Paul Stansik, ParkerGale Capital | The Sales Metric Playbook: A Private Equity Guide to Measuring Sales Growth
2:06 - Paul's origin story and path to private equity
8:01 - The Sales Metrics Playbook and the importance of clean data
15:42 - What to do after you've got clean data
20:08 - Analyzing specific cohorts of revenue
30:04 - Managing long-term revenue goals versus short-term
36:42 - What benefits the key questions in the Sales Metric Playbook have in portcos
40:17 - Prioritizing sales opportunities
44:20 - The importance of marketing
To get in touch with Paul and ParkerGale, go to parkergale.com.
To get on the list for the weekly Sales Metric Playbook, go to parkergale.com/weekly-sales-metrics.
For more information on BluWave and this podcast, go to bluwave.net/podcast.
Welcome to the Karma School of Business Podcast, a podcast about the private equity industry, business best practices, and real-time trends. In this episode, we have a great conversation with our friend, Paul Stansik, operating partner with ParkerGale. We talk about Paul's unique insights and playbook on sales metrics and related management. This episode is brought to you today by BluWave. I'm Sean Mooney, BluWave's founder and CEO.
BluWave is the go-to expert of those with expertise. BluWave connects proactive business builders, including more than 500 of the world's leading private equity firms to the very best service providers for their critical, variable, on-point, and on-time business needs. Enjoy. Paul, great to have you here today on the Karma School of Business Podcast, and maybe just a little bit of background for everyone here. We know Paul, and we know his firm, ParkerGale, really well.
I think we and others very much appreciate your firm's approach to A, private equity, but B, how you all in a pretty unique way, put things out there that you know and that you've learned for others benefit, in very much the same way we also try to do. That's the reason behind this Karma School of Business moniker that I named years ago, because it's just like do good things with and for good people, and life tends to go in the right direction.
That's probably for me, chasing my tail way too much as a young punk and eager to achieve medals and ribbons. One, I'd encourage all of our listeners, they should be checking out ParkerGale's Private Equity Funcast. Now, also Paul, in what he writes, he prolifically puts content out there, so follow him on LinkedIn.
We'll put that in the episode notes, to see some of the things that he's sharing. But maybe before we jump too deeply into some of the thoughts and perspective and insights on sales that you have, I'd love to get just a little bit more of your origin story. Can you share that with the group here?
Yeah, for sure. I'm an operating partner here at ParkerGale Capital. We're a small PE fund headquartered in the West Loop of Chicago, and we buy founder-owned B2B software businesses. Our team, we're half investors, half operators. Our investing team handles all the classic PE stuff, finding, executing, monitoring the companies from a financial perspective. They're the ex-bankers, the ex-consultants. They spend most of their time looking at 100 companies for every one that we decide we're going to partner with.
Then there's me and the operating team. We're the in-house value creation team for the portfolio. We like to say we're here to help our companies finish the work that the founders started. I run the growth practice. I spend most of my time working with our CEOs, CMOs, CROs, to do things like train their teams, position their products, monitor their performance, build campaigns and plan of attack. Basically, figure out how to find our next 100 customers. In terms of the origin story, I've had a lot of different jobs.
I started in the retail world, I played professional sports for a minute. I ran a couple sales teams, somehow snuck my way into Bain & Company for a five-year apprenticeship and what it actually means to be strategic. I think the two experiences that I draw on the most as I approach this gig, which is the weirdest job that I've ever loved, is running a sales team in an era where there wasn't a lot of technology enablement and wasn't a lot of process.
It was very much, "Hey, here's a phone and a machete. Now figure out how to go make money come out of it." Stepping in as the first BDR for what turned out to be a pretty successful research business. I think from that experience, I learned how to connect with customers. I learned about product positioning. I learned how to take advantage of those precious opportunities that you have when you actually get in front of somebody who just might buy. Then my experience at Bain taught me structure.
That was really the first time in my career that I had to open Excel, or crunch numbers or convince a skeptical executive that there's something wrong with your business and yes, there's value in fixing it. When I look back, I'm not sure I would change much. When I think about the combination of learning how to connect with people and wake them up to a better way of doing things inside their business. Structuring that story and structuring an engagement to actually make that value creation happen, those are the two experiences that I draw on the most.
That's great. I really like that background. That's a common theme that we're seeing in a lot of the forward-thinking private equity firms like yours and the operating partners that exist is it's not this straight path.
A lot of people are getting a variety of experiences that then become incredibly impactful for the portfolio companies. It's in some ways that following fate route that brings you to the right place in PE. But it's not just like in many ways, in some ways the deal team, it's like this linear path. In operations, it's much different.
Totally. I think we're in a really interesting chapter of private equities' evolution where everybody realizes that there's value in providing operational support for the portfolio. Everybody in PE is a bit of a control freak. We all want that operational support to be in the handwriting and the culture of our firm, but everyone's figuring out what does it mean to be an operating partner? More importantly, what should you be looking for if you're looking to grow your team?
I've done some writing, which is more of an attempt to make sense of, like I said before, the weirdest job that I've ever loved. I think one of the reasons that I enjoy it so much, but it is very unique, is that it's really four jobs in one. If you are an effective operating partner, you are the keeper of the standard. You have to have an opinion on what good looks like and an ability to convey that opinion. You are a strategic diplomat. It's not enough to know the answer.
You have to create agreements that move the business forward. You're there to keep score because one of the things that we help our companies the most with, which I think we'll talk about today, is metrics reporting and just having a really objective view if you're winning or losing. You're also there to create unique environment that just nudges people towards value creation and improving things. I think that environment is equal parts supportive and demanding.
I think the fun part of being an investment partner, maybe a founding partner who's thinking about, "What does my operating team need to look like and what should we be asking people to prove to us that they can do?" Is each of those four jobs is important in a different proportion, depending on what you invest in, what the culture of your firm in, and what your personality is as a founder.
I just think it's going to be really fun to watch and even more fun to be a part of these next few years, as we all collectively figure out, "Hey, this operations' thing is a thing. What is the best way to make it work in general, but also in the set and setting that every PE fund provides?"
Yeah. I love your perspectives there, and I think they're spot on. As I reflect going back into, I started in PE in the late '90s.
It was still really hard, because there's so much information asymmetry, but it was really about buying low, selling high and the pick of the litter.
Then our value creation plan was upgrade the ERP system and maybe add a salesperson, but it worked. Every day I was like, "I wish I was 10 years older."
I'm jealous. Yeah.
I'm missing it. Then today, it's so much about just creating fundamental value that didn't exist or couldn't exist before. That's why I think this is the age of the operating partner in private equity, and it's so important. Maybe that sets the stage for some of the things that you're doing within your practice and within your firm, to help your portcos create value.
One thing, I think, it's been ingrained in most people in private equity now and even in traditional PE outside of tech, is that growth is the number one correlate to creating value and enterprise value at exit. One of the things I really like about what you've done here, is you've put out this Sales Metrics Playbook that, I think, is extremely insightful. By the way, BluWave, we're already incorporating elements into our own business process.
Let's talk about that.
Thank you. Free consulting from Paul.
Yeah, we'll send you an invoice.
As you think about sales processes, there's the fun part and then there's the unsexy but important parts. Let's start with this notion of having clean and available data as a precursor. This importance of being data aware versus just using data, et cetera, and how do you use it in the right way?
Yeah, I think they're complimentary. Let me talk about the idea of what it means to be data aware versus data-driven, because I think it sets up the importance and the argument for doing the work to get to clean and available data. My take is this is a new thing and it's not a muscle that a lot of management teams out there have. There's a lot of managers out there that only look at their data when they absolutely have to.
When that behavior is at its worst, I think people use the numbers to protect themselves, not to diagnose problems, not to make decisions, and certainly not to improve the business. They know the information is there, they just aren't using it. I like to say they're using the data like a defense attorney uses evidence. It's only there to get them out of a jam. My take is being data-driven, it's not about ignoring your instincts.
It's about bolstering them with a more objective lens into what's actually going on. My approach is it starts with picking good questions, and then selecting easy to get sources of information that objectively answer those questions and help you make better decisions. That's it. That's all being data-driven is about. If you buy all that, what really sets up the ability to be data-driven, is the believability of the data.
Is it actually reflective of what's going on inside the business? Is it clean? Because without that, essentially what you're doing is creating an unreliable narrator. I think data is only as good as the conversation it creates, but the converse is also true. A conversation is only as good as the data that underlies it, hence it should be clean. In my world of growth and go-to-market, this is mostly about three things.
It's customers, prospects, and pipeline. If we have to dig in and actually scratch and figure out and sort through invoices, and figure out who's actually a customer, what they're paying for, what the terms are, what's going on with that customer, what's the context, that's not great. If we don't have a defined list of who we're going after in the pond that we're planning on fishing in to catch our next 100 customers, that's not great.
If our pipeline data, the stuff that we believe might turn into customers in the next quarter or two, if that's old or stale or sloppy, it's difficult to help the sales and marketing team decide where they should be focusing. So they work together. Like a data-driven manager isn't just living in a spreadsheet, they are supplementing their natural business instincts with a more objective lens into what's going on.
It's important to keep that lens clean. Hence, making sure the information is believable and clean, and reflective of what the business is actually performing like.
I like a number of the things that you said there, and one, it's businesses are awash in data no matter how big you are right now.
Focus on the data that matters, that answers the questions you need to have answers to versus getting everything. You're a hammer and everything's a nail and everything's got to be pristine.
Yeah, don't start with the numbers. The first thing that I do with a new management team, is I put something in front of them that I call the data diet menu, which is a simple two-column page. We can figure out how to link to this in the show notes, but these are the questions you're already asking yourself as a management team. These are some of the questions that our playbook is built on but, "Hey, are we on track to hit this quarter's plan? Are we creating enough new opportunities?"
How's the sales team performing? What does our top of funnel look like? What are the deals that matter most? You're already answering those questions. You're demanding to answer those questions, otherwise, you wouldn't be a PE-backed executive. But it's choosing the metric that answers that question and the art of being a little bit closer to objective versus subjective, and getting in the rhythm of consuming that information every week.
That's how you become data-driven. But that's what most people miss, I think, is that it starts with a good question. I love that Clayton Christensen quote. I think it's, "Without a good question, a good answer has no place to go." I think too many teams start with just putting their arms around a lot of information, and building the dashboard and loading up on KPIs.
They lose their North Star, which is, there's an important question here that if we answer it well, is going to tell us something really important about the business and allow us to take a stance on what to fix next. I think part of my role is just helping our teams remember to not forget that question.
I think that once again, makes complete sense. Fewer metrics the better. It's the ones that matter the most, make sure those are clean. The other thing that I always spend a lot of time on this is very much, I used to work with a lot of people from Bain so some of the things you're saying, it's resonating. It's just what do you have to believe as well? The data tells a story and does that story make sense?
Our data people here, it's like, "Look at that data. Does that make sense? Is that a story? Does it answer the story that you think?" Then two things. One, it's either the data has lost calibration, or two, there's something that we got to peel an onion back on multiple layers. I think this using data to answer questions, to tell stories and saying, "Does that story make sense with what you're believing?" Which will lead you to either data quality or further exploration.
Yeah, and it arms you with the ability to take a stance. The stance might be, "Let's wait a little bit and see more of a trend. Let's not fix this right now because something else is more important. Or let's go fix the underlying information, because it's actually impossible to figure out what our heading is because our compass is a little broken."
But I think the data-driven management team out there recognizes that their KPIs, their metrics, their reporting, their data, it's only useful insofar as it helps them take stances. Those stances might be, "Hey, time out. Let's pick this back up in a couple weeks because there's something else that's more important." But the important thing to me is the explicitness with which they take the stance.
It's either, "Let's go run to this fire because it's the most important thing. Hey, let's deploy resources against it," but it's somewhere lower on the priority list. Or for some reason, "Let's wait and see."
I think that's a great segue to, I think, the next part of the playbook is you're asking the right questions. You've got that data clean, you're using it in the right data aware way, and now you're going to put it to practice and actually making decisions.
One of the questions that I think you really insightfully ask in your playbook is, "Are we giving ourselves a chance to hit the quarter?" What do you mean by this and why is it important?
Well, yeah, I think let me just talk about a little speech that we give to new portfolio companies because I think it sets things up. Most private equity investments last about five years. Some are shorter, some are longer. We like to draw attention to that fact in our first board meeting. We say, "Hey, we've got five years together. That's 60 months, about 260 weeks, and we would like to not waste a single one of them." That's a little bit of a rah-rah speech, but it's also something we believe in deeply here.
We think great businesses and great investments are built block by block, a week at a time. Really, the only question that matters for us as investors and for our management teams is, "Did you have a good week or a bad one?" Here's the problem with that. Most founder-owned businesses don't have a way to answer that question, not objectively at least. They've got a CRM, they've got dashboards, they've got regular updates from the sales team, but they don't have an easy way to tell and to know, and to take a stance on if they're on track or off track.
They can't tell if they had a good week or a bad week. As a result, what happens? Conversations about sales performance devolves, the management team spends hours listening to anecdotes about the stuff we all see. Because I'm a recovering salesperson, I love to tell stories too. Prospect meetings, details about the proposal, in the weeds' discussion about how excited someone is about this thing in the pipeline. It's very hard to tell if you're improving things overall.
It's very hard to tell if you're on track to hit the quarter, if the conversation stays at this storytelling level. We like to say, "You can't fix a secret." How do you help these things bubble up? I think it's a two-part test. The first part of the test is the question that you're asking about, so how can you tell if you're having a good week? If you're giving yourself a chance to hit the plan for this quarter, meaning you're converting enough of your pipeline to revenue, you're having a good week.
This is about abundance. It's about having the right amount of pipeline coverage, which we'll get into the weeds on in a second. That's test number one, if you're giving yourself a chance to hit this quarter. Test number two is about the future. If you're creating enough new opportunities that you can close later on, you're also having a good week. That's what we built our playbook around, the simple reports that answered those two questions. Not with stories and not with anecdotes, and not with details about individual deals.
But data that tells you in a very Julius Caesar, thumbs-up, thumbs-down way, whether you're on track or not. How do you tell if you're on track for this quarter? Well, how much pipeline do you have? What quality is that pipeline? How is it moving and how does that compare versus your bookings' target for the quarter? We like to use a metric called to-go pipeline coverage, which is basically, I'll probably screw up the math, and this is bad radio just talking through it, but it's your bookings target minus what you've already booked.
Then you divide that by your overall pipeline. It's helpful to have a rule of thumb because every business is different, and some businesses need one times pipeline coverage and some businesses need eight times. But the rule of thumb that we use in our portfolio just for the purpose of taking stances, is if you're below three times to-go pipeline coverage at any time in the quarter, that's a, "Oh crap, what are we going to do about that to catch up?"
If we're above three times, three, four, five times coverage, that's where we can start to say, "Hey, we have an opportunity to get out ahead of the target and make up for the shortfall that we know we're going to have at some point in the five-year investment." Rather than the classic, "Hey, we got it, we got it, we got it, we're going to hit the target in week 12 of the quarter." This will tell you objectively and with a picture of how the pipeline is changing, whether you should feel good or bad about hitting your target, and allow you to take a stance on what to do about it next.
I really like that. You need more than what you're going to actually need to get. Maybe one of the questions that's a little bit in the weeds, is how do you think about when you think about pipeline and quarterly coverage, and how that revenue lattices out over periods of time?
Yeah. You can get really gnarly with the math here and it's fun to do it. The primary ventures team just put out a great piece on what's called cohort analysis. Where you can look at the vintages of pipeline that you're creating in each quarter, figure out how much of that you're converting this quarter versus one quarter out, versus two quarters out, versus three quarters out, versus four quarters out.
That's extremely helpful, both for just getting a sense of, "Hey, we just had a big opportunity creation quarter, when are we going to start to see the fruits of that labor?" But also if you do find yourself in a catch-up scenario where you have less than three times coverage in the first week or two of the quarter, how much do you actually have a chance of influencing that?
Because if you typically convert 5% of your pipeline in this quarter or the first quarter, well, you just got to bear down and deal with it. But if you have a chance to catch up, then it's time to look for things like pipeline that closes fast, pipeline that you can reheat, expansion opportunities in the existing customer set, things like that.
There's far more technical things you can get into about how a pipeline goes to bookings, goes to revenue. Those are more accounting questions that I try to stay away from. I think the most interesting lens to look at it through is you create pipeline. Your average sales cycle is not the cycle that every deal closes. Like everything in life, it's a distribution.
Understanding that distribution can help you do a lot of useful stuff, not least of all, predicting what you're going to actually close this quarter before the quarter starts. Setting really useful, really specific pipeline creation targets that again, give you a really helpful rule of thumb on whether you had a good week or a bad week.
I like that. Particularly as you think about your businesses that have annually recurring revenue, AKA ARR, that's something that pipeline stacks straight up.
But for other businesses, to your point there, it's also thinking about that maybe isn't in an ARR world, really thinking about how does that revenue lattice out over time? Because you're probably more of a GAAP revenue world.
Totally. If I could only see one metric to determine the health of a business and to score myself on to see if I'm making a difference in operationally improving things, it would be a count of new, qualified opportunity creation for the reason that you just mentioned. If you're creating pipeline and you're not totally what-iffing in terms of your win rate and not degrading the amount of that pipeline that you win.
The growth of the company is just a function of the growth of your opportunity creation. When we get into a commercial review, I've got one later today, we'll typically spend anywhere from 20% to 30% of that conversation talking about what we're doing to create new opportunities, what prospect and target lists we're creating, what plays that we're running and whether they're working.
Because ultimately, how you perform one, two, three, four quarters from now, it's a function of the pipeline that you either are or aren't creating today.
You're rolling this program out with your new portcos and I'm sure the conversations probably change as they get more experienced with this and more involved.
What does a conversation sound like with a team that's maybe newer at this or not as far along in a really good team that is humming and gets it?
I would say a newer team or a team that's just picking it up, they're pretty concerned with what we as the investors want to hear. They're pretty concerned with just getting through the slide exercise and making sure that they can present the data, but you can tell that they're not really using it in their management team meetings or using it internally. That's actually a tweak that we've made in this process.
We started from a place of how can we build reports as investors that give us more control, or the illusion of control occasionally, and help us monitor their performance? I think the piece that we missed when we first started doing this a few years ago, is we weren't thinking about the inception problem of good reporting and making this digestible and easy to talk about. And something that the team uses in their weekly management team meeting every week.
This is part of the reason that I start with that data diet question, is it just tees up the conversation in a different way. Especially for a team that's just getting into a rhythm with using numbers to track what's going on, it's like, "Hey guys, we'll talk plenty about KPIs and metrics and all that soon enough, but let's just talk about what questions are most important for you to answer every week in your team meeting and how you're answering those questions today."
Then we'll have a conversation about how we nudge that a little bit more on the spectrum of objective versus subjective. But in the early days, it's just getting into a rhythm and doing the conversation every month. As we do that, sliding them into not only being more comfortable interpreting the numbers, but more comfortable using those numbers when we're not there.
I would contrast that with our best teams, our most data-driven teams, we're having the same conversation in a monthly commercial review that they have every week as a management team. What are they doing? They're pulling up, "Hey, how do we feel about this quarter? How do we feel about next quarter? How's the sales team doing? Are we creating enough new opportunities? What are the new campaigns that we're rolling out?"
How are those working? What should the sales team expect? What stances should we take about whether those things are red, yellow or green? What I notice is that when we start having the same conversation that the team is having when we're not there, everyone is way more comfortable being more vulnerable and using those forums for what they should be for, which is not a pass-fail test. It's a problem-solving session.
The best ones of these, the team will send the report in advance and say, "Hey, all the numbers are there. Tell us if you see any hotspots you want to discuss, But there's a big gnarly strategic topic that we want to talk about. Let's speed through the metrics as fast as we can so you guys can help us solve this thing that we think we have an answer for. We just want to make sure that we're not missing anything."
I'll also add that is a way more fun conversation than just doing the death march through the slides, and not really getting to the heart of the matter. I like solving problems way more than I like reviewing KPIs. But the crux of this job is that the KPIs lead you to the most important problems to solve.
I love it. Being data aware is going to tell you which parts of the onion to peel back further versus just haphazardly addressing topics or living in the weeds.
Let the data lead the way. It's not the end only thing you look at, but it certainly is something that points you in the right directions.
I think another one of the really good questions that you go through in your playbook is A, we're talking about the now, but let's maybe not look a year ahead, but let's look at next quarter ahead as well.
Are we setting ourselves up for the next quarter? Similarly, what do you mean by this and why is that also important?
Yeah, it's just are you creating enough new opportunities? That seems like a really simple question, but it's tough to tell inside of a lot of businesses and for a couple reasons. One, sometimes there's a bit of a floating bar on what is a qualified opportunity versus an unqualified opportunity, and how real is the pipeline? Two, a lot of businesses will not do the exercise, the mathematical exercise, of setting a simple but real opportunity creation target.
Going right back to the first idea we talked about, are we having a good week or a bad week? What is that number of opportunities where we're giving each other high-fives and saying, "Hey, we did it"? Versus that number of opportunities where we say, "Hey, we're a 10 handicapper in golf, but we just went out and shot 95. We got to go tune something up in the old swing." Yeah, I think it comes down to are you creating enough?
Then the operational question, whether you're getting better at creating new opportunities, it's just what does that trend look like? This is one of those areas where you just have to accept that life isn't linear and neither is your sales funnel. New opportunity creation, it's not a smooth thing. It happens in fits and starts, and no single week in isolation matters all that much. What matters is whether you're getting consistently better at creating those new OPPTYs over time.
We like to use a moving average for that because when you have that nice smooth line, if it's going up, you're getting better. You are becoming more skillful at finding new customers who might buy from you. If it's going down, you're in a little bit of a lull and you got to go figure out, "Hey, where should we?" Some people like to say, "Putting the boat over the fish. We got to go figure out where to move the boat so we can go find more prospects and more chances to help people."
I really like that idea, and I want to delve deeper into life and linearity, if that's a word, and rolling averages. But maybe before we get to that, one thing I think would be interesting to dig a little deeper into. Certainly a lot of the companies that I was involved with in private equity and even as an entrepreneur now, it's hard not to get caught up looking at that full-year goal.
You look at that and it can be daunting and it can be something where it also, depending on how you're doing, it's morale building and it's morale crushing from a day-to-day, week-to-week, month-to-month. How do you think about within your playbook, I like about how you're saying, "Let's play this week's game and maybe think about the next week's, but not think about the playoffs or whatever."
How do you manage that tension within your portfolio of companies if ultimately they're trying to achieve a goal, but you're going to play the week-to-week, the month-to-month, the quarter-to-quarter to get there?
Yeah, it's a good question. Part of it is just I tend to see a bias more towards short-termism than long-termism in our portfolio. I'm not sure if that's true of everyone. But when things get stressful, when things get crazy, our aperture narrows biologically and psychologically. It's a survival mechanism. I think the same is true of most management teams. When things get crazy, you just focus on the quarter in front of you.
In my world of growth and go-to-market, what does that sound like? Well, it sounds like, "If we can just close these couple of deals, or if we can just get this big customer in the boat, or if we can just get this giant million dollar thing in the door that's been in the pipeline for a year, we'll be fine." I don't know, maybe it's the opposite of the dynamic that you're bringing up.
But I find that I have to pull people out of that mode and into the capability building or muscle building mode a little bit more often, and saying, "Yes, let's win what we can win, but let's also establish the rhythm and the process and the way that we do this that's going to lead to more won deals and more opportunities created." Most of the time, it's more of an unlock than a build.
I think the best quote ever about doing this job well is from Dolly Parton, and I'm pretty sure she wasn't talking about private equity operations.
She may be. She's a pretty savvy businessperson.
Yeah, she was thinking about a second career here. But her quote is, "You should find out who you are and then do it on purpose." Most of what I'm doing related to sales and marketing is just figuring out, "Hey, when we're helping customers and when we're going out and attracting new people and getting them to check us out, we're already doing that well."
Maybe it's not happening that often or often enough, but there are fits and starts where we're at our best. How do we establish a process where we're just at our best a little more often? That idea of short-term and long-term, and how do you keep people focused on the right time horizon? I find I have to pull people out of short-termism more than I have to get them focused on the quarter.
I think that's because we design our incentives for the most part in the right way. But most of that long-term operational improvement, it just comes down to creating the process and creating the muscle memory so we're just at our best a little more often.
That's great. I love one, your reference to Dolly as a Nashville based company.
We give various awards to our team members each month, and the very top award is the Dolly Parton Award.
Nice. I love that.
We have a great picture of Dolly in one of our conference rooms, which is also called the Dolly Parton Conference Room.
Amazing. That was unintentional pandering, but it was pandering.
No, that's great. She's got this great poster that an artist made that says, "Pour yourself a cup of ambition," which is that line from, I think, 9 to 5. That's great. Well, maybe let's go back to this concept of how life isn't linear in rolling averages. I think this is a really good intuition, because I probably like you and others, I can only think through sayings and metaphors.
What I always say, "The road to Rome isn't straight, but there are more certain paths and less certain paths, and it's a wandering deal. But over time, you'll see yourself getting there." How do you think about this concept and how you can gauge momentum and progress?
Yeah. Ultimately, the stuff that the next investor who's going to buy a company from us is going to ask about, there's a lot of financial metrics in there. Bookings, revenue, ARR, pick whatever's most important, net retention. I think all of that stuff is just a trail in the sand of what you're doing operationally, and whether you're getting better at the game that you're playing as a B2B software company.
If you think about it like baseball, somebody who's a 300 hitter, they're not going 1-3 every night. They're having some nights where they're 3-3 and some nights where they're 0-3. If you only concentrate on your performance for that day, you're going to drive yourself nuts. Because on the day that you have a really good week, you're going to think you're the best player in the world.
On the day that you strike out three times, you're going to be so depressed you can't get out of bed in the morning. Some of this is just helping you keep a center of gravity, and not get so emotionally caught up or whipsawed in the inevitable variance in performance that's true of people, that's true of athletes, it's true of business. I think the easiest way to do that is track things with a moving average.
When we do opportunity creation tracking, it just takes the noise out. If you're four-week or 12-week or 16-week rolling average, pick one, is sloping up. That means you're getting better at creating new opportunities. If the line is sloping down, you're getting worse. When you make that visual and when you make it obvious, it's almost impossible not to take a useful stance on what's going on.
If you say, "Hey, you're getting better and your batting average is going up." It's like, "Well, what am I doing? How do I make sure that I use that swing thought or coaching point, or that process on the opportunity creation side to keep that trend going in the right direction?" If things are sloping down, we got to change something. We should talk about what we need to change or what we need to restart or whatever it is.
I think some of this is biological. Human beings, we are built a certain way. We have these big, front-facing eyes that are designed to notice things that are big and moving. We all know that data's important, but if you don't design the way that you consume your data to compliment how your body is set up. You don't design your data to point out really obviously when a trend is going positively or negatively, shame on you.
My coaching is make your performance visual and make your performance obvious, because it leads to better conversations about where you should double down and what needs fixing next.
Yeah. I think that's one of those great business and life hacks in general that you brought up here. It seems like it's common knowledge, of course, but it really isn't. It's uncommon, common knowledge that you don't even think about because we get caught in that day-to-day, week-to-week. But at the end of the day, it's more of tracking a portion of the continuum and making it more chunky. Then the world tends to slow down and you can see the trends easier.
I think it's a great point. One of the other things that I think I'd love to get your thoughts on, is you think about this these Socratic conversations that you're having with your portfolio company leadership teams. What kind of benefits do some of the key questions you're asking create, when you have these really thoughtful, question-based conversations with your teams?
We could do a whole podcast on just that. Well, I'll go back to that initial quote, "Without a good question, a good answer has nowhere to go." Part of the art of creating these forums and these conversations with our portfolio, is making those questions consistent. Making them lead the team and us to a place where we can diagnose what's going on, we can take stances on what to do about it. We can all agree so that we create some momentum and we can more easily help each other.
I think the underrated piece of choosing good questions and having that Socratic structure that you mentioned, is it sends a signal of, "Hey, this is a place where it's safe to figure things out out in the open." You don't have to show up with all the answers, and we're going to build the answers and embark on this search for truth together, so we can go fix what needs fixing. Google would tell you from the Project Oxygen stuff, that the number one predictor of a high-performing team is psychological safety.
Which is basically it's safe to be vulnerable, it's safe to take risks, it's safe to screw stuff up, it's safe to not be 100% certain on what's going on. When you structure those conversations less as a one-way readout or private equity tribunal, and more as a question-based dialogue or search for the truth, you're sending that important signal to our team and the management team that this stuff is hard, this stuff is complex.
If we don't peel the onion and get curious about what's going on together, we're never going to get to the answer we need to get to figure it out. I don't know, that's a little bit more of a philosophical bent, but performance matters. Having confidence in your management team matters. You want those people to have really strong instincts, so they're piloting the business in the right direction when you're not there.
But there's a lot of uncertainty in figuring out how to take a founder-owned B2B software company and help it get to the next level, and help finish the work that the founder started. If you don't acknowledge that uncertainty, then you're kidding yourself. I think asking good questions is a great way to acknowledge that there's a bunch of right answers here. We're all here together to figure out what the best one is that we can actually go get behind and do something about.
I think that's once again, spot on. Maybe it's some of the Bain threads I had in my prior life, we very much would follow as much as we could, this Socratic method of discovery and leading people to water. I think a lot of times, particularly if I were to look at my former self, when you're the young pup, you don't necessarily know all the good questions.
People ask questions almost like the gotcha questions where it's like, "Are you still kicking your neighbor's dog?" You're like, "What? No, I never kicked my neighbor's dog." They're painting them in a corner and people learn that there's a method to true knowledge and discovery in a productive way. What are some of the questions that you like to ask or hear from your portfolio company leadership teams?
Yeah. I'll just go straight down the data diet menu that we start with. Two of them are in the playbook. Are we on track to hit this quarter? Are we on track to hit next quarter? There's a double-click into this quarter, which is which of these deals matter the most? Some teams will talk about the path to the quarter or having multiple paths. That's just a fancy way of saying, "What are the list of opportunities that matter the most, either because they're big or they're certain, or they're going to swing us one way or the other?"
How is the sales team performing? The answer to that question is not, "Everyone's working really hard and I'm really proud of them." It should be a question of pipeline coverage by person. The amount of opportunities they're creating, if you do expect your AEs to be creating opportunities. I think everybody should. I'm biased, I had to in my past life. Then just how the pipeline is balanced across the team.
One of the things that I'll ask our teams to do is create a simple histogram of, "Okay. You have 30 opportunities that you say are going to close or have a chance to close this quarter, and you have five sales reps. Does that mean there's six opportunities per sales rep or one person managing 20, is that too many?" Forcing yourself to look at those numbers and just the distribution of the pipeline is a useful exercise.
Doesn't mean you have to do anything about it, but it will tell you something interesting and useful. Then there's always the question of, "Okay, and what about marketing?" I think marketing gets the shaft in a lot of these conversations, but deciding in advance what you want your marketing team to be striving for. If you were to build a moving average of what they're doing, what do you think matters the most to get better at?
For most of our businesses, I have a belief that that's some combination of traffic to your website, because a lot of people are still doing research and just discovering that you exist from your website, marketing-sourced opportunities. Especially people that it's really easy to track if someone filled out a form and then bought stuff from you, like, "Hey, how are we doing on that?" Then content produced.
I still think we're in an age where if you produce content, that people actually want to read, and answers customer questions and doesn't just barf features all over people, good things will happen. If you get better at increasing the velocity of high-quality content, you're going to wake up six months from now and be very happy. You're going to have a very happy sales team because they're going to have to do a lot less work.
There's a lot more questions than that, but the ones I usually start with on my data diet menu are, "Hey, let's talk about this quarter, pipeline coverage. Let's talk about this quarter, the deals that matter. Let's talk about next quarter, which is new opportunities created, is that enough? Let's talk about the sales team. How are people set up? Who's going to hit quota? How is the pipeline distributed?"
How is marketing performing? Are we building a better butterfly net on our website? Are we creating more opportunities from what we're doing, and are we creating and pumping more good content out there?" Then if you have a BDR, SDR team, ask about those guys too. That was where I started my career. That job is a function of activity and it is a function of getting meetings, and that's also your pipeline for growing another sales team.
It's also a great way to have a sneaky view into your talent and say, "Who's the next AE that we want to promote to the big leagues, because they're crushing it for us on the BDR team?" That's a lot, but that's where I'd start. There's obviously more the art of this is also keeping the list from getting too long. Because private equity people, we love the if you give a mouse a cookie approach to KPIs.
If you give us one good metric, we want three more. Part of this is just limiting yourself to keep it simple and useful.
I think those are great questions. There's probably four additional podcasts in there.
Yeah. I'm here for it, man.
But you said a lot of really good things in terms of I love that you brought up marketing. The reason it's called sales and marketing is because they're very symbiotic right now, in terms of working together.
Then there's always that constant battle on attribution. The trick is to make it so there isn't that battle knowing that they're working together. I think that's probably a whole nother conversation in itself.
Oh my gosh, I think the number one most overcomplicated topic in business is strategy, and the close, photo-finish, silver medalist is marketing. Hey, anything that gets customers is marketing. I think people lose that with all the tech stack and attribution and everything that's out there, it can be really simple.
Approach that I take there is, what are the questions that you wish customers had answered before your first sales meeting? How do we go out there and answer those in a way that people actually want to consume it? If you're proud of what you're doing in those two disciplines, keeping those questions updated, which means by the way, actually talking to customers.
Answering the questions in a way that people actually want to read your stuff, you're going to be fine. But most people, if they looked in the mirror, they would say, "Hey, we're either going 0-2 or 1-2 on those." That's a great place to start if you're looking for improvement on the marketing side of the house.
Once again, I love the nugget there both in marketing, but this idea of talking to your customers. I have a lot of sayings here, and one of them is, "If you have the audacity to ask your customers what they think and want, they'll actually tell you."
Yeah, most people don't though.
It's like it saved me from making millions of dollars of mistakes on my entrepreneurial journey.
Totally reinvent the business, but that's a whole nother podcast in itself. Paul, this has been incredibly insightful and really educational. I think the listeners here are going to get a lot out of this that's actionable.
Thank you, thank you so much for spending the time here, sharing your thoughts, insights, and perspectives. For those of you who would like to learn more, we'll put in the episode notes links to ParkerGale, their podcast, and some of the writings of Paul, so you can find deeper insights yourselves on these.
Well, thanks, Sean. Not only for inviting me on, but all the help you and the team have provided us. We can't do this by ourselves. We view you guys as a very important extension of our team, so we appreciate you.
Likewise, Paul. It's a privilege for us to work with y'all, so thanks so much and we look forward to talking again soon. Special thanks to Paul for joining. If you'd like to learn more about ParkerGale, Paul's Sales Metric Playbook, or further related topics, please see the episode notes for links. Please continue to look for us anywhere you find your favorite podcast, including Apple, Google, and Spotify.
We truly appreciate your support. If you like what you hear, please like, review, share, follow. It really helps us when you do these, so thank you in advance. In the meantime, if you'd like to be connected to the world's best-in-class professional service providers, or people or anything else, give us a call or visit our website at bluwave.net. That's B-L-U-W-A-V-E, and we'll support your success onward.
BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.
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