#022 Sales Metrics Deciphered with Russell Huffman

Steven Morell: Welcome to our new episode of Speak Revenue. Remember, revenue is not a goal. It's a result! But a result of what exactly? In this show, we turn our eyes from the output towards the inputs. We speak with sales leaders, entrepreneurs about their journeys. Join us on our quest to uncover and learn the root causes of success. Let's unpack what works for them. What didn't today with my guest, Russell Huffman. Russell, I'm so excited and so happy, and so thankful that you could join us today, in this episode. Welcome to Speak Revenue!

Russell Huffman: Thank you Steven. I'm really pleased to be here. It's quite exciting for me to join your podcast.

Steven Morell: Russell. We know each other. We are members of the same organization. We're gonna discuss this a little more, a little bit deeper, but for the audience real quick, who are you, what do you do, and why are you so successful?

Russell Huffman: Thank you. I appreciate that. So just to give everybody a little introduction, I'm originally from the Midwest and started life as an engineer. Worked as an engineer for about 8 or 9 years before I got bit by the bug. To go into Sales and Marketing. Had the fortune, the good fortune of being able to also do product marketing for a few years, back, way back when. But what I've specialized in is, what I would call , well, startups, we used to call 'em new product introductions, both within, early stage companies, VC funded companies, as well as earlier in my career, large companies. And, the last five years I've focused on the machine learning analytics and data market. And within that, really working with early stage companies that are right now using founder-led sales and helping them transition from founder-led sales to sales-led.

Steven Morell: It's always to have an engineer in the sales environment. I used to be a full stack software developer and I brought that engineering mindset, you know, input, output into the sales process. That's always refreshing and nice. Now, I mentioned that we are both members of the same organization. We are both members of Pavilion. And, if you are listening or watching and you're not a member of Pavilion, but you are a sales executive or want to become a sales executive, go to pavilion.com. and join that organization. It's a must admit, it's a pay for play, but it's very well worth the money. It's a fantastic community, incredible experts all around the globe. Wherever you are, there is a chance that there is a chapter of Pavilion members meetups. fantastic education, remote. I think it's called, Pavilion Academy in that organization. I'm getting so excited that I'm getting off topic. In the pavilion, there is a group of people who are currently between jobs. We call that group on the bench.

Russell Huffman: On the bench. Yes. 

Steven Morell: And Russell is very active in that group and he is somebody who is frequently being sought out for advice on how do I know if I should take the job? Because let's be honest, if you're a sales leader, if you're an CRO / Head of Sales and you're getting a new position, I think currently the median tenure is 18 months. And then you'll leave or you get fired or the engagement ends. So I personally know a bunch of sales leaders who have been on their jobs for years. That means that others are on the job for a quarter. But I know that all my friends who are in CRO roles, they count their tenure and quarters not in years. Long story short, if you take such an job offer, there is a increased chance that it's not a good match, and you find out after the fact, it might find out that the ship you boarded is not going where you wanted to go or where you expected it to go, or not at the speed, or maybe it's a sinking ship. So Russell: Step us through your thought process and your vetting process. How do I find out if a company that I'm joining as a sales leader is the right pick for me?

Russell Huffman: Thank you. Ah, I'd be glad to do that. Just to add another vote of confidence for Pavilion, I've gotten a tremendous value out of their training. With the downturn that happened, I leaned into volunteering, helping my colleagues that are going through transition mentoring first time folks. I love doing both of those things as I love doing the early stage, and I could see a place where those two dovetail together here. So we are talking about earlier stages, so seed stage series A, series B, as opposed to what might be, a more highly developed, situation. So with that groundwork laid, I think, the most important thing that a potential leader of an organization can look at is whether or not the company has product market fit. And as we look at that, you can go out to the internet and Google and you can find some very high level definitions. That really isn't quite granular enough for the stage of the company that we're talking about. You can take a metrics led-approach, and this is something that Pavilion teaches you in some of their courses. Your NPS needs to be above a certain level or specific, Revenue and customer retention goals, all the, all that is really, really great. But, the bad part about it is it can actually be misleading if you try to apply that when you have a very few customers. And I can get into a few examples. I mean, I think it's a great idea, but like any statistics, you know, we need to be very careful of the context in which we start to apply specific metrics.

Steven Morell: I'm very active in the B2B context. I'm very critical about the idea of using the NPS score for most things that it usually is used for. And the reason, and I wonder what your thought on this is. The reason is I have seen personally in the past, my engagements that the people who fill out the NPS score are not the economic buyers. So a typical behavior is and we saw this, and I'm just describing realities here. We saw that in the demographics of our customers. At my last engagement, with a German SaaS company, the user would be, typically a woman in her thirties. The buyer was a man in their forties , because it was the department head, and those were mostly men making the economic decision to buy that tool. And then they handed it off to a colleague who would actually use it. The people using it loved the software. We would get super high NPS scores and then suddenly they would churn because it was the economic buyer who cut the budget and just decided, I'm not gonna use this anymore, and you never actually get their NPS or you never find out if it has a business impact on them. So for me, NPS is something that belongs in the B2C market, where the buyer and decision maker is the same person in the business context, I have big question marks. What's your take? 

Russell Huffman: I couldn't agree with you more. And, once or twice I've actually seen the opposite where the users were complaining and moaning mostly about some minor cosmetic things, but the economic buyer was totally pleased and it was, or was, changed compared to what he or she was experiencing before. And oftentimes economic buyers won't fill out the NPS. It's something that you need to do more, maybe one-on-one or, you know, in a little more social setting or whatnot to get that, true feedback.

Steven Morell: So if it's not NPS score, which metric do you look for when you try to figure out from the outside as an outsider looking in? Do they have product market fit or not?

Russell Huffman: Right. So to me, the challenge being we have a small number of overall customers. And as I stated before, contemporary definitions of product market fit, at least it's hard to find one out there. I've decided to take an approach where we then overlay another known framework for early stage companies, and that would be the crossing the chasm dynamic, from Geoffrey Moore. So I think you've heard of that where you basically are taking a bell curve, you're dividing it into quintiles, and the first 2 quintiles are generally where a series A startup has sales and that those 2 are separated by what's called the chasm. So that's why, hence the name "crossing the chasm" from the other, 3. Quintiles that represent the majority of potential business. One thing that, in applying that framework, has become evident to me. I've had the good fortune of working at places with great founders and as good or maybe even better, VCs. So the wonderful thing about that is you, they have a very strong network of friends and family, let's say, that are willing to adopt a product early on, you know, willing to bring things in. And oftentimes you can come into a customer with, let's say a couple million in sales, maybe a dozen or even two dozen customers that they close and you find there are, there's quite a variance. Let's say customers at 50K ACV and maybe even 1, 3, 4, 500K ACV and it's very easy to start to extrapolate, the high end that okay, we're gonna have more of that and the low end, well, we're just gonna bring that up. It's very easy and I think it's very logical. I wouldn't fault I've done this myself, wouldn't fault anybody for going down this path. But then, like I say, if we take the crossing the chasm paradigm and we do a further analysis of particularly the higher value customers. I have found oftentimes these are very, very close friends and family of the founders. Generally it's been the case. I've seen those ACVs, that those people have come in, those close, customers, it's probably 2 or 3 times. What you're really going to experience in terms of, let's say, selling to absolute total strangers. So I like to go in, look at the current customer list, segregate them into, hey, who are friends and family and who are absolute strangers. So that's the first swipe at this. To give you a just an a level of what exactly might the work be there in terms of needing and to still get to product market fit. 

Steven Morell: What you're saying resonates so much with me because it describes in detail. My last engagement, where I came in, the MRR was around 30, 40 K and it was actually, it used to be an agency before, and those were the former agency customers who were customers for years. You can count this almost as friends who were put on onto the SaaS product and counted. And I think the real, for me, the real important takeaway from crossing the chasm was the definition of a market. And the market is the same type of people that are using the same product and referencing each other. 

Russell Huffman: Right. Right. 

Steven Morell: I would go friends and family is one, but if you look at the customers and they're from totally different industrial verticals, totally different regions, if I would say, if they don't meet. Each other at a conference once a year somewhere. Then chances are you're not serving one market, that this is really random people that you coerced into using your software or product, and that you don't yet have found a niche into which you can sell. Would you agree?

Russell Huffman: This is precisely what I'm driving at it, what you're describing there, the form of what you're describing. It's really almost a consultancy at that point where, and we all know, as wanting to work in the SaaS model, subscription based model . Consultancies do not get the valuation that a SaaS type model does because it's scalable, because it can grow exponentially, through a market. And I think it's important to also, like you say, define what is, what exactly is a market, what is product market fit? And I think it's understanding what are the challenges and problems that the product is solving. How are they common to these, this group of people? And, you know, where are some maybe dissimilarities, that can trip you up in really understanding if you have product market fit? So I think you have a product market fit. When you are solving a common set of challenges and problems amongst a giving group of people. And then sort out how you make that repeatable? How do you make that scalable? 

Steven Morell: I couldn't agree more. So let me ask you. From my point of view, this is not a showstopper, it's just a different show that you're signing up for. In my personal experience, this means you are not yet at a point where you can scale immediately. You need to do some RAM building first. And the RAM building that I would do in that case would be Figuring out which of those customers are the ones that get the biggest impact from the product, and then hammering that niche till you have it really, really under control. Would you agree?

Russell Huffman: I would agree. And this gets into another, I think, early stage challenge is the ICP. I think what you're talking about there is you're using that evidence to drive that: Hey, this is how we devolve our ICP. I had a debate between some of my friends in Pavilion at an early stage, who owns ICP? Is it sales? Is it a product? I would maintain through the end of series A until you raise your series B. ICP is likely the primary owner of the product with, you know, sales is providing the laboratory, they're providing the lab workers to go out and validate the assumptions. But the ICP is still very much a jointly owned concept. And this is something I caution first time sales leaders, don't let somebody dump that on you and say that's yours in a series A. This is still very much a group effort and, product and engineering, they still need to, you need to understand why they are building the product they're building? Who are they building it for? Are we all on the same sheet here?That's another angle that I've seen where if you come into an early stage company and there doesn't seem to be that alignment, With, Hey, I see this problem that we're solving. We're doing a good job solving it. Yet someone's off building features to do something else. That's time to pause and collect your thoughts and understand, Hey, do we need to reset another part of the organization? 

Steven Morell: And I think you need to be aware that if you sign up in that early stage, You're not signing up for a sales leader role just yet, you're signing up for a consultancy role because you will need to have this founder sales that feeds back into product development. If the founders are not doing sales, then they don't feel the pain of not getting it sold to anyone, and if they don't have that pain, Then they will not develop the creativity needed to get the product where it needs to go. So you are signing up to actually be a mentor, consultant, guardrail for the founder or founders to get their product market fit out before you create the job description for yourself that you can fill later on, and then you can slip into the role. But you need to make clear to the founders that you will be taking on a consultant role. It might be on payroll, but being a mentor of the founders is what you do, not building a sales team.

Russell Huffman: I think it's a very important framework that you've just articulated there. For me, sales is the job of a sales leader is to set expectations. Set expectations with the leadership, set expectations with the customer, set expectations with the folks that are working for us. I find that's where folks, particularly first time, people in the role, or if they're coming from a much larger company down to a startup, it can be not quite so easy to understand exactly what you've stated. You are a consultant. You are here to set expectations and to help guide the company versus just, Hey: here's a switch called sales, let's engage it. Let's turn it on.

Steven Morell: Yeah, I totally agree. I would say maybe setting expectation is the main job of every leader role,

Russell Huffman: Yes, yes.

Steven Morell: Especially here. Setting expectations towards the founders about what can be done and what cannot be done at that stage is really important. So apart from product market fit, what else is very tactical? What else should I check before I sign up for such a role? One thing that comes to mind is talking to real customers. Is that something that you recommend?

Russell Huffman: Absolutely. I think that in the roles that I've had, in terms of transitioning from founder led sales to sales led sales, the first quarter or two, I have generally usually partnered maybe with the CTO or somebody, somebody from the sales engineering side, to go out and close deals myself for the first couple of quarters. And that way then you really do understand, hear that problem, do that discovery on your own, hear that problem, those challenges and that you are, providing a solution. I think absolutely you need, you as a sales leader need to get out and close business yourself, not to be what they call a player coach role. I hear that oftentimes, fine to me to be a player coach with the idea after a couple quarters, you're getting out of it. I think it's a mistake for a sales leader to retain a quota that should be devolved to the team. But definitely you need to have that hands-on. You need to have that initial hands-on involvement. With closing deals. 

Steven Morell: You're cutting on an important topic: compensation. I'm with you. You cannot lead and carry quarters. And I think the simple reason is if you do, who keeps you from snapping the best leads from your sales team? 

Russell Huffman: Cherry picking. 

Steven Morell: Yeah. But I think you should be performance compensated. What are your thoughts on this?

Russell Huffman: Oh, absolutely. There's no doubt about that. To me it's, . 50 50 is still, I think the split we see here, within North America in terms of OTE, more folks are asking for 60 40. I can see an argument there as well, depending upon how much upfront work needs to be done that isn't directly related to closing business, those are my thoughts in terms of split. Did you have something else in mind that maybe you wanted... 

Steven Morell: You can probably see from my face, I'm very passionate about this topic. I think that we still see, maybe, we are heading the movement in SaaS and tech, because I think that we, in general, are very progressive people, but I think we see in sales very often a compensation model where people are under pressure if they don't perform. If they have a bad month, then they're worried. And I don't think it helps anyone, if any member of your team has, is under survival stress. So the fixed compensation should be, should not make you rich, but it should keep you worry-free because, else, when you are going through rough waters, you'll have a team of people who are worried whether they can make months ends, whether they can pay their rent, their mortgage, and put food on the table. And this distracts them from finding solutions to the problems. This makes them more prone to committing mistakes and errors. There is tons of scientific evidence that if we are in survival mode, just our brains don't function that well. 

Russell Huffman: Agreed. 

Steven Morell: It should be a motivator. It should not be a scare.

Russell Huffman: Absolutely. And I think you definitely need in your first handful of sales hires, of individual contributors, people who are committed, I've had situations where people have asked me to bring on salespeople in a hundred percent contingent role. I think that's a mistake. As you said, they need enough base to keep the wolves away so they're not distracted by that, that they can focus and help us build, because you need people who are thinkers. You need some pretty special people who are the first salespeople at a startup, who have a lot of flexibility, a lot of range of emotional temperament. And, responsibility I don't want to try to nickel and dime those folks. 

Steven Morell: By the way, I'm trying to remember her last name. Kim, the author of "Radical Candor".

Russell Huffman: Oh, yes. I don't remember her last name. 

Steven Morell: Yeah. In that book, she uses the term, superhero and rockstar. And superheroes are the ones that come up with new solutions. They invent stuff. And rockstars are people who come in every day, do their job solidly, like a rock. 

Russell Huffman: Right. 

Steven Morell: And I believe in the beginning, you need those superheroes, and then you need a lot, a lot of rock stars because if you cannot scale superheroes, you can only scale rock stars. You can hire armies of rock stars. And by the way, this is not something that you are born with. This is who you are right now. You can be a superhero and then you know, you get married, you get kids. Now you need stability, and you become a rockstar at least for a couple of years before you turn into a superstore. Again, people go through different phases in their lives. So this is not talent or something. This is where you are currently, what type of risk taker you are right now. And I think this combination is tremendously important. Would you agree with this?

Russell Huffman: couldn't agree with you more. And one I guess critique I would have of the SaaS world in general, having earlier in my career worked for larger companies and then made that pivot. One thing about the SaaS world is people, they tend to pigeonhole people too much. People are flexible, they learn, they change. And I really like the analogy that you've given here where someone can be a superstar, they morph into a rockstar for whatever reason, and then they can change back. And I absolutely believe even you can hire somebody in as a superstar and they see with the progression of the company, They become a rockstar. I, I have, experienced that as well

Steven Morell: Before I ask the last question. What is your take on team compensation in terms of team commission? 

Russell Huffman: In terms of, including CS and SDR or? More of a complex sale? 

Steven Morell: That's an interesting take, but I was referring to team commission versus individual commissions among salespeople.

Russell Huffman: I think team commission is great when you're including the CS people and some of the other functions, but I want a salesperson who understands individual performance and individual compensation.

Steven Morell: We will have to do another episode and discuss only this, 

Russell Huffman: Okay. 

Steven Morell: But before we do this real quick question before we come to an end here. Russell, if I would have a time machine and I could write, take a postcard and send it to the five year younger Russell Huffman with a warning on it, what not to do, what to avoid, what would you write on that postcard to the five younger self of yourself? 

Russell Huffman: Beware of applying metrics too early. . what I would say are mistakes that I've made in the past, I have applied metrics too early when I didn't have a solid capability to generate numbers underneath it. The metrics are just algebra. I've been doing that since the sixth, seventh grade. That's not a challenge for me. But actually making the challenge to it is making sure you have a consistent, consistent inbound process. You have a consistent outbound method and deployment, and understand and have confidence in the consistency there. Then apply metrics and start talking about metrics and guiding your team that way. 

Steven Morell: I would also understand what is a result and what is the root cause of the result. 

Russell Huffman: Perfect. Exactly. 

Steven Morell: Russell, thank you so much for being here. Alright everyone that brings us to the end of this episode of Speak Revenue, I want to thank our guest, Russell Huffman for joining us today and sharing such valuable insights. A huge shout out to all our listeners who support means the world to us. Remember to check our website: speakrevenue.com for a full transcript and additional resources. And if you enjoyed the show, please, please, please leave us a review on Apple Podcast, Google Podcast, Spotify, or wherever you go for your listening needs. It really helps to get the word out. Also, follow us on LinkedIn, on Instagram and on YouTube. We'll be back with another guest soon. Until then, stay curious, keep listening, and stay safe. ​