Successful Sales Leadership Can Be Explained With 6th Grade Math

Transcript
Objectives in Demand Gen, Pipeline Management, and Customer Success

[0:00] Your objective in demand gen, produce pipeline. Your objective in pipeline management, account executives, to close pipeline.
Your objective in customer success is to retain, expand, cross-sell your existing customer base.
♪♪♪ Welcome to the Full Funnel Freedom podcast.
If you are listening to this, you are likely leading a team responsible for generating revenue.
Purpose of Full Funnel Freedom is to support people like yourself and keep your funnels consistently.

[0:30] Music.
Introduction: Sales Leadership and Sixth Grade Math

[0:36] Welcome to the Full Funnel Freedom Podcast. I'm your host Hamish Knox.
Today, we will be getting ideas and insights around how everything in sales leadership can be explained by sixth grade math from Matthew Iovani, managing partner of Full Funnel.
Now let's hear from one of our affiliate partners.
Free offer for listeners of the Full Funnel Freedom Podcast, I've got a report called three ways to ensure your sales cycle doesn't sputter in the last mile.
You can get that at www.fullfunnelfreedom.com slash sputter.
It's incredibly frustrating as sales leaders when our sellers get a deal almost across the finish line, but can't quite push it to the finish, even though they've promised us that it's coming in real soon.
So go get your free report, three ways to ensure your sales cycle does not sputter in the last mile at fullfunnelfreedom.com forward slash sputter.
Now back to the show.

[1:33] So my guest today, Matthew Iovani, managing partner of Full Funnel.
They are a revenue operations services company that works with sales and marketing leaders to help build, optimize, and maintain best in class revenue operations programs.
Matthew, welcome to Full Funnel Freedom.
Thank you so much for having me. I'm glad to be on. Yeah, I had a blast visiting with you offline and really excited to have you on the show today to share your insights with our guests.
So I've given the audience the 90 second, the 30,000 foot view of who you are and what you're doing today.
Background and Experience of Matthew Iovani

[2:06] Tell us the story of Matthew, what your background looks like and how you got to where you are today.
Sure, yeah, no, I've been in sales since I was 18. So I started selling real estate when I was 18 years old, then ended up doing corporate sales, led sales teams, managed regions, managed the country for a company, worked in startups.
Then we started full funnel in 2014. So I've sat in pretty much every sales and marketing role possible.
And you know, what we do today is that our organization for the last nine years has been developing a revenue operation services platform, and we help organizations deploy best in class programs.
And we do that through both inbound, outbound and structural and systemic program management for RevOps.

[2:57] Amazing. And as I've heard from multiple guests on this program, if you have RevOps as a sales leader, especially in a rapidly scaling organization, if you don't have RevOps, you have nothing and you're probably not going to get there. So I imagine you've had some very interesting conversations over your career. And the one that stood out to me when we first got together is, this comment about everything can be explained by sixth grade math.
Explaining Sales and Marketing through Sixth Grade Math

[3:23] Dive us into that. What the hell does that mean? I'd love to learn more about it.
I would tell you that I have been very successful in sales and marketing, both in my sort of private life as a sales and marketing employee, as well as in my corporate life where I'm running a company that does this. And I don't think that the success that I've had has been really all that hard to explain. I feel like a lot of sales and marketing concepts can be broken down by just using basic arithmetic. I think that what's fascinating to me about the modern sales and marketing program is that so few of them are mathematically based. They don't have modeling. They don't have assumptions and forecasts and outputs. They're not tracking their sort of input costs and their outputs. And what's shocking about that is that, you know, a sales and marketing program at its core is an investment. You're making an investment.

[4:16] A outcome that is going to be realized at a later date. And the same type of diligence that you would take when you're thinking about investing in a company or a stock, you should be doing as you think about taking what are tens or hundreds of thousands of dollars and putting them into whether it's labor, sales or marketing staff, processes, technology, or events, trade shows. I mean, all of these expenditures represent micro-investments into what is essentially a macro-investment thesis that you have, which is your RevOps program.
Nick Neumann And what's fascinating is just very few people when asked have an actual idea of how their program is performing, what their return on capital is, what their efficiency of capital looks like.

[4:59] And it's funny because one of the things my sort of stump you question usually for CFOs in the boardroom is I'm like, what was your return on capital last quarter for your sales and marketing program?
And they be like, I have three heads, they don't have the answer to that, because it's not something that people are used to tracking.

[5:16] Fascinating. So you've given us a couple of things that we could we could calculate. Walk me through a little bit more around this whole idea of assumptions and models. Because by the way, Matthew, that sounds like work.
The Importance of Assumptions and Models in Sales and Marketing

[5:27] We all got stuff to do, that sounds like work.
I'm sure there's a reason for doing the work. What are a couple of those really quick calculations that if you were sitting in a CRO's chair, you would absolutely want to have locked in so you could ensure that you were keeping your funnel consistently full?
Yeah. The first thing you want to look at is, what does the organization need to hit from a financial position to be successful? That will boil back to your CAC target.

[5:54] Your cost of acquisition target is really to be an indicator of sort of what the financial framework that you have to use in your demand and pipeline management programs will be. So as an example, professional services firms, someone like myself, like we usually will run an eight to 12% cost of acquisition spread on the business generally. You look at venture funded or PE funded businesses, that might be a 75% to 150% of first year revenue on things like SaaS products. Some of those inputs will create what is effectively a cost per closed one deal, cost per open opportunity, cost per introductory discovery call with your ideal client profile. For us, like the currency of DemandGen is the SAL.
It's the introductory discovery call booked and held with your ICP. The thing that you're investing in DemandGen as a B2B business is to facilitate that interaction most of the time. So as an.

[6:53] Example, if you know that your cost per SAL has to be $500 or less, everything that you're doing in demand gen, whether it's events, trade shows, paid digital, paid traditional, outbound prospecting, whatever it is, it has to yield results under that $500 bar or less for it to be financially efficient. You know, levers you pull, where you invest is all a function of what tactics and channels are delivering SALs that meet that criteria at the lowest financial cost.
Tracking Financial Efficiency in Demand Generation

[7:23] It's a very simple sort of thesis. It's just one that most organizations are not tracking in a granular context.
We've been conditioned to track against quota, which is what do we need to sell en masse to get to the end point.
And that end point tends to be a number on someone's growth model that they need to sell to someone else that they're doing what they should be doing.

[7:46] That whole process though is wildly capital inefficient. The idea is that if you are generating demand, so in SAO with your target ICP below the financial threshold, you should be shoveling money into that channel until it falls outside of that financial threshold.
Then you need to optimize, you need to sort of diversify whatever it might look like.
But at the end of the day, your objective in demand gen, produce pipeline. Your objective in pipeline management, account executives to close pipeline. Your objective in customer success is to retain, expand, cross-sell your existing customer base. Those functions have very.

[8:25] Linear sort of endpoints that you should be tracking, which is very few companies do that.

[8:31] As you're sharing this, it reminds me of a story of Herb Kelleher, who founded Southwest Airlines, and their goal was to be the lowest cost airline. And someone came to him and said, well, our client, our guests say that they want a chicken Caesar salad with our flights.
And then he's like, awesome. Does that make us the lowest cost airline? If not, not having a chicken Caesar salad, same thing here is, Hey, I'd love to fly across the country to go to this awesome trade show. Hey, that's great. Does that keep us under $500 cost of acquisition?
If it doesn't, then we are not going to that trade show. So I love that metric of like, it makes it easier for us as leaders to make decisions. I would imagine on where are we investing our funds. Is that what you find as well? That's exactly right. I mean, ideally, most of the frustration between the rev ops side of the house and revenue operations would include sales and marketing. With finance, is finance doesn't understand why sales and marketing is spending the money that they're spending and sales and marketing can.
Financial argument vs. revenue goal argument in decision-making

[9:24] Articulate why they're doing it. What they'll say is, we got to get to this goal, we got to get this revenue goal, so therefore I need to do X. They're not explaining like, hey, I have a demand channel that is trading it below what I need to get it at, and I have unlimited upside investment potential on this, and I'm just going to shove money into this until it sort of falls outside of that framework, then I'll reassess. That is a financial argument, as opposed to the argument that most of the finance and sort of operating executive structure gets from sales and marketing, which is this is what I need to hit my goal. Absolutely. Or, oh, it's for branding. It's for awareness. Awesome. I'm aware you exist. I can Google you. That doesn't help me in any form or fashion. This is speaking their language, which we talk about with sellers speaking their buyer's language. Well, our buyers is that financial executive you just talked about.
They're our internal buyer. They're going to have to approve it. So we got to speak their language, and you've just given us some great insights on how we can better do that. You just made a comment about AEs. And specifically, we had chatted offline about AE utilization, and you had some.

[10:30] Fairly specific ideas around how we can effectively utilize our AEs once we get to that point of, hey, this is an ICP, it's qualified, let's do a demo presentation, et cetera, et cetera.
So your perspective, AE utilization, tell us a bit more about that.
So I developed this kind of thesis just based on the fact that I've been sitting at the end of a sales pipeline at Full Funnel for nine years where I get the exact same thing every single call. I'll show up, there's a sales and marketing leader or an executive, and they'll say the exact same thing.
Hey, Matt, listen, as it turns out, when we get a prospect in front of us that's the right fit, we do a really good job of closing that person. What we don't have is enough at-bats.

[11:13] I'm hoping you can help me with. That's pretty much like 90% of what people will say.
What's fascinating is as Full Funnel started to evolve, we got a lot more into consulting work.
We started asking, why are you saying that? Why is everyone say that?
What we found is that most organizations are under-investing in their demand gen program or they're investing across like this wildly fragmented and weird format where sales and marketing that both owns demand gen, we're still operating over those weird silos of sales and marketing which does not exist anymore.
Those folks are not given tools required because they don't have the framework to describe why they need the investment cost per SALs, then we'll get into the AE team. And this is a thing that a lot of sales leaders struggle with. They have AE teams that are wildly underutilized. And the reason that they have these is super simple. SDR roles in the US, people want to be in them for 12 to 24 months. So the reality is by the time they hit that 12 month mark, they are looking for a way out. Now, the reason is because we do not value demand gen professionals in sales. We just don't. And the reality is people know that to make real money, you got to be in that AE seat. So everyone strives to do that.

[12:24] Because of that, there's all this lily padding, SDRs bailing out of SDR roles to get AE roles in other places. So to retain good talent, sales leaders start saying, well, listen, we'll promote you to an AE role. You're a junior AE, you're a half an AE, you're whatever it is. Inevitably, these people then stop prospecting. So what ends up happening is you have an AE underutilization problem where you might have someone who's like only 12 to 15% utilized. One of the easy math problems you can do is say to yourself, okay, look, how many demos or discos should an AE be doing a day, right? There's eight hours in a workday, figure that you're going to be about 80% spent on sales execution work, figure that total maybe you can do five hours of demos and discos, each Each one is an hour, 45 for the meeting, 15 for notes and follow-ups.
So you have five hours.
Five disco demos, five hours, five working days. You have 25 spots per week that you should be doing discos or demos.
We'll run that math and say, how many is your average AE doing? It's like seven.

[13:27] And then you start looking and you're like, you see the problem, you've overinvested in pipeline management, you've underinvested in demand gen.
AT to SDR, or just what is effectively demand gen to pipeline management leverage, has to be weighted towards demand gen. You should have more pipeline than you have people closing.
If you have less pipeline and too many closers, that's bad.
And the reality is, is that it's usually from poor financial management of their program.
If you were looking at this on your sixth grade math spreadsheet, you'd be like, wow, I've really under-invested in DemandGen and I have way too much capacity in my account executive or pipeline management function.
That's why we're always pressing with clients, focus on RevOps as DemandGen, get the horse to water, pipeline management, get the horse to drink, and then customer success, get the horse to keep drinking vigorously, anything about marketing and it said nothing about sales.
I was on LinkedIn this morning and some cheeky person is talking about how STRs is a marketing function, right? It's not a marketing function, not a sales function. It's a demand gen function.
STRs do inbound lead management or outbound prospecting through email, phone, and social.
That's a demand gen function. Your demand gen investment has to be looked at completely quantified and it has to exist where it's creating a outcome below your financially.

[14:53] Required rate. Your pipeline management is a utilization game. Funniest part about that is that AEs do not want to tell you what they're doing. We make everyone track. You go into any sales floor in America and you say you're going to start tracking their time. They'll tell you to go pound sand. Yep.

[15:10] Why? I don't know. We let them do it. But the reality is AEs exchange time for value.
I want to know how much time, where you spend your time, how you spend your time.
That's how I engineer positions. People come and go, but process is forever.
That's the reality of how people need to think about this.
I love that. I was giggling a bit when you said 45 minutes for the demo or the disco and 15 minutes for notes.
I was like, I don't know which AEs you're working with because that's not my experience.
There's not a lot of pre-call planning or a post-call debriefing unless the sales leader is standing over them with a stick.
Now, there are exceptions to that rule and we're not picking on you directly.
However, you are the exceptions, not the rule in this case.
So speaking of SDRs, right? Cause I get it. If you have way more demand than you have closures, it's way easier to also say no to bad fits.
Like all business is not good business. We even during COVID, all of us took business that after the fact, we're like, ah, I took that to keep the lights on and I'd really like it to go somewhere else.
So looking at the lens on the SDR, BDR function, that demand gen function, where specifically are you seeing success with things like tech enablement and making that SDR that much more effective so they can create much more demand for the closers to go after?

[16:32] Yeah, I mean, my hope is that we get to a point where we start calling people like demand engineers as opposed to like an SDR or something to that effect.
Cause I think we're moving towards that point really, really quickly.

[16:41] If you haven't read Tech Enabled Sales by Tony Hughes, I would highly recommend it.
While I don't agree with everything that gentleman said in the book, he has the premise nailed dead to rights. And he did it two years ago.
He saw all of what's happening today coming and I give him a lot of credit for it.
The reality is, is that the SDR position, again, we have to reformat what that position is cause it doesn't work, especially in the US labor market.
So for us specifically, one of the big things is like, there are a lot of tech enabled tools out there that are starting to help.
So as an example, one of the problems post pandemic is connect rates are really low, both on email and on teleprospecting.
So one of the biggest issues on teleprospecting, what you're paying for is not people to dial, you're paying them to talk.
You want time, I call until I hit someone and I'm talking to them, I'm pitching, that's the objective of teleprospecting.
So tools like an Aurum or a Salesfinity as an example, like what they do is they amplify throughput, but the real outcome you get is they amplify the amount of talk time that you have.
Talk equals prospecting, prospecting can equal outcomes. Dialing doesn't do anything.
If you sit there and dial a phone all day, you don't get meetings, it's when you pitch.
So I think that the tech enablement aspect of that is really big.
I also feel like we're over the era of pick your own adventure when you get to work SDR teams.
Like if you are an SDR sales leader and your sales development reps are choosing their own adventure when they get in in the morning, you are screwing up.
The Importance of SDR Tech and Globalization

[18:10] Hands down, just stop. This has to be a highly choreographed function that is paint by numbers.
SDRs are only going to stay in that role for 12 to 18 months. The reality is you have to have this process baked down to a machine. They do X, they do Y. This is how it goes. If they fall out of compliance, off they go. You're constantly A-B testing, right? It's like the whole concept of The paid digital advertising where everything is quantifiable in some context is now where we are in outbound prospecting or inbound lead management.
So I think the SDR tech enabling thing is huge. I also feel like globalization is big.

[18:49] One of the things about Full Funnel that's really interesting is that we build global sales and marketing teams. We have found with every client that we have put a hybrid program together, hybrid being US-based SDR BDRs as well as offshore SDR BDRs.
The offshore SDR BDRs are a hundred percent a better financial outcome for every single client regardless of what they're selling.
Really? Reason for that is really simple. And believe me, I used to like pride myself.
We only build us teams, right? Here's the reality. The math doesn't lie.
Uh, us based SDR BDR, they are right out of school. Usually you're usually paying them between 50 and $60,000.
The cost metric on that at 60, let's just say is like 32, 35 bucks an hour.
The reality is an offshore person, they're going to be half that.
And that would mean that they have to be, you know, the US rep has to be twice as good as the offshore rep just to hit financial parity.
The offshore reps where they can afford to live as a family of four, what have you on the wages provided, they're mid-career professionals.
They've been doing this for a very long time. They are skilled.
They understand what to do. they have good administrative diligence, so on and so forth.
And so what we've found every single time this happens is that the offshore resources outperform the onshore resources.
And that's regardless of how good the resource is.

[20:16] It's just a, it's a thing that people are gonna have to get onto.
The Need to Reform the SDR Position and Embrace RevOps

[20:19] The US FCR model is wildly broken, period.

[20:24] What's the quick fix in your opinion? Or is there one? There is a fix. You got to reformat the SDR position. It needs to be essentially demand generation groups. And demand gen has to be looked at an organization. You should have a head of demand gen. You should have a head of pipeline. You should have a head of customer success. Those all report to the CRO. You said that sales leaders have been coming on this show and talking about if you don't have RevOps, you don't have a program. I bet they're talking about sales operations. I bet they're talking about like data operations and CRM and technology stack management. RevOps is the whole thing. And I think that's a funny thing that we do in sales and marketing is we love nomenclature and we love to create new words. I might be doing it right now, but that's how we define it. And I think it makes a lot of sense, which is RevOps is everything from the time that you're prospecting to bring in demand all the way to retaining your existing customers across an upselling, and all of that sits under that CRO seat. So for you CMOs out there and VPs of sales, those positions shouldn't exist in the next five to 10 years. If the market's smart, it's going to start reformatting to how the modern company has to operate to actually make it work. Robert Leonard.

[21:37] Fair enough. I love those insights and very aligned with some of the conversations I've had with my clients around like, you know, hunter-farmer mindset. You know, that's passé.
That doesn't exist anymore. It much more breaks down like you've been sharing today.
So Matthew, we could probably chat about this stuff all day and nerd out over it. And I look forward to doing that with you in person someday, maybe over a beverage. I've got a few class questions for you before we wrap up. The first one would be, if you could go back and coach your your younger self, go back as far as you like, doesn't matter how far, and say, hey, younger Matthew, you're gonna be here in 2023.
You're gonna have this great company, you're gonna work all over the world, et cetera, et cetera.
You're also gonna have a lot of scar tissue and bumps and bruises.
What would you coach younger Matthew to say or do differently so you get to the same place but with fewer bumps and bruises, maybe a little less scar tissue?

[22:27] I think the reality of getting granular and understanding the numbers and being very detail focused is advice for every entrepreneur or really any like really serious professional.
And I think even as much as I've been espousing like, hey, look, you really wanna be very detail oriented and sort of focused on the metrics, very easy to get distracted by day-to-day life and business as that happens.
And so what I would say is that, Arnold Schwarzenegger used to say that what separated him from everyone else is he would do the last two reps that other people wouldn't do.
I really feel like that boils down to a professional administrative diligence, which is don't skip the administrative shit.
Like don't not get good at updating CRM fields. Don't, you know, forgo doing financial models and forecasts and all the stuff that's boring and so on and so forth.
Cause that's where it separates the adults from the children, the people who make money and the people who don't.
We are in an efficiency game. If you're in a business or running one, you got to get to the efficiency part. And that's what I think I would have told my younger self.

[23:32] Love that. Thank you for sharing that, Matthew. You are clearly someone who reads a lot. You're very into your own professional and personal development. Tony Hughes actually was a guest on the Full Funnel Freedom podcast. We'll put a link to that in the show notes. What have you read, listened to, watched recently that you'd like to share with the audience of sales leaders today? This is really good. So if you don't know Greg Alexander and you're in ProServe, you should be following him. He's a good guy. And the founder of Bottleneck, I just finished that.
I'm reading this, which is the AI Revenue Architect by Petowitz, who also is a sort of giant, who's been in that sort of MarTech space.
And then I was given a book about early exits by a colleague of mine that I have not cracked yet.
So those are the three books that are on my desk right now.
And they have just been added to my reading list and we'll put links to all those in the show notes so everyone can check those out. Last question for you, Matthew, Closing thought, bit of wisdom, something to plug, floor's yours.
Yeah. I mean, I think my big thing that I would be encouraging sales and marketing professionals right now is to start reading about what is happening foundationally inside of sales and marketing as a profession.

[24:45] I think that, I think it's going to be really difficult. I'm getting calls from AEs who are having a real hard time finding work.
They're like, Oh, I have a 300 to 400 OTE band.
I haven't made it in four years, but that's what I'm looking for.
And I'm finding it very difficult in the market.
Yeah, it's like there's a lot of AEs out there that got let go because there's a lot of underutilization in pipeline management.
I'll tell you, I've been getting calls nonstop. I have probably eight disco calls a day, just me and I'm one of three people doing this and everyone says the same thing.
I need demand, I need demand, I need demand.
Yet the positions that do demand gen, paid advertising specialists, SDRs, they're not looked at as core team members or elevated team members inside of most sales and marketing programs.
So if people were looking at the numbers and they understood like leverage and how that works, they would be paying a lot more attention to that demand gen function.
So all of you AEs out there that are stagnant, not getting it done, maybe you guys should start really focusing in on getting really good at demand gen, which is that stop that you skipped over for 12 months, barely figured it out, and then exalted yourself to a pipeline management role that you're not doing great at now.
That's amazing. Matthew, I've had a blast visiting with you today.
Thank you very much for sharing your wisdom and insights on the Full Funnel Freedom podcast today.
Thank you for having me.
Quantifying Cost of Acquisition for Better Decision Making

[26:06] Wow, what an amazing visit with Matthew Iovani from Full Funnel.
I had a few really key takeaways that I wanted to wrap up our episode with.
Number one is this idea of locking down and really quantifying what is the cost of acquisition and then using that number.
As a metric for determining, do we make investments in things like trade shows or marketing or other ways to raise the awareness of our ideal client profile that our company actually exists?
It's way easier to put that decision out on a hard number as opposed to, well, my tummy thinks that this is a good decision, and then ultimately, we end up doing a trade show, investing thousands of dollars and getting pretty much nothing in return.
The other thing that I really appreciated Matthew saying is this idea of the SDR, or as he calls them, demand engineer function being really locked down, really choreographed, not scripted and choreographed.
So we're not asking our SDRs to read from a script. What we are asking them to do is follow a process and a system so that they are ultimately putting and real qualified leads in the funnels of our AEs.

[27:25] Who are gonna eventually run the demo and do the qualifying.
Shifting to Proactive Demand Generation for Consistently Full Funnels

[27:27] Lastly, I really appreciate this mindset shift to demand generation.
I'm a bit of a word nerd, I think most of you know that, and so this shift to demand generation, that's proactive and gets ideal clients' profiles coming to us instead of us banging our head against the wall of why is this marketing thing not working?
Why are AEs underutilized?
Really having that mindset of we are in the demand generation business, to me, is a great way to keep our funnels consistently reliably full.
Thanks for listening. Let me know what your key takeaways were on social media.
And until we connect on the next episode, go create full funnel freedom.
Thanks for listening to today's episode of the Full Funnel Freedom podcast.
You can continue to support us by leaving us a review and a rating, sharing this episode with a couple of sales leaders in your network who you care about.
I'd love to connect with you. I'm easy to find, Hamish Knox on LinkedIn.
Also, if you'd like a free 15 minute call with me, go to www.hamish.sandler.com forward slash howtosandler.
Until we connect on the next episode, go create full funnel freedom.

[28:43] Music.