How Incentives Shape GTM Outcomes with AJ Gandhi

Speaker A: Welcome to the data room where we demystify go to market data for financially strategic execs. We deliver real world guidance for finance and go to market teams helping them collaborate to transform their data into a strategic asset. I'm Scott Stalfer, CEO and founder at Scale Matters. I've been a CEO for over 30 years at various tech and SaaS companies and I've seen firsthand the power of using data and data modeling to understand understand what drives value creation in a business. Before we hop into um, the subject for today, uh, let me just give you a really short note on Scale Matters. Uh, my company, uh, revenue and finance leaders would normally come to us because they're struggling to be able to answer uh, important questions like what's the relative ROI of our different channels that we use to source prospects? Or what's the root cause of our recently declining win rate? Or maybe is my sales team sized properly right in relation to the top of funnel investments we're making? In almost all cases their company's go to market data posture and kind of their ability to adequately model exactly how their go to market engine works is not really sufficient enough to help them answer these key business questions. And that's where uh, Scale Matters helps. Uh, we come in, help them define a data strategy, help them to properly instrument their environment, help them to implement processes to maximize data hygiene and then we deliver models and actionable insights to help inform their decision making. Uh, our work very often kind of fundamentally changes the way these companies operate their business, largely taking the guesswork out of the equation. So enough about Scale Matters. Uh, today I'm excited to be joined by Ajay Gandhi, uh, a true thought leader in go to market productivity and efficiency. Uh, former sales and operations executive at a number of very well known SaaS companies and more recently, uh, AJ spent the last five years as the chief growth officer uh, for Marlin Equity Partners, observing and more importantly advising Marlin portfolio companies on how to drive more efficient growth. AJ has developed the Piston, uh, framework which is kind of a practical playbook for improving go to market execution, uh, at a time when efficiency has never really mattered more. He's going to walk us through that kind of what the data is showing, where GTM is breaking down and how leadership teams can fix it. Uh, aj, welcome and thanks for being with us.

Speaker B: Yeah Scott, thanks for having me.

Speaker A: So yeah, glad to have you. And uh, why don't you talk to us a little bit about Piston and uh, all the kind of curation you've done over all the companies you've looked at to arrive at this sort of framework for thinking about um, better execution.

Speaker B: Yeah, happy to uh, Scott, I mean I'll give you, let's start maybe to think about um, the biggest investment in any B2B company and certainly in a software company and that is go uh, to market. If you think about go to market holistically, uh, uh, we spend a lot of money. It's 40% of revenue of public companies. You go look at uh, venture backed companies, it's well over 40. Private equity companies actually are a little bit more efficient. Oftentimes it's in the 30s, um, uh, but no question it's the largest expense. But when you just kind of take a step back and think about what do we get for all that spend, um, and you think about all the different aspects of it, um, there's a ah, big efficiency problem. Um, so first of all, you know people have been obsessed with marketing qualified leads as hey this is the thing that we should generate that results in pipeline. But the reality is data would say only 2%, it's probably closer to 1% now of these MQLs actually result in uh, a win. So that's not a very good batting average. Um second is you think about what you spend money on. Um, you know typical go to market org is spending 65 to 70% on sales, uh as opposed to marketing, customer success etc. And what do you have in sales? You basically have people. Um, so it's uh, you know, and people are just uh, time and talent. Um, so that's kind of an interesting thing. And there's just a ton of variants in how people operate. And what we see is if you actually look at the data today, the data shows that there's a real performance distribution problem. Um 30% of reps are making their number uh these days and you've got a ah, big separation between the haves and have nots. Um, that's pretty rough. Uh, and you're seeing sales rep attrition spike up as well as a result. You think about the time it takes to hire somebody to enable somebody to ramp them to productivity. Um, you know that's like a 12, 18 month investment and you're losing these uh, days it's more like 20 to 30% of reps who aren't making it uh, each year either voluntary or involuntarily. They're, they're, they're leaving super high cost for an organization. And then churn, you know for the longest time we said hey, the great thing about SaaS, if we're focusing on SaaS companies for a moment, is, um, SaaS is really sticky. It doesn't churn. We, well, we just hadn't seen enough of the life cycle. Uh, I think now we're certainly seeing SaaS indeed does churn. And why does it churn? It's actually pretty basic. Why insurance? It's because people aren't getting value. Uh, and uh, so you all in. You know this. A lot of go to market is process. Um, and yes, there's lots of art, uh, and strategy combined with process. But if you look at something else that's process is like manufacturing. And we've had Six Sigma and Deming's work for 70 years. You know, my quip is go to market and sales is like 0.2-sigma. There's incredible amounts of variance, incredible amounts of waste, uh, for, um, this massive investment, uh, that we're placing, you know, 40 million bucks in $100 million company. So I think there's a lot of room for improvement.

Speaker A: Yeah, I agree with that.

Speaker B: And the reality is it's only gotten harder. Um, so it's interesting. We, when we couldn't go outside in 2021, um, you know, the world was actually kind of humming along for tech companies. Um, now the new normal is hard and it's been hard since 22 and it's staying hard. So the economy has been slower growth, interest rates, macro, geopolitical chaos. You know, buyers have just become more discerning after buying so much more, um, buying so much. Uh, so now they have tighter budgets. It's also very hard to reach them. Um, competitors, um, are tricky now. Um, you know, there's a sea of sameness. So many categories have so many players. Uh, and it's not, you're not just competing against your direct competitors. You're competing for the attention of the Persona that you're targeting. And so if you're targeting a RevOps leader, well, guess what? So are dozens and dozens of other categories. So it's super tricky. Uh, and you know, as you're starting to see consolidation, uh, and commoditization, you're seeing certain vendors get more desperate, more aggressive. Um, you know, a big place where I've seen that is in this space where sales, engagement, forecasting and conversational, um, intelligence tools. You know, those used to be 150 bucks per month per user for a best of breed piece of functionality. Now you can get all three, uh, for 150 bucks or less. Um, you know, when I was at Maryland, we actually negotiated that down to 85 to $120, um, for all three pieces of functionality, which is basically a 70% drop, uh, in kind of price. So uh, that's hard. And then certainly what we've seen is go to market tactics are dropping in effectiveness, SEM, uh, you know, SEO, hiring, SDRs, solving for go to market growth by just hiring headcount, uh, is challenging. And then you know, we're seeing churn. Uh, it's because customers are saying hey, we bought all this stuff, um, and many companies have bought too much and they're evaluating, uh, you know, are we getting value from all these things and you know, is there an opportunity to actually um, you know, simplify this stack. So I think there's a big fresh re look that's occurring with all this kind uh, of go to market technology out there.

Speaker A: So hey AJ on that point, do you see curiosity around AI and how that ultimately plays out as suppressing demand at all for the traditional uh, tech and tools and stuff like that?

Speaker B: Um, I think it's certainly having an impact Scott, where uh, you know, I think there is dissatisfaction with the status quo, especially with all these siloed uh, tools uh, which are excessive. Especially when you think about all the different marketing sub functions, the go to market sub functions, you know, marketing, sales, um, customer, uh, success, et cetera. Um, uh, so there's a desire to see it be better. But yeah, it is still pretty early. Um, and I think there is some caution, there's a desire to experiment, but there's also caution to say hey, I don't want to add more tool sprawl. But I'm not sure who the winners are yet. I'm not sure about the platforms yet. So I think a lot of people are looking at, you know, the market leading platforms to say hey, what do you have from an AI standpoint first? So people are looking at Salesforce, they're looking at HubSpot, um, but it's uh, you know those companies are still kind of emerging their products. So um, I think there's just a bunch of things that are causing the buyer to be uh, more discerning.

Speaker A: Yep, yep.

Speaker B: You know, as a result, I mean I think what we're seeing since you uh, know, kind of the peak which was uh, you know, kind of 21, 22, this is a bit of a complicated slide. Um, this, this actually leverages ah, Ray Reich's data for Benchmark it, uh, which I think is terrific. Um, and while it's not fully updated, the story is right. It sort of says hey, we've actually got a little bit more efficient. We were spending 45% of revenue on sales and marketing. We're down to like 40ish and actually maybe even to the 30s, high 30s. And this is for public SaaS companies. Um, but what's happened is our growth rate is cut in half as well. So you know, our growth rate is actually if, you know, Ray just kind of updated me, it's like in the high teens now uh, for public SaaS companies. So that's half of what it was. And that means efficiency, uh, uh, has really dropped significantly. And um, this, this is his metric of sort of saying hey, for each um, uh, how many dollars of sales and marketing spend do I need to uh, have to get a net new dollar of ARR. Um, so that factors acquisition as well as churn, um, and of course expansion. So um, spend may have gone down, that's good. Uh, but growth has gone down and a lot of things aren't working well anymore. And that's why the performance distribution is really rough. So it's, it's, it's tough out there. Um, I'll give you ah, a little bit of a origin story on the Piston framework. Um, so I, you know, as part of my private equity job, uh, you know, with 50 companies in our portfolio and you know, worked with go half of them and done a ton of diligence. So over my career I probably worked with about 100 companies total, uh, on you know, go to market value creation. And what I found is um, uh, well, I'll give you the origin story. In October 2023 I actually did a conference and we brought together not just CMOs, CROs, CCOs, but also you know, Rev Ops, CFOs and a lot of CEOs together. You know I would actually really assert, you know, the true leader of go to market is actually the CEO and cfo because they're the ones who make all the resource allocation decisions at the

Speaker A: end of the day.

Speaker B: And they're the ones who sort of navigate all these independent fund functions that often don't align that well. And so when we did it, um, the first time we did it in 2023, we did a ton of uh, roundtables. We actually did 30 of them and had a note taker in each one. And we talked about, hey, what's working well, what are your biggest go to market problems? Tell us about your experience with some of the biggest uh, initiatives. Uh, whether it be pricing, account based marketing, partner strategy, sales, sales productivity improvement, rev opsy, kind of things. And we kind of got, we produced this 43 page note, uh, across all these things we stepped back and looked at it. Um, the answer was, you know what, you know what the opportunity is to improve our companies. It's execute the basics. Uh, that's what we need to do. And so that sort of kind of began a journey to just say, hey, it's back to the basics. And that's really where the, this Piston framework, uh, evolved. And this is based off of kind of my three year career, uh, in go to market and looking at and working with a hundred companies over that career. And so these are the things that I think are fundamentals and these are, these are execution fundamentals. Scott. So there is a broader framework, um, that looks at hey, what's the right go to market strategy. Let's think about talents, uh, let's think about uh, you know, kind of metrics and rev ops, et cetera. But these are the things that I feel are the most fundamental things to get right. And I actually find most companies uh, have some big misses in this. Um, so let me, let me walk you through it. Um, the first one is positioning and messaging that drives urgency. Um, the biggest issue today is, you know, we've probably all seen that Martech, uh, uh, page that has like, um, you have dozens, if not hundreds of categories and thousands of logos on it. It's like, okay, you're going to go to a CMO and say all these things are important. I mean that's ridiculous. So the question is why does your problem matter? Um, that's really where you have to start. It's not why does your solution matter, but what are you solving for and why is it meaningful? Um, and why is it worthy of executive attention? Ah, that's probably the biggest question that companies are asking these days. Like, okay, there's all this stuff, but what are the most compelling problems that I have and why, uh, why is that problem important? How should I think about that problem? Um, and um, and then have it lead to your solution. So that's positioning and messaging and if you don't do that well, you're going to get stuck with a mid level buyer who's going to say, oh, I kind of like this, but I'm looking at a lot of other things. I can't get this funded versus if you actually identify it being a critical problem, uh, you're going to actually get a lot more attention. Uh, I'm happy to walk you through some examples of this later, but let me walk through the framework first. So that's positioning and messaging. The second one is, um, uh, not just pipeline generation. It's funny, I go ask people, executives, what's your biggest challenge? Everyone always says pipeline. I'm like, okay, great. Um, but it's not just pipeline. It's like ideal customer profile pipeline. Um, you know, it's great when you find people who are in market. But what I think you really need to do is you need to find people who are high fit customers who are in market and you actually need to go cultivate, uh, and educate them about the problem that they have and not just, you know, pursue the ones who are showing intent signals. You want to get in front of that and actually educate them to say, here's how to think about your business. Here's kind of a key problem that you may have not realized. And then let's go after it. So. Well, uh, what I've done in my career, and this started all the way back at Salesforce, was just focus intensely, uh, on who are the customers who have the biggest problem. So when I joined Salesforce in 2010, uh, as uh, VP of global sales strategy, uh, you know, we had 11,000 accounts in the enterprise and we had 50 accounts per rep. Um, fast forward two years, uh, to 2012. Each rep had seven accounts and we only focused on 2,000. So we shrunk it down massively by just figuring out who are the companies that have the biggest opportunity for us to drive impact. So that's ideal customer profile pipeline generation. When you're super focused, you do much better. Um, the third one is, um, sales talent and effectiveness. And this is just the basics. Are you hiring well, uh, and are you enabling people and are you realizing effective productivity and performance, uh, across the team and retaining those people and managing those people? The reality is most companies are not. What you look at. When you look at most companies is they have, uh, really rough performance distribution. Um, so we Talked about earlier, 30% actually make their number. Uh, but what you have is those folks who are not like the, the bottom 50% of sellers contribute about 10% booking at a lot of companies. Um, so that's ridiculous. Um, so that's a big problem area. It feels like a huge overspend. Um, but you know, it's not just, you know, cut the team that's not working, but find a way to make better hiring decisions, better enablement and actually get people to be successful. Um, so that's just the basics of sales, uh, talent and effectiveness. And I think during this period where it was really hard to hire people like 2018-22, the economy was so hot. Um, you know, there was just a lot of people who weren't a great fit. And then you know, companies over, uh, over invest in reps and not things to make reps successful. Um, the fourth one is team effectiveness and alignment marketing, um, sales, partner ecosystem, professional services, customer success. And then you can even throw in support and of course even product. That's what go to market is it is those seven functions. But and here's the problem, you don't really have an executive, whether it's the five functions or seven functions or four functions, who actually knows all this stuff. How many sales leaders who now are now called chief revenue officers actually really understand marketing and all the different aspects of it? Do they understand inbound demand, uh, outbound demand? Do they understand marketing, operations, brand, product marketing? Not many. So it's like this is a problem. And so how do you actually get all these functions to understand each other and be aligned together? That's where I really think it's the CEO and CFO's job to make that happen. And that's not happening sufficiently in companies. Um, the fifth one is related to um, uh, you know, once you have customers, are you actually um, getting um, delivering value to them? And are you actually able to measure it and not just do it to, to win the deal as you're trying to get the business case funded, uh, to get the initial new logo acquisition, but you're getting it across the board, uh, and doing it throughout the customer life cycle. I mean, why do customers churn? Um, the reasons customers churn is because they're not getting value. And most companies actually aren't even measuring uh, it. And they're not measuring it, they're not communicating it, they're uh, not partnering with their customer on it. And so you know, all this work was done to actually get the customer and all these promises, but it's not actually focused on. And then the final one is just really maximizing um, um, the customer relationship. It's not just about getting the retention, but it's actually getting the upsell, the cross sell and actually having pricing power because you are delivering so much value. So NRR really is the key metric, uh, for fully being uh, successful in uh, leveraging your market opportunity. And what we see is there's so much effort that's put into targeting uh, and campaigns for new logo acquisition. But um, being thoughtful about how you get the full value out of your customer base, um, that is something that's just not really Focused on, um, before I hit the last comment that I have for you, um, uh, I've got two more for you. Scott, why don't I give you a chance to pause now. That sort of seemed pissed, um, him here.

Speaker A: Yeah, I, I think that's great. There's, there's a ton to unpack there. When you were going through it, I was just writing down a few things and maybe I can just uh, hit you with these, uh, one by one and then we'll see whether the audience has anything to add or, or ask. Uh, on the positioning and messaging that drives urgency, I actually saw a post by ah, Peter Confori had good content today that he had done a uh, podcast with somebody or an interview and she was talking about um, how all the messaging has become this sea of sameness. Right. And she said she thinks that uh, what happens is founders are the closest to understanding the customer problem, uh, and marketing people aren't that close to it yet. A lot of times marketing people end up sort of responsible for the messaging or you get kind of, um, you know, committee think, et cetera. Any thoughts on um, kind of who best to drive or how best to achieve the positioning and messaging that drives urgency?

Speaker B: Yeah, so I think what it fundamentally is about is um, staying being close to the customer and being focused on the problem. I mean I think what you're really solving for is why does your problem matter? Um, and guiding uh, the prospective customer how to think about it. And I'll give you uh, my observation of uh, um, some feedback for my colleagues. In private equity, we do amazing amounts of diligence on customers, on the market, on experts, on competitors, when we're doing a deal, um, but how often do we actually revisit that when our holding period is, you know, four or five and even longer years these days, um, it's seldom, um, so you know, we can capitalize the expense of all that research up front but we don't stay focused on it. And actually I think it's the thing that, you know, whether you're owned by private equity or whomever, uh, you need to stay focused on the customer and because their needs are evolving and offerings, uh, that they can use to solve these, their problems, uh, are evolving as well. If you don't stay focused on them, if you don't stay current, um, you risk losing product, market fit, uh, as well as just being irrelevant or just sort of out of touch. And I think that happens to a large percentage of companies. Scott, it's super basic, but focus on the customer But I think you're exactly right. Why does a company sort of take off in the first place and get product market fit? It's because, yeah, I, I think it is because a founder actually is intensely focused on you know, saying hey, I see this problem out there for you know, this type of company and this type of executive, uh, for this type of business function. And I see this pain. And you know, whether it's how you manage dental offices or how do you do service supply chain, how do you um, you know, manage uh, you know, financial compliance? Um, and so I think you have to just be deep, uh, and then you have to come up with a distinctive point of view that really kind of makes the customer stop in their tracks. I'll give you an example. Actually this is a company that um, I worked with uh, for you know, pretty extensively for kind of six plus months. Um, service supply chain software. Um, sounds riveting, doesn't it? That's like hey we're uh, and it's like in the current state would be hey, you're going to go sell to the director of service supply chain uh, and try to convince them that they should use uh, your software when they have some kind of big ERP package that just general um, supply chain management stuff. So why would this matter? Well if you go to a billion dollar plus manufacturer, you actually uh, with thousands of products and uh, uh, uh know tens of thousands of spare parts from thousands of customers scattered all throughout the world, how do you figure out what inventory to carry in the right place such that when an imaging machine breaks, ah, in a uh, in a you know, a physician's office, uh, for body scans, um, and MRIs. Well how do you actually get that machine fixed? Uh, as quick, quickly as possible because you have the right parts there. Uh, when you've been building imaging machines for 40 years, um, and so that costs you from an inventory carrying cost standpoint, that costs you from a multiple truck roll. Standpoint rolled out a truck, try investigate the problem, don't have the part, have to come back and that uh, impacts from a customer, uh, you know, huge customer value, uh standpoint like okay, the imaging machine's down, I got to cancel you know, dozens of uh, patient appointments. And that's not just cost, that's actually potentially even life and death. So when you think about it that way, you elevate to realize hey, the service supply chain is critical. And by the way if that happens and your imaging machine's out for two days, um, your customers can be pissed and uh, they're like, and many of them have like maintenance contracts. It's like, what am I paying this for? Why would I buy more from you? You know, it just makes them a lot more cautious, has a huge negative, uh, ah, impact on customer experience and therefore on their willingness to buy more. And then think about other things. Think about airplanes. Um, you know, uh, you know, if you're doing airplane maintenance, um, so. And so how do you manage for that? Well, we'll just level up the inventory levels and so we'll carry hundreds of millions, uh, in inventory or maybe billions, uh, just to make sure that we don't have that problem. And that's something that you can solve and you can actually improve 30 to 40%. That sounds pretty worth it. That's an executive level problem that the CFO level, uh, no longer a director of service supply chain.

Speaker A: So that's an interesting point. Um, uh, we see it in our own business that there is a very strategic problem. Like, like in our case, the strategic, strategic problem is efficient growth or lack of efficient growth. Right. But if we go to the head of sales or the head of marketing, you know, just down, basically down a layer from the strategic, um, they don't think we have an efficient growth problem. Like for some reason they're not getting that memoir.

Speaker B: Um, why do you think I can ask you, why do you think that is? Since you work on metrics with ah, a ton of companies, like is it a business acumen issue? Is it a data reporting issue?

Speaker A: Is it a. I think there's not enough, um, attention to value creation. Right. What? Think about it. It's growth, it's the efficiency of growth. Uh, maybe some EBITDA and whatever Your Rule of 40, Rule of X uh, metric might be. But sales leader thinking about his pipeline and yes, it should be a component that gets you to the end goal. But if you're not thinking about the metrics that actually drive valuation, because pipeline itself does not drive valuation. Um, I just think people get disconnected from the uh, strategic importance of some of these things. Um, it's just fascinating. And so you end up sort of, you go in and you say, okay, do I spend my energy trying to convince this guy that what he sees, this problem is actually a lot more strategic? Or do I just go with the way he thinks of his problem and try to figure out a way to create some urgency around it, which is kind of what most of the products do or most solutions do, which leads to the sameness, I think, in my view.

Speaker B: Yeah. Um, well, the product part of that is, feels like a different conversation. But look, I think the issue fundamentally is there's a chasm between the understanding, uh, of CROs and CMOs and CEOs and CFOs and boards. Um, so what does the CEO, CFO and board care about? They care about, you know, basically growth and profitability. Um, that's what you get rewarded for. Um, and I think these days, you know, you have to have uh, certainly private equity. We want our companies to at least be break even and we're very much rule of X oriented and rule of X or rule of 40, whatever it is, it's really actually quite simple and it's fundamentals, it's, that is, hey, if you're, we uh, want you to have uh, your growth percentage plus your margin percentage your know, operating margin percentage be 40. Um, so if you're growing it uh, uh, 30%, uh, you know, we expect you to be 10 uh, percent profitable, uh, your operating margin, your EIDOW margin to be 10%. Um, if you can only get 15% growth, we're going to expect you to have 25% EBITDA margin. And, but growth is still valued way more than margin. So um, um, Ray's done great work on this, um, and he basically says yeah, it's about something like 2x. It might be 2 1/2x, um, you know, each point of growth versus margin. Um, so I would say, you know, as a company in private equity, we, we want to see you get to certainly 10%, uh, EBITDA margin. Uh, and we want to see both, frankly we want to see both. Uh, but fundamentally we want to get to the rule of X. Um, you know, we get some companies to, you know, some companies that we, you know, picked up at rule of 45, we took them to like uh, 57, uh, because we improved profitability and we accelerated growth. Obviously that's nirvana. And when you do that, you're going to have a very successful outcome. Um, uh, as a company, the Assembly Eden, you have a acceptable evaluation what you paid for it. Um, so that's really what we're trying to do. But I think here's the problem. Um, the problem is, um, the problem is the CEO and cfo, they know what the metrics, what they want the metrics to be, but they don't know how to get there. They're like, okay, well I'll have a sales team and they'll do sales. I have a marketing team, they'll do marketing. Um, but they don't when it, it's not Working so great. You have all these metrics. Um, um, my metrics say, um, my sales productivity is not as good as I want it to be. What do you do? Well, why? Uh, it's like. And then you do deeper analysis. Well, I've got a performance distribution problem, or my win rates are not as high as I'd like them to be, or the deal sizes, or uh, you know, uh, you know, sales cycles are getting longer. Okay, so great, you did all this analysis. You understand that there's a problem, but you don't know why and you don't know how to fix it. Um, and the CEO and CFO unfortunately, generally don't know. Um, the things of the past. The old playbook was, well, if you want to grow more, hire more reps. Um, okay, so what ends up happening is, um, if you're dissatisfied, you're like, okay, it must be the sales leader. So I gotta hire. They're in charge of this function, so I better replace the sales leader. Uh, and the new person will come in and of course the new person comes in and says, oh, well, the previous person did all these things wrong and uh, let me fix them. And do they turn it? You know, oftentimes they don't. Sometimes they do. Um, but here's the problem. The CEO and CFO don't understand what actions to take. And guess what? When you do all your marketing metrics, um, none of them are going to say invest in positioning and messaging. You actually have to have the business acumen, the go to market acumen to know this is part of the problem. You have a story that doesn't resonate in a market because you've done customer research and then you've come up with an innovative point of view that educates the customer on their problem. Your metrics will never tell you to do that. You need go to market acumen to know that's the lever to pull. Um, but we have a problem with the CMO and the CRO, uh, uh, or chief Sales Officer or whatever. Just call them head of marketing, head of sales, head of customer success. They actually don't have the business acumen, um, to say, well, what I really need to do is I need to think about, you know, uh, LTV to cac, uh, and uh, and I need to think about that by segment, I think need think about that by product line, by geography. And, and I need to break it down because LTV to CAC is a super galactic metric. So lifetime value of the customer. Okay, well what's the average customer? Uh, Revenue on what's their life cycle and how does it expand over time and then cac. How do I think about uh, well, how much should I spend on sales versus marketing versus customer success? Well, historically people, uh, you know, when I was at Salesforce, uh, in 2010, we spent 80% of revenue. Uh, sorry, 80% of go to market spend on sales. So it was 4 to 1 sales versus marketing. Um, I think we were 40% of revenue on sales, 8% on marketing. Um, now it's a little bit more like it's a little bit closer to 2 to 1. But if you actually think about how is the customer buying these days? They're more and more independent. So uh, the latest Gartner data would say 80% of the buying process is done by a customer independent of talking to uh, the potential solution provider or vendor, AKA slows reps. So, so you're spending two thirds of your go to market spend on sales reps who are involved in 20% of the buying process, is that right? Um, probably not yet. That's what most people are doing.

Speaker A: Certainly enterprise focused companies do that.

Speaker B: Yeah. So look, so this is the problem that we have is like, well the sales leader is saying, hey, well uh, you know, you want me to make my number, I need more sales reps. Um, and yes, I do need more marketing, but oh, if we, if we have a jump ball for some funding, you know, I'll probably take the reps, uh, or versus putting it in marketing. And this is the problem, um, you don't really have sales leaders who actually uh, in most companies, uh, especially in like the pe backed ones where it's like 10 million to a billion ARR. If we're talking about software companies, you know, look, you don't have somebody in most companies that actually understands all its sub functions. And what are the trade offs between, between marketing, sales, customer success, professional services. Professional services was a dirty word for a long time. It's like, oh, professional service is low margin. Why would I want to do that? We're a SaaS company, we need to be 80% gross margin. Well, guess what, if you don't actually make your customers successful, they're going to churn. And then all your superior economics that you counted on, uh, and all that expansion goes away because the customer didn't get value. So maybe their professional services is actually important. Uh, and uh, you know, I think people uh, are just starting to recognize that again. And like the company that has this innovative concept is called Palantir. And all Palantir is doing is saying, you know what, we're actually going to have services combined with the software so the customer actually gets value. That's all they're doing. It's as old as time. But we just, we got obsessed with metrics that said, uh, Well, I want 80% margin and I want to shrink that 20% margin. So stuff, um, in a recurring revenue business, you got to be, you have to think more holistically than that. So I think there's a big chasm, Scott, uh, in between how the CEO, CFO and board think and then how the go to market leaders think and then the further the issue is, the problem with the go to market leaders is it's silos. Um, you know, they're starting to learn how to work together. But in most companies there's quite a ways to go.

Speaker A: Listen, aj, uh, I've enjoyed it. There's some important stuff here, uh, very important. Uh, and I think people can take this framework which gives some really practical things to focus on as a, uh, a good starting point. So I appreciate you being with us, uh, and everyone uh, that uh, listened in. I appreciate you guys spending the time with us and uh, hope you all have a good rest of your day. Very good.

Speaker B: Thank you, Scott.

Speaker A: Make no mistake, good data matters for driving efficient growth and valuation. Follow me on LinkedIn where I'm sharing insights from CFOs, investors and strategic go to market execs. Thanks for listening to the data room.