Back in June I spoke at the first European SaaStr event in Paris. My presentation explored the effects of the super high attrition rates and lack of knowledge sharing, and collaboration defining most SaaS inside sales teams.
In my talk, I tired to offer various ways to battle those issues in order to ensure smooth scaling of the sales organisaiton. The presentation was filled with lots of practical advice, tools and best practice that we leveraged at Stack Overflow (where I previously ran European Sales for the best part of 5 years).
You can find the video and full transcript below.
Slides are available HERE.
Dimitar Stanimiroff: Hi, good morning. How we doing? Doing well? Cool, alright. Well, thanks for coming to see this talk. I’ve been a long-time SaaStr fan. I’ve learned a lot from Jason’s posts, from previous speakers at previous events, so I’m quite humbled and honored to be here on stage and share some of the lessons learned over the years in terms of building and scaling sales organizations. So, thanks for making the effort to be here bright and early.
Just before we get going, I know we’ve got a quick introduction, but just to kind of give you a little bit more background about myself and why I feel passionate about the topic of agile and sales. My name is Dimitar Stanimiroff. I’m @stanimiroff on Twitter, so please feel free to tweet along as we go. I was told that there’s going to be no Q and A, so I thought it might make sense to actually get questions as we go along. And I’ll try to get back to everyone afterwards. And of course, I’m going to stick around if you want to come and grab me and chat more afterwards.
I’m the co-founder and CEO of a company called Heresy. We are a London-based sales company. We help sales organizations be 10X better than what they currently are. We do it through the introduction of predictive analytics and more than anything, trying to get the entire sales organization to behave as a single unit and grow together. Heresy is a continuation of my work at Stack Overflow, which is a company I’d like to think most of you have heard of. Just a show of hands, how many of you know Stack Overflow? I’d say 70 percent.
So, I was very fortunate to join Stack Overflow pretty early on. So, I was employee number 28 and had the unique opportunity to build and scale the European sales organization from the bottom up. And what that looked like is that after five years at Stack Overflow, we basically built a team that was growing 100%, 130% on average of bookings year on year, which for a sales company is pretty substantial. And at the time I left, Stack Overflow European sales team was the best performing in the company, generating over two-thirds of the revenue for talent, which the way we built and scaled the European sales team, and later the entire organization as a matter of fact, is slightly unusual for a sales organization. I’d like to spend the next twenty minutes or so talking through some of the key points in terms of what we did. I’ve tried to make this as actionable as possible, so you can take things that apply to your businesses and implement them when you get back to the office next week.
Before we get going, I’d like to tell you why we chose to go in a slightly different way than the conventional sales model. So, I personally believe there are a lot of things in sales that are fundamentally broken. The first one is that — sorry, the clicker’s a bit funny. The first one is that salespeople get, I think, a lot of bad rep. Very often salespeople are perceived as phone monkeys, people who are just diaing for dollars. People supposedly with very low morales, who would sell their own mothers for a bit of cash. So, in order to manage such a crowd, the only way then becomes to kind of deal with a pretty heavy hand, top down, control and command. If they do well, you reward them with cash. If they don’t do so well, guess what, you’re fired. And this is something that has been perpetuated in popular culture and in movies. You don’t need to look further than Glengarry Glen Ross here or, more recently, Boiler Room, or The Wolf of Wall Street.
But, that type of mentality creates the wrong culture and environment in the sales team and leads to a very poisonous environment. If I was to ask you guys what are the first things that you associate with the word “sales team,” it wouldn’t be collaboration. It wouldn’t be knowledge sharing. It wouldn’t be camaraderie. It would be more like tension and backstabbing and people constantly in competition with each other, despite the fact that they’re supposed to be working together every single month. And that in itself presents a lot of problems when it comes to building and scaling a sales organization.
The first one is something that we, I’m pretty sure, are familiar with. That’s the significantly high attrition rate in sales organizations. Way higher than other industries. We’re going to talk about this in a second because it becomes really, really expensive for a company building something.
The other one is that if you have a very significant attrition rate in the sales team, a lot of the knowledge which normally is generated with a team just leaves the organization right away. And that’s a massive drain in terms of how you can scale the organization going forwards. Hello. Glad to see you’re making yourself cozy.
Speaker 2: This is for you.
Dimitar: Oh, is this for me? Oh Jesus, thank you, man. I appreciate it. Thank you. I thought you were just helping yourself to water. You’re a lovely gentleman.
Can you hear me okay then? Is my voice a bit horsey or? Okay, if you cannot hear me, just shout or come and pour me some water. That’s awesome. Thank you.
So, okay … where we … okay, attrition rates. And ineffective reps. This is where we kind of stopped. So, I want to talk to you a little bit about both of the last two points that I made, just to illustrate how bad this could be and how badly it could affect your sales team and actually your entire organization.
The average attrition rate in an inside SaaS sales team is 34%, which is quite significant. That’s incredibly high. And what’s even more shocking is that one in ten teams will actually experience attrition as high as 50%. So, if you think about it, that’s like 50% of your team not being there at the end of the year.
Speaker 3: [inaudible 00:05:54]
Dimitar: That’s inside SaaS sales, yeah.
Speaker 3: [inaudible 00:05:58]
Dimitar: Say that again?
Speaker 3: [inaudible 00:06:01]
Dimitar: Could be, yeah. So, there you go. I wouldn’t be… yeah, I mean if it’s SaaS, it’s even worse. And I’ll show you why.
So, the first thing you want to be thinking about is how much this is costing you. I’ll give you an example. The problem that I have with this is that it’s been massively standardized across the industry. So everyone actually takes this for granted and they say, “Well this is just how it is. The industry is very poisonous. You’re going to have lots of people come and then leave. It is what it is.”
The problem with this is that it costs you a lot of money, right? So I had a friend a couple of years ago, he raised a series A from a TO1 VC firm in the Valley. He relocated his company from London to San Francisco. He sits down with his new board for the first meeting and they’re trying to figure out the model for his company, how they’re going to scale sales. And they tell him the same thing. “Whatever projections you do, take 33% as your average attrition rate.”
And this is what it would have been for my friend if he actually followed that. He would have had 3 people, one of them would have left. And then if you apply this logic, the next generation of sales people, the same thing happens. And if you only get one more generation of sales people, he would have basically ended up with 15 people in the team, which is not bad. Seven would have left. But, the question he should be thinking is, what happens if that didn’t occur?
First of all, seven people leaving actually is super expensive because the average cost per hire is just over 4K. So, he would have basically left around $30,000 on the table right away. But again, the more important thing is what would have happened if various people didn’t leave. He would have actually had, and then were able to hire, he would have had 40 people. And if you assume that the average rep would generate, I don’t know, let’s say $20,000 per month in new revenue, he’s actually looking at half a million dollars in potential revenue loss. So, that’s very, very significant and begins to hurt.
But, what’s more important, and I think this is completely neglected, is the point I made earlier about trying to optimize sales growth through increasing the collaboration and knowledge that occurs in a team.
So, just to kind of illustrate it, I have this graph which shows you… what I’ve tried to show you is how much each cohort of sales people that we hire learn in that duration. And the key here is how much they’re able to pass on to the next cohort of sales people, in terms of knowledge and best practices. Say that they don’t start at the same level, but they start higher and higher. So the idea is that if you are able to retain people, they generate a significant amount of knowledge, best practices and so forth. And they’re able to pass it on to the next generation. Each and every cohort of sales people basically get smarter, they ramp up better, and therefore as a business, you’re on a very steep trajectory of knowledge growth and therefore sales.
Now, the problem is, if you’re losing one in three people, you’re more likely going to look like this. Which is still okay, you’re growing, definitely. It’s costing you money. But the growth is much, much slower. So you should be definitely thinking about this if you’re building and scaling a sales organization.
Just out of curiosity, actually, how many of you are in sales? About half the room. And the rest, are you guys, founders? How many founders? Sales leaders? Okay. So, I’m definitely talking to the right people.
So, what I’d like to do from now on, I think we’ve got about 15 minutes or so, is to actually talk a little bit about things that we did at Stack Overflow. At Stack Overflow, our attrition rate, for the EMEA for the five years I was managing the team was just 1%. Which is absolutely unheard of and most people don’t believe you when you say it. But it’s an absolute fact. What’s more important is it was not something that was coincidental. It was very much accomplished by design.
So, from day one we were very much aware of the flaws that the traditional sales model presents and we tried to focus all our efforts on increasing knowledge retention, collaboration, improving team dynamics between the reps and the team, so we can ensure that a. They stay. And more importantly the knowledge that each and every one of them holds is passed on to their peers so they can grow together.
One of the other things that we tried doing is to create autonomous. This thing is just ridiculous. Sorry guys. So we tried to create autonomous and self-managed team as well. Reason being is once it starts scaling money, one of the biggest bottlenoses that you have on your team is not your ability necessarily to hire sales people, which is actually very hard. But more importantly to hire decent sales management. So, being able to actually create a self-managed team helps you an awful lot.
I do have a confession to make, before we go any further, though. And that is that I actually have experienced all of those traits of the dysfunctional teams that I described. And what’s even more embarrassing is that it actually happened in my first start up. So, it’s quite painful to admit. But, about ten years ago, I co-founded another startup, before joining Stack Overflow and we did everything I described just now. We got it wrong. There was tension in the team. There was animosity. There was fighting. The retention was pretty poor et cetera. But, I got very lucky in the sense that I have a very capable technical co-founder, who was managing the technical team in a very different way to what we were doing in the sales organization. And he kind of opened my eyes to what a sales team could look like if you actually started to apply some of the logical and some of the tools and best practice that the co-founder was leveraging to manage his dev team.
Which is what I’ll try to do now, if basically tell you a little bit more about this and how that worked at Stack Overflow.
So, from now on I’ll try to keep it quite tactical and go through some tools that not only can help you accomplish that environment we’re describing, but also can help your reps be a little bit more predictable, help you as managers to spot problems earlier, treat them and make sure that you actually hit the revenue targets at the end of the month or quarter. Depending on how you forecast.
The first thing I want to talk about is burn down and burn down charts. How many of you are familiar with this? That’s it. Not too many, which is awesome. So, how do you explain this trait in the context of sales? So, if you consider the following example, if you have a small sales team that has to close $200K in revenue in a single calendar month. And for convenience purposes, you have, let’s say, 20 calendar days. The idea is that if you split their work evenly across the 20 calendar days, they should be doing $10K every single day in order for them to hit their target at the end of the month, right?
So, it will look something like this. You will plot the revenue target on the vertical axis and then on the horizontal we have the number of selling days. And then the idea is that in the beginning of the month, they will start with $200K. The first day, they sell $10,000, so they’re left with $190K and 19 days to do it. And the following day they would sell another $10K, so they’re left with 18 days and $180K to do it. And so forth, until on the very last day, they can basically hit their goal. So you have a nice and smooth curve running from the top left to the bottom right. This is kind of what the ideal scenario would look like. Right? I’m just going to have a sip of water. How’s my voice?
Alright, so we all know that this is not going to happen, right? This is kind of the ideal world, but actually, right, this is not going to happen. You’re going to have days where the team does the $10K. You’re also going to have days where they do less. Days where they do more. Or days where they don’t sell anything at all, right?
But, what you do want to see is them having less and less work as time passes on to hit that goal. So, if you plot all of the scenario I just described, it’s going to look something like this. So, you have this green line, which kind of oscillates around the straight line. And that gives you the actual performance of the team versus what the ideal world dictates it should be. Now, the reason why I like this graph so much is because it gives you an instant snapshot of how the team is performing at any one time. The idea here is that if the green line is above the navy, the dark blue one, then the team is basically falling behind where they should be. If the green line is below it, then they’re doing better than expected. But again, it has been instrumental in terms of building and scaling the sales organization at Stack Overflow because it allowed everyone across the company to get an instant idea of how the reps are doing at any one time. Right, you see it, you know how you’re performing.
The other thing I want to talk about is this idea that the burn down actually holds, simple as it is, it holds a lot more value than it seemingly does at first glance, right? If we plot the same data that I showed you in the burn down earlier, how much money we closed every single day, it would look like this. This is kind of the conventional way of showing sales results. We closed this much on day one, this much on day two, and so forth. And that’s fine. It’s great.
But, you’re missing a very important element. If you compare it again with the burn down, the conventional bar chart only shows you what happened, how much we closed. And the burn down actually shows not only that, what happened, but more importantly how it happened. So, you’re not only able to see the results, but you’re actually able to see what led to those results and start talking about performance. Which, again, if you’re going to be trying to build an environment where knowledge sharing is the number one priority, you want people to talk about performance and what moves the needle forwards. So, this gives you a very strong foundation to do that.
The next thing which I find fascinating about burn downs is this: If I asked any whatever one of you here to give me the likelihood of you experiencing substantial financial loss or being seriously ill or your startup going bust by the end of year. Each and every one of you, including myself, is significantly going to underestimate the odds of that happening. That’s due to a psychological bias known as the optimism bias or also called the illusion of invulnerability and it’s what makes us humans.
And sales people are the same. If the sales person, or the team in the example I gave you before, starts slipping behind goal and they start losing their track a little bit, it’s very often because they don’t really appreciate the gravity of their situation up until it’s too late. So, in my experience, that’ll start happening around day 15. And at that point, you can see on the burn down, the team should really have $50K left to go and 5 days to do it. And actually, in this example, they’re at $120K and 5 days to do it. At which point, it’s too late. So one of the things I particularly like about the burn downs is that basically, because they’re so visual, you get a very, very good understanding of how your performance is going right now and you’re able to course correct when you have a sufficient amount of time to turn things around. So that can give you a very good wake up call if things are not going according to plan.
In order to help us do this, what we did at Stack Overflow was basically leverage another development concept, which is velocity. How quickly are we actually burning towards goal? So what we would do is basically figure out how quickly we’re closing deals and try to extrapolate where that would leave us at the end of the month. So, in this case, I can see around day 5, our velocity is not what it should be. And if you extrapolate where we’re going to be going forward, you’re actually forecasted to finish some $50K behind.
The point of that is that you see it 5 days into the month and you’ve got another 15 days to pick of the pace and make sure that you can course-correct and make sure that you actively steer towards hitting your goal by the end of the month. So very, very important.
Another way in which we can think of forecasting with the burn down charts, which is very interesting, is basically plotting all the committed deals that the team has on the burn down. And you can see not only where you’re going to be at the end of the month, but how exactly you’re going to get there. So you can see if there’s going to be any dry periods, so to speak, where no deals come in, so you don’t freak out. You know that’s accounted for.
And the other thing about this, I found, I’ll tell you a story from Stack Overflow, is that it could be incredibly, incredibly motivating. So, in the early days when we started doing this, back in 2011, ’12 in London, it was basically done by pulling data out of Salesforce and me manually entering it in this massive spreadsheet and generating a graph. And it was very cumbersome and tedious. But, my reps really liked it. The second someone closed a big deal, especially when you’re falling behind goal, when you have this big vertical drop, that you can see around day 6, people would come and ask me to plot their data right away so they can see it. Reason being, it gave them a big kick and they got really excited about it. The endorphins were all over the place, so they wanted to see it, right? And what it can do, is to basically play to that and start plotting all the data in advance so people can stay motivated throughout the month and see if their deals are going to close or not.
Now, we all know, though, that if you take your data out of Salesforce or whatever CRM you’re dealing with and plot it on a burn down, you’ll basically end up with a graph that looks more like this, right? Every single deal is forecasted to close on the last day of the month. So, you have this flat line and every single deal’s expected close day is the very last day of the month. Which, kind of, as a sales person makes sense, because you’re hedging your bets. There’s a lot of uncertainty in what you do, and therefore you want to give yourself as much room for maneuver as possible. But, as a sales manager and as a company owner, you don’t want to see that picture. It kind of makes you very, very uncomfortable.
One of the ways in which we battle this again is something the developers are very, very skilled at doing is introducing the concept of sprints. So, instead of thinking of, “I have 20 days to do $200K,” we basically will split the months into sprints. So, small increments of time that are easier to manage and we almost would set mini-targets for each one of them.
In the example that I gave you, conveniently chosen by me, $200K means that if you have 4 sprints of 5 days each, you basically have to do $50K four times. So all of a sudden, that predictability becomes way easier to accomplish because you’re not thinking of 20 days and the reps are not saying, “Oh, I think it’s going to close by the end of the month, but I don’t know exactly.” You can have a conversation around when exactly do you think it’s going to happen within this smaller framework. It becomes way easier to manage.
The other thing that this gives you is regular cadence, which is my final point and we’ll get to it shortly. But, I wanted to tell you about one other thing that the burn downs allow you to do, which is to get incredible visibility as you keep on scaling the sales teams. My European sales team was around 50 people, well 48. Globally, we had over 120 sales people. And burn downs played a key role in providing visibility in terms of how we were performing. So, they way we did it is we would basically have each single rep manage their performance using a burn down chart, so they could see how they were doing. And then we will split the local teams, so we had sales organizations in London, in New York, and in Denver. Instead of having 3 regional offices, we would have teams of teams, which is another developer concept within the office. So, teams of about 5 to 6 individuals.
And what we did was every single sales person would have a burn down. They combined some of the 5, 6 burn downs in their single team, would give you the team burn down. Then we combined the burn downs for the teams, which would give you the office. And then the three regional offices would give you the organization overall.
And at that point, a miracle starts to happen. Instead of having a line that oscillates up and down against the straight line that we saw on the previous page, you actually have two lines that are pretty much overlapping. Assuming that you’re performing the way you should be. What that allows you to do is, should the action start slipping behind goal, and the line starts opening up, you can easily, within a few clicks, track it to a regional office, to a smaller team within the office, to an individual and to a deal, which makes it super actionable in terms of actually fixing problems and understanding what is causing the issue. So, incredibly powerful in terms of diagnosing problems.
The final thing I wanted to talk to you about is kind of going back to what we started with, which is how do you use this as a foundation to bring a scalable team where people are leveraging the so-called wisdom of crowds, the idea that the team is always smarter than even the smartest individual on the team?
What we did at Stack Overflow is introduce stand-ups at the beginning of every single sprint. So you saw that roughly sprints would run, if you’re forecasting monthly, every 5 days, give or take. And that time, the team, and I’m talking about the teams of 5. The small individual teams. Who are completely autonomous, by the way, run from the bottom up. The structure is as follows. You have 5, 6 reps who are actually all selling, all have craters, they’re all revenue bearing reps. You have one person on that team who basically will be responsible for running the stand-up.
And the stand-up would basically look like this. They would get together. They would look at the burn down for the previous sprint. They would evaluate their performance. They would look at what deals closed and what caused the shape of the burn down. They would talk about why this happens. So, you kind of have a living, breathing sales playbook, instead of the big document that you’ve given them day one and no one actually opens it or bothers to read. And because we’re in such a fast paced industry that keeps on changing, this actually allows you to constantly stay on top of what is happening as a rep.
So, more importantly as well, when people are talking in the stand-up about what closed, they’ll be also talking about what didn’t close. Why did it not happen? And I think there’s a lot of value that is often overlooked in traditional sales organizations. Like, losing the deal was a shameful, right? The emphasis was what we did and the idea of applying agile was that we want to be continuously improving and developing so knowing what didn’t work is equally important, if not more important, as what didn’t work.
So, this is kind of a quick preview of what Agile Sales is all about. It’s a long topic and I know we are running behind schedule, so thank you very much for giving me the time to listen to me. If you like, do check out blog.heresy.io.