CFOs Elena Gomez and Kelly Steckelberg believe your sales pitch shouldn’t be about covid, but about the bigger problem you’re trying to solve for them
People interested in how large companies are managing their budgets and sales plans
Spending and sales situations
I’ve summarised talks by Operator Collective  from COOs and CMOs recently, and will be doing another summary today for a talk they did with CFOs on enterprise spending.
- How they’re coping
- Changes in their budget and sales plans
- Metrics they look at
- Predictions for the future
As a reminder, I had a backlog of webinars I wanted to do notes for; we’ll go back to the regular weekly schedule after this.
Highlights for me were:
- Keeping daily standups casual and quick
- Having a meeting where pets, kids, partners are invited
- How they both still want to preserve sales org budgets and capacity
- Advice to make your sales pitch not about covid but about the bigger picture
- Likely changes when returning to office
1. Make your standups casual and short
What challenges are your companies facing?
- Just like a lot of other companies, really focusing on the customer, helping them navigate volatility
- Also focused on employee safety, trying to be as agile as we can
- Focused on prioritisation more than we’d typically be at this point in the year
- While our daily participants have 30x, our staff did not
- Biggest challenge has been scaling our ability to support the customer, and that started with bandwidth
- Also making sure we take care of employees with their needs in the pandemic
LL - This theme of focusing on customers and employees has been repeated in all the three operator collective calls so far. The more cynical side of me wonders who else you’d be focusing on as a business; stakeholder theory would disagree with me and say that investors, suppliers, and communities are all other areas you could focus on
Any tips for making daily standups more effective?
- Making sure it’s not a prescribed agenda but more fluid, top of mind, oriented to employees and customers
- More casual, informal. More important to have the discussion than the 20 page deck
- We also do ours quickly, so everyone is focused
How are you managing employee wellness?
- We set our internal date for return to work in the fall since we didn’t want our employees to have concerns about finding childcare
- Also gave a one time bonus in Q1 to employees to help with any impact they might have experienced
- Continue to monitor how employees are feeling via surveys
- In order to get people comfortable with working from home, we had an all hands where we invited them to bring others to the meeting e.g. kids, pets, partners
- Hearing a lot of people working too long
- Also have to manage home schooling of kids
- We know there’s some productivity loss, so we’ll have to help them manage with tools and stipend
LL - As Josh Wolfe pointed out, the absurd has become normal, and we’re now comfortable with interruptions to our zoom meetings. Doing something like Kelly mentioned will help further normalise a culture of acceptance
2. Don’t sell by talking about covid, make it about solving a larger problem
How are you changing your spending?
- Not immediately a budget cut, but a look across the company investments and which we want to preserve for growth
- Preserve engineering capacity, sales quota capacity as a starting point since without those you can’t grow
- Then we look at the supporting functions, and it isn’t an immediate “Let’s just cut G&A” because that’s too blunt of a cut. Where do we have G&A investments that support growth?
- Relax hiring to a degree where we can absorb it more
- Found that we had to adjust our annual budget on almost a monthly basis post covid. We’re doing monthly reviews of spending and looking at asks that are coming up
- Some obvious things like travel, events, we’re looking at redeploying those budgets
- Looking at things on a short term cadence since we can’t look at an annual or even quarterly budget anymore
- Sales org, anything that relates to supporting our customers, we want to ensure they still have capacity
What spend guidance do you have for your company?
- It has to have a long term impact, either to help us scale or drive revenue
- Also looking at what tools we’ll need to support our teams with continued work from home?
- Any new spend is coming to me, and I’m saying no to some new contracts that in a different world I’d have said yes to
- Thinking about the short term and long term needs
- Want to make sure we aren’t overreacting in the short term and that our investments have long term return on investment (ROI)
Do you see budgets increasing for employee benefits or other retention areas?
- We’ve added a monthly stipend for employees to ease their transition that’s flexible in terms of what they can spend on e.g. education, workout equipment, food delivery
- We also have employee benefits such as counselling
- We don’t have a monthly stipend, but did a one time stipend in Q1 that was well received
What departments are making the biggest changes in budget?
- Travel and in person events. Have shifted to virtual or been postponed
- We’ve refactored marketing, cut a bit but not dramatically.
- Professional services spend. Are our consultants needed or nice to have
- Relooking at our vendor spend <$5k since it’s unlikely to be strategically important
LL - I’ve never really understood why tech companies that hire ex-consultants need to hire more consulting firms. I lack the context here, and would also say that if the vendor spend is low, it could be having a high impact for a low cost to some groups in the company
What advice do you have for startups trying to sell to larger companies like you?
- Don’t make what you’re selling be about covid. Make it about the bigger problem you’re trying to solve
- It feels opportunistic and more short term if you do
- As you support your partners, you have to know the business you’re selling to, and what metrics are driving the growth in their business
How are you thinking about sales comp?
- Evaluating different types of quota adjustments if we need to
- We’re leveraging SPIFFs as much as we can
- Kelly reserved comment given they were in quiet period for company earnings
LL - A SPIFF is an immediate bonus for making a sale
What has been helpful in getting contracts over the line?
- Looking for customers that are in industries that have been in distress and then trying to work with them
- Everyone’s different. Some are more cash oriented, some more operating expense, some looking for a short term fix
- Understand what the customer is trying to solve for
- Providing increased level of flexibility in both buying process and existing customers
What does the world of M&A look like now?
- Keybase acquisition was done entirely on zoom, and in some ways that works even better
- Difficult to keep a transaction war room within the company confidential since people see that happening in person
- We’re always looking opportunistically to see what might complement our roadmap
- Not changing that stance, we’re approaching this per usual, not more or less due to covid
- Remote M&A is not a complete blocker
LL - My friend Barak and I were discussing how it’s still difficult to do deals without meeting the target in person. Wondering if Zoom/Keybase was the exception here.
3. Don’t throw out your core metrics even if they look weird
What metrics do you look at?
- How are people using zoom and what do we mean to them?
- Looking at retention metrics differently and more detailed than before e.g. by cohort, segment, usage trends
- Watching your receivables and making sure that you’re thoughtful if customers have problems paying
- Paying attention to usage of our product as a leading indicator
- Would have looked at these monthly, but now are looking at weekly or even daily
- Looking at pipeline closely
LL - Another repeated theme of looking at more metrics more often
What metrics should companies be looking at given longer term effect on customer cohorts?
- Customer acquisition cost (CAC) will always be important to us
- Looking at renewal rates since easier to preserve customer than get new one. By country, region, over period of time
- Most important thing that drives your revenue as a SaaS company is your current book of business
- What’s changed rather than the type of metric is how often we look at the metrics
- Your core fundamental metrics should still be in place. Don’t throw them out even though they might look differently historically
- Base of business might have changed, but you’ll still have to keep eye on fundamentals
LL - The point about the current book of business here has to do with customer cohorts, and is more relevant for software businesses . When they make a sale to a customer, that customer goes into a cohort for that year. They then track that cohort over time, since there’s a high chance of the customer renewing, implying you get recurring revenue. This also implies that the downside of one bad year with a current cohort gets carried over for multiple years
What are you looking at the metrics for? To guide spend, business exploration, other?
- Guidance in terms of trends to ensure we have right capacity to support customer, resources and people in place to get to a P&L forecast
- How can I make sure I support customers and employees in a way they’d feel proud of how we’re navigating this time
4. Returning to office is top of mind for many CFOs
What shape of recession do you think we’re in?
- My view is we’re in an L, and that view could change next week
- In early innings of longer recovery.
- Don’t know how to predict what stage we’re in, but think we’re in early stages
- Think it’s going to get worse before it gets better
LL - As they both imply, no one really knows.
How are you thinking about returning to office?
- Top of mind for many CFOs I’m talking to
- Thinking about how aggressive we could be on working from home, and what tools we’d need for that e.g. zoom, slack
- What does our end state look like, and what does our interim state look like
- Want our employees to feel safe and supported regardless of how comfortable they feel about returning to the office
- We’ve set an internal target but will re-evaluate
What is it going to look like when back in the office?
- How to give space at work stations
- How to change the path of travel
- How to provide lunches
- Probably less fixed desk, more flexible on that
- Maybe shifts for when in the office vs at home
- We have a workplace team that reports in to me
LL - We’ve seen twitter let some staff work from home permanently, and I’m starting to see more posts by people thinking of ways to save on office rent. The longer the situation continues, the more people seem inclined to plan for lower office usage. At the moment I think most of us will still go back to offices, have teams physically together, but we’ll be more relaxed on work from home days
What should a CFO be focused on now?
- Using whatever data is available to you to understand inflection points
- Starts with customers and making sure you take care of them, can’t overstate that
- Making employees feel safe, productive
- Being ruthless at prioritisation, what are the things that will withstand time
What has been most helpful to you from your board of directors?
- I like when they push us a bit, ask us the questions no one wants to ask
- Appreciate the tougher questions e.g. is this the right investment or customer segment?
- They can see things we don’t see in the day to day
- Operator Collective is a newly founded group for operators from diverse backgrounds to support founders both operationally and financially. Members include C suite people from Stripe, Waymo, Zendesk.
- Panel was moderated by Mallun Yen, founder of Operator Collective
- It’s still applicable to other types of businesses, just more so for software.