Intuit CEO Sasan Goodarzi’s Grown-Up CEO Playbook

21:04Brian Halligan:And is it gross retention? Just like how many, the number of logos churning? Yeah, gross retention, also just retention dollars that we look at. So we look at three, four things, because what we've learned, this is probably the most important thing that I would pass on to those that listen, is if you just look at one metric, like our customers recommending, is your MPS high? You can have a very high MPS and no new customer growth. So you have to really look at multiple metrics. Again, we look at what I just articulated to really get a feel for are the things that we're doing working or not. Okay.

21:35Brian Halligan:Lots of founders asked me about HubSpot's channel program, which we lifted a lot of it from you guys. And you guys kind of took accountants and turned them into resellers and software companies. We took website designers and turned them into marketing agencies. Talk to me about you're advising a founder. He's growing, doing great, wants to do a channel program. Like, how do you do it? What works? What doesn't work? I mean, the first piece of advice I would give is, what problem are you trying to solve with a channel partner? Before you jump into, how do you become great at channel partners? You know, in our case, really our biggest partner is our accountants.

22:17And we don't have a bunch of channel partners. We have developers that will build apps on our platforms. We have partners, but we don't have -

22:23Brian Halligan:And that's what I'm talking about, the accountant channel. Yeah, the accountant channel. And really, so why the accountant channel for us? Well, accountants also serve consumers and businesses, right? They're helping them with their taxes, their books, their accounting advice. And the larger you are as a business, you may have them take care of your audit. You may outsource your payroll to them, right? It depends on who you are and the size of your business. And they're very influential in what a business uses in every dimension possible. And so that's a great example of like, well, that's a very important partner.

22:59And in fact, one of the big things that we've really evolved in the last years, accounts are very important partners. They're not, it's not just a channel. It's not a reseller. They're like, they're our partner. And we have to really up our game in terms of how we co-develop with them, how we think about going to market with them together, how we take their input. It's an area we had to significantly improve in the last year. And really, to answer your question for us, it was about, well, they play a very critical role in ultimately what businesses use. So not only do we have to be great at the products we build for the end business, but we also have to have a relationship with them and they have to use our stuff, love it, and then recommend it.

23:39And that's the biggest advice I would give when you're thinking about a channel partner. Like why are you doing it? Are you doing it because you're trying to manage your CAC? And if you're doing that, well, what does that mean to your overall economics?

23:49Brian Halligan:So everybody, the reason people want to do is they want to grow faster. Yeah. And then the question though is you grow faster, but what's the economics look like? And you have to think about those things. But I would just, the advice I'd give is be very clear about the problem you're trying to solve. And it's okay to throw some stuff at the wall and see what works. But if you just start with, I need channel partners, I think you may make the wrong choice. Okay. Let me run some things we've learned about channel partners through HubSpot by you. And I'm just curious if it's kind of the same. Okay.

24:17Brian Halligan:Yeah. Stuff that worked early was we took website designers, a dying business, and turned them into an agency. And we taught them about this new technology, an idea called inbound marketing, which is ancient now. And we taught them how to run a proper agency. Like we ran a little university. How do you bill? How do you charge? How do you run your agency? That worked. Another thing that really worked is once these agencies started signing up lots of customers, they needed to offer themselves. So we funded a development team to help them manage all their customers. Manage their own firm. Right. And that was a pretty good size investment.

24:53Brian Halligan:Third thing that really worked for us was, and this is a Napoleon thing. Napoleon said something like, it's amazing what a soldier will do for another colored ribbon on his shoulder. And my goodness, we have found that we have like 10 tiers of partners and they will fight tooth and nail to get up a level. So measuring all that, getting that benefit program, that has really worked. One of the things that's at least for us has worked is there's two ways to buy HubSpot. You do it yourself, you buy directly from us, you figure it out, we teach you, or is do it for me and that's where the agencies come in.

25:28Brian Halligan:And that has worked for us. Does any of that resonate for you? Is that kind of some of the playbook? Almost all of it resonates because I could take that same, what you just said, and replace it with accountants. Right, that's what I figured. The same exact thing applies. But I would just ask you, what problem were you trying to solve when you first started engaging these agencies? We wanted to grow faster. Just to be very honest, we wanted to grow faster. And I'll tell you a funny story about it. It's like two, three years into HubSpot, and our product was awful, just awful. And we had a few sales reps, and we had a lot of leads from agencies who were curious about inbound marketing.

26:09Brian Halligan:What's this HubSpot thing? We had a lot of buzz. and I told the sales reps, just leave those leads. There's a pile of them over there. Don't touch them. You know, they sat in HubSpot. Don't touch them. You know, we're not going to do the channel product. The product's not ready. And they kept asking me, no. And we had the thing that's a little bit like Google's 80, you know, 20 % time where we say, you can do whatever you want, nice and weekend. So this guy, Pete Caputa, a great but really irritating sales rep. He started calling them nice and weekends. And then, you know, there's a distribution of sales reps.

26:36Brian Halligan:Let's say we had five of them. And like, it's usually a bell curve. ours was like, Peek Caputo was like 50 times more revenue than the rest of them. Maybe we ought to call on these agency partners. That's how we started it. Fascinating. Yes. You followed the money. Yeah. The other thing that's interesting about our agency partners, if we look at our retention numbers, gross and net, the agency customers have better economics than our direct customers. Interesting. They actually take better care of our customers than we do. By the way, so many similarities. Like for instance, when an accountant recommends a customer to use this particularly like larger customers that we're now pursuing that what we call mid-market, the cycle time of close is 10 times faster.

27:15Yeah. And we end up offering more services, payments, payroll to that customer than otherwise. So there's so many, so many similarities. Okay.

27:23Brian Halligan:You guys, founders always ask me too, you had an app, that was your first act, and then you created a suite, second act, and then you create a platform, third act. How'd you do it? give some advice to that founder. She's got 100 employees. She wants to go from first act to second act. You guys have mastered that. First of all, the big part of it, as you know, it comes out of necessity, right? You've solved one problem while accounting. And ultimately, what you realize is the customer can be far more, you can deliver far more benefit and be far more sticky if then you actually help them with creating estimate and an invoice and getting paid.

28:04And then the next thing is, well, well, they have employees. We need the payroll, payroll, et cetera, et cetera.

28:10Brian Halligan:And so how far into like the QuickBooks journey did you start building other stuff? Well, early on, but remember, you've been around since the dinosaur ages. Yes. Thank you. You said it more directly than I was going to say. Remember, we used to ship CDs. And so one, so when we were shipping CDs and we had desktop platform, we had payroll, we had payments on desktop years ago. I see. But then in order to shift from desktop to the cloud, that was a massive transformation for us as a company because we weren't born in the cloud. It was a hard one as I recall. Very hard. Very hard. And by the way, we're, we've shifted to the cloud, but we still have customers on desktop that we're trying to motivate to come to online.

28:53In some cases are not very happy with us because they want to remain on desktop. But the reason I share that with you is that journey from going to desktop to online took a lot out of the company. And so when we then shifted to the cloud, we were once again only an accounting platform because we had to build everything in the cloud. And then we started building out same journey, money solutions, payroll, et cetera. So the biggest advice I would give a founder is, first of all, everybody has an anchor. Ours was tax and accounting. Then the question is, what's the next problem you can solve for that customer that's right next to that anchor?

29:28And for us, after accounting, it was, well, people need to, we serve service-based businesses, they need to create an estimate and invoice and get paid. So let's build that out. And then let's build out payroll, which is very hard, right? Because state, local taxes, country rules, regulations. And so it's really be very intentional about what's next to your anchor. and is that a big enough problem to solve? Can you build advantage by solving it? And then really nail that and then go to the next thing. And then at some point decide, do you partner on certain things until you build it? Do you acquire?

30:04That's why we acquired like a Credit Karma. We wanted to do more than taxes. We could have replicated Credit Karma. It just would have taken us five plus years because of the data and AI capabilities. So that's the advice I would give.

30:16Brian Halligan:Okay, and this is self-serving. So we built marketing and then we said we're going to go into sales. We were kind of forced into it because Salesforce.com was coming into marketing. And then we went to service and we've added, I think we have eight of these application areas. We always debated, we always knew there was going to be eight. Should we paint better all seven new ones or should we really almost finish the second one before we go to the third? How do you think about second versus third? So your first one was paying people, right? Payroll? No, it was actually creating estimates and invoicing.

30:48Brian Halligan:And then your third one's payroll. So when did you go two, when did you go three? What was it like? Do you look at market share before you go? Or like what? So this is, it's a great question, because I now want to go back to your first question you asked me, which is playbook of CEOs or playbook of any leader. I think that playbook is very different today than it was when you were looking at things serially to decide what's next. I mean, today, you know this as well as I, with data and AI, what we're trying to do is build a system of intelligence where it's no longer about what workflow do I build, what app do I build, it's actually about learning from the customer and with our data and AI capabilities, solving that problem for the customer.

31:31Brian Halligan:That's really important because I don't think things are as serial today than they were years ago. You can also build much faster now. You can build much faster, you don't need to be as serial, as long as, by the way, you have some element of data and AI capability. So I just think that playbook is very, very different today than it was four or five years ago. But the thing that doesn't change in my view is being clear, what customer problem are you trying to solve? Is it a big enough problem for the customer? And can you solve it in a way where you're advantaged versus others and they can be a big business?

32:03Brian Halligan:Let me press on this a little bit. I'm gonna put the clock back. I don't know what year, called 2020. your back office, which is the canonical small business back office. And then we're going to buy Mailchimp in the front office. I remember that very well. And that decision at that point in time, was that because, man, we've got 90 % of the SMB back office. We better go in the front office. We're almost done with these applications. Talk to me about that. When we observed customers and their data, they had created, our customers had created 20 billion records within our QuickBooks platform, trying to manage their customers within QuickBooks.

32:45I see. So they were creating shit.

32:47Brian Halligan:They were using QuickBooks as their serial. And so what we realized is we have to solve this problem because customers are manually creating a bunch of records because they don't want to use multiple different platforms and sort of back to, can we build it? Well, of course, is this where we want to put our internal capital? Do we have the know-how, the domain expertise, or do you go buy it? That's what would led to buying Mailchimp. Okay, got it. You've made a lot of acquisition. Not a lot. You made a bunch. Some have been real docs and some have been terrific. We don't have to name names. And like HubSpot, we've started to buy a bunch of companies.

33:21Brian Halligan:What advice would you give HubSpot and any CEO about, you know, the one that didn't work versus work? Is there some best practices or some things you've learned about how to do them? 100%. Well, let's just put to the side the foundational stuff, which is you've done your homework. there's real clarity of strategically why you're doing it. You understand the culture that you're buying. You have a plan around that you've done your deal. Like let's put all that to the side because that's really foundational. The two big things that we've learned is the pace of product integration and talent. Where we moved fast on integrating the platform, I would use TurboTax and Credit Karma.

34:00I mean, Credit Karma is an absolute home run. Where we move fast to know what problems we're gonna solve and integrate the product so we can get to benefit for customers, which by the way translates into growth. And then where we needed to either upgrade talent or make talent changes when we do those two things well, what we've seen is, and by the way, little acquisitions that nobody asks about. And then there's the big ones, right? Credit Karma and MailChimp.

34:24Brian Halligan:Did you leave the CEOs in place and leave them independent or you put your people in It was situational. Like in the case of Credit Karma, it's situational. Ken and I had a great relationship. He wanted to continue to be CEO, very effective CEO. And he and his team were in place for quite some time. Whereas in the case of MailChimp, Ben actually told us and told me from day one, Hey, we got to get, we got to, we got to upgrade the leadership team. Put your folks in there. That's right. But back to your question, it's product integration and it's talent. Those make an enormous difference in terms of success.

35:00And making the tough decisions up front is far better than waiting.

35:05Brian Halligan:Okay. I wanna come back to something you talked about earlier. You guys have been around a while. You were desktop software and then you had to transit. And I think it was like client server and then went to SAS and went to AI. We're kind of on a big shift now. You were one of few companies that made that shift pretty well. Adobe and SAP, not a lot of companies made that shift from client software to SAS. What'd you do right there? Did you wait too long? Were you too fast? Like when you look at that shift back then. My sense was you moved to SAS actually kind of slow. First of all, your premise of your question is a really important one, which is we were born 40 some odd years ago.

35:46Right. In the era of DOS. Right. Right. Which makes it even more impressive how well you guys have done. And I would just say our success is when we were always in love with the customer problem and always willing to disrupt ourselves. And that's so much easier said than done, by the way, so much easier said than done. But that's why we're still around. And it's also why we were absolutely slow to move to SaaS. We were probably four to five years too slow.

36:12Brian Halligan:Because your customers weren't asking for SaaS. Customers weren't asking for it. They absolutely didn't want to move to the cloud. And as much as we're a culture of disruption, that's a very hard move to make. Did you rebuild from scratch? In many cases, we had to rebuild from scratch. And there's service, remember, it's even harder than the way you're asking the question. We were a desktop company. We had all of our data was siloed across TurboTax, across accounting, across back then when we had payroll payments, all every bunch of siloed vertical stacks and data. It was mess to move to the cloud.

36:48It wasn't a mess the way we were running it, but to move to become SaaS, that's like, that is so hard to do, which is why we were slow.

36:54Brian Halligan:Was it more technological problem or business model problem? The business model has totally changed. Culture, talent, business model, it's everything. Got it. That's why you can look back and go, well, we were slow. But when you're in it, what we had to do was very tough. If you follow the customer home, they're not gonna tell you to make a platform shift. Of course, but if you wanna keep growing, you have to make the platform shift. So yes, we were slow, but the degree of difficulty was very high. I would say we were on reverse. we were very early in AI. I agree. Talk to me about that. What's going on now for you on that shift?

37:29Brian Halligan:Why were you, you were like, we're an AI company in like 2009, a long time ago. Yeah, yeah. Way before it was cool. Were you too early? I would tell you looking back, we absolutely weren't too early. Were or were not? Were not. Meaning I'm glad we declared what we did. But you did all this AI stuff. Did any of it really work in 2009? Well, it was, well, let me first tell you why, and then I'll answer your question. We did it for very practical reasons. When I stepped into this role, because I had the privilege of being in all the businesses serving all the different customers, there are sort of two big things that we put in place six and a half years ago.

38:03One was we have to solve more problems in tax and accounting and we have to become a platform so we can play a meaningful role in the lives of consumers and businesses. That was one big decision. We didn't know how, but that was one big strategic decision. The other big strategic decision was data and AI. for very practical reasons. Because the biggest thing I learned being in all these businesses is consumers and businesses want things done for them. It's money, it's confidence, like get my stuff done for me so I can manage and focus on my business or my life as a consumer. So we said the only way we could do that was data and AI.

38:37And that was the second big decision. And to your question of, well, were you too early declaring it? A big heavy lift was all the work we did around data and data services, like cleaning the data, making sure it's usable, making sure we can ingest data.

38:50Brian Halligan:So when Chat Sheep T came in on, you were ready. Yeah, the AI part was actually the easier part. The harder part is all the data. And now that it's usable and all the services, we have to ingest data. That's why I'm glad we started six and a half years ago, because now we're far better positioned for what we're doing today and the future. And when you think of it, are you infusing AI into your current platform? Or are you saying, hey, we're going to start from a blank sheet of paper and build an AI native version of QuickBooks? I would say both. Everything, I get asked a lot, so what's your AI revenues?

39:23The whole company sits on our data and AI platform. Everything from payments to payroll, to tax, everything sits on our data layer, data models and on our AI platform. So that's sort of number one. Number two, one of the things we launched in July of this year is a virtual team of AI agents that do a lot of the work for you. A lot of that is AI native. Are you going to put the accountants out of business by doing that? No, we're actually, our focus is how do we fuel their success? And we're also very transparent with accountants, which is if you only have, you know, 50 customers and all you do is tax, you should really be part of our platform, our expert platform, because with technology and the supply issues, it's going to be tough as you look ahead.

40:07So we're trying to fuel their success, but we're also partnering with the large firms to really fuel their success because they're trying to digitize. They want efficiency. They want to improve profitability, particularly the PE-backed firms. Our goal is partnership because we believe in AI plus HI. We think human intelligence is essential for today and the future. Our focus is everything needs to be done for you. How do we deliver experiences that's done for you versus building more workflows and designing more product?

40:32Brian Halligan:Yeah. Okay. We only have a couple minutes left. I have a thousand more questions, by the way. I coach all these CEOs. They're smart. They're hungry. They're between 10 and call it 500 employees. And they want to go from like startup founder to scale up CEO. What CEO advice would you give to these people? That's a loaded question. You're a smart guy. I would say really focus on winning. These jobs are hard. Do you like your job? No, I love winning. Is the day-to-day, do you enjoy it? There are a lot of days where I'm like, that was no. I'm not solving for joy. I think that's the advice I would give is if you're solving for just following your passion and defining how the day went by joy and happiness, you're not going to succeed in this world as a CEO or not a CEO.

41:22So the advice I would give is focus on the customer and focus on winning. These jobs are hard. Be prepared, right? If you want to do this job, you got to have grit. You got to work hard. You got to have resilience. you've gotta understand that most days you're not, it's not about passion, it's not about joy, it's about winning. And what we do is very hard. And I just think the mental toughness, I think talent is overrated. Okay. I think it's all about grit and it's all about hard work. I will take anyone that has grit and hard work versus. How do you know if someone's seeing,

41:52Brian Halligan:you're interviewing someone, how do you know if they'll get grit and hard work? Just, you know what? I, there's one of the things we have is one over one approval. Most of, if my team's gonna hire anyone, and ultimately I interview them. And more than 50 % of the time I go back to them and say, I don't think this is the right person. Grit. Because it's just, it's the grit, it's the hunger, it's the passion. You know, sometimes - When do you ask someone to figure that out? I figure it out in the conversation. You can smell if somebody's hungry, if they have grit, if they have perseverance. And I think that's what it takes to do this job.

42:23Back to your question, is the biggest advice I'd give CEOs is don't lose sight of the prize and it's hard. Get after it, outwork everyone, have grit, and if you fail, figure out how to get up and bounce back and you'll achieve great things in life. It may not be that CEO gig, but you'll achieve great things in life. It's the advice I give my kids.

42:41Brian Halligan:You've done an amazing job here at Intuit. You've done an amazing job in this podcast. Thank you for sharing all your knowledge. You're a legend. Appreciate you. Thank you, my friend. Thank you. Okay, hope you liked that interview with Sasan. I really enjoyed it. A couple of high-level things. Both Sasan and his predecessor, Brad Smith, are very polished and very smooth. And they kind of rhyme with a couple other folks I've had on the pod, David Solomon from Goldman and Nikesh Arora from Palo Alto. And it seems like that's sort of a common thread amongst the CEOs who've been hired in to replace the founder in a company.

43:20Brian Halligan:Kind of interesting that they have that in common. Another thought, like I spent that day with Brad Smith, their CEO, a few years ago, Just my suggestion to all of you listening, if you're a CEO or you want to be a CEO, that really worked and was really helpful to me. And so if you know a CEO and you admire them, ask, hey, can I come in and sit with you for a day and sit through your meetings? A very worst thing that can happen is a CEO is very flattered and says no. And so you kind of win either way. He asked a good question of himself every six months. he asked himself the question, if I join the company today from the outside, what changes would I make?

44:03Brian Halligan:And that's a question I always said I asked myself at HubSpot, and I very rarely did it. So if that's stuck with you, I recommend you do it. I like that he, in almost everyone I've talked to, gets on the cold face with the customers, like gets on support calls, goes and talks to customers, follows them home. And I think what kills a lot of startups kind of between 100 and 1 ,000 employees is you get some layers in there and you get all the feedback filtered and you lose that sort of cold face touch with the customers. One thing he talked about was this follow me home concept. And it's at least it used to be.

44:41It's a famous concept in my mind where the founder of Intuit, they sell to a very small business and people typically run them out of their home.

44:48Brian Halligan:So he would go to someone's home and watch them do all their paperwork and watch them do all their accounting and see how frustrating it was and then kind of build from them. That was his sort of secret sauce. And almost every CEO I speak with is really obsessed with understanding the customer. What I think people get in trouble with now is they look at the analytics for the customer and they can see usage data and everything's very wired up quite nicely for the CEO to see. But I think you miss something when you don't actually do that follow me home. Because when you do the follow me home and you sit with virtually or not that end user, you can see not just what they're using, but where are they cutting and pasting into other things?

45:31Brian Halligan:And where's the messiness in the process? I see a lot of CEOs sort of getting away from that. I would encourage you all to stay there. I think a very common cause of death for companies going from 100 to 1 ,000 employees is they kind of lose that cold face with the customer. They get their information filtered heavily by their staff. They get reportings from analytics apps, but they don't actually talk to those customers and they don't make their senior team talk to those customers. So I think that's key. Then we talked about the SMB segment and we have this in common with Intuit, although we sell more to M than S than they do.

46:08Brian Halligan:What he says about S I think is right, is you can't treat them like many enterprises, you have to treat them like consumers, like the individual is like a consumer product, you have to build it that way. And it's a different mindset. And it's very easy to get talked into building all kinds of other stuff for many enterprises. So I like that they did that. The key in SMB is keep your CAC low. If your CAC is relying on Facebook ads or whatever advertising model, it's very hard to scale that. And I like that they focused on that they work through channels, they were obsessive about word of mouth and net promoter score.

46:41Brian Halligan:So I like that a lot. And the other thing you have to do if you want to build an SMB business is you need a really solid LTB. You're going to have churn. Some of these folks are going to go out of business, but like HubSpot will lose, call it 11%. So we start the year with$100 and then we end the year actually with$89, but then we upsell them up to$100,$304. So you have to be able to fill that divot with your best customer buying more stuff. So I think they've kind of got it down how you build an SMB business. I think more companies should go after this target. There's just like gravity on Sandhor Road that everyone wants to go to the enterprise.

47:17Brian Halligan:But if you can think it through, man, you can build a huge business in SMB. HubSpot, Intuit, Shopify, they're all cranking. Okay, we talked about second acts in platforms. And lots of founders asked me about this. A lot of companies die because they can never figure that second act out. I kind of always thought of it in HubSpot. Either you build a platform or you get eaten by a platform. And so we ended up building a platform. What they did and HubSpot did is they had their first app was accounting in the second app, which is right next to it was invoicing. So they didn't go way into HR or stuff like that.

47:54Brian Halligan:Just like we're going to do invoicing. So that was the first act, second act. and then after a while they went into payroll which is a little further away but pretty close to that so when you're building a second act keep it tight keep it close very helpful if it's the same buyer who's buying both of those products not always the case and hard to find that but really important and then the other thing i would say is you as you're going to your third act i think you want to be a little bit more serial than parallel in the way you think about this stuff so you build your first act and then instead of doing second third fourth app and peanut buttering it really go after that second act and get to table stakes on there before you go to your third act, your fourth act, et cetera.

48:33Brian Halligan:I really like Sasan's hiring criteria, grit. It's the first time I've interviewed nine or 10 of these really terrific CEOs. No one's no one said that before. It reminds me of Sequoia's hiring criteria for entrepreneurs. They look for that chip on the shoulder. I don't think they always get it, but pretty much. And so he looks for that. And most founders are telling me these days we're looking for slope or we're looking for experience, but I like his grit. What's your hiring criteria? What's your through line for all your execs you're hiring? That's a good question to ask yourself. Okay. Those are my, my takes on Sasan.

49:08Brian Halligan:I think there's a lot there and I hope you enjoyed it and I'll see you on the next one.