Thank you everyone for listening to our snacking growth podcast. What we have here is a two-part episode with Carl Ferrer and myself Talking through the validity of variable comp plans for sales teams This first part which we're listening to now is gonna go through some of the myths out there I'll why variable compensation is necessary for sales teams and then part two is where we take questions from our LinkedIn audience that people asked about this topic And we went through and we gave our perspective on these questions We have enough material for maybe a part three in the future, but for now enjoying part one and thanks for listening Everybody welcome back another episode of stacking growth on gear with Carl was Cassidy And this is a long-awaited episode where we're gonna discuss our 50 50 variable comp plans for sales teams dead Carl's position we're gonna have a discussion on this welcome to show Carl how you doing I'm good and you said I didn't say it was dead I'm just saying that you know there's some challenges So yeah, it's a super popular topic that I threw a video out on LinkedIn to see kind of how you know the network and the market would react and there was a lot of Awesome thoughts thrown back at me and definitely a wild idea that I didn't think was so wild and for those of you who don't know the idea if you're out on LinkedIn was that it's it's actually not an idea It's what we do at RefineLab, so we pay our sales team 100% Salary so it's not a 50 50 variable They're not split between their base and then basically a performance incentivized second half to their salary they are guaranteed their salary like anyone else in any organization and It's a high salary so we benchmark it off of you know appropriate for our industry and ACB etc but it comes out to a extremely competitive enterprise SaaS OTE and We did this for a number of reasons But you know just just that concept in general just caught a lot of attention on LinkedIn to say the least So I thought we could just debunk some myths because I've learned a number of things What are we casting like six months or nine months into this? I guess you could call it an experiment and I've learned a bunch of things I think there's pros and cons to it and I've learned that there's a bunch of myths to kind of around comp in general that I'm sort of Excited to vaporize, you know, yeah And then we have a bunch of questions from folks on LinkedIn on the back of your Wonderful walk-and-talk video that you posted and we can get into maybe you know you bring it back to walk-and-talk Which I think it's cool. It's kind of like you've gone 2020 LinkedIn retro sales guy But I digress let's get back to the topic at hand so yeah, let's go to these myths And then we'll go to some Q&A So why don't we start with the first one Carl and that is we can't do this because You know we're taking money out of a sales person's pocket these top performer wearing reps make hundreds of thousands of dollars They're gonna make millions of dollars sales teams in general make a lot of money.
That's the myth So if we move to yeah, I'm playing versus a you know a good salary in the left side We're taking money out of the sales person's pocket true boss You know, I definitely I felt that way back in the day like if I if five years ago you were to tell me like Carl one day you're gonna make a you know a high full salary in your sales role like I would have laughed at you Like that's crazy because I believed that I was gonna make a whole lot of money if I was an over performer Well, I was a myth that I believed at the time and for me personally was like well I continued to go like one year after another in sales and continued to over perform I was rising star at HubSpot, which is basically the rookie of the year award I went to President's Club that year I was top-performing top 1% or at previous sales orgs before my time at HubSpot and I started to realize like man, where's my money like I don't actually make that much right your average OTE at HubSpot is you know 160k or something like that and like when you over performing go to President's Club You still might not break 200k, you know, and so it's like there's this myth that like if you over perform You are like swimming in cash and it's really not in over performing like it takes a lot of time You know like to hit a hundred percent of your plan, you know might take 40 50 hours a week to go 200% of your plan is now We're talking you know 10 hour 12 hour days long weekends You're taking stressful sales cations right the sales version of a vacation where you still squeeze in demos on the beach To not make a hundred and sixty K but to make 205 K It's like the juices and worth the squeeze all the time So it's like what's the difference between your lifestyle between 160 or 205, you know, especially after Uncle Sam takes his cut It's like I think there's just a myth that like if you over perform you're making half a million dollars, and it's just not true Redview also shows that most reps don't even hit a hundred percent of a quarter, right? So in the enterprise segment, which is the one that I follow most closely is the one that kind of we fall in right at refine labs Your average seller 46 percent of salespeople are hitting their number in the enterprise sector 46 So 53 percent of the sales team is not even making their OTE They're making less than their OT they're not hitting any accelerators and their lives are miserable because they feel like losers Because they're not hitting their quota, right? So it's just like again the myth that you articulated the sales people making all this money of course is there the Jordan Belfort of your Organization probably they have the top one or two reps ringing the cash register sure there's a lot of other awesome reps over performing that are bringing home Average 150k 160 180 and so it's just like you know and there's a lot of money of course like these are first world problems Right like that's a great life But this is the myth that like everybody's just like these huge stacks of cash for over performing salespeople all the time It's just not the case so there is a myth come from and so I can think about what you just said You know forty six percent of reps half the reps don't hit quota and it's called enterprise sales You have to sold on this idea that you know they can come in and make a ton of cash so like is this just management pulling the wool of their eyes is it an entire kind of cottage industry here is delusional like where does this kind of come from? Yeah, I can I can kind of guess at where it's come from in my own experience Yeah, I think you're sold really well by recruiters by senior sales leaders You know they give you the customer It's just like how a sas company might give you like the customer story of like their highest performing customer ever You know I think salespeople kind of get I don't want to say tricked But they don't they're not giving the whole story right and so they're giving kind of the case study around the one or two salespeople that Just absolutely murder their number and they're not giving any of the details though You know you're not told that that salesperson Literally works nights and weekends You're not told that that salesperson was one of the first salespeople at the organization and so they own like all the best accounts And they actually own San Francisco and New York and Manhattan, you know like there's those details that are like that Now is that always the case?
No, I don't want to like you know, there's talk they work hard I'm sure right but you're not given all the details and so you've got this big lottery ticket That's kind of dangled in front of you like man if they can do it you gotta remember It's playing to my personality too. I'm a seller on type a right I can do anything that I set my mind through so I'm like if that if Cassidy Can do it I can do it. No one would ever stop me from doing that and then you kind of hit a harsh reality Once you get into these roles sometimes because you're like dang they manage all the best They have the best install base in the company. They have San Francisco.
I have Nebraska like this is different There's a different right hand. I was dealt was slightly different You know and so it's you just you know I think that's where the myth comes from we're just sold and we are easily sold at salespeople that dream And so we're a little bit what would be the word gullible? I guess to it and the historically hasn't been a lot of transparency organizations like rep view are pretty new and so Historically, I didn't have anything to benchmark against I wasn't active on LinkedIn So I couldn't just ping my buddies and be like yo is this a bunch of BS or is this real right? There wasn't benchmarking it was like I really had to take the VP sales and the recruiters word for it I could maybe look on Glassdoor seven years ago and get some sparse information But again, it's like a cesspool on Glassdoor You're like is this disgruntled sucky sales reps that weren't making any money?
You just don't know so you stepped into these situations not really knowing just kind of believing that the people you were interviewing with had your best intentions in mind and You know you step into these scenarios that aren't Everything that they were necessary and the grass is in his green as maybe you thought it was and the product is a little bit You know it's a little more vapor than product You know, there's just a lot of unknowns that you just stuck with once you get hired You don't want to be the job hopper So now you're locked into this for 12 months at least so that you don't harm your own resume, etc So I don't want to ramble here But there's I think that's why we were sold on that and I think the tides are turning so because of transparency and Everything products leadership and things like rep view and company all know what we make now We all know what top performers make we all know how many people are actually in reality top performers And it's a lot different than what we thought it was you know five ten years ago when there wasn't this transparency So mid number one sales folks Don't crush it in the context of being you know getting getting wealthy and rich On the back of this and make good money I'm not great money They get sold kind of this story that half of them don't achieve and even as you outline when you do exceed your quota The upside is likely fairly limited in terms of like earnings potential outside of maybe the top water to folks in a company Yeah, fair to say and it depends on your industry, too Right again, you could have a seller that sells into SMB and mid-market and they're just like a awesome salesperson But the ACV doesn't support the very high salary in general right and so again It's just like this is maybe another myth or get into where like top performers would never take a full salary role And that's just it's a yeah, it's just that it's a no So the second thing I want to cover on the list of myths is this idea that it's very Complans are actually good for the company. Yeah You outline this idea that this notion that you know 50% of time a rep doesn't hit their quota What's this mean for the performance of the company? Is this mean the company's not hitting their revenues? So should we assume that 50% of the companies are hitting their revenues because their sales teams are any Or something else going on here?
How do you characterize the value of this? Compensation plan on the performance of the company Yeah, unfortunately I actually don't think they're necessarily connected because you could have the company could be hitting their revenue targets You still have half the sales team missing their targets. We see this in in our marketing conversation sometimes right? We're like marketing is sitting there lead Gen numbers, but the sales team is still missing their quota I think you get the same thing because you get this top down forecasting right so the CEO wants to grow five million this year And that's what the board of directors wants, you know out of this investment out of the company And so the CEO passes that to the VP sales of the CR like okay Well, if we need to hit five million we better make it seven million right so we can overperform and that is that number keeps going?
The sales managers are like okay shoot We better do 7.5 just to make sure that people are in some time the number gets to the sales person It's like we're not trying to add five million this year We're trying to add 10 and so you get half of your team that misses quota because it's not realistic But the company hit because they did get to 50% of the 10 million they got to five So the board is happy but half the sales team is miserable and you know what unfortunately Cassidy out You know it depends on how you look at the math You got you hit your revenue number and you paid you know a bunch of sales people not a lot of money You know from a cack perspective that actually feels unfortunately like a good deal You got a bunch of great activity great revenue great deals and you paid a bunch of sales people 20% more than their base Right you promised them 200 kot most of them came in around 130k for the year and in actual earnings that unfortunately in a really dark and twisted Way feels positive for the CFO But that's not factoring in the real cost of that kind of churn and burn type of culture You know it's very expensive to recruit sales people and now today Cassie the word gets out on these organizations There are there's a hit list of organizations that most sales people never go work for because we know the truth Right, there's all kinds of dark social and back channel in cell and companies that wasn't available before So I think it's gonna catch up with companies, but unfortunately historically I think it was it was a part of it higher 50 sales people there are a hundred Forecast the fact that 50 of them won't be here in 12 months. That's fine We're not gonna hardly pay them anything and we're still gonna use that kind of those the hamsters right to generate the revenue that we want And as a company we're gonna hit our number more affordably than we would have you know Maybe if we actually paid fair market OTU store sellers with you know quotas that were actually attainable I don't know you you've seen you've been that leader kind of at the top Have you seen that or experienced that or is that kind of how I think about that is that you feel like that's an accurate assessment I'm kind of current state of how forecasting quotas are kind of cascaded down For sure, I think you're right. I mean and I'm gonna play this back So I think it's an important point you made and that is a company's target is five million in your example The senior leadership CFO CEO they understand that 50% of the reps are gonna miss their quota so they build Instead of structure they hit 10 million knowing they're only gonna achieve half of that in order to hit the goals of the company And so what you're outlining here is like kind of a malicious intent to underpay salespeople by hitting it by setting a target That's unrealistic because we know there's not the demand generated by the sales team or the marketing team to hit 10 million Nobody's expecting they're only expecting half of them and sales team doesn't know that because that information is not shared nobody's saying Our target from the company's five million, but if you add up all our quota payment for the sales team It would be 10 nobody's ever gonna save that in all hands Word of the sales team and so I mean to me I don't I get this is how the game is played but it feels like massive massively unethical in terms of doing this because you're selling Nobody's selling the sales team on the fact that only half of you are gonna hit your target Like when you think about like the risk reward and taking these jobs You know they're selling the part of the possible that you're going to hit this target when happening well Yeah, they sell the dream and they set the target officially high because they know this is like a giant Ponzi scheme in some ways And maybe you're playing like a good way to get cheap labor Yeah, it's a cheap labor And then you know what two of the top reps that you sacrificed everything to get the job done Which is awesome good for them their top reps they've earned that you know That's their stories are then sold to the next cohort of reps when half the sales or it recycles and quits or gets fired And then you bring in a whole new fresh batch of new hires and they continue to sell you know Tony and Meredith's success And it's just yeah, it's malicious is a strong term, but you know, that's I can't think of a better one But I think you bring up an important point around just like this is really healthy for an organization You know if you look at like it for instance You're gonna rep you and you look at the the organizations that have like the best scores and the highest quota at tements So we're talking about 80 and 90 percent of the team are hitting their quota. There's one thing that's really striking to me It's that they're all very mature companies.
It's like salesforce hub spot Miro crowd strike Amazon Google cloud. So it also makes you wonder like okay If these smart mature companies who have dominated their categories and made it arguably made it when it comes to like business You know if they're doing it this way and most of their team is hitting quota I what I don't understand and I have an answer here is why the younger companies and the startups Don't attempt to follow in their footsteps. I'm like man Most of these teams are hitting quota okay to have enabled robust enablement teams They have good cultures of coaching etc. Why don't more of these reps, you know or these companies follow suit I don't know the answer to that.
Maybe they just you just can't forecast right you're talking about a product That's like you know pre product market fit. Maybe you're just hit product market fit We've guessed at our at our tan large one just to raise money We don't really know like what the opportunity is that lies ahead of so we can't even correctly maybe startups actually aren't malicious They just there's no mechanism for actually doing this accurately and so the sales rep at the end of the day It pays the price for that learning experience for the company I don't know, you know, I'm trying to you know assume good intent here, but let's bring down the The potential letters one is or malicious I'm gonna talk about that. I would like to assume most art two is I don't actually understand how to like structure the sales team Use cop effectively tied to revenue plan like this might not understand this mechanism or not do it well And or maybe their enablement and kind of development of the team is lacking all those examples that you gave Tremendous sales leadership kind of wrote the playbook on enterprise sales So this is very good on what they do and maybe these startups just don't have that little maturity three products It's not very good. You're not a category leader You're building something nobody really wants.
It's a nice to have whereas the examples you gave are all companies who are category leaders on the back of You know strong technology and forces maybe your marketing teams are good So the examples you gave all have room-class marketing organizations and Addition to category leading products in addition to very strong sales teams So yeah, four reasons right there and I think your point being malicious is probably a minority not being able to run efficient sales organization Yeah, I probably say that happens a lot in early stage companies and your product and marketing teams aren't where they need me and Those four things are kind of a recipe for disaster For the sales people, you know, you know, you know the G2 grids that like show all the people in category And you see everybody in the top right corner and I'm like man imagine the sales people that are like on like the bottom left of the quadrant Like they have to sell this software. They probably have the same quotas when they used to think about this at HubSpot You know how it's like a top right corner. It's like these random CRM's and marketing automation companies that I've never heard of It's like there's a sales people with the same quota as me trying to do that At one of these companies. I'm all Cassidy I'm almost like they might be a better sales person than I am like could I go sell like the 50th place CRM You know, like it really and that's what this is a tangent But one of the things I always tell like new sellers is like the number one thing that you can do The best thing that you can do for your career for your sales career is find a category that matters in a company that is leading that category Cuz like man I don't like culture like your boss like all those things are great.
They're secondary like you can make up for that stuff You can have a sucky sales manager and a horrible culture But if you have an awesome product you're gonna make money and you're gonna set yourself up for like a stair step to maybe another company that Has a good product and has all the other good things But I always wonder like am I really like a good so you could be a top sales person at HubSpot Would you be a top sales person some other random CRM? That's super half baked I just go back for those sellers at the same quotas me and There's self-apourware, you know, it's it's kind of an interesting thought experiment to think through But it's a bummer because it's like they probably think that they're loser and they suck at sales because they never hit their quota But really if they were put in the right environment They could thrive because I'm always looking for sales people that come from difficult selling environments because they come into a Situation upper fine labs where it's like strong product awesome team great services great marketing. It's like It's a dream come true, you know, it's like a video game like on easy mode, you know, it's so much better and everything works so much More frictionless. It's like this is what a proper organization actually functions like or product and marketing sales and senior leisure actually worked together This is a good business and fortunately.
I think most businesses just aren't aren't actually good businesses. Yeah I think this is a really good insight and that is It's important insight for anybody. I'm our gonna resale person a product person You want to be a company that is set up to be successful And by looking into that upper right hand part of the quadrant, that's a good indicator However, if your cop is variable it just raises the urgency that you better really pick somebody that you're betting on the horse You need to bet on the horse. Yeah, your cop is variable Otherwise you're gonna end up being a underpaid salesperson fighting a good fight against market leaders and you're not gonna win Yeah, and sacrificing a huge portion of your life and your mental health, you know, like this When you don't have a good product and you don't have good marketing It's like the seller pays the price with their blood their sweat their tears their sleep their mental health your family suffers Because you're short with them and harsh because you're always stressed out There's a huge cost that unfortunately sellers shoulder In those environments when you really think about it when you just outlined it's like a a double it's like a double punch first You're working hard to try to reach a quote attainment.
It's probably not realistic So you're already working your ass off. Yeah, and you don't have the product or the marketing team to support you and doing that So you're working even harder. So now you're yeah two strikes against you You're working your tail off into your point your stress your music moment once me around you and you're likely not gonna be bringing home The earnings that you expect. Yeah Oh, and and what Cassie another point that I thought of too is like what about like how all of that that that that mix that you just Describe like sounds horrifying, but that even further anchors you because now all of your sales behaviors are gonna reflect that state of mind So you're just desperate scarcity mindset all of that flows then I've been talking about how the sales person pays for this But who actually ultimately pays for it even further down the customer the customer success team You know so there's even further like flow that this sewage like flows down to it's like a huge Just a domino effect of pain and agony and I think that's why like so many startups don't make it they can't control You know this this flow and they don't know where to kind of you know stop it or damn it or whatever I don't know it's a nasty image here.
I've created I apologize to our listeners, but it's what it feels like at some of these Orbs I can imagine so anything to get the deal done and toss it over the lawn or success and product You'll figure it out. I've been there. I've been there's like I have to pay my mortgage this month I'm not gonna make it I have to say what I need to say and that's ugly. That's like my first sales job It's ugly, but it's like I'm human at the end of the day It's like I have to feed my family and I need deals and these deals are not gonna close themselves I'll be actually wants this the market to master this I have to do what it takes now for myself To make sure that I can survive and so yeah, it's really ugly scenario That's definitely a me apocalyptic end, but I don't think that's uncommon as people probably think that it is I agree.
I think we beat that knit up pretty good Let's shift directions and go to the next one that is the car all the top sellers would not be motivated without a huge variable Comptojase what are you saying that yeah? It's hilarious. I mean, okay So is your finance team not motivated is a product team not motivated marketing that you know like every but no one is paid like sales is paid In an organization and nobody would ever challenge the motivation of those other departments development team Like those guys and gals work very very hard to ship products And they have processes and frameworks very buttoned up, you know organization You know in most in most in many sass companies maybe not all of them But it's like you say those people are motivated it also assumes another thing that I think it's kind of ugly Cassidy Which is that like sales people are primarily only motivated by money like and of course? That's a part of it, right?
But we're actually motivated at least I am and kind of my cohort of my network a lot of us are not motivated primarily by money That's great Or primarily we're motivated by other things that maybe you know money might afford for us like freedom like remote work etc So there's a lot of other ways that you can calm someone that actually hit at what they're actually motivated by when you see a lot of Like a hustler mindset in sales, which do whatever you want with your time I'm not knocking this persona of seller, but you don't see a lot of like parents in that category You know, you don't see a lot of like later career sales people in that category So appealing to only that hustler type of seller you probably are gonna get or limit yourself to actually a smaller talent pool And these are typically single folks earlier career and that's just where they're at in their life They just they just want to work and that's that's awesome. Like that's a great place to be now I was like that too earlier in my career But I think actually limit yourself to a larger pool of talent that is very experienced That can do what a 22 year old might do in 60 hours. Yeah, I can do in 35 You know, it's just a different access to talent But when you push that hustler kind of culture I think you actually sort of like scare people away and we're also experienced enough to know that like yeah You can dangle that carrot of that big variable in front of me I know it's bullshit, you know, so that lottery ticket doesn't also entice me because I already know I already been there Done I've been behind that, you know, I've chased that carrot for a decade And it's not very fat carrots. I'm very juicy one, you know, it's it sucks a lot of times I've been five years since I caught the carrot, you know, whatever so To say that top sellers again aren't gonna be motivated is is really very silly doesn't make any sense Yeah, what I don't get is that as you pointed out This is the only organization in the company with this type of compensation plan and Underlying that is this notion that for whatever reason this cohort of people are only motivated by money whereas yet You'll see developers working 50 60 hours a week I know what I was in my 20s.
I was working 70 80 hours a week as a consultant Yeah, marketers work hard finance people work hard to your point like later in your career Maybe not to work 60 hours maybe did you know something when you're young you're not to work hard for whatever reason all these other organizations have young talented people Working hard motivated by other factors Personal success company success and build you learn fast and get ahead, but yet this cohort of sales people I don't care any about any of that stuff. We gotta motivate them by using money as like that stick Think about it. Yeah, it is very odd and another thing is like an experienced seller will also like look at risk, right? I look at like a 50 50 variable.
I'm like I feel like I'm too experienced and too valuable to an organization to have to adopt that kind of risk You know, like why would why am I don't want adopting that risk, you know, like 50 I don't get 80k is my base and I have to trust that your product is legit and that you have proper enablement in place Like I know as an experience I like I'm gonna do my job But I also know that that like I can be as awesome as a seller as possible I know that this is largely a team effort at the end of the day to do this well like the product has to be there marketing has to be there RevOps needs to make sure they're carving territories properly So a lot of things outside of my control an early career seller might not realize right because they're sold Everything is in your control just be an owner and learn everything you can you're gonna crush your quote And I like a later career sales person to be like no any any later career sales person is gonna tell you like a lot of sales is Outside of your control, you know, we just face this we're facing this this year right with like this tumultuous economic climate You realize in these scenarios how little control you really have over stuff a season seller is gonna know that They're gonna be like whatever you can say all the things you want about how great you are But a lot of the sale is outside the control of the seller and it's like why would I as a season seller that can bring a lot of value to Company adopt all the risk of that by taking a base pay of 60k That's this is on this on logical another company should adopt the risk I should get 150k base or a full salary and then you know bonus on top of that or like This is weird concept of why does a sales person adopt all that risk? I don't know the answer to that but nobody else adopts that risk right if product doesn't ship a feature on time because they drop the ball Like there's no risk to them. Okay. What's gonna come next quarter the sales team And now adopted that risk because all the roadmap that they've promised is now pushed to 2023 and now they're screwed right?
And you know so it's just odd like I guess to this concept of like risk adoption And why is it that sales people willingly adopt all that risk when they don't control any of the levers or many of the levers right? What levers is a sales person control the contents of a sales conversation? And there's basically the things that they say in the very very tiny sliver of time that they get to spend with a buyer That's all they control of a word that are communicated in that tiny tiny window. It's crazy You know, it's like we haven't really rethought this as a B2B community in that yeah, this may have made sense 15 or 20 years ago.
I think about the rule back then It's hard to get information companies had a lot of power They're gonna massive amount of education as a buyer with going on the internet or social media to learn about others And so your sales person had to go out in like, you know, quote out of the pavement meet people go relationships Sell the company sell the vision get them into the buying cycle close the deal like they were doing this and it And so I can see back in those days when sales was arguably the marketing team and the sales team Yeah driving driving and capturing and generating demand and revenue for your company that you would want to send them to be out They're doing that you know dirty work Which is hard to do and not pleasant with They don't even turn a lot, but that's not the way we live in today Yeah, I think too. What's interesting about the sass world I feel like that comp plan also was birthed from this idea like smaller businesses, right? You think of like door to door like there is not really cash flow running through these businesses like the only cash Happened when an order was placed right so I sell a larm store to door or Bibles door to door or whatever, right? Cut-co knives whatever it is right bug repellent.
It's like Okay, I get that I'm paid after I get money from the customer like that that actually makes sense potentially financially from a cash flow perspective with smaller businesses But a sass company that just that like the margins are on you big, you know, infinite right? Essentially and you just raised like 50 million dollars from some VC It's like the cash flow is not actually the issue and so it's like we've adopted something that actually financially or from an accounting perspective Probably maybe made sense back in the day to today where it's like that it's actually irrelevant from an accounting perspective I don't know I feel like there's something there as well as to kind of how we got here We've never really challenged why is this built the way it is so Really good point and I you know, we often say marketing is stuck and Have you know, BB marketers have a change or in the days last 15 or 20 years and we know that's true And there's a better and different way to market today But you're bringing up a point of like maybe B2B sales is stuck as well and that this behavior is actually causing companies Or harm than good in terms of their performance and no one's really kind of ask that question and so you've kind of brought this up and that is Yes, not great for the seller, but this could be detrimental actually to the company these days Yeah, yeah, I completely agree. I don't think we have a measurement framework in place to do the math properly, you know Like I don't think we've really counted the cost of sending bad deals to customer success, right? churn It's that are like we don't really factor in like churn numbers and stuff like that like hides like the cost of recruiting a salesperson and ramping Them up like those costs don't hit like a balance sheet, you know So it like it hides under the carpet of the financial carpet of an organization And I think you know if we actually had a way to properly measure this like what is the cost of our turnover?
What is our turnover costing us? What does ramp cost us? You know it takes six nine months to really get a salesperson up to full productivity What does that cost us? I don't think we really know what that caught churn like churn is this just an interesting metric It just kind of hides and it's just like high level percentages But do we ever calculate like what if we didn't turn this many customers and we were able to reduce quotas so that salespeople like reverse engineers Some of this math like what would we actually gain as a company?
What if we overpaid 20 salespeople instead of hiring 40 and instead of focusing on more salespeople more volume or activity? We focused more on coaching we reduced sales teams right one manager to 10 salespeople. It's too much Right, what if we had one sales leader to three or to four? There's so many other ways I think to slice up how teams are done I think if you focus on like rep productivity More than just these huge aggregate numbers that are that are funneled up to the board you would find a lot of opportunity for optimization that would That would result in millions of dollars either generated or saved or not wasted etc Same exercises that we do with the marketing teams that come and talk to us You know they look at these blended metrics I'm marketing programs do pretty good overall We spend like a million bucks a year and we get out you know 800k and ARR and just like yeah But to 10% of your marketing actually generates that why are you wasting all this other 80% same thing?
I think happens under the carpet of sort of like the sales org and just kind of the financial ugliness that happens there with those teams So I don't know is that do you feel like does that resonate? Is that more on the right track there or yeah? I think if you think about our company in the way we're structured the majority of our demand comes inbound right from a measurement for Invert it is very structured and precise. We know what's coming in we know how to convert in a pipeline We know how you sell people we need to facilitate that demand coming in we can look at efficiency And what we need to do there we can look at cack and cost structure and compare that to what we look at revenue And so when you think about a model it is very clear And I think to your point like the discipline of the detail is not that clear when you think about that most organizations who?
you know have a mix of inbound and outbound and You know maybe a majority of our businesses coming outbound and they haven't done the due diligence to build a framework And a model that actually makes sense it can help them kind of predict that's performance and sales teams In my opinion. Yeah, somebody out there's on it Just it just I feel like this is a lacking conversation in the market. I don't hear much talk about this It's a black box You know and I think it goes back to this like how do we calculate cack? You know like we calculate our cack you and I have gone through that exercise like some of these sass orgs It's like have you you calculate all that HR all that recruiting all that time ramp etc into your into your cack or you just like You know I think a lot of times it's like we've got these rose colored glasses on and it's like our cack is great Like is it what how are you doing the math in that calculation are you counting the five recruiters and the agencies that are recruiting and all the time It takes to do all this like that is millions upon millions of dollars Profitability wouldn't be so difficult of a thing for sass companies to achieve if they really you know Find tooth combed through every little thing.
I don't know why they do that I think my hypothesis that they didn't they haven't had to because there's been so much capital excess capital That's floating to these businesses profitability is something that's not a priority or historically hasn't been so Whatever like cash on fire growth growth at all costs is all that matter So I think we will start to see more of these conversations begin to happen as you know venture backs high growth sass companies or tech companies begin to You know be required to do more with less. I'm hoping that more of these conversations will happen Maybe we'll get better models to more accurately You know calculate what is the true cost of business? What's the true cost to acquire customer? Yeah, I do think these companies may scrutinize more and I think there's two there's two sides of this equation historically I think one is what you said there's been a lot of money because I'm profitability hasn't been required At the same time you want to prop up a calculation like cack in order to get more money So you may not be using cack to actually run inefficient revenue operation You may be looking at cack as a way to kind of justify the next round of funding So you don't really want to stop a bunch of actual costs in there and then acquire customers You just want to do the bare minimum and we're making a number good so you can get your next round of funding So you put that in your coffers and so forth and so on so Cycle and it's not a good, you know the stats we're solving this for demand Jan and revenue in general With our portfolio of companies But in the problem that we're solving is a standardization of these of these metrics the infrastructure necessary to measure these things properly Sales has frameworks product has frameworks right?
We've talked about this ad nauseam marketing doesn't have these frameworks And I think also you know company the cack doesn't have a standard like everyone calculates that slightly differently So I think that hopefully we see some standardization and benchmarking and some research done that comes out That helps you know companies to better understand not only what their own cack is But is it any good compared to other companies that are trying to achieve the same outcomes that we're trying to achieve etc So there's a lot of issues there that I'm hoping that we see resolved in the next you know over the next few years So let's hit our last myth and then we'll kind of open it up for questions Which we got a lot of questions on LinkedIn so I'm going through that So last myth is this idea that if you were to move away from variable comp structure you would not be able to attract Yeah, huge myth our team is filled with top talent. So it's already a myth here at Refine Labs Another thing too is again It is like we said this before it assumes that top talent is attracted by Variable comp right and I don't think that that's true now Would this comp could would refine labs probably attract the Jordan Belfort the grant cardone of some enterprise? Cyber security firm no it would right would it attract a whole other 60% of awesome sales people It's almost like there's just chess beating that happens in sales where it's like if you're not at 900% of your quota You're a loser and it's just like is 110% Dakota 120% Dakota not outstanding Especially when 40% of your sales team hits their number like is that not a top performer? I think it's like this tribalism that kind of happens It's a little bit as bullying that happens in sales where if like you're not the number one rep like you're a loser And you suck at sales and it's just not true So a ton of reps at every company that hit 105% of their number 110 120 130 they go to P club But they're not the one percenter does that mean that they're not a good rep of course not it's it's ridiculous, right?
It's like it's like saying like it's like saying Oh only if you win the Olympic gold are you a good swimmer? Are you kidding me even the swimmers that didn't make the Olympics that qualified to go to the Olympic Qualifiers I would take them Cassie on my swimming team, you know what I'm saying like there's a world-class swimmers So I don't know why it's like only Michael Phelps is the only good swimmer It's like all of the people that he has destroyed over his career are still absolutely stellar swimmers So we just have to change like you know how we how we define top I have no doubt that as soon as we decide to put a job wreck out there for let's say a 200 K or 215 K base Salary to work with a company like refine labs to learn from an average sales manager like Carl Ferreira Right to be led by Cassidy Shield to work with Chris to work and be on the cutting edge of of revenue R&D There would be a line out the door for something like that and those are all these stellar sales people looking to level up their careers And make a lot of money, you know, this is again Yeah, I'm obviously passionate about this one point because it's really annoying, but it's it's a myth. It's a stupid myth. They really is I'd like to add to that too and that is because of the way the sales profession is structured There's a whole number of people you got to argue the majority of talented people ongoing in the sales And so if you think about the example in our company we have an A on our team who's a director of demand gen?
You know six months ago, and so you know in our world is still sets highly transferable important for the sales process Yeah, he's absolutely crushing it. I mean obviously as a you know sales leader You're helping him on sales skills, etc, etc But on domain knowledge he's off the charts and that's really what customers want today It's what I'm going to fill in with somebody who's knowledgeable and help them through a buying process They can build confidence trust and they know that something matter that they know their business They know their function etc, and so I think it kind of like the evolution of the sales profession I would argue we want to see more people Like this person in these roles people weren't traditionally sellers selling and being a master for your company on the front Lines and prospects and customers, but they're not going to do that in this comp model No, I know from being a director of demand gen making acts and going home to tell your wife and your family Hey, I got this new role in sales and my base comp's gonna be cut You know 30 40 50 percent, but I can make maybe 15% more if I crush it with my ass off and nights and weekends like People are not gonna do that. Yeah, they're not and you're absolutely right you access an entire other talent pool So again, so we look for we look for subject matter experts And so like I'm not gonna go find a world-class demand generator a world-class marketer and be like oh, yeah You're making 160k guess what you're about you're gonna have a you're gonna have an 8080 split now or something like that on your comp It's like what are you talking about? I'm not gonna do that.
This doesn't make any sense again It goes back to risk like why would that person take on that that level of risk? It's unnecessary to do especially their later period again I don't know I have access to that talent now I can and again What's the easy part Cassie like this is like the thing that I'm about to speak out loud that is like people don't want to speak always It's like what is harder to do to learn like some mechanics of selling or to become a subject matter expert Okay, sales is super tough blah blah blah, but you can learn it pretty well like reading a couple of books You know hire you go to gap selling training, you know Listening to podcast listening to the one billion gurus online on LinkedIn to share good content like you can pick up the mechanics of good selling fairly easily That's not the case for subject matter expertise You have to do that you want to be a subject matter as we got to do the job a lot of times for a number of years So we look for people like that and then we I do the easy part I just train them to sell I train with a book next steps I train them negotiate that stuff simple That's if it's tried and true There's book after book written on this stuff probably don't even need me at this point, right? And so I think that's like we don't like to talk about that out loud because it's like no sales is like the super sacred thing And it is it's awesome. It takes skill.
It takes work. It's difficult, but it's a lot harder to do other things And yeah, I did go back to your point It's you're gonna attract a subject matter expert to a full salary And then teach them how to sell and you're gonna track them any other way So it's a whole new talent pool that I think is really is not tapped at all I talk about this on LinkedIn all the time why we have hiring traditional sales people over subject matter experts and Just teach subject matter experts how to sell I think we will see a lot more of that Especially in the professional services space, but I think you'll see it bleed into SaaS more if I'm selling it hub spot like Why hire a professional seller? Why not hire a director of marketing who knows who's already used hub spot in a role and pay him 200k? Why not you will close more deals?
Yeah, you're gonna have to teach him how to do certain things sure But you're gonna close more deals customers are gonna enjoy it more because they're gonna be talking to appear and not necessarily to a salesperson I know I think this is a whole other podcast potentially But a lot to unpack here and I think you're on it opens up talent pool when you change a comp Yeah, I mean the reason you don't have subject matter experts and sales is probably because the car structure Yeah, I'm gonna fighting tooth and nail just for the next deal I'm not spending my extra time learning how to become a better marketer so that I could sell more effectively to marketers That's a side hustle. That's something I might do on the side I might listen to a podcast here there, but I'm not learning that so yeah, you're absolutely right Well, I'm gonna end this session by saying Carl. You're always needed here, so we appreciate you