I'm getting value out of this piece of it, but I'm paying for all of it and I can value, engineer a way to solve the 20%.
Andy:You've got to be objective about exactly that. You've really got to try to be objective about am I, am I right size there? Like it's nice when you're getting more revenue than you know. Maybe you should like, and that's hard to say no to, but it's it's. I mean, it's really about finding that place. Like a lot, of a lot of businesses have conviction, like if only, if only people realize this, like if only people could get to this point here, like it would you know they have this conviction. Well, make them get to that point, like by hook or by crook, because that's everything. That point, like by hook or by crook, because that's everything. And so, if that means it has to be a freemium or whatever the case is, like, get them to that, figure out the way to get them there. And honestly, that's a at least you know for somebody who's possibly venture back but who's got some runway to figure this out. That should be your starting point, because that's where everything starts.
Gary:And what we just described, without being overt about it, is again taking a buyer-led approach, customer-led approach to what your pricing and packaging is. And there are lots of times when we think about oh well, we can put this set of features together and we can justify that you have to pay for them, like well, that might be true, you may think there were something, but you know what is market value, what somebody's willing to pay for it, and it's not just so you can get a handful of people to pay for it. But and it's not just so you can get a handful of people to pay for it but can you actually show product market fit for that package where it's getting pulled through? And that is a function of thinking about what the buyer needs and when they're going to need it and in what order. And that's again it's consistent with the rigor here, right, which is it really is a multivariate, it's a system, it's an entire system and it's a multivariate equation and every time you nudge on one part of it, you're changing another.
Gary:And that's why this has gotten so hard. Is that we starting with a core ICP. It literally it affects every decision that we make from there. It's going to affect product strategy, it's going to affect roadmap, it's going to affect you know, certainly everything around go-to-market, so we kind of backdoored our way into a pricing and packaging discussion. It was a good call out, though, tiana.
Gary:It was it is horribly complex and I know we didn't give it just we didn't. You know we can do a whole podcast on that alone, but it really is consistent with the theme of. You know, if there's one takeaway from this, it is walk in with a fresh set of eyes and look at your organization and say where, where are we confident that we completely understand the the? The day in the life of our buyer, and there'll be lots of places where you don't, or you have you're guessing, or there's the day in the life of our buyer and there'll be lots of places where you don't, or you're guessing, or there's anecdotes or what have you. And now think about how would we design our organization around that?
Andy:Yes, well, an organization being a kind of a broader term. And so to get back to that efficiency question, which is paramount and critical, it interestingly all starts with that intimate understanding of the buyer and then building out a process from there, because then that allows you to, instead of salespeople flailing here and there, you know, in AE doing prospecting that we allude to you have a much more tight definition of who you're going after, what you're saying, and it allows you to then put it put in systems which sometimes our people, oftentimes are tools nowadays to do that more efficiently.
Gary:Yep, absolutely All right. Well, that's a wrap for this week. We're excited. Coming up here over the next several weeks, we're actually going to be digging into this. I'm going to call it the buyer enablement space, because different people are approaching this problem in a lot of different ways. You'll hear it referred to sometimes as digital sales rooms. That's been a big rage here lately, but it's a broader concept from our perspective and it actually is the boots on the ground example of what we're talking about turning this outside in and there's a lot of different ways to think about it. Some really talented entrepreneurs who spent a lot of time here. So, excuse me, we're going to be digging, digging into that over the coming weeks and really excited about that. So, um, so stay tuned for an illustrious guest list, but until then, until next week, go be a pro. Bye, visit gtmproco and continue your path to becoming board ready with us. Share this journey, subscribe, engage and elevate your go-to-market skills. Until next time, go be a pro.