How do you build GTM efficiency in SMB sales? The CRO at Owner, Kyle Norton, shares his learnings and strategies for building better efficiency into your GTM motion at Workshop Wednesday, held every Wednesday at 10 a.m. PST.
While this title is SMB-oriented, the advice applies to Mid-Market and Enterprise, too. The three topics we’ll focus on are:
- The importance of staying focused and how to say no.
- Ways to scale that don’t include rampant inefficiency and burn.
- How to build operational excellence into your organization at different stages of the growth curve.
A Little About Owner.com to Set the Stage
In June ‘22, Owner went from $3M-$6M, then $6M to $16M last year. They just broke through $21M ARR in the 22 months since Kyle has been there. They’ve reduced CAC and operated with a one or sub-one burn multiple, which is where everyone’s trying to get.But when Kyle joined the company, they had one manager and four reps. Early churn was a massive drag on efficiency. The focus was cleaning up and rebooting, which meant exiting two of the four AEs in his first 45 days.
They needed to get their hands on early churn. Let’s look at a loose timeline of Owner’s journey.
- 2022 was a foundation-building year, fixing a very leaky bucket where the product crushed it with the right customers, but they were closing a lot of poor-fit customers.
- 2023 saw the team grow from 6-10 reps, which is pretty modest, and they built an SDR function.
- At the end of ‘22, they started a small pilot and grew that function from one and two BDRs to a team of 10 and then 12. Now, they have over 22 BDRs.
- They grew 2.5x last year while operating at an LTV CAC of four and a half to one, and the growth rate was better in Q4 of ’23 than in Q1.
- This year, the goal is to find the outskirts of rep capacity, and how much more efficient they can make the AE team now that they’ve nailed the demand gen playbook.
Owner’s journey sets the stage for Kyle’s top three lessons for building GTM efficiency.
Lesson #1: Just Say No
Once he joined, Kyle quickly discovered that Owner had a leaky bucket and had either bad or no targeting on prospects, was closing a lot of poor-fit customers, and there were a lot of miss set expectations from sales so customer handoff was sketchy at best. This led to fairly unsustainable levels of churn of early churn. So within Kyle’s first 90 days, they were losing way too many customers to feel like he wanted to put more money in the top of that funnel. And so, the first lesson here is learning to say no. For Owner, that meant actually saying no to a lot of customers.
Culprit number one for Owner’s leaky bucket was deal quality. So Kyle paused the Growth plan that was already in place until they got churn in a better place. You shouldn’t be adding a bunch of sales reps or spending a bunch of money on marketing if the economics aren’t sustainable. The growth engine from both sales and marketing should to be working before you add gas to it.
Kyle made this mistake in his first startup. They had early signs of closing deals, and reps were starting to figure things out, so they hired a bunch of reps in an attempt to scale but it backfired and slowed everything down. Saying no to growth is one of the most important things to do as you focus on customer quality and figuring out what works.
Saying No Has to be Data-Oriented
Knowing who to say no to is directly tied to the data. For context, once Kyle started implementing a lead quality system, Owner said no to about 40% of prospects who 15 days prior would have been closed-won. So on paper, the month Kyle took over sales at owner, they did fewer closed-won deals than the month before he arrived. Then, the month after that, Owner did even fewer closed-one deals. Kyle went into a board meeting the next month and felt really good about cleaning up deal quality and driving up customer quality. They were starting to see good signs but as SaaStr CEO and Owner board member Jason Lemkin pointed out, none of it was showing up in their revenue number yet.
It was a bit of a terrifying moment for Kyle as the new CRO, but it really reinforced that they had to find a fast path to making sure that the improvements they made on efficiency then showed up in the revenue number, which it thankfully did. So board meeting number two was a lot better.
The basis for this success though was figuring out who exactly to say no to.
So Kyle partnered with the business ops team to see what a high-quality deal looked like from their digital profile so they could figure out how to turn it into high-quality revenue. They built a machine learning scoring mechanism called Expected GMV (gross merchandise volume). It helped determine a high-quality deal based on factors like review quality, web traffic, third-party marketplace volumes, how many reviews they get each month, etc.
On the chart, you’ll see when the volume is higher, the churn is green. It looks great, and you can dump money into a business with that profile. This process allowed them to carefully understand what made a good customer and find them in demand gen marketing and outbound. Having this kind of data shifts 100% of your time and energy into higher-quality customers, which sales teams might not be super pumped about because you’re taking away a lot of what they think is their TAM or ICP, so you want to partner with rev ops or whoever fills their funnels with high-quality leads.
A key takeaway here: Stay focused for longer to nail your economics. Take on fewer segments, fewer customer types, and fewer reps. Nail down one small niche of a market before you hit the gas to scale.
Lesson #2: Invest in Prospect Data Way Earlier
So, now that you know what the customer looks like, you need to know how to target them. This is big takeaway #2. Invest way earlier than you think in prospect data. Spend time figuring out how to equip your teams with good prospect data.
Why? Typically, an outbound BDR wastes half their time calling bad leads and having to do their own research to enrich their leads. You don’t want BDRs doing any lead research. At Owner, if a lead is partially filled out, the BDR punts it back to marketing to be resent through their enrichment flow. If you give your BDR team bad leads, you’re telling them it’s ok to work 2.5 days a week. If you get good prospect data, good things happen.
Owner went from 40% data accuracy to 85% accuracy, and the BDR team got twice as efficient overnight.
Owner’s BDR team before Kyle’s guidance was unsustainably inefficient. They would not have scaled it in its original iteration. Once they figured out the data piece, each BDR starting bringing in over $60,000 in closed-won ARR every single month. So highly efficient. If you’re looking to copy a version of this strategy, there are good external providers out there now that can help you increase lead quality, or you can hire someone internally. With AI, this gets even easier. Don’t bother hiring more than one or two BDRs until you figure out this data piece, or the economics won’t make sense.
Lesson #3: Single-Threaded Ownership is the Path to Scaling Without Rampant Inefficiency
How do you scale without rampant inefficiency exploding? Going back to the topic of focus and less is more, we now look at single-threaded ownership. Kyle mentioned his first startup mistake of hiring a bunch of reps because of one closing a bunch of deals, and the new hires led to wasted time, laying off 25% of them, and burning six months chasing their tails.
“Slow is smooth, and smooth is fast,” Kyle says. Take on less and go deeper with it to have more success. You probably don’t need as many reps as you think.
The way we build financial models, the cell for the number of deals per quarter is always something like reps times quota. That’s how many deals come out of it, but that’s not really how a business works. Otherwise, you’d just keep dumping reps into it. The math only works when there’s the proper pipeline to make those reps successful. 80% of the time, companies don’t have a rep capacity problem; they have a pipeline problem.
If you look at your reps’ calendars and they don’t have 3-4 customer-facing meetings every day of the week, you don’t need more reps. It’s also better to have fewer reps and pay them more so you can get better reps.
So, back to single-threaded ownership. This is a smart way to scale for SaaS companies. Have your sales leader own post-sales and watch them become more interested in ensuring those post-sales teams work well. They’ll become more concerned about the quality of deals from sales to onboarding to launch. Owner made this decision in October of ‘23 and saw immediate improvements in deal quality, rep responsiveness, and collaboration.
The key takeaway here: Things start to resolve themselves because you build more human connection, and single-threaded ownership drives a shared objective where everyone is working toward the same results.
Rev Ops and Enablement Are Two Important Hires
Now you have the basics of economics that make sense, replicability in your BDR or pipe gen motion, and it’s time to get busy in infrastructure. The two goats in this photo are Owner’s Director of Rev Ops and Enablement. They’re the engine of the business.
Finding budget for this can be challenging. It’s a big cost to layer on top of only four reps, but you want these problems figured out before you hit the gas because those inefficiencies as you add reps just stack and stack. Find creative ways to solve this problem. For Owner, they hired these two leaders on contract from their networks. There was a lot of trust, and they contracted them for 10-15 hours a week until the team was big enough and the ARR run rate was big enough to afford them without blowing up CAC.
If you can find high-quality fractional folks in this area, it will make a night and day difference for your team.
The key takeaway: hire and invest in rev ops and enablement earlier than you think. They might be the two most important hires you make.
Lesson #4: How to Operate with Excellence Early
As your team gets bigger, things start to leak and break down because it’s harder to communicate, and the feedback loop isn’t as tight. So, you need instruments in the business to make sure things run smoothly. Owner utilizes three tools.
- Monthly business review
- Tight performance management
- Documentation
Monthly Business Review
If you want to run a tight ship, especially as you scale, you must do these three things right. Each team has a section for the monthly business review, and there’s a prompt in each section that managers fill out. Then, the rev ops team provides the data and charting for everybody to use.
This forcing function happens monthly to pause and think structurally about your business. It’s really hard to get out of the weeds and view things from a wider scope unless you put it on your calendar.
A simple framework all companies can use to prep for the monthly business review includes:
- Agree on your template. Decide as a group the most important questions to answer each month. As you get bigger and the business more complex, you will add more to this.
- Rev ops populates this data for everyone and tries to do it two days before every meeting.
- The teams answer questions based on what you’ve framed out and adds comments to ask questions or talk about things they see as opportunities.
- On the call, block out 60-90 minutes on the calendar. Only pull out the essentials during the call, and don’t read the entire MBR during the call.
By reviewing everything before the meeting and only discussing the most important things, everyone can better ingest the data and gain more insights.
Performance Management
Performance management is another critical efficiency driver and is part of your MBR. Every function gets a stack rank. You could have win rates, close one attainment, and deal quality as part of the framework.Having a rhythm of consistently looking at your stack rank is essential because the cost of mediocre talent is high. You’re giving these people valuable leads, salespeople are very expensive, and there’s a cultural impact of letting mediocre people hang around.
Manage bottom performance consistently and move people out as needed. Encourage tight performance management, which can be uncomfortable but is essential for excellence.
Documentation is Cool
Documentation is a great way to force really clear thinking as a revenue leader. It lets you onboard people faster and eliminates annoying Slacks and questions that slow people down. Finding the time to do this can be challenging, but it’s critical, so put a calendar block for 1-2 hours every week to prioritize this.Before they had a rev ops and enablement team, Kyle’s hack early on was to pull his part out of transcripts on cold calls, dump them in ChatGPT, and tell it to turn the text into a training guide. You’ll have to clean up, but you can produce the content at 2-4 times the speed.
Find a way to document. It’ll give you scaling superpowers.
Bonus Lesson #5: Insight on Sales Comp
Kyle ratcheted back their sales comp over his 22 months at Owner. At first, they just wanted to pay for the best talent they could upfront. The idea was that they were dropping reps into a very ambiguous, challenging market in an early-stage startup so needed to be highly competitive on initial compensation offerings. But as Kyle built out more and more structure, comp started to align more with the new goals and complexity of the role.
They’ve got scripts and playbooks and training that people you can learn from now, and the product is also now proven. And so they’re finding more efficiency by right-sizing comp and tying the sales rep to the customer outcome rather than tying them to the size of the customer through their EGMV scoring model that Kyle shared earlier.
Jason asked: “Do you have higher expectations for attainment for yield for bookings per rep in the current world? So in the old days, we aimed for three X, are you driving that up in any ways? Or how are you thinking about that? That metric in terms of efficiency or attainment?”
“2024 is really about making the reps beg for mercy is the joke that I say internally,” Kyle answered. But the idea is how far can they take rep capacity this year? Owner has been pretty modest this year in adding AEs but has doubled the BDR team. Kyle’s actively reworking their growth model based on new conversion rates and attainment and really trying to find the balance point. It might seem crazy to have two BDRs for every AE in an SMB business, but if you’re BDRs are generating six to 10 to 12 closed-won deals every single month (because they figured out the data piece), and it’s a compelling product, then even though it might feel counterintuitive, it actually makes a lot of sense for Owner’s business model.
