And so, uh, Werner, in today's program, we will love to hear from you and to look at the way you are thinking and managing the revenue engine in your company, as well as sharing a couple metrics that you feel are, uh, important for the audience to hear. This program and this recorder will be made public and it will be available to a lot of aspiring revenue operators that either are aspiring to grow in a similar journey as yours, or those that are already in that space and are trying to refine their skillset and experience are learning for what you have to offer today.
So, without any further ado, the floor is yours my friend, and we're excited to have you.
Werner Schmidt: Great. Well, Matt, well thanks for having me. Uh, appreciate, um, you giving me the opportunity to be here and be in a revenue maverick and getting to talk about, um, the, the two key metrics which, uh, which I think will absolutely fundamental to, to all businesses going forward.
Awesome. Okay, so let's get started and let's get to the first slide. So, growth, efficiency. So what do we mean by, by growth efficiency? And it's a term that has been formulated over the last couple of decades, um, given that we've been in this period of hypergrowth, which was growth at all costs.
Um, and someone that I learned along the way. Um, and over the the years of where we've had these periods of, you know, organic growth and growth by acquisition, and then, you know, hidden some very bumpy periods when you get into 2007 and 2008, um, uh, and even nine. It carried on for, for a bit where, where we needed to get, to start thinking about being more efficient.
Um, and what, what, what, what do we mean by being efficient? Because we need to grow fast with SaaS businesses. Um, so how you do that and how you do it efficiently. Um, so I think, you know, if we all agree that if we define growth efficiency as investing in the most productive and cost efficient areas to generate revenue, So if we all agree to that, then it's, well, well how do we do that?
Because should we not be doing that every day? Um, you know, in our jobs as rev ops, um, and enablement leaders, Um, and it's just something I've, I've struggled with over the last 20 years because it's really growth efficiency has pretty much been on the sidelines. Um, there's not a lot of technology out there that measures, measures, growth efficiency.
We, we have, we've got solutions and amazing technology. Um, to do, to do, do certain parts of, of the business. Uh, but what we tend to find is when we start to look at the, what, what drives growth, efficiency, when we start talking about things like sales productivity and cost efficiency, which I'm gonna cover off in a bit.
Um, a lot of that is manual. Uh, and, and it's a lot of work. And hence why, um, a lot of us and myself included, uh, we, we didn't put a lot of emphasis on it. Um, and what I found is that it started to cause issues when we start to, you start to grow very fast and you start to add a lot of headcount. Um, because what tends to happen is you add these people and your growth efficiency starts being impacted by it because the cost goes up, uh, productivity starts dropping, um, but you still need to hit your numbers.
So, um, these are key metrics for us to all grow efficiently. Uh, which I'm gonna cover off now. Okay, so the first one, the sales productivity metric. So this metric is, is, is a basic metric. Um, it's, we've, we've all been calculating it, uh, in some shape or form. Um, generally once a month, more likely, probably once a quarter.
Uh, from the data we've seen in the organizations. We, you know, I've, I've met along, uh, you know, over the years and, and surveyed. Um, and what, what you tend to find is, This, the productivity metric, um, again, as I mentioned earlier, finds itself on the sidelines because it is complicated to calculate. Um, there is a lot of data movements within sales organizations.
Salespeople come and go as we know, um, and, and when it means when a new hire comes in, there's ramp times, uh, someone leaves and you've gotta move quotas around, territories, around, um, and so forth. So what I always wanted to try do was well, What happens if we could calculate sales productivity in real time?
Um, well what, what would that mean to the business? Um, and, and so maybe, you know, I need to, you know, just explain what do we mean by sales productivity? Cuz I know that mean that term means many things to many people. But if we just finally say we. Fundamentally say we have revenue that we generates and we have a number of salespeople, and we've got salespeople that can sell in certain territories, uh, when, you know what territories or, or countries they can sell in or, or products they can sell.
Um, and you start to, to, in its simplest form, divide that by, by the revenue they generate, you start to get to an average, um, which we call the sales productivity number. Um, and as, as you can imagine, um, th this, this does get com complex, but let's keep it simple that it's a number of heads and then divided by, by revenue.
Um, well, if I know that and I know what my average is, so as you can see in the graph, in the, in the pink bar on the right there, you see it's $93,180. Well, let's assume that that's what, well, that is what one person can generate, um, uh, per month or per quarter, um, depending on what type of business you are.
Well, if we know that, Well then we, that starts to help us to decide, well, how many more salespeople do we need if we know what the average productivity is of, of what the team's generating? So now I know that I can start to invest in the right areas because if I see a region where I'm generating 30,000 and I see another region where I'm generating generating 93, I might go, well, hold on.
Does it not make more sense to put the head where I can generate 93? Of course, we need to make sure there's be enough. Leads and so on. And there's enough territory, uh, to make a decision like that. So there's other factors to, to bring in, but if you know the average productivity, you start to, it starts to give you data, uh, to help you with that investment.
Um, what it also starts to do is it starts to help you to establish your teams efficiently and effectively. And what we mean by that is that if we know what the, the productivity is of, of the team, and, and again, this is where the complexity comes in. I can holistically look at my productivity , at a global level, but I need to be able to drill down into the details and say, so what did my new business team generate in the United States or in Canada?
Or in the UK? Um, and, and so forth. Um, and once I know that, well, then I can start to see, well, how many people should I size that team to, uh, based on what the productivity is that it's delivering, or what productivity do I need to reach the targets? Uh, because ultimately the productivity, uh, is, is uh, you know, uh, well what you expect to, to reach, uh, for your, your targets each quarter or each year.
Right? Right. Um, and that, and that's where we get into this. Securing your sales capacity to reach your targets. Because once we get the first two right, right. That then we've got the productivity that then helps us decide, well, how many heads do I need to then reach those targets? .
Matt Durazzani: Uh, so this, I I love this one.
This is a great way to, to, in a very simplistic way to look at the immediate impact. Um, I have a couple questions on this one. Um, have you been using this model and this metric to kind of do almost like reverse engineer? Say, if this is the target that we want to achieve as an organization, and this is the average production that we can get out of a person, how many hats do we need to have in order to achieve the new goal that we have?
Do we have enough hats for that capacity? Have you been able to have specific examples where this became a decision factor for you?
Werner Schmidt: Yeah, uh, absolutely. Matt, and, and, and, and that's it. It really is a great question because this is what's formed the foundation for, for my thinking over the years on how to, to better perform, measure sales performance.
Um, I go back to my day as a web sense, right? Because you had so many salespeople that we are adding and then we grow by acquisition, and it's, well, well, if we need to reach numbers, I need to know the, what, the productivity of those, , the sales organizations are both, both for, for the, the current heads that you've got, your rampant heads and, and what your expected new hires would be with those rampant heads.
Um, so, so you'd need to know then, okay, if I need to reach these targets and this is my current productivity, well then what's the headcount I need? But importantly, when do I hire that headcount? Because you've got a, it's a third metric really that, that you look at, which is your ramp times. Um, and how long does it take to ramp those people?
Um, and then that, that's allows us to then get to this, this place where you can then figure out, well, how many sales heads do I need to then reach my sales capacity?
Matt Durazzani: That's exactly right. Now, you, you made a statement earlier, you said, um, um, when, uh, you think about hyper growth and growth of all costs, right?
Versus trying to be more efficient and still trying to grow. Uh, in a sense at all costs, right? Um, where this metric has made a difference in those situations where you felt that you had to grow at all costs, but at what the right speed, right? You have a specific example that you feel could relate to operators so they can really make this, uh, you know, mindset of sales productivity, their own.
Werner Schmidt: Yeah, yeah, absolutely. And then this is, I, I'll fast forward now, this my, to my, in my days at Citrix where we were grown very hypergrowth, right? This is 2000 12, 13, 14, um, where we're growing the business. Very fast growth from 400 million to 800 million. Uh, again, growth back acquisition as well, um, on top of that.
But, but it was, okay, so how many you, you added 50, 60 sales heads per year. Um, and, and as I mentioned at the start, right, what happens is you start, the more salespeople you add, your productivity starts to drop. And if you're not watching it, what we always tend to do, and I I think we, you know, very much why we, and we still do it today, is that we've, we've got, we hope almost is that, well, look, we've gotta hire 40 salespeople.
We know probably 34, to 35 will work out. Um, uh, so we over hire. Um, and, and that, that's to factor it in. And that's because we are not looking at the productivity data in real time. Because if we were looking in a real time, we wouldn't actually make that over high. We'd hire the 34 to 35 heads because we'd have more of the scientific measurement of what's happening in real time.
Uh, not to do that. And that's what happened at Citrix, is that we started to hire too many heads. The productivity dropped. Um, uh, our costs went up. And then the, the, on some of the product lines, uh, the business started to change it, you know, because there's, there's more competition and, and you've got external factors that happen, uh, to, to those product lines, which means you're not driving the same productivity, but you still got this headcount cost.
Um, and then you've got, you land up in these decisions where you've gotta make really hard decisions. And unfortunately, you have to say, actually, we gotta reduce head count. And we're seeing it today. We're seeing it every day in, uh, you know, in the news of, you know, some company that's had to reduce their headcount.
And, and I fundamentally believe it's because those companies are, are not looking at what their true productivity is in real time and then making their hiring decisions based on that, or at least creating the forward look and models based on current productivity of what you, you expect them to achieve in the future.
Matt Durazzani: That's, that's very, very well said. Um, so before we go to the next metric, maybe one key takeaway that, uh, operators that are listening should probably, um, Jot down, as I note, is as you are supporting your internal leadership as headcount plans, especially now that we're coming up at the end of the year and they're refining the plans for 2023, right?
Um, maybe try to put in place, uh, very basic, you know, sales productivity metric for your organization and have some math that says based on historical performances and what we see, this is actually ideally the recommended number to either adjust the target or, uh, Determining when to hire people and maybe not over hiring to cause churn, and then of course, burning down enablement and another resources really being effective in decision, but really drive for this data to support the final decision, both from an HR perspective down to the revenue models.
Is that fair to say?
Werner Schmidt: Yeah, it definitely Matt, and that, that leads us, you know, into those benefits is that, I, I really, I, I know it, it takes some time to do this, but it's well worth the exercise. You, you won't, I, I know you won't be, won't be able to get it, uh, too granular at the start. But, but it is just, just do some of these calculations even at a global level, maybe per geo.
Um, just do those calculations so that you can actually just see what is my productivity, um, per, per, you know, uh, per region. Um, it gives you a good sense of what, what, what they're producing. Uh, maybe look at it over the last quarter, or actually I'll to take it over the last 12 months, um, to give you that average.
Um, and then also just maybe look at it as I many regions, maybe there's a segment that you're particularly interested in is a new business. I want to look at first. My, my renewal upsell teams. Um, so again, just look at it across your segments. Um, and then maybe you might have one or two product lines that are really big and then, you know, look at your productivity across those product lines.
And I, I, I know with product leaders, They're, they're very interested in this too. And I think as a rev ops team and enablement teams, you know, we, we, we need to be looking at this. And to your last point that you mentioned there, pat, um, Matt, is that you've also got, um, you know, enablement activities that happen continuously, um, within the business and, and really those activities of design to increase productivity.
And that's another reason we, we, we should be centering everything around productivity because those enablement programs should be increasing your productivity. So we need to be able to see that. And that's why even if, if you just do the basic calculations, you know what your current productivity is, well then, you know, measure it then again, uh, you know, within the next month or two.
I dunno, if you don't have the technology, it is manual and it takes time. Um, but, but absolutely it is key to seeing those enablements activities or those rev, uh, rev ops programs, uh, increase productivity over time. Thank you. Excellent. Let's go to your next metric. Great. So as we, we break it, you know, get down, go down a level now.
So, so as we get a bit deeper into, into growth, what we mean by growth efficiency, and now let's get into cost efficiency. Um, so. A very important metric too. So we started off with sales productivity. As you saw, it's important to be able to calculate it. So now you know what your sales teams produce. Um, cost efficiency.
We always, as rev ops leaders and, and, and, and enablement leaders, you know, we, we tend to leave this to, to finance. So we're FP&A and say, look, it's, it's finance, it's problem fp and a, and. I truly believe that, that this, this needs to change. I think Rev ops leaders, revenue leaders should be responsible for cost efficiency too.
Um, uh, because this ultimately, uh, will make sure that we driving the right return on investment that we would expect in the organizations, uh, and, and also making sure that we maintain a certain level of spend, uh, for what our return is. Um, and, and again, I know this is, you know, it's, again, it's not, it's not always easy to get to this data because a lot of companies will feel, well, I don't want people to see all the cost of the sales team.
And, and, and, because you can break it down by individuals. So, so sometimes this is, you know, this information is a bit restricted, but, uh, but there are ways to, to get to it and, and, and look at it at a high level and say, look, I've got, I've got a certain amount of revenue that I generate, um, and I've got a certain amount, amount of costs.
That, that I have. Um, now, yes, we can argue what costs you wanna bring in. Do I wanna bring in, you know, of course base salary should be there, variable should be there, uh, bonuses, you know, anything that's touching the sales team. Um, but, but I promise you, you know, do we add markets in costs? I think that's up to you to decide if you want to do that.
If you wanna add, uh, you know, additional burden costs, um, you, you could do that too. I, I, I find, you know, I just believe, look, keep it simple. We've got, we've now got our productivity calculations that you've done. Let's go look at our costs, uh, for our quota bearing reps. Um, you know, I wouldn't look at the, the, the, the extended sales team, uh, and let's just see what, what that cost efficiency is or, or return on investment.
Uh, so what we really mean by that I, is that this starts to help with decisions like hiring. When do I hire that next person? Um, because if I know I need to maintain my return on investment at. You know, three to one or two to one. Um, you know, ideally three to one is where we'd wanna be, depending on what business you're in, because that's a good return for what, what it costs you.
Well then I know I'm not gonna go hire 10 people next month because it's gonna drop my, you know, my cost to one, one, you know, one to one. Uh, so, so I'd probably need to space out, uh, space out those hires. Um, so that's, that's important. Um, and then also, In its simplest form, it's, it's what revenue do regenerate it versus what it cost us.
We know some regions are more expensive than others. We know hiring a person in the United States is more expensive than hiring someone in Ireland or the uk, um, or, or in other parts of Europe, um, and, and so forth. But we know the productivity is higher in the US than, than it is in in, in Europe. So therefore you've really gotta balance it.
And that's why it's really important not just to look at sales productivity, but also look to look at the cost efficiency. And, and lastly on that last, you know, business decisions that you start to do is you can start to see your trends. What you don't want to happen is you start to trend your cost.
Efficiency starts to trend up because that means over time you are gonna land in, in, in, in an issue where your gross margins are gonna start to drop. And we know when margins start to drop, um, um, multiple start to, you know, your valuations start to drop. Um, and hence why. I, I, I, I go back to the sales productivity number and cost efficiency because these two metrics are directly related, uh, to revenue and, and, and operating, uh, you know, operate a margin.
So, so very key. Um, and that's why I truly believe RevOps leaders, um, you know, we, we do need to take ownership on this, um, and really create this bridge between sales and finance.
Matt Durazzani: Perfect. So let me, you know, you, you gave me a lot to think and I'm thinking myself, right? If anybody's listening here and the different type of audiences, what would they like to ask you?
So there's a couple questions that, and what you said came to my mind. Um, I think for a second, for those organizations that maybe are earlier stage, maybe they're younger or maybe they're companies that have been out for some time, but their Salesforce has never really been developed and all of a sudden they have a product that they want to scale operationally from a revenue perspective.
And so they have not been able to develop yet the level of sales proficiency that you were talking about a moment ago. And, but they need to be hiring a certain number of people to start that engine, therefore their ROI will be below their cost. Right. Um, do you have any advice on how they wanna think about it and maybe at what speed or ratio they should start, um, making some plans?
Any advice you would give to anybody that is not yet on an oil level, like you're looking in these graphs and say, Hey, we know that for the next five months we're gonna be spending more operational costs than actually getting return. Especially cuz there's a ramping time like you discussed.
Werner Schmidt: Uh, exactly Matt.
And that's, I mean, it really is. It's great because that, that, and that third metric, again, I know we're not gonna go into too much detail on it now, is those ramp times really important to know exactly how many days does it take to ramp someone? Um, not just, well, it takes three months.
Well, is it 90 days?
Is it 85 days? Is it 95 days? You really need to know how many days it takes. Um, uh, because it is key and, and, and you're right for small, you know, for, for organizations that are, are just about to start, you know, start a startups. Um, uh, and it's really starting to scale up. Um, you know, you know, you're going from, you know, maybe five to 10 heads to 15 heads, and then you, you, you're starting to really accelerate some companies from, you know, 20 to 30 to f to 40 to 50.
Um, and what's really key is to, is, is just to be beware of, of. You know? Yes. Um, it's easier to then calculate it because you've got less dates and movements, but it's important to then maybe then set those goals of what product productivity target would you like to be reaching, um, to get to your numbers, to your target.
As you mentioned, Matt, it, you know, you can set a productivity target that'll help you then get to your targets. Uh, of what you'd expect, but also then to just look at your ROI and say, look, great. You know, you generally have won a three to one return. That that takes time. It's not gonna happen in year one because obviously you've got your ramp period that starts.
Um, but as the reps become more, more tenured, uh, your productivity goes up. So it's important to be tracking it and looking at it. Um, but also what, what I do, you know, advise and my, my advices and what I learned over the years that, you know, we sensor reverse Citrix and, and, and all the companies are recently at stage.
Um, was that the, the what, when we tend to hire, we tend to over hire and I, if you look at your productivity data, Um, I think you will find that you won't hire as many people upfront, and maybe instead of five people, you might hire four. Uh, because what you, what that helps to do starts to maintain your productivity levels.
But now there might be good reason, there might be a product launch, there might be something that's happening within the organization that changes that, and that's fine. It absolutely might be fine to over hire. But what's important to do then is make sure you're tracking your ramp times and making sure you're tracking this on a monthly basis.
Because if you start to see your cost efficiency going up and your productivity drop in, you know that those trends and it's trending over time, that way, it's hard to suddenly change that. Um, um, so I think being, being, you know, cautious on it will first, having these metrics and understand them and seeing it, and at least keeping an eye on it, um, will, will make us all make those better decisions in the future.
Matt Durazzani: Perfect. Thank you for that. Um, anything else that you would like to talk about this cost efficiency before we kind of wrap things up. Any other advice on, on this metric?
Werner Schmidt: So I think, I think it's just Matt, the last piece is on the benefits is really just that, you know, the return on investment, uh, everyone wants to note.
Um, I think it's important, um, as I've mentioned, and I'm repeating myself. Yeah. But I, again, I'm really drilling it in that this, cuz this is effectively contribution. It's what is the contribution of the sales organization bring into the business. Um, and, and that's important to talk about because there's a lot of time that you've gotta justify this very expensive headcount for what it brings in.
Um, so I think being able to talk to now show is, um, as a rev ops team, uh, elevates function at all as all and also creates that bridge, as I mentioned, between, between sales. And finance. Um, uh, secondly, it's just the comparison across teams to understand what your new business teams are doing versus your renewal teams and, and maybe your upsell teams, depending on how you organize or even hybrid teams and how they compare across the regions is important.
But also, lastly, what I want to end on here is these, both these metrics are forward looking models. Once you've got the data and you can see the trends, you're able to then predict far better of where, where, where your productivity needs to be, uh, to be able to hit, hit your numbers, um, uh, and then align that to what the forecast that you, you know, that, that, that are coming outta the sales teams.
Uh, and then importantly, the, those forward looking models then help you start to create your capacity plan. Um, as we get into revenue planning, um, so that you, you, you, you've got far more data to work with and, and create far more accurate plans for the future.
Matt Durazzani: So this was really, really great advice today.
I think, uh, um, you know, I, I really like the idea that in order to be an effective business, You wanna look at two things. One is putting down a baseline of what it is the current performing, the contribution that we're getting, uh, at least, uh, as a company. Uh, then we can look at individually from a regional perspective or all the way down to a rep.
And we know that not every individual contributor always fires the right cylinders at the right time, right? So you have a contribution and dynamics of an organization that can overall as a team work effort, produce the level of efficiency needed. And that efficiency that is tracked, of course, against the very, very important metric, which is the most critical of all at the end of the day, which is, are we staying within the boundaries of our budgets? Are we being profitable as an organization that ultimately benefits all sorts of downstream impacts in the organization? Right. Um, revenue operations is definitely a space that is fastly growing these days, and these revenue operators are becoming more and more critical. And those CEOs and CROs and organizations that understand how to really leverage these resources internally for success are the ones that actually unlock their best potential to really bring not just a performance metric result, but bring all their skill sets to the table to make a difference in organization.
So I, I wanted to ask, um, um, one final question here, uh, more around your current experience with your current company. Uh, one, what brought you to start it and two, Uh, even more importantly, um, what is, uh, an advice you can give to maybe other CEOs and CROs that may be watching this, uh, in how to really, um, capitalize and, and, and work closely with these revenue operators that support your mindset and your strategy and your organization?
How, how would you say to think about these people?
Werner Schmidt: Yeah, so, so I think, I think first of all, I, I think it's, um, It, it's not easy. I get it. We get the first questions right? We need to, we need to hit our targets and we've gotta grow as fast as we can. And then literally the next conversation, um, is, is we gotta grow efficiently.
And it's like, well, okay, so we need growth. Um, like we've been doing it for these two decades of hypergrowth, but we now gotta do it efficiently. So we, we just need to be smarter, uh, at how we do it. And I, I, I truly believe that, that, that we, you know, now we, we get into a place where, And we've got technology to do this.
And hence why I, you know, I found it later what was, to be able to, to move these metrics into real time so that we can rather focus our time on analyzing the data of, of what that data output is than actually doing this all manually, you know, in, in, in Excel and so forth. And I, I think to leaders out there, Um, is, is, I know some companies are really good at, at, at looking at the, the, this, this productivity data and, and cost efficiency data.
Not, not always together. Um, but I, I think the sooner we bring this together, um, the sooner that we will be able to drive more efficient organizations, um, w within our, within our companies. Um, and I, and I, I think what's also important is that the, the, the essence of what we, we are creating here, and you've mentioned this, Matt, is, is this contribution, is, is what is the contribution delivering.
Um, and these are metrics be to be able to get to that. And those are questions that are coming from the board, from the C-suite. You know, into the revenue leaders, into the finance leaders all the time. So, so, so if we've got this data to hand, we can rather spend more time on, on, on what are the strategies for us to grow efficiently and how are we gonna do it?
And focus in on what's gonna drive, um, you know, create that incremental lift, be it on the product side or, or, or where we need to focus on the, the Motown side. Then, then, then go back and forth on the numbers, trying to figure out, You know, how productive the team is or how efficient it is. Um, where, where we could rather be using our, our, our, you know, our collective, uh, brains and so on, and our, our thoughts to be, to, to be focused more on, on the strategies of what we're gonna do to hit our numbers.
Matt Durazzani: So this has been awesome. Thanks for participating today. Uh, great advice and. Uh, clear a lot of experience that you have developed over the years. Uh, why don't you go ahead and tell us a little bit, uh, quickly about your organization and so that people know, um, also where to look you up and, and, uh, understand what other services you can offer.
If people ever want to get in touch with you,
Werner Schmidt: uh, that would be great. And, um, you know, the, the company's called later.io. Um, you know, we, we found it, um, very recent recently. And, um, really what we are doing is we automate in these calculations so that you can see your productivity in real time. You can see your cost efficiency in real time.
You can calculate, you'll see your ramp times, uh, in real time. We can actually calculate along it takes, uh, for salespeople to be ramped. Uh, and it gives you those, those metrics. And, and we do that seamlessly. We, we plug in automatically to the, the Salesforce. If you run Salesforce, we are on the app exchange.
If not, we can, we can load the data manually for you. Uh, so that you could see this, uh, but I do, you know, please reach out to me on, on LinkedIn. Um, if you wanna learn more about growth efficiency, um, and, and, um, you know, how you can build revenue plans because ultimately that's what we are doing. Uh, and that's also another service that we offer is our capacity plan in, uh, module where you could you take your productivity data, your cost efficiency data.
And your, your ramp times. And that then feeds your, your, your capacity plan or, or your revenue plan. Uh, and we can absolutely talk more about that. Um, if, uh, you wanna learn more about it, so the website later.io. Um, and if not, just reach out to me on LinkedIn and, and happy to jump on a call with you. Well, thank you Warren Schmidt.
Matt Durazzani: I really appreciate your time and, uh, we wish everybody, uh, a good evening and until the next episode.
Werner Schmidt: Okay. And then thank you Matt, and thanks for having me.
Matt Durazzani: You got it. Anytime.