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Quick Fire Series: Revenue Is a System Not a Sales Number · What's Broken in GTM and How to Fix It

0:00
Simon: Louis, we're kicking off a new run of quick-fire episodes today built around your recent blog content arc on what B2B can learn from B2C, and we're starting with the idea that revenue isn't a sales number, it's a system.
0:13
Simon: What's the TL;DL("Too Long; Didn't Listen") for anyone who doesn't have time for the whole episode?
0:19
Louis: So, B2B often treats revenue as the output of sales, it's actually the result of the connected choices about market, proposition, price, channel, customer experience, and value delivery.
0:31
Louis: Now, a modern CRO's job should therefore be to make the whole system coherent and to optimize the quality of revenue, not simply its volume
0:39
Simon: Stay with us for around 15 minutes or so to learn more.
0:43
Simon: Hello, and welcome to episode 60 of the What's Broken in GTM and How to Fix It podcast.
0:48
Simon: I'm Simon Daniels…
0:49
Louis: and I'm Louis Fernandes
0:51
Simon: We are exploring the challenges facing SaaS GTM leaders that Louis has been discussing in his newsletter, drilling into the topics a little further to provide some solid practical guidance for SaaS GTM success.
1:02
Simon: Now, before we get into the episode and indeed the series, quick reminder, Louis, that you've got a couple of things coming up in the next week or so.
1:12
Simon: You're at the Nexus conference on Friday, and then there's the Winning by Design London Impact Roadshow next week.
1:19
Simon: Busy lad, say a few more words about those.
1:23
Louis: So I was invited to attend the Nexus conference tomorrow to give a talk on scaling businesses across Europe, which I'm very much looking forward to.
1:33
Louis: So that's gonna be a fireside chat.
1:34
Louis: And then next week I'll be back in London with the Winning by Design crew, including Jacco van der Kooij and Mike Bougaard, to co-host the, uh, London Impact Roadshow, which I'm very much looking forward to, should be great.
1:49
Simon: Sounds awesome, and I know people can get in touch if they want to, uh, to know more or, or possibly even get involved.
1:55
Simon: So thanks for sharing.
1:57
Simon: Now then, let's get onto the matter in hand, today's episode, and, um, I'll say a little bit about the overall series as well.
2:07
Simon: So what we're going to be doing over the next few weeks is this.
2:11
Simon: Louis, your newsletter's recently wrapped an eight-part arc looking at what B2B can relearn from mature consumer businesses, from banking to travel to FMCG, and really understanding customers and building a coherent revenue system rather than just chasing pipeline.
2:29
Simon: We're going to spend the next five episodes of the podcast working through that whole arc in short, quick-fire form.
2:38
Simon: So Louis, I need you to have your wits about you and be ready to, uh, answer some quick questions.
2:44
Simon: And so in a change to our normal cadence and perhaps a return to our original cadence, we're going to be publishing these weekly, although they are going to be shorter form episodes.
2:56
Simon: So, let's move on and what led you to put this content arc together in the first place?
3:06
Louis: Yeah, I think it's one of these things.
3:08
Louis: I mean, I've, I've spent now 38 years in industry, and the last 20 years in software and software-related services, and one of the things that I've seen a lot is that I'm becoming increasingly convinced that B2B has effectively developed a very narrow view of what revenue is.
3:28
Louis: On this podcast, we've talked a lot about go-to-market, right?
3:31
Louis: We talked about building sales motion, we measure pipeline, we obsess over conversion rates, all this kind of stuff, and that's all good stuff, and none of it's wrong.
3:44
Louis: But it is incomplete.
3:46
Louis: What we've done is we've come from this era where capital was in abundance, and you could just throw more at whatever the motion was and do more, and that was fine, and it would pave over the cracks.
3:59
Louis: Now, if I look at classic FMCG as a good starting point, they haven't had the same sort of budgets, and the way that they've worked has been very much around, we need to understand the customer, we need to understand the category, we need to understand how products are adopted, we need to understand lifetime value, how we cross-sell, upsell, next best action, all these kind of things.
4:22
Louis: We think, need to think about segments and segmentation.
4:26
Louis: We need to think about behaviors.
4:27
Louis: We need to think about how consumers change with life events, all this kind of good stuff.
4:32
Louis: We never really do that in B2B.
4:34
Louis: And the reality is that customers' needs change over time, yet we don't necessarily evolve our segments in line with that.
4:42
Louis: We don't think about what is the next best action, and we're just slowly catching up.
4:47
Louis: FMCG's been doing this for decades, and they haven't had the funds, and they're, they're very successful, yet their valuations are nothing like what the valuations of the majority of SaaS companies have been until of late.
5:00
Louis: And now with the SaaSpocalypse, what we've seen is valuations contract massively.
5:04
Louis: Why?
5:05
Louis: Because capital's not cheap anymore, and now suddenly you've got to show a result for what you're doing.
5:10
Louis: And this has got me to think, well, you know, B2C had to go through this.
5:15
Louis: I spent a lot of time in B2C, you know, I started my career at NatWest, and then was there for seven years.
5:20
Louis: Learned a lot about banking, learned a lot about consumers then, and then went into travel, learned a lot there, and then I was at agency side.
5:27
Louis: And we then finally got bought by a tech company, which is why I've ended up in tech.
5:31
Louis: But throughout that, I've got different lenses, and I thought,"What can I learn from one experience and bring it on to the next?" And that's essentially what I've done in that arc.
5:40
Louis: So that's what we're looking to do in this series, is take some of those lessons and apply them to the whole B2B thing.
5:47
Simon: Very good.
5:48
Simon: Let's dive into episode one of the series, and we're starting with revenue as a system, not a sales number.
5:54
Simon: Let's get to it, shall we?
5:55
Louis: Let's do it.
5:58
Simon: So let's start with how did B2B SaaS end up treating revenue as just a sales output?
6:06
Louis: Quite straightforward really.
6:07
Louis: You've got a lot of capital going into SaaS 10 years ago.
6:11
Louis: Any Tom, Dick, and Harriet could raise a couple or 3 million, and that couple or 3 million soon became 20 or 30 million in the next round.
6:20
Louis: And all people did was start throwing more bodies at things and do more stuff, whatever that might be, and produce a revenue.
6:28
Louis: Nobody thought about u- economics, which we covered a long while ago.
6:31
Louis: Nobody thought about how efficient that capital was being just so long as you could still see growth.
6:37
Louis: But the reality was that people were buying growth a lot of the time.
6:41
Louis: And, that mantra was fine until we saw the end of ZIRP, zero interest rate policy globally.
6:49
Louis: And that's been compounded through COVID, it's been compounded through the current Trump administration and some of the policies they've brought through.
6:57
Louis: It's been compounded by geopolitics everywhere.
7:00
Louis: It's been compounded by the oil crisis that we now have.
7:02
Louis: All of these kind of things have all brought to bear.
7:05
Louis: And one of the other things, of course, AI.
7:08
Louis: So all the capital has flowed out of SaaS and found the next bright, shiny thing, which happens to be, as I've just said, AI.
7:16
Louis: Consequently, all those investors that came in early, well, guess what?
7:21
Louis: They want a return now, and there's gonna be no more good times to be had.
7:25
Louis: So now all the SaaS businesses out there, they're gonna have to start showing some results, and they're gonna have to show them pretty damn quick.
7:31
Simon: And that's what we're here to help them do.
7:34
Simon: Now, you've had a pretty unusual route into SaaS yourself, and I that's obviously what's informed a lot of this particular arc.
7:43
Simon: Tell us how banking, travel, and consumer marketing shaped how you think about this and, and what that experience means in SaaS go-to-market.
7:54
Louis: Yeah.
7:55
Louis: So I, I, I started my commercial life off in 1988 working for NatWest Bank.
8:01
Louis: And it was classic, you know, B2C banking.
8:06
Louis: People have bank accounts, uh, you know, they use those bank accounts, paid in cheques at the time, paid in their salaries and then, you know, um, wrote cheques out and, and, and took money out the, the hole of the wall.
8:19
Louis: Very simple.
8:21
Louis: But it's not because that's only one aspect of what banking is about.
8:25
Louis: And one of the things I learned very early on was that as consumers change over time, their needs change.
8:32
Louis: Classic one was the milk round as we used to call it in NatWest, where you'd go to around the universities and try and get people in, you know, young kids going, getting their first bank accounts, get them in so they've got a bank account.
8:42
Louis: It was a big deal because once you got them hooked, you keep them hooked.
8:46
Louis: Their needs change over time.
8:47
Louis: You understand how the segment changes.
8:49
Louis: You think about the life events that are coming up.
8:51
Louis: So when they're then getting their, uh, first mortgage or they're buying a car or they're having their first child or they need a pension or they need life insurance, any of these life events that are having, happening, the bank is there for it and it knows before you do.
9:06
Louis: Why?
9:07
Louis: Because we'd looked at all the data.
9:09
Louis: So all of these things were around a commercial question that wasn't about what can we sell, it was more around what does the customer need now?
9:19
Louis: What are they likely to need next?
9:21
Louis: And how do we build a deeper, more valuable relationship over time?
9:25
Louis: And all of that holds true in terms of how I think about commercial relationships in a B2B context
9:32
Simon: And is it the case that you're saying that B2B businesses are simply not thinking in those terms?
9:38
Simon: They're not thinking about what can we do for the, for the customer next?
9:42
Simon: What, what can we do to help them in the next stage of their journey?
9:46
Simon: They're, they're just thinking,"What can we sell to them next?"
9:49
Louis: I think we disguise it as what can we do to help them next?
9:54
Louis: But really there's a revenue number behind it, and that's what we're really focused on.
9:57
Louis: And it goes back to some of the short-termism that I've been talking about in revenue operating governance.
10:02
Louis: You know, how do I save the quarter?
10:03
Louis: Just sell them some shit.
10:05
Louis: You know?
10:05
Louis: And, and that's the thing.
10:08
Louis: It's not necessarily thinking about the needs.
10:10
Louis: Even though we all go on about we wanna be customer centric, actually what we really wanna be is we wanna be number centric, and we, we've gotta hit the number because that's the plan, and if we don't hit the plan, the CRO's gonna get fired, and nobody wants to get fired.
10:23
Simon: No.
10:23
Simon: So
10:24
Louis: They do anyway.
10:24
Simon: Quite, and not, not least CROs.
10:27
Simon: That, that title itself, is it really as broad as it sounds?
10:31
Simon: I mean, it makes it sound as if they're in charge of, of all revenue.
10:35
Simon: Is, is that true?
10:36
Louis: So in my experience, a lot of CROs get the title, but actually they're glorified sales leaders because most of what they've done in their career has been, I've been in charge of net new name sales, and we still think it's all about net new name sales, and then suddenly I've had marketing appended onto it and also customer success, whatever the hell that might be.
10:56
Louis: And the way that it tends to work is, I want marketing because they supply me with leads.
11:00
Louis: What's this brand stuff over here?
11:03
Louis: Not really sure about that.
11:03
Louis: Anyway, somebody else can deal with that.
11:05
Louis: And then with a, um, customer success piece, we suddenly think about, oh, there's this other metric over here, net revenue retention.
11:13
Louis: Probably need to do something about that.
11:14
Louis: Oh, that's upsell, cross-sell, so we'll treat that the same as, um, net new name sales.
11:17
Louis: But actually, where I'm gonna spend most of my time, effort and energy is still gonna be in net new name sales because that's where I look like a hero.
11:25
Louis: And that's the mentality that prevails.
11:27
Simon: Right.
11:27
Simon: Right.
11:28
Simon: And, and talking of, of brand and, and bringing it back to the, to the kind of consumer F- FMCG side of things.
11:35
Simon: So FMCG brands, consumer packaged goods brands will usually have a brand director.
11:44
Simon: do they think about what they're doing and their role compared to most CROs?
11:51
Simon: Or what is it that most CROs perhaps don't think about?
11:54
Louis: Yeah.
11:54
Louis: So first of all, let's, let's just get it out there that in B2B, the term brand director can be a bit misleading because what we think of as brand directors are people that look after, as it says on the tin, the, the brand.
12:09
Louis: In FMCG, it means something completely different.
12:11
Louis: A brand director is actually a commercial leader, and they're expected to know where the brand sits in the category, who buys it, why they buy it, when they buy it, what else might they buy instead.
12:23
Louis: They understand what drives penetration.
12:25
Louis: They understand frequency, loyalty, switching, repeat purchases, all this kind of stuff, and they really get into the weeds around price architecture, around promotion, distribution, channel economics, and margin.
12:38
Louis: But above all, they're expected to know where the growth is coming from genuine healthy demand, or whether it's being borrowed from the future through discounting, over-promotion, or channel distortion.
12:48
Louis: And ultimately, they are accountable for delivering the revenue number and the profitability, and most importantly, for maintaining and increasing market share.
13:01
Louis: There's a fundamental difference.
13:02
Simon: And that brings me to the last point I wanted to cover, which is there's such a thing as revenue quality, right?
13:10
Simon: Revenue in some respects is not fungible, and I think to your point about revenue and profitability and also those other, those other elements, that's really what is hiding in the ARR number of a SaaS business that, that the CRO really needs to be focusing on.
13:29
Louis: Well the clue's in the, in the title, ARR, annually recurring revenue.
13:35
Louis: And the way that most people treat annually recurring revenue is I've closed the deal, therefore I've done what I need to do.
13:41
Louis: We've now got annually recurring revenue.
13:42
Louis: No, you've closed a deal.
13:44
Louis: Hasn't recurred yet.
13:45
Louis: Doesn't talk anything to lifetime value.
13:47
Louis: Doesn't talk anything to what the cost of acquisition has been to, to actually keep that on board.
13:53
Louis: Doesn't talk about what you've discounted it for.
13:55
Louis: Doesn't talk about why people have bought.
13:57
Louis: And, and all these things play into it.
13:59
Louis: Why?
14:00
Louis: Because I haven't thought about switching.
14:03
Louis: I haven't thought about loyalty.
14:05
Louis: I haven't thought about how the customer's gonna use it and the use case specifically.
14:09
Louis: I've just thought about how the hell do I sell my, my software?
14:12
Louis: That's it.
14:12
Louis: And, and that's a very short-termist view.
14:14
Louis: So yes, while we talk a good ball game around wanting to put the customer at the center of everything, what we actually end up doing is we end up just trying to close as much business as we can.
14:24
Louis: And it goes back to this perennial problem of what do I need as a, as a CRO?
14:28
Louis: I need more leads.
14:30
Simon: And we will be getting on to ICP, segmentation and the fact indeed that closing the deal is not the end, it's the beginning.
14:39
Simon: Anyway, we promised rapid fire, and so we'll leave it there for this time.
14:46
Simon: Okay, Louis, that together in a sentence or two.
14:50
Louis: So revenue leadership isn't simply the management of a funnel.
14:53
Louis: It's the management of a system that produces durable and profitable revenue.
14:59
Louis: So if revenue is a system and the first design choice is which parts of the market behave differently enough to deserve a different commercial approach, the next bit then really needs to be about what are those different bits of the market we need to be tackling.
15:14
Simon: Those are our takeaways for this episode.
15:15
Simon: Thank you so much for listening to episode 60 of the What's Broken in GTM and How to Fix It podcast.
15:21
Simon: Check out our LinkedIn page where you can find show notes relating to the episode.
15:25
Simon: You can also get in touch with us via LinkedIn and follow us for regular updates.
15:29
Simon: And don't forget to subscribe in your preferred podcast app to make sure you don't miss an episode.
15:34
Simon: Next time, we ask which parts of the market actually deserve a different commercial approach as we turn to ICP and segmentation.
15:43
Simon: So please join us.
15:44
Simon: Until then, it's goodbye from me, Simon Daniels…
15:46
Louis: and it's goodbye from me, Louis Fernandes.
15:49
Louis: Have a fantastic day.