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Become A Top-Performing Company: How To Analyze And Optimize Your Revenue With Scott Stouffer [Episode 124]

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Are you analyzing and optimizing your revenue?

In this episode, Doug C. Brown speaks with Scott Stouffer, the CEO and founder of scaleMatters, about how to analyze and optimize your revenue for maximum profit and top earning success. Doug and Scott discuss how to scale your company to become a top performer, why narrowing focus helps your company succeed, and much more.

 

In this episode you will learn:

 

Episode’s guest – Scott Stouffer

CSS 122 | Optimize Your Revenue

Scott Stouffer is a 5X CEO/3X Founder — currently, he’s the CEO & Founder of scaleMatters, which delivers go-to-market operations, analytics, and insights to help businesses drive capital-efficient growth. Scott is also the co-host of The Data Room podcast. Scott took his first company (Visual Networks) public in 2001 and grew it to a peak market cap of $3 billion. Since 2011, Scott has focused much of his energy on early and growth-stage tech companies, building quantitative data and process models that uncover waste, inefficiency, and friction in the go-to-market function. His method of managing go-to-market was so effective (71% CAC reduction and 47% faster sales cycles in 6 months) at his last company (Salsa Labs) that he started scaleMatters to help more B2B companies drive faster, capital-efficient growth.

Visit his website: www.scalematters.com

transcript

Become A Top-Performing Company: How To Analyze And Optimize Your Revenue With Scott Stouffer

I’ve got Mr. Scott Stouffer from a company called scaleMatters. They’re at ScaleMatters.com. We’re going to talk about optimization. We’re going to talk about how to analyze things so that you cannot have top-line revenue but you can optimize your revenue. Now, whether you’re selling in a sales role, the CEO of the company, or somebody internally in a different department or different division, please write this down, “Optimization matters.”

Why? It matters because it’s the difference in profitability. It’s also the difference in frustration levels. In other words, when things are moving along smoothly and you’re making as much money as you can out of your initiatives, it’s a happy day. Without further ado, let’s go speak to Scott. We’re going to talk about modeling as well toward the end of this particular episode. You’ll all get a lot out of that modeling side, so let’s go talk to Scott now.

Scott, welcome to the show. Thanks so much for being here.

Thanks for having me. I’m looking forward to it.

Why don’t you tell everybody what you do and what your company does and we can set the frame for this?

The company is called scaleMatters. You could think of us as playing in the broader revenue intelligence market space. Specifically, we provide a platform and some associated services that is effectively a purpose-built BI platform for go-to-market leaders of B2B growth stage companies. What they use us for in particular is to help optimize their go-to-market motions specifically within that by identifying friction. Finding the things that are working, and things that aren’t working, understanding the why behind it, and using our platform to help optimize their overall go-to-market approach.

For folks out there, BI, that’s Business Intelligence, correct?

Yes.

What would you give as a definition for friction?

I use friction or inefficiencies interchangeably. I’d say there are 2 or 3 impacts. Friction could be things where you’re wasting sales money or marketing money. You’re spending marketing dollars and attracting people that aren’t good fit prospects for you. That could be friction. It could also be things that are causing revenue leakage, conversion rates to be depressed, or cycle times to be elongated. It’s anything that is diminishing the return that companies are getting on their sales and marketing investments.

If I understand this correctly, I’m spending money on marketing. I’m getting leads but not sales-qualified leads. I’m having my salesforce and myself as a salesperson run around chasing people who basically aren’t that qualified for me but I’m spending $10,000, $50,000, or $100,000 or whatever it is a month on leads but I’m not getting the return. On the other side of it, let’s say my leads are qualified but I’m getting there. I might be having revenue leakage by not being able to sell certain things within the upsells, cross-sells, down sells, and/or maybe my process for selling.

The process is a very common thing at the bottom of the funnel that we see. During the quoting and contracting stage, a lot of growth stage companies don’t have a very efficient approach to that. There might be 6 steps and 2 of them might be manual, where salespeople are manually adjusting quotes, errors come into play, and customers get frustrated.

If that process isn’t done very well, you’ll end up with certain customers bailing because of the indication that maybe this company doesn’t have its act together. That could be a process issue. You could have a process issue in the handoff and follow-up of leads. If it isn’t done in a way that’s super timely, the value of leads decays very quickly, especially an inbound lead or somebody who submits a demo request. They’re in purchase consideration at that moment. They submit the demo request and if they get a response from you six days later, they’ve already forgotten. That’s a process issue. Where if that is not dialed in, you’re going to get leakage.

I had this happen to me and when you were saying that, I wrote it down. I’m like, “Oh, my gosh.” I had a person who cold contacted me. They did a nice job cold contacting me. They went through all the work, started with email, then we progressed. We had a conversation, then went to a demo and a quote stage and everything was fine.

The person’s supposed to be sending me some information on the quote but they never did and they never followed up. Now, it’s not an inexpensive purchase for us. It’s a sizable purchase but they didn’t follow up and they didn’t do that. Is this an example of, we’re somewhere in the process, the ball is getting dropped because we’re at the point, we had a meeting, and we’re going, “We don’t trust this guy anymore?”

That may not be a process issue. That may simply be an individual performer issue. If you think about inefficiencies and go-to-market, they could be related to your strategies, your messaging, your processes, and your people. That may be a people-related issue but nevertheless, it’s ending up potentially with revenue leakage that was almost a done deal.

I have a question. Should the process maintain the people? Should there be a process in this case that said, “Once we submit this quote process, we have X amount of time in which to get an answer or follow up?” Should that be part of the process?

That should be part of the process but then, you need technology to enforce that. Documenting a process, if you don’t have a way to measure compliance with it, doesn’t do anything for you. That is a big role that technology can play in helping teams optimize their go-to-market motion by measuring certain things that ensure compliance with the processes that have been designed. They don’t necessarily ensure compliance but they highlight non-compliance. That’s the thing that can happen. You can be alerted to non-compliance, which you can then take action to resolve.

Getting real-time insights into this data, it’s significant. The reason I bring this up is a lot of people and many companies downplay the value of the data-driven process because they don’t understand it. Conceptually, they all get it like, “If we track everything, everything should be much more efficient and we should get this.”

They don’t implement this enough and they’ll hire a guy like me or my constituents to come through. We’re going, “Your leads haven’t been followed up on in three weeks. Look at all the dormant clients who haven’t been contacted in X amount of time. Why are we going from stage 1 to stage 2 but it’s not going from stage 2 to 3, 43% of the time?”

Having real-time intelligence tells us like real-time because that’s revenue lost. It’s leakage that is completely lost but then, we have to say, as a business owner or a salesperson, “I lost those sales. Now I got to make up other sales to make them up but I have a cost of acquisition on every sale. It’s not just one sale I’m losing to make it up. I might have to make up 5, 6, or 7 sales to make up for the initial revenue leakage.” Am I thinking correctly or am I in for it?

You’re thinking correctly. Where the gap is, as you said, everyone buys into makes sense to measure stuff. Everyone also likes to think of themselves as data-driven. The problem is there’s a sizable investment to be data-driven and it’s in two places. One is producing legitimate data. If you think about the go-to-market world, the data gets generated out of the tech stack, the CRM, the marketing automation platform, the sales cadence tool, and the call recording tool. All of these tools, while they’re built to automate some function, they end up being generators of data.

The vast majority of early and growth-stage companies do not do a particularly good job at strategically configuring those tools so they generate the data that they need. What you’ll often see is a very common thing in companies where alignment between sales and marketing isn’t pristine. You get marketing folks operating off of data in the marketing automation platform like Marketo, HubSpot, Pardot, or something.

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Optimize Your Revenue: Alignment between sales and marketing isn’t pristine in most companies.

 

You get salespeople operating out of data that’s in the Salesforce, the CRM, and the data conflicts with each other. They end up spending energy arguing about the data, rather than interpreting it and saying, “Given out, what should we now do to make our process better?” You have this issue that many companies do not strategically architect their tech stack to produce the right data, to begin with.

The second problem with the data is that companies are notorious for data hygiene issues. What do I mean by that? If you say that the predominant source of data is the CRM, most of the data in the CRM is created by the way salespeople interact with the CRM. If you have complete inconsistency across the sales team with how they use the CRM, then the data is under the integrity of the data is undermined from the get-go. If you’re going to be sophisticated at dialing in your go-to-market and functional efficiency by leveraging data, then you have to be very thoughtful and strategic to make sure that you’ve got good data to leverage.

The second part of the challenge for these companies when it comes to data is the process of analyzing it. Somebody still has to put eyes on it. Tools like ours or other revenue intelligence tools or BI tools are doing a great job visualizing data in a way that it starts to make it easier to interpret but somebody still has to put eyes on it.

I use this analogy. Let’s say you have the world’s highest-resolution MRI machine and you get this MRI image. If I looked at it, I wouldn’t know what I was looking at. You still need a radiologist to look at the thing and say, “Here’s what this means, and here’s what we ought to do to treat it.” That’s an analytical skillset when it comes to go-to-market teams.

The sales leader certainly doesn’t have the time to be the business analyst. In most cases, sales leaders don’t have the analytical. That’s not the bend they come from. We do see marketing leaders tend to maybe be a little bit more analytical but they don’t have the time. If you don’t have somebody that fundamentally has the time and skillset to put eyes on the data and separate the signal from the noise so that they can curate insights for the senior leadership team. It’s all rendered moot, to begin with. That’s what we see. We focus on the growth stage, B2B companies. The vast majority of them haven’t got the data thing. Both in terms of the data itself and the process of analyzing it, which is why they don’t give lip service to the fact that they’re data-driven.

A lot of times, I see companies look at it and they go,” We’re better this quarter. We’re doing good.” What they’re not looking at is how good they should have done. That optimization component of it might be the difference between a swing and 10% profitability in that quarter or whatever period we’re measuring. We talk a lot about being a 1% earner here or being a 1% company.

If we want to be in the top 1%, that means we’ve got to be healthy at all levels. People who aren’t measuring these things are never going to be likely in the top 1%. I have not worked with say, a company like Apple but they’re a pretty profitable company from all published reports. You said something like the value of leads declines quickly.

You need to be healthy at all levels if you want to be in the top 1%. Click To Tweet

Let’s say that they’re not at that stage where they can have this perfect analyzation person in there or whatever, but they can still look at things like, “Lead time came in here and we’re responding at this. We closed this many people from responding at this time. We lost this many people because we responded at this time.” They can still look at a metric like that, correct?

Provided they have configured their tech stack to measure that, yes. That in itself requires thought. That thought is, “We need to measure response time to leads.” How are we going to do that? You need to think through, “How do we do that?” What triggers are we going to see and which tool we can use as an indicator of that?

To your point of now, we want to correlate response time to win rate. How are we going to do that? It’s like any science project. You have to design how you’re going to measure stuff because none of these tools innately do it out of the gate. They give you the capability of doing it but you have to decide how do we manipulate this tool, that it is measuring the stuff that we want to measure.

Who thinks about that? The people that think about that are RevOps people or data analysts. The first sales leader is not thinking about that. He or she is thinking about, “I need to hire some heavy hitter salespeople. I need to pound on marketing or build an SDR team so we can start getting some meetings set up.” They’re not thinking about, “Where are the dials I’m going to have to turn, typically?”

Certainly, at larger companies that are more established and started to get this culture around efficiency and optimization, that happens. When you’re looking at a sub-couple of hundred-million-dollar companies, in many cases, they’re very immature on this. I can tell you one thing. The companies that are good at this and I’ll say this is scaling efficiently, your 1% if you will.

There are a couple of things that we see. One is there’s this almost religious attention to finding friction and they have built the data infrastructure to support that. They’re constantly looking for the choke points. Where is the friction? Where are the points of inefficiency? They align themselves on the highest impact friction.

On the go-to-market side, your biggest choke point is deep in the bottom of the funnel or maybe at the contract and quoting stage. Let’s rally all of our efforts at fixing that before we worry about whether we’re throwing more stuff at the top of the funnel. It’s a very different mindset. It’s a focus on what matters mindset at these companies. Find the friction, focus on what matters and the other thing that we see that’s very common in these top-performing companies is a constant experimentation culture.

We find the friction, we look at the stuff that’s most impactful, and we build experiments to try to eliminate that friction. They’re constantly going through that motion and they do it very quickly. The one thing that separates them on the experimentation side is they’re disciplined about it. You’ve heard me talk before about what we call conscious iteration at speed. Everybody’s go-to-market function is perpetually iterating. That’s what we do because we always are trying to get better. We do that by iterating.

Top-performing companies have a constant experimentation culture. They find the most impactful friction and build experiments to eliminate it. Click To Tweet

The difference between best-in-class companies and everybody else is the level of consciousness to which that process of iterating or experimenting has risen. For example, they are very clear about, “We’re going to try this.” Let’s call it an experiment. “Here’s the hypothesis of why we’re doing that and what we expect the outcome to be. Here is how we’re going to measure it,” and they document this stuff.

“Here is how we’re going to measure this experiment to know whether it’s having the desired outcome or not. Here’s how long it’s going to last. Here are the pass-fail criteria.” They’re doing that all the time and they’re able to make sure that they aren’t running conflicting experiments then which might make the outcomes ambiguous because then, you don’t know which one’s having the impact or not.

Contrast that with the 99% of companies that constantly try new stuff but they aren’t very thoughtful about how are they going to measure whether that new stuff is working or not. They’ve got all these initiatives that continue to go on. Many of which are having no positive impact and they’re wasting money on them but they don’t have a way to tell because they never designed it properly to begin with.

We’re speaking with Mr. Scott Stouffer, his company’s called scaleMatters. I don’t know if this is a fair question, Scott, but how do you design it? When you’re talking, I see companies do this all the time, “Let’s go hire an SDR team. We’ll go outbound.” Months later, they go, “We’re losing money on this.” They go, “Kill it.” What they never have done is measured why. Why is this not working since month one? It goes back to the design, I believe, based on what you were saying. There were no real points where they said, “We’re going to measure this or that. All we’re looking at is how many leads we got, how much we converted, and how much we didn’t convert.” That was the measurement side of it.

They didn’t properly model it properly, to begin with. One of the things we do with all of our customers is trying to get them to model everything in great detail because that’s effectively codifying your set of assumptions. If we think outbound may work and we want to do an initiative to establish an SDR program, etc., then model it. Start with, how long is it going to take us to hire these people? How long is it going to take them to ramp? What does the ramp look like? Are we measuring the ramp in terms of the number of calls they’re making or the number of first meetings they’re setting up?

Try to get people to model everything in great detail because that's effectively codifying your set of assumptions. Click To Tweet

Let’s say we’re going to do it in terms of first meetings set up, what do we think that ramp should look like? First of all, sometimes you’ll build your model and you’ll look at it and say, “Even if it works like this, this isn’t any good for us.” That’s one of the benefits of modeling. It saves you from going down the road of something that’s likely not to be useful anyway.

You make sure that you can measure against the things that you modeled into the thing because that’s how you’re, in real-time, able to test your assumptions. You don’t have to wait 4, 5, or 6 months. When you model it realistically in this particular example, your model should say that this thing won’t be productive for about 8 or 9 months. Nobody should expect an SDR program to be productive in four months. That’s silly in my mind. That’s part of the problem. If you don’t model things, then you go into them with unrealistic expectations.

That’s a good point because a lot of companies that I see or have talked to do things like that. They’ll come in and go out quickly but they’ve never modeled and said, “This is supposed to take.” People do this with marketing all the time. It’s like, “We’re going to throw all this money at this marketing campaign. It’s been three months. It hasn’t worked.” No kidding because it needed to take seven months for it to take traction. As you said, if they model this out ahead of time, they would go, “Seven months, we don’t want to run that run rate or that burn rate on this initiative at this point.”

That’s not something we can afford to do now if they had modeled it out properly. Modeling, as I said, is codifying a set of assumptions. It’s hard to do if you don’t have people that have some experience because experience and intuition are what give you those assumptions. A lot of times, you see this whip sawing of starting stuff and stopping it, etc., because potentially the teams are less seasoned than other teams are.

We’ve had a growing number of solo businesses. People reading this, as well as larger companies and mid-size companies, I would challenge them that they could model too, based on what you said. You may not know what you don’t know but there are other people within our influence that we could take our model to and go, “Punch holes in this. Tell me what’s good. Tell me what you don’t like.”

We could do those types of things and we wouldn’t run into that initiative, enthusiastically, running down that path finding a cliff at the end of this path. This point you’re making is so important for people, whether they’re salespeople, which are entrepreneurs in an entrepreneurial role, and/or they’re massive corporations that are not doing this. I have seen hundreds of millions of dollars blown up. They run it at something and it didn’t work. They never even looked at why it wouldn’t work in the first place or why it should work or what the timeframes were. I’m a big proponent of what you’re saying.

I told you, we call it conscious iteration at speed. It’s got four parts. 1) Model the motion. That’s the first thing. Effectively build the plan or the model. 2) Measure the motion. 3) Analyze the measurements, and based on that, 4) Build experiments to iterate. It’s just a cycle, but if you don’t do the modeling part, you’re doing everything in a vacuum. It gives you so much context then against which to measure the actual performance.

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Optimize Your Revenue: The conscious iteration has four parts. These parts are modeling the motion, measuring the motion, analyzing the measurements, and building experiments to iterate.

 

We wouldn’t go jump out of a plane with a parachute without trying to model it out ahead of time. Better check your equipment on the ground and figure out how fast your descent is. Should you be jumping into a mountainous range or not? It’s those types of things. Landing on trees is not going to feel good no matter who you are. Scott, I’m sure we’ve got some people going, “This makes sense.” How do they get ahold of you? How do they get ahold of the company if they wanted to learn more about it?

ScaleMatters.com is the website. You can email me directly at Scott@ScaleMatters.com. I will respond. I certainly read the first line of every email. If you’re emailing me in response to Doug’s show, I will respond to it, so that’s the best way, or Info@ScaleMatters.com.

In the subject line put “Doug’s show”.

That would do the trick.

Scott, I always love to ask this question of people like yourself who won run companies. I know that CEOs and owners of companies told me this over and over. They don’t like to be sold to but they like to buy. If somebody was going to approach you, not knowing you. They’re just coming out. What would be something you could say to them that would give them some indication on how to approach a guy like you in a position that you’re in from the sales side?

I don’t know if this is as much related to the position I’m in or more my personality type but I’m into efficient communication. Start with what’s the problem you solve because I can then, in two seconds, say, “That’s a problem we have or that’s not a problem we have. It’s a problem we have but it’s not here on my priority list.”

The advice would be to trust that people are able to understand what is important for them to be dealing with at any given time. Be very crisp in saying what problem you solve. I don’t need to know how you solve it yet but I need to know that you’re solving a problem that’s important to me. For example, the twelve emails I get a day from people who are trying to sell us offshore development help waste.

We’ve got a partner. We love our partner. It doesn’t show up as a problem for us. I’m not even going to respond. I’ve already wasted my time having to see that’s what that email was about but what’s my single highest priority now? It’s raising money for my company. If I had an email and the line was, “We invest in companies,” and the profile was very much like ours, I’m going to say, “Let’s talk.”

I get a lot of outreaches from private equity firms and growth-stage investors and we’re much earlier than them, so I know we’re not a fit. That’s not a solution to me and I will more likely ignore that. To me, start with the problem so that the person doesn’t have to waste a lot of time doing mental acrobatics to know whether this is worth reading any further.

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Optimize Your Revenue: Start with the problem you solve so your prospect doesn’t waste time doing mental acrobatics to know whether what you offer is worth doing for them.

 

I love that. A little hint to people, before you send that email, do some research and figure out what the relevancy of that is. Everyone else is getting these emails like you said. It’s not only a waste of our time and energy but it’s also a frustration point that it creates. I look at them and I go, “Not another one.” The four that sent them before the fifth one, I’m even more upset about the fifth one because I’m wasting more time. My emotional levels go up on these things.

I had somebody send me one that said, “Your manufacturing company could use our help.” It’s like, “I don’t have a manufacturing company.” I’m trying to focus on something else but if they had done a little bit of research, they would’ve seen that we’re not a manufacturing company. They could see that we could support manufacturing companies. If they said, “We help people like you support manufacturing companies, which we have worked with quite a bit.” That would’ve caught my attention more. I agree with you. Number one, make sure that the problem that you’re looking to solve is relevant and meaningful to you.

I don’t even care personally if someone does cold outreach to me with something that’s completely irrelevant. It’s not like I get offended by that. My name’s sitting there in a sales loft cadence or an outreach cadence for them. I understand what’s going on. What I get offended by is the fact that it’s not easy to say, “Take me off your list,” because they force you to change something in the subject line. What I get offended by is I have to get the five additional emails from that person. When the last couple starts making comments like, “Growing your company is an important priority of yours now.” It’s like, “Stop the bullshit.” Yes, it is but what you’re selling isn’t an important part of me doing that.

That’s called a rapport break.

For sure. Again, I don’t mind the fact that people miss but there’s got to be an easy way to stop it after the first miss.

That makes sense. Scott, thanks so much for being here at the show. I appreciate the analytical approach you’re bringing to this because a lot of our guests are super brilliant but we’re drilling down into the analytical side, which balances off some of the folks who aren’t as methodical, if you will. I appreciate you doing so.

If you’re good at the data and analytics side, think about it. What you’re doing is giving leaders a lot tighter dials that they can turn. It’s the only way to get precise in the way that you run your shop. Doug, thanks for having me. I appreciate being here with you.

If you're good at data and analytics, give leaders much tighter dials that they can turn. It's the only way to get more precise in running your business. Click To Tweet

I wrote these down. I thought this was important. The top companies, the one percenters, if you will, have a religious attention to finding the friction or the inefficiencies in their company or the inefficiencies in the process. I thought that was interesting because, in many companies that I have looked at or talked to, CEOs of companies sometimes look like, “Topline, we’re not doing great here, but overall, we’ve got this profitability that’s working for the company.”

When you’re looking through your optimization of the selling process, you’ll find things that you go, “We could improve this even if it was by 2%.” If you think about if you did a 2% or 3% increase over 5 or 6 things that compound interest, what does it bring you in the long term? It brings you a lot more money and profit and you work easier.

It’s one of those ultimate leverage points. They align themselves with the highest point. In other words, you don’t work on everything all at once because that’d be throwing all the balls up in the air and trying to juggle them. You can work on one thing, get that down, see how it affects the other things, and move on.

The third thing they said was they constantly are experimenting with it. In other words, they have an experimentation culture. They’re going to try something but they’re putting models around that process to understand how to measure and when to pull the plug, so to speak, if it’s not working. As important, not to pull it too early because if you pull the plug too early, you don’t realize the full value of what you could have out of it.

If you like this episode, please give it a five-star review. If you want to get yourself into this client acquisition and expansion mode, in other words, you want to get to the top 1%, be a non-stop earner yourself, or want your company and your people to be that way, reach out to me at Doug@CEOSalesStrategies.com and let’s have a chat and see what we can do.

If you are an expert in something and you think it will fit the CEO Sales Strategies model, how to sell to CEOs, how to build revenue profits in the company, and how to improve sales and capacities or you know somebody who is, reach out to us at YouMatter@CEOSalesStrategies.com and let us know. We answer all inquiries and we will get back to you and let you know if it fits or if it doesn’t.

If you’re interested in being on the waiting list for our upcoming academy on how you build your client acquisition and revenue growth strategies within your company and how you are efficiently selling as a nonstop 1% earner, reach out to us again at YouMatter@CEOSalesStrategies.com and we’ll get you onto the waiting list and let you know how things are going and let you know when that’s going to be kicking off in 2023.

Until next time, go out and sell something. Sell a lot of it. Sell it profitably. Play win-win. That means you win, they win. It’s the happiest sale on the earth. That is what spawns more referrals than anything and follow up with people and let them know you care. Until next time, to your success.

 

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