Building a world-class sales org | Jason Lemkin (SaaStr)

24:23It's a complicated product. It's more complicated than the product I last told than I just didn't have time. Jason, this conversation is going exactly how I'd hoped. There's so much actionable advice here. Let me try to summarize a little bit of the things you've said and then keep going. So let me know what I'm missing here. I'm going to try to just highlight some of the important things you mentioned. Since it's a when it makes sense to start hiring, your first salesperson, a couple of things you shared is you've closed the first 10 customers on your own as founders. and if you're spending more than 20 % of your time on sales and you need to start creating more leverage, I'll throw in one other thing I've heard and just to tell me if this is also true that there's kind of a repeatable process you've created.

25:02Like you can sell consistently enough or you can tell someone here's how I've been selling. Is that right? Yeah, if you hire a VP of sales before then is approaching 100 % chance of failure. I see. So you can hire the first two reps before a year like here's a pretty good process that has worked for you a number of times. Yeah, I mean, listen, it's hard as hard as it is for a lot of founders to even get their arms around. The reason is you've got to be that crummy first head of sales with them. You've got to manage those reps. You've got to be in the field with them. You've got to be figuring it out before you can hire the person.

25:33You just have to. Even if you're terrible at it because you're still going to be a good midler. You're still going to be a good midler. Okay, a few more things that stood out to me. One is higher to sales reps immediately, not just one. These reps, you need to interview about 30 people. Eight will be like pretty good, 20 will be terrible, two are gonna be, these are people you can see selling your product and you would buy from them. And they're often very quirky and not maybe a traditional sales background. They've never been VPs of sales essentially. They're more like AES and things like that, historically or maybe not even sales people historically, is that, is that right?

26:10I think you will regret it if you don't hire these first couple sales reps and have a couple years of experience if you're in B2B with B2B sales. They need a couple of years of experience and they need a certain amount of maturity and maturity is a real issue in any early higher because we just don't have time to babysit people. There's no onboarding, there's no training. So they need a couple years of experience, ideally something close to your deal size. We can chat about why. That would be nice. And enough maturity that you can trust them with that lead. We can trust them with your customer, right?

26:42Okay, and then you hire a VP of sales once you're ready to go from three to 300 reps. Your advice is also give the VP of sales a bag, slash a quota, slash they need to be doing sales themselves in today's world. At least, at least for a little while and more importantly, if they don't want to, I think today's world you got to run from them. Exactly whether they fully carry a quota, a half quota, whether they backfield the sales team, You want a salesperson and here's the thing Lenny you want to sell this is gonna sound silly But it's not this trust me on this for anyone watching listening you want to head a sales that actually wants to do sales And I got to tell you and I'm still struggling with this myself after the last three years or so So many folks in all functions we could talk about other functions too, okay, but especially in sales don't want to do sales anymore They don't want to do it.

27:38They don't want to do it. 2021 was crazy because everything was too crazy. There's too much money, too much going on. 2022 was the night falling. That was crazy, too. 2023 was just hard. Okay. And whether it's burnout or whatever out or just too much of a too much change, I would say I've probably interviewed for different reasons 50 VPs of sales in the screening question. And that's why they got to carry a bag because it proves they actually still care about the craft. And the best sales folks love sales. It's a craft. They love money. Yes, they love money and that does matter. Do not hire a sales rep that doesn't like money.

28:21Trust me on this one app. The zero percent chance they'll work out either. But they also like the craft. They like honing the script. They like beating the competition. They like figuring out the counterfe. They like figuring out the weapon and the 10x feature. They like working on a team. They like hunting. They love it. But then sometimes I just think burn out is always a reality But I just think that the last three years have been so yo -yo that folks are just they're out They're out and don't hire them no matter how smart they are and that's the test The I'll tell you I talked with a really great VP of sales candidate that had worked with a top 10 company tech company And I asked him what he wanted to do in this next role in these like yeah I got a great team.

29:03I've got eight people that I can bring with me. We're ready to lock and load. I'm like, okay, well, let me tell you one of my views in today's world is that you've got to actually visit more customers now, not less, in a distributed world that's more important to visit customers. And he lived in the East Bay in Pleasanton in the East Bay, which is maybe 20 minutes east of Oakland. He said, I'm willing to visit customers, but I won't go as far as the peninsula in San Francisco.

29:29He's just happy at home. He's happy at home, Lenny. And he don't want to sell and this guy has the best LinkedIn and the best references, but you don't want to sell anymore He needs a job. He wants to be a VP sales and I see this across the industry and I'm struggling to find answers And I think the biggest hiring we talked we talked about a lot of tactical hiring mistakes that you can make today in sales The biggest strategic mistake you can make today in sales because there's so many veterans There's so many folks that work to Twilio and Mongo and wherever pick any any great company you want, right?

29:58There's so many veterans out there. You just can't hire the ones that don't actually want to sell anymore and there's too many There's too many you mentioned that you actually just ask them in the interview the first question is do you actually want to sell? What other questions do you ask for either let's go through both you said you have these questions that you ask For the early hires and then the vps sales what are some tips for people when they're interviewing these folks? It's interesting vps sales of vp a product. I look for the same answer One of the Colombo style questions I ask them, I mean, it's barely even counts as a question, is what do you want to do your first 30 days?

30:33What do you want to do? Actually, I usually ask what do you want to do your first two weeks? And in B2B, if I don't hear from the VP of Sales or the VP of Product that I'm going to go meet customers, out, I'm out. There's too many VP of Product too, Lenny, that don't want to meet customers anymore either. The majority of VP of products that I interview, they don't say meet customers. Every single great VP of product, chief product I've ever worked with in my entire career. You know what the first thing they do in the first two weeks, they like leave me alone. I'm going to go talk to 20 customers, leave me alone.

31:04Leave me alone. I'm going to go talk. They don't want to sit out of meetings and look at PRDs and talk out of their navel on endless internal meetings. All the best ones they say they just leave, they literally say something leave me alone. I will see you in two weeks. I'm going to go meet with 20 customers. And that would product should do sales, whether it's prospects or existing customers, it can vary, right? But they should be like, I'm my first day, I want to join five calls. And when you hear that story of, I don't want to travel out of Pleasanton, or they say, I, here's the what you're going to hear from the wrong person for anything, even up to 50 million revenue.

31:38I'm going to spend that first month working on process. I'm going to spend that first month getting, getting salesforce up and running. I'm going to send the first month on territory planning, because we really with our three reps. I really want to make sure we've nailed territories, right? Let you'll do the South, Elaine, I'll do the East, Jason, I'll do the West. Will you hear process, process, process from any, from marketing product, sales customer success to boy, it's the death of customer success. It's just people and it's not that you don't need process. It's just, it's even worse than it was than a few years ago.

32:12Because I know this is going to trigger some people, but the truth is they don't want to work. They don't want to work. They don't want to work. I literally just got this linked in email to work with me at Saster from this person who's reading Saster for eight years. You're like, I want to run account management, customer success for you. Here's what you're doing wrong. Here's how to do it. I'm like, this is pretty good, right? And I DM their back. I'm like, great. To be honest, you realize that you're actually going to have to talk to customers and sponsors yourself in the beginning. No response.

32:44Just out, just out. And that was the best one I got the last 30 days. That was the best inbound that I personally got. So I know it sounds triggering or critical, but as founders we have to be honest that There's this vast pool of veterans with great linkedins and great resumes that are so burnt out Lenny and let's not blame them I know it sounds like I'm blaming them or being negative and and I'm trying to not be negative I'm empathetic. I am empathetic to the burnout, but don't you can't hire these? There's too many work the industry is littered with the burnt out They're littered with it. And if you hear a touch of cynicism, if you hear anger, if you hear I don't wanna meet customers and I'm gonna say any VP role, product sales, marketing customers.

33:25If they don't wanna meet customers, they're first, let's make it a 14 day test. You know they're never gonna wanna meet customers. These folks that don't wanna do sales, that are VP's of sales, I imagine when you're further along, that's more okay, because you don't need them to be doing sales, right? They wanna manage, optimize, no, I see you shaking your head. I mean, okay, you think, okay, there's an element. Let's call it North of 50 or 100 million, where for what sometimes call commercial sales, SMV sales, it really is all process, okay? So for sure, I agree, but you know, at Salesforce, they're trying to close $100 million plus deals.

34:05You think that the sales leadership doesn't need to be in those deals? You think they can just refresh on the dashboards and track them from home? No, Mark Bannyoff today is still flying to meet customers. He said the other day, you know, you whiter's Mark Bannyoff go to Davos, right? He sits and I have never been to Davos. He sits at the same place at the top of some staircase, okay? And Salesforce drops millions of Davos and he waits to meet customers, prospects, and partners in person all day because it's efficient. Because it's efficient because he can do 50 or 100 customer or prospect meetings a day at Davos.

34:37He's still doing it at 30 something million in revenue, right? So this idea that is there some truth at at at at like for example when I worked at a doby back in the day There it is true that a doby which was you know Parts of the business you know sales literally was not in dashboards like I get it Okay, it four billion ten billion revenue, but most of your audience is not ready to hire at four billion or ten billion A revenue they're not ready to hire that person don't hire them right? I don't know maybe saute is listening You never know. I think on the sales side of the business, they're flying out to the big deals.

35:17To close the loop on this thread, when you're interviewing the early sales reps, those first two quirky folks, where are some questions and ways to know if they're maybe a good fit? You mentioned one of like, you feel like you would buy from them. Okay, really the simplest one. And early in my career, I thought this was silly or hated at this Glengari Glen Ross. I don't know if it's Glendary Glen Ross or that toxic Leo movie about sales which is still entertaining But what yeah one way another Lenny. It's got to be sell me this pen But it's not sell me this pen. It's sell me this app So I don't like surprises.

35:52I don't like games I like to do this in a second interview or whatever give them time and I don't like to judge too harshly But it whether it's the first interview or the second they got to sell you this pen They've got to put in the 30 minutes of work and maybe it's two hours. But here's the thing, today's world, you can go on YouTube or someone's website. There's an explainer video for every product under the sun, isn't there? I am shocked how many sales people I have met, Lenny, from SDR to SEP of sales that by the time I'm doing an interview for like a portfolio company. This isn't a screen review.

36:26They haven't even watched an explainer video yet. I could be the fifth or eighth interview and they don't know how the product works They have not even gone to the effort of searching YouTube or the homepage and watching it and forget about explainer videos Enough, but so many companies do webinars now and they publish them on that like really good stuff customer testimonials Right if you're a sales rep you don't actually have to know how the web looks work or how to provision an API key But you need to know the product as well as that webinar that's on YouTube And 98 out of 100 folks won't bother an interview.

37:00They won't bother. They're just going to click on apply on the, on the ATS and tell you, hey, I recently stumbled upon whatever it looks like you have time to discuss, right? But that one that actually does enough work and watches the video and then can sell it to you and they're going to make mistakes. They're not going to get it right, but they have enough confidence with the core problem to be solved because here's the mistake that 99 % of founders answered. sales reps make. We're not really selling in V2B. We're solving problems. And this is why so many people are struggling in 2024 because they can't solve their products as sales reps as companies.

37:38They can't solve big problems anymore. Our job as sales reps in SaaS is to not sell a used car. Okay. We are selling a Tesla Model 3 performance. It has competition. I might not need it this week. Okay. But it's pretty darn good. Okay. And I'm going to help you understand, Lenny, because you're in the market for the car. Why? This is the best one. I'm going to be honest about where it's not. I'm going to answer all your questions. I'm such an expert. And then I'm actually, Lenny, when is that how much you have 280 ,000 miles on the Civic? Why? Let me help you get you into that Model 3 performance today.

38:11And I've even got a special discount for the end of this month. And let me just help you. And I've spent four calls answering all your questions. And I'm explained to you all the things and why the supercharging network is better than the regular one that doesn't really work at the charger near your house. And I've got on Google and I've seen there's no charging network near your house. There's only super charges. I've I've I kind of got you, don't I? And that's the job of SAS and sales because we're not selling commodities. We're not and that's why the best reps will also tell reps when not to buy their product.

38:40As painful as that seems in tougher times in 2024, the best reps say, no, you know, we're not there yet. We're not the right. If you need this feature, if you need this integration, I want you back in six months when you use this big product that isn't that great, but today we're not the right solution for you. That's the best ones do that. They have the confidence to know that close it. And the rest of the world thinks this is like some sort of adversarial transactional thing and it's not. Right? Software. I think hopefully all your audience would agree when it's done right. Software is magical.

39:13It solves incredible problems, incredible What Airbnb does, what Uber does, what's the answer is that things sell, I can track my customers, I can manage, I can automate my communications. It's magical. You shouldn't have to use boiler room tactics and use bar tactics when you have something, but it doesn't sell itself, except for a little while in 2020 or early 2021 that screwed the whole world up when products actually sold themselves. I feel like this is a separate podcast we should do. I've just had to get better at sales and had a sell, but I feel like that's its own hour of conversation.

39:50I did a great episode with April Dunford where I don't know if you follow her stuff, but she essentially describes exactly your approach of how people understand the market, like help them understand the entire landscape and then talk about your problem. So anyway, willing to that episode has a lot of good advice there. In terms of this interview, selling you a pen approach to give people something very concrete to do. Like, how do you actually set this up? Is it like sell me your product and then they put together a pitch for your team and then like they pitch you on the product? I'll tell you until like the boom, until everyone in late 2020 got so desperate to hire anyone with a pulse, almost everyone in sales had to come and they had during an interview process they actually had to do the pitch.

40:31They would come and you used to do it in person with this screen, you can do it on Zoom now. It really doesn't matter, but do it for real. do it for real and everyone would see. And everyone in recruiting change, people stopped doing reference checks, they stopped doing these tests and they would just higher warm bodies. Late 2020, I can tell you a funny story in a second and it was okay until it wasn't and our hiring processes have not reverted back to pre -March 2020 and I think it's failing founders left and right. I can't tell you, I would say 95 % of the hiring I see out there, people don't do reference checks anymore, Lenny.

41:10And we can talk about when they work and when they don't, but no one does them. No one does them. No, how you're going to invest so much, if we're going to forget about the salary, it doesn't really matter. So much time. Your time, your leads, your everything's so precious to bring Jason into your company and you're going to go through all this recruiting process and you're not even going to do any reference checks. people don't even do reference checks and they don't they stop doing doing this demo because they were so worried that rap would go to gusto or go to deal or go to remote there was no time I got to get like this SDR has 50 offers Lenny we got to hire this SDR with three weeks of experience we've got to decide today and that's the way and hiring does not come back and you're just those if those hires bounce not only is it bad for you but it's a disservice to the to the it's worse for the higher.

41:59I mean that poor cloud flare woman that blew up right with the thing. Like there's so many issues there we could dig into but it's all cloud flares fault for hiring her. Okay, let's forget about that. She didn't close a single deal. Okay, so objectively in sales, should you retain your job at in sales if you can't close a single deal? Like I don't want to get into some of the triggering things but remember if you hire someone and they fail, it's all your In fact, she didn't know what she was getting herself into. No candidates can do enough diligence ever. There's not enough time. There isn't enough time.

42:32And this is true all the way to the top. And so when as an investor aboard number, it's funny when I do interviews, I do this thing at the, I try to be the last interview sometimes. And the founders don't want me to do it. They want me to sell, right? I want to be the last one. And what I want to do is when Lenny, you've decided to join Ellen at her startup, right? At the end, I said, You've got I talked Ellen she loves you have the job You've got the job what I don't want you to do Lenny is bouncing three months after so let's slow down Let's talk about the questions you haven't on your mind and Let's have a safe space where we can make sure you're gonna be happy and successful there, right?

43:09And sometimes even the founders get mad at me for doing this because sometimes the candidate fails But I'm like I know you're mad at me today But this is, you know, it is your fault. 100 % your fault if any of your hires fail. Don't blame them and I'm guilty of this. I get upset when people start, and they don't give it their all, right? Or they don't do it or hide, you know, I mean, you know, what if you hired someone for your podcast and they decided, you know what, I don't wanna do the podcast, the podcast this week. I'm tired, I'll do it next. Okay, you're so mad at them, but you should have seen it during the hiring process, right?

43:44So tying it back, that's why you've got to do the sell me this pen. You've got to before you hire the salesperson, have them sell your product for you. Do the demo. And if they need more time, give them more time. Let them watch another demo. Don't have them feel like it's a track or spook them. Treat them the way you would like to be treated. But if you skip this step, I mean, you know, it's the point. You're not helping them. What I love about this process is it connects exactly to what you recommended you look for in these tires is would I buy my product from these people? So this makes a lot of sense.

44:17And you give them this assignment at home, and they do work on this and they come in red. It's not like come to the office. If you talk to a great transactional VP of sales that's hiring tons or reps to do it, like they'll make them do, if they're still doing this, they'll make you do sell the pen fast in the process. They don't have time. They're doing 20 interviews a week, 30 interviews a week. You've got to sell me this pen. But if you're a founder and you, and I'm talking about you've already talked to a bunch of candidates, you're down to one or two. Make them tell them look this isn't a trick.

44:42I'm not that great at telling my product. You're myself, right? But we I got to know that you're gonna be happy and successful here So do a demo for me and if they won't do it, they're not a salesperson They're not and too many people went into sales not the other weird thing about speed to be sales in good times Is actually a lot of these folks are not really what you might think of sales people. They can't do outbound They can't pick up the phone all they know how to do is to manage leads that come in and say I want to buy today And you need those people too, okay? And I'll say I'm not saying you don't need those people too, but that's not always what we think of as sales.

45:16Another black box for me, and I think a lot of people with sales is comp and quota, had actually set up their comp free early hires and then had actually decide on quota. What advice do you have for figuring that out early on? Like what percentage is commission, what percentage is salary, all that stuff? Yeah, everyone gets this wrong. We worry, look at, at scale when you're extremely mature. extremely mature and very profitable. You really got to tweak this stuff very carefully. Okay, and we could talk about that if it's relevant. But in the beginning, we get this all wrong. What matters is, can a sales rep close more than they take home?

45:53In the very beginning, that's all that matters. It's just you selling, right? The first three months of a new rep, you're lucky if they can close as much as their take home payers, their OT, okay? And so, So in the really early days, my early early day comp plan is, look, your first three months, you keep 100 % of what you close. Of course, that's not profitable for the business, but you've got to invest in them, right? You keep 100 % of what you close. And if you have enough going on your business, usually that's enough to put supper on the store. And that's without a salary? No, no, you pick a OTE, a salary.

46:28But you've got to, okay, let's step back for a minute. You've got to pay market. it. You've got to pay market. And this in the early days, if your brood strapped or really in this stress as folks out like I just talked to this great rep, but he wants 150 K O T right. And in fact, it's a step down he had 170 K at Slack, but he knows this is in the startup. He wants 100. He might take 140. And O T is total comp overall. And the founder panics, I don't have a high I'm only making 60. How can I pay 140? Well, let's break it down for a minute. First of all, let's be tactical. It's usually 50 -50, right?

47:0850 % base, 50 % bonus for a sales rep. So they're really only taking a 70k base trying to make another 70. Okay. And then 70 divided by 12 helped me do my math. It's not quite six K a month. Well, maybe with taxes it is. You're only paying six K a month for a couple months to see if this experiment works out. You're investing 20 ,000, you don't have 20 ,000 dollars to do sales, then don't do sales. If you you can't find $20 ,000. So people freak out too much about this top line number, this base and bonus, the on target earnings OTE, and they're not more practical about what am I committing to cash upfront.

47:44Two, you need a plan where it's a win -win. So if this person makes $140, but ultimately a sales rep's got to bring in four to five times what they take home. Okay, so that $140 is gotta be $600 or more. or the more enterprise you are, the bigger the multiple has to be, and the higher the comp, but it's gotta be three to five exit, and then three X for small businesses, four X for mid -market five. You've gotta get there, but you don't have to be there in day one and two. When you get there, the rep should be a credo, shouldn't they be? If they make 150 and they bring in 450, unless your marketing costs are out of control, which can happen, but that's not sales fault, is it?

48:24If your marketing costs are reasonable, and you pay a sales rep 150 for closing 450. If you engineer your plan right, you should be smiling, not frowning. Where it gets tough is when you have a ton of folks not closing. When you have a ton of folks not closing and you have extremely high marketing costs, then it all breaks, your cat breaks, your payback period breaks. But if you have inbound leads, if you have demand and you have sales reps that can sell you this pen, they're going to be a creative lending because of that math. And take the pressure off, don't make them close 5x. They're take on their first quarter, they come close, what x?

49:02Let them put points on board, let them eat. And so negotiating here's the point. If you think about it, negotiating someone down from a 150 K O T to 130, it's not going to make any difference. You want them to close 600 or 700. It's not going to matter. At scale, does it matter for Mongo, maybe, right? Maybe. But you want what you care about is how much can and how much more can they close and they bring in? And then you let's write, you want them to make a lot of money, you want them to be rich, you want them to take home a lot, for a whole bunch of reasons. And so don't freak out about the acronym OT, what they take home, figure out what it's really gonna cost you, and would you buy from them?

49:38And if you would, they're probably gonna bring in more than they take home. Right? And on the marketing side, like in the early years, you're lucky if you can find a marketing channel that is that a creative. If. Amazing. Okay. So, just to summarize, you start a sales person with, say, 75K in salary and then say, 75K in expected sales and they take bonus from sales. Bonus from sales and the idea there is they take 100 % initially of their sales for the first month or two. Just to make it feel amazing, they're making money. See how they're doing. Don't put a lot of pressure on them. and then the plan is over time, get a toe point where they're bringing in to the business four to five times what they're taking home in terms of.

50:23Yes. Yeah. Do you set expectations every month or two, or is it every quarter? We're going to revisit your comp and quote it and adjust. If you get it right, you never have to revisit it. Not for years. I mean, I'm using the same sales comp plan I have for a lot of years. It still works. Listen, you can make tweaks, okay? You've got to listen to all human beings and people, and again, remember your sales team has to eat. They've got to eat, okay? And you've got to be somewhat competitive. But there's only so much you can tweak, Lenny. I mean, they have to bring clothes more than they bring home, right?

50:55And so you can make tweaks at the margin. The problem is if you make too many tweaks to this model, you burn up all the cash. You're trying to plug a leaky boat. There's no point. There's no point. There's no point. And remember, related to this, for a long time, for most folks, unless you're even if you're hyperfunded, you're better off with fewer, better reps than more reps. There is a stage when you get big enough where this concept of capacity planning really does matter. Linda, if I got to go from 50 to 100 this year, okay, but at 50 million, if each of my reps can do 500, okay, I need 100, don't I?

51:29Okay, and literally if you have 20, you mathematically cannot hit the plant. So there's a certain truth at scale. In the early days, this is a rookie error. Like, I'd much rather have two reps, each closing a million, right? than 20 reps struggling to close 100k each. Like, culturally it's terrible. There's no domain knowledge in the company. Everyone's miserable. Everyone's fighting. What you wanna do in the early days is concentrate your leads and your best closers. At the same time, bring new people up, but you've got to concentrate your leads to your best closers. And that means year two, year three, year four they should be making a lot of money.

52:03Lot of money. Sometimes too much. I remember the first investment I ever made was a company called Pipedrive, which sold for a billion and a half. You know a SMB CRM and I put in the first sales rep there he used to work for me and the founders got mad at him They got mad at him because in three months he was making more than any of the founders They're they're pissed. I'm like guys. I know we're we're up have different backgrounds and cultures, but this is what you want But it took him a long time culturally as self -serve because fight prep was a hundred percent self -serve at the time They'd never had a sales rep when I put the guy in and what he did was he when he looked all these self -serve customers He was like, this was the company was at about 2 million revenue at the time.

52:41And he's like, okay, who's bought more than one seat? He just did a reverse sort. And he called them. I remember he called the AOL back in the day. And he's like, you guys have 20 seats to five -tribe. Would you like to buy more for your sales? And they're like, thank you very much. We'll take 100 seats. And he just went down the list, taking the top to the bottom. And he took home like 20 % of those deals. Now that difference, that extra 80 seats at AOL, he brought it in. So, Kim keeping 20 % of that is a great deal for the company, right? But he was pretty good at it and he was the only person for a while.

53:13So he made hundreds and hundreds of thousands of dollars when the poor company, the founders are paying themselves like, Diffed. Sir, advice there is, don't be sad if your sales person is making tons of money. A good, if you architect the simple sales family talked about and they're making a lot of money, you're making a lot of money and your equity is worth a lot of money. Yeah, your equity is worth a lot of money, right? Right. When do you make that switch from their taking home 100 % of what they're selling to smaller percentage? Look, some people are going to think it's good for what I said about 100.

53:42I just view it as a simple ramp. You could do, I think you do it for one quarter max, one quarter. The problem is if you let this go for too long more than a quarter, like if you make it too easy for longer quarter, the problem is the mediocre lean into it too much. And that doesn't help. The not only does it not help you, it doesn't help them. You don't want, you don't want to make mishires. They're so damn I mean you can have a whole podcast on you just on miss hires like this It's probably the single most important thing and scaling startups is not hires. It's miss hires But if it's a tragedy if you miss hire to rep but you don't want them there six months.

54:15It's not good for them either You want it you want to support them? You want to help them find a place where they're successful and here's the quirky thing on the miss hires and This is why that first guy hired was mid packet back like you less than the pack Here's the thing about sales is you know someone can be very good in certain sales environments and completely fail in other ones Completely fail It's probably more binary than any other function and so you got to find it before you hire them And but you also got to root it out fast because those leads are too precious and it doesn't mean they won't go on to another company And be wildly successful, but you could utterly fail and the one related point I'll give if I had to be if I had to throw one hint on this first any of these reps first 10 or the MVP of sales one hint more than anything else trust me.

55:03God up higher someone whose last product was harder to sell. This is so important. This is a recipe for utter disaster. If you take someone in sales and their last product was easier to sell. They will have none of the skills to sell your product. But this is the mat and I'll give you an example in a second. If you hire someone from something that was just a smidge harder, a smidge harder to sell and they come into your company, it's like they're on Mars. It's like weight has been released from their feet. Like they learned how to sell a harder product and get it done.

55:46And then who went on to be CERO at Brex, and then now is a partner founders fund. And we worked together from the very beginning, first SDR. And he came, before that, he was an SDR at a company called Intact, which was bought for a billion, which was online of financials, okay? And back in the day, no, we don't want the one thing people didn't want to put in their cloud was, they're financial statements, okay? It just wasn't trusted that. There are some things you would trust to the cloud, like a CRM, but they'd be like, these are my crown jewels, I can't put these. So he went from desperately trying to convince folks to do to move a business process.

56:20They had no interest and he came to us. And it was hard, but it wasn't that hard. And he instantly was number one. He went from SDR to S and B .A .E. to bid market a to direct ourselves to head of this whole set because I mean, there are many reasons he was great, but he came to me and I said, Sam, why are you? Why are you crushing it? When everyone else here is struggling, he's like, this is much easier than intact. So hire someone like that and don't make it no matter how much you like them, the sell me this 10 thing will control for it a bit, okay? But when we get, we get, we give in the hiring process, right?

56:52We never get what we want. Be very, very careful if the last product was easier to sell. I love this advice. What is the heuristic that the last product was harder to sell than yours? What tells you that that's probably true? Be very careful if it was more technical. Very technical. It's some folks can go from it from a from a like a business process sale They can go from selling a gone or a sales offer an outreach and they can go sell a complicated API to VPs of engineering or VPs of product but most can't Okay, so more technical is a tough is a tough heuristic more competitive is a positive What really works Lenny is if you hire someone that from the number four in a space and they did well

57:36You take someone, those number four of the space, and then your number two on the space, you think number two is really hard because number one's crushing you, but they're at number four. In a space where no one can tell the difference between these products, that's a great one, right? So more space that's more competitive, a space that is a positive, more technical. The other one related to technical on the pure B2B side is much more complicated business process. Okay, I see folks fail in B2B when they've sold us, yeah, it's hard, but they've sold a simple business process. They go to something that's got a lot of integrations, a lot of complexity, and a lot of business process change, and they just melt because it's too complicated.

58:17They just melt, right? Like, there's a company invested in, it's doing over 20 million today, and for some reason, to simplify what they do, which is pretty complicated. They called it the Gong for X. Okay, the Gong for X. And it's great for V to get a VC meeting in a few of the, but it's not even on their home page Okay, it doesn't really make sense and the CEO had me listen to this to this senior sales exec he hired and the only thing he could tell the prospect was that they were Gong for X They're props that's that as they well. How does this deep integration with with this business process flow and Zendus works And how does this go over to sales sources like well, we're Gong for X

58:56$600 ,000 deal was lost. But maybe that works in some space, right? I mean, in Gongs Hard to Sell today too, don't give me wrong, but you see my point, it's just that simplicity, it's too complicated, right? And I know it's not the perfect characteristic other than this technical thing, but the technical one, man, trust me, right? The too many B to B type wraps melt and beaded They just they just melt they just sell into VP avenges at different. It's the same beast, but they don't suffer fools You're they not the VP avenger hearings. I'm close. They don't suffer fools I haven't heard this term be to D before business to to developers to develop Is what it seems for interesting.

59:37I haven't heard that term before Okay, let me zoom out a bit and I want to move on to a different topic, but before we do that So we've talked about kind of these early days of hiring your first two reps getting your VP of sales to help scale out the team. To give people a sense of where this goes as the business scales, what does the org evolution look like? You have these two reps, doing sales on their own, then you have a manager, what does it look like over the next couple phases of the sales org? Look, to simplify, there's rules of eight. So in sales, I'm actually not sure what the tip of heuristic is in product, because product teams are leaner, at least I hope I like it when they're leaner.

1:00:14But in sale the thing about sales is there's no there's no efficiency like if you have a sales ad motion Half your company is going to be in sales at 10 million error half -efficient means sales at 50 half -efficient He's going to be in sales and I under it It's it's one of the top parts of the software model is that there's no there's actually Almost anti -efficient season sales the the the public companies are actually less fit They have the higher cax and startups believe it or not Because they have so much market penetration But so you're gonna need a lot of people and it's rules of eight eight SDRs Outbound reps need one manager eight AEs eight sales execs need a director above them And then when you really scale, you know eight eight directors You don't really have eight directors, but eight directors could have a VP or eight reports And so there's rules of eight if you want to build an organization on it's all rules of eight for while for SDRs Thinking this is a high velocity entry -level position people pushed it to 12 But I, but the more folks I talk to today, the more I hear everyone's over today.

1:01:14Like, I'd rather a fewer SDRs having better conversations. And so it's just you can build your whole org with AIDS. That is way too easy of an answer. So the idea there is you hire those VP of Sales, then you hire six more sales reps, eighties. So what happens next, you hire another... You've got to start hiring manager. Yeah. Got it. And then you scale eight more reps. And once you have eight AE scaled, you almost always are going to start. The VP is going to already, a good VP sales already me hunting two directors, two directors. Whether they're just split up normally, whether they're East West is a classic way, another way, depending like you might have smaller and larger customers.

1:01:52That's pretty standard right, commercial and enterprise. But a good VP of sales, once you have a sheer, he has eight reports, we'll be bringing in two directors, or maybe two VP's if they're an SVP. Maybe there's a lot of title inflation today, which doesn't bother me nearly as much as a lot of other things we've chatted about. I don't care what your title is, if you'll actually do sales or do work. But yeah, well you need to bring in managers at eight. And folks that can also, a related point is, a lot of founders worry, when will my, I really love my head of sales, but she's a stretch. Like most of them should be stretches.

1:02:25If you hire the season to one, they're not gonna work. So for 95 out of 100 of us, our first head of sales should be a stretch VPS sales. And what that means is usually they were a director before that or a senior director or sort of a VP Okay, but you should be cautious about hiring your first VP of sales for their first third VP of sales gig They're not willing to do the job and where you need a stretch and it's it's worth it for their career growth It's worth it for their personal growth is worth it for the equity, right? So you're gonna hire a stretch That's a that's an important tip right there But then you're gonna be a little worried how how far can Lenny go how far can because is you know I love Lenny, but he was a director for two years before this and this is his first role and he did so good last year But I've word Lenny's gonna break Right, I'm worried Lenny's gonna break and Related to the squit that simple answer is Lenny will break if if he can't source those directors under him You can scale forever as a sales leader if you can hire better managers under you It's true of any functional area, but what you'll see in sales is you'll see your stretch VP of sales drown when they never can hire better managers under them.

1:03:32They'll end up doing some weird internal promotions, which you want. You want to do internal promotions. My rule is you want to promote 50 % from within and hire 50 % without for your managers. If you're really the only people you can promote are just junior people on the team. You can't find leaders. You can't scale. right? And so I do see this happen too frequently is at first time at a sales, does it, and then they're like here are my managers Lorraine and Jason, but they really were just reps for two years and they don't know how to do it So you have a whole bunch of people who don't know how to do it.

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1:05:16Just go to LinkedIn .com slash podlennie to claim your credit. That's LinkedIn .com slash podlennie. Terms and conditions apply. There's these terms that we throw around account executive reps. It might be helpful just to give people a sense of what does it actually mean when someone's an account executive. Is that they're just sitting there calling and doing sales directly. whatever the key terms are for like the roles or the title might be helpful to quickly summarize. Yeah, I think the two ones that are probably less obvious for folks that are new are SDR, sales development representative and A .E.

1:05:48account executive. Very great. And SDR is generally, although I wish it wasn't, it is generally an entry -level position, often fresh out of school, generally paid on the order of 60 to 80K, OT, and SAS, and U .S. base SAS. And their job is to email for dollars, dial for dollars, And in many cases to screen, to screen inbound leads. It's entry level, and their job is to pass on a lead to a sales executive and account executive and AE. And so not all companies have SDRs. It's a longer topic, but pretty much all the best teams have some type of SDR function now. So that because we've learned we want to specialize.

1:06:29We want openers opening and we want closers closing. And so that's the rough idea of SDRs are openers in some cases. and account executives are the more seasoned folks closing and you know it varies a compensation from account executives that are US based could be anywhere from like 90K to 200K depending on that's bunked with base and bonus split at 5050 depending on whether they're hunting tiny deals or big ones that's the way the account executive works and I think what doesn't happen today which means so those are the acronyms SGR and A I think you can figure people can figure out VP of sales that's vice president of sales I think I think that's gone on in the industry that founders expect now, because there's so much discussion of it on LinkedIn and social media.

1:07:10But I haven't found work. Is that an account executive will magically be full -sack. They will do outbound themselves. They will develop, they'll go use Zoom info and Apollo and develop a list themselves. They will manage that outbound list themselves. If they don't have enough inbound or enough in their free time, you know what they'll do with any in their free time, they'll just do more outbound. It does it. You know what, sales reps do in their free time today, they sell real estate or courses. Okay, there is no, if you want a tip for founders, I know you want this full stack AE, and they do exist when they're micromanaged in certain high -performance sales organizations, but they don't exist in real life, right?

1:07:46They're specialized. So most AE's, they want to be closers, they want to be handed a lead, a contact me a lead, they want to work the lead and close the lead, and in you, you hire some SDRs to help generate more demand. And so those are the basic acronyms. What's horrid for most founders? Most, here's the tough part. Most founders have enough stamina to manage a couple of these AEs, these account execs, these folks to work the leads. Most founders do not have the stamina to manage 10 kids fresh out of college that need to be micromanaged on an hourly basis to call leads. So very, very few founders themselves can manage a team of SIRs.

1:08:26But if you can, it's like a superpower. That was really helpful. I did not know what exactly these terms represented. And when you're hiring those first few reps, they should be the count executive level. Yes. Yeah. And they'll do some outbound and they'll do some of this SDR work. It's just ultimately people end up specializing. Where does the title for someone above the account executive is a director of sales? Yeah. There's really no, you know, it's a meta topic. I wish there were another career path for these ICs. Okay. Okay, this does exist in product, it does exist in engineering, okay? It should exist in sales, but the truth is, there is no senior SDR and for this Album and for this AE, this person closing, yes, you can go more enterprise and make more money, but there isn't really a senior AE track, but there should be.

1:09:12It's unfortunate, it should be. Too many of these folks are looking for, they look to go into management for promotion, when what they really should look for is to be a super IC. And it's a shame that more folks don't try to implement a super IC role in sales. But that's basically at the career path is to enmanagement, right? And that's why another tip, another mistake that founders often make is they hire the number one account executive at a hot company to be their head of sales. It's not the same skills. Most sales executives should not be managers. They don't want to be managers. They want to be individual.

1:09:48They want to be highly paid individual contributors these days that mostly work from home and make a lot of money working 30 hours a week That's not does not lead that does not naturally breed great management skills. I Want to shift directions a little bit and talk about product and sales a lot of listeners of this podcast their product managers or founders building products how involved should Product managers be in sales and vice versa how involved should sales be in the roadmap and what's being built? I think in the best run B2B organizations that I've worked with in my own as well, the great, at least the head of product that VP of products are deeply involved in sales, deeply involved in sales, deeply involved in sales.

1:10:37A company I invested in that's just crossing 60 million, they just had a meeting with who will be their largest customer. Okay, and the head of product was there is that the board meeting is like thank God I was there because what they want to do with our product we sorted it Quistorted, and the product does do it, but what they want to basically do is deconstruct the product Okay, they don't actually want to use the back end and analytics in some other pieces But they don't really need the front end of the product if the head of product hadn't been there that deal would have been lost Would have been lost and AE doesn't know that even if an AE did know that a sales rep didn't know that even if the VP of sales didn't know a VP of sales would not be empowered enough to stand up in a meeting and say I know what you want we can launch tomorrow on this and in 90 days Well, we'll tweak the UI so it does exactly we You want that in your big deals if you have that that magical VP of product that truly owns the roadmap owns And it has the gravitas for that meeting they become like the mini CEO in these meetings a lot of CEOs at scale I've talked to I was just talking with Daniel Chatech, Greenhouse, he does this.

1:11:43There are over 200 million. When they have that head of product, they divide and conquer with the big customers. And the CEO can do some, right? And the VP of product can do others. This is sometimes the VP of Android, if they're very producty, can also do that role too. Like sometimes you get this three weapons. In the old days, sometimes your VP of customer success could do this, but unfortunately, and I know this is going to trigger some people. I don't see customer success stepping up for this pseudo product role anymore. and I see them shrinking more and more into process. But that magical VP product, they give you that scale, that CEO level scale.

1:12:17Can a product manager or a director do that? In my experience, the best ones, absolutely. The mid -pack ones that are working on the color of the pixel, I'd rather not have them in the deal. That you have to be empowered, you have to be utterly fluent in the product, the entire product, right? You have to be the one that knows how to connect the pieces that don't always connect themselves. You have to have the gravitas to work with a large customer to make commitments. Deep knowledge and commitment, it's hard below the VP level, but if it does exist, they become one of the greatest strategic weapons of a B2B company.

1:12:57Bringing the product team. The VP of sales never quite goes that deep and can't make the commits. The CEO can't be everywhere. The bane of many product managers existence is at the flip side of sales is involvement in product. Do you have any advice for how you've seen the best SaaS companies handle requests from sales going into product? How product teams should think about requests from sales and making that work? I think this one is so simple and I'm surprised people make it so complicated. Okay. I know we all release 28 times a day, okay? But the reality is software still goes on quarterly release cycles no matter what we say.

1:13:32Business, your customers cannot process 88 releases a day. The maximum customer can process is two big releases a year and maybe quarterly. Let's simplify because that's how customers think. Forget about how we build software. Every quarter, give your head of sales a certain budget, whether it's story points or 10 % of the pie chart. However, you do it, give them a budget. When you do this, things will radically change. They radically changed because even the best VPs of sales They change like the wind okay on Monday what they really need is the HubSpot integration and like oh my god like You know we're gonna do that for two years, but I guess we could change everything on Monday But then on Wednesday a new prospect comes in and you know we need SAP like but but we just fed two days Speck it up.

1:14:18Oh you did you did SAP and then on Monday It's sales force right and it's not that sales isn't honest. It's just the big deals the big ones always is the tails wagging the dog and it burns out the organization. Even with the best sales leaders, I find it burns out, especially because the stressful deals, like they overreact and they're not as good as they are, they're not product people so they don't really know how to prioritize and force rank. If you say, okay, Lenny, my VP sells great HubSpot SAP, whatever you want, you've got 10 % of the budget, you've got 100 store points, whatever metric or heuristic you use, but you've got to decide now each quarter.

1:14:51And if you want to change during the course of order, if you want to disrupt our whole engineering product team, you can do it, but other sand there's a high cost. And the later you do in the quarter, the less successful it's going to be because we already started the HubSpot integration. Like not only will it demoralize the team, but we're going to run out of the, you already use your budget. So, when each, if you, as a product, I just don't see enough product leaders being objective here. Same, listen, here's your budget. You get it. Curious. No one can take it from you. You know, I guess the CEO can steal it if she really wants to, but it's yours, VPSLs.

1:15:22And they will do the low balancing across their team. They will do it. They will listen and they'll say, maybe I don't need that hub -sword integration after all. Maybe, right? Because what a VPSL should be doing is taking, like a VPSL, you can't, the product has to look like the COS look five years into the future, product has to look about two years into the future, and you really can't ask a VPSL to look more than 12 months into the future because that's where they're next on the line. But a good one will load balance feature requests across the year and they will listen to all that because they'll actually be in sales.

1:15:53They'll actually be in deals and they'll be listening. They'll realize, look, even though we're gonna lose this deal to HubSpot, I've gotten four SAP requests to last, I'm gonna take that bet. Even if I'm wrong, I'm gonna take that bet. You gotta give them that and you gotta talk about it every week and say, look, here's your budget, Jane, here's your story points, your whatever, your 10%. This is what we're currently, this is what we're building now for you. Objectively, and this is what we're currently planning for the next two quarters. Would you like to change the ones for the next two quarters because we haven't committed any code yet?

1:16:22And if you really want to change what's in process, you can't otherwise it's going to be hyper disruptive, right? But you got to at least pretend to be objective for sales. If you're too emotional about it, you break through organization. You've got to say, listen, I know we've already written 80 % of the sub -side integration. If you really need us to put us on the shelf and drop everything for a million dollar deal, we're a startup. We'll do it. but understand just is this really, really what you want. And if you involve them every week as a stakeholder, it's magic happens. Well, I see, I just don't see the VPs of product that I work with.

1:16:52Maybe I'm not, I know I'm on all the staff meetings, but the meetings I'm in and the board meetings, I don't see this back and forth happening. There's maybe the same exact answer you just gave, but say you're a PM and a salesperson comes to you, hey, we're about to close this deal. We just need this one feature. Can we just get this on the roadmap? What's the best way to help that salesperson understand and why it's not happening, help them feel like, okay, I get it. Is it exactly what you said? Okay, we could change everything. Here's the story point, you have this quarter. Well, are you assuming that PM is the header product or are empowered enough to make the decisions?

1:17:24I'd say, yeah, that PM could put something on the roadmap if they think it's important. The reason I'm a little confused just because I want to get it right is I'm hearing, what I'm hearing, which babies and what you said. What I'm hearing is a junior IC rap is talking to kind of a more mid -level product person about the roadmap. That's a bro, and you want to have that. That's like one of the reasons we actually go to the office because those discussions don't happen on Zoom lending. They don't happen. And you want those discussions to happen, but you don't actually want them empowered. You want them to say, listen, I will talk to my boss.

1:17:55That's the right answer. It's too confusing. This stress between product and sales is a good thing. It's a sign of a well -run B2B company when there is stress between product and sales. It's a good sign. It is a good, if there's no stress, you're not in enough deals. You're not in enough deals if there's no stress. But the stress has to have enough process even in a startup that it doesn't break. Because your question loses the fact that it can break organizations again and again, right? People get, people resent it on either side, right? And so this is one thing where the answer has to be, look, we can chat about it over lunch.

1:18:29We can chat about this and actually you've got a good idea, your individual contributor. I'm going to tell my boss on Monday that I think we should do that. I'm going to use a little social conversation, but you've got to push the decisions up. That's as far as you can make recommend. Otherwise, instead of that one stressful conversation at the VP level, you've got 100. You've got 10 times, 10 times 100. And again, they're fun lunch conversations, but they're recu. So the advice there is basically, talk to your manager. I'll talk to my manager. They need to hash this out. It's not my call. I think you've got to push it up.

1:19:01But I think you've got to force the VP of sales and the VP of product to have this weekly meeting about the budget. And that will force them to have enough, just enough organization on their team so that it can all be surfaced up. Because that means they each have to have a meeting with their team for 30 minutes each week and say, I'm going to put up on the whiteboard guys to my sales team. I'm going to put up on the white, like the sales team is going to say, look, and I've been to many of these meetings where you force the sales team to force rank what they want. And you end up like, are you Lenny?

1:19:27100 % of the time in the sales meeting, when you force do a whiteboard forks rank, you end up walking out with very different outputs than when you start the meeting in sales 100 % time. On the product side, you need to do the conversation and just say we owe sales 10 % of our points. So we're gonna put in a weekly, in our team meeting, we're gonna put in 15 minutes of our team meeting, and we're gonna make sure we have the priorities right from the sales team. Let's go over what I got from Linda. This is what she says, is she wrong? Should we do something? How can we help the sales team be even more successful?

1:19:54And what input is the team hearing? And they can raise their hand and say, I just had this hallway conversation with Bobby, but honestly, Lenny, I can build the sub -spot integration in the day. What? I thought it was really hard. No, I did it my last company. And listen, actually, we can actually outsource it to Bob and Linda at this agency. I know for 20 grand, they'll build it next week. I'm like, that's a magical moment, right? That's a magical moment. But you gotta each have these parallel meetings, or it's just, it's just, that good thing that tension can become debilitating, right? We've all seen those fights.

1:20:23There's almost fights that break out. and they come from a place of passion, right? But you gotta have structure. Great advice. Another trend I've been noticing is that product teams are taking on P &L responsibilities and revenue goals. What's your sense of is that good? Is that bad? How do you think about that for product teams? You want everyone to be aligned on the big picture with the for revenue goal for the end of the year. Is the question, you mean having financial bonuses and stuff tied to hitting the plan? More that there are KPIs and their OKRs, essentially like this much revenue you need to drive this much revenue from your experiments from your product launches.

1:20:59As you can see I have a lot of opinions on things here that are data driven their live experience. This one I don't I need another year in the oven and I'll tell you why I'll tell you why. What happened the last 18 months is in customer success which is it which is you know in the old days it was related to product now it's it's less so which is I think is unfortunate. In customers in the last 18 months this happened all across the industry. 24 months ago, customer success's goal was happy customers measured in retention. Sometimes NRR, like net retention with upsells, sometimes with GRR, like just logos, how many logos say that was your only job.

1:21:33Happy customers. Happy customers. Then things got harder in many areas of B2B and every customer success team last year, their goal was revenue. You need to bring in more revenue from existing base. And it destroyed customer relationships. It had there is a leading public company. I will not name them. I'm a positive guy I will tell you a company we all have used for years and loved okay And they did this to their customer success team and they came to us last year We paid $299 a month for this product for our team they asked us for $50 ,000 up front or said they would turn it off that day That week me was that week 50 ,000 dollars That's what happens when you weaponize and so customer success I know this is gonna trigger some people but it is true when I talk to leaders customer success got weaponized And I don't like it.

1:22:17Okay. I don't like it as a product as if all founders are product people I think I don't like it as a product because I think it's bad for customer that experience I got was horrific Wasn't it that 50 ,000? So being told and it got walked back and the fact that it got walked back is almost even worse because it wasn't true Right, it was a threat, right? And so do I want to weaponize the product team? I want the product team aligned with revenue. This is these are the tough decisions for founders, right? But but I think we're gonna regret to some extent weaponizing teams that we don't need to weaponize Having said that I will tell you and again no knock on Adobe But when I was a VP of Adobe and it was a long time ago when product was in a dothar building in some cases That was not great Okay, and I love Scott and the whole team like it was a great experience But I can just tell you what I learned is that did not work for me as an agile guy like having groups that would like Do this work in isolation and and the problem was they would never talk to a customer, right?

1:23:10So I know I want product constantly talking to the customer. I know I want the VP of product with a lot of equity wanting to hit the bookings number for the year Do I want your average PM weaponized and forced to bring in revenue from an experimental feature when everyone Agreed it's the the the test we're gonna run like we only can run so many like you say should we should they have Revenue for like new feature launches for new product expansions for new things. Yes, but everyone's got to make that decision There aren't that many of us that have a thousand extra engineers sitting around with nothing to do.

1:23:43These are very, even the smallest experiment, no matter what it says on the internet, again, that we release 100 times a day, I would argue bringing any product extension to markets very expensive and risky, because you're taking away from something else, right? These are expensive decisions, and I were, if you punish people for the mistakes in product, right? This is something that big companies are actually better at than startups, which is they don't fire you if the new initiative fails, right? Because then no one at a big company would ever join the new initiative, right? There are exceptions, but no one at Adobe or Google would work on the new product.

1:24:15If you got fired, if it didn't hit 100 million, it's worse to you. So one thing I saw that was very, that I don't know how to bring to startups it. My big company experience was it's liberating, to some extent, to let people fail up to a point. It's liberating, because the cost of failure in a certain of so high, isn't it? It's just so high. So I know that's not what the exact question I and I asked me in a year But I but my vice is just be careful that you don't weaponize functions. I Probably should have clarified. I think this is mostly true in PLG companies where most of the growth is coming from Product, but I imagine the advice is still the same as like be careful putting too much pressure on the product team to focus on That's how you get dark stuff.

1:24:56I mean back in the day I remember my sister worked at Vista print for online business cards and her entire job was to I was to force people to buy upsell of additional products on the checkout paints They didn't want to buy that was her whole job and she was paid a large variable comp to get people to buy third party Products without realizing in their checkout and it worked like that's all she did for three years was figure out dark stuff I mean dark -ish grayish stuff so that when I bought my my Business card I also bought go daddy and eleven things that I didn't want There works, but it doesn't create a high NPS, does it?

1:25:35Here's the thing that you have to think about. What's crazy when you talk to a lot of folks is there's so many SaaS companies that have a billion or more in revenue. I just wrote up, there's just a preplorer, which is SaaS for construction. It just crossed a billion in revenue. So many folks are at a billion, cloud players crossed a billion. and the only way you can do that is if you're revenue compounds. You're revenue, and I just, in fact, I just myself, I just interviewed Matt Mullenwig from WordPress 20 years. He's been doing this. And he said the number one thing he didn't understand at WordPress, at automatic, was the power of compounding.

1:26:10So when you do these things that are customer hostile and a lot of us were under stress this last 12 days, it's the numbers, right? This is your job as founders. You've got to load balance the fact that the cash has to last and my investors are mad with me, but nothing matters in B to B that it compounds. And some of this dark stuff you talk about on PLG, it anti -compounds. Right? And I would say, let me flip it around. So the magical thing at a high level that it compounds, if you have a self -servish model, a PLG model, I actually think the number one most important metric is churn. Going to this churn, churn, churn, churn.

1:26:44And when I meet any startup like for investing or anything, if the churn is not top -desile for a low end product, I'm always out. It's almost unsolvable. It's almost unsolvable. This three to four percent a month churn rate that a lot of SMB stuff, it's almost unsolvable. So, you know, I think that's where the energy should go is relentlessly bringing down churn so that 20 years from now, we all have billion dollar error companies. That's what we want. I have kind of a rapid fire set of questions before actually lightning around. So we'll see if we have time for all these things. So I'm just going to have a bunch of random questions.

1:27:18I'm going to fire EMC. it comes up. Sound good? Okay, cool. That sounds good. Okay. Okay. What is just one thing a founder or product leader can do to become better at sales? The number one thing they can do in this very tactical at the end of each meeting because again, both of them are good middlers. The head of product and the founders are good midd - demos. They're good at talking shop. They're going to talk in the industry. They're good at talking workflows. Learn. This is the only skill you have to learn. Even if you're not comfortable asking for money, learn to ask for what's the next step, Lenny.

1:27:46This is what all great salespeople have learned to do. Actually, mediocre salespeople are terrible at this. The best salespeople never leave a meeting without a next step. The next step does not have to be a check. Okay, if that's don't break the relationship. But what's the next meeting? And the next meeting might be Lenny is there someone else at your company that I could do a demo for? People are lazy. They don't want to do multiple demos. But in 2024, we all have to demo multiple stakeholders in 2021. It was one stakeholder. Now it's a four stakeholder sale. So if you don't know what to ask at the end of the call, ask who Who else can I, who else, Lenny, is there someone else?

1:28:17I know you're excited to buy our product, but who else, is there someone else organization? I can, can I help you? Can I just do a demo? A demo is not threatening, right? Whatever the next step is, right? Can we do, can we get, what's the next step we can get on our books, right? And listen, and the best salespeople march deals step by step by step by step, and then they put in the time. They've done the demos, they've done the pilot if they need to, they've helped them get going, they've helped them see the value. And then that if it takes six steps to say okay, let me now we've got five folks at the organization using it It's seen here's the deal that they love it right what can we do?

1:28:51I need to get going can we get can we get a contract sign so we can get going on February first? It's just very natural and founders just end the zoom

1:29:01That's in the zoom and they wait they wait in their inbox for the next step to come But it doesn't it rarely comes on its own that's the number one tip is make sure your cell and you log it in your CRM that you always have a next step up. You don't have to be great at sales as long as you're moving the ball down the field and get it into the red zone and then figure out how to ask for the money. But you're not the ask for the money until it's in the red zone. Amazing. While we're on this topic, is there like a book or a course or anything that you just recommend folks go to get better at sales just like is there some tactical go read this thing?

1:29:31It'll help you or is it just tart? You're not going to figure it out reading a book. I am a voracious reader. If I only wanted to plug myself right and I usually wouldn't Two things that we have we have something called saster university saster. University. It's free There's a pretty good course on getting learning about sales. It's not perfect But it's pretty good. It just organizes a lot of the stuff we're talking about and it's free So I think it's pretty helpful We actually wrote a book called from impossible to inevitable that sold about a hundred thousand copies I did almost none of the work although it's a lot of it's my content Aaron Ross did it It's actually really good and an interview is a lot of top sales leaders and goes through a lot of stuff we did So I don't usually hype it but for 15 bucks I think this I and actually I've never made one dog I've even got a check for these hundred thousand copies But I do think it's actually the second edition is pretty good So I think if you like what we're talking about the SAS University and the others I would say the foot I would be very caught I just hyped my own course, which is free like I don't think I'm selling something if it's free the book I don't make a dollar on I'd be very cautious and this is tough I maybe there's something we can work on together because I there's so many courses and so many people selling stuff the last two years just be cautious, just be cautious.

1:30:39The last thing I will say is there is another community I'm called Pavilion. I do think it's great Pavilion. It does have a lot of networking and stuff for sales and connecting sales with founders. And I am a super fan of what they're doing. That one's worth investing. But be careful about Bob and John's sales courses on internet. There's just too many. Awesome. All right, we'll link to all those things in the show notes. Next question. What is the ideal trial length for free trial for a sales team? Is it like 14 days a month? Years, what do you recommend? I'm Tomas Tungus did a whole saster presentation just on free trials and free trial legs.

1:31:15It was really good, but it was the one thing you didn't know, which I know just being an old timer is the reason, one of the reasons we have 14 day trials on the internet is in the old days, the Salesforce sales team, when they were asked to be focused one to close deals that month. So they forced Salesforce to move from 30 to 40 days. There was no evidence, it was better for the customer. There was no evidence that it got usage going or people they just wanted to close deals the same month And so my my real one so so that's something to be cautious about these metrics and be cautious that they're since we're talking to product folks Be cautious that their customer centric You know that you know that's a sales horse and it sells for its very enterprise now But in the old days it pushed it to 14 days so the sales reps could make closed deals faster What we learned from Slack in Zoom until recently was infinite trials worked pretty good.

1:32:02So does Canva? Slack and Canva until recently Zoom were okay, waiting four years to convert. And those are epic companies. Those are epic companies. And these are one of the things that only founders can make these decisions. I wrote this post years ago saying, who's your VP of free? Because who's got a VP of free? Do you know anybody that does a VP of free? I got a VP of growth. I got a VP of product. But if you have this massive free base, who's your VP of free? I almost know one that has a VP of free, right? And usually it's some kind of collaboration between product and the CEO, right? They're the VP of free.

1:32:35But even then, you need a VP of free. We don't have one. And so just think, there's no prior answers. But in the world where we're tightening newses everywhere on trials or tightening newses everywhere, be careful with advice you get. Be careful with the short term advice. For example, another related terrible piece of advice VCs give you is switched annual contracts. This is terrible advice. Terrible advice, Lenny. Terrible advice from people who have never built products in our And in the field. Going to annual contracts on a spreadsheet looks great. On a spreadsheet that looks great. You know, it's better?

1:33:05Letting customers pay they want to pay. If it's you or me buying for ourselves, Lenny, you know, we're still going to put it on a credit card. To go the way they don't want to go so just start this is this is a project audience Product needs to be the voice of the customer. It's not so much customer success as it used to be It's not so much sales. You've got to be the voice of the customer together with the founders and push these things think about I would do the longest possible trial that is still customers center and understand their tension Understand their tension, right? I say anytime I'm in a board meeting where someone wants where some BC says let's do annual for an SMB.

1:33:53I mean, I'm like, no, show me the money. Show me the evidence that this is better for the customer, right? How many times have you gone to buy it something for yourself? And it's like, thank you, bucks a month. And that's annoying because it's a, it's a hunting credit card charge. But do you want to pay 240 of French? I mean, maybe you do it for a riverside or something use all the time, but some random product you just discovered, you're just going to bounce. So who's going to show the data in the bounce, right? A related point for like in sales, No one does enough. Everyone does these win -loss meetings, but no one talks enough about the deals they lost.

1:34:24Everyone talks about the deals they won. All the lore, the tribal lore and sales is how we won the deal. People should be spending more time talking about deals they lost than deals they won. Right? And same thing for this PLT motion. If you make your... Yes, I know I give everyone a pass for 2023. Everyone who's growth plummeted and did things they shouldn't. did price increases that didn't earn, cut the free trials, hid their free editions. I'm gonna give you, look, you gotta give your team a little stress relief, right? So I'm giving every person I work with, every portfolio, everyone, a one year pass, but the pass is in the past.

1:35:01We gotta get back to being customer -centric and building businesses that have, that builds a one billion ARR on their own because they're wonderful businesses that are product -centric, right? That recur. and every time you rip a customer off, you lose up that relationship's damage, isn't it? And a controversial thing I say to the product team, but I think this is the right thing if you're going long, is look, everyone raised prices last year, as you know, right? Everyone raised prices. The question I asked folks is, did you earn it? What feature did you show? Did you raise prices 8 % last year?

1:35:38Did you add 30 % more value to your product? In the old days, pre - this crazy years, you had answered usually was yes. People would wait up. They would wait a couple years, right? And the whatever product from four years ago was so much better. It really had earned 1995 a set of four. Last year, no one earned their price increases. No one came out with an amazing new addition and amazing new functionality that earned it. They just sent you an email saying, you know, you're paying more. So we get one pass, but earn it. Earn your price increase. That had the longest free trial possible, own it.

1:36:14And this VP of Free thing, like it's got to be founders working with product. Because no one else cares about the free. You can't expect the sales team to care about free, can you? You can't expect the marketing team to care about free. Not unless they can immediately monetize that, right? Unless they can ram them into conversion. People abuse their long tail in the last 18 months. But your long tail is your, even if they don't convert that, much there are your advocates. I mean, how many people read your newsletter? 500 ,000 people, right? Almost 600 ,000. Okay, 600 ,000. Now, not all of them convert, do they?

1:36:46No, no, that's exactly how I look at it. It's kind of the brain -bell process. What about the 590 ,000 of them that love Lenny that don't convert, right? If you overmonitize them, then Lenny's community doesn't exist if you overmonitize them. But when you bring in a VP of sales for Lenny and a VP of growth with an event like you can't expect them to care as much about that long tail as you, right? I love your passion around this. So what I'm hearing partly is your big fan of premium essentially, right? And the benefits of product -like growth where there's something you could just use indefinitely, or do you still think that's a trial where there needs to end at some point?

1:37:23Or is it just like now, premium is great in a lot of cases? Listen, I'm a big fan of long tails when they work. They don't always work for enterprise products. I'm a big fan of delivering more value than you take out for your customers. And I am a big fan overall of free because, and I know you'll agree with me this, every founder figures this out at some point, free products are better software. Products that cannot offer a free edition cut corners because they don't have to be good at onboarding. But comics that do not have a free edition have human beings that bridge the gap between buying and deployment.

1:38:02And that's okay at service now. And that's okay in certain products. But the products are the best products have, invest the engineering cycles to have a free edition, whether that's truly free, whether it's an extended free trial, whether it's a long tail or a medium tail, the amount of all of your product is better if people can actually, if you have a free edition. all of your customers benefit, even your enterprise customers benefit. They all benefit. This idea of VP of Free, I think technically it's probably the head of growth for a PLG company or the person leading the self -serve part of the business.

1:38:36But even in the organization I work with that have those structures, that person is focused on monetizing that tail. Who stands up for the 590 ,000 other readers of Lenny? Who's their champion? Yeah, and you're 100 % right? That's exactly how I think about the newsletter. There's this free audience and ideas over time they get convinced this is worth my money and let's give it a shot. Yeah, so yeah. And your V and your growth versus like let's say 1 % converts. I'm just making that up. Going from 1 to 1 .1 actually is a big deal at that that's a color 1 .2 right that that's okay. But but you've got to nurture the 490 ,000 and not spend all the calories just ramming the paid edition through, right?

1:39:17This only, it's the fun thing because once you hit a little bit of scale, this is part of your job as founders and product leaders is who's going to be this VP of free. Like, it's not growth. I don't think it's the growth team or something. They're two, they're, their focus is, they got to get their, their goal. Any of their goal is to get another half million out of the newsletter this year. That's their, and they get to get that's their bonuses tied to it. You think they're going to work on the free ones? No chance. Makes sense. Oh man, there's so many things I can go into and want to go into.

1:39:48I also want to let you go. So with that, is there anything else Jason that you wanted to share before we get to our very exciting lightning round? Anything you want to leave listeners with? I think just make this the year of the customer guys. And I really think that sales has been There's so much pressure the last 18 months customer success has changed. Product teams have to step up. This is your time to do great things this year as product people. Be the voice of the customer. Be the VP of free. Be the whatever. Be the champion. Stick your neck out. Work harder, folks. Work harder. The funnest part of anything that startups is working hard.

1:40:24But in product, it's extra fun. By working harder, you have the more fun conversations. Find the delight in product is making customers happy. It's not worth it otherwise. It's otherwise it's drudgery and it's endless PRDs and gantt charts and mindless discussions make your customers happier this year You will be happy this is the year of product and we all get a pass for whatever whatever bad deeds We did or mediocre deeds we did in 2023 get back and be the van guarding our companies Startups need and bigger companies. They need someone to Inject energy again in many cases energy has been lost and it would be great if product can do it and say Listen, let's do something like even if we're not exactly sure how to get more leads.

1:41:07Okay, even if we're not exactly sure what to do. This one thing under our control is the code we write and the product we ship. Let's do some three great things this year. Let's just do them not good. Great. Let's do three great and what you will find is the whole company will respond including sales, including marketing, including if we start shipping great thing, few things inspire teams more than when you're shipping great products. So, if you weren't the leaders the last two years, if you were being forced to weaponize your customer base, somehow be the ship three great things this year. That's my challenge.

1:41:38Ship three great things. I love this. This is the year of product. That might be the title of this podcast. Jason, we've reached our very exciting lightning round. I've got six questions for you. Are you ready? I'm worried about the first one, but go for it. They're very non -surprising because they're always the same. What are two or three books you recommended most to other people? That's the one I just wanted to take a pass. I know they're the same. I read I read more than anybody else in the but I don't I wish I had those two great great books that have changed my mind the last 12 months, but I Hopefully I've added some value, but this one I think I got to take a mulligan on it except the bull acceptable acceptable answer Is there a favorite movie or TV show that you really enjoyed?

1:42:20Oh the terminal list, the terminal list. The terminal list. The terminal list. Yeah, I'm not into the Chris Pratt. I'm not into that goofy super here movie he does, and I don't feel like it, but the terminal list is pretty. I got it, it's written by this ex Navy Seal that, I think tech people don't read the, everyone outside of tech reads this author, but Amazon did this thing to the terminal list. And I think it's, the reason it gripped me, it's like this post, it's like a lot of tech is right now was like, we're trying to do the right things, but are we doing the right things? It's just confusing.

1:42:57So this one, this one I couldn't put down, the terminal list. That was my favorite show. The other one, you know the one I liked, that I couldn't believe, you want the second one, you'll be, even though as product people, Maverick. And I'll tell you why, this movie Maverick, okay, you wouldn't think I'd be a Maverick guy, but the quality of this product, here's what, it was so high. And was interesting, you remember Maverick was supposed to come out before COVID, right? And Tom Cruise said, no, he's like, this is good. This is such a good product. We're gonna wait years for this thing to come out.

1:43:29I'm like, I'm not gonna like this. I mean cocktail was pretty good, but I'm not gonna, but as a product, when I've watched this movie three times from a product perspective, and to what? Just like software, when something is done that well, like every no wasted calories, like you see everything tied together, that's the kind of software we love, right? It just delights us when it works better than we expected. So those are my two. You also did all Zones stunts which I think is a good metaphor for the VP of product maybe being involved in sales actually do do the work Yeah, exactly. Oh man, stretching it.

1:44:01Okay, next question you answered a few of these already But you have a favorite interview question that you like to ask when you're interviewing salespeople Especially I answered it, but I'll bring it up again in case you do it again is what do you want to do your first 14 days to had a product or had a sales. What do you want to do your first 14 days? It's not a technical 30 day plan six. You don't have to do 28 slides. It's when I call a Colombo question, not that I really watch Colombo, but Colombo is this old detective on TV who I don't know if you would ask these dumb questions, right? And then the murderer would, as Colombo was so dumb, but by the end of the episode, he would always incriminate himself because of the question.

1:44:34So when I interview, I always do Colombo questions, they're never tough ones, right? They're always, they're always nice. I don't know if I'm nice, I'm honest, but the interview's interesting. But then I I mean, so, so, Lenny, what would you do your first 14 days of VP product here? And they don't want to visit customers. Don't hire them for either old sales or product just don't hire them. I've got the answer now. That's exactly what I was going to say. Next question. What is a favorite product that you have recently discovered that you really like? My two aren't really amazing, but I'll answer them.

1:45:03The one I, I, I, I really, I love this Opus Clip app for making clips from video. I know you have a whole team so you probably don't need it. But I produce a lot. I mean, a lot of us do content marketing, right? Whoever does it. And we produce a lot of content. I don't have enough time to do this. So the only AI tool that I found helpful so far is OpusClip, which takes all of the incredible amount of YouTube content we have, four strengths it and turns it into 59 second clips. And I'm a case study on the website. I tried the early products. They were almost there, right? But it's not as good as a clip team, right?

1:45:39Is it no? but literally in 50 seconds, what's interesting is it can do something I don't have time to. I could never make YouTube clips. I could never make Instagram shorts. I could never make it. I just would never happen, right? It would never happen. And the fact that one product enables you to do something at an minimum viable quality you can do before, like I'm a super fan. It's pretty interesting. So that's my favorite and my other one is this one. This is the fully fun that's finally as good as a normal phone. See, there's the terminal list that I've got. Yeah, fold it up and it just works.

1:46:11That's wild. Ways the same as an iPhone. Wow. And so the reason it's cool is this has changed the way I do productivity. One plus. It's the one plus. One plus. Yeah, it's the first one that's the same form factor, same weight, same. So there's really no, there's no loss, right? And I just, well, you know, you can use, I can use my normal phone here, like I'm using. It's got a little funky, but it's the same, and then to be able to do content, to be able to check, to be able to do full email, full calendar and full everything, like an iPad. We see your Tesla where it's going, I think it's parked.

1:46:42That's very cool. So it's basically like an iPad plus a phone in one. Yeah, I probably use this 50 % of the time of the iPad. So that's it. That is it. The other ones that didn't interest me. Yeah, it's Android. Amazing. I have not seen that. That is extremely cool. Very cool. Two more questions. Do you have a favorite life motto that you often come back to share with friends or family find useful in work or in life? It's be kind. When I reflect on my career, right, mistakes, it's when I don't think I mean, I actually think I care more than most people on the planet. I like to think I've helped a lot of people.

1:47:22But it's not taking the time to be kind at times and not taking time to be kind when things don't work out, not taking time to be kind when you leave a situation, not taking time to be kind when maybe someone's done the wrong thing, right? Not taking time to be kind to a customer that leaves, right? I remember the early days of Adobe Sign of Echo Sign, we had a top tech customer, and I killed myself to close this customer, right? Famous, huge, huge tech company today, and then our champion changed, right? Champion changed a big issue within software product. It came in and brought in DocuSign instead of us, and then I was just so mad.

1:47:59I just tore into this guy. This guy had actually had dinner at my house, right? And he did it, he actually never, he just did it because it was good for his, his own career, right? And I was so mad, but I've like broke the relationship forever, right? That's just one random example. And I just think there's so much advice to to fire fast and to be relentless and do all these things, right? But you've interviewed so many people, Lenny, right? I mean so many great leaders. I haven't done what you've done, but I've talked to almost all the top CEOs in SAS, okay? And they're They're kind. It doesn't mean that they're soft, they're not soft.

1:48:35Okay, they make tough decisions every day, but they are kind. And so in this world where everyone feels like they're getting ripped off or they're not paid enough or I want a founder pay for founder work, this motto really, it's troubling. Everyone is founder pay for founder. Like, you want me to work more than 30 hours? I need 30 % of the company. I need founder pay for founder work. It's like I hear you, but you will find that by being totally committed going 100 % But and also find a way to be kind that will like endure across your whole career So I know it's true back because I I think I'm good, but not always kind It's how I challenge myself all the time be kinder in that conversation and the big epiphany We already talked about it the big ep it shouldn't have taken me this long to realize it any time an employee fails It's your fault be kind you hired them They never knew what they're getting themselves into if the job's too hard if they're If they lack the skills, if there's not enough budget, if there's not enough people, if it requires too many hours of work, you should have known that.

1:49:34Not that. Be kind. Be kind to every single person on your team that doesn't work out. That's not just putting together an email spreadsheet and sending out, try harder, be there for them. Be kind. I love this. I know that you actually hate your username on Twitter, it includes be kind in your... It's a reminder. It's a reminder. Yeah, really back this up. Amazing. Okay. Okay, final question. You're on a giant conference saster. Yes. First of all, just talk about what it is so people know and explore and check it out. But that actual question is, what would surprise people most about running a conference like this, things that they now think about it goes into running a conference like this?

1:50:13Any business had no matter how weird it is, that's at scale like the best one in it. Like it's always interesting, I think, for case studies, right? The best what at pick anything, the best the best cup maker. Whoever it is, whoever makes the best, like this is not an interesting business, the Starbucks cup on his own, but the best person, I pretty much guarantee you there's a good story there, right? Saster is a community as well, like you have. We started this really early in 2011, 2012, for B2B founders back when that seemed like a weird thing to do. Now it doesn't seem so weird. So we built a lot of content and we started doing events and meetups.

1:50:48I never did a meetup. You do a lot of meetups, but when I did meetup, I never actually even did one. So I did meetups in 2012 and 2013. but like a thousand people came to the meetups. Like that will make sense to you today, about a decade ago for B to B. It was pretty, like people were like, well, I don't know where all these people here are. We thought there were six of us that cared about B to B. So then we did a big event. We did a one day saster annual in 2015 and 3 ,000 people came, including the evening. And so we just kept going. So we get about 10 to 12 ,000 people together a year. What that means is change.

1:51:17It's no longer novel. I'm not the only person producing B to B content anymore. I'm not the only founder that sold their company, like in the old days. There's plenty of much more successful founders and better. I certainly don't, I don't do many, very many podcasts because I'm not a tenth, a hundred as good as you. I do like one -a -quarter, for example. But the events have become this meeting place for founders that have hit scale, that are somewhere between one million and twenty million and especially folks that aren't in Silicon Valley, especially folks that aren't sitting in Hayes Valley or wherever that don't have a community.

1:51:47And that surprised me in the beginning how many international folks would fly all the way the Bay Area. Remember this founder came from Perth, Australia for the first restaurant. I'm like, thanks for coming, but this is a lot of work for it. He's like, I didn't come for you. I came because there's no one like me in Perth. So it taken on a life of its own. There's a lot of learnings. I think, you know, it was I didn't intend to do mass scale events. I intended to just do meetups because I had a community like you do meetups. So it was not it was acts absolutely an accident. The learnings are extremely expensive.

1:52:17It's extreme and it as this It's a weird curve, okay, that's a weird curve where, and this is more because I think actually all founders, all startups should be doing events for their own customers, at least stake dinners, ever and never. You should get your customers, if you get your customers and prospects together, you sell more. Get your customers and it does not need to be a million dollar or $10 million dollar event. It can be roots, prises, it can be whatever does not even mean fans just get them together to get. It has to be stake though. Yeah, well, no, but stake does work. I mean, I'm not a big stake guy.

1:52:44It could be any, just something nice where they want to go. It's just where they want to go. Your customers will sell your prospects for you. Your customers will do the selling for you, putting them together. When you do it really small, it's cheap because how much does that backroom cost at the stake house, right? It's worth it if you get one big deal out of it, right? And then you graduate and then you'll do like a meet up and like you'll do it at someone's office. Some tech company will give it to you for free. They have an extra cost. That cost nothing, right? And then you're like, well, that one, well, we got a hundred, two hundred people came to Lenny's thing, a digital ocean.

1:53:15And then you say, I'm gonna do an event. And then you rent a theater, a disused, and these theaters are actually kinda cheap because they're dark during the day. There's not a lot going on, a lot of, not movie theaters, but music. So those are cheap. But then you're like, well, there's only one stage and it smells like beer. So then the next day you do a hotel. A hotel's pretty expensive. It's like half a million, 800 ,000. And I hated hotels, but you know what I learned from this model? It's turnkey, Lenny. So your marketing manager can call up the Hilton in any city and in two weeks spool up some mediocre AV some mediocre chicken wings and drinks, okay, and you and I don't like to go to the Hilton that much the ballroom See we don't like to go to Vensima, but it turns out your customers don't care They're just they want to be together and talk about your app, right?

1:54:04And then if you do community like you do you could probably charge a couple hundred dollars for tickets and get some sponsors and bring in some revenue right? But then after Hilton, fall room B, it costs like $2 million to turn the lights on. And Saster Annual, so our Europe of End and London's in early June, June 4th, the 5th, please come if you want. That costs $2 million to turn the lights on and London. To turn the lights on in the Bay Area for 12 ,000 people in September in the Bay Area, which is the most expensive place, right? It's $10 million to turn the lights on. Only shit. It's $10 million to turn the lights on.

1:54:35Now I'm being a little expansive in what I mean by turning the lights on. But this is what it's It's going to cost you about $1 ,000 per attendee in the Bay Area or Las Vegas to have a mass scale of it, not smaller, not one day in Grand Ballroom B, but a multi -day event, right? The 80s is 1 .5 million. The food and beverage is 1 .5 million. The 10 -10 is $800 ,000. I can keep going. So once you get to like 20, 30, 40 million in revenue, quietly, there's public companies out there. They actually become, they have software like margins at that scale, but before that, that it's brutal, right? And when I started doing these events, I interviewed the head of it back before March, 2021, tech companies did their own events.

1:55:14They pretty much given up, which is an interesting side topic, big ones, like big, not small ones, big ones. I interviewed the head of events at everyone, right? At Twilio and Marquette owned, and they all be like, well, how much, how did the event go? They'd all be the same. We brought in about 1 .5 million revenue. Oh, okay. And we lost two million. Everyone lost two million. Very single one lost two million. And you can see in the financial state, Even Zoom in the scale just announced how much money they lose in Zumbtopia. So it's a terrible business. It has just what I like to say is it has just economies of scale.

1:55:45The Lenny's little free meetup caught zero, right? And then the one at Cloudflare's office caught zero. And the one at Hilton B maybe costs $200. But then it costs $1 ,000 per person at scale, right? Even more like Moscone, like in San Francisco, it's probably most expensive. You're approaching $2 ,000 per person because you have to buy about $15 to $20 million dollars of hotel nights to do an event in Moscone, right? So I don't know if that's a, we could do, I mean, it's a side topic, Lenny's side podcast of people that care, but this Disconomies of scale, but there are a handful of public companies that do like lot, Comliens, money 2020, shop talk, a few others that are at Sastras scale and they cobbled together these very profitable public companies, but they all got to do at least 20 to 30 million because you got to get over a 10, and it's intimidating to get over a 10 million dollar net, right?

1:56:33And so what it means is we have to spend like 14 to 16 months each year planning for saster annual Because it's not that fun if you fall six or eight million dollars behind That's what happened in March 2020 We were the first major event to be canceled by COVID in March 2020 the first one RSA happened for security before then We got canceled so we lost 10 million dollars in one day and it took a long time to dig out of that whole Letty such as since we monetized like nothing it took a long time, but They're worth it. I know you don't do traditional events, but you do do meetups in your community, and I know they're worth it.

1:57:09I know they're worth it. Bringing your customers together, bringing your community together. And we talked about this offline before we started. Second tier, third tier events, I do not think are worth it because they do not attract the best people. It's just a fact. Most people, it turns out founders are our core ICP. They go to two events a year on average. Two events a year. Okay, and they'll do other steak dinners. So if you go to one of the two that they're at you just might bump into Jeff Lawson or Eric one or whoever the next one they might be there at that might be one of their two, but they don't go to number three through ten They don't go to the so so find my role in general is People wonder should I go to events is it worth my time?

1:57:48It's a waste of time I know you thought about it my and and I the irony is even though we produce events I used to think that I didn't want to do events. I just want to do meetups right? I just wanted, I was shy. I just wanted to do meetups. But then I learned over time that the best events bring the best vendors, the best executives, the best everything together. So pick the one or two best events in your industry. And even if you're anti -social, try to go to one or two a year, go along. It pays off. It pays off, but don't, maybe don't bother with the rest, even if they're ski slopes or they're fun.

1:58:18The subscale, subscale just doesn't work for meeting and marketing to be able to do the people just doesn't work. I said at the top of this podcast that there's a billion things that we could talk about and I think that's exactly what happened. We can go in so many directions and that alone was extremely interesting because people want me to run a conference and I really don't and I really enjoy the meetups that we have now and we actually do have sponsors that cover drinks and food and things like that and they're very chill and I really love what happens at those things. But yes, this is really good information.

1:58:49and Jason, I have two more questions for you that I ask everyone. I think we went through a couple of these things, but just real quick, working folks find you if they want to reach out and maybe follow up on some of the stuff you talked about. And well, how can listeners be useful to you? In general, just go to this kooky url saster s a a s t r dot com. That's a way to access a lot of what we're talking about. If they want to reach me to be transparent, I get a lot of impound like I'm sure you do. It is to be be honest guys. It is hard to process the amount of inbound that folks get right but But I'll give you an insider tip like I do see almost all of it So if you want to reach me if you just want like an hour of my time randomly I don't have sorry honestly.

1:59:31I'm sorry. I don't have that hour of time, okay? But if you want to interact lightly I mean I I'm on Twitter all most days at Jason Lk I'm on LinkedIn LinkedIn a lot on just search for me Jason Lemkin and LinkedIn's pretty cool. I have 260 ,000 followers. We have really good conversations. And I will tell you, if you have a question, like you really need some help in your business, or you wanna do a pitch. If you send me the world's best email pitch, I will read 100 % of them, like track it. Put it in mix max, put it in HubSpot, put it in, you will see I will open that email if the title's good.

2:00:05It doesn't mean I can respond. I'm sorry, no, Lenny can't respond, but realize it is gonna be read. If you need a favor, like a help. If you ask the question super discreetly, Like Jason here's the LinkedIn. I'm I'm Lenny. I'm trying to hire this person. I'm at 4 million aero Double and should I hire her? There's a chance I'll look at that LinkedIn I can tell you or if it's one question But if it's an hour or coffee it ain't gonna work, but it is gonna get read so do that by email Do it even by LinkedIn? I didn't used to read those LinkedIn emails, but if it's really good I will read it and I probably respond to five or six on the day I give free to the Senate's helpful for answers free advice We're not that I charge for anything, but but make it good.

2:00:40Don't ask for coffee. So many folks have written this the most important people in the world read email. It's an open medium, right? And a subset of the folks actually read their social media even Elon Musk reads his you know before he bought Twitter He read it. You can access almost anyone in this industry just be super strategic about how you do it Put again put yourself in your shoes. Would you answer this? Would you do this? But I would say half the stuff gets open to red So I know that's a rambly answer, but first we talked about sales. You can reach anybody in the world via email. It's magical.

2:01:10I'm sorry for the many emails you might get from this podcast. That is actually really good advice resonates deeply with me as well. Jason, thank you so much for being here. Thank you for all the time, Lenny. I'm a super fan. It's great, great to be here. And let me know anything I can do to support your community going forward. I really appreciate that and the same in reverse. Bye, everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or a leaving review, as that really helps other listeners find the podcast.

2:01:47You can find all past episodes or learn more about the show at Lenny's Podcast .com. See you in the next episode!