Marylou:       Hey, everyone. It’s Marylou Tyler and this week I have Daniel Barber who is VP of sales at Datanyze. Datanyze is a company located in the Bay Area. Correct, Daniel?

Daniel:          Yes. We’re in San Mateo, California.

Marylou:       Datanyze produces services and products that are near and dear to all of us since we are working with lists and trying to figure out who to contact and also to figure out how these people resonate with the things that we’re looking for in terms of our product sales services. We want to make sure we start with a really good, clean, live, active list.

                    Welcome, Daniel. Thank you so much for joining us.

Daniel:          I appreciate it, Marylou. Happy to join and cover a few topics today.

Marylou:       Tell us a little a bit about Datanyze first. I know they’re a relatively new, are they not, company, or tell us more about what the company is about and why they are in this market place helping us become better closers and better sales people and working with prospects.

Daniel:          Absolutely. Datanyze, we’re going into our fourth year. The company, we’re really the leader in technographics. What that means is that we provide real time insights in buying signals into a company’s technology choices. If you think about every company today runs on some form of technology, we surface who’s using yours. As companies selling technology, we got to a point where every function – whether it’s HR, finance, accounting, marketing or sales – every different function is using a different technology. We crawl, on a daily basis, 40 million websites. Courtesy of that, we have historical data as well as real time data on what technologies they’re using and what they change on a regular basis.

Marylou:       That’s interesting. I asked you to join us today, we’re trying a different format, you’re my guinea pig. We’ll see how this goes. What I wanted to do, I’ve really start to get a sense of this as I heard from people regarding the podcast, is that the guest on the podcast, you especially, have such a wide range of experience and I wanted you to select something that you felt was important to discuss as we move into the New Year especially. I’ve asked you to put together for the listener some of the biggest pressures that you’re seeing, or maybe it’s one, that you’d like to talk about today. We’re going to follow that thread all the way through to what if they don’t do this or what if they do do this because you’ve had so much experience across the board. The topic we’re talking about today is 2017, we’re in January 17, if you’re listening to this podcast, and the actual topic is 2017 planning. Why did you select that topic specifically, Daniel?

Daniel:          I appreciate the context leading into our topic. I don’t know if I can live up to all of it but I’ll do my best shot. For our listeners, all of us in some shape or form are in leadership. Whether you’re an individual contributor and you’re essentially running your own business and you’re tuning in, or you’re a sales leader and you’re trying to lead the team effectively to a target or goal, or you’re in the marketing department and you’re doing the same thing, you have some type of goal or some type of objective.

But in reality, all of those objectives tie to revenue in some shape or form. The common march toward revenue is something that the entire business usually rallies around in January. You see that even all the way up to the CEO trying to do determine what the associate revenue target should be. A lot of that planning may have happened in November or December, for some companies it’s happening in January or even for companies that were planning already in November and December, they’re ensuring that those targets are attainable and make sense as they go into January. It’s something that we often see a lot of pressure and a lot of that pressure comes from external pressures, right? If you’re an individual contributor, it perhaps comes from your sales manager or your VP of sales, it could come from the CEO, you might see pressure from the board, you see pressure from investors, you even see pressure from other employees in different functional areas that are not in sales but know that you need to hit your number, and if you don’t then they actually may not be employed.

There’s a lot of pressure that happens that goes into 2000 and the number there planning. I think it’s a topic that a lot of us try to avoid because it’s taking away time from doing the actions that actually result in revenue or closing business in the short term. But if you really don’t do that long term planning, you’re going to see some failure down the road. I thought why not cover a topic that is probably near and dear to all of us but one that we often times try to ignore.

Marylou:       Not only that, I think you hit the nail in the head is there’s a process probably to plan that you’re going to share with us which is great. I can remember sitting in meetings back when I was in sales and the CEO or a board member would get up and just stick a number out there, what we were trying to achieve, and he would look around the room and you’d see these faces of people saying how was that number derived? Is it vaporware? Is it based on data? What is the key? I know you held the key, Daniel. What’s the key to planning? So that we’re not sitting in a board room at the beginning of the year being told a number that has no basis?

Daniel:          I think the overarching goal. If you would read anything from [00:16:55], you would see that the goal is to get to $100 million business in roughly seven years. I would say I personally validated that, I was fortunate enough to have four interns from Cambridge University in the UK work with me during my time at node. During that time, we had three of them – these are MBA interns – work on a project where we selected roughly 30 companies that are now publicly [00:17:26] and essentially looked at their S1s, their financial filing as they went to become public and looked at the information that we could derive from that to determine what do the revenue numbers look like on their period of seven years before they went to going to become public.

Really, we validated that yes, in fact, it is seven years and yes, in fact you should reach roughly $100 million at the seven year mark. That is not just an arbitrary number, it’s based on data. Therefore you can start to back into that number. You can start to look at what your number should look like in year one, year two, year three, year four, year five and so on. Some of that stems from first off it’s how fast can you get to $10 million. Even before that, how fast can you get to a $1 million. There is somewhat a lofty goal that does get put in front of an organization right from the start. There’s also a whole set of backend planning that needs to happen which I outlined a little bit today that we’re going to cover. I’m excited to share some of that around how you can work backwards from that number and get to a place where you have confidence going into the number and the respective people on the team that are all driving towards revenue also have confidence in that number.

Marylou:       Is there a ramp that you look for to get to the $100 million or is it based on the products and services that you’re offering at the one, two, three, four, at those markers? Is there a ballpark range that you’re trying to be at or are you able to do something like that?

Daniel:          You definitely can. In the early years, sort of first year to second year, you’re trying to just get to $1 million. How fast can you get to that $1 million and that determines whether you actually reached some form of product market fit and I use that term loosely because really it should be used loosely, there’s a lot things that determine that.

Reaching $1 million indicates that you have a customer base that believes in your product, is willing to give you probably a deal size between $10,000 to $20,000, up to $30,000 in bookings. You probably have your first 30, 40, 50 maybe 100 customers. From that, then the next target is $10 million. How fast can you get to $10 million? Most companies try to do that in their third year. Growing the business across $10 million in their third year would be a good target. Then that next raise from $10 million is to $100 million. There’s a couple of milestones between there. Getting to $30 million, getting to $50 million.

The makeup of the sales organization and really the revenue organization will change as that happens. Really, that change will happen based on increasing the average contract value. If you really break down the way a revenue organization works, you have really a sales velocity model that runs everything. You have a certain number of opportunities that come into the pipeline in some shape or form, whether those are inbound or outbound, then you have a deal size or an average contract value, that’s a set dollar amount, probably collected on an annualized basis if you’re a SAAS company or selling something that’s annualized.

You have a win rate, meaning you have a number of those deals that you win and then some of those that you don’t. That numerator is over a denominator which is time. If you look at that formula, what you find is the step function becomes the average contract value. From a standpoint of as you increase the contract value, that doesn’t necessarily proportionally impact time.

What I mean by that is a $10,000 deal doesn’t necessarily take half the time of a $20,000 deal. A $100,000 deal doesn’t necessarily take 10 times more time than a $10,000 deal. This may be basic for some of the listeners, but it’s important to remember because it goes into how you plan your year around revenue, and it goes into how you allocate resources whether those are field reps sitting in their homes, working from home, flying to different locations, doing deal sizes for $500,000 or all the way down to fairly transactional inside sales reps that are closing $4,000 to $5,000, $10,000, $15,000, $20,000 dollar deals.

Marylou:       Right. We still see a lot of companies that I don’t think have segmented the way that I just heard you say. Can you walk us through what this begin with the end in mind looks like in terms of what you need or what the guidelines are for this type of opportunity to get to a $100 million in seven years?

Daniel:          Yeah. Why don’t we start in an area that at least I can share my own experience getting to $10 million in revenue is obviously a hard task. I’ve seen that experience through my time at ToutApp, I’ve seen that experience in my time at Datanyze now. We’re on that path, definitely same sort of path of my time at Node. And then I can share some highlights of my time at Responses crossing over $200 million, and working in other organizations that are everywhere in between.

It all start with working backwards. If you’re going to work on the $10 million target or sort of that three year milestone trying to get $10 million in revenue, on that third year of business, you’re trying to get to $10 million, you need to work backwards from that number. That really starts with okay what does your average contract value look like today? If it is $15,000, $30,000, $50,000, then what you’ve got to work out is how many deals are you going to need to get done in order to get to the revenue goal of $10 million. If you enter the year at $4 million in revenue and your goal is to get to $10 million in revenue, then to get to that $10 million you’ve got a $6 million shortfall.

That shortfall, you can either do that partly through new business, bringing on new customers, or you can do that through up selling some of your existing customers. In the early stages, you want to bring on as many new businesses as you can because that gives you more potential to do up sale down the road. Bringing on those new businesses, you can look at the average contract value of those customers that you previously brought on over the last prior two years and start to work backwards.

Using the average contract value, that second number in the numerator of that formula that I mentioned earlier, and break that down into one of four segments. If the deal size is greater than $500,000 and you’re in your third year, please give me a call. I’m very interested in joining your company. If you figure that out in your third year, I will absolutely join. If you’re in $100,000 range which again is very, very, very successful, you’ve managed to crack $100,000 deal size meaning deals larger than $100,000 in your third year, congratulations. But I think that’s where the number of deals that you need to go from 4 million to that 10 million number is much smaller.

There’s that upper midmarket range which is probably between $50,000 to $100,000, these deals are perhaps taking two to three, maybe five months. You need a certain number of those. And then there is that bottom end to midmarket which is the $10,000 to $50,000 range, deals that might be taking one month, might be taking two months. From that delta, difference between $10 million and $4 million, you’ve got a difference there of $6 million. Once you work out what the new business number is, you essentially can work out how many deals you need to close by just dividing that annualized number by your average contract value.

Marylou:       Wow. Do you proportion it in a certain way? Or do you look at heuristics or historical data in order to be able to proportion it? Or are there guidelines for how you mention four different areas, how you would break that up? Are there formulas that you recommend or guidelines for that or is it more of looking at the historical data to see where you’ve been successful?

Daniel:          That’s a really good question. The guideline there I would say is the goal is to move up market as fast as possible. I think if you were to look at any business whether it’s Zendesk who started in doing self serve $1,000, $2,000 deals, many businesses start there but their goal is to grab enterprise logos and that’s largely because those businesses will pay them more money. The faster you can add an additional segment of revenue, to answer your question directly, you may need to segment and maybe this year is the year that you do it. Maybe this year is the year that you say okay, we have this set of customers that are paying us $10,000 to $20,000 but then we have a few customers that are paying us $50,000 or $100,000. The quicker you can build momentum around an additional segment of revenue that’s above the one you’re in, the faster you’re going to hit that next milestone. Whether that’s $10 million or $50 million or $100 million.

Marylou:       Okay, interesting. That’s the opportunity area. What about the number of accounts? Can that translate into the number of accounts a rep should be working or can it not? What’s your answer there?

Daniel:          Also sort of translatable, right? That next step, once you’ve figured out I’m trying to get to $10 million, let’s say you are closing $50,000 deals and you have a short fall like I described earlier, a $5 million, then you need collectively 100 deals in the year at $50,000 to get to that $5 million. Using that number, you can start to work out how many accounts you need.

There’s the same type of criteria that applies to accounts, except this is where I would probably say my time leading sales development teams will come in. My experience there would say that a lot of people will look at an account from the lens of the revenue side of things. What I would also advocate for is look at the number of stakeholders that are required for a deal to get done. It’s very easy to do planning and say, okay, I’m going to give my enterprise reps 300 accounts. But in reality, that luckily become a meiotic in the way that I look at those accounts, clearly because there’s just too many people involved in every account.

If you think about a deal size in today’s consensus based buying environment, if you’re talking about a $500,000 deal, you definitely got 10 plus stakeholders. Meaning that 10 people are involved in that purchase, whether that’s the CTO, the CIO, the VP of engineering, the VP of marketing, the director of whatever; you’re going to have 10 people that are either explicitly or implicitly involved in the sales cycle.

Therefore, you want to think about how many people can someone actually manage to communicate with on a daily or weekly or monthly basis. What I would advocate therefore is that as you look at the number of accounts per rep, you really should think about for field sales probably in the vicinity of about 50 accounts, that’s for deal sizes greater than $500,000. For enterprise, north of $100,000 segment, it’s really in between sort of 75 to 120 accounts. For that upper midmarket where you’re seeing deal sizes between $50,000 and $100,000, you’re probably talking about 120 to 150 accounts. And then for midmarket where you’re saying deal sizes from $10,000 to $50,000, you’re probably in the range of 150-200 accounts.

Those numbers again are not arbitrary, they’re based on working with, I would say at this point around 300 sales development teams over the course of my time over the last five years, and also testing it myself. As you go all the way down to midmarket where you’re doing deal sizes between 10 and 50,000, you’re going to see around three stakeholders. You might see a director involved, you might see a VP involved and then you might see a manager actually is operating in the platform or operating in the tool on a day to day basis. You need all three of those people to buy in before you actually get a purchase.

 Marylou:     When you’re planning this and going through the actual revenue pieces and now we’re figuring out – my head is spinning with the SDR role and business development – do you have a sense of where that breaks up in terms of support in the sales roles? Field, I get. I understand that completely, but when we get into enterprise, upper midmarket and midmarket, how are those teams structured in order to achieve those goals? Just kind of loosely what you’ve seen or the way you’ve worked. Is there a separation of roles to help generate conversation?

Daniel:          Absolutely. I think the year of specialization is definitely here. I think you and I have seen that evolve over our time inside of the industry and I think you definitely have more experience to talk to in sort of how organizations are doing that today. I would say, broadly speaking, absolutely. There are a number of resources that listeners can go to.

Obviously, the bridge group does their annual study on the separation of roles and also the allocation of resources around how many sales development or business development reps do you apply to the respective average contract value. I would think about as the average contract value goes up, you really should try to move towards a one to one ratio. The closer you can get to that as you get to field sales, the better.

If you’re in a growth stage, if you’re trying to get to field sales, you’re not doing $500,000 deals, you may even still want a one to one ratio because you’re trying to grow. That example I gave earlier of going from $4 million to $10 million, that might be a year you say okay, we applied additional SDR resources and we do a one to one ratio. Meaning one account executive for every SDR. One SDR for every account executive, whatever way you want to look at that. That means you’re essentially funneling large amounts of pipeline to the account executives. The passing of the baton, so to speak, will be smooth and will ensure that you meet those revenue targets that will obviously increase costs of the business. The topic of this conversation being planning, you want to think about what the cost is to do that type of heavy allocation of resources. But if you’ve got the venture capital or you have the facilities to do it, then go forth.

Marylou:       Go forth and conquer. The other thing too that this is screaming to me is not only are you planning for the revenue objectives but you’re planning your sales process because these are very different, just the stakeholders alone. My mind is racing, thinking, wow it also means that in the qualification process and getting the deal ready as an opportunity for the AE, the Account Executive, there’s going to be different sales process for each of those areas depending on the number of stakeholders.

Daniel:          Correct. I think as you see a larger and larger deal, the expectation is that you’re going to involve more stakeholders, therefore the sales rep is responsible for speaking to more individuals, and therefore the sales rep, the account executive is going to need more and more support from the sales development team. I think what you see as you see larger organizations that run effectively is that the sales development individual is actually involved further and further into the sale cycle. That’s a byproduct of leveraging that individual to continually add value beyond just scheduling of the first meeting. Again, a byproduct of when you have a large number of stakeholders, it’s an efficient use of time to involve two individuals to speak with 10 versus 1. Definitely as the sales cycle and the deal size goes up, you’re going to see that again, (effective) organizations will involve their sales development rep further along in the sale cycle as the deal size goes up.

Marylou:       It implies a certain level of sales skills to get further down the pipeline which is what I’m seeing a lot is that the sale development role is actually splitting back when we did predictable revenue, we had an SDR. Now there are multiple SDR type roles depending on positionally where they need to get that opportunity in the pipeline. That’s another area that’s really kind of fun trying to figure out what we need in terms of the actual SDR skill set in order to be able to help move this along so that we can reduce the lag, otherwise the lag is going to go way up if we don’t have someone who’s proficient at starting conversations with multiple stakeholders.

Daniel:          Totally. We are, again, fortunate enough with the responses. We had two different segments within the business. We had an enterprise segment that was really north of $500,000 over an annual sale cycle, we had deal sizes that ranged anything from that $500,000 average all the way up to multimillion dollar deals. And then we had what I would call an enterprise or upper midmarket segment where deal sizes ranged between $75,000 and $150,000. In that type of organization, not only was the sales closing team segmented as I described earlier but the sales development team was as well.

I think a lot of organizations are starting to separate and segment their sales development team. That’s just a function of needing to have different specialization based on sophistication of the sale. To your point earlier, it also allows a beautiful progression and promotion plan for folks that are perhaps entering their first or second role in sales organization and gives them the facility to grow in the org, move on to something that’s a little bit more sophisticated, and then perhaps move over to a closing role and smoothen out that transition as they do that.

Marylou:       Right. It seem to me Daniel that all these things come up when you actually own the planning. Help us understand, if I’m listening on this call and I’m like okay, I get it. Daniel’s right, I need to sit down and plan this thing out. What’s a good action plan for someone who’s listening to this call and wants to put this into action right away?

Daniel:          Totally. The key part here it all can be overwhelming. We discovered a lot of numbers, again, planning is something that it’s like that New Year’s resolution. Unless you actually plan to do it and actually execute on it, it’s just that gym membership that just never really worked.

I would say that they’re obviously operation departments, sales operations, business operations, marketing operations that will help facilitate part of that. But if you are a leader and by leader I’m going to separate slightly here from individual contributors who are definitely leader in their own but also sales leaders, marketing leaders who are trying to set goals for their respective teams.

For the latter listening, I would say it’s time to own your own number. We need to leverage our friends in operations to make sure that you have the right level of rigor applied to that analysis that needs to be done. But fundamentally, you need to understand that analysis. I think long gone are the times that the number gets thrown out, no one really understands me, we all agree to it, and then we fail.

                    Directionally, the way I would say taking action out of this is work out what you feel like your third or fourth year or fifth year revenue target should be and then take it to your operation leader. If you don’t have one of those, then start backwards, start with the number that you have in mind based on looking at a seven year plan and work out what your average contract value is and start to document it. Small steps around that sales velocity formula will go a long way, but really you need to own the number. I think relying on the ops team to own all of it often can end up in a lot of trouble. I think owning that number and understating some form of the analysis is very valuable and can be an action out of coming out of this goal.

Marylou:       And then of course we all know the typical outcome which is we just get numbers with no meaning behind them, no planning, no resources and we start executing and we fail. That’s the typical bad outcome that I can think of. Tell us with a good outcome, I’m sure you’ve experienced this since you’re obviously well versed in how to do this. On a good note, a high note of someone who’s really taken action, really owned that number and worked towards generating that revenue number each year.

Daniel:          Part of it stems from what are the earliest indicators. The earliest indicators can come from the sales department team. You can start to see early success indicators, meaning pipeline generators. What I would do is start to look for those early indicators when you set your planning and you’re starting the motion. When you see those early indicators or perhaps the pipeline number is a little higher than you anticipated, try to promote that, try to incentivize that, use spiffs or anything you can to try to nurture that early success because that will usually play out into latest stages of deal cycles and therefore into planning. Once you start to see success against that early goal, whether it’s January or February or March, or even if it’s the end of the year, working on how you can continue to derive that and therefore expand your stretch goal.

                    Speaking from my own experience, we had our target for December. I had two stretch goals that I’d articulated to the team. We hit our first stretch goal at about the midway point last week before the end of December. I really thought there was a possibility for our second stretch goal. I made it clear to the team that we’re close to our second stretch goal. How do we get there guys? What do you need me to do? What calls do you need me to be on? How can I help? I think that’s where making it clear it’s a goal as a team. That way you can expand your stretch goal, as a result you can hire more folks. I think keeping transparency across the team of what the goals are so that that way everyone knows what collectively we’re shooting for.

Marylou:       This has been a great chat, Daniel. Thank you so much for you time. How do people get a hold of you if they want to discuss this or any other topics related to revenue planning?

Daniel:          Thanks you for the opportunity, Marylou. I think I’m available in a few different channels, obviously email, daniel@datanyze.com. LinkedIn or white pages of the internet, you’ll find me there, and then also on Twitter I have an unusual Twitter handle, @gaijindan, if you’re curious it’s Japanese because I spent two years there. It means foreign person. I’m generally a foreign person in all environments, that’s what I name myself.

Marylou:       I’ll be sure to put all those connections in our show notes so that folks can get a hold of you. Again, thank you so much for you time. Really enjoyed this conversation. I’m sure listeners’ heads are spinning as mine is. Wow. Even a solo entrepreneur can take this advice and apply it to their different levers. They may not have the different levels of sales and products but we can definitely look at the different levers of income that we have and start allocating what we want to do where and then work towards that goal. It seems so stress-less when you do it that way.

Daniel:          I’m glad I could help.

Marylou:       Thanks again, Daniel.

Daniel:          Thanks, Marylou.