“I would like to see FP&A drive the planning process for go- to-market just because I think they will have a better natural understanding of what it means to actually build a plan.”
Scott Stouffer, a former engineer, is a serial entrepreneur and founder. Currently he is CEO and Founder at scaleMatters, the world’s first Go-to-Market Optimization Platform. Previously,he executed the sale of Salsa Labs, a non profit CRM to PE firm Accel-KKR at a period of $12MM annual revenue and 70 employees. In this wide-ranging interview he reveals the real impact he believes CEOs, such as himself, are looking for in choosing CFOs and building a finance team. He also argues for a bigger role for FP&A – including leadership of a company’s go-to-market strategy incorporating how an organization can engage with customers to convince them to buy their product or service.
This interview covers
- Scott’s roadmap for growth leading fast-scaling companies
- Why many CFOs are “glorified controllers” (and why that is a problem)
- How FP&A can prevent sales and marketing teams “from winging it” by bringing the “analytical brain power” to the
- The power of a good plan in a fast-scaling business
- Should Rev Ops and Data be owned by the CFO
- How FP&A should be the first port of call in building a companies Go-to-Market strategy
- How finance teams can work better with sales teams and better modeling sales capacity
- Why in 60% of cases companies have too many sales people by failing to do proper modeling
- Why you need to hone self-confidence as a skillset
Read the full transcript below
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From Datarails. This is FP&A Today.
Paul Barnhurst:
Hello everyone. Welcome to FP&A Today, I am your host, Paul Barnhurst, aka the FP&A Guy And you are listening to FP&A Today. FP&A Today is brought to you by Datarails, the Financial planning and analysis platform for Excel users. Every week we welcome a leader from the world of financial planning and analysis and discuss some of the biggest stories and challenges in the world ofFP&A. We’ll provide you about actionable advice about financial planning and analysis. This is going to be your go-to resource for everything FP&A. I’m thrilled to welcome today’s guest on the show, Scott Stouffer . Scott, welcome to the show.
Scott Stouffer:
Thanks, Paul. Pleasure to be here. Looking forward to it.
Paul Barnhurst:
Excited to have you. So a little bit about Scott. Scott comes to us from the Washington DC area. He graduated from Lehigh University with a degree in electrical engineering and earned an MBA from NYU. He has also worked as a CEO at multiple different companies, including visual networks where he led the IPO process. And today he’s currently the CEO at Scale matters, a go-to-market optimization platform. So we’re thrilled to have Scott here with us and get a perspective from a CEO a little different than our normal guest on the show. So maybe Scott, could you start by just telling us a little bit about yourself and your background?
Scott Stouffer:
Sure. Paul, as you said, name is Scott Stouffer. I’ve been in the tech space for virtually my whole career. Graduated from college with an electrical engineering degree and started in the semiconductor world and moved into network and systems management, which is where I started my first venture back in 1993, quite a while ago. But over the last 30 years, I’ve basically been founder and CEO of founder and CEO, or just CEO of five different early and growth stage tech companies. And it’s been a joy and look forward to continue doing it. Just a little bit in terms of profile. I, you know, can’t escape your engineering roots. So while most of my energy in these businesses that I’ve run has been focused around the sales and marketing and customer and revenue side of the house, we go at everything with quite a bit of a quantitative mentality. So I’m pleased to be on your show where the audience is will be near and dear to my heart in terms of the way they think.
Paul Barnhurst:
No, I appreciate that. And I’ve always said, I’ve worked with a number of people in FP&A that come from an engineering background, and I’ve almost always found there’s some of the best people to work with in FP&A. Cause they have that very strong quantitative background. They know their numbers, they know the data, and I’ve always found they make some of the best FP&A professionals. So if you ever want to come over to FP&A, let me know
Scott Stouffer:
May maybe next time around.
Paul Barnhurst:
Oh, fun. So I know you run a current venture, it’s called Scale Matters. Can you maybe talk a little bit about that venture, what you do, how that came about, just a little bit of the story there?
Scott Stouffer:
Sure. So the background is at our previous company. And the previous company was, it was about a, I don’t know, $15 million business. We made a CRM and a marketing automation platform that were purpose-built for nonprofits. And we sold predominantly to smaller nonprofits. So I’m not talking about Red Cross and some of these organizations that feel like major enterprises. I’m talking about the millions of smaller nonprofits. And one of the things that we recognize, I mean there was kind of a feel good aspect to trying to help these nonprofit organizations because for the most part they’re trying to make the world a better place. But with that said, they are not a particularly great customer to build a good business model around. And the reason is they tend to be low pay, high touch, and they churn a lot because they lose their donors and stuff like that.
And so it forced our company to get very, very vigilant about how do we get efficient at acquiring these customers. And I’m not sure I’m, some of your audience operates in the SaaS business, but not all of them do. But a key metric of success to SaaS companies is what we call LTV to CAC, lifetime value divided by cost of acquisition. And because the LTV numbers were always struggling, it forced us to say, we really got to focus on CAC, right? How do we acquire these customers a heck of a lot cheaper than we currently are? And so we basically put on our engineering hats, we deconstructed our entire process of sales and marketing tore down our tech stack. And when I talk about a go to market tech stack, I’m talking about the CRM and marketing automation platform, all those kind of tools.
And we basically modeled the process. We proceeded to model at a very granular level the entire process or journey, from the point somebody would hit our website to the point they would become a customer. And then we rebuilt our tech stack in a way that we could measure it at the same level of precision that the models were built. And that started surfacing a lot of really powerful data. And at the time, and mind you, I’m the CEO of this company, the first thing I did every single morning for five years was log into Salesforce, export a bunch of reports into Excel and start manipulating the data into charts that actually the management team could use to make decisions. And long story, bringing it to an end, what we managed to do in just over a year was reduce our cost of acquisition by almost 75%.
And it was just a complete change of opportunity for the company as a result of that. And so when we sold that company to a private equity firm in 2018, there were a few of us from that company that we said, look what we’ve done here, we can basically productize that approach and make that available to other companies. So that’s really what the genesis of Scale Matters was. So effectively what we do is we have a platform, think of that as a bunch of software that we’ve built, including a bunch of models that we use and we have some services. But basically we come into these early and growth stage B2B companies and we help them get to a much higher level of precision on how they can manage their go-to-market efforts. Ultimately using data to surface where there’s friction surface, where there’s inefficiencies, help them take it out and basically get to a much more efficient place.
Paul Barnhurst:
Thank you for sharing that. Something so many companies need, that’s a huge thing to be able to, like you said, 75% reduction in CAC. Not to say every company’s going to get that, some might only get 5%, some might get a hundred, but every little bit of efficiency you can get there extends runway, gets you to profitability quicker, maybe allows you to hire more salespeople so you can grow faster. It all makes a big difference. So I could see where that’s something that’s extremely valuable for companies.
Scott Stouffer:
Yeah, it’s helping it. It’s helping companies for sure.
Paul Barnhurst:
Good. No, that’s great. So I know you’ve spent nearly a, I think 30 years now roughly as a CEO at five different companies. And as you mentioned, I believe all of those are companies where they were scaling, growing, probably went through those hyper-growth phases, a lot of growth. So how do you think about having done this a few times, how do you think about growing and scaling a company? What’s that kind of roadmap look like?
Scott Stouffer:
I think there’s a few stages, and one way that I think about it is not dissimilar to how investors think about venture capital type investors thinkbout it, which is there are different phases of risk. And the first one is product market risk. Have you even got an offering that solves a problem for enough people out there? Or uniquely solves a problem for enough people out there that you could actually, if you can get them all, have a nice business? And then after you’ve sort of solved for product market risk, you start to say, okay, well now we have to focus on go to market. Can we come up with a repeatable, predictable way to actually acquire customers? Right? And you’re thinking about very different things in those two phases when you’re focused on product market risk, what are we spending all of our time doing?
We’re spending as much time as we can talking to the types of people who we think are the customers we want to sell to so that we get continuous feedback into our development organization and keep tweaking the offering and that sort of thing. But you’re not spending money on salespeople or marketing programs or anything like that right at that time. I mean, you may spend money in order to get access to enough people to actually talk to. Sure. But you’re not necessarily trying to sell them at that point. But one, once you reach product market fit, then it’s about, okay, who is the ideal customer profile? Do we have clarity around that? Because a lot of early stage companies, and I understand why, because we all in our early stages just feel desperate to get any business.
But so many of us therefore take on business from customers that aren’t necessarily really well suited for what it is we do. So I encourage companies to put a lot of energy into gaining clarity around their ideal customer profile. And then within that, who are the right personas that, who are the beneficiaries of this stuff? Who are the people that can say yes in a sale process? Who are the people that can say no? And starting to understand and develop some theories around how do we reach these people? How do we access these people? What is the messaging once we do, etcetera? So you’re really focused on trying to create the recipe of how you sell. You’re not trying to scale yet. You’re just trying to see whether you can come up with some repeatable recipe of how you can actually get customers in the door.
And once you’ve proven that, then you go, okay, now it’s time to think about scaling. Scaling is simply a sophisticated word for growing faster. And this is where you start to need a lot of money. Because this is where you have to start to invest in marketing programs, start building out sales teams, etcetera. And what you often learn is that what was repeatable in a non-scaling fashion doesn’t work when you’re actually trying to scale. So you end up having to change the recipe and stuff like that. But we usually would then move once we got into scaling mode, you’re really just focused on growth. But then you get to a certain point that you say, okay, this unabandoned growth maybe can’t last forever, and or our investors have been in this for five or six years, they’re going to want to start getting an exit. So you do have to start thinking about profitability or efficiency, think of it. Cause a lot of times when companies are in that scaling mode, they’re not that concerned. I mean, there’s a benefit of efficiency there, which is sure you could actually scale faster if you’re more efficient, but it’s not really top of mind.
Paul Barnhurst:
No, you described that very well. And I was sitting there even as you were listing some of that, thinking about myself as my own business and going recently, this is an ideal customer. Sure it’s revenue, but is this really what I want to do? And I’ve learned to say no to a few things and I’m still trying to figure out, okay, how do I make sure this is really what’s going to help me figure out how I scale? So I can very much relate to what you’re saying. And also I think a lot of people probably relate to very similar to this different stages of venture capital you’re trying to test, okay, is this product, can you get it to M P? Is it really valuable? And that seed you’re starting to test. Okay, is there the market out there in series A? You’re a little bit of that execution and you get that series B and C and it’s really about scaling it and then you get closer to D and E outside of tech, sometimes it’s about how can we get it profitable so we can take it public. Okay, we’ve now started to grow it. And so there’s a lot of similarity between what you described there and the different stages of the typical venture capital journey.
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All right. So when it comes to a CFO, what do you look for from a CFO ? How do you decide what you want and what makes an effective CFO?
Scott Stouffer:
Sure. I guess for starters, I, I’ll just offer an opinion about what that title means. And the reason I bring this up is because at least in the tech world, particularly in sort of sub $25, $50 million companies, there are a lot of people that have that title. And to me they’re controllers, they’re glorified controllers. . And to me, there’s a very big difference between finance and accounting. Both are critically important, but accounting is not finance. And when I think about a CFO, I think of that person as kind of a number two colleague or partner to the CEO. I think of that person as very operationally focused, that who views their responsibility supporting the other functions within the organization, but supporting them in a way that’s helping to drive accountability of the results that yield the financial outcomes the company needs. I think of the CFO of course, as owning the responsibility for making sure the company is financed properly. And I think of the CFO in many cases as owning the relationships with the investment community.
Certainly I expect that there’s an accounting function done very timely and very well that reports into the CFO. I also expect that there’s an FP&A capability and other nominal things. Sometimes it might be there. One of the things, I’m not sure if you know the term revenue operations, but I’m beginning to be a very big fan of ops reporting into CFOs because the CFO has this sort of unbiased position around data. Whereas if you have a cmo, chief marketing officer and a head of sales, they don’t necessarily see eye to eye. So it’s nice to have this independent arbiter, but I think of the C F O as really probably the second most strategic C-level position in a company bec, because they’re, well, a couple reasons, right? The cfo, and the C E O by necessity are the ones that have the most exposure and interaction with the board and investors.
So they’re in a continuous dialogue around strategic stuff. The rest of the C level is not, right? I mean, there are in dialogues around important stuff. How are we going to get our numbers? How are we going to get our supply chain fixed, et cetera, right? But there’s a whole nother level of conversation, which I’ll just call board level conversation that goes on all the time. And the CFO F is a party to that. And so we expect the CFO to be a strategic leader and looking at the bigger picture.
Paul Barnhurst:
No, tha thank you for that answer. There was a lot there and I appreciate the idea of a secondhand person, you say kind of the right hand person that really helps with the strategy. And I think it makes sense where you mentioned they’re the ones that talk to the investors the most. They’re externally, you, the C E O and the C F O manage most of those external relationships, which forces you to have a lot of those strategic discussions because that’s what the external is mostly focused on financing sometimes. But really the is the strategy, are we going to be able to accomplish our targets? Am I going to be able to get my value out of this investment of mine? That’s their number one concern. They’re not worried about the weeds and the details until you start missing all kinds of numbers. Then they might start asking you everything, but as long as things are going well, they don’t get into that level of detail. So that makes a lot of sense.
Scott Stouffer:
One other thing I would mention, and again, I, I’ll qualify it from the vantage point that I operate, which is in tech, which is mostly growth focused, right? And a good cfo in tech has a growth mindset, not a expense mindset. And it’s very important. I’m not disparaging CFOs who are very kind of expense, let’s not spend anything because that plays a role. It just doesn’t play a role very much in tech. Sure. And instead, the C F O needs to be bringing something to the table in terms of thoughts, innovative concepts, etc, that are going to help accelerate growth, not just kind of be the person that puts the handcuffs on everyone else that’s trying to spend money, so to speak.
Paul Barnhurst:
So they need to be A C F O instead of a C F No, as I heard you say. Yes. Right.
Scott Stouffer:
Exactly.
Paul Barnhurst:
No, that makes a lot of sense to me. So next, and I know we talked a little bit about this before, when you’re looking at FP&A departments and you mentioned Scale Matters, you’ve seen a big difference between companies that look at FP&A as strategic versus kind of look at ‘them as back office. Can you maybe just talk a little bit about that as well as just your own experience of how you look at FP&A?
Scott Stouffer:
Sure. Well, again, with an engineering background, I tend to be very data oriented, right? I want a bunch of analysts in my company, I don’t care. I don’t what we do. I want people looking at data that have the skillset to actually separate the signal from the noise, recognize patterns, curate it, and identify actionable stuff from it. My view is FP&A organizations that offer the highest value to companies are not the ones who are simply focused on helping to prepare for the board meetings or make sure the financial reports and that kind of stuff are all done properly and on time or doing forecasting and stuff like that. But the ones that are actually complimenting the other functional areas of the company, and again, since I spent so much time focused around go to market sales and marketing stuff, I’ll talk about in that arena. The best sellers or the best leaders of sales teams are not typically terribly analytical people
In much the same way that the best analysts are not typically great salespeople. And so the FP&A organization can compliment the skillset of these leaders in the go-to market team by filling in this gap they don’t have, which is an ability to leverage data to help them make really good decisions. And when we don’t see that, what we end up seeing in sales and marketing organizations is a lot of gut feel winging it. A lot of sort of haphazard experimentation. I often talk about last sales call syndrome or the loudest seller syndrome. Loudest seller gets off his last sales call, just lost the deal, comes pounds on the table. Oh, we’ve got to do all these things differently or we’ll never sell anything. That’s a data point of one. The problem is it typically has outsized influence in most of these companies. And as a result, many companies end up reacting to data points of one because they don’t have anybody that’s supporting the decision making team with slow down. Let’s look at a broader picture. Let’s see what is statistically significant here, what’s impactful, what’s real, what’s not, right? And that’s where these FP&A teams can be just tremendously valuable, really, really change help change the trajectory of a company is by basically adding analytical brain power into the other operating functions of the company.
Paul Barnhurst:
I really appreciate what you said there, particularly the analytical brain power. Sometimes you see, as someone described a bit, the F and the P are fat and the A is skinny in some organizations, and you want that a to be just as big as the others because it’s where you drive the insights. The financial planning to a certain extent is kind of blocking and tackling. You got to put a plan together. Yes, there’s strategic stuff in it, but it’s really that analysis and when you get off course and when helping to find insights that can really allow you to achieve that plan, that there’s so much value that can come from FP&A. I still remember I had a business leader who said to me one time, he goes, what I like about you, and it was one of the best compliments I had, is he goes, you don’t just report the numbers, you help us achieve the numbers. And I think the word he used is shape the numbers. You have an impact on the P&Ll. And I think that’s what you’re saying you want to see from your FB and a department is those best departments by the analysis, they’re bringing in the insights or driving value for the organization.
Scott Stouffer:
For sure. And by the way, I think the P part of it is critically important in order to have the A. because if you think about a plan,
A plan in my mind is a blueprint or it’s a hypothesis. Let’s talk science, right? Sure, yep. We’re going to start this experiment. Here’s our hypothesis that we’re going to do this and it’s going to result in this, right? Well then you have to set up the test, which is, okay, how do we measure it? Yada, yada, yada, right? What are the pass/ fail criteria? But then somebody has to look at the results and you can have all this great data and think of it like having a very high resolution MR I. And if there’s no radiologist, it’s an amorphous black and white picture on acetate, right? So I do think the plan is a critical piece of context against which performance actually can be analyzed. And I do think also that far too many companies, I mean companies pretty reliably do pretty good financial plans. I mean, what’s our gap revenue going to look like our expenses? Who are all our employees going to be? What are their salaries going to be? How much fringe, right? I mean, that’s what FP&A do out the wazoo, but let’s talk about new bookings. We need to acquire thousand new customers and drive 3 million of new ARR.
Where’s the detailed blueprint behind that? And most companies just fail miserably at taking their goals. They almost think their goals are their plans. They fail, fail miserably at taking their goals and deconstructing those into these measurable blueprints to actually execute. And of course, if you do that, then you actually can start to measure and analyze the performance against those blueprints. So I do think the planning is critically important too, but just it needs to go beyond simply the traditional financial planning.
Paul Barnhurst:
And I completely agree with you. And what I meant is just kind of the many of the pieces they have to do, the fringe all, just the general stuff that goes into building it up. But I a hundred percent agree that blueprint and being able to take that financial plan and make sure it hangs together with the operational plan, and that is it’s all consistent and integrated and that you have a plan to achieve it versus, I mean, how many times has somebody said, at least I’ve heard a lot of times in the meeting, I don’t even recognize that number. Finance put that together.
Scott Stouffer:
Yeah. Yeah. It’s sad it, I’ve heard that so many times. Well, guess what? Then that’s likely your number.
Paul Barnhurst:
And so then there’s something, there’s wrong if that’s the case, right? Because you’re not, that process isn’t hanging together and it’s so important that everybody’s on the same page and there’s different reasons that happens. But yeah, I think that gets into, that’s where the planning is really critical is getting everybody on that same page. And like you said, making sure you have the blueprint versus, well, we got to get $3 million in growth and 30% and then we’ll just hire more. It’s not a plan. That’s kind of a wish. That’s exactly right. Give me some detail behind that.
So I want to go back to something you said earlier, because this is a conversation I’ve had with a number of different FP&A people and different is rev ops. There’s often sometimes Rev Ops sits in finance, sometimes it sits in sell marketing, sometimes it’s out on its own. You know, had mentioned that you think OPS belongs in finance. And I think you talked about a little bit about aligning incentives and kind of finance being that neutral group. I’m not that biased. Can you maybe talk a little bit of what’s led you to that conclusion and just how you think in those operations there and things, what belongs in finance and FP&A versus in the business when it comes to that?
Scott Stouffer:
Sure. So if you think about the revenue function. In many companies, there’s kind of three sub-components, marketing, sales, and let’s call it customer success. All the post sales support stuff. There are natural tensions that exist between those organizations. That’s just the nature of the roles, even though they might be all kind of emotionally bound and aligned to the art overarching goal in getting there, there are natural 10 tensions no different than there’s within R&D. There’s tension between the development group and the quality group, right? Sure. So there’s just these natural tensions. One of the results of this tensions is that you get misalignment and siloed data. So you end up in these meetings where you’re talking about we generating all these leads and all this other stuff, and for the exact same metric, the head of marketing will say it’s X. The head of sales will say it was Y.
And so what ends up happening then is these meetings devolve into a state of bickering. Finally, if there’s an adult in the room, they say time out meeting’s over, go reconcile the data. And these companies spend so much time reconciling the data rather than acting on the data, simply because the tensions that cause this misalignment cause people to want to expose data that’s supportive of their positions, right? So the solution is you have to get unbiased. The owner of the data should not have a horse in the race, so to speak. So to me, there’s a couple choices. If you have a legitimate CRO. So remember I said I have some suspicion around some people that get called CFOs? Well, I have a lot of suspicion around a lot of people that get called CROs, chief Revenue officers because in 70 percent or more of the companies that I see, that person owns sales, it, it’s a glorified title for VP of sales. In a company where they have a legitimate CRO that owns revenue, owns marketing, sales, and customer success, then by all means, rev ops should report to that person.
There is absolutely nothing wrong with that. But if you don’t have that situation, then you have to find an unbiased, some other unbiased C-level participant to put Rev Ops under. And what I like about it going under finance is finance by definition, the CFO is more likely to have an analytical mindset than a CRO. And so you will tend to get ops teams that are under CROs tend to be more technology focused, like they’re great administrators of Salesforce or great administrators of HubSpot. They’re very good at the technical aspect of making the technology work. They might also be very good at enablement training and onboarding new salespeople. But you don’t generally see those fun functions be particularly good at business analysis. And the Rev ops teams that show up under finance tend to be better, in my view, at business analysis, which is really much like I was saying about FP&A. It’s really the place where rev ops can become a strategic asset to the organization. Otherwise it’s a must have to manage the tech. So that’s why I like to see it under finance. And we’re seeing more and more organizations put it under finance, which I think is encouraging.
Paul Barnhurst:
And I’ve always felt like it more naturally fits under finance. And your explanation there made a lot of sense to me. It’s one of the best I’ve heard. Cause I’ve asked this question of different people a few different times and you know, get some different answers. And I think there’s that natural bend, like you said, toward the analytics versus the tech stack with the C F O. The other thing I think we’re seeing a lot of and get your opinion on is people putting data under the c F. So the data analytics seems like a lot of modern CFOs want to own that data, your take there. Do you think that’s the natural fit for it, or it kind of depends on the org or how do you think about that?
Scott Stouffer:
Yeah, and for pretty much the same reason, or at least the last part of that last answer, which is, well first of all, where else is it going to go? Yeah. Is it going to go under, I guess if there’s an IT that’s the other place.
But again, when I see that, and we have the opportunities to engage with a number of data operations teams and stuff like that. And so they are so focused on the technology of, well, we’re building a warehouse on Snowflake and then we’re going to use Power BI or Tableau. It’s all about what the tools are they’re going to use and all the work they go through to do normalization of the data and clean up of the data, which is all important because there’s no point analyzing it if the data is not prepped properly. But then they just fall short on, okay, now, now you’ve done all this work with the tech to have data. Who is using it to basically help advance the company? And so again, I think if it’s under a CFO because of what I imagine is the CFO’s natural, you’re more likely to see a better investment and a little bit more priority around the analyst part of it.
Paul Barnhurst:
And that would be my answer as well. That makes sense to me. That’s what I’ve seen. My last company, we got a new CFO and one of the first things they did is bring in data under him, under the CFO and there is a real focus on, hey, how do we get the technology cleaned up so we can do good analysis? I don’t care if it’s Snowflake or this or that or what tool we’re using, how do I get the insights I need to move the business forward? And so I think that that’s really important there. So switching gears a little bit, talking of go to market, how do you see, can FP&A better support the go-to-market function? What do you want from the FP&A team to ensure that go to market as being as efficient as they can be?
Scott Stouffer:
First thing I would like is to see FP&A drive the planning process for go to market just because I think they will have a better natural understanding of what it means to actually build a plan. And so we talked about a plan or a model as sure as the blue blueprint, right? And I think that’s the first place that FP&A could be very beneficial to the go to market teams is just help them build better blueprints. And the reason I say that, when you do that well, the process itself of building the plan often surfaces some tremendously valuable insights, unfortunately, which mostly say your plan is just ridiculously unrealistic, but it forces people out of this hope as a strategy mindset. And so that’s why I think the planning process is so valuable because it just forces reality into stuff. Now you might say, yeah, our win rates have hovered around 20% every single month last year, and we’re showing ’em at 40% this year, but we actually have a reason we believe that, right?
And that’s okay. But if you look at the step function trench chart and you can’t actually explain why is that step function going to happen, then that forces you to say, okay, well it’s probably not, let’s build something more realistic, which then typically will force you to actually have to say, okay, well we probably can’t spend the money we were hoping to spend either. So it just makes people more responsible stewards of their organization if they do really good planning in my mind. And I think FP&A can play an invaluable role there. And then the second part, of course is what we’ve talked about is just analyzing the data. Since particularly in kind of sub $50 million companies, most go-to-market teams don’t have a business analyst assigned to them I mean, you get big companies mean they’ve got people, sure. Basically FP&A who have been transplanted into the go to market.
Speaker 1:
Exactly. They’re embedded in the
Scott Stouffer:
Business. Yeah, they’re embedded in the business. But until that point, I think they need to play that role on a proxy basis.
Paul Barnhurst:
That makes complete sense to me. But it led me to one question as listening to you in thinking about it. Do you look, when it comes to sales commissions and building plans, what role do you look for finance kind of FP&A to play in that? How do you think about that kind of tension of salespeople and developing the plans they know how to incentivize, they understand a lot of quota the market, but there’s also that financial aspect and making sure you kind of have that neutral observer. So how do you look at that as you’re structuring it and think about the role finance slash FP&A should play there?
Scott Stouffer:
Yeah, actually, again, I have to qualify by my world because of course we’re not talking about big enterprise companies. I would say there’s still a ways to go for finance to do a better job at that. And why I say that is what I’ll typically see is finance people have, again, largely because of the exposure to the boards, who basically are typically investors who have 30 companies they can look at. So they’ve got benchmarks, they understand what good ratios look like. So if it’s a SaaS business, we want to see minimum four to six times OT E in terms of bookings, ideally seven or more. And so they sort of understand what the appropriate benchmarks to strive for are. Unfortunately, I see a lot of finance organizations sort of just dictating, okay, that’s what it has to be. And yet to me, you can actually build a very clear understanding of what a rep is capable of.
And I’ll tell you why. We have a thing, we call it a rep capacity model, but basically by understanding conversion rates throughout the pipeline, you end up knowing that for every deal I’m going to get, I need to get 16 opportunities that enter into stage one, eight into two, and so on. It’s just a reverse engineered conversion rate. Sure, you can sit with your sales team, sales leaders and say, let’s do some activity accounting. How much time does it take for a salesperson to prepare for and then execute on the activities that happen in stage one, two hours. So you end up capturing the amount of time required at each stage, and then how many times you have to cycle through each stage to get a deal. You basically can create a very good model that says it consumes 72.4 hours of a salesperson’s time to get a deal.
Then you say, okay, well, we know if everyone worked five days a week, 52, they weeks a year, there’s 2080 hours, but they’re going to take five weeks off between holidays, vacations, then there’s human tax of inefficiency. So you have a starting point of what the actual capacity of hours they have in a year is. Then you have your 72.4, it’ll tell you they can do 32 deals. And I just don’t see enough companies putting that energy into it. And I think I might have mentioned to you in our pre-talk, but I would say well over 60% of the time, if not more, most of the organizations we see actually have too many salespeople, substantially too many salespeople, particularly relative to the top of funnel support that they’re getting. And it’s because they don’t do this type of model.
They’ve gotten used to this level of mediocre performance where people are producing three x their O T E and revenue, and they are afraid for some reason, they think, well, if we cut the sales team back, our revenue’s actually going to go down and it won’t. I’ll tell you why it won’t because if you cut it back, your best salespeople are actually going to stay because they can actually make some good money. Then when you’ve got too many salespeople, nobody can make good money. And so I’d like to see the finance organization go a step deeper on modeling really what sales is based on the actual activities.
Paul Barnhurst:
I really appreciate all you said there and most of my career, I’d never got into all that. And I got one company where he really did that, and I learned so much getting in depth, and he had a really good boss that one of the businesses he managed, I took it over for him when he became my boss and he was finance, he’d gone through and said, look, it doesn’t make sense. We’ve added all these salespeople and we just have a bunch of mediocre salespeople. Let’s scale back the sales team. And they were still getting the same sales numbers with 30 less salespeople. All right, well now we just saved $5 million or whatever the number is. That’s all bottom line. And we pretty much have the same top line, maybe a slight difference, but almost virtually the same top line.
Scott Stouffer:
That is the single easiest way to increase CAC efficiency, customer acquisition efficiency in my mind, is shrink your sales team.
Paul Barnhurst:
No, and it makes sense.
Scott Stouffer:
I Mean, of course you want to shrink it by getting rid of the bottom performers
Paul Barnhurst:
If yeah, of course you want to keep efficiency and make sure the marketing engine’s there so they can close. But yeah, generally you can do more with less than sales than a lot of companies. I agree with you, what I’ve seen. Yeah, makes a lot of sense there. Well, I’ve really enjoyed this. Now we’re kind of heading into the part of the interview kind of wrapping up where we have some standard questions we ask everybody.
Scott Stouffer:
Okay, I’m getting nervous, but go ahead.
Paul Barnhurst:
So first, what we’ll ask you here is what’s something unique about you that you can share with our audience? Something we wouldn’t find online?
Scott Stouffer:
Oh, Jesus, let’s move on. I don’t know.
Paul Barnhurst:
All right. And too,
Scott Stouffer:
I’m a pretty ordinary serial entrepreneur that just works too hard and everything else in his life suffers as a result.
Paul Barnhurst:
So you got the bug, and that’s what you love to do.
Scott Stouffer:
I do love doing it, but it’s not without its sacrifices.
Paul Barnhurst:
Yeah, I could imagine. No, I know it can be a long, long hours to do that, but that’s glad, glad you love it. So next question, like after everybody is our sponsor is datarails, and data LS is an fp and a platform that’s built around Excel, right? So it’s very much designed to keep the user in Excel. So what’s your favorite thing about Excel? Could be a formula, a function, a feature, something you really like that you’re kind of your go-to maybe in Excel?
Scott Stouffer:
I spend a lot of time in Excel,
And I could probably spend less time if I knew more of its capabilities, but we do a lot of modeling, right? I am our CFO, I’m our C E O, I’m our cfo, F I’m our head of product and our head of sales. So I’m doing all of our financial models, I do all of our go to market models, et cetera. I get pretty good efficiencies out of lookups, whether it’s V, X, H, doesn’t matter. I get used to using those and it helps to speed things along quite a bit. But I would not view myself as a top 10 perce percent Excel skillset.
Paul Barnhurst:
And honestly, I wouldn’t expect it as a CEO. If you’re a top 10%, you’re probably spending more time in the spreadsheet than you should be
Speaker 3:
Probably. So
Paul Barnhurst:
I think that that totally makes sense. You need to know it enough to do your job, but it’s not where you’re going to get your greatest value. So that makes sense. All right. So we have two questions here and then we’ll we’ll be done. And first one is, for someone out there that wants to reach that C level, maybe be a CEO or even A C F O, they’re starting out their career today, what would be the one piece of advice you’d offer them?
Scott Stouffer:
Be confident, but be humble. And what do I mean by that? Our world thirsts for leaders. I mean, just the vast majority of people seem to be quite content, letting someone else take the lead on things. And my view is the people who are best positioned to fill that void are the people that have a lot of self-confidence. Ideally, it’s not all ill formed,
Speaker 1:
Of course,
Speaker 3:
But even if it is, somebody needs to step up and take the lead. And I think for young people, particularly this generation where everything’s sort of about community and equality and stuff that may not be that comfortable, but people like me, I mean, this is my last gig here. I’m not doing another one of these. So I want to be able to look at the younger people in our company and say, who’s stepping up? And I think the people that have the confidence will step up. So be confident or fake it at least, right? Because as you start to then take some responsibility and you have some success, your confidence will build. But the reason I said be humble is because there’s so much to learn. A and too often if you don’t have the humility to at least tell yourself, even if you don’t tell anyone else, at least tell yourself that you don’t know that much, right? Then you won’t be open to learning all that you can. So that, that’d be my advice, right? So you step above everyone else that’s waiting for somebody to take the lead, but make sure you’re always learning because I mean, just there’s so much to learn as it is. And then again, if you think about what changes all the time, it just never stops. The requirement to stay current is just, it’s daunting.
Paul Barnhurst:
I like that answer. I think that’s the first time I’ve heard that one. But it makes so much sense of be confident, but also be humble, right? Nobody likes a confident, arrogant person that distance. They know everything. They’re usually, they’re hard to work with, but if you’re confident and humble, people trust you, and you’ll find that they gravitate toward you. And that makes a lot of sense. If you want to advance and lead people, having those qualities make you a leader, help make you a leader. I mean, there’s other things, obviously, but I really like that answer. Sure. So last question. If someone wants to get ahold of you, maybe learn more about scale matters or has a question, what’s the best way to contact you?
Scott Stouffer:
Contact me. Email scott@scale matters.com. I still use email. I actually see every email before I delete it. I don’t necessarily open it, but I’ll at least look at that first line of, so you got some real estate to catch my interest. But no, absolutely. E email me@scottscalematters.com. You can also reach out to info@scalematters.com or just go to our website if you just want to learn more about us.
Paul Barnhurst:
All right. Well thank you for that. And on that note, we’ll go ahead and let you go. But thank you. I’ve really enjoyed interviewing. I know our audience will enjoy this podcast. A lot of great advice there and thoughts about how finance can step up and better support the business and what fp and a should be doing. So thanks again for your time. I really appreciate
Scott Stouffer:
It, Paul. It was my pleasure. Thanks. I appreciate being on. All right. Bye now.