Turn Your Monthly GTM Meetings Into Your Most Strategic Asset

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, to understand what drives value creation in a business. Again thanks for joining us today, uh, for another session in our webinar series called Bridging uh, the Gap between Finance and go to Market. Uh, I'm Scott Stauffer, with me is uh, Tim Mann who is our uh, CRO at Scale Matters. We're going to talk about uh, uh, structure uh, for running meetings. But that's the um, sort of the tactical answer to a strategic issue. And the strategic issue we're going to talk about is the emerging SaaS efficiency crisis where the economics of growth are really becoming unsustainable. Uh, we're going to show you how the way that most growth in mid market B2B companies uh, operate their go to market function is actually a significant cause of this inefficiency crisis. But mostly what we're going to show you is a better way to run your go to market, uh, a way that actually drives efficient growth. Uh, we'll leave you with a template that you can use uh, as a practical tool uh, in order to improve your own good market. Name is Scott Stauffer. Uh, Scale Matters is my fifth company as CEO and fourth that I either founded or co founded along the last 30 years. One of the things that I've really gained uh, an appreciation and in fact kind of a passion for is leveraging quantitative assets such as analytics and models to help run businesses with more efficiency and effectiveness. I found that discipline modeling of a business's dynamics is sort of instrumental in driving alignment across functional departments. You can almost think of it as systems thinking applied to business. Um, before we uh, get into the meat of this, uh, just a little bit about Scale Matters. Uh, we've seen firsthand that businesses with really good data and analytics and models around their go to market function are able to deliver outsized growth and efficiency because they can operate at a level of precision and intentionality that companies without such a data posture just can't do. And uh, for many years kind of in the VC and PE backed ecosystem, we also have recognized that most companies at these stages struggle quite a bit to get their go to market data house in order if you will. And as a result their leadership team is missing an important tool to drive efficient growth. Uh, we, our mantra that we talk about internally is your crummy CRM data isn't the reason you aren't growing fast, but it is the reason that you struggle to figure out what steps to take to get grow faster. Uh, there's so much expensive capital, so much precious Runway, uh, is wasted by growth stage and mid market companies because they don't have the data to run their go to market function with precision. And, and that's kind of why we start scale matters, uh, basically to help companies transform their go to market data such that analytics can be performed and models can be built that legitimately help the leadership teams improve outcomes. So that's done with the advertisement. Let's get into today's meet and to set context about this SaaS efficiency crisis that I mentioned, uh, at the very uh, beginning I'm going to borrow some material from David Boyce and the folks at Winning by Design. We know that ARR growth is the primary driver of company valuation. Uh, this is a comparative R squared analysis showing the correlation of just growth on the left, rule, uh of 40 in the middle and rule of X to valuation. And the conclusion is that rule of X is the best indicator of value of valuation and rule of X values growth at twice the weight of profitability. Uh, so we know that growth is critical um, to drive valuation. But we also know that over the last four years average growth rates for scale ups has more than half right cut cut more than by 50% while the cost to acquire a dollar in growth has skyrocketed 60%. So the, the efficiency uh, is, is more than four times worse than what it used to be. And if you just look at public SaaS companies only 18% over here on the left are spending less than a dollar to get a dollar in growth spend, uh, a dollar to get a dollar. That used to be the standard of efficiency that, that basically warranted investment. 82% of these companies are unable to grow efficiently. But these companies, public companies, they're at least at the scale that they really aren't at risk of dying right just end up as sort of slower growth zombies, uh, with maybe lower valuations. In the private markets we have the same efficiency crisis, but these companies aren't necessarily at the scale where they could just accept slower growth with some modest profitability. They need to keep fueling growth. But with these efficiency metrics they really aren't Fundable. So unless something changes, we should expect to see a lot of carnage in the coming years. And our topic today, while seemingly very tactical, uh, is a major step towards reversing the strategically important Go to market efficiency trends. So using a very sophisticated graphic here, uh, in an appropriate title, let's look at a box with arrows in it. Right? What do, what do we notice here? All of the arrows are generally pointed either up or to the right. Right. Up and to the right. That sounds like a nice place that we would like to take our business. So let's call that our goal, which must mean that we're starting. Our starting point is at the bottom left. Now let's imagine that each of the arrows represents a set of activities performed by various parts of the Go to Market team. Maybe this arrow here represents uh, branding activities by marketing. Maybe another arrow might represent cold call prospecting by an SDR team. And maybe a third arrow are new features being developed by the product team. And yet another arrow represents product demos by the sales team. But what we have here are uh, really just a bunch of disconnected activities all ah, generally intended to move the business closer to our goal, but none of them working in concert with one another to efficiently move the business there. How many times have we heard sales saying, uh, they aren't getting enough, um, good quality leads, ICP leads from the marketing team. And in that very same meeting, marketing is able to show us that they actually are beating their MQL goals. How many times have we seen the product team release a new feature that they've spent maybe the last three sprints on only for sales to not even discuss that capability during the demo. This is what we often see in growth in mid market SaaS companies. This is what we call lack of alignment. And this is why despite our best efforts, SAs go to market is increasingly experiencing this efficiency crisis we just spoke about. But what if you connected these activities kind of into a beautifully choreographed motion where each activity, uh, actually built on the prior activities? Right. In that case, movement towards the goal is intentional and can almost feel effortless. And these arrows are exactly the same arrows that were on the prior slide just connected. Uh, and that's what an aligned Go to market looks like. And this is how you will absolutely need to operate if you're going to have a fighting chance at an efficient Go to market engine and subsequently a company that's attractive to investors. And what we're going to do today is share a very simple tool with you, uh, that has proven to be very effective at driving an aligned go to market engine. In fact, we'd argue it's a necessary component of a go to market function that's designed to be aligned. And that tool is the business review meeting or the go to market meeting. And this may be part of a, uh, regular executive leadership meetings. It may also be part of board meetings. To be clear, it is a leadership tool. But before we get into it, let's first look at what most kind of business review meetings or go to market meetings currently look like. So the prevailing way of running go to market leadership meetings today is structured around the individual departments that make up go to market. Maybe it starts with marketing, right? And the marketing leader will stand up and they'll review their metrics versus goals, typically things like MQLS or marketing generated pipeline. Uh, then they're going to walk through progress on any key marketing initiatives and then each departmental leader will basically follow with the same basic format. Right. Clearly this is a meeting. This meeting structure is, it's really an exact metaphor for the first box of arrows. We consider all those arrows that were generally heading up or to the right, but they weren't connected. So it's a lot of well intentioned but disconnected activities working in isolation of one another to hopefully move the company closer to its goals. So what's wrong with this? Well, what's wrong with this meeting structure is that it fosters a siloed operating culture. There is no forcing function to facilitate alignment around strategic goals of the company. And the primary strategic goal, uh, obviously is value creation. It's equivalent to our box with the disjointed arrows. Right. Everyone working on things that by and large should be helpful, but no coordinated alignment towards specific strategic goals.

Speaker B: Yeah. Scott, quick question. From your perspective, uh, and experience, who should own this structure? Like who, who should, who should be the one that, that puts it together and uh, drives it.

Speaker A: If you have a CRO that owns all of revenue, that owns, you know, marketing, sales, cs, rev ops, that's the person. Uh, if, if you, if those functions report directly up to a CEO, um, then it should be the CEO. Or what we'll normally see in maybe larger organization, 50 million or higher, where there's a strategic CFO, uh, in place that that person may own the structure of how they operate, kind of operate as a CEO. But it's very difficult for one of the functional leaders to own this. Right. Just because egos and other stuff gets in the way. So it's got to be somebody with cross functional responses. Possibilities are. So let's take a Look at the structure of, of a business review meeting for what we call an aligned go to market, uh, meeting. Right. And there's really three primary sections to this meeting design. Uh, the first section is meant to be a constant reminder of why we're doing this in the first place. Right. Which is to create value. Uh, then we sort of, in the second section, narrow the aperture with, with more a focus around ARR growth. And finally we focus on the priority growth or value creation levers that we should be focused on and any initiatives, uh, associated with them. So what's all that mean? So part one of the meeting, uh, let's first take a look at the few key metrics that are the primary impactors of valuation. And the reason we do this is we want to ground all of the leadership discussions around our North Star, which is driving valuation. So this is a slide that we generally use or have our customers use one set of metrics, basically four metrics. Right. Um, we start with the scale and growth, which is how much ARR do we have? How does that compare against what we expected to be at this point with plan and what's the growth rate of that ARR? By looking at the year over year and quarter over quarter comparisons. Then the next two metrics are basically efficiency metrics, which is the middle two green tables. Uh, the first is our efficiency at acquiring ARR. We generally like uh, CAC over a dollar of ARR.

Speaker B: Right.

Speaker A: How much are we spending to acquire $1 of ARR? You could look at CAC payback. There are different efficiency metrics. Pick the one that feels right for you. But, but, but, but you don't need to look at two or three different variations of it. And then we look at even though. Right, because that's more of a measure of the company's total efficiency. Uh, and we want to look at as percent of revenue versus plan and how that's growing as well. And then, though not essential, we do like to keep everybody's attention on one of the rule of metrics, either Rule of 40 or Rule of X, and how that metric is changing over time. And again, for those of you who aren't aware of, uh, Rule of It's a metric that combines growth rate, top line growth rate and profitability. And as I mentioned earlier, at least recently, rule of X, which overweights growth rate, has had the highest statistical correlation to valuation of any other metric. So again, the whole point of starting the meetings and uh, focusing on these, uh, valuation drivers metrics is that we want to keep everyone focused on the North Star, uh, and everything we do should be intentional about moving these metrics in the right direction. Before we do one, one of the things I wanted to mention, you can't get all of this alignment that we'll talk about with all without also, um, looking at compensation strategies. Uh, and in my experience, I think executive compensation strategies have often sort of further fomented a siloed culture. My marketing gets bonuses on lead gen or pipeline created sales gets comped on, deals closed. And we encourage more companies, all the people we deal with, to attach a much greater portion of variable comp, uh, to these North Star metrics. Right? Because that's again, it's what drives valuation of the company and they cross functional boundaries. And so we, we think if companies would overweight these metrics, the valuation drivers on variable comp, uh, it'll keep people focused on the right things and it will drive better a lot.

Speaker B: Tim.

Speaker A: What are you gonna say, Sean?

Speaker B: Yeah, I was just gonna ask Scott. What, what, what barriers do you think exist that like, why aren't people, why

Speaker A: aren't more people doing that?

Speaker B: Uh, uh, and why is that such

Speaker A: a shift for people? I think so many times people say I only want to be comped on what I can control. Um, and you know, sales is comp. On closing sales deals. Right. Uh, the reality is they can't control that either because they have to have a good product to sell, they have to have leads, etc. But I, I, I think there's just this cultural notion of, uh, if I can't be fully responsible for it, then don't hold me accountable for it. And, and you know, it's, it's decades or it's maybe longer than decades, that, that's how people think. And we as leaders, as CEOs, and as venture firms and boards have allowed that to perpetuate and it makes no sense. Right? I mean, at the end of the day, we're trying to create company value and we need everybody to keep their head focused on that. But I think that's, that's the primary issue is, um, a distaste for accountability for something that is not completely in one's control. Do you have any thoughts yourself, Tim, on that?

Speaker B: I think it's a fair point. It's, you know, there's, there's trust and alignment that has to happen in any organization for that, for that to happen. And people have to be on board with what the primary goal is and brought in and aligned to that goal. So, uh, I think it's important to Set that stage early on. Right. It's one thing to make that change later on, but you know, as, as you bring on a new leadership team and as you reshape companies at times, you know, it's a good opportunity to start fresh and align everybody on what's important. Yeah.

Speaker A: Well, I mean, one other thing that's kind of a little bit of an obstacle is the relative portion of different people's compensation that is variable. Right. Sales, as a rule of thumb, 50% of their on target earnings are variable. They're going to be very focused on what that, what drives that, uh, where maybe marketing or CS, it's 10 or 15% of their on target earning. So the compensation, the variable part of their compensation as a rule isn't going to grab as much of their attention as it would for sale. So I mean that, that ought to be kind of, if we could get society to relook at that relative weighting, I think that would be helpful as well. But, uh, we won't. Yeah. So down that rabbit hole right now. Um, so after we focus on the North Star metrics, which is the valuation drivers, since we know growth is the biggest of those metrics, if you will, we, we want to focus, uh, the lens now on growth. Uh, and just for context, let's take a quick reminder look at the SaaS growth model. And if you're not a SaaS company, you have a growth model too. Right? Um, so the idea is, think about your growth model. We, uh, start with a certain ARR, start a period with certain ARR. We add to that the ARR from new logos that are acquired. Um, uh, if you're not a SaaS company, you add the revenue from new logos that are acquired, which we're getting through some kind of new logo acquisition funnel process. Right. If you're SaaS company, we subtract from that the ARR from churn logos and the ARR from logos that reduce their commitment. And then we add back in ARR from expansions and upsets and that leaves us with an ending ARR. So what we first want to do is look at the makeup of our growth year to date. And obviously this is very simplified. We would actually had numbers on this if this was a real company. So we use the ARR waterfall for this. And again, think of the value of getting your leadership team to focus on the ARR waterfall, which is basically SAS growth model. Right. Except we've taken away the, uh, detail of the new new logo file. Uh, there's nothing in here that talks about Marketing or sales or SDRs. All this says is did we have net growth and if so where did it come from? Not who did it come from. And then we may want to further drill down on that year to date ARR waterfall by kind of looking at the monthly net growth relative to plan including its component makeup. And uh, basically what this is is it takes the prior slide and it does that slide for each month and then stacks the things rather than spreads them out. And so you can see in this example this particular company uh, has had negative growth uh, other than one month and you could see where that compares relative to their plan. But it gives the leadership to team. Um, and, and of course you would imagine the primary reason this company's had this negative growth is because it got way more churn than they were expecting. Right? So this, it gives the leadership team a sense of where they need to focus their energies. And in this company's case it, it's really on ah, churn and retention. Um, and, and then let, let's say you happen to be um, trying to make some kind of market, market move. Maybe you're as a company saying uh, we want to move up market. You might choose to look at those same two charts but filtering just for the target icp. Um, right, so the waterfall and then the uh, then the monthly uh, uh, breakdown of that as well. Uh, so what we've done to this point in the go to market meeting is we focused leadership around the handful of metrics that drive valuation and then we drilled a bit deeper into an analysis of growth which is the heavy hitter metric for driving valuation. Again we've not talked at all about any of the functional departments and functional specific metrics. Now we're going to switch to an action orientation and again we're not going to talk in terms of functional departments but instead we're going to focus on the levers we can and should be pushing on to drive accelerated growth. Uh, growth. We refer to these as value creation levers. This will look familiar to any of you who have seen some of our previous webinars. For any growth model there is some set of levers that you can activate to drive growth. Uh, and here we're showing again the straightforward SaaS growth model. And now on it we've labeled the levers that we can consider activating. Now to give you a feel of how the aligned go to market meeting structure flows, we're going to pick two of these levers and I'll walk you through how that discussion flows within the meet, uh, we're going to focus on the first, which is increasing the number of ICP leads, uh, and the third funnel, which is the third, which is increasing funnel conversion rates. So, uh, the first lever, again that this company has prioritized is to increase the number of leads that match our target icp. Now, let me be clear. Let's say there's six levers, six growth levers in that SAS model I showed you. You as a leadership team should not say all six are equal priority because they're not at any given time. Like in, uh, that example I showed you where the company was churning so much. Their priority should be on that lever of reducing churn, right? Now, in this particular example I'm using of saying this company prioritized increasing the leads, right? Because maybe their churn and retention's fine and they just need to bring in new customers. Right? Um, so for each lever, we're going to do two things in this meeting. First, we're going to look at lever specific insights that might inform actions we could take. And then we're going to review the initiatives that we're working on. Specifically each leverage. So lever specific insights. There are two insights or data curations, uh, that we'll always want to look at related to this lever of driving IC more ICP leads. The first is segment roi, because that's what actually determines who our target ICP should be. Uh, and, and we do segment ROI by using an LTP to CAC analysis broken down by segment. And we look at this every month in the meeting because we just want to make sure we are all still clear on who our ICP is. Uh, and we want to make sure that the data isn't changing. Right? And then when we look at this, we ask ourselves collectively, does the data change our view of icp? And again, part of the reason we do this, and I don't know if you guys have experienced it, but I've seen it so many times. Marketing's targeting one set of prospects. Sales is going after a completely different set of, uh, prospective customers. Right? And so forcing this discussion every month keeps everyone aligned around who, who is our icp. Right? But then the second, uh, insight that we look at is we want to understand which of the sourcing strategies or the channels that we use to bring these people in in are most effective at bringing it them in. And knowing that will likely cause us to shift around our investment levels in order to maximize the ICP leads. So those are the two insights, uh, that we always look at associated with that lever of Increasing, uh, the number of ICP leads. Next we turn to really the meat of our operational approach, which is the initiatives that we as a leadership team have decided on. Um, and this is in prior meetings that this company would have decided on these. Uh, so in our example company, uh, they earlier decided that their messaging wasn't particularly optimized for their target icp, so they embarked on an initiative to fix that. Um, because it was, it was creating friction in, in, you know, getting ICP people who had hit the website to actually, uh, hit a call to action. Right. And as you can see, while this is a marketing intensive initiative, right, There's a set of actions that all together make up this initiative. You can see marketing's on a lot of them, but so is sales and so is sdr. Right. They have responsibilities as part of this initiative as well. Uh, and in the meeting, what we basically do is we have each leader talk about the particular actions that are there that they own within this initiative, give a qualitative assessment of how it's going, uh, a risk assessment as well. And then following that qualitative assessment of the components of the initiative, we will review the key metrics that we defined at the start of the initiative. And this is very important when, as a leadership team, when you guys decide that there's a specific initiative to help activate one of these growth levers, be very, um, intentional about how are you going to measure the impact of that initiative. Right. And so with our companies that we work with, you know, all these initiatives have very clear measurements, uh, on how we could tell whether we're having impact. And they go through that to understand, um, is it having the desired impact of expected. If not, should we contemplate changing the initiative, etc. So let me quickly go through one more example. Uh, and we're going to use the third lever. Uh, this one is focused, uh, around increasing funnel conversion rates for ICP leagues. As with the previous lever, here again, there are some insights related to this lever that we're always going to look at. In this case, we increase conversion rates. We use this, uh, thing called theory of constraints. What we're looking for is the biggest choke point, right? The point in the funnel where we are experiencing the most leakage. Uh, and we have a set of standard data and charts that the leadership team looks at to help us understand that choke point. Uh, and we have a standard set of charts and data that we look at to help identify what the root cause of that choke point is.

Speaker B: Right.

Speaker A: Uh, and again, we look at the Same insights for each respective lever every meeting. Just to understand if anything has changed that would cause us to want to change our initiatives. And then this example company, uh, they had concluded that the biggest choke point in their final conversion was that the demo itself and that they've designed then an initiative to improve the demo conversion. This uh, includes adding some functionality into the product, uh, includes modifying the demo script and then retraining the sales team. Right. Uh, on how to most effectively uh, execute the demo, uh, to give off the intended message. And again look very carefully here. This initiative involves the product team, the sales team, product marketing and enablement. It's truly cross functional initiative as most are. And I can't stress enough how effective this aligned uh, go to market meeting structure is at breaking down the silos and actually making progress on key cross functional initiatives that accelerate growth. If you want to get alignment, you have to discuss stuff in an aligned manner. And again, ah, as before, every initiative has very specific metrics attached to it that help us understand if we're seeing the desired impact. So summary, let's relook at the agenda for an aligned go to market meeting. First we review the key metrics that drive valuation and we do that in order to keep that front and center on everyone's mind so that we focus on what matters. There are so much energy consumed in go to market teams on stuff that isn't making, making a difference. Right. And so we want to make sure that everything we're doing is aligned to driving value valuation. Then we narrow, we know that growth is the most important part of that. So we narrow the aperture around growth and we use the growth model metrics to understand, uh, to understand basically how the growth is because it's representative of the system as a whole rather than looking at functional metrics which are very siloed. And lastly we review the initiatives that are structured to activate the growth levers. Right? And this by definition results in cross functionality and it becomes a forcing function for alignment of all the activities within an initiative. If you go back to my box with disconnected arrows, this management technique is what connects and aligns those arrows into orchestrated success. So we know that this approach works. We've seen it work a number of times to accelerate growth. We'll end it here. Thanks a lot, Have a great day. Make no mistake, good data matters for driving efficient growth and valuations. 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.