Matt Durazzani: What's very unique is that Julia brings over 15 years of experience in revenue operations across different companies
Matt Durazzani: and across different skill sets that are usually required for that specific function.
Matt Durazzani: During her period she has been in several hyper-growth companies, and anybody that has experienced a hyper-growth company understands that you experience both a startup mentality, as well as the need to refine optimization as the companies get larger and larger.
Matt Durazzani: So the need to build structure and operation efficiency
Matt Durazzani: requires a breadth of skill set that Julia has developed over her tenureship in the industry.
Matt Durazzani: And so we're excited to have her Today
Matt Durazzani: Julia, for you today in the program. We will love to hear from you on how you look holistically to the revenue engine
Matt Durazzani: within the organization.
Matt Durazzani: and we also know that you prepared the 3 metrics that have made a difference in your experience that you would like to share with the community today. So what i'll do, i'll turn the time over to you and let you present, and let's have a conversation around what you are offering the community today.
Julia Herman: Thank you, Matt. Thank you for the wonderful introduction really excited to be here.
Julia Herman: just the the first slide is really just an overview. So I really wanted to kind of talk about something that can be very timely again, depending on when everybody is doing their budgeting, but I really wanted to look at you know the fundamentals of really building an annual budget for next year.
Julia Herman: I'm going to talk about 3 specific metrics today, and how to put them together. I'm going to be very high level, but again, there is obviously a lot more details that go into this, and you know again feel free to reach out to me if you if you want more information.
Julia Herman: So the 3 data points I'm going to be talking about today is pipeline created,
Julia Herman: pipeline conversion metrics, and then rep productivity.
Matt Durazzani: So I noticed that here at the center. You talk about revenue forecast.
Matt Durazzani: why do you think these 3 elements particularly impact directly the forecast of your organization, maybe in terms of the budget size that you're considering for today's presentation?
Julia Herman: So I I think there's obviously a lot of metrics and a lot of data you look at when you prepare the budgets . For me these are the 3 core ones, because essentially using them together, they are the building blocks, for you know your initial budget.
Julia Herman: You can add a lot more data, a lot more assumptions and make a lot more changes to that, but I really think if you don't understand how much pipeline your reps are generating, where it's coming from, what your conversions look like, and then again, what you can expect from each person on your sales team,
Julia Herman: it's going to be very hard to put together a budget. So to me these are kind of the core core metrics for that.
Matt Durazzani: I think it's very well said. Take away here on this slide is really
Matt Durazzani: if you don't have a lot of metrics inside, or a lot of experience, if you can cover at least 3 basic pillars, your positioning yourself in a successful manner to make budget decisions to impact positively,
Matt Durazzani: the outcomes of the revenue forecast for next year.
Julia Herman: Hmm. Exactly.
Matt Durazzani: Okay. Let's dive into. It
Julia Herman: Okay. So the first item we're going to look at is pipeline creation. So I think you know, as revenue leaders, we're all very familiar with pipeline and pipeline created. So
Julia Herman: I'm not going to spend a ton of time describing you know what pipeline is. I hope you guys understand. So for me, historically, I've worked in Sass businesses, so new ARR is, you know, for the teams the most important.
Julia Herman: Renewal ARR is another, you know, monster in itself, so you need a whole, another session just to cover that, so for this presentation in this piece I really am specifically speaking about new ARR.
Julia Herman: So what we are looking at is essentially how we slice and dice my data to start thinking about
Julia Herman: okay, how much pipeline are we bringing in? So right now again, I want to start with the standard pipeline creation metric, but I want to emphasize how important it is to really break that out
Julia Herman: by team - So right, if you have an enterprise team, if you have an inside sales team, if you have a mid-market team.
Julia Herman: Any other team you have by geography, I would suggest you actually look at each one of those teams separately rather than lumping them all together. Because especially when you build out the budget for next year, you do really want to consider each segment right, and
Julia Herman: figure out where your growth segments are, and where the opportunities lie.
Julia Herman: So for you know the the first one, I'm give an example for my enterprise reps. So this is how much pipeline they've created each quarter in the last 12 months. So again, if you're on a calendar year, I'm looking at Q1-Q4, you know
Julia Herman: January to December. And really
Julia Herman: this is how much new pipeline they're producing. The one other split I did between my enterprise Sales team is I also broke them out between new reps and tenure reps. So again, what you count as a tenure rep really counts and is very individual, based on your sale cycles your onboarding program. But
Julia Herman: again, this is something that you should know, and you should start to evaluate when you actually consider a rep. A tenure rep versus a new rep.
Julia Herman: because again, you are gonna see very different expectations, and you know very different, let's say results potentially in these metrics, if you look at new hires versus people who've been here
Julia Herman: for longer. So for this one again, in my experience in you know my past companies, I do find that new reps actually tend to create pipeline at a higher rate in the beginning, because again they just got handed a whole new big book of accounts,
Julia Herman: they you know are hopefully working on some accounts that they've dealt with in the past, so right away they're very eager, and they're, you know, reaching out to those accounts, and really starting to build that pipeline.
Julia Herman: Especially because when they're coming in they're usually not coming in with anything, where the tenure reps already have opportunities that they are working on, you know pipeline they've built over the last
Julia Herman: 12, 18 months, and this way I have seen, you know again in the past, that in the first couple of quarters, sometimes the tenure reps, you know, actually create less pipeline than the new reps, but again, depending on sales cycles, you know enterprise versus inside sales, that really does vary.
Julia Herman: So on the top chart you also see that we have targets for each type of rep. So again, this, you know, on average, we're expecting them to create 2.5 million dollars of pipeline in Q1, and then again you could see historically how they performed. So
Julia Herman: although I am speaking about this, you know, on a budget for next year, this is a metric that you really need to look at, you know, month over month, quarter over quarter, and make sure that your reps do have goals for pipeline, so that you could make sure that you know at least the pipeline portion is there, because it is a leading indicator obviously to the closed won revenue.
Matt Durazzani: Just a quick question on this one. I think you're bringing up a very good point with regards to being able to look at each of the team, or in this case also new rep versus tenured independently in order to get the right statistics. So I think it's very, very valuable what you said.
Matt Durazzani: One thought that comes to mind here when I look at this chart is seasonality of the business. Where in some companies there's more of a hockey stick approach where they plan to close more later. I noticed that you know, in other companies could be that they
Matt Durazzani: close a lot first, and then they close the last quarter less. How does seasonality impact the way you're thinking about
Matt Durazzani: these metrics and creation.
Julia Herman: Yeah, absolutely. So I think for this. It's you really have to understand your seasonality right. When I worked on you know, the government side, Q2 and Q3 were huge for us, right. A lot of people spent their budgets in Q2, Q3.
Julia Herman: In the enterprise. B2B world you find that usually Q4 is your hockey stick, so you know, and maybe Q2, Q3 are a little bit of a lull, especially if you're working in Europe, you know a lot of times, though they have the summers off, and
Julia Herman: business is just in general very slow. So the seasonality is really really important, because, you know, here we are looking at pipeline created, but you know again, when we are building our budget for the future year we will want to look at the pipeline we already have, and how much coverage we need for Q1 targets or Q2 targets and again, how long that pipeline takes to convert.
Julia Herman: So again here it depending on, you know, by region, that's why I say, you know regions are very important, especially if you're in a global business, every country, every region has very different seasonality to it, right?
Julia Herman: So it is really important to do that. And then this way you make sure that you have enough coverage for that pipeline when you are setting those goals.
Matt Durazzani: awesome. Thank you.
Julia Herman: So the second piece is the pipeline created by source. So again, I think it's really really important to understand where your pipeline is coming from. So in my history we've always bucketed it into kind of 3 primary categories. Obviously there's a lot of subcategories underneath this, but
Julia Herman: really, who created this pipeline? Where was the first kind of contact from that? Was it sales? So sales making their own calls and reaching out, you know,
Julia Herman: was it marketing? So again your SDR team, your demand gen teams right, really going top of the funnel and introducing new leads to your sales teams. Or did the leads come from our channel partners right? And again, there you have very different sales motion sell too's, sell through, sell with.
Julia Herman: But again, you really have to understand where that pipeline is coming from because at the end of the day you want to be able to measure right how much your
Julia Herman: partners are bringing? How much is your marketing spend converting into pipeline? And these are really really important because
Julia Herman: if you don't have expectations for how
Julia Herman: your pipeline is supposed to look, and where it's supposed to come from, and you just have one large sum, it's also very difficult to hold other teams accountable. Here right by understanding how much you're expecting from each source, and seeing
Julia Herman: what those results look like, it really does add, you know, accountability beyond just the sales team. So you know, if our marketing pipeline is coming in under. Then we have to go back to our demand gen teams and say, "hey, what's going on, you guys aren't living up to your end of the bargain right?" Because at the end of the day sales really does involve
Julia Herman: almost the entire company in order to sell something. So you want to make sure that other teams feel just as accountable for their numbers as sales feels accountable for their sales targets.
Matt Durazzani: What a what a great point about keeping in mind that revenue operation is not just about the sales teams.
Matt Durazzani: But it's really bringing together all those different pillars - marketing, sales, customer, finance, right, where they can all come together and making sure the contribution is evened out. So thanks for bringing that out.
Julia Herman: So the second metric we're going to be covering is the pipeline conversion metric. So here, essentially now we're taking a look at okay, here's all the pipeline we've created, how are we actually converting that to closed won revenue? On this slide I'm only showing one example. So again, I'm showing an example of closed won by tenure enterprise rep.
Julia Herman: But again, when I do the data, I slice and dice it in as many segments as I can. So again, different teams, different regions.
Julia Herman: And if you know again, very different new versus tenure, because when I'm building my ramp models for next year, I want to make sure I really understand what a rep hired in Q2 can deliver, what a rep hired in Q3 can deliver for the year, because it does really change, and because ramp times
Julia Herman: do vary by company. You really need to understand and have, you know again, realistic expectations of when your reps can start delivering revenue and how much revenue that will be. You know a lot of people <I> I found
Julia Herman: make the mistake of saying well, if somebody is hired July 1st, I expect them to deliver 50% of the revenue that you know a tenure rep has.
Julia Herman: But again you you're forgetting that not only were they not here for half a year, but then they also do need time to onboard and learn, and actually build up that pipeline because
Julia Herman: a lot of times they're starting with 0. So that's just something else that, you know, I think is is really important to model out, and you know you reallydo need to understand it, because this is where I see a lot of people do get in trouble.
Julia Herman: So here again I'm just showing by rep the conversion rates. So again, you know, in this example, they range anywhere from 23% to 30% on average and how I'm really looking at it is, you know the closed won revenue divided by the closed won
Julia Herman: plus closed lost for that quarter. There's different ways to look at this data in terms of right looking at close rates, other people look at how much pipeline did I start with,
Julia Herman: I just find that, you know, in my experience pipeline dates have shifts so much, and you have to pick a really good time, for, you know, to get that snapshot. And you know again, a lot of times data goes up, data goes down, deals increase, decrease. So for me, the cleanest, cleanest way to look at this is really just taking a look at
Julia Herman: everything, you know, closed won
Julia Herman: divided by closed won plus closed lost in that quarter. So it doesn't even matter if this was forecasted 2 quarters out, if they closed lost it in Q1, I'm going to put it in the Q1 bucket.
Julia Herman: And you know again, sometimes a lot of times you might see negative numbers here, especially for new reps.
Julia Herman: Maybe they're not closing anything, but close winning anything quite yet, but they could be closed losing a lot because they see it's just not the right fit. So again, you really do need to look at this by segment to really understand what your close rates look like.
Julia Herman: And then the other important part is, you really do need to look at it by source. So again, in my experience, the sales opportunities actually converted to higher rate than the marketing opportunities, or even the Channel opportunities
Julia Herman: It does vary by by region and by company, but again, you really do want to look at those sources independently, to make sure that you really understand, you know, because you can't just say I need 4X coverage, because the 4X coverage could be different, depending on where that pipeline is coming from.
Matt Durazzani: One question it comes to my mind, is, you know, data accuracy, or
Matt Durazzani: you know the CRM hygiene in a way.
Matt Durazzani: I think about the scenario where
Matt Durazzani: you have a lot of new reps, or maybe the BDR, SDR team that put a lot of opportunities in the pipeline of an account executive.
Matt Durazzani: And of course, if you reject and close out a lot of pipe, then, of course, that immediately skews that conversion rate
Matt Durazzani: quite, quite strongly right. What recommendation do you have in order to
Matt Durazzani: have the right conversion rate in relation to how you manage the hygiene of the database?
Julia Herman: I think the first one that I've always done in the past is
Julia Herman: I haven't put it into pipeline unless it's a sales accepted opportunity. So again, SDRs create opportunities, but it's almost like they're creating leads right. Marketing is creating leads, and then, after
Julia Herman: a whole checklist of qualification criteria, that the rep needs to go through with their SDR
Julia Herman: and the meeting, if that meeting is successful, and the rep wants to pursue this opportunity, then they put it in the pipeline. So again they are the ones to actually convert it and say yes, I'm going to take this, because the other part that we're measuring them on that, like you mentioned is, how well are they converting on these opportunities. If marketing is giving you
Julia Herman: a million dollars of business and you're closing a $100K of it,
Julia Herman: you know, is is that okay? You know? Sometimes it it is, and sometimes no, because your counterparts could be closing 500k out of that million dollars of pipeline. So it is really important that reps are responsible for
Julia Herman: picking up opportunities that they want to work. And again, ideally, you're partnered with your SDR and you have a good relationship that you build where you know again, there is some pushback that's allowed, and it's not just everything gets dumped into pipeline. I also really do like introducing a kind of a pre stage to
Julia Herman: your standard stages, so you know, kind of call it stage 0. So here is a place where you can work those opportunities you can work those leads, you can work those channel
Julia Herman: opportunities, but it's not actually going to count in pipeline until you put it into stage 1 and stage 1 is the thing I count when I'm looking at pipeline created, and then it's what I'm looking at when I look at conversions.
Matt Durazzani: I I think you are you read the mind of a lot of experienced revenue operators. we have been hearing
Matt Durazzani: a similar message from other leaders. The importance of that either state 0, or that
Matt Durazzani: pre qualification approval from an account executive before it's accounted for, versus automatically just going into as part of the pipeline. So those little definitions are the things that you want to take away from how do you put in place the correct pipeline conversion metric?
Matt Durazzani: You apply some of this field that you just mentioned to have that accuracy. So thanks for clarifying that.
Julia Herman: And one more thing I will mention on this slide is that this, you know, especially if you start to look at conversion rates, you can also start to build out almost your cost of acquisition model. So again, you're spending a certain amount of marketing dollars to, you know
Julia Herman: get the pipeline, but here you're actually seeing how it converts. So this is a really good way to understand what channels are working right? Is my
Julia Herman: linkedin channel working better than you know my, let's say conferences, and you know you really can't optimize
Julia Herman: how much dollars are going in to how many dollars are going out. And this is again really important, because, as we look to grow revenue, we want to make sure that we're not doing it, you know, in a way that's not efficient for the business.
Matt Durazzani: Excellent.
Matt Durazzani: Let's go to metric number 3.
Julia Herman: Let's do it. So this is the last one. So once you have, how much pipeline your reps are creating by segment you have, how each segment is converting that pipeline.
Julia Herman: Now you can start to build out a plan of what rep productivity looks like. So again, this can be done in excel, It can be done in fancy software that you could use. But essentially right, the the most basic part is
Julia Herman: I now know an enterprise rep, who's tenure is going to deliver 2.5 million dollars in revenue.
Julia Herman: and then I know how much revenue I can expect from a rep who starts in Q1, Q2, Q3, because again I've built out my ramp modeling, I have those metrics, and again I have a bi-segment. So it's not like. I'm lumping everybody in into that huge bucket.
Julia Herman: And then from there you start to build it out and you start to model it out. And again you can make assumptions right well I'm assuming my marketing conversions are going to go from
Julia Herman: 15% to 18% next year. I would say you can definitely play around with that, especially if you see some abnormalities, let's say in the data right. A large deal closed lost, or something else that happened. You can try to isolate it and pull it out. But you know again, rule of thumb is
Julia Herman: Don't change it too much, because it's not really very realistic. And here again you want to have something that you can actually achieve for the year, and you want to have the data to back that up.
Julia Herman: And if you are moving it a significant amount, have a plan of how you're going to get there right. What enablement are you going to put in place? What changes are you going to make to make these improvements right? How is that change
Julia Herman: going to actually help you drive that metric? And again, really make sure that you're setting that bar, and you're tracking against that each quarter.
Matt Durazzani: Very, very good point question for you on this one. So you talked about the fact that there is a change a year over a year of improvement, right. The current graphic, of course, shows the essence of that skeleton says, hey
Matt Durazzani: we can produce this, this is our conversion rate, therefore this is what we need.
Matt Durazzani: Do you include in in the way you run your models also maybe what is the expectation that although it was 37% conversion rate last year, we do expect, based on new hires, some strategic bets that we're doing,
Julia Herman: an additional 3%-5%, and therefore the pipeline need a reflex at 37 plus 3 equal 40%. Is that something to you guys have found success doing? What would you recommend?
Julia Herman: So again I start the year by saying, okay, here are the numbers for this last year, right.
Julia Herman: These are set in stone again. Sometimes you have to forecast that the last
Julia Herman: quarter, because again you're really not doing budgets after you're ready finished the year, usually doing it, though the quarter before. So you do probably have to make some projections and some forecast for how you're going to finish the year, but pretty much everything else is set in stone. And then from there you make those assumptions right. So what you're seeing on this slide is already, let's say, with those assumptions included. So my marketing
Julia Herman: conversion could have been 15%, and my my goal is to get it to 18%. You know. again, my current productivity for a tenure rep maybe is 2 million dollars, but I think I can get it to 2.2, because I have an awesome enablement program that we just put in place.
Julia Herman: So it's really about right looking at each of the metrics and what you are doing to impact it, because again, if you just take it with no change, again I don't think a single sales or finance leader is going to approve that. I think they always want to show some kind of improvement. They want to show that the investments you're making in your team
Julia Herman: in the company, in the technology is going to drive some revenue growth, and if you can't show that the investments you're putting in are actually driving that, then nobody is going to let you make any future investments
Matt Durazzani: makes sense. Thank you.
Julia Herman: sure. So I think, for here again you know, one important part I wanted to touch on is when you are doing that waterfall and you're modeling out again you know how much you're expecting from your tenure reps, and we're looking at not just the pipeline they've
Julia Herman: created in the year, but we are also going to look at the pipeline that they're going to start next year with, because, you know, essentially, it all adds up, and not to say that all the pipeline is going to go to the next year again, depending on your sales cycles, it might push out even further.
Julia Herman: And then obviously, you're going to create pipeline next year, but there's no way. 100% of the pipeline you're creating next year is actually all going to be
Julia Herman: closed won next year. So again, it's going to impact future here, so it's really important to model out seasonality, your average days to close. And again, this does very much vary by segments, enterprises versus mid-market versus inside sales.
Julia Herman: And then the last part I'll talk about here is rep attrition. So the one of the biggest mistakes I see that revenue operations leaders make when building budgets, and they don't put in rep attrition into their modeling.
Julia Herman: Unless you have the most amazing company in the world, You cannot expect a 100% of your reps to stay there.
Julia Herman: Some will leave voluntarily, some will be forced out because they're not hitting their goals, and they're not creating enough pipeline, and they're not getting on the phones.
Julia Herman: But again, based on your historical data, and you should look this up, you know you should check with your HR teams how much your attrition is in this example I'm using 20%
Julia Herman: rep attrition. So you actually have to estimate okay.
Julia Herman: 20% of my sales force may leave right. Yes, I will be replacing them hopefully with new reps, but they will need time to ramp, so it's not a one for one, you know, the numbers do really fluctuate and do go down. So you want to make sure you build that in, and all the numbers i'm showing here are
Julia Herman: expectations right? This is how much we actually expect a rep to deliver, this is not the quota I'm. Giving the reps right. Once I figure out what those expectations are, I'm actually going to give them a quota. You know, an average of 20% higher than that to give ourselves a buffer, because obviously, you know, we have managers, people come and go.
Julia Herman: So you do want to make sure that you build in a healthy buffer between all the different levels, so that if you do have attrition, or if something doesn't work that you know, you can essentially have
Julia Herman: room to fill it and make it up.
Matt Durazzani: Yeah, that's a good point.
Matt Durazzani: You made me think that
Matt Durazzani: if we, if someone will want to make these these 2 type of visuals for themselves even more effective
Matt Durazzani: on the one hand, they could even break down here that this is the walk in pipe for the year, right that we already have, so they can quickly see the difference, because that's a very important piece to have right, and maybe they can even add that piece as an individual column to say, look, we walk in with X pipe,
Matt Durazzani: they can all produce this. Therefore
Matt Durazzani: we also expect that this is probably what we need as a pipe, and I think that plays in the same manner with regards to your attrition, right. Losing a brand new rep versus a tenure rep,
Matt Durazzani: It's a different ARR quantity of the pipeline that you are now neglecting in your waterfall metrics. So I think this is a very good template to to think in terms of
Matt Durazzani: How do we calculate really that productivity? And what are the true expectations if we really break it down. So thanks for explaining this today.
Julia Herman: Yeah, absolutely. Thank you, Matt.
Matt Durazzani: Okay.
Matt Durazzani: the first question we have for you with your experiences.
Matt Durazzani: What advice would you give to a CRO,
Matt Durazzani: or in some cases, CEO, depending on who you have more in charge of the revenue.
Matt Durazzani: but based on those roles. What advice would give them to to help the operational leaders like yourself
Matt Durazzani: to bring more alignment between the disparate revenue operations of
Matt Durazzani: marketing sales, customer
Matt Durazzani: and finance. What specific help do you think they can offer you?
Julia Herman: I mean, I I think, the biggest one, I think the most help is when everything is on one team. right. So again, your revenue operations team is really responsible for marketing, customer success, and sales. Because again you're looking at the same metrics.
Julia Herman: You're using the same data, and it's really, you know, again, a lot of the questions each of those teams are asking, they're actually asking the same questions, just from a different lens.
Julia Herman: So I I would say that part is is very helpful I would say the best thing to do is to try to centralize your data So this is really where I've seen, you know, struggles in the past. Finance is showing one data set,
Julia Herman: sales is showing another marketing is showing the third. So this is really where you know, again, if you can't have revenue operations under one house, you do at least need to have a core BI team and platform and agreed upon data that again is accessible. It's not somewhere in a spreadsheet and somebody's computer.
Julia Herman: It's really accessible to everybody you know who is in that role who needs it. And then this way, when we're doing board presentations, the 3 leaders, aren't showing up with different metrics. So that's really important. And you know again, I think
Julia Herman: for For me the
Julia Herman: the investment in technology and automation is also very important. I think you know, really good CEOs, you know, CROs, they see that they see where technology can help us and how we can help us improve efficiency.
Julia Herman: Because again, a lot of times, I think it's just
Julia Herman: you can only do so much on the people's side, and it might not be as efficient. There are really some great tools out there that can help
Julia Herman: in this role.
Matt Durazzani: Yeah, very well. Sad. So take away, and that one is centralized the information
Matt Durazzani: Create but one version of the truth that is available to everybody
Matt Durazzani: and to me is prepared to talk about the same data so that you can drive decision instead of arguing who's right, who's wrong?
Matt Durazzani: Listen, Julia. Thank you so much for for joining us today on our podcast.
Matt Durazzani: and for being available to be a revenue maverick here for the community so great insight, thanks for your time and for putting the time to prepare these slides.
Julia Herman: Thank you, Matt, appreciate it.