Aaron Ross of Predictable Revenue hosts a panel on something we CEOs and founders all want to do: scaling the sales to $100m in ARR. He’s joined on the Hypertactical stage with Andrew Bothwell, VP of Inside Sales at TalkDesk, Aaron Schilke, VP of Enterprise Sales at TalkDesk, and Josh Stein, Partner at DFJ Venture Capital to talk about how to achieve that milestone and the often painful transformations a company has to go through to get there. What got to $1m in ARR probably won’t get you to 10, and it certainly won’t get you to 100.
How do you let go of people that were great for one stage, but aren’t fit for the next? How should you think about building out your sales process? What do you need to keep in mind when communicating and making your board happy? Why should you start up your outbound marketing machine sooner rather than later?
Check out this talk to get the answers to these questions and more.
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Aaron Ross: Why you’re here is for me to introduce these guys. Why don’t we start with Aaron actually, who’s VP of Enterprise Sales at Talkdesk, if I got that right.
Aaron Schilke: Yeah.
Ross: Come on up. Come on. How about a round of applause, people?
Ross: Glad to have you here.
Schilke: Glad to be here. Thank you very much.
Ross: There are a lot of As here. Now, we have Andrew, VP of Insight Sales at Talkdesk.
Andrew Bothwell: Hey.
Ross: Hey. Great to have you here.
Andrew: Great to be here.
Ross: Josh Stein. Come on up. Partner at DFJ.
Ross: I’m assuming you’re on the board of these guys, right?
Josh Stein: I am.
Ross: Good to see you. We’ll to get Josh last here for a fun facts once he gets to sit down.
Josh: All right.
Ross: Josh and I have some history.
Ross: We’ve done this before, but quick fun fact about yourself.
Schilke: I started my career in procurement, believe it or not.
Ross: Cool. Procurement to sales.
Schilke: That’s the middle ground in between. Moved to the dark side later.
Ross: There’s hope for some of you here. OK. Andrew?
Andrew: In college, I maintained three jobs at once. That’s nice. One of the jobs I had was Community Service Officer. I was a bike cop on campus giving out bike tickets and parking tickets. Let’s just say I was not the most popular person at the bars or walking around campus.
Ross: Good way to meet people. [laughs]
Andrew: You learn how to communicate extremely well.
Schilke: By the way, have you guys seen the show “Chips?” Ponch and John…
Schilke: We think that would be a pretty good Halloween costume in the office.
Ross: You’re dating yourselves.
Schilke: I know.
Ross: I watched that as a kid, but…
Schilke: We knew there was risk to that.
Josh: My fun fact pretty relevant for here is I’ve been on the board of three SaaS companies that have gone from 0 to 100 plus. I’ve seen it as an investor. My personal fun fact is that when I was 16 years old, Aaron sold me a used moped for $300. My parents wanted to kill him as a result.
Ross: I’d totally forgotten about that, actually.
Josh: Yes, a yellow Puch?
Ross: That little moped, yeah, that we used to get to school for a while. Later, I upgraded to motorcycles in college, which my parents weren’t too happy about.
Ross: Yeah, I like motorcycles. Maybe that’s my fun fact. Again, I’ve got 11 kids, there’s probably a bunch of them including, not the baby, but the two year old, I’ll put on the front and go slow. She just thinks it’s hilarious.
Josh: I’m pretty sure that’s not recommended in the State of California.
Ross: When mom’s there, we put a helmet on her, but when she’s not there…It’s the helmet that gets in the way. It is actually less safe for the little kid to wear a helmet when she’s in front of me, because that’s right in my face.
Josh: That’s totally wrong. That’s totally backwards.
Ross: I can’t argue the point when I’m right.
Ross: Having said that, let’s get to…well I don’t know if we have top 10 but we’ve got some top lessons here from scaling up to $100 million. Why don’t we actually start with probably one of the most important ones, which is, let’s say you’ve got a sales team and you’re a million or 10 million. Isn’t it true that when you get that right VP of Sales, you get your right structure, that will take you up to $100 million?
You don’t have to do anything else, after that. You just grow it?
Josh: Totally, just rinse and repeat.
Ross: How often do you need to re-change the leadership or restructure the whole team as you’re growing? How often have you guys had to do it?
Schilke: Hopefully no more than three times in Talkdesk’s case, right?
Josh: Three of those, yeah.
Ross: Josh, you might know. Actually, of the three companies, how often do you see them, people come and go?
Josh: I’d say for entrepreneurs of a million of ARR, five million of ARR, the most common thing we’ll see in their plans is the financial plan will ramp straight up. It’s just a projection forward of the assumptions around sales efficiency, churn, quotas, and whatever else.
Having actually done it, the one thing I can tell you is what got you to one, is almost certainly not going to get you to 10, in terms of the exact process that you are using and the people you are using. I can guarantee you it is not going to get you to 100.
Most companies we work with go through at least one, if not three, four, or five major shifts. When I say major shifts, I mean transitioning from inbound to outbound. I mean completely rethinking their territories, and their assignments.
Ross: Inside the fields.
Josh: Inside the field. Breaking field into commercial enterprise and field different sizes of accounts. People is the other one. There’s like the rare unicorn who I’ve seen go from 0 to 200. Jim Herbold at Box did that. It’s the one and only time I’ve ever seen that.
Especially if you’re the CEO of the company, you need to be prepared that you’re going to, at best, have to top your sales leaders along the way. By top, I mean bring in someone on top of them like a VP, SVP, EVP kind of thing, or probably transition people.
I would say, between 1 and 100, three or four transitions of sales leadership is probably average.
Andrew: I think the big thing, too, when you start thinking about that growth, you’re looking at every six months. You’re continually measuring and tweaking. The big thing in regards to the sales organization, you get the bought ins. They need to get bought in. There’s going to be change. That’s the only one thing that’s going to be consistent.
You’re always looking out six months. You put your plans in place and you go march towards them. When you get a really good ops strategy person in place, you’re continually looking out those next six months to figure out, what do you need to tweak to get right, to continue to hit the targets in the growth and projections.
When you continue to rinse and repeat that cycle, amazing things can happen. We went through that before at Talkdesk I was at Zendesk for four years. We were continually doing that, rinsing and repeating, figuring out what tweaks we needed to make to continue that scale, and growth, and trajectory.
Ross: Anything to add?
Josh: Nothing to add.
Ross: OK, perfect. What about another mistake that you might have made? Actually, we’ll say Aaron, a mistake you’ve made while scaling that you see people make commonly?
Schilke: You hear it all the time, the hiring profile. I remember learning a lesson of hiring a highly successful sales rep, or a number of reps, that focused on an IT sale. They had a very difficult time making that transition to selling business applications.
It manifested itself months into the tenure in the fact that they didn’t understand how to conduct proper discovery and really evaluate which opportunities we ought to be pursuing. They weren’t accustomed to doing that.
Ross: Do you think, though, that was because they were so experienced, it was hard to teach an old dog new tricks, or because the skills were so different? It was just hard to learn the new skills? Were they inflexible?
Schilke: Yeah, it depends on the person. I think it’s a little of both. I can think of a couple of examples, certainly some examples where you hired somebody who was tenured that had a long track record of success. It was very difficult to reteach the skill set.
I think there are cases where you can find somebody who is early enough in their career and hungry enough and eager enough to learn, and coachable, that they can make the transition. My mistake was not understanding that dynamic early on, so we learn from those mistakes.
Andrew: I think the other big thing, too, is letting go. It’s not about firing people, but when you go from 1 to 10, just like you might go through two or three different VPs, you might go through different types of AEs and leadership too.
As you scale, you understand where the target market is. You go from, to Josh’s point, commercial maybe to mid market, up to the field. There’s a few people that always make that transition all the way up. I say letting go, because it’s not about firing.
If you have the right expectations set throughout and you can communicate that with people, they’ll agree. Even coming to talk to us, we’ve had some people, they self opted out. They’re like, “This is not for me,” as we go from this target up to the next phase of the organization.
Be comfortable with that. Don’t hold on just because you have a relationship or they’re a good person. Let them go spread their wings and figure out what’s great for them because it will have better impact to your company, and also to your sales organization.
You always think about the bell curve of your C, B, A players. Your A players will recognize and represent, especially as you bring in the new account executives, new management, whatever it might be as you continue that growth curve.
Josh: I think all of these guys are talking about the people factor. They’re in the trenches actually doing it. As a sales manager, it’s all about hiring the right people, giving them the training, giving them the skills.
As a board member and an investor, I’m working with the CEO, usually at maybe a little bit of a higher level. I think the biggest thing that I see companies screw up as they’re scaling is just forgetting to think about how hard it is to keep up a growth rate like 100 percent.
At DFJ, we have a venture fund and we have a growth fund. Our growth fund partners say what really separates the men from the boys in these companies is the year of going 25 to 50. That’s really hard. That’s maybe 10 percent of the companies that we see.
Lots of companies double to 25. Going 25 to 50 is incredibly hard. The big filter is 50 to 100. If you can go 50 to 100, grow 100 percent at that scale, you’re almost certainly going to be an IPO scale company.
If you think about what that entails, it means in that 12 months, you have to add more ARR and more revenue than you’ve done since the inception of the company to date. The thing people forget is you have to do the planning for that and lay the groundwork for that, usually 12 or even 18 months ahead.
For example, in hiring those reps, if you haven’t hired those reps six to nine months before the start of that 100 year, you’re not going to get there. There’s just like this long lead time.
I’ve seen more companies get so fixated in the day to day execution that they forget the broader planning context and how much the investments you’re making today are really about the next year.
Ross: Josh, really important, when you look at companies who are trying to set aggressive growth targets…Balance that between, if we miss our targets, we’re going to reduce trust with our boards, our executives, how do they navigate that, because around a CEO board trust versus aggressive growth?
Josh: Predictable Revenue, I’m a huge fan. I think predictable is the key. If you’re talking about investors, your board, and the capital markets more broadly, predictability is everything.
If you can call the ball and say, “In the next year, I am going to do this,” and then deliver on that, your board will be happy. Capital will be easy to raise and at good valuations. If you are missing your targets, it’s going to be a nightmare because people are going to lose trust.
What distinguishes early stage venture versus later stage growth capital and the investors that buy at the growth stage or at IPOs, is if you are able to say, “Look, give me $100 million. I’m going to put it into my magic sales machine and $200 million of ARR’s going to pop out the backend,” and you can show people that you do that reliably, you are going to have infinity capital coming to you.
Ross: Which is a good thing.
Josh: Which is a good thing. That’s what we do as venture investors. We take that risk early and work with the companies while you’re developing, but it’s all about predictability. If I had one piece of tactical advice for the CEOs in the room, hire an FP&A person within your first 30 hirers.
Ross: FP&A is…?
Josh: FP&A is Financial Planning and Analysis. What it means is someone who is good with a spreadsheet, who can sit with your sales VPs, who are by their nature optimists, who can sit with your finance team and who can say, “Here is the forecast for the quarter.”
If you know what the topline is going to be within some band, you can spend with conviction. Topline minus bottom line is your burn, and your burn versus your cash is your life. There’s nothing worse than ramping up your expenses, thinking the revenue’s going to go up, punting on the revenue, and then ending up in a hole.
That’s when everyone starts freaking out and getting scared. Being able to say, “This is what I can do. This is what I can deliver,” just from a career protection standpoint as a VP of sales, have that FP&A guy to keep you honest.
You want someone who can go top down and bottom up through your pipeline to really understand what can happen.
Andrew: Yeah, I think with that, the board CEO level, the VP level, I mentioned this before, it’s having that phenomenal Director of Sales Op and Strategy that analysts that you probably hire in the first 10 to 20 employees, you’re probably giving direction to on a daily basis saying, “Go run this report, look at these metrics, come back to me,” and then you’re double checking.
As you go scale, you don’t have that capacity. You need that partner that can go work with the FP&A person, look at that predictable revenue, and start to build it out. That person that can not only partner in finance, but most likely with marketing, depending on where you’re at scaling wise, if you have marketing operations, you want that person to look at the whole funnel through and through.
That way, you can look at everything. That goes back to my point. Looking out six months, where are we at pipeline wise, where we are at marketing wise because when you go build out these business plans, everybody needs to be held accountable.
Also, things break, occasionally. Things don’t go to plan. Where are we struggling? What do we need to tweak? What do we need to do in order to get back on track? That way you have a consistent communication story across teams.
That’s extremely important. That communication, not just with sales and marketing, but other departments like finance, it’s huge as you go scale.
Schilke: Shout out to Mike Leeds. He’s our ops leader. We appreciate him very much. He helps us do our jobs. Lots of pipeline solves a lot of problems for us.
As we look ahead, for our business, I’m building out the field organization, I look not only six months, but really 18 months out into the point that Josh made, really laying the groundwork and the foundation today for what we’ll do in 2018.
At the stage we’re at today, we’re heavy on sales development, continuing to focus on building out momentum on marketing, and really getting ahead of the curve on the partner ecosystem.
For my business and the upper end of Andrew’s business, the partner ecosystem is something that we’ll invest heavily in this year, substantially in the first half of this year, really to expect results the back half of this year, really seeing that growth curve the end of next year.
We’re starting to pull on a few levers to make sure that we have the pipeline coverage so that we can get to the predictability that Josh is expecting of us.
Josh: If I can talk my own book really quick. If you can’t afford an FA&A guy, there’s a company called InsightSquared that we’re investors in. It’s pre-built analytics. You plug into your Salesforce. It will basically be a FP&A guy in the cloud for you.
It’s amazing. It’ll look at your pipeline, historically trends, it will generate your board reports, your forecasts. I think you’re crazy if you’re not using it.
Ross: Fred, the guys came of out of Salesforce who started that. I mentioned him in From Impossible book. I actually have in one of the little sections. Do you guys remember how big Talkdesk was before you hired a first dedicated sales ops person? Usually, people wait too long before they get someone.
Schilke: It’s before our time.
Andrew: It’s before our time. I think there were probably about 10, 15 reps. They brought somebody in to come in and the guys looked at that.
Josh: It was in the mid single digits when I invested. Part of it Talkdesk grew so fast. Talkdesk went from one to mid single digits like, it was a million a month. It was crazy. That hyper growth can actually be really challenging. You’re building so fast, you forget to add some of the plumbing that you would normally build. There is a little bit of a catch up process.
I would say probably between 5 and 10.
Josh: No. 5 and 10 million in ARR. They’ve got big silly fast.
Ross: Yeah, it’s a problem, but it’s a horrible problem to have.
Josh: It’s a good problem.
Ross: We’re going to spring a bit of question on you, I realize, going back to really tactical stuff, everyone asked about sales process. How do I figure out my sales process? What do you need for your sales process? What is your steps?
Two part question. First, you may have different ones, maybe you want to layout a few of the steps, not the whole thing. How you come up with your sales process and evolve it? I’m always feeling like, it doesn’t work to get someone else’s. You always seem to be successful when you come up with your own version of it.
Maybe talk about sales process.
Schilke: Do you want to start with that? You got a blot of rigor with your inside team.
Andrew: I think, first, you always need to keep it simple. Don’t walk in and with 12 different stages. That just becomes more administrative work.
Ross: How many do you guys use?
Andrew: We use six stages today. We still keep it simple. It’s also going to be dependent on what type of sales cycle you have. You might have some sales cycles that are very transactional, or you might want to keep it even more simple.
For us at Talkdesk, I think the market’s evolved, especially the SaaS market. We think how people buy today, very educated buyers. You can go that demo, trial, buy methodology which is really easy. Josh just pointed out that 5 to 12 million. We’re in hyper growth where you’re almost slinging product in some ways.
As you try to go to scale to that next level, for us, we often think about moving away from qualifying but they’re trying to understand more about these companies. We call it discovery, trying to understand more about the buying process, not just the technical aspect of things.
We actually want to really evaluate and partner with our prospects and customers throughout the rest of that journey. There’s tons of statistics out there depending on who you read and what you’re following.
One of the key ones, I think it’s from Forrester, is 36 percent of that internal buying process, when somebody is buying, is completed. 64 percent…
Ross: Inbound leads, but not for outbound, right?
Andrew: Outbound’s a whole different metric and stuff. With that 64 percent, you need to get your salespeople tactical enough to go help them identity why they should be doing business. You’ll see it all the time. It’s always no decisions is close lost.
The question you’d ask yourself as a VP and as you look at training and development like, “What are we doing to help our account executives and sales people to go deliver that?” and then move on to the close at the end of that.
Ross: How did you get that six step sales process? Did you take a little bit of this at the other, did you find that out of a book, did you make it up on a whiteboard?
Andrew: A little bit Predictable Revenue, and just over the years, we went through a lot of different processes.
Zendesk started in the SMB, moved up to mid market and then I ran the Enterprise Business Unit before coming in over to Talkdesk, just seeing what works, different experiences, and Salesforce as well, early on in my career. It’s just a multitude of that.
Actually, coming in and running some sales cycles through and through to see what was happening and where did we want to take the organization and the team to go hit where we want to be the next 24 months, just not the next 12 months.
Again, it should evolve. It might change in six months based off the type of buyers we’re seeing and as the product evolves and where we want to go into the market.
Ross: Actually, so, it brings a really good a question I thought of, either when you got started, how do you keep a hand in the day to day of your team so can stay connected to what they need and how it works?
Do you player/coach? Do you do one on ones? Do you handle your own sales? How do you get on top of it?
Schilke: For me, just a couple of comments just to provide some context for the answer. We use the same sales process here, Andrew and I. Our sales cycles are really bifurcated in the field. We’re transforming the context in our space. We’re selling into a very defined mature category in bringing cloud software. It’s very similar to the conversation that Salesforce was having, the Siebel customers in early 2000.
Our sale process has a very similar rigor to Andrew’s, for 80 percent of the opportunities in a certain segment of the lower end of the enterprise. It’s just the cadence between stage two and stage three and stage four is much longer.
There’s quite a bit more of strategy involved, not necessarily exclusively my team versus his, but more of strategy involved in between those stages. From the initial discovery and qualification to how you actually work through the evaluation.
There are moving parts, the stakeholder group may be broader, partners may be involved, there’s a little more complexity and you have to have a solid handle on the strategy. That’s where you win your deals. That’s where you learn whether you’ll spend time on the deal or not.
The other part of it is there’s maybe 10 percent, 5 percent of our opportunities are evangelizing for the deals that we’ll do in a year or two years. Those are $2 million to $3 million ARR deals or more, but the market’s not quite ready to take the risk to digest something like Talkdesk.
There’s a little bit of different cadence. We actually don’t have a separate defined sales process in Salesforce for that, but we do have different strategies.
To your question about how do you get a pulse? For me, it’s fairly easy at this point, as I’ve come into the business and really starting a startup within a startup.
I jump on calls. If I have time and an SDR can log me into a call and not introduce me as anybody in management, I’m just part of the sales team, I’ll listen in, I’ll contribute. You have to learn by doing, the nuance of the market. I run sidecar on deals if I can.
That’s how you’ll learn. That’s how you’ll learn the nuances of the challenges that the reps are running into. In coaching and development, even with tenured reps, it’s still important, as we’re all trying to become more effective at selling in what is…there’s a new dynamic in this market.
People might have come from the contact center space but maybe not from a space where you’re disrupting the incumbent competitors, tactical.
Josh: Just as a tactical piece of advice. You touched on something very important. Being able to listen in on calls, barge in, coaching reps.
Talkdesk actually as a platform is incredible for that. If you’re using a call center solution like a Talkdesk, you can have a manager be able to listen in to call, join a call. We have Slack integration, so you can do out of band Slack integration while you’re coaching the rep on the call live in an out of band way.
I’m always encouraging our teams, “Use all the technology that you can.” We were scaling Box. That was one thing that Aaron was religious about, was just trying everything.
When we get pitches for an enterprise software companies, Box is almost always like one of the early customers, because that’s part of their culture. I’d really encourage you to use technology. I think Talkdesk for sales is a key one.
Andrew: Yeah, especially with the integration in Salesforce and just like the click to dial, extremely easy.
To wrap this part up, I think also two things, one, we have a methodology on our management team. 90 percent of the time, it should be coaching and 10 percent of the time, it should be managing, directing.
You should be continually developing your reps and helping them scale. You shouldn’t walk into feedback at the quarterly review with the rep and they’re blindsided by some feedback. That should happen at real time consistently. The other 10 percent, you’re managing and telling them what to do.
The other part is, it’s just having a sales cadence. The reps should know when they should forecast and when the manager should know when they should have one on ones on a weekly basis.
At my level with a bit of a larger team, it’s just even doing monthly key deliveries to make sure we have a pulse and the right strategy top down, to make sure we can go win those key deals because those key deals can really move the needle really quickly for you.
Ross: To wrap it up here, we’ll be one, either new point or reminder of what you already said is a takeaway for people to…
Schilke: One, we’re hiring, just so you know.
Ross: Talkdesk is hiring? [laughs]
Schilke: I think it’s really important to have an ongoing dialogue to…I mean this is kind of a Captain Obvious statement, but make sure you really deliver about staying aligned on expectations with your CEO. We’ve got two heads of sales here. We do our best to work diligently to operate as one.
That’s something that Andrew and I continually needing to focus on a weekly basis, daily basis. We talk a lot at the end of the day and make sure that we’re in line. I think that helps us communicate more effectively with Tiago, our CEO.
I think when you have a gap between where you are and where you need to be, you need to reconcile that, square up with that, and make sure that you’re having that conversation on a regular basis so that you’re on the same page.
I think it’s a very important constant dialogue that you need to be having. Don’t wait quarterly to have it. Keep out in front of it.
Ross: Actually, did anyone see my newsletter this morning? Reminds me of that.
Andrew: I think two things we haven’t touched on. One is, don’t be afraid to try new things. Just because of what you’re doing today, it doesn’t mean, to Josh’s point, you’re going to be doing it tomorrow.
Whether it’s some new packaging, whatever, work with product marketing. If you see there’s a window of opportunity, go test it. Go test it with a couple of reps, see if it works. If it works, then go scale it. Don’t be afraid to try new things.
I forgot the second one already.
Ross: One is good.
Andrew: Yeah, one is good.
Ross: All you need is one.
Josh: Mine would be, to some degree, just scaling to 100 is math. It’s the number of leads, lead to opportunity, opportunity, win rate, ACV, etc.
Keep an eye on all those variables and the further out you can forecast, the further out you can be predictable and have those headlights where you know problems are coming six months in advance, or a year in advance, and you’re not making commitments that you can’t honor.
That’s going to be critical. There’s nothing better than a company that is just hitting its plan, quarter after quarter, year after year. Those are the companies that just have the smooth path to success.
Andrew: Got it. Don’t wait to go outbound. Just because you’re getting a ton of inbound leads and all that stuff, don’t wait.
Josh: I would totally agree with that.
Andrew: Start at day one. Even if marketing falls off or there’s a change or something like that, you’re still held accountable. Start it from day one and level that. Set that expectation that that’s part of your guys’ build and part of the program. Extremely important.
If you can do that 1 to 10, imagine 10 to 50, 50 to 100, because that’s going to become a bigger dependent as you scale and graph.
Schilke: There’s nothing worse than getting a hold of a customer who’s just made a decision to go with your competitor because you weren’t on it. You got to get after it.
Particularly when you’re at our stage, people don’t necessarily know who Talkdesk is in different segments of the market. We did a transaction in Q3 that came from a world tour event. They loved what he had and said, “Where the heck have you guys been?”
Andrew: Educate the market.
Schilke: Yeah, education and being proactive about that is super critically important.
Ross: If you do want to get into outbound, obviously, Predictable University is where we have a bunch of online resources. I’m going to go after this and hang out at the Predictable Revenue booth. We have some team in there who’re willing to talk to people.
I want to thank you guys very much for coming up here at the panel, being here at SaaStr. It was really a joy.
Schilke: Thanks for having us.
Andrew: Thanks for having us.
Josh: Thanks, guys.
Ross: Thank you, everybody.