The Twenty Minute VCDave Kellogg: How to Forecast in 2024 & Why CaC Payback is Flawed and CAC Ratio is Better | E1110
CHAPTERS
- 0:00 – 0:59
AI sales tools: musical chairs and the urgency to experiment
The episode opens on the explosion of AI sales tooling and Kellogg’s core warning: the market is in a chaotic phase and will consolidate quickly. Founders should avoid waiting for “the winner” and instead actively test tools to learn what genuinely improves productivity.
- •AI sales tooling market will rapidly “organize” into winners/losers (including via M&A/feature absorption)
- •Founders should be aggressive about establishing presence while the market is still fluid
- •Customers/operators should play with tools now rather than waiting for consolidation
- •AI’s near-term value is removing sales drudgery, not replacing high-quality work
- 0:59 – 3:22
Career highlights—and the lesson he wishes he learned earlier: power dynamics
Kellogg recounts scaling BusinessObjects from $30M to $1B revenue and other CEO/operator roles. He then shares a key personal lesson: understanding corporate power structures matters as much as being “right.”
- •BusinessObjects growth story as his signature operating achievement
- •Why directness and “winning arguments” can still lose in organizations
- •Marketing vs sales mindset: theory vs reading the room
- •Board conflicts as examples of misreading power structures
- 3:22 – 5:55
Efficient growth in a CFO-controlled buying environment: start with ‘what’s working?’
With budgets centralizing under CFOs, Kellogg defines efficient growth as disciplined analytics and focus. Rather than broad experimentation, he pushes teams to identify segments and motions that already work and double down.
- •Efficient growth requires calm, data-driven prioritization
- •Analyze win rate, sales cycle, ASP, and retention by sector/segment
- •Early-stage reality: ICP starts as aspiration and becomes regression over time
- •Focus beats broad expansion when buyers are tightening spend
- 5:55 – 12:41
CAC payback vs CAC ratio: why simple, ‘atomic’ metrics beat compound ones
Kellogg challenges CAC payback as the go-to efficiency metric and argues CAC ratio is clearer for operators. He explains how compound metrics get muddied by churn, gross margin, and accounting treatments—useful for screening, less useful for fixing.
- •CAC ratio = Sales & Marketing expense / New ARR (cost to add $1 of ARR)
- •CPP is a compound screening metric; atomic metrics are better for diagnosis
- •Common “fudges”: excluding CS costs; capitalizing/amortizing commissions (ASC 606)
- •Benchmarks: CAC ratio ~1.0 SMB; ~1.5 enterprise (bigger deals justify higher spend)
- 12:41 – 13:57
Do CACs rise over time? The ‘low-hanging fruit’ excuse and market-size realism
Harry asks whether CAC improves or worsens as companies scale. Kellogg argues CAC should generally go down with learning and brand effects, and that “we picked all the low-hanging fruit” is often a cop-out for underestimating market size or execution gaps.
- •CAC should often decrease with scale via brand, process, and learning
- •“We ran out of easy customers” needs data proof—especially at small ARR
- •Rising CAC can be real, but founders often over-claim saturation
- •Demand rigorous evidence before accepting the saturation narrative
- 13:57 – 18:23
NRR vs GRR: what retention actually reveals in the downturn
Kellogg defines NRR as what happens to ARR after it’s in the bucket, then contrasts it with GRR (NRR before expansion). He notes the market’s “good NRR” expectation has fallen significantly due to increased shrinkage/churn in the downturn.
- •NRR calculation by cohort: ARR today / ARR a year ago
- •GRR excludes expansion; max is 100% and spotlights pure churn/shrink
- •Benchmarks shifting: “good” NRR moved from ~120 to ~105–108 in many cases
- •Downturn effect mostly driven by increased churn/shrink, sometimes reduced expansion
- 18:23 – 22:19
Customer Success in 2024: stop ‘hugging’—own renewals and expansion like an account manager
Kellogg argues many CS orgs drifted into customer love/hand-holding or became de facto premium support. He advocates for CS as a commercial role anchored on renewals, with clear accountability and honest positioning to customers.
- •Three CS archetypes: ‘huggers’, advanced support, and sellers/account managers
- •Best CS intro: explicit responsibility for renewal and account growth
- •Whether to eliminate CS depends on deal size/account concentration (true enterprise may not need it)
- •Transparency builds trust; primary goal is renewal, not squeezing every dollar
- 22:19 – 25:11
Incentives and ‘farmers vs hunters’: split expansion credit to prevent internal warfare
Kellogg explains how single-owner expansion models create conflict between Sales and CS. His fix: shared credit so work flows to the right person (simple upsells via CS; complex cross-sells via Sales) and avoids mismatches against specialized competitors.
- •Avoid pitting your ‘farmer’ (CS) against someone else’s ‘hunter’ (specialist seller)
- •‘Fries with your burger’ upsells can be handled efficiently by CS
- •Complex cross-sells with different buyers/competitors should be led by Sales
- •Incentive design: manage CS on portfolio value growth (e.g., 100 → 105/110)
- 25:11 – 28:12
Forecasting: churn is easier than new sales—then how to forecast sales in 2024
Kellogg argues churn forecasting benefits from usage signals and relationship visibility, while new sales forecasting is inherently opaque and adversarial. For sales forecasting, his single-word prescription is “triangulate” across multiple independent views.
- •Churn forecasting inputs: product usage trends, behavioral signals, and candid customer conversations
- •New sales is hard: competitive bake-offs, info denial, committees, misalignment
- •Triangulate forecasts: rep, manager, roll-ups, stage-weighted EV, category-weighted EV, conversion rates
- •Operational rule: reps and managers should produce independent forecasts (no ‘muscling’ reps)
- 28:12 – 34:27
Weekly forecasting discipline: what a good forecast curve looks like (and what ruins it)
He outlines a weekly cadence where reps submit their own forecast every week, enabling leaders to observe forecast ‘shape’ over time. A good forecast gently slopes up toward actuals; a bad one is wildly optimistic or manipulated via motivational bullying.
- •Weekly forecast submission builds visibility into forecast drift and credibility
- •Good forecasting ≠ quota attainment; it’s accurate prediction of what will close
- •Bad practice: using forecasts as a club (‘man up’ to a higher number)
- •Separate motivation/coaching conversations from the forecasting number sent to finance
- 34:27 – 36:50
Sales management mechanics: forecast calls vs pipeline scrubs vs deal reviews
Kellogg differentiates three core operating rhythms and warns against mixing them. Forecast calls should be numbers-only; pipeline scrubs validate data integrity; deal reviews are collaborative sessions to help win specific deals—especially if material to the quarter.
- •Forecast call: produce a forecast—avoid storytelling
- •Pipeline scrub: validate value, close date, stage, and forecast category
- •Deal review: mobilize team/exec help to win; not meant to intimidate
- •CEO involvement should scale with deal materiality; ‘I don’t know, ask Joe’ is unacceptable
- 36:50 – 41:47
Stopping deal slip: zero sympathy, close plans, and ‘valid vs invalid’ excuses
Kellogg takes a hard line on slipping deals, calling it a core sales responsibility. He introduces the close plan as an anti-slip checklist that expands every time a deal slips, separating foreseeable process failures from true “acts of God.”
- •Treat slipping as a failure to manage closing mechanics and process discovery
- •Analyze slip symmetrically: what slipped out vs what slipped in from prior quarter
- •Close plan questions: signer availability, approval committees, budget authority/process, paperwork timing
- •Valid slip example: acquisition triggers purchasing freeze; invalid: ‘purchasing was on vacation’
- 41:47 – 43:09
Buyer truth and ‘Selling Through Curiosity’: how to confirm who really decides
Harry probes how to tell if you’re speaking with a real buyer. Kellogg recommends a curiosity-led methodology—asking humble, process-revealing questions about stakeholders, budget ownership, prior spend, and decision dynamics without antagonizing the contact.
- •Use curiosity questions to surface stakeholders and approval paths
- •Ask whose budget it is, who else is involved, and what similar purchases looked like
- •Avoid confrontational “you’re not the buyer” language; stay humble and investigative
- •Understand that committees and constituents can obscure who’s actually winning
- 43:09 – 46:41
2024 discounting strategy: value, give/gets, and resisting the ‘wet rag’ squeeze
Kellogg frames discounting as something to prevent through value selling and upfront negotiation structure. When late-stage discount asks appear, he recommends playing cards like value/risk of delay, enforcing prior give/get commitments, and resisting continuous concessions.
- •Prevent discount traps by anchoring ROI/value earlier in the cycle
- •Use delay risk and lost benefits as leverage against last-minute discounting
- •Manage sales cycles as explicit give/gets; call foul on re-trading prior concessions
- •If you cave quickly, buyers keep squeezing (‘wet rag’ metaphor)
- 46:41 – 53:46
Customer references and outbound reality: why ‘outbound as savior’ often disappoints
Kellogg argues good customers should reference you without being forced, making references a weak negotiating chip. He then critiques the ‘outbound will fix everything’ mindset, noting tooling arms races, buyer saturation, and the need for targeted ABM-style outbound where the economics justify it.
- •Customer references matter, but coerced references are low-quality and poor negotiation chips
- •Outbound ‘fever’ often masks failure to diagnose what’s working in ICP/marketing
- •Outbound is an arms race; effectiveness can decline as inboxes saturate and tools commoditize
- •Outbound makes sense for targeted ABM/large ACV or deliberate vertical replication; less so for cheap horizontal tools
- 53:46 – 59:48
Horizontal vs vertical product marketing: ‘people like me’ proof, use cases, and focus discipline
Kellogg distills Geoffrey Moore into one idea: people buy when they believe people like them use your solution. He explains layers of similarity (vertical, then use case) and warns founders against broadening ICP under pressure—sharing a story of focus driving success and later dilution killing momentum.
- •‘People like me’ evidence: logos, references, domain fluency, and completing the buyer’s sentences
- •Vertical strategies work but are higher-cost; horizontal requires mapping convincing use-case similarity
- •Founder mistake: broadening ICP at launch out of fear; hopping cells in the vertical/use-case matrix is risky
- •Versant story: failure with no focus → success with sharp telecom focus → decline after forced broadening for Wall Street narrative
- 59:48 – 1:05:07
Engineering vs GTM founders and the return of founder replacement debates
Kellogg discusses the industry’s shifting founder archetype preferences (product-oriented currently) and his own ‘superpower’ helping technical founders learn GTM. He predicts a move back toward a healthier middle ground on replacing founders as CEO—keeping founders in vital roles when appropriate.
- •Technical founders can learn GTM quickly if taught credibly and concretely
- •Industry fashion: product founders favored; engineering was historically dominant
- •Founder replacement may become more common as the pendulum swings from ‘founders are untouchable’
- •Replacing a founder as CEO doesn’t require removing them; founders can remain critical to product/vision
- 1:05:07 – 1:12:19
AI’s org impact and quick-fire: subscription pricing risks and 2024’s core challenge
Kellogg returns to AI’s likely impact: meaningful productivity gains and leaner sales orgs, but transient advantage in outbound once everyone has the same tools. In the quick-fire, he flags subscription pricing as a ‘religion’ risk, enterprise expansion pitfalls, sales hiring mistakes, and efficient growth as the defining 2024 challenge.
- •AI may enable ~30% leaner GTM orgs for the same seller capacity (per Battery-style model)
- •Outbound advantage from AI personalization is likely temporary due to saturation
- •Biggest SaaS worry: subscription pricing as dogma; high opportunity cost when VCs push fads
- •2024 challenge: efficient growth; common founder mistakes include enterprise-unready product and pedigree-based VP Sales hires
