How to hit revenue targets in a recession | Sahil Mansuri (Bravado)

1. 0:00 – 8:26

   Sahil’s background

   1. SMSahil Mansuri0:00

      It's hard to plan what you should do for all of 2023, and I think the advice that most founders are getting from their boards is, when you have limited visibility, you have to plan in the most conservative way. And on the one hand, of course that's true. Like you have to be conservative. But on the other hand, you don't want to be unreasonably conservative because, you know, say you don't want to be floundering from like, oh we're screwed, to everything's better, to we're screwed, everything's better. And so the way I think about setting up a, a plan when you have limited visibility and some major headwinds is setting up a really conservative plan and then having milestones, short term milestones that unlock the ability to lean into growth and spend based on hitting those targets. (instrumental music)

   2. LRLenny Rachitsky0:49

      Welcome to Lenny's Podcast. I'm Lenny, and my aim here is to help you get better at the craft of building and growing products. Today my guest is Sahil Mansuri. Sahil is the CEO and founder of Bravado, which has built the world's largest online sales community of over 300,000 salespeople, and they're now building SaaS products for salespeople. Sahil has one of the most unique perspectives on the art and skill of sales, partly because of the community and the company that he runs, and partly because he was a longtime salesperson himself. And as you'll hear in this episode, he has closed some incredible deals, including a wild story about cold emailing Sheryl Sandberg at Facebook and what that led to. In this episode, we focus on what founders should change in how they do sales during this market downturn, including how you should approach sales quotas, how you should rethink the way you do comp. plans for salespeople, how you do forecasting, also why you should refocus on retention and your existing customers, how to improve your sales technique in general no matter what role you're in. As someone without a lot of depth in sales, I always find it fascinating to learn how to get better at sales, and this episode has something for everyone. With that, I bring you Sahil Mansuri. Hey Ashley, head of marketing at Flatfile, how many B2B SaaS companies would you estimate need to import CSV files from their customers?

   3. NANarrator2:13

      At least 40%.

   4. LRLenny Rachitsky2:15

      And how many of them screw that up, and what happens when they do?

   5. NANarrator2:18

      Well, based on our data, about a third of people will consider switching to another company after just one bad experience during onboarding. So if your CSV importer doesn't work right, which is super common considering customer files are chock full of unexpected data and formatting, they'll leave.

   6. LRLenny Rachitsky2:38

      I am zero percent surprised to hear that. I've consistently seen that improving onboarding is one of the highest leverage opportunities for both sign up conversion and increasing long term retention. Getting people to your aha moment more quickly and reliably is so incredibly important.

   7. NANarrator2:52

      Totally. It's incredible to see how our customers like Square, Spotify, and Zuora are able to grow their businesses on top of Flatfile. It's because flawless data onboarding acts like a catalyst to get them and their customers where they need to go faster.

   8. LRLenny Rachitsky3:09

      If you'd like to learn more or get started, check out Flatfile at flatfile.com/lenny. This episode is brought to you by Merge. Every product manager knows the pain of slowing product velocity when developers struggle to build and maintain integrations with other platforms. Merge's unified API can remove this blocker from your roadmap. With one API, your team can add over 150 HR, ATS, accounting, ticketing, and CRM integrations right into your product. You can get your first integration into production in a matter of days, and save countless weeks building custom integrations, letting you get back to building your core product. Merge's integrations speed up the product development process for companies like Ramp, Drata, and many other fast-growing and established companies, allowing them to test their features at scale without having to worry about a never-ending integrations roadmap. Save your engineers countless hours and expedite your sales cycle by making integration offerings your competitive advantage with Merge. Visit merge.dev/lenny to get started and integrate up to five customers for free. (instrumental music) Sahil, welcome to the podcast.

   9. SMSahil Mansuri4:21

      Thanks, Lenny. Thanks for having me.

   10. LRLenny Rachitsky4:23

       So we're gonna be talking about sales, and in particular what you should be adjusting in your company during these very turbulent market conditions. But I thought first it'd be helpful if you just gave a little background on yourself to kind of give folks a sense of why you have such unique insights into the sales world, so maybe just talk about a little bit of your background and then what you do now, the company that you run now.

   11. SMSahil Mansuri4:46

       I've spent my whole career in sales. Uh, I started out in sales when I was in college. I worked on the Obama campaign. We didn't call it sales, right? We called it turning out the vote or, you know, street teamwork or field ops or phone banking, but it was sales. We were just, you know, selling the dream. Literally the American dream as it were. And so, you know, I've been in a, some sort of a role where my primary responsibility was to cold call, send emails, have conversations, objection handle, and try to get someone to sign a contract for my entire career. And that has spanned, uh, you know, I started selling in September of 2008, was my first month with a quota, so I started selling in the middle of the last financial crisis, and in 2009, the company that I used to do sales for which is called Meltwater, this company ha- wha- it's- it's a pretty crazy story. It's one of the few companies that has made it to $100 million in recurring revenue without a drop of venture funding, and it's a Norwegian company actually, and if I remember correctly, the, uh, don't quote me on the exact numbers here, but the company had basically gone 10 million to 30 million to 50 million to 70 million, and then in 2009, they went from 70 million to 69 million.It was the first year that they hadn't like, not only increased revenue but revenue had gone down. In, in that year, in 2009, I broke the company record for the most sales by any individual person in one year in the history of the company. And I say that not, not out of hubris or out of pride. I say that because I've literally sold in a downturn. Like in the middle of a recession, I have been an account executive selling, carrying a quota, and have been successful in doing it. Um, I then went on to, you know, be a sales leader at a bunch of different places. Probably most notably at Glassdoor, where I joined as one of the first 20, 25 employees. Was responsible for enterprise sales there. Personally closed Facebook, Google, Amazon, Microsoft, Ford, Visa, Bank of America, JP Morgan, Walmart, and you know, kind of, I think it was at its peak at one point, I think Glassdoor had about 100 of the Fortune 500 customers and I'd sold about 60 of them myself. So I, I did a lot of, I've done a lot of selling in my career. Also a decent amount of sales, uh, management and sales leadership. But really my forte is selling. Like I love to sell, I love to talk to customers, I love to train salespeople. I've been a VP of sales and CRO in a couple different places. And then for the last five years, I've been building a community for salespeople that's called Bravado. And Bravado is a network of about 300,000 B2B tech sales, uh, tech salespeople. That's about 50,000 VPs of sales and CROs, about 150,000 account executives, another like 40 to 50,000 SDRs, and then the rest of it are kind of customer success, sales engineers, sales ops, sales enablement, et cetera. So it's a network that purely focuses on sales. And much akin to your business, I suppose, marries community, learning, upskilling, recruiting, as you know, this one place that a salesperson can go in order to beat the odds, be successful in their career, find a great job or, you know, hit and crush quota in their role.

   12. LRLenny Rachitsky8:22

       Awesome. And I think that gives a clear picture of why you have such

2. 8:26 – 10:27

   What is Bravado?

   1. LRLenny Rachitsky8:26

      unique insights. I don't know if there's anyone that has such a broad access to so many salespeople and what they're doing, what they're thinking about. The core part of the Bravado product, just to make it even clearer, is like a community where people ask questions, help each other through sales issues, things like that, right?

   2. SMSahil Mansuri8:41

      Yeah. So if you're familiar with Stack Overflow and what that network and community means to engineering, Bravado has a product that's affectionately known as the War Room, which does the same thing. And so you have 50,000 companies, sales teams that are on Bravado, and we get a real time pulse of which companies are hitting quota, which ones are missing quota, which sales reps are closing deals with which organizations, which industries are doing better or worse. And so we do get a really interesting perspective within the world of B2B tech sales, to be clear, a really, uh, interesting perspective on what's happening in terms of companies and, and revenue and forecast and quota, which gives us a, a, you know, hopefully an opportunity to serve those members and the general tech community at large in terms of how they can beat the odds, especially as we're back to kind of that 2008 crunch that we saw then as well.

   3. LRLenny Rachitsky9:39

      Awesome. And just to put this out there, I'm a very small investor in Bravado. I'm just li- a fan of these kinds of companies, community-led SaaS tooling. And I was just, I was really impressed with the way you're building and the way you're approaching it. And I'm also, I don't have a lot of depth in sales and so I loved this opportunity to learn about how sales works by participating. So thank you for letting me join the journey of Bravado. It's a really unique company and I'm excited to see where it all, where it all goes. So with this podcast, we were planning to talk about sales and like initially it was gonna be how to get better at sales, how to be a better salesperson. But you had this great suggestion that we instead focus more specifically on what founders should change in the coming year, knowing the conditions of the market and how things are turbulent and how people are spending less and things

3. 10:27 – 12:00

   How to shift your sales strategy to meet the market

   1. LRLenny Rachitsky10:27

      like that. So we're gonna talk about five things that you can do right now to change the way your sales process works, starting now for the next year. And the idea is once you listen to this conversation th- you can go and do these things immediately with your team. So that sound good?

   2. SMSahil Mansuri10:41

      Yeah, it sounds great. I mean, I think, you know, inherent in this conversation will be things that you can do to be better at sales, but I think the way in which you sell has to be different based on market condition, you know? And so if we had done this podcast eight months ago or, or, or 18 months ago, or 28 months ago, or 38 months ago, they, I think we would've had one set of conversations. We would've talked about, you know, growing top line revenue. We would've talked about how to get your first 20 customers. We would've talked about how to, you know, build and scale a sales team. We would've talked about like setting quotas and whatnot. And, and I think that today the market has shifted because we know that the cost of capital has gone up. We know that funding has dried up and we know that investors today are only interested in companies that have strong unit economics and have high retention rates, and, you know, cold prospecting goes down in favor of cross-selling and upselling your existing customer base because it's hard to break into new accounts when companies have budget freezes and, and hiring freezes and layoffs. And everyone is watching really closely the, the capital outflow from their business. And so your sales strategy has to fundamentally change in order to meet the moment and meet the market to where it is.

4. 12:00 – 19:06

   How to set a conservative plan that still allows you to lean in when growth is possible

   1. SMSahil Mansuri12:00

   2. LRLenny Rachitsky12:00

      Great context setting. And you touched on a few of the things we're gonna talk about, so I'm excited to get into it. The first topic I wanted to chat about is forecasting and quotas. Do you have some advice on how founders should be thinking about adjusting their forecast plans and their quotas for next year? Can you talk about that?

   3. SMSahil Mansuri12:18

      Yeah. So let's start with some data, and then we'll talk about why this matters. So on Bravado, as I mentioned, we have 300,000 members, but only about 200,000 of them, so about 65% of the network, uses a product called the Seller Portfolio. And the Seller Portfolio is a real-time tracker of how you and your sales team are performing relative to quota. You can kind of think of it like Mint.com, but instead of being for personal finance, it's for sales. And based on that, we're able to get a real-time perspective on which companies in specific, and then overall, which industries and which sectors are at or above or below quota. And so I'll share some stats with you. So in Q3 of this year, so let me guess, as of last month, in Q3 of this year, 63% of sales reps missed quota. 63%. That's up from 54% in Q2 and 46% in Q1. So you've basically got 30% more of the sales team missing quota today than you did literally just six months ago. If you broaden that out to a team-wide structure, 76% of companies missed their Q3 target. 76% of companies missed their Q3 target. That's up from 59% in Q2 and 51% in Q1. So you actually have, tr- you know, 33% more companies that are missing target. And, and at this point, you know, it's gone from being like a, oh, like the occasional company struggling to pretty much every tech company is struggling. We would predict, based on the data that we're seeing, that over 80% of companies will miss their Q4 goals. And so in a world in which the vast majority of sales reps are missing quota and the even larger vast majority of companies are missing quota in their forecast, that, you know, on the one hand explains why you're seeing this rush of layoffs. On the other hand though, it raises the question of, what do I do for next year? On the one hand, you don't want to bring down targets too significantly, because that's gonna raise a lot of red flags in terms of spend and burn and probably mean a lot of really painful decisions. On the other hand, it's really hard to have visibility into what the market's gonna look like, you know, six months, I mean, heck, even like six weeks (laughs) from now. You know, things are changing on a real-time basis. Something interesting that we saw is that, uh, 'cause we, we have quarterly tracking but we also have monthly tracking. So something interesting we saw is that from November until March of last year, companies were basically blowing out their quota, sales reps were blowing out their quota. All of a sudden, everything came to a screeching halt in April, and April, May and June were really tough times. And you saw that outwardly in the market in terms of layoffs and, and hiring freezes and such. But we saw it on a real-time basis in terms of like percentage to quota and like companies missing their target. What was interesting is that a bunch of companies then revised down their forecasts for the rest of the year, but then companies started beating those forecasts in July, August, September. And so for a moment there, it actually looked like we might be out of the worst of it. And you know, then came the obviously much maligned double-dip recession, which, you know, then in October, November, all of a sudden everyone just started missing. You know, many of your listeners, I would imagine, work at VC-backed SaaS companies so they can, you know, in the comments or whatnot speak about whether they, this is also true for them. But I would imagine that for the most of companies, going into the middle to end of September, they probably felt pretty good. They actually thought like, "Oh, maybe, you know, we can actually squeak by in Q3, maybe we can revise up forecasts in Q4, maybe we can hire into next year and we can go back to growing the way we were for the previous, you know, 10 years." And then October was just a bloodbath. Uh, on companies that do monthly quotas, 85% of sales reps missed quota in October for their monthly number. And I think it's gonna be even higher in November based on what we're seeing. And so again, I share all this information with you to kind of set the stage on like what's happening real-time in the market. And so given that like September felt good but today we're s- totally screwed, it's hard to plan what you should do for all of 2023. And I think the advice that most founders are getting from their boards is when you have limited visibility, you have to plan in the most conservative way. And on the one hand, of course that's true. Like you have to be conservative. But on the other hand, you don't want to be unreasonably conservative because, you know, s- you don't want to be floundering from like, "Oh, we're screwed" to "Everything's better" to, "We're screwed," "Everything's better." And so the way to think about setting up a, a plan when you have limited visibility and some major headwinds is setting up a really conservative plan and then having milestones, short-term milestones that unlock the ability to lean into growth and spend based on hitting those targets. And so here's an example. Let's say that you did that $10 million in revenue this year, and next year you have no idea what that's gonna look like. Maybe you say, "Okay, let's plan like we're gonna be down to $9 million. We're gonna lose 10% of revenue next year e- despite our best efforts because the market's gonna be really tough." But if in Q1, you know, so that would mean that in Q1 you'd need to hit $2.5 million in revenue. And let's say in Q1, if we hit 2.5, then we should revise up our targets for the rest of the year and we can unlock this additional budget to kind of spend off of. If we hit below 2, we should revise down our number. And so kind of being comfortable with regularly re-forecasting, forecasting, you can't just like forecast a quarter out every time, obviously. That's a tough way to run a business.So you got to forecast the year, but then set milestones, checkpoints, and kind of make predetermined decisions that allow you to avoid the bias of then walking into Q1 and being like, "Oh, we missed in Q1," but, "No, no, we're really going to hit it in Q2." You got to set the targets upfront because as founders, we tend to have a bias towards optimism. (laughs) That's generally how founders operate. And in today's market that's more of a disadvantage than an advantage. And so my, my suggestion is to really think about forecasting conservatively, setting up checkpoints and milestones around what future success may or may not look like, and if you hit those goals, then decelerating or accelerating into it depending upon what you get there. And coming to an agreement with your board, with your sales team, with your sales leadership in advance so that there's no debate about what to do when you actually get there.

5. 19:06 – 21:34

   Why the downturn in tech may not be over anytime soon

   1. SMSahil Mansuri19:06

   2. LRLenny Rachitsky19:06

      That is awesome advice. As a PM, it makes me think a little bit about moving to an agile sprint sort of system versus this long-term waterfall-oriented planning process. Have you seen this need happen in the past? Is this like a the first time we need to plan to re-forecast throughout the year, or have you been through periods where this is just the way people operate when times are super uncertain?

   3. SMSahil Mansuri19:28

      First of all, I think the vast majority of CEOs and sales leaders haven't been through a period of dramatic uncertainty in their careers, right? I mean, I, there are obviously people who have been in business for more than 15 years and who have been through other downturns, but unless you were a sales leader, a CEO, an executive in 2008 which I would imagine that, like, not very many people were, or certainly not everyone was, then you haven't seen anything like this. People try to analogize it to COVID, but I think that that's actually not a good analog for this. The reason why is because COVID was an external factor versus this is actually an internal issue, which is to say that there are actually industries that are doing much better these days except for tech. Like tech is getting crushed, right? Like i-i-in COVID everyone's getting crushed and so it didn't matter if you owned a yoga studio or a gas pump or a whatever, like hotel or ... Like there was nothing that was working well unless, I guess, you owned like Amazon Fresh or something like that. There are very few businesses that were doing better as a result of COVID. But there's a bunch of companies that aren't doing that bad. I mean, we, you know, if you listen to other podcasts you've probably seen that, like, tech is the one that is getting the most hammered in this, although I think the last two weeks crypto has caught up pretty quickly. But it's really kind of tech, right? And so when you see a slowdown in tech that is disproportionate, you have to assume that, that it may last for a much longer period of time than you imagine, and I think that given the lack of visibility and the amount of volatility, I think it is a unique situation for, for most companies, for most leaders. And I think that the only response to which is to try to get really comfortable with being wrong and adding new data in, in order to make decisions regularly without the fear of coming across as not knowing what you're doing.

   4. LRLenny Rachitsky21:27

      Things seem to have been crazy for a long time. It's interesting that this is the first year where you're finding that companies have to do this.

6. 21:34 – 23:04

   How Bravado gets its data from users and creates global benchmarks

   1. LRLenny Rachitsky21:34

      Before we, um, get to the next topic, I wanted to come back to the stats that you had real quick.

   2. SMSahil Mansuri21:39

      Mm-hmm.

   3. LRLenny Rachitsky21:39

      Can you talk again about how you get those stats? Is this like a salesperson plugs into their system somehow in exchange for getting access to the, to the benchmarking? How does that work? 'Cause that's very cool.

   4. SMSahil Mansuri21:49

      Yeah. Exactly. That's right. It's, it's, uh, a give to get model. And so the way it works is that you enter your stats and in doing so you get global benchmarks of how you're doing versus other reps or other companies. And so there's a premium for being accurate here because otherwise you don't actually get a real sense of how you're doing versus others and so there's an incentive structure that's built in to be really precise. And then that information feeds into our kind of global leaderboard where we are able to slice and dice and say, okay, of companies that are headquartered in San Francisco, here's how your company's doing, of sales reps that sell to CMOs, here's how you're doing, of reps who carried a quota of between 500, 700K this quarter, here's how you rank. And so we, we do global benchmarking for sales reps and sales teams and we share that information for free to anyone who is willing to participate in the ecosystem.

   5. LRLenny Rachitsky22:43

      That is very cool. I had no idea that was something you did. How do folks join that if they want to join up?

   6. SMSahil Mansuri22:49

      Simple. Everything's available for free. Just come to bravado.co and we have something called a seller portfolio. You can go ahead and build one of those and then enter the information and then you'll start to receive the stats and they come out each quarter.

   7. LRLenny Rachitsky23:00

      Sweet. Okay. Second topic, comp plans.

7. 23:04 – 33:23

   Why SAAS has an outdated comp structure

   1. LRLenny Rachitsky23:04

      Do you have some advice for how teams should think about comp plans for their salespeople? What's your advice?

   2. SMSahil Mansuri23:09

      So comp plans are, or compensation plans for sales are very different than they are for most other professions. So in most professions like yours in product management, you have a base salary that encompasses the vast majority of your cash compensation. You then often have bonuses that are either based on company or sometimes personal milestone in which you're often paid out end of quarter, end of year, and then you'll have an equity grant that, that, that you vest over the course of time, and the- that's not how it works in sales. So the way it works in sales is that you have what's known as a base and then what's known as an OTE. An OTE or on target earnings is how much you make if you hit quota and the most common ratio that you see in SaaS is what's known as a 50/50 split. So let's just use some round numbers. Let's say that your OTE is $200,000. What that means is that your base salary is actually only $100,000. So unlike in most other professions, sales reps make very little base salary but their OTEs are often higher than in most other professions because they're variable and so the second $100,000 you unlock through your performance on the sales team.And what is the most common, again, and I'm gonna use, like, the most common examples for this, and- and, you know, every comp plan is different, et cetera, but what's really common is if you have a 200K OTE, 100K base, 100K commission, then your quota will be $1 million. So the ratio between your OTE and your quota is typically five to one, so your quota's usually 5X. And this comes from this idea that your cost for a sales rep fully loaded should be about 20%, so you can afford to pay 20% of your salary to a sales rep. So let's talk about, uh, what that all means. So what that means is that you as a salesperson have to sell $1 million of software in order to make $200,000 of money. But that $1 million of software is- is only around new business, so the vast majority of account executives are only responsible for new business, which means top line revenue growth. So let's pick two theoretical examples, okay? Let's say they're Sales Rep A and Sales Rep B, and they both have the same quota, same OTE, okay? And we're selling for the same product, same- same sales team. Sales Rep A closes $1.5 million in the, in, you know, 2- 2022, and just for easy math, let's say that's 15 100K deals. So if products is 100K, they closed 15 deals in a year, they've closed $1.5 million. That means that they would hit 150% of quota. When that happens, when you exceed your quota, you hit, in sales, what are known as accelerators. So it's not like if you hit one million, you make 200, but if you hit, like, you know, 1- 1.2 million, you just make an extra on that 200K. You actually often make extra, extra money for exceeding your quota, and the more you exceed your quota, the more money you make. And so you would- you would imagine that if someone sold $1.5 million, they wouldn't make 300K, which would be 20% cost of sale, they might make 400K. That's pretty common in sales. And so this person who closed $1.5 million in business from 15 deals ends up making $400,000, and they get taken on a free trip to Cabo because they made President's Club, and they're put on the leader board and the CEO of the company gives them an award at the end of the year, and they are, you know, heralded as the pinnacle of all things that are sales, and the VP of Sales says, "Wow, I can't wait to clone 10 of you." And that's how sales teams are set up, right? And then you have Sales Rep B. Sales Rep B only closes 12 deals for $1.2 million, so they still exceed quota, but they only exceed quota by 20%, not 50%. That sales rep ends up making, let's say, 250K, all right? So they make $150,000 less money. They don't get to go on the trip to Cabo, they don't get the award at the end of the year, they're not the ones that are celebrated or championed and- and- and they're seen as, like, a good performer, but- but, you know, not as good as, you know- you know, uh, Team Player A. That all makes a lot of sense in a world in which companies are really focused on top line growth and nothing is more important than the amount of ARR you're making and how fast you're growing, and investors are- are basically demanding that you go 3-3-2-2-2, which is common parlance for, you know, if you make $5 million this year, you should make 15 million next year, you should make 45 million the year after, and then you can slow down to going 90, then 180. This is- this is how VCs often think about funding SaaS companies, is they look for this, like, 3-3-3-2-2 sort of multiple growth on ARR, new business ARR. And that's how the world used to function until six months ago, and then six months ago, all of a sudden the music stopped and capital got expensive and everybody started being like, "Whoa, wait a minute, we should think about things like net dollar retention, and we should think about, you know, what renewal rates look like, and we should think about how efficient you are at acquiring customers." And, you know, all of a sudden profitability, efficiency, retention came into focus as everybody realized that, you know, unprofitable growth was no longer going to be rewarded because you couldn't just keep spending in order to acquire customers, and acquiring new customers was gonna get harder, so retaining the ones you had and making sure they were happy was actually far more important. And so let's go back to our example. So Team Player- (laughs) Player A, who closed 15 deals for 1.5 million, poster child for the company, got $400,000. Let's say out of their 15 customers, 10 of them churn next year, and only five of them actually end up renewing. How much does that affect Player A's compensation, their- their performance, their celebration, et cetera? Doesn't affect them at all. Makes no difference. 99% of SaaS companies are set up this way, right? Every SaaS company you know of, with very small exceptions, HubSpot, monday.com, there's- there's a handful of them, except for very few SaaS companies, no difference to the salesperson's performance. It's seen as a failure of customer success, you know, other people get blamed for it. Sales rep, no- no, uh, change in- in their- in their comp or- or their success. Meanwhile, Sales Rep B who closed fewer deals, uh, 12 of them, let's say all 12 renew. And not only do all 12 renew, but let's say that three of them actually are so happy with the product and service that they're willing to be featured on your website as, you know, the folks that you advertise. And let's say six of them are actually willing to be references, so they help you close even more business by getting on the phone with prospective customers and- and are willing to actually, you know, advocate for your product. And let's say that not only do they renew, but four of them actually upsell because they're so happy, they end up spending more and they sign multi-year contracts and whatnot. How much does that affect Sales Rep B's performance? Do we go back and revise and say, "Well, wait a minute, actually Sales Rep B's customers were way better, and actually we should probably have rewarded Sales Rep B because they actually had done the homework of finding the right clients instead of just shoving product down people's throats," and no, none of that happens. And again, that kind of made sense up until six months ago, but it makes no sense today.And so sales comp plans are stuck in the stone ages. They're stuck in the world of, you know, Glengarry Glen Ross, Boiler Room, Wolf of Wall Street, like, you know, get the dollar in through the door, Matthew McConaughey, "Ah-ooh, ah-ooh," you know? Like that's, that's where sales comp plans are stuck. And what we haven't done is built a modern technical sales compensation plan that actually aligns the needs and incentives of the business, the customer, and the rep. And so, I think that, you know, for a while there ... I, I mean, I've been writing and talking about this for years. For a while there, it fell on a lot of deaf ears 'cause no one cared. People care now, because all of a sudden for the first time, all of the things that we're talking about around retention and renewal rates and stuff are coming up. And so, I would say that, you know, my, my general advice to companies is to say, what are the metrics that matter, and ensuring that those metrics are the ones that your sales team is rewarded for. I also call into question the notion that your sales team should have a 50/50 split on compensation. And by the way, that doesn't just extend to the sales team. That's often how the VP of sales is compensated. So your executive, your chief revenue officer, your VP of sales who sits at the same table as your CMO and your CFO and your COO, that person also has a 50/50 split in most cases. Sometimes it's 60/40, but it's very rarely 90/10, which is what it is for almost every other executive on your team. And so salespeople get labeled as coin-operated and mercenaries and, you know, all these other adages because the way we compensate them, the way we treat them, the way we measure them is in a mercenary sort of way. And again, I would call on founders and, and, and VCs and, and executives to rethink that and to instead come up with compensation that aligns the incentives, again, of the customer, the business, and the rep and the leader. And so I think that, you know, setting up a longer horizon where if the customer you sign up today ends up renewing tomorrow, the rep should get a kicker on it. We should look at what the overall renewal rate is of the sales rep, comparing it, of course, to the renewal of the rest of the business, and if one rep is doing a better job of qualifying the right customers upfront, they should be rewarded for that. And so things like that I think are, are missing from sales compensation, and I'm excited to see them come to the front this year.

   3. LRLenny Rachitsky33:00

      As a, an outsider, this all sounds very obvious, like this is how it should work. I imagine a reason it doesn't is it adds complexity, and then there's this, like, feedback loop that's a lot longer 'cause you don't ... You have to wait to see if they renew.

   4. SMSahil Mansuri33:15

      Mm-hmm.

   5. LRLenny Rachitsky33:15

      So two questions there, I guess. One is, you're saying that it works, companies are doing it this way. You mentioned a few, HubSpot, monday.com.

8. 33:23 – 37:18

   Why companies are resistant to restructuring comp plans

   1. LRLenny Rachitsky33:23

      Are there others that folks can look at to model how they could approach it this way? And then is there any other reason that folks haven't rethought the way comp plans work? Is it just like, "Nah, it's working. We're not gonna ... We don't have to break it."

   2. SMSahil Mansuri33:36

      I'll answer the second question first, because, uh, the answer to the first question is really simple. I think that there is a lack of transparency around how a lot of sales compensation-

   3. LRLenny Rachitsky33:44

      Mm-hmm.

   4. SMSahil Mansuri33:44

      ... plans work, and companies tend to make it up as they go along. Oftentimes, companies change their comp plans like each month, each quarter, based on, like, whatever is the business unit or the, the goal of the business. So I've seen things like, "Oh, company released product B after only selling product A, so we'll double the commission on product B 'cause we wanna get it in people's hands." Or, "We really wanna target CPG customers, so CPG customers are worth extra commission." And so, like, uh, companies tend to weigh down comp plans with, um, basically a bunch of bullshit that doesn't have anything to do with how the compensation plan should be structured, but just has to do with the whims of the executives and the board that month or that quarter. And so, you know, I don't know of any organizations I think do this excellently. I just know a lot of companies that do it better than most, and I think it depends on your company, your business, and your incentive. But I would say that in today's economy, taking a longer term view to, uh, sales compensation instead of the short term like you're a hunter, your job is just to close deals and, like, you know, it doesn't really matter, a dollar is a dollar no matter where it comes from, is not true anymore. So, I guess that's the answer to that. Coming back to the other question, though, which is why, you know, why are sales comp plans not innovated off of 'cause this seems obvious. First of all, it's obvious because of how I explained it. And I, uh, it's not that I'm taking credit for it. It's just that, like, I'm giving you a lot of context that you would not get otherwise, right? The context you would get otherwise if you just walked in and you got your tr- traditional, like, old school VC and CEO who doesn't really know what they're doing and is just listening to their board is like, "Here's how sales comp plans work, right? You want to grow revenue. You wanna get customers. Like you gotta pay top dollar and you gotta fire them up and set aggressive quotas and you gotta push them and, you know, you wanna put these big spiffs out there 'cause that's how salespeople work." And like, a founder doesn't fucking know, you know? Like this is the problem is that people don't know 'cause nobody really understands sales and salespeople. They just kind of are like, "Well, I can't sell and, like, I don't really wanna do that. And so, like, I'm just gonna, like, hire this, like, 50-year-old white guy who's done this at a bunch of different companies and then have him bring in..." 'Cause it's always a 50-year-old, it's always a white person, it's always a guy, right? Um, sales is one of the least diverse professions when it comes to leadership, and it's one of the things that we really champion here at Bravado is this idea that, you know, a lot ... 92% of sales leaders are, uh, VPs of sales are men. Uh, over 85% of sales leaders are white. And so, like, you know, is that, is that representative of the total population of who should be a sales leader? No, of course not. It's just representative of the fact that, like, oh, you don't wanna innovate here. Just hire someone who's been there, done that before. And so you get a lot of sludge in the system. You get a lot of people doing the same shit over and over again, even though it doesn't work, which is kinda the opposite of that Einstein quote, right?And so founders don't know how to set comp plans. They are just listening to what other people tell them should be the way they do it. There's a way it's done and it's really hard to break that, you know? It's kind of like when you talked about waterfall versus agile. Like once you do agile you're like, wait, why would we have ever (laughs) done it the other way? Well, it's 'cause everyone was al- always doing it that way, right? Like et cetera, et cetera. No one ever got fired for buying IBM, you know, et cetera. You're like, you, you get where I'm going. But the other thing, Lenny, that I think is, is, is problematic is everyone loves to optimize in the short run when it comes to revenue and sales. That's really, I think the, the other big driver.

9. 37:18 – 41:18

   The problem with hypergrowth in today’s market

   1. SMSahil Mansuri37:18

      If I offered you a plan that said, "Hey, you can grow by 20% revenue quarter over quarter, or we can spike revenue by 75% this quarter, though I don't know what that's going to do to the business in the future, which of these do you want?" Tell me how many founders really are willing to take option A? What do you think? Like let's say I just told you those were your options. I, I can figure out a way to increase revenue by 75% this quarter, though I can give you no promise as to what that means for the future, or I can make you a plan where we increase revenue 20% quarter over quarter for the next six quarters. Which of those two plans would you sign up for? What do you think is a percentage of startup founders six months ago, eight months ago, 10 months ago, to like indefinitely that would've signed up for plan A?

   2. LRLenny Rachitsky38:01

      Yeah, it's interesting hearing you describe the way it should prob- be structured and then hearing you pitch this. I would definitely pick goal one. Like, let's grow, let's get this... It'll work out. It'll work its way out. We'll figure it out later. Let's just keep new customers coming in. So I don't know, I guess like-

   3. SMSahil Mansuri38:15

      That's right.

   4. LRLenny Rachitsky38:16

      ... 99% probably choose that first bucket.

   5. SMSahil Mansuri38:17

      Yeah, I think that's right. And, and well, I mean, th- that is right because that's what everyone (laughs) signed up for. But then all of a sudden i- i- a- and again, that was okay because even if all your customers turned, it didn't matter because you could just go raise more money based on the growth and then just keep pouring more money on it, more money on it. No one gave a shit about the leaky bucket, right? Because, uh, the, uh, you could just keep adding more water at the top. Now all of a sudden the faucet's off. And so, you know, given this, like, seismic change in the market, how is it that we can reverse the short-term thinking and start to actually build good businesses? 'Cause I think that's the real problem, right? The real problem isn't sales compensation plans and quotas. That's a symptom. A real problem is we all just wanted to have hypergrowth instead of thinking, are we actually building good businesses? And I wouldn't say that we at Bravado were immune from this, by the way. It's not like I'm sitting here on my, you know, golden throne pontificating to the masses. Like, we made a bunch of decisions over the course of growing this business that were incentivized for the short term. And every single time we did that, it ended up (laughs) being really expensive. Now, sometimes we caught that before money ran out and before we saw the problem. Sometimes we didn't, and then we were like, "Oh, shit, it's a fire drill." But at the end of the day, there is no replacement for building a product that customers love and having a great go-to-market motion that brings that product and that value to your clients and ensuring that they actually are thrilled that they bought your product and are getting a lot of value from it. I- it sounds so simple, but the amount of companies that actually don't really care if their customers get value from their product versus just measuring top line revenue growth numbers and number and logos and whatever is, is I think more meaningful than people are willing to admit.

   6. LRLenny Rachitsky40:16

      (instrumental music) Today's episode is brought to you by Miro. Creating a product, especially one that your users can't live without, is damn hard. But it's made easier by working closely with your colleagues to capture ideas, get feedback, and being able to iterate quickly. That's where Miro comes in. Miro is an online visual whiteboard that's designed specifically for teams like yours. I actually used Miro to come up with a plan for this very ad. With Miro, you can build out your product strategy by brainstorming with sticky notes, comments, live reactions, voting tools, even a timer to keep your team on track. You can also bring your whole distributed team together around wireframes where anyone can draw their own ideas with the pen tool or put their own images or mockups right into the Miro board. And with one of Miro's ready-made templates, you can go from discovery and research, to product roadmaps, to customer journey flows, to final mocks. Want to see how I use Miro? Head on over to my Miro board at miro.com/lenny to see my most popular podcast episodes,

10. 41:18 – 43:28

    Why it’s time to shift into a retention-based strategy

    1. LRLenny Rachitsky41:18

       my favorite Miro templates. You can also leave feedback on this podcast episode and more. That's miro.com/lenny. That's a great segue to the third topic, which is around retaining your existing customers and putting more focus on that versus top line or, yeah, new growth. Do you have some thoughts on just how to do that and why that's so important?

    2. SMSahil Mansuri41:42

       Let's start here, which is cold call, cold email response rates have never been lower. Never been lower. And I think you're seeing this across every sales team. Again, if you're listening to this and you have a sales team, you know what I'm saying is true. And top of funnel pipeline is drying up fast, faster than our planet's drying up, in fact. And enterprise sales cycles are just getting longer and longer. You know, we, we are lucky to have a couple of investors who have really, really broad exposure to the tech market, you know, everything from really large public IPOs all the way down to small startups. And in conversations with them, they've been really clear that they're seeing this incredible, like, you know, the average enterprise sales cycle was 62 days. It's now like 115 days or something. And so customers are dr- dragging their feet. Everything's going to no decision. No decision typically means I'm not gonna say yes now 'cause I don't wanna spend the money. I actually like the thing, but I'm not gonna buy it. Which means the same thing for you as a, as a, as a business, which is that (laughs) you're not making any money. So...In a world in which you can't sell to new customers, your only hope is to keep the ones you got for long enough to survive and then hopefully even maybe be able to upsell and cross-sell those customers into new products as well as potentially leverage those customers to get warm intros into a potential new business. So first, let's, you know, psychologically, when times are tough, people hoard. People keep their things close. And people trust the safety of those they know versus those they don't. This, this is basic human psychology, right? And so given that that's the case, if you're a company that doesn't have a lot of customers and you're trying to go out to market and sell your product, I think you're in a lot of trouble.

11. 43:28 – 51:20

    Why your best sales staff should transition to post-sales for customer retention

    1. SMSahil Mansuri43:28

       If you are a company that has a large customer base and you've done a shitty job of engaging, retaining, maintaining relationships with them and prioritize top of line growth, this is your alert, right? (laughs) This section is for you because what you should be doing, here, here's ... I will tell you the most dramatic thing you could do, and then we can kinda work backwards. Take your best salespeople and make 'em CSMs. There's no point, there's no point in having your best pe- salespeople sell. Well, what's the point? People aren't gonna buy anyway. I mean, and if they do, they're gonna buy in onesie twosies, not in these big enterprise deals. No one's gonna sign these big accounts right now. Like who, who in tech today is like, "Wow, I can't wait to sign a multi-year contract with a new vendor we've never tried"? Right? Nobody's doing that. Uh, ev- if people are signing things, they're signing for three-month pilots or kind of like, you know, all sort, I mean, eh, deal sizes are coming down, et cetera. I mean, you, this is all very common. Make your best salespeople CSMs and be like, "Your job is to make sure that all these great customers we have never, ever, ever leave."

    2. LRLenny Rachitsky44:33

       And CSM is, uh, customer success manager.

    3. SMSahil Mansuri44:35

       Thank you. Sorry, sorry. I should've ... Uh, um, too jargony.

    4. LRLenny Rachitsky44:38

       Yeah. (laughs)

    5. SMSahil Mansuri44:38

       Thank you. So typically, most sales orgs are divided into pre-sales and post-sales. Pre-sales works with companies that are not yet customers to get them to sign up. Post-sales works with companies that have already signed up to help them either find value or retain or renew or upsell. That's how most sales orgs are divided. Typically, you put your best people in pre-sales 'cause it's harder. It's harder to sell a new customer than retain the one you have. That's always the case 'cause you gotta actually be able to build trust, build the relationship, evangelize something that they haven't bought before. So you typically take your best talent and put it in pre-sales, and then you take the people who are really good relationship builders and really caring and nurturing and, and, and, you know, not necessarily the, the people who are y- you know, the most gifted at, at creating value or whatnot, and you put them in CSM. That's obviously a huge generalization 'cause I know many CSMs who are much better at sales than new business, and in many businesses, it's actually harder to be a CSM because the product isn't very good, so you actually have to do a lot of selling even after the product is sold. So that was a big generalization but is, in broad strokes, true. Um, I would take your best account executives, pre-sales reps, and I'd put them into CSM. And I'd say, "It doesn't matter how much new business we work on in the next six to nine months 'cause it's gonna be hard anyway, but what we cannot under any circumstances do is lose our existing customers 'cause replacing them is gonna be impossible." So it's kinda like, you know, you got your leaky bucket, you gotta, like, patch that leak really, really fast and really hard, and I think putting your best people on it is one good way to start. Now there's a lotta people who are gonna listen to this and think that's crazy. Like, why would I take my best performer in a tough market and move them to, to, to post-sale? Like, this is bad advice. Maybe. Maybe it's bad advice. I, I can't, I can't predict the future any more than anyone else can. But I can tell you it's what we're doing. I can tell you, like, I'm actually doing it. Like, we're taking our best people and we're moving them into CSM at Bravado. We're trying to maintain every customer we have because I believe that doing so sets us up for the best chance of success as a business. Maybe you disagree with that and you think that that's not right for you, you should do what's right for your business. But I would say that, you know, it's not just talk, it's action. You know, like, I'm doing it. I'm also telling every one of my portfolio- I do a, a decent amount of angel investing, telling every one of my portfolio companies to do the same thing, discussing the same thing with our investors and with our board as well. And then let's talk about how to a- like, okay, so you put your best people on it. Then what else should you do? So I think that what often goes underserved is the opportunity to help your customers, uh, themselves survive. So le- let's take a, I don't know, what's a, what's a good product exam- let's take something like a analytics product. Uh, let's pick on, like, Amplitude or Mixpanel or, you know, uh, pick your favorite. If I was a company like that and I was like, "Okay, I don't know how many new customers I may be able to sell, but I've got a lotta really good customers I wanna keep," I would invest a tremendous amount of energy into helping product managers and product leaders get benchmarks and stats on how other product teams are, like what changes they're making because the advantage you have as a vendor, this is the advantage we have in sales as Bravado but it's the advantage that every vendor has, is you get a cross-section of what everyone who fits a certain ICP is doing at the same time. How good are you at extracting value out of that and finding ways of, of becoming less of a tool, eh, as part of the SaaS stack and more of a value-added advisor that can help you actually plan and prepare for what to do next? I think most companies are not good at it. You know, they, they put out a white paper for lead gen. I wanna put out a white paper for customer retention, you know? Like, I wanna think about ... But one thing that we're actually doing is we're basically saying to all of our clients, "Hey, we'll tell you what percentage of companies that look like you are hiring or not hiring. I'll tell you how they're adjusting quotas. I'll tell you how they are changing their comp plans. I'll tell you how much they're paying. I'll tell you what percentage of their sales team's hitting quota, et cetera, if you stick around with us as a client."So now you're not just... I'm not just, like, placing sales reps. Say we make our business as a recruiting marketplace, so we help companies hire sales rep- people. Obviously, that's slowed down tremendously 'cause people are scared to hire and spend money right now. But if they're getting insights on what's happening in the market, that's still valuable to them. That's still something that they can't get elsewhere, that I am uniquely positioned to offer to my customer base. What are you uniquely positioned to offer to your customer base? I think about, let's pick another example that I think is really easy which is Greenhouse or Lever, or another applicant tracking system. If you're an ATS, you know, and, and all of a sudden every recruiting budget's getting slashed and recruiters are getting laid off faster than any other department 'cause no one's hiring, et cetera, you're probably at the most risk of being ripped out or, or being downsized or, or getting downward pressure to your... That obviously ...What can you do that nobody else can do in order to give your customers a really good insight into how they should navigate thinking about hiring versus layoffs, versus headcount, versus burn per department, et cetera? 'Cause you've got some really interesting data, don't you? You know exactly how many customers have paused, how many roles and whatnot. Like, if I was Greenhouse, I would be putting out all kinds of reports that tell me th- you know, that, that... Let's use me as a customer here. "Hey, you know, of series B companies that have a roughly 50 employees, they used to have eight open headcount, but now they're down to four. The o- the main area that they're investing are X, Y, and Z. Salaries are moving up and down." Like, you could get a lot of insight from, from a company at Greenhouse. And then I'd be like, "Whoa, this is so valuable." Like, I can't live without this data 'cause this is actually helping guide my business decisioning. And I think moving from a world where you just focused on, like, how can I, you know, jam product down your throat, to how do I use my unique perspective in the customer segment we serve in order to create broader insights for the industry is something I would heavily prioritize. You know, I'd take my product marketing team and I'd kind of shift them to be my research team. I'd take, you know, a data analyst or two and stick 'em on the project, and start to create content that is exclusive for my customers, and have them see that as another point of value that they can get that would, you know, maybe help stay off chart.

    6. LRLenny Rachitsky51:07

       I love that advice. Be helpful. Find ways to be helpful even if your core product isn't... Like, basically go above and beyond what you're already doing as a software product and find ways to help your companies be more successful. Feels like there's just, like, a ton of nuggets you just shared.

12. 51:20 – 59:30

    What are warm intros, and how can existing customers help you get new ones?

    1. LRLenny Rachitsky51:20

       And I wanna make sure we also get to the, this other topic that I think is also gonna have a lot of great nuggets, which is around just advice for closing deals in this time. You touched on a couple of these, warm intros, a couple other things. Anything else you could share of just, like, ways to increase the rate at which you close deals during this wild time in the market?

    2. SMSahil Mansuri51:40

       This is a good segue 'cause it, it'll, it'll bridge us back to where we just came from and hopefully move us forward, which is warm intros. So if cold outreach is going to be less effective, then what increases in efficacy in this time is, again, warm intros. So one thing you gotta remember, as like a more general statement, is that companies either grow or they die. There's no middle ground, right? There's no, like, "Oh, we're gonna cut burn and just try to, like, survive the winter long enough so that..." Like, it, that doesn't work, right? Because employees get de- get demoralized, investors lose faith, the, the, the days become long and the nights become longer, and eventually you just run out of energy as a business. Like, I think startups in particular are effectively energy driven, and the more energy, the more belief, the more momentum that you have and the more tailwinds you have, the, the, the, the more things grow and feel possible. But of course, if you looked at the odds empirically, no startup should ever begin because the odds are, like, you're gonna fail. And, and that failure meets you in the eye over and over again as you're shrinking the size of your team, as you're shrinking the size of your budget, as you're doing fewer things and you're taking things away. And so, I don't really believe in this like, "Oh, we're just gonna, like, survive mentality." I th- I think you have to adjust, of course, and I think you have to be a realist. I'm not, I'm not, I'm not suggesting that you, you know, be blind to reality. I'm just suggesting you also have to keep the energy going, and so what I mean by keeping the energy going is to say, "Okay, let's get..." Eh, so here's something, eh, here's a couple ideas. First is, "Let's cut a bunch of stuff, but keep some money that we're gonna invest in doing an in-person customer event." Okay. W- why do I think that's a good idea? I think it's a good idea because, first of all, we've all been stuck in our houses for a couple years, and so when we get a chance to go on a trip for free somewhere, we tend to say yes. Uh, that's nice. And secondly, I think that you could be strategic and maybe have the trip be for customers only and in February or something, so maybe you survive the budget cuts this year 'cause people are like, "Well, I've got this great trip and I really don't wanna miss it, so like, is there a way we can just keep this tool on?" And, and you might think, "Oh, well, you know, are you bribing customers?" Or whatever. I mean, it's just psychology. I think you have to use psychology to your advantage. Um, I would do a big customer event in February, invite all my current customers and say, "Hey, as long as you're still a customer as of Feb 10, 2023, you're invited to this all-paid trip to Napa to go, you know, drink a bunch of wine for a week." I bet, (laughs) you know, that would probably meaningfully change your turn rate. Yeah, yeah, you know, it's not gonna change everything, but it'll change something. I bet it would, 'cause, you know, at the end of the day, people are people. Sales is done by people. It's a belly-to-belly human sport. It's not just lines of code on a, on a piece of paper. Like, you gotta talk to another human being, which is what makes it hard and unscalable and more of an art than a science, but also makes it really fun because it just plays by different rules, a different set of rules as many other things do. Recruiting being the other thing that is like this. The... S- so in-person customer event. The r- other reason why I like in-person customer events is because they're a perfect opportunity for you to get new deals done. And, and so how, how does that work? Does that mean I also invite prospects to the event? No, actually I wouldn't do that. So I think a lot of companies do this where they'll invite customers and prospects to the same event and they'll, like, oh, they'll co-mingle and sell each other, right?... not the smartest way to do it. You want only customers in the event, and you wanna use that against your thought leadership and such. But then, it's during all the happy hours and the lunches and the late evenings and whatnot where you start to say, "Hey, look, uh, in this, in this market you're finding value in our product. Who are one or two other folks that you know in the same position as yourself that might also find value? Who do you know that has the same problem? Who do you know that's going through this? Who do you know that might benefit from this research paper?" Et cetera. And you just start collecting a bunch of warm interest. But then, you don't just stop at getting the name, 'cause a lot of teams stop here. They'll basically get the name and then they'll be like, "Okay. Well, got the name, now I'm done." Actually not the right way to do it. You get the name and you say, "Great. Can you make me an e-intro right now?" Actually, even better, "Can you connect me over text?" So one tip that I have for all founders, all sales leaders, everyone out there, stop using email. Email is where deals go to die. Text message is where deals get done. And so, this notion that, like, I'm gonna e-intro you over email and that's how we connect is, is far worse than the thing that I would really recommend, which I do all the time. Like, you know, we have Webflow as a customer. I love Webflow and other sales leadership. We try to do a really good job for them. Any time that their sales leader mentions a company that might be needing to hire or whatnot, my only response is, "Great. Connect me over text." And then I get the text intro with the person, and then I'm... And, and here's the other fun part. I don't take the intro-er off the thread. So the other thing we tend to do is BCC the person who responded. But in texts, you don't need to do that, right? You can keep the person on a little bit, and it holds the person's feet to the fire to actually show up for the meeting. Yeah, it's these little things, right? 2% here, 3% here. This is how you win in this economy. You gotta do all the things right. And so, you keep the person on the thread long enough so that you've actually built that relationship from the first call. O- o- obviously not forever, but the first 10, 20 messages, I'd keep the person on. And that allows you to ensure that, you know, the person ghosts you, which happens a lot, I'm sure you know. You know, you get an intro and the person never responds, or they cancel on you, you can't get back on their calendar. Just stay with them. I, this happened recently where I got introed from one sales leader to another, and that sales leader basically then had a unfor-... Like, family orig-... A legit situation, but then he got busy and was like, "I'm not taking this thing." But I just kept pinging into that group that, you know, every week or two for, like, actually, like (laughs) nine weeks. And then by the, you know, like two and a half months later, the person finally was like, "I'm so sorry," uh, you know, et cetera, only after my original contact was like, "Yo, you're making me look bad here." So that pressure is what forced... And then we got them as a customer, and now things are good. So like, you know, it just takes all that. It takes, it takes those little things. You got to build a bridge from your current customer base to future customers, and parlay the goodwill, relationship, et cetera that you've earned in serving your current customers to get new ones. 'Cause otherwise, I don't think it's gonna... I don't think just relying on a bunch of STRs and cold emails and stuff is gonna get you through the next six to 12 months.

    3. LRLenny Rachitsky58:14

       I love that tip. Feel like there's probably more nuggets. I'm gonna keep fishing in this well of, of tactical advice for closing deals. Is there anything else that you've found? I love that texting tip. I feel like I've been on the end of that one. (laughs)

    4. SMSahil Mansuri58:27

       (laughs)

    5. LRLenny Rachitsky58:27

       And it's wor-... And it works great. So yeah.

    6. SMSahil Mansuri58:29

       From me, yeah. (laughs) That's right. Uh, that's, that's right. Like, for example, I didn't have your phone number, and I told my wife, "Make sure you take a selfie with Lenny and then send a text message to the three of us on one thread so that I know how to get a hold of Lenny in case he falls apart."

    7. LRLenny Rachitsky58:43

       Uh-oh. (laughs) And here we are now.

    8. SMSahil Mansuri58:44

       And here we are now. That's right. You know, but, but, but the point is, sales, when done well, doesn't feel weird. Okay? If it ever feels weird, you're a bad salesperson. Right? I've been selling now for 14 years. I've sold literally hundreds of millions of dollars worth of deals. I could pretty much call any customer I've ever sold to and have a conversation with them. And it would be like, "Hey, sales, how's it going?" Whatever. And that's because I put a tremendous amount of energy into investing and building a real friendship. Not relationship, not busi-... Friendship with the people that I sell to. So I'll tell you a couple of sales stories and, and, and maybe from that we can, we can, we can mine the nuggets that you're fishing for. Um,

13. 59:30 – 1:08:08

    How Sahil was able to get Facebook’s account at Glassdoor

    1. SMSahil Mansuri59:30

       I will tell you about how I sold to Facebook when I was at Glassdoor, 'cause this is a fun story. So Facebook was the Moby Dick of Glassdoor. I think the first time they tried to sell to them was, like, the beginning of two- th- end of 2008 or something like that. And, and Facebook was one of those accounts that obviously should be on Glassdoor, because the way Glassdoor's product worked is that the more people that came to your company page on Glassdoor, the more value there was for you as a, as a, as a recruiting firm to, to put branding and to put jobs and whatnot. Facebook was the most visited page on, on Glassdoor. So by virtue of that, it was the best account to sell to. And it had gone from CEO, to VP of Sales, to new VP of Sales, to enter... You know, rep to rep, et cetera. And I finally got my hands on it, like Feb of 20, 20, uh, 20, 2011. And the only reason I got my hands on it is because I closed Microsoft. And so, because I closed... And, and Goo-... I think I'd closed both Microsoft and Google at that point.

    2. LRLenny Rachitsky1:00:26

       Oh, big deal.

    3. SMSahil Mansuri1:00:27

       But certainly at least Microsoft. Certainly at least Microsoft. Well, it's important to the story, uh, not, not to brag. And so, I looked at it, and I looked at who we were talking to, Lori Goler, who's the chief talent. I think she's still the head of talent there, but was the head of talent who we had pitched... And every time, we got the same response. "No, we are not interested in outside partnerships at this time. No, we are not interested." Like, she, I think she had a canned response for all vendors, and it was just, like, the same response in the CRM over and over again. And so, again, Einstein, right? Same thing over and over again, different result. So I tried something different, and I sat there and I went through every single...... review that had been written about Facebook on Glassdoor. At first I had it pulled by a data scientist and did a word cloud and did a bunch of analytics on what was being discussed there. Pulled salary ranges, pulled salary ranges for Google and Amazon and, and, and Microsoft. And so Glassdoor had three types of information. They had, like, the review of the company, they had the outlook of the company, and then they had the review of the CEO. So it was like, "Do you approve of Mark's handling of the company?" It was yes or no. And Mark had, I think, like, 96% approval rating. It was one of the highest rated CEOs on, on Glassdoor at the time. I have no idea what it is today, but that's what it was then. And so (laughs) I basically pulled every review, all the salaries, and then Mark's approval rating, and turned it into, like, a nine-page report that broke down how Facebook employees, specifically software engineers, 'cause that's what we were specialists at recruiting for, how software engineers at Facebook talked about working at Facebook and how it compared to how Google engineers talked about working at Google and whatnot. Salary band comparisons and even reviews of Mark specifically versus the other CEOs by the ... of the other big tech companies. And then sent an email to Sheryl Sandberg, a cold email to Sheryl Sandberg whose email address I did not have, but that I, you know, assumed had to be one of, like, 15 things. So I think I put like, you know, ssandberg@facebook.com in the to line. And then in the BCC line put every variant I could think of, like everything. Like, and when I say, I mean everything I could think of, I put. Underscores and dots and first name and last name and abbreviations and, you know, et cetera, et cetera. And the title of the email was, uh, "Mark's Approval Rating on Glassdoor." And I was like, "Hey, Sheryl, you know, I'm from Glassdoor. I was doing research on Facebook and comparing it to all the other big tech companies. I personally work with Microsoft, so I have a little bit of insight in this. Here's, like, what your employees think about you. Here's what Mark's approval rating looks like versus others," et cetera, et cetera. I had this whole research report, I kind of broke out some highlights, a couple of screenshots, attached the report and said, "Hey, I'd love to discuss this with you sometime." I think I sent the email around 3:00 or 4:00 PM on a Sunday. By 6:00 PM I got a response back from Sheryl Sandberg, CCing elt@fb.com or something like that, which I later found was executive leadership team at facebook.com, saying, "Hi, Sahil. This is super interesting. We'd love to meet with you tomorrow. Are you available to come to Facebook HQ at 10:00 AM?" (laughs) So at the time I was 22, 23 years old or something like that. Uh, I was pretty new to Glassdoor anyway. And, uh, so then I, uh, of course I said yes. I sent the email to the CEO. The CEO's like, "Do you want me to come?" And, uh, you know, whatever. And I just said, "No, I'll handle it." It really brought a customer success person and the two of us went. And we actually got to meet first with Sheryl, and then I got to go to the Fishbowl. So I don't know if you know this story but, like, Mark, uh, Mark had a famous, like, office that was all glass, like, in the, in the middle so that, you know... he really believed in transparency or whatever, so this was known as the Fishbowl. So I got to go into the Fishbowl, I met Mark Zuckerberg himself. And as it turns out, that report and that rating got added to their weekly packet because Mark wanted to know on a weekly basis how his rating and how their v- i- th- the employee's view of Facebook was. You, you know, how it was changing week over week and what people were writing, et cetera. Uh, and, and it became, like, a thing. It became m- like, uh, I don't know if it's still a thing today, I have no idea, but, like, e- I got to have this, like, in-depth strategic conversation with the executive leaders of Facebook around their reputation, what their employees thought, their pay bands, their interview questions, you know, leadership guidings, uh, uh, you know, w- uh, shared the word cloud sentiment analysis, et cetera. And then needless to say, of course we closed a massive deal with them and, and whatnot. But, like, that's the kind of shit it takes in order to close deals, right? So, like, this idea that, like, I'm gonna go onto my CRM system and fire up a hundred cold emails and, and I'm gonna close business, like, that mit- works when capital is cheap and everyone's buying everything and every rep hits quota and every company's growing, et cetera. That shit does not work when you are in tough times, in desperate measures, (laughs) trying to figure out a way to build your business. So what I would say is, you gotta really over, over, overindex in the hole. I'm gonna teach you something, right? It's not that I'm gonna give you value, 'cause that's like a really weird thing to say, and it's not like my product's gonna solve a problem for you 'cause quite frankly I don't know if you know what my problems are. But I think that, like, one thing I would advise is, how can I do something that will make ... that will make this worth your time in a way that it isn't about buying my software or putting job ads on my site? And so that's how Facebook became a customer of Glassdoor.

    4. LRLenny Rachitsky1:06:06

       That is an insane story. I feel like those are, like, moments that salespeople live for. How did you feel once you got that email that day? Were you just, like, freaking nervous? Were you jumping up and down that sort of thing might work?

    5. SMSahil Mansuri1:06:16

       I love to play chess. It's my favorite game. And the reason I love chess is 'cause I love to think a few moves ahead. I expected to get that email back. Like, I knew when I sent the email that this was gonna work. I was like, "There's no way this won't work." The only way it wouldn't have worked is if she never saw it. So if she sees this, she's gonna respond, you know? Because it would be crazy for her not to. Like, the information on here was so good. And so, I felt a sense of satisfaction that I had played the game right in a way that no one else at my company had. You know? Like, no one else understood the psyche of the buyer, you know? And so, to me, sales is, I don't, I don't care about the commission, I've never cared about the money. I think this is true for most great salespeople. And I think this is actually true for most people who are great at something, is that they don't do it for the money, they don't do it for even necessarily the trophies or whatever. They do it because they love what they're doing.And like winning is, is, it's contagious. It's, uh, it's addictive and it's, uh, rewarding. And so, uh, uh, closing Facebook was a blast because I really got a chance to flex into something that I take a lot of pride in, which is being able to deeply understand my customers, where they sit, and how I can be not a sales rep, but someone who actually changes your perspective in how to do your job. Like, that's what I live for. And so, I think that's what you have to do in order to be a great salesperson, is I think you have to be willing to, you know, go beyond just the, "Oh, uh, I wanna hit my quota," or whatever. If you're a founder and you're trying to, like, sell in this market, it's like, "How do I get my product in the hands of customers?" Like, you gotta go beyond that. It's like, how do I change the way you operate as a business? How do I do something that is transformative? Like that Glassdoor rating literally got added to the ELT report that went out every single week. That's the part of the

14. 1:08:08 – 1:12:50

    Why CEOs are actually salespeople

    1. SMSahil Mansuri1:08:08

       story I'm proud of.

    2. LRLenny Rachitsky1:08:09

       You've mentioned that you don't do sales, that you're not a salesperson technically anymore. You now, you know, run this company. Do you miss that job being a full-time salesperson?

    3. SMSahil Mansuri1:08:19

       I think CEOs are full-time salespeople. I mean, think about the job of a CEO, right? Like your job, like let's start from the infancy, right? Let's start from starting a company from, from scratch. First thing you gotta do if you wanna start a company is you have to convince yourself to do it. You have to sell yourself on the fact that you wanna do this. This is where most people fail, actually. They can't sell themselves. They're not, they're not able to convince themselves that they should take this leap and say... They should, they don't believe in themselves enough to do it. And so first, you gotta be good enough to sell yourself. Eh, maybe that's delusional. I don't really know how to coin that, but let's just say sell yourself. You gotta then sell other more talented people than yourself to join you at a time at which you have no money often, no idea, no traction, nothing. And they're typically making a lot of money and a well-paid job. People who hire great founders, they have the, a choice of where to work. And you gotta convince them to believe in you, believe in your idea, believe in, believe in the future that can be. This is the second place where most people fail. Assuming you do those two things, you still gotta do one more thing, which is you gotta actually sell an investor to give you capital based on P typically virtually nothing or maybe like very middle traction. And then you have to go and convince your initial customers to believe in you. 'Cause I, yeah, sure as heck know startup's product is great, right? Like everyone wants to be like, "Oh, we're gonna go change the world." You're not changing the world today, right? You've got, you know, 1/100 of the feature set of any of your (laughs) competitors. And all you have is this dream and this energy and this belief and, and, and, and somebody who's willing to take a bet on you. You gotta get someone to be willing to bet on you. That's sales. And then if you do all that, then, then maybe you need to get some press. And so now you gotta convince a reporter to write about you, and you gotta be able to do that. And then maybe you need to hire some more people, so you gotta convince some candidates to come work for you. And then you again go... I mean, like I spend my whole day selling. All I do is sales. And all any founder does is sales. It, it's kind of like venture. You know, people, people don't misunderstand this. Like VCs are salespeople. 100% of VC is a salesperson 'cause they're selling LPs to give them money, and they're selling CEOs to take their money in exchange for equity. Like that's, that's the job of a, of a VC. All the analytics, all the, the, the, the data, and the this and the that, those are just like updating their CRM. Like the core function of a VC is to sell. The core function of a CEO is to be a great salesperson. And like any great salesperson, you have to balance cynicism with optimism. Right? Great salespeople don't have what I call happy ears. This is a problem that, that people misunderstand. People think that being a great salesperson is being ever the optimist. And that's actually not the case, 'cause then you'll waste your time on a bunch of deals that'll never close. Great salespeople are extremely pessimistic internally and are great at being able to then still be optimistic externally where they're actually trying to disqualify you. They're looking for signals that you're not gonna buy and weeding those out while still at the same time positively spinning you and selling you. And that ability to juxtapose is what, you know, diverges good from great. 'Cause good salespeople will get misled by customers who tell them they wanna buy, but if you would really press harder, you'd understand that they can't or won't or whatever, and so you waste your time on a bunch of companies that never buy. Versus great salespeople know how to prioritize and spend their time properly. The same applies in venture. You know, like if you are a CEO who's fundraising, I cannot tell you... Honestly, Lenny, I can't tell you how, uh, how many other CEOs I know get constantly misled by VCs where the VC says like one or two good things and they're like, "Oh, they're definitely gonna invest," as opposed to giving that VC every out to not continue the conversation. And if they still are willing to talk to you after that, then you know that they're for real. And I think that like, you know, being a CEO and being a salesperson are the same job. Different forms of it, of course, like different, different audiences, different products, et cetera. But ultimately they're the same thing. So no, I don't miss it. I do it every single day and I love doing it. And I'm learning more and more every day from the failures and shortcomings I have.

    4. LRLenny Rachitsky1:12:36

       It's very clear that you, you love doing it. It's so interesting just to s- watch the energy when you talk about sales. I, I rarely meet folks that do sales. And so it's really fun to dive into all this stuff. We promised folks five topics. So you've gone through four.

15. 1:12:50 – 1:19:44

    How to survive a downturn

    1. LRLenny Rachitsky1:12:50

       The last one I wanted to touch on, and you've already talked a bit about this and maybe there's just like a quick tidbit to add here is around just how important growth continues to be for companies at this stage. Like it's easy to be like, nah, the markets are tough. People are gonna give us a little bit of a leeway 'cause, uh, no one's gonna be able to grow. And your point is it's still incredibly important. So is there something you wanna add there before we get to our very exciting-

    2. SMSahil Mansuri1:13:12

       Yeah.

    3. LRLenny Rachitsky1:13:12

       ... lightning round?

    4. SMSahil Mansuri1:13:13

       I guess there's just one last thing, which is...Innovation is often put to the side. People just try to do the things that everyone else is doing. And so, I'll tell you something that we did at Bravado as an example of this. So we run a recruiting marketplace and, you know, competing with An- LinkedIn and AngelList and Hired and all the rest of it. And like all those companies, we have seen a massive slowdown in our business. Unlike those companies, we didn't take that as kind of the end of the road for growth for now, but instead said, "Okay, so let- let me put myself back in the perspective of my buyer, my customer, who are often founders and- and CROs and CFOs." Those are the people that tend to buy from Bravado, 'cause they're the people who care the most about growing revenue. "I can't hire any more full-time salespeople because like, you know, the- the market is- is tough right now and- and- and I can't increase my burn or whatnot. But I still want to get new customers. It's just I can't afford to hire full-time people. In fact, I might be forced to lay off my team. What do I do?" And, you know, we kind of just sat there with a blank whiteboard and just said, "All right, uh, you know, let's put ourselves in this situation. What would you do?" And one of the things that I think would be really interesting is, I'm actually willing to pay money to acquire customers. I just can't take the risk that I hire someone and they won't bring me customers. What if we created a 100% commission only sales role? It doesn't exist today in SaaS. It does exist in other places, it just doesn't exist in SaaS really. But what if we created a way for sales reps who can't find a full-time job 'cause the market is slow, and companies who can't hire a full-time sales rep but still want customers to work together on a commission only basis? Now, a year ago, this product would not have worked, right? 'Cause the supply demand equilibrium was so tilted where every company needed great sales talent and every sales rep was getting multiple offers. So, in- in that world, this product, you know, makes no sense. But in a world in which you have far more sales reps who are looking for work and far fewer companies who are hiring, maybe we can create a new model of sales. You know, if Airbnb and Uber were, you know, grew dramatically during the pandemic and actually are somewhat counter cyclical businesses because if you can't find a full-time job then you find gig work, what would we be able to do for our community that instead of putting them in a different field, lets them use the- the skills, the network, and the expertise they already have in order to do the thing they want to do, but be able to do it in a down market as well? And so we launched something called Bravado Flex, which is a way for companies and candidates to work together in a non-full-time employment way, and that can mean contract to hire, it can mean 100% commission, it can mean fractional work, it- it can mean, you know, small stipend plus milestone based. Like, yeah, there's a bunch of different ways it works. And overnight we went from, you know, having a massive slowdown on our business to one of the best months that we've ever had in company history, which was last month, and this month will be even better than that. And so while our full-time recruiting business slows, our fractional business grows. And so there's, you know, I- I- I use that as an example of the type of innovation that companies should be thinking of, as well as, you know, uh, if you are a company that is thinking of, like, increasing revenue but doesn't have enough levers to pull, maybe this is one that you might want to explore. But I think it comes back down to that, like, fundamental, like, staring at the whiteboard being like, "If I'm a customer and I'm in this world, what can we do today to change the- the- the rules of the game?" Because sometimes the rules of the game are stacked against you, you know? Like as a recruiting business, the rules of the game were now stacked against us. No one's got money, people don't want to hire, there's hiring freezes, et cetera. Like, you know, there's more candidates in the market than ever before. Companies are going to be less and less likely to want to pay us to recruit for them. There's nothing I can do about that. I mean, I can stick my head out the window and scream and cry and- and complain, but that ain't gonna get me anywhere either. So what I need to do is change the rules of the game and- and start to think about the problem differently, and I think that not enough founders do that. They just kind of bash their heads against the wall with the same kind of preconceived notions on what success may or may not look like. And so I would really advise, you know, and I'll give you some examples of where this goes beyond Bravado Flex, but like, you know, change your pricing strategy. So let's say that you sell a product and it's $12,000 for a year. Try charging $1,000 a month and going month to month. Try charging 20 bucks today and going day by day. And you might be like, "Well wait a minute, that just changes every..." But- but you have to adapt, right? Like, if your old model is not going to work, it's asinine to just sit there and then try to, like, make minor changes like, oh, instead of 12 we'll reduce price to 10 or something. I, people try to, like, optimize their way out of problems. You can't optimize your way out of a problem. You got to completely change the rules of the game, and in doing so you suddenly will learn something new. Now it may not s- well, you know, Bravado Flex may not work forever, it may not be there, who knows? But maybe, just maybe as we've been doing this, we realized that there's actually a lot of sales reps that prefer this, because they can do Flex for multiple companies. So, you know, all of a sudden we learned something really new, which is that our mar- our audience, our c- th- the same candidates that we're replacing to full-time jobs are actually in some cases preferring doing this fractional work 'cause now they don't need to go to all the meetings and they don't need to update Salesforce, they don't need to do all the boring shit that sales reps don't like to do. (laughs) And instead they can just work for three companies, use the existing network they have, get meetings set up for all of them, pitch the best product to the right customer, and all of a sudden they feel like instead of having to pitch the one, you know, like, like one hammer that you need to use for every, they have a wide tool set that they can bring to their customers. And all of a sudden companies are like, "Well wait a minute, this is actually pretty cool because now in, I- instead of just hiring one person at a time and training them, I can hire 10 people at a time and I can have multiple ba- you know, kind of fish in the sea." And so it, we just changed the rules of the game around sales hiring as a market.And I think that's the sort of innovation that you have to bring to the market if you want to survive in a downturn, which is, you can't just sit there and just try to do the same stuff over and over and over again. Like, you got to, you got to really be willing to, to break all pre-conceived notions of what success looks like, innovate something new and then give it, give... Like, take bigger swings, I guess, is the thing I would say.

Episode duration: 1:26:30