Aaron Ross is a bestselling author and he co-wrote the playbook for new Saas companies. Today we discuss why you need to specialize your sales roles to create predictable, scalable revenue; how to grow and build a sales team; and how he built a $5M business while having nine kids…at the same time!
Aaron Ross is my guest on the show today and we’re gonna dig into the importance of specialized sales roles. We’re talking about key outbound metrics for sales managers, explore those circumstances where it makes sense for SDR prospectors to be paid as much as a seller’s, and what to do about chronically low close rates in B2B sales. Aaron Ross is the co author, along with Mary Lou Tyler have the book titled Predictable Revenue: Turn Your Business Into A Sales Machine With The $100 Million Best Practices of Salesforce.com. It’s become the playbook for many companies implementing an inside sales driven repeatable revenue model. Aaron is also father to a large family of nine kids. The first time he was on the show, he had to hide in a closet from his kids to find a quiet place to record. And what you would reasonably expect would be a hectic home. Aaron and his family recently picked up stakes and relocated from the sunny shores of LA to the decidedly less sunny Edinburgh Scotland. So what are the impacts of the pandemic having on your business, if any?
So getting sued the early stages? I think like a lot of them. There are three types of businesses out there. The first are companies that are basically gonna go out of business or be severely damaged because of travel or restaurants right? And then there’s companies that are going to have a huge influx and boom, like Zoom, all on a virtual teleconferencing, Amazon. And then there’s pie most companies that are like, well, it could go kind of either way, depending on what we do in our company, Predictable Revenue, calm all into that. I think a lot of people will lose some clients, because they’re going to struggle, we’ll probably get some new clients that are better positioned, it’s going to be just a lot of change. And I think, like a lot of people, the key is to kind of stay calm. Be aware of all the challenges like everyone’s there’s a lot of people who can have cashflow problems, and we probably will as well in terms of like, turning through different company. Customers and bringing new ones to reposition our offerings and kind of adapting to the new climate. Because we don’t know how long it’ll last. I think it’s a lot easier for me to be calm in the sense of knowing that in the past where there was this company of power companies, and I’ve had them fail and where it sells and so on. That it’s the times that tend to catapult you towards the kind of success you want, in one way or another. So in some ways that might be you’re in a company or in some situation where it’s not a good fit, and it’s going to force you to get out of that. The company might close or get fired, like there’s just not a good fit there. You kind of forced into something you might have been resisting or might force you to reposition yourself or your company what you do to be better fits. But people a lot of people come out of this better for it. You know, of course, there’s gonna be a lot of challenges, just socially. There’s a lot of sickness effects living on people’s lives, but business wise, I think again, these are the times when people look back in a few months or a few years back, and had a lot of immense growth because of it. Whether it was felt good at the time, or not. Like I look back again, to the times I learned the most when I had a divorce and when I had a business fail, yeah, times incredibly painful. I personally don’t want to go through those types of things. Again, I don’t expect to but it’s more sometimes the things that feel the most dear and painful if you want to say embrace, but you kind of run towards them to at least deal with them in some way. It’s just navigating step by step, day by day, moment by moment. At some point, you come out the other side, like okay, yeah, I made it, and I’m better for it. I think then that’s where we’re going. A lot of businesses are gonna go through this way.
Andy Paul 7:04
That’s a great point. It’s like you said you’ve been through some difficult times in the past. And perhaps the biggest lesson you learned is you got through it.
Aaron Ross 7:14
Yeah. So unfortunately that we grow comfort is the enemy of growth. No contract doesn’t mean easy just means like habits. And these are the kinds of times when really they force us to confront our habits that we may not need to change.
Andy Paul 7:32
Yeah, well, I mean, it’s sort of interesting. Let’s talk about this book you and Mary Lou wrote Predictable Revenue which, sort of is the playbook for many companies doing inside sales and by extension remote selling these days. So yeah, we were in the sweetspot before but really are in sweet spot now. So for people that maybe aren’t in the SAS business where your books most often put to use as explain what Predictable Revenue was about and how companies are using it.
Aaron Ross 8:06
I think there are a lot of companies in the SAS and software businesses that have heard of and use the book Predictable Revenue. But really, it’s a book for anyone who has salespeople. I just think that the SAS companies tend, and a lot of technology companies tend to be the most aggressive at changing habits and try new things in order to grow faster. They’re more willing to throw out conventional practices and try new things. But it really is for any company. The book Predictable Revenue has been out since 2011, which is when I got married. So again, I had a family and one business book out. The book is essentially a lot of the ideas, basically still true ever since of one of the key ideas, and it’s standard, and I’d say like Silicon Valley type companies now. Especially analyzing salespeople but it’s still really quite uncommon actually specializes in salespeople. Same idea if you had a soccer team, you don’t tell all your players to attack and everyone do defense. You have a specialist like attackers and defenders and so on. And in sales we still don’t do this. It’s still uncommon to do that when you have prospectors do prospect closers, who close account management so on. And when you do that you can enable people like prospectors to be dedicated at being great at things like outbound prospecting people doing fewer things better. And outbound prospecting, of course, is something that the team created at Salesforce that system helped them grow faster, almost double how fast they’re growing in certain markets. And that is something that if you can have a system like that to create predictable lead generation, then you’ll be able to create Predictable Revenue, but without bound unless you have people dedicated to it, it’s just not going to work well. So a lot of these principles still are true. What happens is the markets get busier. Let’s just take outbound to this area, outbound has been a hot area for a while. Inbound is really hot for a long time. It’s never gonna go away, not only outbound kind of follows inbound, because inbound, grew and matured faster earlier in the sense of content marketing, and SEO and all these forms of marketing to drive leads to your website. And inbound, happens as the world gets cluttered. It all still works. It’s just you have to do that to be better. You know, John Miller, the co-founder of Marketo said 10 years ago when he could put up a blog post and rank in the first page of Google for keywords that same day. Today with engagement, he’s been trying for three years to be on the first highly ranked for terms like account based marketing and you can’t. So with outbound the same thing, more people are doing outbound. It still works, but just have to be able better serve. And this is really the future of the trend, more content, more channels, more messages, more apps, more everything, more overwhelm, which means not only for your customers, but if you’re a sales leader, this is also true of your sales people, more confusion, run more overwhelm, and more decision paralysis. So I think the key for future success today in the future, it’s really this word of focus. And there’s many ways you can do this. So that is really is the essence of what it’s going to take to be successful in growing sales.
Andy Paul 12:01
Well, I mean, use the term better, right? We got to be better and do better. I want to dig into that because you’re one of the more frequent criticisms of inside sales the way that I think the preponderance of SAS companies practice it is just more. We do more as opposed to do better. As opposed to saying, look, if we learn how to do it better, we can do more better, but we’re just gonna do more right now. So how do we break that cycle? Because we see that people are getting overwhelmed. Outbound is still an essential part of developing new leads. How do we get people to really focus more on the better? I had a conversation with a CIO of a big brand name SAS company and talked about what his growth plans were and it was just like, we’re just gonna beat the crap out of top of the funnel and throw stuff at it. We’re so good at our lead machine.Well, if you’re focused on improving the quality of the leads and improving your win rate all these things. Now, do we just do enough? We’re just playing a game of chance at this point, if we just throw enough that we know we’re gonna get a certain percentage of it. Right now, it seems like that, you know, turning sales into a game of chance attitude has taken hold. How do we break that cycle?
Aaron Ross 13:25
It’s always gonna be there in some way. That’s why a lot of my content and so not so much in Predictable Revenue. There’s a book I did with a guy named Jason Lumpkin, founder of SaaStr, called From Impossible To Inevitable. It actually was ranked one of the top 10 startup books of all time. There’s a new ebook with workshop or simple training. It’s called Outbound Sales Mistakes Even Smart Leaders Make. These are all around focusing on the quality side, not just quantity, because I think everyone’s default is to quantity. Right? So to me, it’s like education, and trying to get people to look a little bit more top down. So for example, when we talk about case studies with outbound funnels. Can the right metrics, you do want the quantity metrics in there, but I tend to focus on here are the metrics you’re missing, like the quality metrics.
Andy Paul 14:32
So what those are.
Aaron Ross 14:35
So here’s one example. This is one of the common top 7 kinds of mistakes about sales, mistakes in an outbound funnel. The thing with outbound is there are probably the most subjectivity in this funnel, as in around the entire sales stack, marketing stack, because you have oftentimes a lot of newer people doing appointment setting and you’ve got a lot of salespeople receiving those appointments. And they don’t often have enough training consistency around what actually counts as qualified. That includes the salespeople. Then what nobody does or it’s so rare is they need an audit check to review all these outbound appointments or appointments set by outbound SDR. So the term is often outbound SDR about BDR is the prospector. Were these appointments that were held accepted and in turned into qualified opportunities by the sales team. And then of all those that were qualified by the sales team or accepted, reviewing all those. So these are sort of the all the commissionable events, the prospectors. Using every single one for consistency, and kind of completeness, and consistency means was it actually qualified according to the criteria? And you do need some criteria? Were the notes in there, did the salesperson actually talk to him on the phone? Because a lot of salespeople will think, Oh, you know, my prospector is really working hard. I’ll just flip them. I’ll just do him a favor. Which is deadly.
Andy Paul 16:24
Don’t do him a favor by going through with a demo, even though they’re not qualified.
Aaron Ross 16:27
Yeah, exactly. Or even just by kind of qualifying over email or just it doesn’t happen. You have to check every opportunity that’s been accepted for consistency for what’s actually outbound according to the actual rules of attribution rules or attribution terms to say was this inbound versus outbound? Was it actually outbound? Was it actually qualified and is it basically consistent, we need them entered in the CRM and the notes and so on. What you find is there’s so much it just takes time. Coaching in practice and reminding everybody, that consistency is really hard at that step of the funnel. So you need that kind of check. If you don’t have that, what you have is a whole bunch of inconsistent, qualified opportunities. So you don’t have an accurate sense of the amount of actual qualified opportunities entering your sales pipeline through the outbound channel. So you don’t really know what’s working. And when you have the situation, like now, when you actually look at your funnel, and your pipeline, especially the outbound source one, it’s gonna be very inaccurate. And so if you thought you had $10 million in pipeline, there might only be 6 million. Or, again, if you dig into and you will hit $10 million of outbound pipeline, and you dig into it, you realize, well, actually, half of that $5 million came from inbound sources. So you’re kind of just like driving a car and you realize, Oh, my speedometer is wrong. I just got pulled over by the police because I had no idea or my map system is wrong. So I don’t know where I am. Especially these times you need to have the truth of your pipeline in order to make effective decisions. You have to have the truth and know what’s my actual pipeline and what’s actually sourced it so I know what’s working. So I know how to best adjust it to invest, where am I going to grow?
Andy Paul 18:25
So what does that consistency metric look like? For instance.
Aaron Ross 18:33
So really what that means is the metrics that are common might be comping outbound SDRs on the number of held meetings. So the actual different metric could be comping them on sales whether they call it sales, accepted leads or sales qualified opportunities or whatever. If there’s so many sales people have held another call. And it could be a demo. There’s all kinds of discovery call demo salesperson talking by phone. They call it pre qualified, qualified and accepted it as they’re going to take it. Sometimes if you’re doing more account based or enterprise companies could take three or four meetings. You may not be in. So it’s a number of sales accepted opportunities that we use sales accepted leads. Sales accepted leads and those have to be all checked for consistency by a manager or some sort of third party in the company to make sure they’re all kosher. It’s a lots of coachable moments, because most people don’t know. They get it wrong. They don’t put the right notes in salesperson qual x accepts it or rejects it and fairly. There’s a lot of coaching that needs to go into this to get a consistency in terms of the pipeline being generated. And if you don’t have consistency, you don’t have predictability. So that’s why toxic, the quality is really the quality of the work. Now there’s many other types of quality and focus, right? This is the focus on which customers are the right ones, right that quality, fewer better customers isn’t focused on. Specialization works because salespeople can focus on doing fewer things better, so that the quality of their work can be better. They don’t have to be juggling too many different things. And lastly, one of the impossible book, there’s a whole section on doubling your deal size, this idea it’s a lot easier to grow revenue by growing your deal sizes than is by just getting more customers, which you can do, especially through outbound because you can target bigger opportunities. And, how do you find companies that have bigger deal sizes? How would you potentially restructure or sort of propose bigger deal sizes, that’s really one of the best and easiest ways to grow revenue, just double your deal size. So it’s like fewer bigger, better customers. It’s usually healthier for most businesses.
Andy Paul 21:02
So we’re seeing more companies are saying, well cash we really need to have more seniority in the SDR role. Especially because we’re doing bigger deals and primarily the big more complex enterprise sale. Interesting what you’re saying that cuz I’ve talked with several and I’ve seen some companies hiring SDRs now who were AE’s coming back into this prospecting team role with a penetrate big accounts.
Aaron Ross 21:32
I did an interesting webinar with a guy Collin Cadmus from Aircall, VP of Sales there and the webinar is called the STR Models Broken, which against a bit of a dramatic statement, but his hypothesis is that this is the time for SDRs to have a parallel career track to salespeople and be paid basically equivalently, treated the same way, have 10 years more experience. And so I agree. It depends on the segment of the market. He’s in a very hyper competitive market with communication systems. There’s gonna be more types of segments and niches and ways that outbound applies to a company. And there are a lot of companies where, especially in more transactional or hyper competitive areas, you do need more tenure. You do need more experience because for him, he thought it would take about three years to get the whole outbound team and program up and running and getting to the point where they really felt like it’s producing. And it’s taken nine months to ramp a new SDR to be effective, because they do need a lot more market knowledge, they need longer term nurturing cycles, because a lot of their companies are under contracts. And they can’t just switch out the contract. But I think it really comes down to knowing your market, knowing your customers, where we’re marketing, to who we’re marketing to, and who we’re selling to. I specifically use the term outbound SDR as opposed to the inbound SDRs because you should not be mixing those roles. We kind of have the classic outbound SDR model with a junior SDR who has relatively little experience maybe not goes up? Or should we think about some segments where we have a parallel career track or when we’re hiring a AE and people with experience who might get paid the same as the salespeople, right. So it might be harder to get the meetings than it is to close them or equivalent challenge. We’re taking the prestige out of the closing part of it, buying and paying the roles in similar ways and treating them similar as a parallel career track. I think that what’s going to happen is not going to be the default but it’ll be for the right segments and companies who can adapt it to with their area. It’s going to happen more and more. Not everyone’s going to change that model.
Andy Paul 24:19
No, they need to have the right mindset, the right market, the right product to sell to do that, but too often I’ve seen SDRs say there’s a bit of ageism when it comes to it, quite frankly, in the valley. Because, you know, flushing people with a bunch of experience we just don’t get prospectors and that’s fine. And yet, now they tend to be valued just as they get older because of the perception that they can’t keep up with the pace but you know, on the right roll, they don’t need to have that.
Aaron Ross 24:48
Yeah. And you know, I think that there’s a lot of things like that go into roles as to how do you keep the outbound interesting for people. Whatever is gonna get the best results for a company. You know, if people feel like they have good people to work with, and they have ways to learn, even if the day to day job can be boring, they can stick with after two or three years, right or longer than they used to. And there’s some people that are kind of career prospectors. It’s not very common, but maybe that’s because, again, the crop just paid less. It’s really hard to separate out. There’s so much more prestige and compensation attached to salespeople, and for good reason. So it’s really hard to detach those and say, if the prospecting job was paid exactly the same as equivalent challenge and equivalent compensation to the sales job. What would that look like in a company? So someone’s probably done that. And it’d be really interesting to see then that your company reaches out. So I’d love to hear more about how that works and how people culturally know how it just changes things.
Andy Paul 26:16
Well, I mean, I worked at one startup where it truly was a team sale. And it was a complex enterprise sale, satellite communication systems. We didn’t pay commissions to the sellers or to the closers. They got stock and other compensation that came with it, but, they were not bearing the risk solely. I mean, it took 5/6 people to work on the account and everybody’s contribution was of equal value. So, I think those situations exist out there and companies need to be willing to break the rules in order to put the right team together. So one question that comes up quite a bit for me, some companies have implanted their inside sales model is that it seems to me they are accepting really low win rates as to serve a fact of life which speaks to sort of the quality. They lack quality at the top of the funnel and we’re just going to play the serve game of chance. And again, conversations with multiple CRMs about what are you doing to improve your win rates as a faster, less expensive route to growth, just trying to invest in generating more leads to top of funnel? I mean, not that I come from a background, admittedly, but I was working for startups selling complex enterprise stuff and if we were trying to exist on 20% win rate, we would have gone out of business.
Aaron Ross 27:46
Okay, so now this is a great let’s do this exercise which is 30% of what right? So from which part of the funnel do we have.
Andy Paul 27:54
Aaron Ross 27:56
Okay, types of qualified opportunities. I know you got that on me now inbound. So there’s referral so the thing is like, another idea that the Predictable Revenue book introduced and we expanded on in the From Impossible To Inevitable book is this idea of different types of leads, three types, seeds, nets, and spears. Remember that each type can have different metrics, win rates, and so on. So seeds, which would be word of mouth, they’re gonna have higher win rates, right? So then maybe 33%, or could even be 50% from qualified to close outbound using that 20%. Now, if you have a services company or really uniquely challenging niche, it could be lower. There’s always variety, its product II type businesses 20% is pretty standard for outbound. Inbound leads can vary because there are many types of inbound leads. So, I would say that generally, if it was lower, if it’s a product company. A lot of it depends on the type of lead. There’s a whole range, right? If you generate a lot of leads from webinars, there are more nursery education and not only buying signals and outbound, you’re gonna have a lower win rate just by the nature of the lead sources. Again, lots of referrals and you’re gonna have higher win rates. But the thing is that to qualify, some companies are able to qualify a lot heavier at the beginning, like if you’re super enterprise, or if you can know your market. And some companies have to be a little bit more open because they can’t tell. So there’s a lot of right in there, but 20% to me doesn’t sound that bad. Sounds pretty typical.
Andy Paul 29:56
Yeah. I think for my opinion, that’s for most companies. That’s not a sustainable path to growth because you’re not giving your sellers enough time to work each of the accounts the way they should in order to increase the opportunity, the potential of closing. I think especially when you have companies that have excessive pipeline coverage ratio requirements and so on, then people just don’t have time. I mean, if you’re meant to work a deal, that’s a relatively high value deal and selling to an enterprise, and you got a five x pipeline coverage requirement, you are only going to close 20% of your deals. But why not? You have a three x requirement and close with half.
Aaron Ross 30:41
I would agree that if the company can figure out earlier what would better qualify or disqualify the prospect. How do you only let things into the pipeline that have a great chance. So sometimes you don’t know. I would rather the salespeople get fewer better meetings, because the busier sales people struggle with juggling lots of things, especially today, right? And the fact is, there’s lots of technology tools but now it’s the point it’s getting worse because there’s too many kinds of apps people have to log in and do things that you’re getting this stack overwhelmed stuck destruction as a login to outreach in Salesforce. So it’s a never ending kind of battle for simplicity. This is a focus to go back to what are the best types of customers? How do we better market to them? Once they come in, how do we identify which ones should be passed to even inbound SDRs? As salespeople how do we keep out the riff raff people who aren’t ready? So it’s kind of an ongoing challenge. But I do think back to there’s too much focus on big numbers and activities and leads and not as much of a focus on are we getting the right leads? Are they kind of moving through the right steps? You can’t have too few meetings for salespeople, but you can’t have too many either. Because then they get busy and they just drop stuff. So what’s the right number for people and it’s going to be lower for enterprise and higher for midmark.
Andy Paul 32:43
So question, a follow up on specialization which is a particular interest area of mine. We’re doing that at the sales level, but we fundamentally haven’t really changed how we manage sales in forever. And so, I take example, you look at the average Premier League team and the way their coaching staff is organized. It’s hyper specialized. You got the first team coach, he’s the head coach. And you’ve got a coach who just for the first team, you’ve got three different performance coaches, one for fitness performance, one for skills performance. Well, you know, they got a coach for throw ins for goodness sakes. You know, the ability to shift I like where you’re going on sales is why don’t we have specialized performance coaches and so on.
Aaron Ross 33:55
I would be totally behind that. I hadn’t even thought about it that way. You’re exactly right. Now, if you’re not big enough to, you’d have to have to kind of justify hiring people. But one thing that we have written about in this mistakes book, you can have people on your team who specialize, like if you say you have a team of six salespeople, and you have one manager. Well, you can have someone on the team who is probably the best at calls and they can become like the call coach. Right? You can have these kinds of side jobs and ways to take some of the management responsibility and distribute that through the team in ways that actually give people on the team opportunities to do something different and prove they can add value and practice specialized skills. But your point is, is right on. That is the way to go. I think there’s a lot to be said around modeling the best performing stuff for teams in the world. There’s a lot of things they do that our sales teams, even the most successful ones don’t do.
Andy Paul 35:10
Yeah, there’s somehow this mythology built up around this. You’ve sold consulting services for years. I’ve sold consulting services for three years. I pretty much ended up always having to sell to the CEO because VP’s are so anxious about having somebody come in that they might perceive as I can’t have somebody here that knows something that I don’t.
Andy Paul 35:37
Which is impossible, right? You can’t possibly know that. So, we have to reconceptualize those roles. I think if we really want to improve performance at the sales level because I think that you’ve seen the CSO insights stats and sales performance for reps is dropping year over year and quota attainment. It’s because we never really focus on performance at the management level, and we have these people, they’re trying to be jack of all trades. I think just taking a cue from Predictable Revenue, if we specialize at that selling level, why aren’t we specializing at the management level for sales?
Aaron Ross 36:11
I think that’s the way that people should go and move that way a little bit towards sales ops. It’s been great to see the growth of specialists who are doing the tool configuration for us in our CRM configuration because you have to have that. You know, I think for smaller companies, or even bigger ones, if you don’t have someone in house, you can do it like bringing a coach or consultant or some training from the outside. If you have someone in house, you can volunteer and be that specialist. If you’re big enough to have people who internally you can do that. But, in this world of overwhelm coming back to that means that there are too many things going on, people can’t stay on top of everything. So you have to have people who specialize and do fewer things better. So they can get really good at that thing, which might be like you say calling or emailing or messaging or technology. Time management is probably one of our biggest hurdles for salespeople. You just need time and space to really delve into those things to get really good.
Andy Paul 37:25
Go back to my earlier point, if you want to be able to do more. You have to do better first on what you’re doing then you can do more. We tend to skip that and just go to more without saying we gotta do better first.
Aaron Ross 37:47
First, the product market fits and then they do repeatable revenue model, high predictable revenue, and then they scale. It says the most common problems are that startups skip the second step. So they get product market fit. And then they try to scale, right? And they don’t realize or slow down and say, market fit, and then figure out how to make it repeatable. And that will lead to scaling. You say get better first and then that will lead to the growth.
Andy Paul 38:47
You gotta sell outside your circle of friends and once you do that, then you have that repeatable process. Fantastic talking to you again and you’ve got another book coming out soon.
Aaron Ross 39:01
We had a second edition of the From Impossible To Inevitable book come out. I’m slowly working on a book I’m tentatively calling forcing functions. If you remember that chapter and the impossible book on how to make success inevitable, is willpower is not repeatable. Everyone can be overwhelmed means more procrastination, confusion, paralysis, for anybody. I’m right there with everybody. So for me, forcing functions have been kind of my number one key to break through all that and create leaps at home from zero to nine kids and work with a lot more. I’m thinking about slowly dipping my toes in and turning that into a book someday. Okay, I would not guess not this year. I don’t think but we’ll see. You never know what’s happening.
Andy Paul 39:55
Yeah, six kids at home. Three more in Los Angeles.
Aaron Ross 40:00
Yeah, but yeah for now it’s just an ebook on Outbound Sales Mistakes Even Smart Leaders Make.
Andy Paul 40:09
Right people check it out. So Aaron, thank you. We’ll look forward to talking to you soon.