SaaStr Podcast #356 with Atrium Co-Founder Pete Kazanjy

Ep. 356: Pete Kazanjy is the Co-Founder @ Atrium, the startup providing proactive, always-on insights for sales operations, managers, and leaders. Stop asking questions. Start getting answers. Alongside Atrium, Pete is also the Founder of Modern Sales Pros, a community of 15,000 focused on sales operations and sales management. Pete is also the author of Founding Sales, the canonical writing on early-stage startup sales. Prior to founding Atrium, Pete founded TalentBin, culminating in their exit to Monster Worldwide in February 2014. Finally, before TalentBin, Pete founded Honestly.com building the world’s first professional reputation clearinghouse and raising funding from CRV and First Round in the process.

In Today’s Episode We Discuss:

* How Pete made his way into the world of SaaS and how he came to be one of the leading figures on sales operations and management that he is today.
* Why do founders have to sell the product themselves at the start? When is the right time to hire their first sales reps? What profiles should founders look for in these first reps? What are the most common mistakes founders make when hiring their first reps? How should they structure their comp plans?
* How do the best onboard their sales reps? What can be done to minimize ramp time of new reps? How is the documentation used most effectively? How can sales calls be used for new rep onboarding? How does Pete think about optimizing payback period on a per rep basis?
* What are the leading indicators that a sales rep is successful? What are the core metrics founders should measure to determine the effectiveness of their reps and sales teams? How does this differ between SMB and enterprise? What are the challenges with enterprise given the long sales cycles?

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Pete Kazanjy

Below, we’ve shared the transcript of Harry’s interview with Pete.

Harry Stebbings:

We are back for another week in the world of SaaStr. My word, I’m so excited for this one. Who doesn’t love a deep dive into the world of sales, operations, sales management, and more? Well, we couldn’t have a better guest for these topics, as I’m thrilled to welcome Peter Kazanjy, co-founder at Atrium, the startup providing proactive, always on insights for sales, operations, managers, and leaders. Stop asking questions, start getting answers. Alongside Atrium, Pete is also the founder of Modern Sales Pros, a community of 15,000 plus focused on sales operations and sales management. Pete’s also the author of Founding Sales, the canonical writing on early stage startup sales, and prior to founding Atrium, Pete founded TalentBin, which ended in the exit to Monster Worldwide in February, 2014.

Harry Stebbings:

But that’s quite enough for me. So now without further ado, I’m so excited to welcome Peter Kazanjy, co-founder Atrium.

Harry Stebbings:

Pete, it’s so great to have you on the show today. I’ve had so many great things from Karl at SalesLoft, from Brad at [inaudible 00:03:08]. So thank you so much for joining me today, Pete.

Peter Kazanjy:

I am very excited to be here, Harry.

Harry Stebbings:

Now, I would love to start with a little bit of context. So it’s a wonderful world, SaaS, but it’s also an interesting one. So how did you make your way into the world of SaaS, and how did you come to co-found Atrium?

Peter Kazanjy:

A little bit of winding road, like I imagine most people. So as you know, currently the co-founder of Atrium, we make sales performance analysis software that continuously monitors key performance indicators of AEs, SDRs, etc, and bubbles up areas of interest to managers, and operations, and leaders. So that’s my day job. This is my second software company. My previous software company was a company called TalentBin, which was a recruiting software company that started in 2010, and was acquired by Monster Worldwide in 2014.

Peter Kazanjy:

So at TalentBin, that was kind of like my first training wheels, SaaS business, and also the place where I started to learn and appreciate go to market. So I went from being a business generalist founder, so prior to that I was in product marketing and product management at VMware, so big enterprise software company. Then at TalentBin, realized very early on, “Oh, wow, got to figure out how to sell this stuff, or else the company is going to go out of business.” So that was like my first entry point to that. After TalentBin was acquired, I ended up writing a book on startup sales and sales for founders called Founding Sales. Mainly because when I was at TalentBin and had no idea how to do direct selling, I was kind of making it up as I went, and trying to learn.

Peter Kazanjy:

Most of the literature is really for existing sales leadership or sales professionals, but not for people who have never sold before. So that’s why I ended up writing Founding Sales, and that led into Atrium, and also led into Modern Sales, which is the sales operations, leadership, and enablement community that I run. It’s an 18,000 person pure education community. So nowadays I’m all go to market all the time. But that’s the winding road by which I ended up landing there.

Harry Stebbings:

I do have to touch on the TalentBin element, because I’m always fascinated by transferable learnings from these past successes and experiences. I guess the question for me is when you self-reflect, what worked with TalentBin that you took with you to Atrium? On the flip side, what didn’t work, which you kind of disregarded?

Peter Kazanjy:

So I think at TalentBin, there were some key product insights that have informed how we’ve gone about doing things at Atrium, and also some key sales mess ups, or errors, that we made. So I think on the product side, one of the things that we realized early on was that automation is key. So TalentBin, the way to think about it is LinkedIn recruiter for the entire internet. So we crawled Stack Overflow, GitHub, Twitter, Facebook Meetups, etc, etc, in order to populate a database of passive candidates for technical recruiters to search and engage with, which technical recruiters would often times say, “Hey, I really want to find candidates that other people don’t have access to.”

Peter Kazanjy:

But it turns out doing that takes a lot of work. The searching, and the writing, and the emailing, and the followup. So early on at TalentBin, we had a lot of engagement challenges. So what we realized is, the more that you can automate that, unsurprisingly, you see this in products like Outreach, and SalesLoft, and of course before that, in marketing animation solutions, like HubSpot, and Marketo, and what have you. But the more and more you can automate things, the better off your customers will be.

Peter Kazanjy:

So we really brought that to Atrium, in so far as another thing that humans hate to do is do metrics analysis, performance metrics analysis. So if you could have software that just did that via statistics, did the continuous analysis, and then importantly, reasoning, like interpretation of those metrics, that would be something that sales managers and leaders would really appreciate, since they didn’t get into doing sales and sales management to do accounting and math all day. So that was something that we did well. Something that we did really poorly at TalentBin early on was not really focusing on a very crisply defined ICP and insufficiently investing in customer success. It’s kind of related to the first point a little bit, about automation and product engagement.

Peter Kazanjy:

But early on, and this is my failure as an early seller at TalentBin, lesson learned, right? This is in Founding Sales, as a result. We would sell to anything that would move, right? Like a VP of engineering would go to some conference, and hear someone on stage talking about how they need to be spending all their time doing recruiting, etc, etc. They’d say, “Oh, yeah, that’s right. That sounds good. I’m going to go over here. I heard about TalentBin, I’m going to buy a seat for $8,000.” Then it turns out that a VP of engineering doesn’t have time in their day to do searching, and writing outbound emails, and so on and so forth. So what would end up happening, of course, is they wouldn’t adopt, they wouldn’t utilize, and of course, they’d churn. Which is not great for your SaaS metrics.

Peter Kazanjy:

So I think that was something that we really took to heart and said, “Okay, we’re going to focus on a very, very clear ICP of people who have this pain point, but importantly, have time and energy in their day to adopt. Then also we’re going to invest like crazy from a customer success standpoint, to make sure that people onboard and then utilize well, and instrument that on an ongoing basis.” So I talk about that in the customer success chapter of Founding Sales as well. Lots of learnings. Ideally, you make these mistakes once, right?

Harry Stebbings:

I do want to double-click on the early sales journey there, because a lot of founders, as you’ve seen many, many times, really struggle with this and getting their head around it. You said before, “Founders need to sell themselves, so they can’t rely on others.” I guess my question to you is first, why do you feel this is the case? Why does it have to be the founders in the early days?

Peter Kazanjy:

So I think, if you think about the journey of a product and a product company, it goes from identifying a pain in the market, validating that that pain exists, building a solution that then proves that you’re relieving that pain, that you’re solving that problem, and then getting commercial exchange for that solution. Okay, great, I solved this problem, you need to give me money in exchange for that. So if you think about those earliest steps, so A, identifying the pain point in the market, B, validating it, those are kind of like customer development, customer research. So Eric Ries talks about it a lot in Lean Startup, Steve Blank talks about it a lot in Startup Owner’s Manual, Four Steps to the Epiphany.

Peter Kazanjy:

So the process by which you do that usually is become a pretty substantial market expert as a founder. So those are product management behaviors. But then what ends up happening is you start transitioning to what I like to call a weaponized product manager, where now you’re turning around and you’re engaging with parties who have this problem that you validated, and proposing to them this solution that you’ve ideally validated with beta customers or what have you. Well, that’s a new problem to be solved, or that process right there of figuring out that sales motion, if you will, of saying, “Okay, this is who we talked to about this problem, this is how we talk about the product in a way that helps them understand, okay, yeah, this is worth me engaging with, etc.”

Peter Kazanjy:

So no one is going to be as expert as you in that problem space and how your solution fits that problem space. So you’re the preeminent expert on the fit between those two things at that point in time. So you can imagine doing one of two things. Either A, you get good at low scale, talking with and engaging these prospects. Or, alternatively, you can grab somebody else and then try to pour all that information that’s in your brain into their brain, and get them as expert as you. So usually the latter case, that’s harder to do than the prior case, because what ends up happening is you kind of end up playing a game of telephone. Now eventually you’ll have to get there. But at that early … It’s kind of like the Paul Graham thing of, do things that don’t scale.

Peter Kazanjy:

To start, being a founder seller, it’s not scalable. But what you’re doing is you’re maximizing your chances of success by virtue of avoiding that lossy-ness of getting that information into somebody else’s brain, who is then going to do it on your behalf. Moreover, there is a feedback loop where early on, you’re going to be engaging these prospects, and they’re going to be telling you things like, “Yeah, that’s actually bullshit,” or, “Oh, I actually have this other solution that already solves that problem,” or whatever. That’s actually really important information to feed back in the other direction, upstream to product, engineering, what have you. So the sooner you have abstraction, the earlier you have abstraction, where that work is being separated in multiple human brains, the more opportunity there is for fall off, and lost in translation stuff. Early on, you just don’t want that.

Harry Stebbings:

Can I ask, in terms of minimizing the friction on that telephone call or osmosis of knowledge, so to speak, [crosstalk 00:11:20] the first few sales reps, is there things that can be done to ease that? Be it documenting extensively the process, the wording, with as you said, [inaudible 00:11:28] documenting? Is it recording sales calls? How do you think about reducing the friction of that knowledge osmosis?

Peter Kazanjy:

So the first thing is that you have to actually discover the knowledge. First we have to discover how to make fire. That’s why the selling behavior has to be done initially by the founder, and done not just once, and not just three times, but ideally a statistically significant number of times, such that what you’re doing is you’re mapping out … The phrase that is used in the industry is a sales motion. But essentially what you’re doing is you’re discovering what is the appropriate sales motion. Who are the humans that need to be talked to and signed off on in what stages? So once you discover that knowledge, now it’s a question of documentation.

Peter Kazanjy:

So ideally, what you’re doing, while you’re discovering that knowledge, you’re reinforcing and refining your own documentation. So as you’re going through these initial sales conversations, you’re iterating your sales deck, you’re adding discovery questions. Oh, it turns out that I keep hearing this issue over here, I guess I should make sure to add another discovery question to my set of discovery questions that asks about this particular solution. To use the TalentBin example, “Cool, do you guys actually have a technical recruiter in house?” “Oh, no, we don’t. We only have an engineering team.” “Okay, I’m going to disqualify you.”

Peter Kazanjy:

So refining those materials, whether it’s discovery questions, or your sales deck, your talk tracks, your demo script, etc, etc, that’s the work that’s being done as you’re mapping out that sales motion. Then ideally, if you’ve been doing a good job, now congratulations, you have a bunch of documentation. Essentially, you’ve been making tooling for yourself, such that then when you go to bring on other sellers, ta-da, the materials are already there. So that’s another reason why that’s really important.

Harry Stebbings:

So totally with you on the importance there, the beauty of when those materials are there. In terms of when to bring on those extra individuals and when to hire your first reps, there is so many statements put out to marketers, “Oh, it’s when you hit a million in ARR,” or, “Oh, it’s when you hit X,” whatever that is, how do you think about them? How do you advise on when is the right time to hire their first sales reps?

Peter Kazanjy:

Yeah. So the right time to hire an incremental sales rep is when you know that you have a repeatable sales motion that is predictable in your hands. So then the next step in the maturation of the organization is proving that you can abstract that into somebody else. Because the way that SaaS organizations get to scale, at least those that have a direct sell component versus self serve, product led, etc, is really just by hiring incremental reps who then get to success, and then are essentially just little revenue machines who throw off bookings on a monthly basis. So the sooner you can prove that someone other than you can sell this thing, the better off you are, because the end state that we want to get to is hundreds of reps selling this thing in a repeatable fashion. Well, the way that you get hundreds of reps to sell this thing in a repeatable fashion is to get one, to start. Right?

Peter Kazanjy:

After you prove that you can repeatedly sell this yourself, the most important thing to then do, and this is challenging in early stage sales, because on the one hand, you’re like, “Oh, I want to continue to scale my customer acquisition and what have you, so I want to keep selling.” But at the same time, the thing that is the gate to your success is the ability to get someone else to do it, such that then once you prove that, then it’s like, “Okay, great, well, now let’s get three people to do this. Now let’s get nine people.” So A, it’s important, once you’ve proven that you can do it yourself, it’s like, okay, wonderful, let’s pause on that.

Peter Kazanjy:

Maybe not 100%, because it’s always … Especially if you’re going to be talking to investors, “Hey, where did this revenue dip come from?” “Oh, that’s where I stopped selling and I onboarded two reps.” “Oh, well, it’s really bad that your ARR dipped right there.” It’s like, okay, well, what do you want from me, man? I had to onboard reps. So it’s–obviously there is a balance there. But really, that becomes the next job, is proving that somebody other than the founder can repeatedly sell it. It’s like the journey of 1,000 miles starts with a single step. Getting that incremental rep who can sell repeatedly is the first step there.

Harry Stebbings:

So totally with you on the repeatability, and that’s when you know it’s the right time. I guess the next question for founders, and the one that I hear a lot is, “Harry, they’ve got the amazing CV, they’ve just come out of Salesforce, they’ve just come out of, you name your top company, and we can get them,” or, “There is this guy or girl, and honestly a bit of a weird route into SaaS, but they’re incredibly hungry, and they’re hustlers.” How do you advise founders on the right profile candidate to go for in these first few sales hires?

Peter Kazanjy:

So most of our audience here for SaaStr, I imagine, are SaaS companies that are probably selling into the mid market to start, maybe some enterprise, and usually selling an innovative new product as opposed to a well trodden solution. Usually what I recommend there, and I talk about this as sales hiring chapter in Founding Sales. So I keep referencing chapters. Founding Sales is available online for free, it’s just foundingsales.com. So the entire book is up on the web, you don’t have to buy it. But one of the things that I talk about there is identifying reps from the prior cohort of successful SaaS companies in that space.

Peter Kazanjy:

So for instance, say you were selling a new creative recruiting solution, and you were selling it yourself, and you’ve got some success. Well, maybe what you would do is it would probably be untoward to go look for an account executive out of Twilio, Oracle, or Success Factors, or what have you, because usually those reps are used to lots of marketing support. They’re usually very highly compensated, usually later stage organizations are more upmarket, etc. Instead, what would probably be more ideal would be to look at reps who are fairly tenured, maybe in their second, third, fourth year at an organization like a Greenhouse, or a Lever, or what have you, right? So it’s the cohort before your cohort in the same space, or if you can’t be in the same space, necessarily, looking for a match of sales motion.

Peter Kazanjy:

So it’s like, “Okay, my sales motion …” I’ll use Atrium as an example. So Atrium makes sales performance analysis software, it has an easy in sales motion, where people can just turn it on, it takes five minutes to set up, and we primarily engage with sales operations people, sales development leaders, and sales leaders. Right? Those are the people who have the pain points that we solve. So the reps that we work with can come from a variety of places. We could have people who have previously sold to sales, and so have some subject matter expertise there. That’s cool. But we can also pull from organizations that maybe have sold analytics, like a mid market rep from like a Looker, or a Mode Analytics, or something like that. That could also be a fit, because that analytics sale is a multi stakeholder sale, usually there is analytics team, and then maybe a data team, and business users as well.

Peter Kazanjy:

So you got to engage with a number of different people in order to get the ball across the line. So what you can do is you can look for these patterns to say, “Hey, does this person’s prior experience, have they either sold in this space, or are they familiar with a prior sales motion?” The opposite, of course, of this would be something like, “Cool, I sell marketing analytics software, and this rep is coming, and my buddy knows a guy who previously sold at Yelp, or Groupon, or what have you.” It’s like, that’s a pretty different sales motion, right? They’re selling $500 contracts to mom and pop takeout shops in New York or whatever, that’s kind of going to be a little bit of a different sales motion then selling recruiting software to HR people. So that’s the way I guide people there.

Harry Stebbings:

I’m really interested, you said there about the comp plans for the people at your Twilios, your SuccessFactors. Comp plans is one that universally I find founders struggle with on the first reps that they’re hiring. How do you advise founders on structuring the right comp plan for those first few hires? How the fuck are they meant to know, especially for first time founders, what would your lessons and advice be to them structuring them?

Peter Kazanjy:

Yeah. So this is another reason why selling yourself in a repeatable fashion is really helpful, because now you have proof it can be done. Yeah, hey, I was selling halftime before, and I would close about three deals a month at this average selling price. I’m not even a professional seller. So we can probably expect that you can sell four at a 15K ASP or whatever. So based on that, that seems defensible. Anyway, that’s another reason why it’s really powerful to have that statistical significance of your own selling. A traditional SaaS comp plan is usually 50% base, 50% variable compensation, and that variable compensation, so say $140,000, just to use a standard, mid market sales person in San Francisco or New York, 140K on target, 70K base, 70K variable, and that variable is usually based on 10% of 10, 11, 12, 13% of booking. So in that case, that’s a 70K variable at 10% would imply $700,000 a year of bookings, right? So it’s 55K, 60K a month. That’s a mature sales organization comp plan.

Peter Kazanjy:

Usually earlier on, it’s kind of harder, where, okay, prove to me that somebody can sell this, because this is what a sales rep is going to be looking at you and saying. “All right, I’m happy to take that comp plan, but can you please prove to me that somebody has sold this $60,000 of bookings per month, because that way I will know and I will have confidence that I will be able to attain my 140K OTE.” Usually that’s hard, because like you were talking about your first and second rep, it’s like, “Yeah, well, I sold it a bunch.” But yeah, you’re right, we don’t have repeatability with someone who is not me. That’s where I really like Jason Lemkin’s early stage comp plan of a base salary, depending on where you are in the world, 4K, 5K, 6K a month, and then essentially a 20% commission rate on bookings that exceed that base.

Peter Kazanjy:

So if somebody closes greater than $6,000 of bookings in a month, say they close 30K of bookings, which would be 24, you net that out against the 6K, and now you’ve got 24K of proceedings. Okay, pay 20% on that, which would be 4.8K. So what that does is it derisks things for the business, where you don’t have a rep who is upside down and costing the business a bunch of money. But on the flip side, they have a huge incentive to close business, and they get to participate well on the upside. Then eventually what ends up happening is after you then have a couple of reps selling like that, then we actually know what is the physics of the sales motion. Like, oh, it turns out that it’s not really tenable for us to sell $60,000 of this offering a month. It’s more like 40K.

Peter Kazanjy:

Okay, well, then that means that we have to change our compensation plan and probably means we’re going to have to find lower cost sales people. This is why you see SMB focused sales organizations like Zenefits, or Yelp, or Yaxed, or what have you. Usually those sales organizations are in lower cost areas, like in Phoenix, or Denver, or fill in the blank. So that’s the way to approach that early on.

Harry Stebbings:

The challenging element for me is actually when you’re in the enterprise sales segment and you’re looking at your new rep, and you’re going, “The average sales cycle is eight to nine months, save for these large ACVs.” So that eight to nine months, you don’t really know if they’re doing well, you don’t get much feedback. They can almost lose confidence given the length of the sale. How do you advise founders in terms of engaging and getting information in the ramp time of those enterprise sales reps in their first few hires?

Peter Kazanjy:

Yes, Harry, that is a problem. You are correct. So really what this kind of comes down to, and this is literally what I spend my days thinking about, is leading indicators, because the challenge that a lot of founders and people who are not familiar with direct selling is they oftentimes think it’s magic. There is a potion, there is magical incantations, etc. But really, the key to high performance sales is just a high quantity of high quality selling activity. So the cool thing is that you can actually instrument that selling activity.

Peter Kazanjy:

So if you break down what a sales rep does in their day or in their week, they have meetings with customers, they email people, they have opportunities that are in their pipelines. Their opportunities advance stages. So by virtue of if you instrument that, and you instrument those leading indicators, well, suddenly now you’re going to understand, especially in a situation where there is a long time offset between the start of work, if you will, like an enterprise sales rep, and the outcomes. So bookings or wins. Well, you can actually understand how they’re pacing towards those things.

Peter Kazanjy:

So are they engaging in a sufficient number of customer facing [inaudible 00:23:53]? How many first meetings are they having a week? How many first meetings are they having a month? How many new opportunities are coming into their pipeline? Are those opportunities real, because they’re advancing a stage? Are those opportunities real in so far as the reps are touching them, and they’re not just sitting in their pipeline languishing? So instrumenting these dozens of KPIs, essentially putting telemetry around your reps, is the way that you solve this, rather than just crossing your fingers and your toes and hoping that magically deals pop out at the end of the quarter, at the end of the month, or what have you.

Peter Kazanjy:

So the cool thing … This is essentially the essence of modern sales, is, by virtue of the fact that a sales process can be decomposed into its constituent parts and then moreover, you can instrument those constituent parts. Well, now all of a sudden you can look into the future and say, “Hey, I know that you’re not going to get there in three or four months, because I’m looking at your leading indicators right now, your customer facing meeting behavior, new ops, number of accounts you’re interacting with, number of contacts you’re interacting with, and it is out of band as compared to the other reps on our team or me. So we have to remediate this, or in three or four months, we’re all going to be real, real sad.” But the good news is we’re not going to wait to be real, real sad four or five months from now. We’re going to take action right now.

Peter Kazanjy:

So really, what the answer to your question is leading indicators, leading indicators, leading indicators, it’s just a phenomenal book by a gentleman named Jason Jordan, called Cracking the Sales Management Code. We give them out like crazy at Atrium. We give them to people in exchange for discovery conversations, it’s really kind of great, because we work with sales operations, people in sales, and they’re like, “Hey, this is a phenomenal book that preaches the gospel of instrumenting leading indicators in sales organizations, would you like a copy to talk about leading indicators in sales organizations with a company that makes software that does it? Oh, great, yes.” But it’s a phenomenal book that I recommend people check out. That’s just the way to solve that.

Harry Stebbings:

So I’m totally with you on the leading indicators. I think where I struggle, honestly, is where do you set the goals? Because you’ve got to have the balance of achievable, but a stretch, but also not too much of a stretch where it’s like, “Oh, there is no way I can get to this goal.” How do you think about the balance of achievable versus too optimistic targets?

Peter Kazanjy:

What is an appropriate goal? Can we just pull it out of our ass and be like, “Yeah, here you go. It seems like you should be able to do this.” No, right? So the key to setting appropriate goals is, one, you want them to be reasonable and attainable. So then the question is okay, how do we know that they’re attainable? Moreover, what you want is you want to have goals, not just from an output standpoint, like, “Hey, you got to get to a million dollars of bookings, or you’re fired.” But back to our previous point, you also want to set goals on those leading indicators as well. So then you would say, “Okay, what are the appropriate levels of those leading indicators?”

Peter Kazanjy:

Well, there is a couple of ways you can figure that out. One, you can base it off of historical performance of other reps in your organization. So this is something that we do with our customers all the time is we light up their data in Atrium, they usually have very poor visibility into their sales organization, their SDR organization, what have you. So very quickly, within 10 minutes, they can see all the historical performance levels, KPI levels, of their various reps. So that’s actually very helpful, because now you can say, “Oh, okay, I can squint at this and say, “Yeah, it looks like our SDRs, historically, they’ve created around 10 or 12 opportunities per month. Okay, let’s set the goal at 10.” Right? So you can use your historics.

Peter Kazanjy:

The other thing you can do is you can do bottoms up. This is, again, kind of the crux of modern sales, it’s not dissimilar to Frederick Winslow Taylor, modern management time in motion studies where you can say, “Hey, there is 40 hours in a week, there is 50 hours in a week, what do we want to have our people spending their time on? What is the amount of time it takes in order to have a customer facing meeting? Send an email to a prospect? Make a dial?” Things like that. So you can do a bottoms up approach where you can say, hey … I’ll use our Atrium AEs as an example.

Peter Kazanjy:

So usually they’ll have a 30 minute discovery call with somebody, typically turn on the data for that organization by connecting to their CRM. They’ll usually have about 15 minutes of prep before that meeting. THey’ll probably have about 30 minutes of followup afterwards. They then have to do a little bit of setup on that person … This is just one opportunity. They have to do a little bit of setup on that person’s instance, and then they reconvene a few days later to have a data review meeting, which is usually an hour. It takes a half hour in prep before that, about a half hour in followup after that. So pretty quickly what you can hear me saying is I’m adding a layer cake of time for an account executive, things that they have to do in order to run an opportunity. Then you just kind of divide that out based on how much time there is in a week.

Peter Kazanjy:

So pretty quickly, you start to understand, okay, given the fact that this is what is required in order to run an opportunity, or in the case of a CSM, to onboard a customer, and in the case of SDR, to do prospecting, or what have you. Pretty quickly you can add that up and say, “Okay, with potty breaks, and lunch, and Instagram time, or whatever, this is the total amount of things that can be done in a given week or in a given month.” So that’s a bottoms up approach.

Peter Kazanjy:

Then the last thing you can do is you can give benchmarking between different organizations. So usually what you want to do is do all those things, and then kind of squish them together in a pot and whisk them, right? Kind of, all right, so based on all of these things, I’m interpolating that you should have 15 customer facing meetings a week, five of them should be first customer meetings. Ideally, we want to see five opportunities come into your pipeline per week, multiply all this by four, on a monthly basis. Then based on a 20% win rate, which is what we’ve historically had, this is the number of wins that should come out of that, and our ASP has historically been 20K. So all of that backs into this amount of bookings.

Peter Kazanjy:

So now, what we’ve got is an entire linkage between leading leading indicators, level of activity metrics, and then output metrics like wins and bookings, crossed with quality metrics like win rate, opportunity to convert. So now we’ve got this entire linkage, and so now we can instrument that. Say, “Hey, you know what? I’m worried about you because three weeks in a row, you’ve had fewer than five new opportunities coming into your pipe. So given that our sales cycle is historically 70 days, I’m worried that 70 days from now, we’re going to be having a really sad conversation. So we need to get your new opportunity ingestion up.” So that’s the way to approach that.

Harry Stebbings:

I’m too intrigued not to touch on that, and final one before the quickfire, because I could chat to you all day, is essentially, when you look at opportunities coming into play, SDRs and AEs could point and say, “Well, marketing aren’t delivering the inbound, they’re not giving me high quality candidates.” Then you see the intrusion sometimes in sales into the marketing realm, and I guess my question is how do you feel about AEs and SDRs going out and finding their own pipe? Should it be segmented? No, that is not your role? Or is it an absolutely, this is a hunt for hunt’s sake, and well done to you for doing so?

Peter Kazanjy:

Yeah. So I think it kind of depends on the sale motion. What you want to see is proactivity and high activity. Again, the secret to sales performance is just a high quantity of high quality selling behavior. I know that sounds simplistic, but really, that’s just kind of the secret. So what you want from an AE and an SDR is you want to see that constant motor, they see somebody mentioning something on LinkedIn, somebody tweets something X, Y, Z about hiring a bunch of … Like use Atrium for an example. Somebody is talking about how they’re hiring a bunch of AEs. Oh, you’re hiring a bunch of AEs? That means that you’re going to be ramping a bunch of people. Ramping a bunch of people means that you should be paying attention to your leading indicators and ramp. Uh-oh, this seems like somebody might need Atrium. Let’s go and investigate. So you want people to constantly have that hunger and proactivity.

Peter Kazanjy:

Now, that being said, there is the question of Eli Whitney, interchangeable parts, and specialization, like relative advantage specialization, same with Henry Ford, etc. There is efficiency gains to be had in specialization and relative advantage. So for instance, SDRs are junior sales people. They cost less. So to the extent that you can have them engaging in behavior that is important, like prospecting behavior, identifying the accounts, identifying contacts, engaging them, sending emails to them, calling them, etc, etc. Those are behaviors an account executive can do as well, but they’re lower value behaviors. I don’t mean to sound dismissive at all. They’re very important behaviors, they’re just lower value than having a closing conversation with a CMO or what have you.

Peter Kazanjy:

So the beauty of a modern, specialized sales organization where you can abstract that out, and say SDRs are going to be responsible for prospecting, and they’re measured on new opportunity creation. They’re quote, unquote, ‘openers,’ versus deal runners and closers. Then our AEs are going to be focused on having discovery meetings, having business conversations, doing presentations, doing demos, doing consultation, higher value behavior. Well, that abstraction and specialization can be very powerful, because now you can have somebody who costs you $70,000 a year doing that behavior that would otherwise have to be done, still, by the account executive for $140,000, $150,000 a year.

Peter Kazanjy:

So this is the beauty of modern sales behaviors of sales organizations, where a CRM can be used to orchestrate that behavior, SDR creates opportunity, it’s handed off to the AE, no balls get dropped, nobody gets confused, and these handoff processes happen seamlessly. I’m presenting a platonic, ideal version of this, of course. It’s usually messy in practice. But that can be very powerful. Now the thing that you don’t want to have is capture the upside of that specialization and relative advantage.

Peter Kazanjy:

What you don’t want is to then facilitate lethargy or lose that hunting spirit on the part of the account executives. Like, “Oh, yes, I will just sit back and the opportunities will arrive to me on a silver platter. SDR, please peel these grapes. Thank you.” You don’t want to have that situation. So usually it ends up to either A, through good instrumentation, where it’s like, look, the reason why you’re not doing prospecting is because you’re having 15 customer facing meetings a week, and you barely have time to go to the bathroom. In that situation, fine. But if you’re not fully utilized, you should be spending your time prospecting, and maybe we even KPI that. So a lot of times, my answer to a lot of these questions, I’m like, yeah, just better expectation setting and better instrumentation is the way to capture upside without encountering the downside.

Harry Stebbings:

Yeah. Listen, I’m totally with you. That was a brilliant presentation. As you said, sometimes it doesn’t always work out quite like that, in terms of perfectly specialized roles. I do want to move, though, Pete, into my favorite, which is essentially quick fire rounds. I say a short statement, you hit me with your immediate thoughts. Are you ready for this intensely pressurized round?

Peter Kazanjy:

Hopefully I don’t disappoint you, Harry.

Harry Stebbings:

This is what 15 years of doing the grind of startups has been about, these next five questions. Why do people from more technical backgrounds not go into sales?

Peter Kazanjy:

I think usually it’s because there is just confusion or lack of familiarity as to what is possible in sales, and that it’s not magic, that you can learn it the same way you can learn JavaScript, you can learn to have conversations with people who you don’t know. My friend Jeremy Donovan, who leads sales strategy and operations at SalesLoft had a really good point about this the other day, too. If you’re graduating with a STEM degree, well, you usually get a pretty good compensation immediately out of school.

Peter Kazanjy:

Now, you might be capped from a total earnings standpoint. You might not ever be a VP of sales earning a million dollars a year or what have you. But coming out of school, or university, as Harry would say, maybe you can make $100,000 or $120,000 versus getting on the sales train, you would start as an SDR making $70,000 a year or what have you. But I think it’s a familiarity thing, and this is where folks like you, like publishers and educators, and things like Founding Sales, will help people understand, “Oh yeah, this isn’t scary. It’s not complicated. I can do this too.”

Harry Stebbings:

Totally. Absolutely. I find that terrifying that people are actually influenced by my work, which hopefully is a good thing. But is sales is more of an art or a science today? We listen to you and we talk about leading indicators, we talk about ratios, metrics, so intensely. But has sales has been transformed into a science or not?

Peter Kazanjy:

It’s both. It’s artistic behavior, persuasion, empathy, communication, that can be scientifically instrumented. So there is a really delightful feedback loop there, where you can very quickly understand that somebody is having poor quality, their artistry is off. You can understand that somebody’s artistry is off by virtue of looking scientifically at the echoes, at the metrics echos of that artistry. So for instance, we see this a lot with our customers, when SDRs are promoted to AE, usually they’re very high activity cell, because SDRs are good at being high activity. But if they haven’t been sufficiently trained and onboarded to the AE role, oftentimes, they’ll struggle with having high quality discovery conversations and what have you.

Peter Kazanjy:

So what you’ll see is you’ll see poor conversion rates from the first stage of an opportunity, discovery, what have you, to demo and further conversation. So the answer, and maybe the unsatisfying answer to it, is that it really is both, but it’s unlikely that you’re going to science the entirety of sales, because sales is about discovering pain points, empathizing with people and their pain points, then also persuading them that this is the thing that they should be focused on solving, and that it should be a higher priority versus a lower priority. Those things are very artistic in nature. But then scientifically instrumenting that, and then being methodical about the execution of that at scale across many, many, many reps, that’s definitely a science.

Harry Stebbings:

If you could change one thing about the world of SaaS and sales today, what would it be, do you think?

Peter Kazanjy:

I think that the … This is happening already. I think that the focus on, “Got to hire some closers, got to close some business,” is really kind of anachronism. I think this is partially driven by the fact that you have a lot of founders who don’t have a sales background, understandably, I didn’t, who have only seen this stuff in the movies. Their only experience with sales is used cars sales, buying a car, or watching [inaudible 00:37:32], or what have you. So they have these misconceptions, and especially older school sales where it was kind of like this, had these anachronistic behaviors that are still kind of working their way out of the ecosystem, versus the crux of a modern seller, to me, is the way that I like to phrase it is the consultant that has a predilection for a particular solution.

Peter Kazanjy:

So at Atrium, all of our customer success people at Atrium are former sales operations people. So they’re essentially the same category of professional as the people that we sell to, just because it’s important for them to be able to support our sales operations customers, our sales leaders, etc, etc. Our AEs, I trained the hell out of them so they can speak sales strategy and sales operations, sales analytics. Like a 28 year old AE can go toe-to-toe with a 45 year old VP of sales on sales performance analysis, because I need them to be able to have a consultative conversation, like a good business conversation with that person. So the more we can focus on good consultation, good problem finding, and then fitting of that solution to that problem that’s been discovered. Or alternatively, if there is no problem, be like, “Great, hey, you know what, have a good day. Here is your copy of that book, and we’re not going to pursue this conversation.” That’s the ideal model of sales. I think we’re turning in that direction. It’s just taking some time.

Harry Stebbings:

Pete, as I said, I heard so many good things about you before this show. I was really excited for this one. We totally went completely off the schedule, but that’s the sign of a brilliant interview, so thank you so much for joining today. I’ve absolutely loved this.

Peter Kazanjy:

Yeah, so it was an absolute delight, Harry, I look forward to continuing to listen to all of your various podcasts, across your various properties.

Harry Stebbings:

Absolutely loved having Pete on the show. If you’d like to see more from him, you can find him on Twitter @Kazanjy, likewise, it’d be great to welcome you behind the scenes here. You can do so on Instagram @HStebbings1996, with two Bs.

Harry Stebbings:

As always, I so appreciate all your support, and I can’t wait to bring you a fantastic episode next week.