GE 17: The Sales Process that Grew EchoSign to $100M in ... · The Sales Process that Grew EchoSign...
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GE17:TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast)
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TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 1
Eric:Helloeveryone.Welcometothisweek’seditionof“GrowthEverywhere”whereweinterview
successfulentrepreneursandbringyou;businessandpersonalgrowthtips.I’myourhostEricSiuand
todaywehaveJasonLemkinwho’saco-founderofEchoSign.Jasonhow’reyoudoingtoday?
Jason:Doinggreat.ThanksforthetimeEric.
Eric:Yeah.Thanksforjoiningus.Soyeah,Jason,whydon’tyougivetheaudiencealittlebitaboutyour
backgroundandthenwe’llgofromthere.
Jason:Sure.So,I’marepeatfounderCO.MylastcompanyisacompanycalledEchoSignwhichwas
boughtbyAdobeonJuly15,2011at3:01p.m.Idorememberitwell.ThenIwasthevice-presidentof
webbusinessservicesatAdobeandfrominceptionofEchoSigninJanuary1
st
of’06.
Throughthat,grewthatbusinessfromzeroto,whatisnow,ahundredandforty-fourmillioninreferring
revenueattheendoflastyear.So,Isortof…What’sinterestingaboutme,atleastintheSassworld,in
thisBtoBworld,I’vedonethezerotoahundredmillionjourney,I’vemadeatonofmistakes,andIkind
ofdecided,backwhenIwasacorporatevice-presidentatAdobe,totheextentthatIwasallowedto,that
Iwouldjuststartsharingsomeoftheselearnings.
AndsoasyouknowwekindofbuiltacommunityaroundthiscalledSasStr,we’vegotahalfamillionfolks
readthisstuffeverymonth.It’sallaboutgoingfromtencustomersandwhateverthatrevenuemaybe,a
thousanddollars,athousanddollarsamonth,tosortoftenmillion,thatkindofjourneyfrom,youknow,
havingsomethingwheretenpeopleactuallybuyyourproducttowhatIcallinitialscale,tenmillion,when
youcannolongerbekilledright.Andsothegoalistoshareallthehardlearnings,whatworked,what
didn’t,hownottohiretheterribleVPofsales,whatmarketingreallydoes,howtothinkaboutcustomer
successsothatultimatelyyoucandoevenbetterthanme.That’smygoal.
Eric:Gotit.Perfect.AndIthinkeveryonethat’swatchingthisneedstoreadJason’sblogandalsohis
answersonQuora.There’snothingouttherelikeitrightnow.It’sprettymuch…Itsworldclassstuff
so…literally,everything.SoJason,howdidyouguysgetthefirstonehundredusersforEchoSign?
Jason:Yeah,andyouknow,timesweredifferent,right?So,thewaywegotourfirsthundred,infactit
workedwellforusuptoapoint,wasreallyjustpressright?Todaywecallitcontentmarketing.Thingsare
alittlebitmoresophisticated.So,somethingsaredifferentandsomethingsarechanged.Literallywe
launchedonTechCrunchbackwhentherewereliketwoTechCrunchpostsadayin’06.Nooneread
TechCrunchbackthen.Itwasjustthisfunnylittleblog,butitwasenoughtogetusgoing,right?Andso,
myuberlearningsfromallthat,andI’mahugefanofPRcontentmarketing,whateveryoucallittoday,is
formost…forBtoBservicesit’snotenough,okay?
Youcan’thavethismagical,[what’sapp]explosionjusthotoffsomepress.Butitcanhelp.Itcanreally
help.Itcangetyousomeofthosefirsttencustomersorthefirsttwenty.That’snotenoughtobuilda
hundredbilliondollarbusiness,butifyoudoitrightitmaybeenoughsothatyoucanreallylearnandget
youinthepipeline.
Eric:Howdidyougettothatnextlevel,Imean,theinitialPRbumphit,right,butwhatgotyoutothefirst
thousandorfirsttenthousand?
Jason:Yeah,Ithink...SoinsomewaysIdideverythingwrongbecauseIhadn’tdoneitbefore.We
launchedwithoutclearpricing,whichIlearnedwasadisasterforapaidservice.Welaunchedwiththe
wrongmessagingandthewrongmarketingpositionandthewrongeverything.Butwesortofjustdidone
thingrightinthebeginning,right?Wereallyjustdidtwothings.Anditwasn’tenough,but…Itwas
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 2
enough,butwecould’vedonebetter.Wedidtwothings:one;whatevercustomerwehadwelavished
themwithjustincredibleattention.Iknowthisseemsobviousmaybetomostpeopletoday,butyouget
tencustomers,atpresstheypay$10amonth.Wecallthatbeermoney.Allwedidwithourfirsthundred
orsocustomersisdrinkbeerbecauseitcouldn’tevenpayoneinchinyoursalary.
Sothatwas…Ididn’tthinkitwasveryfunny,buteveryoneelsethoughtthatwasfunny.ButwhatI
knew…Here’stheonethingIknewfromthetwelvemonths,andtheywerereallyroughthefirstyear,
here’sthething.Iknewforeveryonecustomerwehad,wecouldgetanother.ForeveryQualcommwe
couldgetaGE.ForeveryBTwecouldgetaDell.ForeveryweddingphotographerthatusedEchoSign,
eventhoughwehadonetostart,Iknewwecouldgettwo.So,ultimatelymygoalwastojustdouble
downonwhateverwasworking.
AndIonlyknewhowtodotwothings:one;keepthecustomerswehadhappy;andtwo;howtotryand
keepupthecontentmarketingPRstaff,sotheviralengine,oratleastthewordofmouthenginecould
run.Andtheuberlearningwasitallworked,okay?Buttheproblemis,ifyouwanttogetwordofmouth
andviralityworkinginBtoBversesBtoC,itjusttakeslonger.So,literallyittookeighteenmonthsfor
thatenginetowork.Becauseyouthinkaboutit,Isignedupfortheproduct,whichwasMicrosoft.Itryit
forthirtydays,right?AndthenmaybeIconverttopay.
Butmaybeittakesmethreeorfour,sixmonthstofallinloveandthentointeractwithenoughpeople
throughacontract,orwhateveritis,thatwillcreateasecondgenerationcustomer.Andittookuseight
monthsfrompaidtogenerateasecondgenerationcustomer.Andifyougobackintimesinceinthefirst
quarterwehadtencustomersitwasreallyhardforthatviralenginetogetmomentumforabouttwo
years.But,oncewewereintoabouttwenty-fourmonthstheviralandwordofmouthtogether,whatIcall
mini-brand,wasconsistentlythemajorityofourrevenue.Butthatjustcan’thappeninthebeginning,
right?Theengineisn’tlearningyet.
Eric:Gotit.Yeah.So,…
Jason:AdifferentwayI’velookedatit,wecantalkabouttechnicalthings,butIreallythinkthekeytoall
thisstuffinSassistodowhateverithumanelytakestogetamillioninreferringrevenue.Getupto
eighty-thousand,fifty-thousand,ahundred-thousandamonth.Andthere’sa…There’sonlysomanythings
youcando,butyoudon’tknowwhichonewillwork.
Onceyougetuptoamillioninrevenue,theneverythingworks.Thenattwomillionitallbecomes
programmaticandlogical.Butwe’reallgoingtohavetofinddifferentwaystogettoamillion.Ifyou
knowhowtosell,maybenotbytraining,butbybackground,maybeyou’lljustliterallygrababagand
magicallycreateamillioncustomersoutofthinair.Ifyou’reterribleatsales,butyou’rebrilliantat
contentmarketing,maybeyou’llbuildanincrediblecommunity.LiketheguyssayatBufferdid,“Gofor
justabrilliantcommunity.”
Idon’tknow,butinthebeginningyou’vegottohackitwithwhateverofthepanoplyofthingsyoucando
toyourcustomers,that’syourbestbet.Forus,forme,itwasshowerwhatwehadwithlove.Iwasgood
atthatbecauseIthinkIwasjustsothankfulthatwehadanycustomers;andtobeenthusiastic,totryto
getthePRattentionjustthroughsheerpassionforwhatweweredoing.ThosewerethetwothingsIwas
goodatandIwasprettymuchterribleateverythingelse.
Eric:Therecurringtheme,I’verepeateditsomanytimes,isit’sjustdoingthethingsthatdon’tscale.
Everysingleentrepreneurhasdonethatinthebeginning.It’sliterally,that’swhatit’sbeen.Andwetalked
about…
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 3
Jason:Ithastobetheonesthatworkforyou.Thethingisifit’sunnatural…ItellyouIwasgoodatcold
callingtobigcompanies.Icouldcallup,youknow,IcoldcalledintoGoogleandweclosedGooglethat
way.ButthenwhenIhadtocloselikesomedebtconsolidationfirminIndianaandmakefiftycallsaday,I
justcouldn’tdoit.Iwasn’tthefiftycalladayguy.Imean,Idesperatelywantedthiscompany,whichwas
abouttogounder,tosurvive,butIcouldn’tdothefifty.Otherpeoplecandothefifty.So,Icoulddothe
largedeals,soyeah,thissortofstuffthatdoesn’tscale,butyouhavetopicktheonesareagoodmatch,
becauseifyougooutanddothisstuffthatdoesn’tworkforyou,it’shopeless.
Eric:Ithinkeverything’sreally,Imeanyoureadatonofarticlesoutthere,evenyourarticle,soeverything
attheendoftheday,it’sdone,Imeanyoudoitforyourselfbasedonthecasebycasebasis.Youdon’t
havetonecessarilyemulatewhatpeoplearesaying.Whatworksforsomeoneelsemightnotnecessarily
workforyou.AndIthinkalotofpeopleneedtounderstandthatbecause…Justbecauseyouseedata
herethatprovessomethingdoesn’tmeanit’sgoingtoworkforyou,right?
Jason:Yes,that’stheparallelofthequantitativeblogpostthatmakesitsoundlike,ifyoucouldonly
increaseyourfinalconversionfrom2.34%to2.684%you’dhaveabilliondollarcompany.AndanytimeI
readanarticlelikethatIwanttojumpofftheroof.
Eric:Samehere.So,Ithinkinsomeofyourblogpostsyoualludedtogetting…there’recertainrevenue
checkpoints,sotospeak,thatyougetlikeyoumighthitasnagso,youknow,yougettoonemillionor
twomillionandmaybetenmillionaswell.Canyoukindoftalkaboutthosecertainsnagspeoplemight
expectontheirwayup?
Jason:Yeah.Ithinkthere’smaybefour.Thefirstonegenerallycanhappenaroundhalfamilliontoa
millionrevenue.It’stypically…Let’sstepbackforaminute,okay?Gettingevenjusttenpeopletobuy
anotherweb-serviceisimpossible.Doyouseriouslyneedtobring…Areyouseriouslydesperatetobring
anotherweb-serviceintoyourbusiness?Imean,youknow,maybeyou’llplayonyouriPadatnightandgo
theAppStoreorGooglePlayandfindsomecoolnewgame.Wehaveanenormousappetiteforthat,
right?Orhopefully,maybethere’sactuallysomethingnewonNetflixIwanttowatch,soI’llspendtimeon
Netflix.
Buthowmanypeoplegohomelateatnightandsearchforbusinessapplications?There’sacoupleinCIOs
officesofinnovationofficers.Thereareahandful.Iknowwecantalkaboutthat.Butit’sanextremely
smallnumber.Somypointis,gettingtenusers,ifyou’reusingacoolphotoshareapp,doesn’timpress
me.Gettingtencustomersisepic.We’vedonetheimpossible.Andsokudos,it’sjustnotenoughrevenue.
Andsothenyou’veactuallydonetheimpossibleandthencanyoubuildsomethingthat’sreal...that’s
actuallyreal.You’llgetafirstcheckinwhenit’salmostreal.Whenyou’realmostthere,atwhatIcall
initialtraction,butyou’reonlyhalfwaythere.
Thatcouldbefivehundred-thousand,eighthundred-thousand,amillioninrevenue,you’rehalfwaythere.
Whatwillhappenisyou’llbegoodatit.Thefounder,seethefounderisvisiblygoodatitandmaybe…But
you’resosmall,youdon’thaveenoughmoney,youdon’thaveenoughthis,andthey’llbemaybeonekid
that’shelpingyou.Thatsortofworks.Buttheengineisn’tquiteworking,right?Thenumbersarethere,
butthe“eh”…youcan’tfeeltheengine.Andthat’satoughtime,atleastbecauseyoudon’tknowhowit
comestogether,butyouknowit’sworkingforyou,butit’snotrepeatable.It’snottrulyrepeatable.The
numbersaregrowingbutit’snotrepeatable.
Thenextkindofphaseis…Youhavetoblowthroughthat.Youjusthavetosuckitupaspainatthegym
becausewhat’llhappeniswhenyougettwiceasbig,usuallyliketwomillionARRassumingyourdealsize
issmall,maybeit’salittlebigger,maybealittlesmaller,onceyou’retheretheengine…Iguaranteethe
enginewillwork,whetherthat’sfivehundredcustomers,athousand,ahundreddependingonyourideal
size.
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 4
That’senoughthatyou’llhavearealenginethatyoucould,evenifyou’renotreadyforaVPofsales,we
canchatabout,atleastyoubringpeopleintoyourorganization.Youcanbringagreatheadofmarketing
in,agreatheadofcustomers’success.Twomillionisnotenoughtopaythesalariesofyourfullteamand
hireallthepeopleyouwant,butit’sreal,right?So,yougettheonemillionandyou’reseeingitinthe
numbers,andyou’reseeingitinthelogos,butit’snotanengine.
Twomillionandyoufinallygettheengine,okay?Andthenyou’relike,“Okay,it’sworking.Icanactually
spendadollarandmakemorethanadollar.”“IcanactuallybringLindaorBobinoffthestreetandthey
canactuallyclosesomething.”Thenthekeyis,andhere’sthethingthatIlearnedthatIdidn’tknow;
you’vegottogettotwototenasfastaspossible.Let’sjustdosimplemath.Ifyougettotwomillionand
youhavesomegrowthtoit,morethanfiftypercent,giveitenoughtimeyou’llgettospendmoney.You’ll
gettoscale.Ifittakesyoutenyearsyourdeadthough.Notonlywillcompetitionkillyouandmarket
changewillkillyou,butyou’llliterallydieofexhaustion.
Ifyoucandoitinoneyear,whichisincredibly…borderlineimpossible,ifyoucandoitinayearoreven
eighteenmonthsnomatterhowmuchpainyousufferthroughit’sallepic.Becauseonceyou’reatten
millionyouarefat.Youhaveextrapeople.Youcanhavesixtypeople,eightypeople.Youcanbringinten
ortwentysalesguys.Youcanhaveandextrafiveorteninextraengineers.Imeaneverybodyhastohave
anextraengineer.Oronceyougettoten-millionyoucanactuallyhaveawholeextrateamworkingon
coolnewstuffyoucanhave.
Soyou’vegottoget…onceyou’reattwo,you’vegottogettoten.Andtherealkeyisnottoburnout,
becauseifittakesyoufiveyearstogettoten-millionyouwillbetootiredandyouwilldie.Idon’tcare
howyoungyouare.TheothernightLeBronhadhisgreatestgameeveratagethirty,sixtysomething
pointsandthenightafterthathesaid,“I’veneverbeensotired.”Okay?Hemissedthethree-quarterto
tiethegameanditwasoneofhisworstperformances.Youcan’tdothat.Youcan’tburnout,right?And
burnouthappensifyou’repoor.
Eric:Gotit.
Jason:Andithappensagain,andagain,andagain,andagain,andagain.So,myreallearningis;attheend
oftheday,itdoesn’treallymatterhowlongittakesyoutogettoonetotwomillioninrevenue.It’dbe
greatifithappenedinaweek,orsixmonths,orayear,butthetruthis,itdoesn’tmatter.Whatmattersis
pushingasfastasyoucanfromtwototen,right?Sothatyoudon’tdieofpureexhaustion.
Eric:Gotit.Doyouthinkthisrule…ThisobviouslyappliestoSASS,itsoundslike,butdoyouthinkitapplies
toregularservicetypebusinessesortraditionalbusinesses?
Jason:Itappliestoanybusinessthathasreasonablegrossmargins.BecauseifyouhaveSASSlikegross
marginsthatareeightypercentorhigher,whatitmeansisthattenmillion,youcanspendeightmillionof
itonpeople,onhelp.Ifyouhavealowgrossmarginbusiness,ifit’stoserve,thisisbusiness,it’sforty
percentmargin,it’smathdoesn’tworkout.Ifit’se-commerce,wheretherealmarginsareliketwenty
percent,thanyouhavetomultiplybyfive.Insteadoftenmillionit’sgottobefiftymillion.SoI…Itdoesn’t
reallymatterwhetherit’strueBtoBSASS,butforthesesortofonetotwototennumbersthey’rekindof
dependentonthemargincontributionthatyougetata…Reallydoweneedsixserverstorunatenmillion
dollarbusiness?
Eric:Right.Gotit.So,oneofthebigthingsthatI’vealwaysbeenwonderingis,youguyshavebeen,oryou
havebeenreallyontopoftrackingallthenumbers.Youhaveallthesecoolgraphsandthingslikethat.
WhenIwasatastart-upaswell,weweren’tsupergoodattrackingeverythingsoIguess,howdidyou
guystrackthingswhenyoufirststarted,maybethefirsttwoyearsorso?
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 5
Jason:Attheendofthedaythere’sonlytwometricsthatmatter,ortwoandahalf:Revenuegrowthand
revenue;andhowmuchcashI’mbleeding.AndallthesewonderfulmetricsthatItalkaboutandoreven
wordsadnauseam;customerlifetimevalue,customeracquisition,cost,revenueperlead,Imean,they’re
allgreat;butifyourevenueisgrowingquicklyandyou’renotlosingmoremoneythatyoucan-noneof
thatmatters.So,thosearetherevenueswetrack,butthenyouwanttounderstandthesizebecausethe
realkeyisyougothrough.
Theonemostimportantphaseyougothrough,maybeithappenswhenyouhitinitialtraction,thattwo
millionnumber,maybeit’searlierlater,isonceyouactuallyunderstandhowyourbusinessworks.And
thenwhatendsuphappeningisyouhaveacoresetofuniteconomicsthatareplausible.
MycorecustomerIspendonedollarandIgettwobucksoutandthatyieldsxpercentofgrowth.Well,
maybeyoudon’tlikethatpercentofgrowth.Maybeonedollartogettwodollarsthatyields50%annual
growth.Thenyourjobasafounderistoaddthatextraincrementalcustomer.Thatmaybeitisadollarto
getadollar,orevenadollartogettwentycents,aslongasyourcoreuniteconomicsworks,that’sokay.
Soanyhow,Ithinkthatwecantalkaboutallthesedifferentnumbersandpipelinenumbers,andthings,I
thinktherealnumbersthatmatterareyourgrowthrate,yourburnrate,andthenthere’sthatcoreunit
ofeconomics,thecorecustomerthatprobablycostsalmostnothingtoget.Yougetitthroughwordof
mouth,orvirality,oryourbrand,it’sthatpositive.Ifthat’spositiveandyou’regrowingahundredpercent
youhavemagic.
Eric:Gotit.
Jason:Youlookatlike,whyisBoschspendinghundredsofmillionsofdollarsayearonsalesand
marketing,doesthatlooksstupid?Itmaylookstupid,butyouknowwhatthey’redoing?Bosch…we’llsee
theirexactnumberswhentheygopublic,buthere’swhatthey’redoing.They’rekindoforganic…Theyare
atahundredmillion,morethanahundredmillioninrevenueandtheyhave,whatI’llcall,anorganic
growthrate,Idon’tmean,literallyit’snowork,buttheengine’sworking,right?I’mgoingtosaythat’s
fiftypercentforthemnow,sixtypercent.Theywanttodoeightysotheywillspendahundredmillion
extratogofromsixtytoeightybecausethemultiplesjustify.Butitdoesn’tmeanthateveniftheunit
economicsareallofffromsixtytoeightythatcoresixtypercentgrowthisgood.Youneedgood
economicsthere,Iguaranteeit.
Eric:Gotit.Thattotallymakessense.Yeah,andit’skindofscaryhowthey’regoingheadtoheadwith
Dropboxtoo.YouactuallyhadapostonthetenmillionARRmark,andARRmeansrecurringrevenue,or
ARR’s
Jason:ARR’s,yesabsolutely.
Eric:Sowhy…Youhaveatrainthat’sgoingupinthatbloglist.Canyouexplainwhytenmillionisso
special?
Jason:Yes.WhatIlearned…IwishedI’dknownthiswhenIwasanentrepreneur,okay.WhatIlearnedis;
everythinggetseasieratten.Everything.Bythetimeyougettoten,atleastinyourindustry,yourlittle
segmentthatyousellin,everyone’sgoingtokindofrefertoyou.Justthinkaboutthemath.Let’ssayyou
gettotenmillionrightandyouraveragecustomerisathousanddollarsortenthousanddollarsayear.
Howmanycustomersdoyouhave?Athousand.Tenthousandcustomers.Andit’stakingyouacouple
yearstogetthere.Andthey’veheardofyouandthey’vetakenyoutotheirnewjob,andthey’vetoldyour
friends,andallofthis,andyou’vebeenheardof.Andsotheleadsjustcomein.Maybenotenough.It’sall
there.
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 6
Soyouhaveabrand.Andlet’snotdiscountthevalueofabrand.Thebrandisepic.Abrandiswhywebuy
aVMWbrand.BrandiswhywebuyanAppleproductthatwenevereventouchedit.Brandsmatter.
Brandsareproxyfortrust.Soyoucangetaminibrandmuchearlierthanthator…Somepeopleinthe
industryinTACorlikeOneSegment,butbytenmillioninyourrunrate,inyourbestniche,everyone’s
heardofyou.Okay?Soatleastyou’regoingtogetintoeverydeal.Youmaynotwineverydeal.Youmay
losethatdealtoyourscrappiersmallercompetitororyoursmarter…butatleastyou’llhaveaseatat
every…atmostdeals,okay?Sothat’sone.So,gettingintoeverydealiskey.
Two,here’sthething;tenmillionisfat.It’senoughfatthatyoucanhire…Let’ssayyou’redoingtenmillion
andyougroweightypercent.Thatmeansyou’regoingtoaddeightmillioninincrementalrevenuenext
year.Let’sassumeyouhaveahighmargin.ThatmeansIcanspendsixmilliondollarsonpeople.How
manyengineerscanyouhireforsixmilliondollars?
Eric:Aton.
Jason:Sixmilliondollars.That’swhyeveryonethathassomethinginordertoacceleratetotenmillion-
youcandoanythingwithsixextramilliondollars,right?
Eric:Yes.
Jason:So,youhavethebrand,youhavetheextramoney.Attenmillionyouhavesomanycustomersthat
thequestionis;howquicklydoyougrow?Butyou’reoutoftheperiodwhereyoucan’tbekilled,right?
Googlecan’tkillyou.Adobecan’tkillyou.Youknow…Salesforcecan’tkillyou.Salesforcemaybecankill
youwhenyou’redoingamillioniftheywanttothrowoutallthisspace,butattenmillionyouareun-
killable.Youcontrolyourfate.
Eric:Ilikeit.Cool.Soyou…There’salotoftalk…Imean,alotofyourblogpoststouchuponcustomer
success.Canyoukindofexplainwhyallthemoneyisincustomersuccess?
Jason:Yes.Andthistakesawhiletofigureout.So,yougetgoing,inyourfirstyear,howmanycustomers
haveyouhadformorethanayear?Zero,right?Andthenevenasyougetinto,like,thefirsthalfofyour
secondyear,youknow,monthstwelvethrougheighteen,thinkaboutgoingbackayearintime,yourvery
firstsixmonths,howmanycustomersdidyouget?Barelynone.
Soittakespeopleabouttwoyearstoevenunderstandwhattheheck’sthepointofinvestingincustomer
success?Becauseobviously,onthesurface,itseemslikeapointlesswasteofmoneyinyourfirstyear,
whichitisn’t,we’lltalkabout.Andevenbytheendofthe…Ittakesyouinthesecondyeartohaveenough
customersthatyoucouldreallyseeaquantitativeimpactfromcustomersuccess.
ButwhatIlearned,andthenwecantakebackaroad,butwhatIlearnedabouttwoyearsin,okay,was
justwhatIsaidbefore;wegoteightypercentofourgrowth,fromourexistingcustomersandthat
constitutesbothviralandwordofmouthandthebrand,butalsoimportantlyup-sales,upgrades,buying
morefromyou.Andhere’sthesecretsaucethere.Ifyourcustomerlovesyoutheywillbuymorefrom
youelectively.Ifyourcustomerhatesyou,butisforcedtouseyourproductanyway,right,likeUnited
Airlines.IwillstillflyUnitedifit’stheonlyreasonablewayformetogettoNewYork,butIwillnever
electivelyflyUnited.IwillalwayselectivelyflyJetBlueorUrgent.
So,ifyoubuildthisattitudinalroyalty,okaywhereyourcustomersloveyou,youwillgrowanothertwenty
percentbecausetheywillbuymore.Andtheywillchurnoutatamuchslowerrate.Now,wedidthismath
andIreallyfeellikeonceIgotmyselfrealdeeplyinsalesandhadanenginegoing,Ifeellikewehadthe
bestsalesteamintheSASSintermsofefficiency.
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 7
Havingsaidallthat,withthebestteamoncewehitfour,fivemillioninrunratewestillcouldhavegrown
literallyeightypercentayearwithoutanytraditionalsalesjustbymakingourcustomershappy.Westill
neededsomebodytogive…westillneededasalesteam.ButwhatImeanis,thesalesteamcould’ve
focusedjustoninternallygeneratednewrevenueandstillgroweightypercent.
That’sthemagic“A-ha!”Andso,whatyou’reseeingtodayisfolkslikemewholearnedit,especiallyfor
companiesthathaveenoughfunding,butevenifyoudon’t,you’reseeingthembringonacustomer
successorcustomerhappiness,ifyouwanttobeserious,aucourantofficerslikeliterallywiththefirstten
customers.Iwasthecustomersuccess,theVPcustomersuccessinthebeginningandthenwehadan
internwhoturnedouttobegreat.
Butyou’vegottojustshowerthemwithloveforthefirstday.Andtheninyearthree,here’sthetough
part;itpaysoffandyou’refreebecauseofthemathwetalkedabout.You’vegottomakethatinvestment
nowinsecurerevenuesothatallthatloveandallthatwordofmouthandvirality,andupgrades,andup-
sales,andallthisstuffthatIcallsecondorderrevenue,becauseitcomesoutofit.Secondorderrevenue
areseedsyouplantandyouharvestinyearthree.ThisiswhyyoulookatalltheseSASScompaniesand
they’vebeenaroundforalongtime,likesevenoreightyears,thenyou’llturnaround,butthenitjustgets
epic,oncetheseseeds…theycanreallyharvest?
Eric:So,whenyousayharvestareyousayingthey’reactuallyup-selling?Isthatwhatyou’resaying?
Jason:Up-sale,up…andthey’lljustwanttobuymorefromyouiftheyloveyou.Becausethethingis,if
youmakeitthroughfouryearsyourproductwillgetbetter[laugh].Andsoonewayoranother,whether
it’sthembuyingmorelicensesacrossthecompany,orthembuyingmoremodules,oreditions,or
whatever,basicallywhathappensis,outsideoftheverysmallbottomofthemarket,everygreatrunning
SaaScompanyhasnegativechurn.Negativechurn.Andthetypical…ThenumberIsetforourteamand
thatwehit,wasahundredtwentypercent.
Eric:Wow!
Jason:—Organicgrowth.SoeveryyearifIbuyintheendoftheyearwithafourmillionbase,my
customersuccessteamwasnotjusttokeepthatfourmillion,buttogrowthattwentypercentinthenext
year.Theyhadtoturnthatfourmillioninto4.8thenextyear,inclusiveofchurn.Includingchurn"Wow",
right?Andallthegoodteams,theycanallachievethat.So,that’sjustaverynarrowdefinition.That’snot
newleads.That’snotvirality.That’sjustliterallytakingthecustomersthatlovemeandthemwantingto
buythirtypercentmoregrossbasis,twentypercentonthenetbasis,itallwillhappentoanyoneifyoudo
itright.Butittakestime.
Eric:Gotit.
Jason:Becausethey’vegottotrytheproduct,they’vegottoliketheproduct,they’vegottodeploythe
product,they’vegottobecomfortablewiththeproduct,andthey’vegottogetmoreusersonthe
product,andthenthey’vegottogetreadytobuymore.Thefastestthatreallycanhappenisliketento
twelvemonths.
Eric:Imean,ifthere’sanytestamenttowhatJason’ssayinghere,likewe…Ihaveaservicebasedbusiness
andwestartedimplementingtheclientsuccessmanagersorcustomerservice,whateveryoucallit,it’s
startingtowork.We’restartingtogetreallygoodfeedbackfromit,butagain,likeJasonsays,ittakes
time.So,Ithinkitdoesapplytoalmosteverysinglebusiness.It’sjustanobrainer,right?
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 8
Jason:Ithinkwhatmost,sortofBtoBentrepreneursarebetterattodaythanwewerewhenwestarted,
thebestones,isthey’remorepatient.Wewerenotpatient,okay?Wewantedtoachieve…Wegave
ourselves,sortof…andthiswasin2006whenthemarketswerehundredsofsizes…ittookaboutten
monthstogettotwomillion.
Eric:Wow!
Jason:Weweren’tpatient,right?Andwedidn’tevenknow…HonestlyIhadtolearnhowtobepatient.
Eric:Ithinkmostentrepreneursaren’t.
Jason:They’renotpatient.Buttosomeextentwewereimpatientinthewrongways.Andso,today
there’remoreexamplestolearnfrom.Andso,customersuccessisallaboutpatience.Becauseifyou’re
givingyourselfonlytenmonthstomakeit,ortwelvemonthstogettothreemillioninrevenue,there’sno
pointininvestingincustomersuccessbecauseitwon’t…itcan’timpactyou.Butthesma[rt]…thegreat
entrepreneurstodayarethinkinginseventotenyearsintheirfirstperformance.
Eric:Whichisgood.Thelonggameisgood.Doyou…So,questionfortheaudience,Ithinkthiswouldhelp
them.Doclientsuccessorcustomersuccesspeoplegetcommissionsfortheup-sales?
Jason:Yes.Theyshould,right.Butit’sacomp[licated]…Everythingabouthowyoustructurethe
organizationintermsofordering,howdoyoucompensatecustomersuccess,it’snotasclearcutasitis
withsales.Infact,youknow,IspokeatTreeForestwiththeCOofGainsight,whichisacustomersuccess
softwarecompany,hewasVPcustomersuccessatMarketo,longtimeexperienceinthisindustry,andhe
didtwelvedifferentorgchartsofpiestructure,acustomersuccesssignaturehadacustomersuccess
reporttotheCO,ortheheadofsales,ortheheadofthis,tomarket;there’snoperfectanswer
unfortunately.Becausehere…
Let’sstepbackforaminute.Let’stalkaboutthechallenge,let’stalkaboutthesolution.Thechallengeis
youhavetodecidewhatbehavioryouwanttopresent.There’sonethingIknewIdidnotwantinmy
company.Ididnotwantusedcarsalesmenincustomersuccess.Andtherearealotoftheseguys
especiallyoldschoolguys.Sometimesthey’recalledaccountmanagersorwhatever,theseareguysthe
customerneverheardofandonday362beforethecontractisupforrenewalallofasuddenMarvin’s
there.“Marvin.Myname’sMarvin.Iknowwe’venevermet,butyourusageviolatesourtermsofservice
andyou’renotusingourcrappyotherproductyoueverheardofandI’dlikeyoutobuyanotherten
thousanddollarsofmyproductthisyear.”Right?
Ijustfeltlike,eventhoughtheyhaveagoodnetwork,Icouldneverworkthatcompany,anditwouldnot
createthisattitudinalroyalty.SoIknewIdidn’twantthatandalotofcompaniesdothat.Theydothe
hardsellonday360andmorepowertothem.But,Idon’tthinkit’sthenumberoneapproach.Butifyou
havethosedudes,whatdoyoudo?They’rejustsalespeopleonyourexistingbaseandyoujustgetgive
‘emaregularcommission.Themajorityoftherevenuesisgoingtocomefromcommission,orhalf,right?
Butthatdoesn’tbuildthekindofrelationshipswe’retalkingabout.So,youknow,thekindofratiothatI
cameupwithwasasfollowsisaneighty/twentyformula,soeightypercentbasesalary,twentypercent
bonustarget,andthatwastiedtothathundredandtwentypercentnumber.Wesegmenteditbygroup.
So,generallyspeakingifyoutook...Let’ssayyou’reacustomersuccessmanagerandyoumanagetomake
amillioninrevenue.Yourjobistogetitto2.4,Idon’tcarehowyougetitdone.Butifyoudon’tbuild
goodrelationshipswithyourcustomers,theywillchurnandyou’lltotallyscrewitup.Right?Andifyou
selltooharditwon’tworkeither.Andit’snotsomuchcommissionthatyourincentiveistodonothing
aboutthat.Andthatmeant…whatIchosewasatotaltargetforyourwholebase,whichiswhatmost
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peopleendupdoing,andhavethecommissionbematerial,youknow,twentypercent,butnotsalesit.It
seemstowork.Itseemstobewhatmostpeopledo.
Andthentogetintothenittygritty,thequestionis,butwhatiftheydosomethingthat’smaterialorwhat
iftheyjustdon’tgrowtheirbasetenortwentypercent,buttheyaddamilliondollarsinrevenue?Turns
outIthinkwhattherightansweris,isthis,whichalotofcompaniesdo,istheybasicallysay,ifadealisup
to…Ifandupgradeisuptoacertainsize,saytwentypercentoftheinitialgrowth,saytwentythousand
dollarayearcustomer,iftheybuyuptotwentypercentmore,uptotwothousand,thecustomersuccess
justhandlesit.Nosalespersonsinvolved.
There’snodirectcommission,okay?Andassoonasit’saboveanumber,itcouldbeahundredpercentof
thedeal,itcouldbetwenty,itcouldbewhatever,thencustomersuccessbringsinsaleswhetherthey
wanttoornot.Andtheymaynotwanttobecauseoftherelationship,buttheyhaveto.Andso,lateron
whenyougetmoresophisticated,Ireallylikethisideaofdrawingthisbrightlinebetween…belowthe
minimalstructural,youknow,itstayswithcustomersuccess,nodiscounts,nogains,it’sjustlistprices,so
it’snotthatmuchmoney.Right?“AndI’lljusthelpyouGeorge”right?Andnoneofthatsalesmoneyhas
tocomeback[laugh].Butwhenit’saboveanumberandyouactuallyneedsalesexpertise,saleshastobe
involved.
Eric:Yup.Gotit.Makessense.AndIthinkyouhadinonepost,youtalkedaboutacertainpercentageof
revenuesgoingintocustomersuccess.Whatpercentagewouldthatbe?Ithinkyousaid…Whendoesthis
happen?Likethreeyearsin?Whendoesthishappen?
Jason:Youmean,howmuchshouldyouspendonit?
Eric:Yes,thatisthequestion.
Jason:Youknow,it’sgoingtodepend,butroughlyspeakingyou’regoingtowanttospendtentofifteen
percentofyourrevenueprotectingthatrevenue.Andyoucankindofbackintothatnumberinasense
that…Thereisaslightlymisleading,butusefulindustrymetricofonecustomersuccessmanager,one
humanbeingcanmanageabouttwomillioninrevenue.Andjustthinkaboutit.
Let’ssayyouhaveamilliondollarcustomerwhichisabigdeal,butIjustwantoneortwopeople,Iwant
thatguyorgaltoonlywinthatcustomerandoneotherright?Let’ssayyourcustomerisundertwenty
thousanddollarpricepump.Maybethispersoncouldhandleahundredcustomerstotal.Thatmeansthey
canbedraftedwithallofthem.Theycanvisitmostofthemifthey’relocal.Anyhow,ifyouthinkaboutit,
twomillioniskindofrightacceptthat’s…Youwannadoitinadvance,onarrears.Youdon’twanttoget
pasttwomillionbecausethentheguy’s…theperson’stoobusy.Soreallyit’sprobablymorelikeamillion
tomillionandahalfforcustomersuccessmanager,okay?
Eric:Gotit.
Jason:So,youknowitsadvanceonarrears.Solet’simaginethatit’samillionandahalforamilliontwo.
Takethefullyburnedcostofthatperson.Let’ssaythefullyburnedcostishundredthousandwith
benefitsandcoolmacro-careandthebrands,andmaybeit’smore,it’smore,right?Thataloneisgoingto
beclosetotenpercentofthebusinessthatthey’reprotecting.Andthenyou’vegottogivethemmoney,
andyou’vegottogivethemcollateral,andtime,andallthis,soyouit’sgottobefifteenpercent.
Eric:Gotit.
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Jason:Soifyoukindofbudgetthatin,youknow,sincethisismymost…myhighestmarkingcustomerthis
isallthesourceofmysecondorderrevenue,let’sspendatleastfifteenpercent,makingsurewedon’t
loseit.Andyou’llseethatmanyolderschoolcompanies,andmanypeoplethatareintoprofitspendfar
less,likefivepercent.Andthat’stheworstinvestmentyou’reevergoingtomake.
Eric:Gotit.Fifteenpercentguys.Cool.
Jason:Andmaybealotmoreintheearlydaysifyou’rewell-funded.Maybeifyou’rewell-fundedinthe
beginning,it’sthesinglebestinvestmentyoucanmake.
Eric:Canyoudefinewell-fundedfortheaudience?
Jason:Wellcompaniesthatareraisinglotsofmoney,likeeightortenmilliondollarsearly,ifyouableto
dothatsomehow…Iwouldhirefourcustomersuccessmanagersthenextday.Showeryourcustomers
withlove.Evenatamillioninrevenue.Wejusttalkedaboutthismetricoftwomillionpercustomer,but
it’sreallymorelikeamillionandahalfonadvanceonarrears,butifIonlyhadamillioninrevenue,that
mathsaysyouneedoneperson,right?
Eric:Yup.
Jason:IfIhadeightmillioninthebankIwouldhirefour.
Eric:Okay.
Jason:Sothattheyjustgetthosefirstcustomersjust…alltheirneedsaremetnomatterwhat.Andifyou
lookatthesewell-fundedcompanies,theymayhaveacrazynumberofsalespeoplemaybetoolittle,too
few,theremaynotknowwhatthey’redoing,buttodaythey’vegotfourcustomersuccessmanagers.
Eric:Wow!
Jason:Okay?
Eric:Yup.Idon’tthinkalotofpeoplerealizethat,buthereyougo.Cool.Let’sswitchgearsalittlebit.Let’s
talkaboutsomethingthatalotpeopleask.Ithinkyougetaskedthisquestionalot.Whenshouldyouget
aVPofsalesandhowdoyougetagoodone?
Jason:Yes.So,thefirstoneseasiertoanswerthanthesecondone,althoughthey’rebothmorenuanced
thananyotherpositionyou’regoingtohire,okay?YoushouldhireagreatVPofengineeringbeforeyou
startquitting,becauseyoucan[laugh].YoushouldhireagreatVPofmarketingassoonasyoucanafford
togetone.Even…Whynothireoneatten-thousanddollarsamonthinrevenue.IhiredmyVPmarketing,
who’sinsanelygreat,nowshe’sVPmarketingandweweredoingtwenty-thousanddollarsamonth.AndI
didn’tloseadollar.
Youcan’tgowrong.TheVPofsalescangowrong.Forgetaboutthefactthisisthemostexpensivehireon
paperyou’reevergoingtomake.Youbringthispersoninbeforeyouhavearepeatableprocess,itnever
works.Itneverworks.Andsowecantalkaboutwhy,butthebottomlineis;untilyouhave,generally
speaking,untilyouhaveatleasttworepsthatarehittingaquotaandyouhaveanenginegoing,ifyou
bringinaVPofsalesitwillbeatrainwreckninetimesoutoften.
Soyoubackintothatwhenwetalkedaboutourstagesbefore,ifyoubringinaVPofsalesbeforeeven
onetotwomillionofreferringrevenue,it’sarealVPofsales,youhaveaninetypercentgrowthrate.So
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 11
whatdoyoudo?Youkindofhavetwooptions,thatifyouhavetheskillsyougettwotothreerepsupto
thatlevel,getthemgreat,getthemgoing,thenbringintherightperson.That’stherightwaytodoit.And
that’swhatyoushoulddo.That’stherightanswer.
Havingsaidthat,whatifyoulacktheskills?Whatifyouareliterallydonot,nomatterhowmuchyoulike,
noneofthefounders,andthisissad,butitdoeshappen,noneofthefoundingteamhastheskillto
managetwotothreefolksselling.Andtodothat,stepback,youhavetosellfirst.Becauseifyoucan’t
close,andIclosedallofourfirsthundredcustomers,ifyoucan’tdoityourself,how’reyougoingteacha
twenty-fouryearoldkidhowtodoit?Youcan’t.
So,you’vegottoclosethemandthenyou’vegottoteachtwopeoplehowtoclose.Andyou’renot
possiblytrainedinsales,sothere’sahugelearningcurveforyou.Soyou’vegottogetthatteamofthree
whichisyouplustwo.Youhavetodothat.Butwhatifyoucan’t?Thenyou’reinthishyperriskyphaseof
hiringaVPofsaleswaytooearlyandthisisthepersonIcalltheevangelist,andthey’renotreallyaVPof
sales.Theyaresomeonewithexperience,usuallycharismaticandverysmart,theycantalkthegame,
theycandowhatyoushouldbedoing,asafounder,butlacktheskillstodo.Sohirethatpersonasyour
secondbest.,butjustbearinmindthatevangelist,thatsupercharismaticpersonthatyousendoutto
attractthatten-thousanddollars,thatpersonwillneverscaletobetheguythatmanagestwentyreps,
zerooutofahundred.
YoumayhavetotransitionthatpersontoaVPofBusinessDevelopment.Itdoesn’tmeanyou’vegotto
getridofthem.Itjustmeans;thatmagicalguythatcancomeinwithnorepsunderthem,nothing,anddo
thismagicalstuff,isnotthesamepersonthatcanhireyourfirsttenrepssuccessfully.Zeropercent.So,
justbearthatinmind.
Eric:Ithinkyoualludedtothis,thatthisistheindividualcontributorthat’sreallygood,but…
Jason:AndtherelasttitleattheirlastjobmayhavebeenVPofsales,butusuallyitsevangelistwhenyou
reallypickthroughit,“Sohowmanyofthoseeightguysthatyoumanagesinceyouhired?”“Well,Ireally
didn’thirethem.Iinheritedthem.”“Wellwhatdoyoumeanbysalesrep?”“Itwasmoresalesoperation
thansalesstrategy.Ireallymoreworkedwiththeeightreps.”“Ahha…”Right?
AndthatgreatVPofsalesthathiredeight,ten,ortwentyrepsandbuiltareallyefficientengine,that
person’snotgoingtocomeintoyourtenthousandamonthrevenuefromscratch.That’snotwhatthey’re
goodatandtheydon’twanttodothat.Sometimes,butthey’llcomeundertheten-thousanddollara
monthrunratecompanywhentheyhavetenmillionusers.
Eric:Yup.Thatmakessense.
Jason:They’llcomeinlikemyVPsalesdid,thefirstsalesmanageratLinkedIn,whenitwasallself-service
business,liketherewasnorealsales,buttherewerealotofusers.
Eric:Andtheycomeinandtheyfigureitout.
Jason:Theyfigureitout,butatleastthere’sthebase.NogreatVPofsalesisgoingtocomeinwithno
base,nothingtoworkwith.WhatthegreatVPofsalesdoistheyhireandtheyincreasetherevenueper
lead.Theydon’tfigureoutwhetheryouhavemarketproducts.That’showtheydoit.That’swhatItell
Judith.
Eric:Samethingwithhiringamarketertoo.You’vegottohaveproductmarketfit.
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Jason:Youdo.Youdo.ButthepointisyouhirethisVPofsalestooearly,they’regoingtoflameout.You
highertheVPofmarketingeven…Aslongasyouhaveahundredcustomers,aslongasyouhavetimeand
money,it’sgoingtobeokay.Aslongasthere’ssomethingtheretoworkwith,rawmaterials.
Eric:Iagreewiththat.Cool.Intermsof…Doyouhaveanyprocessforsettingquotaforpeopleor
like…Howdoyousetquotaforsalesteams?I’lljustputitthatway.
Jason:Let’sstepback.Therearecertainindustrynormsthatareveryusefultoreferenceandthere’swide
bands.Buttheroughindustrynorms…laterwhenyou’reatscale,whenyou’repasttenmillioninrevenue,
everythingkindof…pastamillioneverything’skindofthesame.GivenanACD,atagivenaguildsize.
Maybeevenpastthreeorfourmillioneverything’sthesame.Companiesthatselltwenty-thousanddollar
ayearproductspastthreetofourmillion,theyallhavethesametypeofsalesstructure,thesametypes
oforganizations.Companiesthatareahundredthousandarethesameandcompaniesthataresortof
lowendorself-service,oncetheyareallthreetofivetofour,theyallenduplookingthesame.
Solateryougetbracketedintothefollowingquotas.Thebigenterpriseguysgetmilliondollarquotas,but
maybelaterit’stwomillion,butonetotwomillion’sahugevariance,but,youknowamillion.WhatIcall
andsomefolkscallrunratewraps,thatsellfour,five,six,eight-thousanddollarayeardealsendupwith
quotassortofinthefourorfive-hundredthousanddollarrange.Andtypicallyguysthatselltothevery
smallbusinessesendupwithquotasthataresortofinthetwotothree-hundredthousanddollarrange.
Okay?
Sothat’swhereyou’regoingtoendup,Andyou’regoingtoenduppayingthoseguysapercentageof
thosenumbersbackasontargetearningcommissionplusbase.Sothat’swhereyou’regoingtoendup.
Thequestion’s;howdoyougetthere?
Eric:Yup.
Jason:Right?You’regoingtokindofendupwith,intheverybeginning,youhavetopaypeoplealiving
wage.Ifyoubringyourfirsttworepsinandtheycan’teatandtheydoagoodjob,like,what’sthepoint?
SowhatIdidinthebeginningwithourfirsttworepsinthebeginning,whenweweregettinggoingis;allI
wantedinthefirstninetydayswasforthemjusttocovertheircosts.Thatwastheirquota.
Soyou’reinitialquotaisahundredgrandandthenitscalesuptothosenumbers,threehundredthousand
orwhateveritis.Butithas…Youwantyourreps,ifthey’redoingagoodjob,youwant…theyhavetobe
successful,theyhavetofeelsuccessful,soyouhavetoengineerquotasandtalktargets,thatifthey’re
goodtheycanhititandtheycanseeitandiftheydon’t,ImeanIknowpeoplethathavehadsuccesswith
impossiblegoalsinthebeginning,butIfindthattotallydemoralizing.
Eric:Gotit.
Jason:Or,letmeputitdifferently.Iwroteapost,like,yourbestrepyouwantdrivinganM6convertible.
Eric:Yup.
Jason:Inhisfirstyear,“Weoughttowrapthosetwenty-four…”youknow,oncehewasunleashedfroman
SVRintoanindividualwrap,youknowinsixmonthshehadtheMercedesconvertible,andthenaround
monthfourteenitwasthenewM6convertible.That’swhatyouwant,right?Thatmeansyourcompline’s
working.IfeveryonehasanM6convertibleyouhaveaproblem.
Eric:Totally.
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 13
Jason:Butaftereighteenmonthsno-onehasaM6convertibleandthey’reallsayingit’snotaboutthe
money,it’saboutthejourney,you’redead[laughter].
Eric:Ilikeit.
Jason:Salesisaboutmoney,right?Salesfromthestart-upisaboutmakingmoneyandenjoyingmaking
money.Salesinthebigcompanyisjustaboutmoney.Inastart-upit’sabouthavingachancetomakea
lotofmoneyandnothavingajerkbossandhavingfundoingit.Beingpartofagreatteam.Ifyougointo
SASSstart-ups,anystart-upthatareliketenmillionoraboveandgrowingwell,andyoumeetwithteam,
you’llseejustthisincredibleenergy.It’sjustwonderfulandbuildsonitself.
Eric:Yup.Iactuallyhadafriendwhodidsales,itseemslike,ifyou’regoingtohiresalespeoplethey’re
goingtohavereallyexpensivetastesowhenyouinterviewthemyoushouldaskthemwhattheirtastes
areor,youknow,whatkindofcardotheywanttodrive,right?
Jason:Yes.
Eric:Ithinkyoualsosaidthattoo.
Jason:Yes.Iliketheoneswithexpensivetaste.TheoneIreallydon’tlikeistheguythatdrivesthesixyear
oldMercedesE63.Okay?Thatman,sixyearsagohethoughthecoulddriveanAMGMercedes,butnow
it’sgotalotofdentsandthere’salotlikeBigGulpcupsinthebackandallthat.Irunfromthatguy.
Eric:Gotit.Cool.Makessense.So,actuallybacktrackingalittlebit.Yousaidthatinthefirstninetydays
theyshouldbeabletocovertheircostsyousaidahundredgrand.
Jason:Yeah.
Eric:So,wouldthatbenetorgross?
Jason:Well,Imean,youknow,lateritshouldbeinclusiveofallcosts.Inthebeginningwhenyou’resmall,
whenyou’reastart-up,justtrytomakethemathwork.
Eric:Okay.
Jason:Defineitinthemost…Justmakehersuccessful.Sodon’tplayanygames,likeliterally,ifyoudon’t
haveanengine,sayallIwantyoutodointhefirstninetydaysisclosewhatever,tenthousanddollarsof
newbookings,makeiteasyandthenmakeithard.Whenyouhaveoneortwosuccessfulpeople,you’ll
haveanintuitionthere.Butsetthe…makethebarachievableforthatfirstpersoninthefirstninetydays.
Eric:Gotit.Afewmorequestionshere.Ithinklikethreemore.So,andthisisfunny;youactuallyalluded
topayingthemoff…makesureyoupaythemabaseandthengive…givingmostlyabaseandthena
commission.AndthisissomethingthatAaronRosssaidwhichwewilltalkaboutinasecond.So,yeah,
actuallyjusttalkaboutitrightnow.AaronRoss,formerdirectorofsalesatSalesforce,Iknowyouwere
workingonabookwithhimrightnow…
Jason:AaronandIknoweachotherrallywell.
Eric:Canyoutalkaboutwhatyouguysareworkingon.
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Jason:Aaron’smisterpredictablerevenue,butit’ssortofasequeltowhathe’sdonein“Predictable
Revenue”
Eric:Gotit.
Jason:So,itshouldbegood.It’sgoingtotieintothethemesthatIhave,whichinsomeways,arebroader
themesaboutrecurringrevenue.Totieinsortofwithhisnextgenerationthesisandviews,taking
everythingthathe’slearnedverysuccessfullyandtakingittothenextlevelonthesalesside.
Eric:Gotit.Sototheaudience“PredictableRevenue”,that’samustreadsalesbookifyou’rebuildingan
organizationandIthinkthesequelisdefinitelyamustreadalso.Also,Jason’sblogaswell.What’sone
mustreadbookyourecommendtoentrepreneurs?
Jason:Ohgoodness.Nowyougavemethetopquestionofthehour,right?Idon’tknow.Itellyouwhy.In
allhonesty,andAaronisgreat,he’saperfectexample,right?Ishouldknowthatanswer.
IstruggledasanentrepreneurwhenIwasbuildingmySASScompanygettingtosomething,youknow?In
thoseyearsfromthesixtillnineIcouldn’tfindthebook.SoItriedtoproducethecontentonQuoraon
SasStrtoprovidemyguides,right?IwishIknewtheperfectsource,butIdefinitelywouldincludeAaron
inthattopfivetoreadgroup,right?IwishIhadtheotherfourandaskmeinayear.Ijusttryto
contributesomeofthatcontentbackbecauseIcouldn’tfindit.
Eric:Mmhmm.
Jason:IwishIhaditbecauseIwouldhavereadit.There’salotofgoodcompanybuildingstyle,right,and,
youknow,butthere’sonlysomanybiblesonhowtoscalerecurrentrevenue.
Eric:YouknowIthinkthereallyinteresting.
Jason:Tellme.
Eric:No,Iagreewiththatbecauseit’sreallyhard,ImeanbeforeIreadAaron’sbook,andbeforeIread
yourstuffthere’sreallylittleinformationonhowtobuildasalesorganization.Andalotpeoplearejust
like,“Oh,wedon’tneedsales.”Andthenthere’sthisthoughtuptherelike,“Oh,wedon’tneed
marketing.We’rejustgoingtoletitgroworganically.”whichtotallydoesn’tworklikethatforthemost
part.So,Ithink,yeah…
Jason:There’salotofsalesmanagementstuffwhichisfocusedononetrafficpostscalemanagement
theory.Butwhenyou’redoingsomething,Ireallydon’tneedtohearalotsalesmanagementtheoryon
thehundredmillionoronebillionfromtheSVPofsalesoperationstotheSAP.Itjustdoesn’thelpme.
Eric:Totallymakessense.Intermsof…What’saproductivityhackthatyouuse?
Jason:Mytopproductivityhap,becauseIwroteaboutit,wasforme,ontherevenuesideatleast,was
onethatpeoplethoughtwasnutty,butnowmorepeoplehaveadoptedit,whichwas;creatingasales
commissionplanthattotallyalignedinterestwithmeandthecompany’sfund.WhatIdidwas…WhatI
learnedwas…andyoucanfindtheexactplanatSasStr.com.
WhatIlearnedisthatwhenIdidthisanalysis,Iwishtherewastheperfect[proof]backthen,butwhatI
learnedattheendofthedaymostsalescompplansbasicallytargettwentytotwenty-fivepercentofa
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 15
deal,uptothirtysometimesifit’sattheverybottommarketSandP,twentytothirtypercent,really
twentytotwenty-fivegoesbackoutasbonusesandcommissions.
So,Iknewthatwaskindofthewaythatthewaytheworldhadworkedoutovertime,that’sanatural
organicpattern,andthenIknewthisotherthingthathappened.WhenIhadmyfirstVPofsales,who
almostranthecompanytotheground,whichwaswhenwehemorrhagedcash.So,hecameintookthe
tworepsthatIhad,whichweregreat,andwouldhiretenpeopleandwithinahundredandtwentydays,
ourproductivityhadfallenfiftypercentandwewererunningintotheground.
Eric:Wow!
Jason:Anditwasn’tthat…Ididn’tknowwhattomakeofitoffigureout,right?ButIsawsomethingwhich
Ireallyhatedhappening,whichwaswhenhehadbroughtinatraditionalsalescompplanfrom
Salesforce,whatIsawis,whenyoucombinethatwithBminusreps,Ihadabunchofpeoplecomingin
theofficesellingalmostnothingandlivingofftheirbase.Okay?Sotheywere’nt…So,theonethingIknew
isIdidn’twantanybodytoliveofftheirbase.Ijustwantedto…OntheotherhandIwantedthefolksthat
killedittomakeaninsaneamountofmoney.TheotherthingIhated,fromthebigcompanysalescomp
planwaswhatweredecelerators.Theideathatifyoudotoowell…”EveryyearI’mgoingtoraiseyour
quota,dude,becauseyoudidsowell.”I’dgetupandIdidn’tlikethat.Isaid,“Listen,ifyoumakethe
companyhalfamillionthisyearandamillionnextyear,I’mgoingtopayyoutwicenextyearasmuchifI
can.”
Eric:Ilikeit.
Jason:Ihatedtheideaofraisingthebaronpeoplethatwerekillingit,right?AlthoughIgetwhyyouhave
todoitinalargeorganizationsoIsaid,“Okay,howcanImake…haveno[tax],nodecelarators,nogame,
nostupidity,andalsonothavethelosersthatI’mstuckwithlikelivingofftheirbasesalary?Becausegreat
folkswillleavefortheirbase,buttheloserswill…iftheycanmake80Kayear,it’snotthattheydid
anothergreatjob,sowhiletheyspinintheircubeorattheirdeskjusttryingtocloseanything.
So,anyhow,that’swhatItriedtoaccomplish.So,theplanthatIcameupwithwasbasicallythis:youpay
backyourbasebeforeyoumakeadollarincommission,yourfullyburdencost.So,ifyourbaseis60K
annual,you’vegottobasically,andsaythat’s5Kamonth,right?You’vegottobringinsixorseven
before…youdon’tmakeanymoneyonthosebookings.
Butthenyoutakeabigchunkofwhat’sbeyondthat.So,insteadoftakingtenpercentorfivepercentof
what’sbeyondthat,I’mwillingtofigureoutwhatthemathematicalmaximumthatIcangivethem,and
it’sperhapsliketwenty-twopercentorsomethinglikethat.Andsothatmath,youknow,ifyouattheend
bringinamilliondollarsinbookings,you’llmakeahundredtwentythousand,forsomebodyelseiswas
twenty-fivepercent,they’dmakeaquartermilliondollars.Ineedtwomillion,that’shalfamillion.Andso
thefolksthatkilleditmadealotofmoney.
Here’swhatIknewasafounderCO,ifhebringsintwomillionisthereanywayIcanlosemoneyinmy
company?Impossible.Iknow…Ididn’tevenhavetoworryanymoreaboutincen[tive]…sosales…here’s
theprofoundthing;saleswentfromacostcentertoaprofitcenter.AndIdidn’tevenneedtolookat
anything.Ididn’tneedtoseethedumbreportsorloggingthesales,itdidn’tmatterbecauseIknewthat
thosesalespeopleweredrivingtherevenueperleadup.That’sallIcaredaboutwasrevenueperlead.
AndIknewitwasacredence.Iknew,foreverydollarthattheywrotein,Iwasgivingthemlessthana
dollar.Nomatterwhat.Andallmyworrieswentoutthedoor.
Eric:Ilikeit.I’mgoingtohavetore-readthat.
TheSalesProcessthatGrewEchoSignto$100MinRevenueswithJasonLemkin(podcast) 16
Jason:Ididn’tcare,right?Buttheykneweveryincrementaldollar.Theymademore,andasafounder,
andanequityholderImademorebecauseIaddedvaluetothecompany.So,gogetyourM6convertible.
Thedudeistotallycool.Enjoy[crosstalk]
Eric:Thisisinthebookright?
Jason:IthinkAaron’sgoingtohaveitinthere.Whenyou’reinabillioninrevenueitdoesn’twork.It
doesn’tworkforAdobe,butyou’reafoolifyoubringinthissalesforcecompplan,andSalesforcemay
haveimproveditsincethen,IloveSalesforce,butbringingthatintoyourtwomilliondollarcompanyisa
recipefordisaster.
Eric:Gotit.So,Jason,thankssomuchfordoingthis.Alotofinsighthere.Irecommendpeoplewatchthis,
re-watchthis,andthengoJason’sblog,readeverything.Read“PredictableRevenue”twiceandyouwill
beasalesmaster.So,Jason,thankssomuchfordoingthis.Wehopetohaveyouontheshowagain,
sometimesoon.
Jason:Yeah,thiswasgreat.Perfectstuff.