Book Review; From Impossible To Inevitable: How Hyper-Growth Companies Create Predictable Revenue

Fantastic read of From Impossible To Inevitable: How Hyper-Growth Companies Create Predictable Revenue and I think it is even better, or at least it builds upon, and goes further than Predictable Revenue, an earlier book by Aaron Ross.

Here’s what I learned, as it pertains to us. There are many other gems in this book, the below are the “ah ha” moments that I had:

It all starts with nailing your niche. If sales has specialized (more on that later) and is still struggling it is probably because you haven’t clearly identified your ideal customer and what your pitch to them is. In our language who is our customer and what is the job to be done for them.

And if you know who your ideal customer is how do you tell them what you can do for them? What is your really simple pitch? The conversation you would have with a neighbour where you describe what you do. Not the marketing jargon, the conversation. “You know how some people have problem X, well our solution Y results in Z reduction of that problem. For example we saved Acme Company $10 million dollars with our solution.” In other words “You know how some people have [problem]? Well, we [solution and benefit]. For example, [one sentence case study].”

If you can’t resonate with your target customer then you either need to pivot, or refine your pitch. Either way, don’t go any further until you have nailed it. And if you have nailed it and it is resonating, then focus on creating a predictable revenue pipeline. Aaron and Jason feel there are three components to the predictable revenue structure:

• Seeds - many to many leads, created from word of mouth, networks and relationships
• Nets - one to many marketing campaigns, including content and inbound
• Spears - targeted outbound prospecting

My big takeaway from Seeds is just how important the role of Customer Success is in making the Seeds grow. Customer Success, according to the book, is five times more important than sales and it needs dedicated roles and leadership to pull it off. The purpose of Customer Success is to systematically reduce customer churn, increase upsells and referrals, and help capture more, and better, case studies and testimonials - it is a revenue driver, not a cost center.

Customer Success should be measured on targets for customer churn of 15% or less per year, or just over 1% per month, and revenue churn of 0% or less per year, based on the revenue that leaves and that is offset by revenue from the customers who buy more.

Whereas nets are all about one-to-many campaigns to generate leads, with tactics like inbound marketing, in-person and online events, and online advertising. Net types need quotas. How many qualified leads, keyword is QUALIFIED, do they need to generate and if in a freemium model, how many people are they bringing into the pipe.

Spears are all about about outbound prospecting and this is what Aaron’s first book - Predictable Revenue - was all about. The key to make outbound prospecting work is to realize that it is a specialized role. A dedicated role. Sales should be divided into outbound marketing, inbound marketing, new business closing and post sale retention and account growth. These roles shouldn’t be combined. Specialization is key. To learn more about how to setup Predictable Revenue check out Predictable University. We currently have 3 people enrolled and will be sending another 2 or 3 shortly.

Outbound marketing focuses on lead generation. And not just any leads. Qualified leads. They reach out to a continuous stream of new prospects and work with that prospect to see if they are a fit. They don’t sell. They consult to determine if they can provide a benefit to the client they are after. And if they can, they pass them to the new business closing types. The best way to evaluate outbound marketing is to track the pipeline creation rate as calculated by the number of qualified leads generated this month over last month.

You want your specialized roles to have very clear and simple compensation that rewards collaboration. Don’t create a competitive environment.

Once you have nailed your niche, tested your pitch, specialized your roles, and it’s starting to hum, now you need to replicate it. Grow the numbers by doubling down on the sales team.

To do this you need effective sales leadership that does, in order of priority;

1. recruiting
2. coaching
3. tactics; training, onboarding, territories, quotas, comp, scripts, ICP’s, sales system, dashboards
4. strategy; new markets, bottleneck elimination, kpi’s
5. closing deals (only the big ones)

Arron and Jason classify sales leadership characteristics into the evangelist to get you going, then you need the “make it repeatable person” who scales your team and with every addition grows at least linearly, and preferably exponentially, they don’t let laws of diminishing returns kick in to their scaling effort. Followed by Ms. Go Big. She tunes customer success, and coordinates outbound with marketing to kick everything up a notch. Last is Mr. Dashboards and this person is all about big company politics. Way out of my realm.

In terms of hiring there were a couple of key points that I found really interesting.

• When everything is undefined - look for builders, when it is defined, look for growers.
• When hiring, hire 2. This way you know if it is you, they both don’t work out, or them, 1 works, 1 doesn’t.
• Hire for prior success, work ethic, curiosity and intelligence - their prior success doesn't have to be in sales.
• Hire the same type of people, train them the same way, give them the same quantity and quality of leads, and have them use the same process, don’t deviate. Make it repeatable.
• Have a well thought out training program. Invest in it. Don’t wing it. Make it repeatable, measure it, and improve it, continuously.
• Provide constant, on-going, integrated coaching.

When hiring create a clear picture of who you want to hire, include a video (really like this) and make the post read like a personal letter. Have every applicant write a 300-word essay on an aspect of, or trend in, digital marketing that they found interesting and why they would be a great fit for the role. Be systematic in your evaluations. Use a spreadsheet and score the essay, voice clarity, energy level, personality, vocabulary, attitude, listening skills, questioning, cultural fit, etc. And interview twice, first by phone, and then video conference or in person. Be really clear and honest about comp expectations.

If your predictable revenue is hitting the ROI you want and you have a sales hiring and training process that is working, double down and go for broke. Crank up the machine and add sales capacity.

And all along the way measure and tune your organization:

• Pipeline Creation Rate: Is the start of your pipe growing, are you getting the lead generation your want. Are the investments that you are making there actually paying off.
• Open Opportunities Per Rep Per Month: You typically want 25 to 30 open opportunities. If more the pipeline might be full of wishful thinking that needs to be purged, or you don’t have enough reps and you need to scale up, if less, lead generation might be lacking, back to Pipeline Creation Rate.
• Close Opportunities Per Rep, Per Month Closed Won, Closed Lost: You should have fairly consistent throughput. If not enough are they light on quality opportunities, is there pipe full of wishful thinking, not closing effectively, or are they just not keeping the system up to date?
• Close Won Deal Size Per Month, Per Rep: Are reps grabbing low hanging fruit small deals, is your deal size trend going in the wrong way, are you discounting too much, do we have too many large deals and as such have high risk?
• Win Rate Per Month Per Rep: The number of closed won opportunities over the total opportunities. If the overall win rate is high are prices too low? Does one rep outperform others and if all other factors are consistent what do they know that they can teach others? Or, is it not an equal playing field and things need to change? Have you made changes and are those changes working? Keep in mind that win rates for word-of-mouth leads (Seeds) should be much higher than leads generated by marketing (Nets) or outbound (Spears).
• Sales Cycle: The average duration it takes to win deals and ideally how long opportunities spend in each sales stage. Use this number to calculate if on the whole you are on track to hit your targets or in trouble, and then on an individual basis to weed out opportunities that are in trouble as they are taking far too long as compared to your norm.

One of the other big takeaways from me is just how important adding services is to a software as a service business. Seems counter intuitive but the math in the book is really compelling as to how services can decrease churn and multiply your customer lifetime value.

And the other significant multiplier is going up market and when doing that give some serious thought to moving from selling a tool to selling a solution and pricing accordingly. According to Arron and Jason you can make 3x to 20x revenue gain on a solution sale, versus a tool, to enterprise customers. Just remember you will need a lot more people and processes (and features and software development) to provide a true solution.

In closing this is definitely one of the best business books I have read and by applying our Learning 2.0 process to this review I have come up with 21 actions that we as a company are going to take. Definitely a record in terms of takeaways from a book review. Just keep in mind that there are many other key points in the book, I just focussed on what were my epiphanies. You should take a read and find yours.

How To Chase Your Tail

You do not understand or can’t describe the “why” of what you do,

You don’t know the impact that what you do should make,

You cannot succinctly describe how you do it,

You can’t make what you do repeatable, and

You don’t measure what you do,

Congratulations! You're chasing your tail. You are on a circular treadmill going nowhere.

Never do anything unless you understand WHY. Actually, ask it five times to make sure you really know the WHY.

Know what your work should achieve. What impact will I have.

Make your work repeatable and describable.

Measure it. Learn and Improve. Get creative. Repeat.

Lookup. Go in straight lines. Enjoy.

The Late Great Institution Called a “Bank”

I walked into a bank in the middle of the day and there was no one there, and it got me thinking...

A thought experiment:

I’m a bank and I am really AWESOME. I have really big secure buildings, with big heavy vaults and I hold and keep your money safe. You come to my buildings to get some of your cash back, put more money into my vaults, or negotiate with me to lend you some of the money that doesn’t belong to me, to you. I pay for all of these buildings and services and the salaries of all the people that work here, including pretty big C level bonuses, from all the money you pay me to hold your money and lend it back to you. Along the way you have learned not to like me very much because, let’s face it, I haven’t always been that interested in you, but hey, I am one of a very select few that you can choose from and we are all pretty much doing the same thing. You need us.

Hmmm… but hold on. I’m a customer at the bank. I don’t get paid in cash anymore and I rarely pay in cash for anything I need. I never go to your buildings. If my great grandfather gives me something called a “cheque” I take a picture of it and send it to you. My relationship with you is via the app on my phone. If your app sucks, our relationship sucks. And since the product that you have is “money”, the lowest form of a commodity that we have, I can move it to a better app if I want to very easily. About the only thing that you do for me is hold the ledger of what I have and what I owe.

Hmmm… but hold on again. I don’t have to count on you Mr. Bank to hold my ledger. The blockchain can hold it. And if the blockchain holds it I can choose to borrow from anyone who pools money from blockchains together for a fraction of the costs that you have, or invest according to the rules that I define with firms that have the “algorithms” that I like, and funny enough, the algorithms don’t make six and seven figure salaries. So it is pretty cheap for me to self manage what money I have.

I’m a bank. I have walls and vaults that don’t mean anything anymore. Apps that can be replaced in days by those who actually specialize in apps and who have none of the legacy systems, technical debt, bureaucracy and self serving interest groups that I have. I have overheads and salary expectations that boggle the mind and the ledger that I maintain can be open sourced. And all of the services I provide disrupted one by one by upstart kids in Y Combinator type labs around the globe. Hmmm?

The Effortless Experience

I just finished up the book “The Effortless Experience: Conquering the New Battleground for Customer Loyalty” by Matthew Dixon, Nick Toman and Rick Delisi and it really changed the way that I look at customer support. I highly recommend it!

The premise of the book is that you want loyal customers and they define them as: those who repurchase, they increase the size of their purchases, and they refer others to you. Who wouldn't want this? What I didn't know is that how I thought you go about using customer support to accomplish this is wrong. Years ago I read The Best Service Is No Service and this changed how we look at what we call touch reduction, but The Effortless Experience has given me greater understanding of the other factors at play, which I have summarized into the following insights:

You cannot increase customer loyalty by exceeding customer expectations, it does not pay. The primary driver of customer loyalty is the customer’s perceived effort. Any customer service interaction, regardless of how well it goes, is 4 times more likely to drive disloyalty than loyalty. Track the Customer Effort Score and Touch Index and relentless eliminate everything, from all aspects of the organization, that drive them up.

To reduce touches you want to eliminate the reason for the problem in the first place, failing that you to want resolve the issue on first contact, and you want to go further, and include next issue avoidance in that first content. If they have had to contact us, let’s use the contact to make sure that we find and correct anything else that could cause them to have to contact us again. Track repeat contacts from Customers within 7 days and continuously eliminate reasons for why that happens and drive this number down.

Customer perceived effort is increased by having to initiate multiple contacts, repeating information, having to switch service channels (most importantly from self serve), being transferred, and being treated in a generic manner. Eliminate all of these aggravation points.

Most customers prefer to self serve. It is not about getting customers to use self serve, it is about getting them to stay in self serve. Guided self serve versus customer choice works best. Customers who attempt to self serve and then have to resort to picking up the phone are 10% more disloyal. Invest in self serve. Investing further downstream is like shutting the barn door after the horse is out.

Customer perceived effort is very different than actual effort. You can engineer the Customers perception by advocating for them, using positive language (don’t say no) and anchoring. To effectively use anchoring you need to know the root cause of the customer’s problem, not their stated problem so that you can set the stage for a solution, albeit a compromise, that could work for them.

Top customer service reps are; resilient, handle pressure well, take responsibility for their own actions, respond well to constructive criticism and are able to concentrate on tasks over extended periods of time. These traits can be grown (nurture versus nature) by providing autonomy and eliminating micro management, building trust, having alignment with company goals, and peer support.

Creeping Into Technical and Experiential Debt

Software technical and experiential debt typically comes about because sales and marketing doesn’t know how to sell the product that has been built, or product owners don’t know how to eliminate user churn of those who have already bought it, or more than likely a combination of both. When this happens sales demands more functionality, or one-off functionality to land any sale they can, and product owners give up working on the hard stuff of how to make what they have better, and both parties end up pursuing greenfield new stuff to add. Both reactions compound the problem as you now have more code to service, all of which bleeds [churns] badly and sales still doesn’t know how to sell it. Technical and experiential debt multiplies. Don’t do this. Pivot away completely from the product or stay with it and focus on reducing churn and building a sales engine that can sell it. Either eliminate the product and start new, or eliminate technical and experiential debt before moving to the next greenfield.