[SPEAKER_01]: Half the entrepreneurs I meet are doing too slow. [SPEAKER_01]: Half the entrepreneurs I meet are going too fast. [SPEAKER_01]: It's just go at the right pacing. [SPEAKER_01]: The root cause of that is sales. [SPEAKER_01]: People think that the root cause of a retention issue is product or the account manager post sale now. [SPEAKER_01]: It's sales. [SPEAKER_01]: It's who you chose to sell to and the expectations you set along the way.
[SPEAKER_04]: Well, everyone, and welcome back to the show. [SPEAKER_04]: Today's guest is a true unicorn in the world of building companies. [SPEAKER_04]: Mark Rebers is the founding CRO of HubSpot, where he took the company from zero to a billion dollar plus IPO by treating sales not as an art, but as a science.
[SPEAKER_04]: After teaching the next generation of leaders at Harvard's Business School, he's now the Managing Partner at [SPEAKER_04]: stage two capital and the author of the book The Science of Scaling. [SPEAKER_04]: He's here today to challenge the growth at all costs mantra and give us a data driven playbook. [SPEAKER_04]: for earning the right to scale.
[SPEAKER_04]: This, if you're a nerdy salesperson, if you're like into nerdy sales stuff, scripting, philosophy, compensation, you are going to absolutely love this episode. [SPEAKER_04]: This is a sales nerd episode at its core. [SPEAKER_04]: Let's get on to Mark Robers. [SPEAKER_04]: Why is the narrative about scaling that you see like on X or Instagram so much different than the reality that founders actually face on a day-to-day basis?
[SPEAKER_04]: Like why are we sold this like scale at all costs 20 hours a day, lose your friggin mine, burn every bridge, spend every dollar, it's like what you see, you know, in the mooms, but we don't know, that's that, to be successful, that's not how it really works. [SPEAKER_04]: So why? [UNKNOWN]: Yeah. [SPEAKER_01]: I'm, yeah, that's a really good question why it happens.
[SPEAKER_01]: I mean, I would think like it might, we have to do a minor history lesson here where it's like, if we go back decades in entrepreneurship, it was absurd to lose money on a business for years. [SPEAKER_01]: Like, the venture capital was such a small piece of on instillist. [SPEAKER_01]: People will get confused. [SPEAKER_01]: It makes all the headlines, but people are still shocked to hear that more wealth is generated in entrepreneurship and non venture capital back startups.
[SPEAKER_01]: That's like shocking to people, like especially in the U.S. [SPEAKER_01]: I think it's the only way to like do a startup is to do be, you can't even tell you Ryan how many founders show up to me looking for money. [SPEAKER_01]: And I'm like, don't raise venture capital. [SPEAKER_01]: And that's what I'm selling. [SPEAKER_01]: You know what I mean? [SPEAKER_01]: Like you get the whole.
[SPEAKER_01]: So I think maybe it's a history there where it's like, you had this, you know, startups isn't the whole point of the business make money and then like all the sudden, maybe we'll call it 2000.
[SPEAKER_01]: where you had the dot com craze, which was like up and down, but like VC like catapulted and that kind of entrepreneurship catapulted like if it crashed, but then it stayed high and went bananas and you know, work like the blitz scaling came out where it's like dude, you got a go fast break things burn money get into orbit and it's went too far. [SPEAKER_01]: Right, because I think we could all sit around and just like two far in certain contexts.
[SPEAKER_01]: So let's like kind of frame that first. [SPEAKER_01]: Because like, I think first of, we all could agree that if you're a founder, unless you're like Elon Musk, which is an extreme era and you're doing SpaceX, which is a very different context. [SPEAKER_01]: For most startups, you're not going to burn up billion dollars a year. [SPEAKER_01]: Okay, and then for like a VC back start up, burning 100,000 a year isn't just not being aggressive enough.
[SPEAKER_01]: We can agree on those parameters, but where is optimal in between there? [SPEAKER_01]: And like that, what came out of that was this obsession with top line revenue growth as the only way to measure success, because that largely drives your valuation and to burn it all costs to do it, and there's just not enough scaffolding. [SPEAKER_01]: And like, Ryan, I'm not saying you should go slower or go faster.
[SPEAKER_01]: And the answer to that can be a approach with the rigor that we have in economics and finance and strategy and marketing today and it's kindergarten level today. [SPEAKER_04]: When I first got into business was right after the dot com bubble crash 2002 and I remember back then. [SPEAKER_04]: It's almost flip from the way it is today. [SPEAKER_04]: Like, if you were an entrepreneur back then, it was because you couldn't hack it in the big businesses. [SPEAKER_03]: Exactly.
[SPEAKER_04]: For world. [SPEAKER_04]: And now it's the flip. [SPEAKER_04]: Now the badge of honor is, I'm an entrepreneur, you know, like, you can't hack it as an entrepreneur working corporate. [SPEAKER_04]: And it's, it's such a different story. [SPEAKER_01]: It's funny. [SPEAKER_01]: I agree the rank as I get jokingly, I was in business school around that time, it was just crashed and there was a joke the B to B and B to see him back to banking and back to consultant.
[SPEAKER_01]: To your point, right? [SPEAKER_01]: It was like that. [SPEAKER_01]: And I was like, I was at MIT at business school. [SPEAKER_01]: There was like 500 kids in my class. [SPEAKER_01]: I think three of us were doing startups and everyone was like, what a bunch of morons. [SPEAKER_01]: You know, like, what are you doing? [SPEAKER_01]: That was so 1998.
[SPEAKER_04]: Yeah, if you like look at the pictures of entrepreneurs, it's like great greasy kids in a, you know, yes, warm room that like make you into social, we're all the anti social kids. [SPEAKER_02]: Right. [SPEAKER_04]: With the entrepreneurs back then, you know, fine. [SPEAKER_04]: It's so funny how that is flipped and now they're like the rock stars and that's [SPEAKER_04]: that's probably where some of the mythology comes from, you know what I mean?
[SPEAKER_04]: You get these people that just don't know how to to pass this down and sell it. [SPEAKER_04]: I guess when it comes to this this idea and what I love about your book is how you've taken this idea that for so long has almost been sold as like an art form, like you're there. [SPEAKER_03]: Yeah. [SPEAKER_04]: you're an entrepreneur, you're a few, you have this magic wand and you can see and it's really just math.
[SPEAKER_04]: I mean, there's a little bit of you got to make them for sure. [SPEAKER_04]: God can stink. [SPEAKER_04]: These things are important. [SPEAKER_04]: But like, do you think is it intellectual laziness? [SPEAKER_04]: Is it just that there's 10 million things they have to think about and this idea of scaling smart is just a brain cycle too far? [SPEAKER_01]: There's I think the couple layers on why it occurs.
[SPEAKER_01]: I would say when you're faced with the decision the people around the table don't have a ton of that bats at that moment. [SPEAKER_01]: In a lot of cases, the founder, it's the first time. [SPEAKER_01]: Like literally, we're at this moment, Ryan. [SPEAKER_01]: It's like, you're a group of six engineers, you've got dozens of customers, [SPEAKER_01]: is started to fly, you're at a million in revenue and someone hands you eight million bucks. [SPEAKER_01]: That's fucking it.
[SPEAKER_01]: Like as a first time founder, that's like intimidating. [SPEAKER_01]: Holy shit, I've never seen this much money in a bank account and I'm in charge of it. [SPEAKER_01]: And the person that gave it, so they don't, they've never done it. [SPEAKER_01]: They do that. [SPEAKER_01]: I don't know what to do. [SPEAKER_01]: It feels like I should go fast because I read about the top three stories in the history of the world on how fast open AI went, how fast Databricks went.
[SPEAKER_01]: It seems like that's what I should do. [SPEAKER_01]: And then the VC that gives it to you, a lot of times they had an operated what their career as a band is they've sat on 10 boards and one hit it and the one that hit it did that.
[SPEAKER_01]: They hired 10 reps the next month and they took off so they're like, oh that's how you do [SPEAKER_01]: But what happened in that case was like, that company, whether it was Databricks or OpenAI or Google back in the day, it happened, their strength of product market fit was so outrageous that they could have hired chimpanzees and they would have hit their quota. [SPEAKER_01]: Like it was like, it was order taking. [SPEAKER_01]: And there's no assessment for the current company.
[SPEAKER_01]: around the strength of the product market fit, which is not that if you look at Wikipedia, it's like people talk about it like it's a feeling and it can be totally quantified, which is a precursor to that massive scale. [SPEAKER_01]: And then the premise of go to market fit, which is like product market fit is just like, that's your product deliver the value promised and we can measure that.
[SPEAKER_01]: And then the go to market fit is like, now that I know that, can I sell it profitably? [SPEAKER_01]: like quotas, commissions, territories, and then we can go into the scale mode, right? [SPEAKER_01]: So, but like I think that's probably one of the root causes is the people are on the table have very little experience around many, many at bats of the different contexts in which you can be faced with this, okay, we're going to, are we ready to scale fast and how fast can we go?
[SPEAKER_04]: that coming out of the insurance industry. [SPEAKER_04]: So I share with you before we went live. [SPEAKER_02]: Yes. [SPEAKER_04]: My home industry was the property cash of the insurance industry. [SPEAKER_04]: Yes, and after 20 years, most of the retail side and had started my own digital commercial insurance agency, found in my own agency, seven days with a zombie apocalypse hit of New York.
[SPEAKER_04]: Not a free time to have just sunk about 50k into us in your own insurance agency every. [SPEAKER_04]: And it was commercials. [SPEAKER_04]: There's another great part. [SPEAKER_02]: Right. [SPEAKER_04]: It was virtually, it's not every customer in the world. [SPEAKER_04]: My tan was literally zero for every month. [SPEAKER_04]: That was an interesting experience. [SPEAKER_04]: I mean, we were able to grow out of it and all this kind of stuff.
[SPEAKER_04]: But you have this concept of a leading indicator of retention. [SPEAKER_04]: And that one I hadn't [SPEAKER_04]: I had never thought about a leading indicator of attention, and as someone coming out of the insurance industry where retention is our entire business. [SPEAKER_04]: The reason that the property casualty insurance world can operate like it's 1992 technology wise is because the business model is so good. [SPEAKER_04]: Don't tell anybody, but if you could see fire.
[SPEAKER_01]: I don't. [SPEAKER_01]: I don't care. [SPEAKER_01]: Great crush it. [SPEAKER_01]: Right. [SPEAKER_04]: This I talked to me a little bit about like, and where I, what I liked about this was in the product market fit section because I'm framing this question poorly, but the idea here is I like, I really like the idea I love for you to expand on, in the product market fit stage, thinking about who's going to retain and what's I looking to retain out of it.
[SPEAKER_04]: I had never thought about [SPEAKER_04]: thinking into it that early in the process. [SPEAKER_04]: That's what I'm trying to go that way. [SPEAKER_01]: Let's be if I know exactly what you're asking about. [SPEAKER_01]: And it's like, I remember I'll kind of root this in a funny story. [SPEAKER_01]: And it's about our series de-investment at HubSpot, we got from Sequoia and the partner there, who's like, by the way, like, a billion air.
[SPEAKER_01]: Like, I'm just, I'm gonna kind of like poke at them for a second, even though like I sat down with Packgradian, January brought my students to him, like, best friends, like high respect, bow down, whatever. [SPEAKER_01]: Let's just cut. [SPEAKER_01]: But like they did our series de-investment. [SPEAKER_01]: I remember and it was a while ago, right? [SPEAKER_01]: It was like 2008.
[SPEAKER_01]: So like we were still in this exactly your question is Ryan where we hadn't quite got and how important retention was in the cloud journey and how important sales was to retention, which is kind of what you're getting at and is shocking to people. [SPEAKER_01]: And I remember I was being peppered by the Sequoia partner as he was deciding whether to make the investment and he's like, I need to talk to the sales leader.
[SPEAKER_01]: And I was talking a lot about this of like selling into high value accounts, qualifying against their willingness to use the product. [SPEAKER_01]: And he was like, dude, just go close business. [SPEAKER_01]: Like sales is job is a drive revenue. [SPEAKER_01]: Like customer success and product is in job of making it work. [SPEAKER_01]: And it's fine. [SPEAKER_01]: Like again, bow down and we're all in that, but that is like not a crack statement in a lot of situations.
[SPEAKER_01]: Um, and when I go in and having to help these companies that are flatlined, which a lot of case the root causes, um, is retention. [SPEAKER_01]: And surprisingly, the root cause of that is sales. [SPEAKER_01]: People think that the root cause of a retention issue is product or the account manager post sale or the person that unbored it now. [SPEAKER_01]: It sales. [SPEAKER_01]: It's who you chose to sell to and the expectations you set along the way.
[SPEAKER_01]: Like in my world, it's like if you don't get IT, but if they're set up work needed on your product and you don't get IT involved, pre-sale, that customers cooked. [SPEAKER_01]: And by the way, I can get a contract and a wire without talking to IT. [SPEAKER_01]: You want me to sell, fine, I can do it. [SPEAKER_01]: I've got sell, I used to ask most. [SPEAKER_01]: But that's not a good business.
[SPEAKER_01]: And so yeah, like, to your point, [SPEAKER_01]: You know, the underlying theme there is retention starts with sales and the objective of sales is not to get a wire in a contract is to generate a lifetime value customer, which is what you experience in the insurance world. [SPEAKER_01]: And that's why one of the key were, you know, one of the works in the book.
[SPEAKER_01]: is around defining your leading indicator of retention because like when you're trying to like you're kind of pulling away from that like okay sweet like I need to incentivize my salespeople to sell lifetime value customers and their complaint is not set for that their complaint is like go close 500,000 this quarter and I'll pay you. [SPEAKER_01]: which has nothing to do with LTV.
[SPEAKER_01]: So the immediate instinct is like, okay, why don't I just start paying them in a new way? [SPEAKER_01]: Like every time I get paid every month, they get paid. [SPEAKER_01]: I don't know if that's how it works in insurance rhyme, but that wouldn't work in a lot of businesses because then you'll have reps who first off they come in, they have to build their book of business.
[SPEAKER_01]: So that means you're like probably attracting a bunch of junior reps because it takes a while to make money. [SPEAKER_01]: And then once they've hit it two years later where they have the book of the business, there's on the beach all day. [SPEAKER_01]: They're not motivated to work. [SPEAKER_01]: Right, you got to like, when they have a good quarter, they got to get paid when they have a bad quarter, they get a fee on their paycheck.
[SPEAKER_01]: And that's where the lead indicator attention comes in, which is like, what is it that you can see in the first month of a customer's engagement with you? [SPEAKER_01]: That if that occurs, they'll be with you forever. [SPEAKER_01]: And if it doesn't, they'll leave. [SPEAKER_01]: And some classic examples that were like slack if the customer sent 2000 team messages in a month, [SPEAKER_01]: HubSpot if they use five or more features in the 25 feature platform.
[SPEAKER_01]: These were the leading kit or attention that you could see in the first month that if they happen, they're with you forever, if they don't, they leave. [SPEAKER_01]: And you can over times statistically correlate that to long-term attention to be sure. [SPEAKER_01]: And once you have that, you can do a whole bunch of things with it, including payer reps.
[SPEAKER_01]: So now the complaint is like, yeah, you get paid half when you get the signature and wire and half when they hit the lead [SPEAKER_01]: And it's like, I'm not, I'm not screwing you over. [SPEAKER_01]: Most people hit the lead and kid attention in the first month. [SPEAKER_01]: And some some people, if you have a free trial, hit it before they even send the wire.
[SPEAKER_01]: So just do both jobs, get the wire, get the money, and get them, and you're not like turning your, a lot of people think, oh, I'm turning my rep into a technical consultant. [SPEAKER_01]: No, it's just like, you still have the technical on boarder. [SPEAKER_01]: You still have the customer's success, measure. [SPEAKER_01]: You still have the commenter. [SPEAKER_01]: The rep is just saying the things necessary that they should be.
[SPEAKER_01]: to tee up the expectations of the account, to work. [SPEAKER_01]: But how's that translate in insurance, Ryan? [SPEAKER_04]: directly. [SPEAKER_04]: So one of the things that I have always thought about with SaaS and SDR compensation is, and this is a better, this is a conversation that has probably been had more than any other space in the property casualty insurance industry.
[SPEAKER_04]: Because the reason that property casualty insurance or other say insurance, because I want to separate out life, it's a completely different monster and health.
[SPEAKER_04]: I'm sort of the talk and guys we're talking home and autos commercial insurance that kind of stuff is that the up front commissions are very small so it's called building a book of business and essentially you get a front end new business split and renewal split and one of the things that you when I'm working with founders of agencies. [SPEAKER_04]: You know, because I've worked in that space a lot, is that those levers are really important to what you want your business to do.
[SPEAKER_04]: So if you want, and you know, big fit incentives drive action, right? [SPEAKER_04]: So if you want top line growth, if that's what matters to your point, then you ramp up your new business commission, you ramp down your renewal commission and guess what they're incentivized to do. [SPEAKER_03]: Right.
[SPEAKER_04]: Fogs the mirror put it on the [SPEAKER_04]: business owners, agency owners, in this case, founders of its assass company, they love to thump their chest about that new business revenue. [SPEAKER_04]: Oh, right. [SPEAKER_04]: Don't you, you should see the year I had, man. [SPEAKER_04]: And then it's rolling off the back, just like you said, you're you're pushing 60, 70% retention rates and you can't grow an insurance business out. [SPEAKER_01]: A year later.
[SPEAKER_01]: Yeah, which is too bad. [SPEAKER_01]: Now you've like debt buried this. [SPEAKER_01]: You've dug this hole for a year. [SPEAKER_01]: Holy cow. [SPEAKER_04]: So here's my question for you because I have I have I have a whole bunch of thoughts on this in this area. [SPEAKER_04]: And I think it's very goals.
[SPEAKER_04]: What you're trying to do with your company, what season you're in specific, but you said you said something and and I just I'm very interested in this question from sales leaders. [SPEAKER_04]: Let's say that SDR has a retention piece to their business, right? [SPEAKER_04]: So some form of, hey, you bring it in, you get half, you, they hit their, uh, leading indicator retention, you get another half, and then we give you a, uh, 3% ongoing spiff for the lifetime.
[SPEAKER_04]: And the account for, you know, if you need to come in and touch them or, you know, be that kind of, uh, second set of hands or whatever. [SPEAKER_04]: And they get to, [SPEAKER_04]: 500,000 in personal income, right? [SPEAKER_04]: And they just like you said, downshift into second, Rela goes in the drink, feet up on the stool, but they're maintaining a half a million dollar book of business every year. [SPEAKER_03]: Yes. [SPEAKER_04]: Why is that bad?
[SPEAKER_04]: Because you're wasting an army of people managing a half a million dollar book, if the retention can, let's assume for this thought experiment, the retention is higher if they're continuing to touch it. [SPEAKER_01]: Yeah, this is like this is cool Ryan because we could like maybe try to push the front here on insurance commission plans and strategy, which would be great because we can learn from you and more on my tech world and we can do some things on the tech so.
[SPEAKER_01]: I have an answer to that, which the Astros is going to be like ability to track talent. [SPEAKER_01]: But the problem with that strategy and I get it, it's like you busted your home for two years, five years, whatever it took. [SPEAKER_01]: And now you got your big, big business. [SPEAKER_01]: This happens in wealth management to some degree. [SPEAKER_01]: You know, like it happens in other industries. [SPEAKER_01]: The problem is you're wasting a skill set.
[SPEAKER_01]: That person has the capability to not only maintain that bucket business at the, you know, the 98% that you want, but also go find another 2 million every year. [SPEAKER_01]: They're just not motivated to do so. [SPEAKER_01]: And you could devise a, no, I'm going to take like talent competition aside for a sec. [SPEAKER_01]: You can devise if the whole industry moved in this way, you would get way more of those folks.
[SPEAKER_01]: And you could do what they call a gated commission plan, which is like, all right, congrats Ryan. [SPEAKER_01]: You've got what's the book? [SPEAKER_01]: When do you relax? [SPEAKER_01]: Is it 5 million? [SPEAKER_01]: When when you start to put the [SPEAKER_01]: What's the book business at? [SPEAKER_04]: The industry standard is when you hit about 10 grand in monthly renewal commission.
[SPEAKER_04]: So about a buck 20 is when you see the first downshift and at 250 is when they start to coast usually. [SPEAKER_01]: Okay, so good for you. [SPEAKER_01]: You've got your huge book of business. [SPEAKER_01]: You're you've got 250k coming in every year just to maintain that. [SPEAKER_01]: And so basically, I'm going to pay you, what do you get paid? [SPEAKER_01]: The goate is at 3% on the Ronaldo, so we can talk to him. [SPEAKER_04]: maybe 40% new 20% renewals.
[SPEAKER_01]: Okay, so I'm going to give you 20, you're making 250k. [SPEAKER_01]: So you've got $5 million book of business. [SPEAKER_01]: I'm paying you 20% and you're just coasting. [SPEAKER_01]: So here's how you, the problem is you're wasting that hunter skill, because that's a gifted person that could be just doing more business for you and them. [SPEAKER_01]: And so you could use a gated commission plan, which is this.
[SPEAKER_01]: If your new sales in 2026 is under 200,000, I'm going to pay you 15% renewals. [SPEAKER_01]: If your new sales in 2026 is between 200,000 and 500,000, I'm going to pay you 20% renewals. [SPEAKER_01]: If your new sales is between 500 and 750, I'm going to pay you 25% renewals. [SPEAKER_01]: I like that. [SPEAKER_01]: I mean, push back though. [SPEAKER_01]: I mean, my first push back would be, dude, what what scene your person is going to come there?
[SPEAKER_01]: It's like, I have to work forever now. [SPEAKER_01]: I can't just do the whole reason I got into insurance was to work my ass off for five years and then go by a beach house. [SPEAKER_01]: But this Ryan's complaint is shit. [SPEAKER_01]: I have to work every year. [SPEAKER_04]: So that's definitely a problem because, you know, burnout for, I mean, burnout for sales professionals is a real thing. [SPEAKER_03]: Yeah, of course. [SPEAKER_04]: There's no doubt.
[SPEAKER_04]: But I will say there is a particularly a particular acuteness to burnout and insurance. [SPEAKER_04]: If you are, nose to the ground grinding for five, seven years, like, [SPEAKER_04]: Insurance is a odd business dude. [SPEAKER_01]: Yeah, I can work on it with you though. [SPEAKER_04]: I want to take it to get a chance of working on that but keep going on your keep going Yeah, so what my it's an odd business in that and I fought this for a decade yeah, I fought this idea that like
[SPEAKER_04]: there was actually something unique about the ecosystem, the fact that there's 50 states, every state is regulated independently, there's also federal regulation, oh, there's all this, the data, like I don't know if you've ever dug into the data issue in the insurance industry, but it is like, it'll make smoke come out of your ears. [SPEAKER_04]: It's really bad. [SPEAKER_04]: So there's like this, there's like this frictional grind to the process as well.
[SPEAKER_04]: There's there's no straight-through [SPEAKER_04]: I've seen a lot of founders turn to and I'm really interested in your take. [SPEAKER_04]: I love this gated idea. [SPEAKER_04]: Yep. [SPEAKER_04]: Where does it go? [SPEAKER_02]: Yeah, has issues. [SPEAKER_04]: Like a phantom equity play as well because I've seen guys and gals try to use something like a phantom equity or some sort of ownership plan as a way to incentivize a long term growth as well. [SPEAKER_01]: love it.
[SPEAKER_01]: Yeah, there's multiple different ways to do this. [SPEAKER_01]: So there's that play and then yeah, there's you can you're just trying to like give them a reason to, you know, continue to grind and get out there. [SPEAKER_01]: Okay. [SPEAKER_01]: Now my only countermer to my personal levels out of the gate, which was like competition for talent, where it's like I can go to one firm, work my asset for five years and say on a beach.
[SPEAKER_01]: I can go to Ryan's firm, work my asset for five years, and I still have the work [SPEAKER_01]: My counter to that, though, is remember that I, yes, I did say that if your sales sock your renewal commission drops from 20 to 15, but I also said that if your sales were good, your renewal commission goes from 20 to 30. [SPEAKER_01]: So I believe that we'll get around and there are, you tell me if I'm wrong, but like every sales industry has those friggin grind.
[SPEAKER_01]: They just are addicted to the quota. [SPEAKER_01]: They love to do this. [SPEAKER_01]: It's their art. [SPEAKER_01]: They wanna wake up every morning from the age of 22 to 65 and freaking go find new people. [SPEAKER_01]: They're coming to your firm. [SPEAKER_01]: because they're getting paid. [SPEAKER_01]: So like that would be my slight counter is like, I think this plan will sus out the mediocre, I wanna do, you know, and really attract the bigger performers.
[SPEAKER_01]: I would say like the other thing that was like wound up in your comment was burnout. [SPEAKER_01]: And that's an everything dude. [SPEAKER_01]: Like tech is a grind too. [SPEAKER_01]: Like these were all grinds.
[SPEAKER_01]: And I had this innovation at HubSpot that, while in the midst of a text sales climate where the average 10 years, 2.2 years, I was able to pull off 6.5. [SPEAKER_01]: And the key to it was this, because I would get these interviews from, I would interrelike these top reps coming from their places. [SPEAKER_01]: I'm like, why are you leaving? [SPEAKER_01]: They were like, well, I'm just kind of like burnt out there.
[SPEAKER_01]: I have the same OT, the same quote or the same territory. [SPEAKER_01]: And yeah, I guess what, we just did our annual planning. [SPEAKER_01]: They caught my territory in half. [SPEAKER_01]: They doubled my quote. [SPEAKER_01]: I'm like, why are they doing this to their top talent? [SPEAKER_01]: Like, these people are just leaving for these absurd, scaling strategies like cut quote and half, double quote, like that's the formula.
[SPEAKER_01]: And so I was like, okay, we're not doing that. [SPEAKER_01]: I'm like, these, and the other thing that was happening was I kept having top reps coming to me and be like, I want to be a manager, and I'm like, why do I go? [SPEAKER_01]: That's the only way you can grow in sales, and I'm like, dude, there's so many studies that show that the top reps make the worst managers.
[SPEAKER_01]: And like everybody, all the top reps become like, if they try it, they're like, dude, I hate this. [SPEAKER_01]: It's like a dull daycare. [SPEAKER_01]: I've lost all my personal independence. [SPEAKER_01]: I'm making less money because I use it just crush it on my own. [SPEAKER_01]: I'm trying to crush it through eight people. [SPEAKER_01]: So like I'm putting these things together like, dude, there's gotta be a way to grow. [SPEAKER_01]: without becoming managers.
[SPEAKER_01]: So I create this promotion path, which is kind of what you're getting at Ryan with this pride, this equity share, where the way I did it was that you come in as a level one wrap, and you get like your 50K based 50K commission, and you know, like you gotta hit your quote is whatever, like 800,000. [SPEAKER_01]: And then the way that you get to level two, if you get to level two, I'm gonna increase your commission to 60K. [SPEAKER_01]: So you get a 10K OTE bump.
[SPEAKER_01]: I'm going to give you a thousand stock options. [SPEAKER_01]: That's how it worked. [SPEAKER_01]: It was very common, exactly. [SPEAKER_01]: And there it goes. [SPEAKER_01]: Sick, that's awesome. [SPEAKER_01]: How do I get to level two? [SPEAKER_01]: Once you hit an $800,000 install base, and then you can put other stuff in there, like, oh, you're leading an indicator attention needs to be this, right? [SPEAKER_01]: So that's another way to have them as an LTV hunter, you know?
[SPEAKER_01]: And this is where you could, let's do the insurance example, let's do it that. [SPEAKER_01]: So you come in at level one, you get your payment. [SPEAKER_01]: And if you get to level two, I'm going to bump you to now 25% renewals instead of 20. [SPEAKER_01]: And the way you get to level two is you need an install base of, you know, a million bucks. [SPEAKER_01]: And your new sales average per training six months has to be like whatever 10,000.
[SPEAKER_01]: So that gets some hunting all the time. [SPEAKER_01]: Once you hit that, some people do it in four months. [SPEAKER_01]: Some people will take two years. [SPEAKER_01]: You go to level two. [SPEAKER_01]: You get the bump. [SPEAKER_01]: Now you got to go for level three. [SPEAKER_01]: Level three is to get to three million install base and your new, your average monthly sales has to be 50,000. [SPEAKER_01]: I'm apologies if my numbers insurance are off, right?
[SPEAKER_01]: You guys get the point. [SPEAKER_01]: And when you get to level three, we bump you another, your renewal rate goes up a little more and we give you a little equity. [SPEAKER_01]: You get what I'm saying and what happens Ryan is there's this game that they're playing that motivates them. [SPEAKER_01]: Like this, this six year journey, seven year journey and insurance is no longer just, it's like, oh shit, I'm level four. [SPEAKER_01]: I'm trying to get to level five this year.
[SPEAKER_01]: And you could correlate with like skill certifications, certain trainings, mentor, you know, like, it could become this whole like college experience. [SPEAKER_01]: And maybe you've seen it. [SPEAKER_01]: Like I apologize if I'm like talking about stuff that was done 20 years ago. [SPEAKER_04]: No, I love this.
[SPEAKER_04]: I would say, [SPEAKER_04]: There are a few more sophisticated organizations that do have and run sales departments with, I'm not gonna say anything like that, but certainly more sophisticated and well-thought out versions, but they're rare. [SPEAKER_04]: I think the online. [SPEAKER_02]: Today work.
[SPEAKER_04]: I give leadership in general in the insurance industry, a C-minor, so it's hard for me to say, you know, and there's a common joke that, you know, if you're even a B-plus player and you come to the insurance industry, you feel like an A-plus player, like it just, well, I want to work on that together too, but like, okay, I gotcha.
[SPEAKER_04]: Yeah, and there's a whole conversation there, yes, it's a very odd space, but, [SPEAKER_04]: what I think an unlocked that that you have given my mind in this call is I love the idea of attaching a variable stages of compensation to this leading indicator of retention. [SPEAKER_04]: Yeah, because especially, you know, it's not a one-off business. [SPEAKER_04]: It's not, we're not so accurate.
[SPEAKER_04]: Sure, even though you can have T-shirt rule, I guess, but um, you know, this is a very [SPEAKER_04]: There are absolutely indicators, particularly if you own a niche, you have a specific industry you're going after, a specific product you sell. [SPEAKER_04]: It's not hard to figure out what the leading retention indicator is going to be on these fairly quick. [SPEAKER_01]: What was an example? [SPEAKER_04]: Like a simple one would be the number of policies you have.
[SPEAKER_04]: Great. [SPEAKER_04]: Industry average, if you have one policy, 30% retention, two policies, 72, 3%, 93. [SPEAKER_01]: Perfect. [SPEAKER_01]: That's like very classic, like platform sale [SPEAKER_04]: Yeah, so that would be an easy one. [SPEAKER_04]: And, you know, it's funny though, and so here's what I'll put in front of you.
[SPEAKER_04]: My agency, the reason that we, so for one year, we were the fastest growing small commercial agency outside of the top 200 in the entire industry. [SPEAKER_04]: So think of top 200 agencies as like Martian McLane and Brown and Brown, and some of them are publicly trading, et cetera. [SPEAKER_04]: Then you have everyone underneath that. [SPEAKER_04]: That's essentially the way the industry works. [SPEAKER_04]: There's like top 200 mega agencies and then there's everyone else.
[SPEAKER_04]: And we were the fastest growing small commercial agency in the country for a 2021 because I built and we were wholly inbound. [SPEAKER_04]: So everything we did was based on YouTube and SEO. [SPEAKER_04]: We were driving north of 35 inbound leads a day for it. [SPEAKER_04]: Amazing. [SPEAKER_04]: 14. [SPEAKER_04]: And I built this like sales process that was all psychology based.
[SPEAKER_04]: It was basically Chris Voss has never split the difference, but rigged to insurance, right? [SPEAKER_04]: So at the end, the person had been, you know, psi off to the point where they couldn't say no. [SPEAKER_04]: Now, and so this is where my question comes from. [SPEAKER_04]: Our philosophy, because on inbound, my personal philosophy is sell the problem, close the account later, right? [SPEAKER_04]: So you round out late sell the problem at the point of sale.
[SPEAKER_04]: So because with inbound, right? [SPEAKER_04]: I mean, you know this as well as anybody, you worked at Hubsbyte, right? [SPEAKER_04]: When they have inbound is more like, I have a problem and I have decided that you are the person that I want to sell with my problem.
[SPEAKER_04]: So what I taught my reps was, [SPEAKER_04]: sell that problem close solve that problem for them take that concern off their brain which is often one policy but the numbers don't lie you need multiple policies if you want to retain so we then would go back around and we had a process for going back around and trying to close out and round out the rest of the account. [SPEAKER_04]: Same evening or later.
[SPEAKER_04]: Yeah, so [SPEAKER_04]: In general, what are your thoughts on that, and we did flail quite a bit with compensating because of that model. [SPEAKER_04]: Getting the reps to go back around and close out. [SPEAKER_04]: Do you have account managers do it? [SPEAKER_04]: There was a lot. [SPEAKER_01]: Yeah, that's a great question. [SPEAKER_01]: Yeah. [SPEAKER_01]: Let me, let me, I'm talking about that.
[SPEAKER_01]: By the way, when you went back around, was that like a separate meeting or you tried to do it in the meeting? [SPEAKER_01]: Same meeting. [SPEAKER_01]: to get the second pause in the third one. [SPEAKER_04]: Unless they just said, you're taking all my stuff. [SPEAKER_04]: It was a separate meeting. [SPEAKER_04]: We would come back. [SPEAKER_01]: Yeah, that's fine. [SPEAKER_01]: That's cool. [SPEAKER_01]: OK, I think I like it in general.
[SPEAKER_01]: And then you're asking a abstract question. [SPEAKER_01]: So first of all, let me just frame it. [SPEAKER_01]: You're asking an abstract question of like, do you specialize or not? [SPEAKER_01]: And the quick answer in that context is I don't think you do.
[SPEAKER_01]: I think they're they're full cycle, but I have actually I'm I'm faced with the strategic decision all the time and very different context from pharmaceuticals to trackers to software to whatever And there's a two part question to help you determine it the first question is what percent of the lifetime value that account is captured in the first sale Like the LTV potential if like it's 90% then you're going to specialize because this is around
[SPEAKER_01]: The the toughest skill in all the whole go to market journal for journey from marketing to customers because it is just that hunting closing skill. [SPEAKER_01]: I don't want to waste that on retention. [SPEAKER_01]: If I'm going to capture 95% of the potential on the first sale. [SPEAKER_01]: But in this case it's not. [SPEAKER_01]: One policy we can get four. [SPEAKER_01]: We're talking like in on average maybe 25 to 40% of the potential is in the first sale.
[SPEAKER_01]: So that's like second question is, [SPEAKER_01]: That's leaning toward full cycle. [SPEAKER_01]: But the second question is, what's the skill set necessary to capture the other 70%. [SPEAKER_01]: Because there's some places like open AI, they just trip compute wires, and they just have to click by more. [SPEAKER_01]: Like I'm not going to waste a hunter on that. [SPEAKER_01]: But like, in this case, no, it's a skill.
[SPEAKER_01]: Like, you get to get back in front of that, you know, husband or wife, you got to like, probably even more difficult because they're pressing in with life insurance because they're about to have a baby. [SPEAKER_01]: But now you got to get their home in auto too. [SPEAKER_01]: You know what I mean? [SPEAKER_01]: So it's like, that's tough because they're already like with someone else. [SPEAKER_01]: So I think the answer is definitely full cycle.
[SPEAKER_01]: Um, is keep people there because the reasons are like there's always pros and cons and specialization. [SPEAKER_01]: I think we'd better away the the pro is your your you're taking that very hard to find hunting skill and making them hunting clothes all day as opposed to waste them with my new skills. [SPEAKER_01]: But the the cons are I just spent like, you know, a month with Ryan talking about his family, his kids, his wife.
[SPEAKER_01]: That's like a relationship and knowledge that is going to be super useful for me to go get the auto and home insurance and if I hand that off that's a that's headwinds right so so yeah yeah and so but yeah to your point like I like that we call it the land and expand in software [SPEAKER_01]: and I think it's the way to go.
[SPEAKER_01]: I think it's the way to go and it just takes deep discovery unlike what you know when you look at it from their lens, why would they want to after they bought life insurance with you? [SPEAKER_01]: Is there a common path like what they started with and then what you had up some to? [SPEAKER_01]: Or was it all over the place? [SPEAKER_04]: That's a business because we sold commercial insurance tax. [SPEAKER_04]: We believe it was most people started with us for Workers Compensation.
[SPEAKER_04]: And then we would expand from there. [SPEAKER_04]: So we would get the workers' comp. [SPEAKER_04]: We'd get it on the books. [SPEAKER_04]: Because it was also very often time-sensitive. [SPEAKER_04]: And then from there, we would dig into all the other stuff that they had. [SPEAKER_04]: And you know, what I was trying to get the rep.
[SPEAKER_04]: So for me, because 90 plus percent of the leads in our business were inbound, [SPEAKER_04]: own, you know, I didn't want them doing anything other than talk. [SPEAKER_04]: Yeah, just close it. [SPEAKER_04]: Right.
[SPEAKER_04]: We used we used like this we call that the one call closed process and video proposals to sell so we we sold on video proposals and never wanted my reps to talk to a prospect more than once it happened, but the goal was and we actually got it the highest mark we had was 63% of. [SPEAKER_04]: 102 accounts were sold with the rap only talking to the prospect one time. [SPEAKER_01]: That's insane. [SPEAKER_01]: That was amazing. [SPEAKER_01]: I mean you crushed that first experience.
[SPEAKER_01]: Let's double-click another bundle because this is classic bundling and I think when you look at it in a buyer's centric which I write a lot of bottom of the book and stuff that's like how do you be buyer centric versus sales centric which will help you build up better business and more durable business.
[SPEAKER_01]: Um, when you look at this decision from biocentric way, it's like, you just take the extreme uh, options here, which is like, can I bundle everything with you guys have all three policies or why not have the best policy and here here for, with three different agencies. [SPEAKER_01]: And what is, what's the button-leaning advantage?
[SPEAKER_01]: And obviously there's I, you know, I'm curious what you say to that and I have a follow on to that, but like I imagine there's just like, you know, administrative shit, you know, three different relationships, I imagine there's some discounting around bundling, like talking to you through what you guys were doing. [SPEAKER_04]: That's essentially, I mean, the good news wise. [SPEAKER_04]: because people were coming to us, and it wasn't based on ads.
[SPEAKER_04]: So we weren't, we weren't, there's trust. [SPEAKER_04]: Wedging in with an ad, it was all content marketing. [SPEAKER_04]: So I had people that had watched, and this isn't sane, 30 videos on YouTube before they'd call us. [SPEAKER_04]: So like they were already closed, right? [SPEAKER_04]: So like, what happened to us? [SPEAKER_04]: is like guys, we're not selling them anything. [SPEAKER_03]: Yeah. [SPEAKER_04]: We're validating that they're decision to buy from us.
[SPEAKER_03]: Right. [SPEAKER_04]: Taking order. [SPEAKER_03]: Totally. [SPEAKER_04]: We're doing. [SPEAKER_04]: Yes. [SPEAKER_04]: And in the, but when I found, so, so based on this process, I was able to get a new rap who would come in at a 30 to 40% close ratio. [SPEAKER_04]: And when we talked, talked them the one called close process, we would get them north of 80%. [SPEAKER_04]: So they're closing [SPEAKER_04]: when ever, and I, I wanted to bundle.
[SPEAKER_04]: So I wanted to, oh, I mean, because I know the numbers. [SPEAKER_04]: It's easier. [SPEAKER_04]: It's less calls. [SPEAKER_04]: It's less time. [SPEAKER_04]: It's more money. [SPEAKER_04]: It's higher attention. [SPEAKER_04]: I, I know all the math, but when I found, and I was never able to get my head around this was, if someone called me for workers' comp policy because they had a problem with their workers' comp.
[SPEAKER_04]: If I injected, hey, send me your liability and your property and your auto to, Closery show will go down a pressure. [SPEAKER_04]: 10 points. [SPEAKER_01]: I totally agree with you. [SPEAKER_01]: I think if we couldn't run a scientific experiment, running those two sales motion side by side, what you landed on with the land and only focus on worker's comp is absolutely the right decision of the first call.
[SPEAKER_01]: And my fault question that I wanted to sac with you was thinking through now the intention, now that you've got them close and you want to go to the bundle. [SPEAKER_01]: What was the biggest, [SPEAKER_01]: What was the biggest reason for lack of success and no more, no more acute pain? [SPEAKER_01]: Would you be able to get them back on the meeting? [SPEAKER_04]: Yeah, so it would be, you know, it would just be ghosting.
[SPEAKER_04]: Because you know, remember, a lot of these are shots. [SPEAKER_04]: We should truck right three workers with them doing escaping. [SPEAKER_01]: Right cool. [SPEAKER_01]: So I think like what I, that's what I figured and that's when you have to like, this is gets down to like this really cool stuff about like sales process design is you have to like really isolate down to this step and this psychological moment and strategize around that.
[SPEAKER_01]: So it's like, we got them on the land, sign contract payment. [SPEAKER_01]: We got to get them to the bundle and the blockers getting back on the phone. [SPEAKER_01]: And so like what can we do there? [SPEAKER_01]: So now what I'm trying to think is in that moment of the land What's the offer that is like they have to get back on the phone with me? [SPEAKER_01]: After this is done. [SPEAKER_01]: It's kind of I don't know what it is.
[SPEAKER_01]: It's like hey, I [SPEAKER_01]: this got to be something in there, um, it's like, I, I wonder if like what it, I, this could be at into like moral hazard manipulative slimy stuff, but like, did you ever try, hey Ryan, um, hope you're doing well. [SPEAKER_01]: I know it's been six weeks, uh, this is a good little issue on the policy. [SPEAKER_01]: Could you, um, mine email me back with a good time to talk?
[SPEAKER_04]: Um, I didn't ever try that, but I would say we tried a lot of stuff around it, um, you know, we would, so the best success was table setting the round out without asking for the business. [SPEAKER_04]: Sure. [SPEAKER_04]: I like that. [SPEAKER_03]: I like that. [SPEAKER_04]: Let's cross it. [SPEAKER_03]: You know it's in there. [SPEAKER_04]: You understand what the portfolio actually looks like.
[SPEAKER_03]: Yeah. [SPEAKER_04]: And then you just kind of say hey and if everything goes smoothly, you know, I know you got liability and property. [SPEAKER_04]: I'll come back to you in about a month. [SPEAKER_04]: Yes, and we can get that all squared away too because like I was I was a big assumption of seller Yeah, good.
[SPEAKER_04]: It's easiest psychological help from a sale perspective and and so we would just kind of assume the sale a month later and that worked But it was it was definitely it was definitely a challenge. [SPEAKER_04]: We had to use you know, we used all the kind of drip campaigns. [SPEAKER_04]: Yeah, yeah, good. [SPEAKER_01]: I wanted to abstract because I know some people in shares are like, oh, this is cool.
[SPEAKER_01]: I want to play with this and I want to abstract this out for everyone else into some principles here. [SPEAKER_01]: There's two things that happen there and this has to do with platform sales and bundle sales where I have a company right now that's crushing that's completely messing this up. [SPEAKER_01]: they have a platform with five features and the reps are just like getting these customers on the column and like rushing to tell them about all the features.
[SPEAKER_01]: And I know the close rate is one third of what it could be and it's like there's tons of data that shows that what you've done is correct [SPEAKER_01]: offering that that's your unique advantage. [SPEAKER_01]: You have to do deep discovery to understand the module or two modules that are most applicable and spend 80% of the call on that. [SPEAKER_01]: And then it's like a before they leave. [SPEAKER_01]: Oh, by the way, just want to make sure you're aware of this this and this.
[SPEAKER_01]: We're not going to talk about that now. [SPEAKER_01]: Don't focus on that route. [SPEAKER_01]: Just want to make sure you're aware of it. [SPEAKER_01]: And then to your point, you're kind of qualifying some of the other stuff. [SPEAKER_01]: So it's just this like, don't try to get through it all. [SPEAKER_01]: lean toward the that's an abstract point. [SPEAKER_01]: The other one that's coming out here too Ryan is aligning the sales.
[SPEAKER_01]: The point of a sales process is not to get your product out there and pitch your product is to help the buyer buy. [SPEAKER_01]: And one of the one of the fundamentals of any strong I talk about this in the science of scaling book, one of the key foundations of every good sales process designing a buyer journey. [SPEAKER_01]: People have their pitch deck objection handling, discovery guide, qualifying matrix, no one has a buyer journey. [SPEAKER_01]: And that's the framework.
[SPEAKER_01]: And like, it's coming to life here in what Ryan's saying where if you did a buyer and surety of a policy buyer, in the beginning, they're just like trying to figure out what workers come to get and Ryan's crush that was his content marketing. [SPEAKER_01]: Now they bought his work in cop. [SPEAKER_01]: Guess what's next?
[SPEAKER_01]: they need to understand the advantages of bundling and why like the cost savings so his marketing is totally different and I was doing drip campaigns. [SPEAKER_01]: Right, so it's just like some some abstract principles on this mini case we're teaching right now that like applies to no matter if you're selling software, pharmaceuticals or tractors. [SPEAKER_04]: Yes, and I, I completely agree.
[SPEAKER_04]: I, so I tested to, I had a, but built a sales script for them literally tested every word in a script and every word and I'd have different reps work in different versions and all this kind of stuff, you know what the ultimate the biggest jump in close ratio was the very first question that we asked. [SPEAKER_04]: which was quite simply. [SPEAKER_04]: Hey Mark. [SPEAKER_04]: Thank you for choosing Rogue Risk. [SPEAKER_04]: My name's Ryan Handley. [SPEAKER_04]: What's going on?
[SPEAKER_04]: How can I help? [SPEAKER_03]: Be careful. [SPEAKER_04]: Then you shut. [SPEAKER_04]: Yes, like teaching silence to sales people. [SPEAKER_04]: It's like a super power and it's the hardest thing in the world to do and I would literally say to them.
[SPEAKER_04]: Shot the like in a nice way like but but like you're you're I know and cares that we have 50 carriers no one cares that you've been in the business for 17 years right only like nobody cares as I [SPEAKER_04]: standing outside of a job site and he's a worker's comp policy to get fucking paid like just just shut up and listen to him. [SPEAKER_04]: He'll literally tell you and that's this and this is my question for having run so many sales teams and workers so many founders right.
[SPEAKER_04]: I get a lot of questions um you know because my past about like what do you do when you have a process that works? [SPEAKER_04]: and you have a talented salesperson who seemingly wants to make the process their own and you know they're not maximizing because of it, right?
[SPEAKER_04]: I get that tension between do I just go hardcore like you're not doing it you're out or is it do I coach them like how do we coach up that talented but underperforming salesperson like what's the best way to maximize their
[SPEAKER_01]: That was a beautiful question in my first book elaborated on a statistical study I did where after a hiring 200 salespeople had quantified all the interview assessments and scored everyone on a 10 on eight different attributes and then over time was able to correlate that to success.
[SPEAKER_01]: It took me two years to figure this one out, but it became the number one attribute that I interviewed for, and it's rare for me to find a sales context where it isn't a top three if not number one. [SPEAKER_01]: Coachability. [SPEAKER_01]: So the answer to your question, dude, is like, there are some hiring attributes that you have to be super precise on because if you hire them and they have the negative of it, it takes a psychology degree to online it.
[SPEAKER_01]: and you just gotta like, sus those out. [SPEAKER_01]: A classic one is like, people that are new to sales, like some people have call reluctance, you know, they get anxiety. [SPEAKER_01]: And that does take kind of, it's something in your wiring of a child, that you have to go to a psychologist. [SPEAKER_01]: Like fix it versus like product knowledge learning, like, okay, we can get there. [SPEAKER_01]: You know what I mean?
[SPEAKER_01]: But Coachability, the biggest answer to your question Ryan is make sure that's a huge part of your interview. [SPEAKER_01]: And like, I just say, hey, listen, hey Ryan, love your resume, love the 15-minute screen. [SPEAKER_01]: I'm going to have you come in the office. [SPEAKER_01]: I think you're great. [SPEAKER_01]: Part of the interview that we're going to do is I'm going to send you our training manual. [SPEAKER_01]: And we're going to do a role play.
[SPEAKER_01]: I'm going to send you a LinkedIn profile as well for a prospect. [SPEAKER_01]: And we're going to do a role play and just be prepared for that. [SPEAKER_01]: And so we'll do the roleplay in the interview, and then there's a bunch of things I'm testing in there. [SPEAKER_01]: But after the roleplay, I'm like, okay, Ryan, great job. [SPEAKER_01]: How do you think you did?
[SPEAKER_01]: I'm letting himself assess because their ability to self assess is a attribute of their coachability. [SPEAKER_01]: Like low coachability people think they did great. [SPEAKER_01]: High coachability people are very analytical about their self assessment. [SPEAKER_01]: And then I coach them and I say, hey,
[SPEAKER_01]: Here's an every interview I give one piece of positive feedback on the roleplay and one piece of negative because I don't want them to think that they're bombing and they have an anxiety attack so the positive thing was great report the negative thing was you could have had deeper discovery on the problem set and I coach them and I watch how they pay attention and then I either repeat it in the moment or I'll say listen, putting you through to round two we're going to do another
[SPEAKER_01]: role play as part of that interview. [SPEAKER_01]: And I'm getting a real good view on coachability. [SPEAKER_01]: Now that that's the biggest thing because it's really hard to take an uncoachable person and make them coachable.
[SPEAKER_01]: The if I do if someone sneaks through and like, you know, [SPEAKER_01]: There's so much to this dude, but like first off like there's instilling a coaching culture in your organization, so many people on the hamster way on their reactive and their own calls and they never get to it. [SPEAKER_01]: First day every month is coaching setup day. [SPEAKER_01]: As director of all my managers, I'm like, all right, we're going through each reps.
[SPEAKER_01]: diagnosis, coaching plan, and how we're going to measure how we did with that coaching involvement. [SPEAKER_01]: And we're looking at data, everyone to get, and the manager's with a wrap working on that. [SPEAKER_01]: Like, hey Ryan, let's look at your data after all this and like your reflections. [SPEAKER_01]: What do you want to work on this month? [SPEAKER_01]: Like urgency development. [SPEAKER_01]: Great. [SPEAKER_01]: How should we do it? [SPEAKER_01]: Great.
[SPEAKER_01]: I'm going to jump into three calls. [SPEAKER_01]: Let's book those three calls right now for the month. [SPEAKER_01]: So my whole coaching booked. [SPEAKER_01]: in the month. [SPEAKER_01]: So that's like proactively driving a coaching culture. [SPEAKER_01]: And the final wrinkle dear question right is that God forbid someone's like, Dude, thanks for the coaching, but I'm good. [SPEAKER_01]: I have my process.
[SPEAKER_01]: Then you just need a culture where it's like performance plans are factual. [SPEAKER_01]: First day of the job, welcome to the company. [SPEAKER_01]: Here's the CEO. [SPEAKER_01]: Here's the commission plan. [SPEAKER_01]: Here's the product. [SPEAKER_01]: Here's the way you get fired. [SPEAKER_01]: is if you are miss your quarter two quarters in a row if you're a little below 80% you aren't a performance plan.
[SPEAKER_01]: And if then that next quarter you're not above 90% you're fired. [SPEAKER_01]: No hard feelings is how it works. [SPEAKER_01]: So then the system's there to catch it. [SPEAKER_01]: And if I got a non-coacher, then it's like, okay dude, you do your thing. [SPEAKER_01]: And that person watches me sitting with Julie sitting with Bob, sitting with whatever. [SPEAKER_01]: 90% of the time they come back [SPEAKER_01]: So there's a couple of nuggets for you.
[SPEAKER_04]: Yeah, no, I love establishing how we break up at the beginning.
[SPEAKER_04]: That was a big unlock for me in my hiring process, because you'd have people when you outlined, because when you outlined, okay, here's all the best case scenarios, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah,
[SPEAKER_04]: When I implemented the, and here's what happens if you don't hit your numbers. [SPEAKER_02]: Right. [SPEAKER_04]: You'd get people who self-select out at that point because they know they can't coast, right? [SPEAKER_04]: Like just having that in there will get people to self-select out. [SPEAKER_04]: That was a, I mean, I completely agree with that part.
[SPEAKER_04]: That's a, I know a lot of people don't do that, and it was a huge unlock, because the coasters will go, oh, wait, they're actually going to track my progress. [SPEAKER_04]: And like, I'm going to have like real hurdles if I don't hit my numbers. [SPEAKER_04]: I don't want to work here. [SPEAKER_01]: I want to go keep that at the competition. [SPEAKER_01]: Keep them at the competition. [SPEAKER_01]: What a great way to build your culture.
[SPEAKER_04]: Yeah. [SPEAKER_04]: The other thing we did, which I think I've talked about very briefly on the show, but I'm interested in how you would do this in tech as well. [SPEAKER_04]: I created a profitability monthly profitability score cards for every sales rep. [SPEAKER_04]: So, one of the things I realized was that I felt a disconnect between our reps and their contribution to the overall growth of the company.
[SPEAKER_04]: and on both sides right if they're not doing their job the negative impact and on the top top side their positive impact created these little PDFs and every month we'd send one out to every and it would be basically their salary, their benefits, their commissions split on new and renewal so their total cost to the company versus how much actual rabbit top line revenue they were bringing in and we gave them like this this net profitability score and then pulled it out
[SPEAKER_04]: our high performers saw that and it was like we put, you know, Elon Musk level rocket fuel up their ass. [SPEAKER_04]: So they, they just took off because they were like, wait, I'm contributing five grand, ten grand, like they saw their profitability number go up and like those accumulators, those, those people that are driven just by progress, they want to see that up into the right.
[SPEAKER_04]: They like couldn't freaking handle it because now they, they've had like, [SPEAKER_04]: It was almost like there was like the sense of pride of like, look how much profit I put back on me. [SPEAKER_04]: It was really cool. [SPEAKER_04]: So good, Matt. [SPEAKER_04]: Like, yeah, that came from a mentor mine, but that was a huge unlock for us as well.
[SPEAKER_01]: I think it's brilliant and I'll abstract it for everyone on here, which is like, it's totally incorrect in the way we all measure our sales people, which is like you put it up on the board. [SPEAKER_01]: How many new sales did you generate this quarter? [SPEAKER_01]: That's a part of the story. [SPEAKER_01]: What you're saying Ryan is like the end picture in your business profitability, which is pretty much everyone.
[SPEAKER_01]: But like, they're like for a high blitz scaling business. [SPEAKER_01]: Like it's a little, it really like the way we talk about it is in unit economics contribution, right? [SPEAKER_01]: And like, which is a big part of like the LTV getting back to that.
[SPEAKER_01]: You're how much you sold in a quarter gives zero visibility into the lifetime value of what your customers and that needs to be more of the end game which is what you're getting at so like where where I see it translate now other business like yeah fine measure measure the quarterly revenue new revenue from these reps but also measure their LIR of their install base. [SPEAKER_01]: measure the LTV, the retention of their install base.
[SPEAKER_01]: Right, so I think that's the key point there is like the microscope we put on and measure classically measuring sales teams is like incomplete. [SPEAKER_04]: I want to pivot away from this sales thought experiment as we kind of come into the close of our conversation. [SPEAKER_04]: You went from private to public, [SPEAKER_04]: to academic, to investor and have seen this incredibly broad swath and an incredible number of companies.
[SPEAKER_04]: What are some of the biggest differences in mindset and they can either be positive or negative between those different places, right? [SPEAKER_04]: Because I know most people tend to sit in one of those buckets, right? [SPEAKER_04]: They just live in private or they get into public, they just live in public. [SPEAKER_04]: And like, what can they be learning from each other? [SPEAKER_01]: Wow, man. [SPEAKER_01]: Yeah, there's a lot in there. [SPEAKER_01]: Thank you.
[SPEAKER_01]: That's a cool question because like you're right. [SPEAKER_01]: There's not a lot of people that sit deeply in all those places. [SPEAKER_01]: I guess I'll try to give like the general and I hope I don't offend people through this, but I'm just going to try to generalize the average of those that are sitting in each of those private. [SPEAKER_01]: It's a hustle. [SPEAKER_01]: You work your ass off. [SPEAKER_01]: There's really amazing people.
[SPEAKER_01]: It's a little more athletes than specialists. [SPEAKER_01]: You don't see as much of like I did this one little job for 25 years and on the expert. [SPEAKER_01]: It's a little bit like my job could change next month and I love that big upside.
[SPEAKER_01]: Can I just clarify something you called that athlete's versus specialist I've never heard that type of person referred to as an athlete before is there's something there yeah for sure we talk about that a lot in broad spectrums It's like think of your first salesperson to start up with five engineers what they have to do and compare that to the hundredth sales person higher into a 10,000 person company like their their job is like they have the
[SPEAKER_01]: the Midwest Territor for the S&B's with a coach in the bitch, you pitched that, like the first rap at the, they've nothing, I mean it's like that's an athlete, I mean they're doing everything from like setting meetings, building scripts, like setting up the CRM, like doing the first demo, like talking to the engineers on what to build, that's an athlete.
[SPEAKER_01]: versus the hundredth higher, who's like, dude, you're gonna run the San Francisco healthcare territory for us in mid-market. [SPEAKER_01]: That's a specialist, right? [SPEAKER_01]: And you can translate that into R&D, find it's whatever. [SPEAKER_01]: So yeah, that's what you have in there. [SPEAKER_01]: I like that stuff personally, that's where I'm most attracted to you. [SPEAKER_01]: Once you approach public and go public, very, very polished, very buttoned up.
[SPEAKER_01]: The politics comes in quite a bit. [SPEAKER_01]: a little less risky people who want to hit doubles can sustain through their career rather than like massive home runs. [SPEAKER_01]: Which is fine. [SPEAKER_01]: I mean, I'm not a fan anymore. [SPEAKER_01]: It's just like this is what you start to see. [SPEAKER_01]: A little more nine to five.
[SPEAKER_01]: Just a lot of like more about like it's a lot about setting up systems and people movement stuff as opposed to like writing code and selling deals. [SPEAKER_01]: You know, because you're just so far from it. [SPEAKER_01]: You're setting up the strategy. [SPEAKER_01]: And also like in the beginning, I would say 10% strategy, 90% execution. [SPEAKER_01]: Once you get the public, it's 90% strategy, 10% execution.
[SPEAKER_01]: Cause these like, when you're like six people, you're like, okay, like, [SPEAKER_01]: I have an idea. [SPEAKER_01]: Good. [SPEAKER_01]: Let's try it. [SPEAKER_01]: Two days later, we've tried it and we know the answer. [SPEAKER_01]: When you're in like running a 7,000 person company, you're like, I have an idea. [SPEAKER_01]: Let's try it. [SPEAKER_01]: It takes you 18 months to try it because you're like mobile, you know what I mean?
[SPEAKER_01]: So so that's where, and that's why I'm a Kinsey and BCG make a lot of money because the strategy is so important. [SPEAKER_01]: Okay, so you get in an academia. [SPEAKER_01]: I mean, again, it's just a lot slower-paced. [SPEAKER_01]: I mean, and rightly so, the people who are like tenure-tracked, dude, like you're gonna take any question that we asked today, like the optimal way to like specialize your reps, that's a five-year research study for a professor to make tenure.
[SPEAKER_01]: you're spending five years researching every single angle of that to come up with new law which is like, you know, for me, I'm like, I just can't, I don't, I have ADHD, like, career age. [SPEAKER_01]: I can't do that. [SPEAKER_01]: There are some people, but it's important because that's where breakthroughs and medicine and economics and all the stuff came from. [SPEAKER_01]: Was that rigor?
[SPEAKER_01]: So that, I mean, this is really important today where it's like, you know, like, we didn't talk much about this, but like, I think there's a ton of energy being put into building and driving the new AI technology and next to zero energy and understanding the implications. [SPEAKER_01]: And I think academia can play a massive role in that because of just the way they're set up, right? [SPEAKER_01]: So, so like that, that's what it's like there. [SPEAKER_01]: It's all about truth.
[SPEAKER_01]: It's very abstract. [SPEAKER_01]: It helps you a lot of operators think they know the truth, but it's only the truth in their context. [SPEAKER_01]: Whether it's tech or insurance or SM or US versus Asia, you know North America versus Asia. [SPEAKER_01]: In academia, you know truth abstract. [SPEAKER_01]: because you have to look at it from every state. [SPEAKER_01]: You know, get what I'm saying? [SPEAKER_01]: When I talk about like, this is how sales works.
[SPEAKER_01]: Here's a first principle of sales. [SPEAKER_01]: I've pressur tested that in North America, Africa, in Asia. [SPEAKER_01]: I've pressur tested that in a $10 billion business, and a $10 dollar business, and I've pressur tested that in healthcare and tech. [SPEAKER_01]: And that's where academia shines.
[SPEAKER_01]: And in the last part is before you ask the following is like VC, [SPEAKER_01]: pattern recognition, um, you know, do like we look at 500 companies for every investment we make. [SPEAKER_01]: So, it's about founder picking, it's about Validian that's a big enough market. [SPEAKER_01]: And I would say one of the big surprises is, um, there's two things. [SPEAKER_01]: Just because we have money to invest and you're looking for money, that's not a fit.
[SPEAKER_01]: You have to remember that, like the MIT and Domets, my main anchor, they look at a thousand VCs, they pick 30 to do business with. [SPEAKER_01]: They pick those 30 to fill a hole. [SPEAKER_01]: Like they need consumer B2B life sciences, they need growth, they need pre-seed. [SPEAKER_01]: So when I walk in and say I'm a B2B software investor at the seed stage and you come to me with a life sciences business at the growth phase, you might have a sick business.
[SPEAKER_01]: I can't do that deal, right? [SPEAKER_01]: So it's like, so just you have to, there's a qualification there and I think the other thing, yeah, and there's like fun math associated with it. [SPEAKER_01]: And I would also say there's like a little bit of a capitalization fit, like I said at the beginning, like there's a lot of people that show up with a great idea, but I'm like don't raise venture capital.
[SPEAKER_02]: Yeah. [SPEAKER_01]: Because there's certain ideas that should be bootstrapped, there's certain ideas that should be private equity, and that's kind of a surprise too. [SPEAKER_04]: That was one of the biggest things that I had learned in the hard way in my career.
[SPEAKER_04]: So I was telling a scale of my business and I ended up selling it coming out of some big whole bunch of stuff happening just over 24 months we spin the business in [SPEAKER_04]: And I didn't, if you've never been through selling a business like that before and I didn't have anyone, I didn't have anyone in my corner who had enough experience to kind of tell me look like,
[SPEAKER_04]: these guys are saying the right things but structurally what they're going to want out of your company just doesn't align with you know going back to incentives what they were trying to do and it was friction you know three months from three months in told I hit my first exit trigger it was just friction friction friction friction how you know when this was a huge eye opener to me
[SPEAKER_04]: In my mind, like, I was selling my business to these people who were going to inject it with all this capital and I was rolling equity into this, you know, the P back company and, you know, we're going to the moon and then come to find the reality hits of, you know, P economics and their obligations to their LPs and all this kind of stuff and it becomes this major issue. [SPEAKER_04]: How? [SPEAKER_04]: What are just some reverse vetting metrics?
[SPEAKER_04]: I'm a founder, I'm an entrepreneur, I'm going out, I either need money or I've built this business for seven years. [SPEAKER_04]: I know I'm looking to actually maybe be acquired or merge with someone like, [SPEAKER_04]: I know this is a very deep question, probably do hours and hours, but what are just some of those, the things commonly missed that lead to friction post sale? [SPEAKER_04]: What are some of those, oh yeah. [SPEAKER_04]: This is that people commonly miss.
[SPEAKER_01]: Yeah, I mean, we can talk about the exit path for a moment. [SPEAKER_01]: And like, obviously, if like, this is just a transaction with nothing after you don't have to think too much about it. [SPEAKER_01]: If you're like, you're selling this thing for five and a million, you're getting it cash on the day it closes, then you're, you don't have to think too much about it. [SPEAKER_01]: Other than like, yeah, you want to take care of employees, you want to take care of customers.
[SPEAKER_01]: Like, you want to know a little bit there, but personally, it's not as much. [SPEAKER_01]: Well, people get burned a lot here, because they just think that like, okay, I've been growing this business 20% for the last 10 years, like as long as I keep growing it for 20% for the next three, I'm gonna hit each of my exit triggers. [SPEAKER_01]: But they don't realize that like they're no longer sold in charge, like this gets embedded into the system.
[SPEAKER_01]: So like you got a first half just to appreciate that and then like dig into those questions. [SPEAKER_01]: Like what are we doing here? [SPEAKER_01]: Like once this deal closes, are you leaving us alone here in Albany? [SPEAKER_01]: and let us do our thing like, how are we, what is the integration path? [SPEAKER_01]: Can we just run or do I now have a boss? [SPEAKER_01]: Am I, is my sales team gone and my, I'm selling through this team?
[SPEAKER_01]: How do these products work together? [SPEAKER_01]: What's the fact like so many of those questions need to be walk through? [SPEAKER_01]: If you're being dependent on exit triggers to deal with your personal situation. [SPEAKER_01]: And like this, that same narrative can carry to, they're like a fundraise.
[SPEAKER_01]: Like, dude, like, okay, cool, like, okay, I want to invest 30 million at a 500 millimeter valuation, okay, great, like, like, like, is there any, like, um, is there any, uh, preference stack on that, like, is it clean, blah, blah, blah, as you're taking a board seat, blah, dude, that's like not the whole conversation. [SPEAKER_01]: Like, once the deal's done, what is the plan for next year revenue wise? [SPEAKER_01]: How many sales people do we need to hire?
[SPEAKER_01]: Like, [SPEAKER_01]: I want to make sure we have that discussion to make sure philosophically we're in sync so that we don't have that boredom eruption. [SPEAKER_01]: Because I would say like boredom eruption is a top five killer in these like growth journeys. [SPEAKER_04]: Yeah, I, the experience for me was, and I think part of it is I'm probably a little too trusting as a human in general.
[SPEAKER_04]: what i found very interesting was they bought me because we were lean mean selling machine we just sold we were fucking good at it and i thought when they bought us that [SPEAKER_04]: Why wouldn't you just want to keep pulling that lever? [SPEAKER_04]: Read a cash machine, right? [SPEAKER_04]: It's the insurance industry. [SPEAKER_04]: We had figured out how to sell with a cac that was like near zero. [SPEAKER_04]: It was literally like just my time.
[SPEAKER_04]: So like we're talking like near zero cac. [SPEAKER_04]: I mean, we are crushing. [SPEAKER_04]: And when I found very interesting is all sudden, I started getting calls about the, [SPEAKER_04]: professional nature of my tech stack. [SPEAKER_04]: And the human resources guidebook and hasn't been properly delivered to the employees.
[SPEAKER_04]: And you know, all of a sudden I got a $8,000 enterprise IT costs associated to my budget line because if I wanted to call tech support to help them with my Mac, you know what I mean? [SPEAKER_04]: Like it was, I started looking at that going, [SPEAKER_04]: Wow, like, I'm 42 years old and I feel like a baby. [SPEAKER_04]: I feel like I'm 18 again, learning these lessons, like right on the nose.
[SPEAKER_04]: And I just couldn't wrap my head around a 17 person board meeting in which I was told my CRM wasn't professional enough. [SPEAKER_04]: I was like, I don't even understand what that means. [SPEAKER_04]: I also hardcore ADHD, Irish Catholic, and Sailor, like, you know, so I'm struggling just to deal with these people who I don't think have the brain capacity to keep up with what I'm doing to begin with.
[SPEAKER_04]: And now they're telling me that I need to go from, from, you know, a $15 a month user seat CRM to Salesforce, which is $275 a user seat. [SPEAKER_04]: And I got to eat that cost on my balance sheet.
[SPEAKER_04]: Can I just go back like you bought me to make money can I just go back to doing that thing like yeah, that's all I had no idea what founder life would look like post sale right and it is my one of the biggest mistakes I have ever made in business is not spending more time on like what is my day to day look like when this when I Put my signature on that piece of paper and I say that only because we fit this point and just a cautionary tail of founders like
[SPEAKER_04]: That is such like having someone else who's buying you, describe what they think your world looks like. [SPEAKER_04]: That is like question number one now. [SPEAKER_04]: I'm helping a couple other businesses raise money and I'm like, guys, what is your, what do they think? [SPEAKER_04]: Now, what do you think your life is going to look like? [SPEAKER_04]: What do they think your life is going to look like? [SPEAKER_04]: I didn't ask that question and, you know, it was brutal.
[SPEAKER_01]: I think that's the abstract takeaway for everyone here on that point is like during an investment or an acquisition 90% of that work is done to like transact that thing. [SPEAKER_01]: And you have to do way more work like 50, 50 on post transaction, post investment post transaction life. [SPEAKER_01]: that needs to be done. [SPEAKER_01]: And it's key because like most people go through these things one two or three times in their life.
[SPEAKER_01]: This isn't like a sales call that you just like skin your knees for the first ten and then you eventually get it. [SPEAKER_01]: So yeah, that's a great take away. [SPEAKER_02]: All right. [SPEAKER_02]: I mean, I [SPEAKER_04]: I want to ask you about AI, but we don't have a lot of time. [SPEAKER_04]: And it's such a big question. [SPEAKER_04]: Yeah. [SPEAKER_04]: I almost just want to table. [SPEAKER_01]: Yeah, yeah. [SPEAKER_01]: I think you do.
[SPEAKER_01]: Yeah. [SPEAKER_01]: It's a huge bubble. [SPEAKER_01]: It's a huge bubble. [SPEAKER_01]: Lean as an- Oh, a huge bubble right now. [SPEAKER_01]: Yeah. [SPEAKER_01]: Like, just like, it's going to define the whole world. [SPEAKER_01]: You have to start playing with it. [SPEAKER_01]: It's going to slow you down at first. [SPEAKER_01]: You have to be patient. [SPEAKER_01]: Be coming to AI and able, leader, seller, whatever.
[SPEAKER_01]: I think like a lot of what you read about in the right now is like more pets.com and web then then it is Google, like it just do the read could just go into chat. [SPEAKER_01]: TPD and ask do first movers usually win or do fast followers just ask them that and read all the studies and then you'll find out. [SPEAKER_04]: with that little treasure hunt in mind. [SPEAKER_04]: Mark, this has been an incredible conversation. [SPEAKER_04]: I appreciate the hell out of you, man.
[SPEAKER_04]: I can pepper you with questions and have this back and forth for not for hours, dude. [SPEAKER_04]: I love the way you think about the business. [SPEAKER_04]: The book is the science of scaling. [SPEAKER_04]: I'm just gonna advocate that we can't go off God anymore. [SPEAKER_04]: There are gut decisions we have to make, but to do this right, based, you know, you need math, you need to work in the numbers and have a real plan. [SPEAKER_04]: I love the way that you've outlined this.
[SPEAKER_04]: Besides going Amazon, picking up the book, where is the best place to go deeper into your world? [SPEAKER_01]: Yeah, LinkedIn, I'm very active. [SPEAKER_01]: And thank you for the plug-rine and just want to remind everyone that I'm donating 100% of the proceeds to mental health. [SPEAKER_01]: So if this, I hope that the reason you bought is for the scaling curiosity, but just know you're doing good as well. [SPEAKER_04]: I appreciate you, man.
[SPEAKER_04]: Wish you nothing but the best things for coming on the show. [SPEAKER_04]: We're outta here. [SPEAKER_04]: PUSS!