The Operator’s Den: How Operators can hit their goals

Ken Pham: I’m Ken Pham. And you are listening to the operator’s Den. Welcome to the first episode of The Operator Den, which is a…now I forgot what I’m going to say anyway. This year we’ve been talking about this for a while, right? We wanted to build something very unique as a podcast. It’s all about us sharing our experiences and thoughts, specific topic that affects an operator. So before we start, maybe a quick introduction. First of all, I’m Ken Pham. I’m the principal here at the Technology Innovation and Banking Team for Scotiabank Roynat Capital. My background, you know, I’ve been an ex operator, first CFO for top hats, so I’ve been playing this game for about ten years down to a lot of perspective I see now from both sides the table being on the operator and on the other side as well. I have my other co-host here, Jeff Lu. You know, he come from the VC space and been with me for the Technology and Innovation banking for over three years now. Jeff, what’s going on, man?

Jeff Liu: Not much, Ken. As you mentioned, you and I have been working together since the beginning on helping to build out this tech practice here at Scotiabank. Basically, I think what we were trying to build here is to build a platform that not only provides capital, but also goes deeper into supporting early stage companies. The podcast is just one of the initiatives that we want to do, so happy to be here.

KP: I want to introduce the rest of the co-hosts for this episode. I got one of my good buddies here, Alamin Mollick, head of Finance for Posh Technology. How are you doing, Alamin?

Alamin Mollick: It’s going good, man. Super excited to be here.

KP: And also got a good friend here, Bryn Knox, CFO for BenchSci. How you doing there, buddy?

Bryn Knox: Doing well. Thanks for having me. I love talking about this love getting into the weeds. I’m excited.

KP: Okay, this is our very first episode. We’ve got a great guest coming to join us. Shonezi Noor, our CEO of Sampler. This show today, it’s all about a subject that I’m really excited about. It’s all about budgeting your own budget. It’s always been a topic that we feel operators should really get a handle on. But before we start, let’s talk about what this show is all about. I look at you guys as the new generation of operators, CFOs, EVP, Finance, right? And if I look back to my past, you know, when I started out with Top Hat and everything else, there wasn’t really anyone to lean on. Like, you got to figure it out yourself. And anyone that’s listening out there, they could say, Aha, you know what? I’m experience what you guys are experiencing. Or they could probably say, You know what? Probably crazy, but who knows? Like, I think the idea is if we just want to resonate with everyone and to give everyone that opportunity to learn. But Jeff, what do you think?

JL: No, I totally agree. I think this is the one thing that makes us a bit special here is that we understand what the operators are going through, like Ken I think the best way you kind of build these connections is that he’s able to relate and also share some of his words of wisdom to you guys in your journey of developing and building these companies.

BK: Yeah, I think what it is is getting all the perspectives right, because that’s what I like. What do you not know and what can you learn from someone else that’s not reinventing the wheel every time someone’s probably done it, and I hope out of us and our guests and the community we’re building, we can really try to build that conversation.

KP: Exactly. Almin, love to hear what your thoughts are.

AM: Yeah, this is a great show and forum, hopefully for not just operators, investors, founders, early stage later, stage execs are learning to be more acclimated in their role. You know, we’re going to talk different topics across the board. And it’s not just like office of the CFO or COO necessarily. How do you align finance? What the go to market side? How do you align financial product? How do you approach trying to see? How do you manage your board fundraising metrics? What really matters? How do you navigate difficult conversation with VCs? So this is really a forum to have a lot of different audiences here chime in and understand, sure what’s in our minds, folks that come in from a finance background, operating background, but also how do we try and work with others based on the different personalities and personas we deal with on a day to day basis?

KP: That’s beautiful.

JL: That is poetry in motion.

KP: Sign me up. 

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KP: Today we got a really awesome guests joining us in the studio, Shonezi Noor, CEO of Data Product Sampling Platform Sampler. You know, we’re very sorry to have you here, so welcome. 

Shonezi Noor: Thank you. 

KP: Shonezi, before we start, I love to hear about you and learn more about Sampler. 

SN: I’ve been at Sampler for about four years now. And if you’re not familiar with Sampler, we’re the best way to find the next product you’re going to fall in love with. We work with companies like L’Oreal, Unilever, P&G, Hershey’s to help consumers find products that are just tailored to their life and their lifestyle. Working with those brands essentially as a platform. And if I do say so myself, but I’m definitely biased, the smartest way to market and build your brand, especially if you’re in the CPG or physical goods space. So that’s a little bit about what sampler does, but as a COO, I oversee everything from people, operations, operations, legal finance to. And so really excited to be here because I was introduced to Scotiabank through the network and been working with some amazing people at Roynat  for the last six months now and here because I’m super excited about the business we’re building together and excited for the partnership so happy to help in any way.

KP: Awesome. Awesome. So I think the first topic that we should ever tackle here as a group should be something that we’re all doing right now. And I’m assuming it’s always been about budgeting. I’m sure you pull out your hair for at least two months straight on trying to figure it out, trying to get it approved by your board. I’ll be honest and open here. So I’ve been building budgets for ten years and over those ten years I’ve never hit a single one that’s not a lie. My first budget, I was probably off by 50% right off the bat, first start up trying to build it out on a year, year and a half for trying to figure out how to do it, top down, bottoms up, whatever you can say right. We’re just trying to make things up that makes sense when you try to tie the metric between your sales rep and how much they can produce, what you need to do to burn to grow the tech stack. You know, you put all that together and you’re hoping that you’re gonna hit that number, right? You’re probably right now also in that process of building the budget out, and I’m pretty sure you got you have the board to approve it because the banker needs it within 120 days.

BK: So that’s why you do it right.

KP: The year end. But yeah, we’d love to hear about what your thoughts are in the budget process, some pain point that you seen and if there’s any advice. We’d love to hear it.

SN: For sure. And so, I think that it’s important to understand the perspective of the organization I’ve been budgeting in. So, we’re under 50 people as a team. Our finance team is basically two and a bit people like not very large. And, when you think about the context of the operational or the financial infrastructure, you have to build as you scale to being in the seven digits of sales and revenue, that’s a very lean place to start from. Right. I also think the important context is I’m not a trained finance person. I don’t know very many heads of finance who don’t come from that background. And I think that for a while it was difficult because I would second guess myself, but really it made me a really strong finance leader because I understand the operations of our business inside and out. And you brought up a really insightful thing, right, which is it’s hard to hit a forecast because you’re trying to tie between different teams. And if you do not understand how those teams operate or have a similar language or vocabulary of how forecasting works, like those are the things that make budgeting extremely difficult. It is not a spreadsheet or a formula or a layout or trying to get the numbers to tie. It’s really how truthfully or accurately can you represent the business and what you think is about to happen to it in the next 12 months, for example, right. And so, yeah, there have been budgets we’ve put together which have not happened, but if I think about just this year, 2022, there were definitely points in time where we’re like, oh, we are off track. But when we think about being off track and we took the actions to get back on track, it put us into a place where I think we’re going to land at 98% to the sales goal we set this year. That is a first I’ve ever heard of that in any company or any industry. And like, that’s exciting, right? That that didn’t come from the fact that we put together a strong budget that the board approved. And, you know, we had a plan on paper. It came because we understood how the numbers connected to the behaviors in the business. And that’s the art of budgeting or the art of forecasting. And that doesn’t come from my finance background, that comes from my operations background, and it comes from being tied with the rest of the organization.

KP: You know what, let let me jump in there. I respect you very much for that perspective, because, you know, you’ve worn many hats, right? Knowing every single department how the lever that drives them is the key to building a really good budget. And I agree to the fact that if you do that, you should be very close to what your budget target is. Right. And when I say this is like exactly how you say when you’re building this, whether it’s your sales reps, your marketing, your R&D, I believe each one of those should have its own metric that ties in ROI and you need to hold people accountable for that. So. Bryn, Adam, we’ve talked about this all the time, right, about specific metrics or whatever that we call, and I want you to share that with everyone. There has to be accountability like this year a budget is all about accountability. And if you don’t have accountability, you’re just pretty much guessing all the way through and you’re never going to do anything if you’re guessing. Right. Alamin, I love to hear your thoughts on that. Bryn I love to hear some of the key, I guess, indicators or metric that you use to get your budget in place. And if we had to like give the audience some points, let’s drive that by departments and how do we tie that together? And I think that would be amazing. Take away for this episode for anyone listening.

AM: Yeah I know that’s a great Kennith and by the way I love they don’t come from a finance background actually because part of us being successful in our roles is having a deep partnership with every department leader. So when I’m talking to sales, I’m not talking software sales expenses. You know, we’re talking ramped reps, we’re talking quota attainment, we’re talking average deal size. When I’m talking to marketing, we are talking cost per lead, conversion rate, channel mix. When I’m talking to product, we’re talking roadmap, we’re talking how much just to keep the lights on, how much of new capabilities. So there’s a part of the finance side where you have to really understand their language. And it’s exactly what we’re talking about here because they have their own way of measuring ROI and we have to hold ourselves accountable. We take all those drivers and inputs and yeah, it comes out with what the budget is supposed to look like. My own philosophy, really, when I think about it, this budget, this plan, I like starting to first contextualize it with where are we trying to be in three years? You know, just as a starting point. Like you always have to have some sort of forward direction or guidance so that, you know, if we’re planning for a year like we’re all doing, we can be like, okay, well, based directionally on three years, we’re trying to go, you know, let me just use the example numbers and I’d love to hear everyone’s perspective, but you know, okay, we’re trying to grow double from 10 million ARR, annual recurring revenue, to 20 million annual recurring revenue. So as that as a starting point, high level perspective, I like to start with is okay that’s we’re trying to grow by and how much are we willing to burn to get there in the context of the startups and where we operate very, very simply you start there, right? And so burn multiple equals mention, right? How much are you willing to burn to add that ARR Right and so depending on your liquidity situation, you’ll either want more efficient growth or you’re willing to burn more because you have a lot of liquidity and you know, it’ll scale over time. So I find that is like philosophically is a good starting point. The other thing I’ll say, just because, you know, we are talking about budgeting and it is very hard, you know, I love that you said like how many times you’ve it. I’ve definitely had, you know, one year where I’ve been above plan on the revenue side and cash and the other year where we were off like revenue and cash. And so tying that together, I find, you know, you’re always going to have like a rolling forecast like this plan becomes an ongoing platform for discussing every month, every quarter because in my opinion, a really good finance teams are are forecasting every month, minimum every quarter. And the key is the partnership with other department leaders to understand, okay, this is how many QA quality assurance people to developers we’re going to need because this is what’s happening for us to be able to scale quality. This is what we need from an infrastructure perspective. Oh, our CS, customer service team need more support because they’re getting burdened with all this capacity that, you know, we’re seeing retention issues. So I think that’s like an important starting point for me on the philosophy side.

BK: Yeah, I love the non finance background because to your point, I think that matters less than knowing the business, right? So I think that is actually make a distinction on the operator, right. Because that’s when you actually start understanding what your drivers are. And so I think that’s the right place to start, is you’re going to be wrong like 100% , like it’s awesome you hit revenue and then I guarantee you start going and then you’re like, Oh, I missed that or did that, right? And that’s like even the perfectionist brain that’ll come up. But if you go in knowing it’s going to be wrong and I’ve always tried to work with the, hey, next quarter you’ve got to be above 90% and then like second quarter way start getting to like 70, 80 and then as you move further out does it gets a little fuzzier and then to your point out Almin, but what is that two, three year roadmap and how are you actually laddering up to that, right? So like if you have that work back, you can always kind of understand what those drivers are that need to happen. And then if you build those frameworks with each kind of department you have, you can kind of get that structure and rationale behind what do they need? So is it like engineering? What does it look like to have a team? Like what is the right makeup of that team to build your product and you start trying to understand that and so it’s like become scalable, right? If you’re building like they’re not coming to me like I need 50 people. 50 people for what? You know, if you’ve got kind of that structure and it’s the same with marketing, same with sales it’s the same with hr. People like you’re trying to build what is the framework so that you start trying to get that guidance and outline, because I think that is sometimes the challenge that finance I think has is you’re using a specific set of language in terms of how many but I’ve got these metrics and I’ve got these ratios and I’ve got, you know, these things. I got a hit and other people have different goals, right? Products like I got a ship, I don’t care, sales like I got to sell, I don’t care. Marketing is like I got to let people know I don’t care. And so you can run wild. And so if you start trying to understand what their goals are and then understand that your goals are the same, right? You’re all about success in terms of your business. So if you can kind of start from there and then understand how you prioritize and build structure around it, I think that can help drive the right conversations and then get to a place where you’re constantly on the role in your budget. I think that I.

AM: Definitely.

KP: Like, yeah, to keep on rolling all the time. It’s always definitely. You always got to be forecasting.  Like that’s after every single month when you close your books, you got to roll that forecast. You had to make sure because it’s always going to change, like my personal thought is like if you’re not doing a rolling forecasts, you’re doing something wrong, like you can’t be how to like what you are. A fixed six months straight doesn’t work.

BK: Especially post COVID like macro events and now whatever central banks are doing, that’s out of your control. But it’s going to impact. Is it impacting your customer behavior? Is it impacting you know what I mean? Your ability to raise is it impacting other sort of it’s like so you’ve got to just constantly be reacting because you just put your head down and think like I just pushed through the plan. You end up in a bad place.

AM: 100% of plan is like a roadmap, honestly, and forecast is that like best prediction always being updated. And you know what I think like even like unpacking like I’ll talk about like given what we’re doing at Posh just around that and you know really like I got to say the first like very important key alignment starts with the CEO, CFO being okay, this is the revenue target and this how much we’re going to burn together, kind of what we were talking about.  So, you know, 

KP: The burn multiple.

AM: Right, the burn multiple. 

KP: The sales efficiency.

AM: That’s right. Yeah, yeah, right.

KP: I believe those are key points, man. Like, those are the key things you gotta look at.

AM: Absolutely. No. Absolutely. And so, you know, from that, like, you know, you’re you’re seeing as I love you’re saying, you know, because you have to do this top down bottoms approach. What does that mean? you know, for us okay, so, okay, let’s take this example of trying to go from 10 to 20. So you’re trying to add ten net new. Okay, we’re willing to burn $20 million to get that 10 million net new. Okay. So 20 million like very, very high level. That’s a two burn multiple. Makes sense from what benchmarks we’re seeing and some of the context that we were talking about is I know like BenchSci like for example, they have, you know, long sales cycle. So sometimes the progress you’re trying to make within a year, you have to frontload that investment because there’s actually a spill over into 2024. And that’s very key because for us, you know, as we’re moving up market, one of the easy ways to make a mistake we’ll talk about this is you’re under investing for the following year. And what you need to do. So we really start with that top down. Okay. What are we trying to grow by? Like a realistic target and what are we willing to burn to get there from there? So to unpack it a bit. Okay. So if we have a $200,000 deal size and we’re trying to add 10 million net new, that’s 50 closed one deals that you’re trying to get through the door. Okay. Like kind of simple economics, part of the metrics that you’re thinking about as you’re developing this top down view is, well, how much of our existing base of customers are going to expand going to this year? If you see, you know, for example, 120% net dollar retention. So if you have 10 million and out of that 10 million, 2 is going to come from all of your existing base, you only got to add 8 new well, you only got to add 8 million worth of new business. So really it’s more like, okay, we’ve got to add 8 million divided by 200,000, 40 closed one deals. That’s how many deals we got to get. And then I like the starting point of like really it starts with a go to market piece. How many sales reps are we going to need? You know, how much capacity are we going to need to be able to produce that goal? Because you’re going to understand the burn after putting all of these key input that make the business work. So if a rep has $1,000,000 of quota capacity, meaning that we plan for reps to close $1,000,000 worth of business, $8 million of new business and account executives closing your business, you’re going to need eight reps, 8 million capacity. And so I like to start there. And then you work down, you know, what’s your pipeline coverage? What are you going to need to generate in terms of opportunities? I find that is just like an easy you can do back of the napkin and then that’s top down like you should be able to very quickly get a picture of this is not the amount of reps I need. This is the amount of opportunities I need to generate based on your conversion rate from closed one deals to opportunities. And then, you know, all of us have different businesses. Opportunities come in different ways. Maybe you have an inbound funnel, maybe of an outbound funnel, maybe a partner channel funnel. And so the cost of an opportunity to just average it out, how many opportunities and what is it going to take for you to fund that piece?

KP: I totally agree. You said I actually went out on the fact that, you know, you all start to look at the ramp up time as well, because that’s why you do the multiple years, right? Because some of these sales cycles take much longer period time. It rolls over, but it also dependent if you’re wrong on new sales rep, you got to see what the ramp up time is. Right. Some of them could take three months to build their book of business to like go out into the market. And at that point, you still need them time to like start closing, right? So who knows? Somebody said, are you going to be investing six months before they even bring a single deal in? So going back to your point, Alamin point here, that 8 million, it’s just not as simple as just averaging us as well. It’s just like real time of hiring and if you’re behind hiring, you’re not going to hit those number. So I love to hear that perspective. Let’s talk about sales now. Let’s talk about BenchSci, how do you guys look at sales.

BK: Sure, yeah. I think a great start there is that if we likely, all have very different businesses like who you’re targeting, how you’re targeting them, and how you ramp them up. So I think if you want to have like a place to start, I think that’s the general thing is like know your business, right? Know your customer, know how you get them in, know your sales process. Because I think that’s the best place to start because like you can read all of the metrics and VCs and articles and blog posts online and then it’s like 90% of it may not matter because you really got to know your business. And so I can definitely say for BenchSci yeah, we’re working with pharma, large pharma, so massive organizations think of the speed they may move at, right? It may not be as fast. We’re bringing a product they’ve never seen before for the most part. And again, think the universe of large pharma. It’s not a lot, right? So we’re so focused on top 25. Really for us we call it land and expand in our sales process. So it’s like, how do we actually get in? Start with kind of, hey, they’re doing, you know, our initial platform they’re using, they’re finding the value and then what is that expansion plan and how do we do that?

And then that’s the challenges like that sales cycle. You’re talking 12 to 18 months, getting that traction and then also building budgets because we’re talking in very large numbers, never spent this before. So it’s kind of like what is all of that look like? And again, it’s just mapping that journey and also knowing as much as you can go here’s customer A that like worked that journey perfectly, you can apply that to every other customer, right? There’s so much context that’s going on, right. Whether that company there their restructuring or what is there for us therapeutic area focus. So again, know your customer, what are they focused on? I think at BenchSci, I’m lucky because I can literally look at our list of customers and know the account plans. Right. And like, what are we doing? Okay, we have them. What is our plan? And then kind of work it out with sales and the sales rep who’s on it and then pay net new. How are we capturing, where are they on the funnel? And then you can kind of like start building out what does that map look like? And then you’ve got all the history of like what has worked and what doesn’t. So like you take what sales says and you try to put your haircut against it, right? So if they’re telling you, Oh, we’re going to close this for X, you’re like, okay, what’s the realistic? You start putting probabilities and you can kind of work your plan out. So, I mean, definitely at BenchSci like I’m lucky that I can just look at the pipeline and go, okay, great, I know who’s here. What is our expansion plan for them? Who do we need to add and what are we thinking? And then like kind of work back on timing there.

AM: There’s a lot that resonates with what you said, you know, especially like, you know, your business is easy way to mess up on the budgeting process. Number one, depending on that, your sales team like I’m always thinking about capacity like how much bag, how much ARR can one like rep carry, you know, and you’re going to have to divvied up by segment if they’re mid-market versus enterprise, depending on your business, you have to take that in ramp time like you guys. Sometimes it takes three months on a six months. Heck, they’re even businesses that are nine months. So you have to factor that in. And then the productivity like to your point, like based on what sales execution has actually been, what is the historical attainment? We like to plan a Posh at an 80% attainment. So we put a 20, you know, we street quota and our actual budget street quota is at 100% like our actual budget that 80%.

KP: So for your board. Right, that’s for your boards already.

AM: Yeah. Yeah. And we’re vocal about it, you know, it’s, it’s, it’s like, you know, our board knows.

KP: But they let your sales rep know that the.

AM: Yeah. They’ve gotta hit quota.

BK: That’s the difference. Like we can’t let sales listen to this because you tell them to hit 100, 110 and that’s your expectation. But then behind the scenes, like, okay, yeah, it’s really it’s going to be like 88 and like how do you plan generally?

KP: Shonezi We love to hear what your thoughts are.

SN: I might have lost track of the original question, but I think I have it still. So I feel like you know, an entry point to budgeting is or at least that Sampler like what we do our process so we don’t put any pen to any spreadsheet or any numbers until we’re really clear on how our business is going to be evolving in the long term, you know, as well. And so I think that CPG has been an industry that’s been transformed, but more importantly, marketing has been an industry that has been completely transformed and is continuing to transform. And there are trends that we have to be on top of that we see coming down the pipe, understand how they impact their clients and how to position ourselves well for, you know, what’s going to be top of mind for our client objective. So we take being a client driven or client obsessed organization quite literally. And so we are constantly trying to get better at understanding how we as a business are going to continue to serve as clients. We’re also not a pure SAS place. And so, you know, I think what kind of gives me a different perspective from what you guys were saying is that, you know, when you’re building a transactional business, some of the things that you might be used to talking about as SAS indicators may not apply, but the principles do, right? So ultimately what we’ve been talking about so far have been how do you build up your confidence on showing the lever you need to pull in order to grow? And earlier, we were talking about how sometimes the CFO and the CEO will sit down and agree on a revenue target and how much you’re willing to burn to get there. I would say that the revenue target in a transactional business is like it’s almost like harder to get a close amount of forecasting because you don’t have the security of an annual recurring contract. A monthly recurring contract it operates in a very different way. So for our business, I think it really has come from what perspective do we think the market is going to take in the upcoming year and how are we going to win in the market and prove to our clients that we’re the best possible partner to help them build their CPG brands in the next year and beyond. And we are technology forward  but we’re also partly services. We ship things. We have such a complex business at every turn and all of those things coming together have meant that finance in our business really is not finance. It’s you have to be sort of a jack of all trades, master of all trades in terms of how the departments are kind of working and planning because they have to move in concert in order to hit that objective. And so for us, you know, we just actually this morning got out of our meeting with our board to talk really about our priorities for next year. And it’s so great to see how in the four years I’ve been here, how we’ve evolved to become such a cohesive team and how all the departments are kind of converging on the same objective and moving in the same direction and rowing the boat at the same speed. That in itself is a challenge that you might have all of the plans, you might know the ramp up time for a sales rep, but then you might realize that it’s actually a positioning issue that’s going to kill your forecast number, not the fact that you don’t have enough sales and your numbers in work and you didn’t know how much time it would take to ramp up. Right. So it’s interesting because I think the most fascinating part about planning and budgeting has been in this ability for us to kind of like understand the crystal ball of our space and our our business. And nobody has a crystal ball. We don’t either. But to a certain extent, we have a spidey sense that’s getting sharper and sharper and sharper. And now it’s so sharp that we’re able to see things before they hit any of our competitors or hit any of our market. And then you see it in the papers like six months later, but we’re hearing it in conversations while in advance, and that impacts our forecasting and our rolling forecast actually. So every single quarter this year we told the board three months in advance what was happening in the quarter and it literally happened and.

JL: That’s a great segway to like we said. But your spidey sense is like what are some key indicators or levers on knowing when to change courses on your marketing or into your sales? Like, Yeah, we’d love to know more about your your spidey sense. 

SN: The spidey sense.

KP: Yeah we love hear about that.

SN: But yeah, I’m hearing about it.

KP: Because I would imagine your business is really driven by marketing , from a top level marketing is probably your biggest driver. It’s all your drivers and levers are there, right? We’d love to understand more about that, like how you do that budgeting because I think that’s pretty much where your business is, right?

SN: Yeah and I’d say taking a step back, you know, team came up a few times how we work as partners with the business. Like that’s really how the spidey sense works for us as well because our executive team, they’re all very tenured in the business, all very experienced in the business. We’ve been through many, many tumultuous times and good times together and that really helps. So I’d say our Chief Revenue Officer Garrett and I are really close partners in the business. We talk to each other a lot, sometimes are in working sessions for hours at a time, but very specifically every time he is forecasting every two weeks we’re a partner in that process and it might have started as simple as, hey, they just need some simple ways to kind of get the thoughts down on paper in a structured way every two weeks to understanding how that translates into what the future of the business will be. He’s the one with the ear to the ground with the rest of his sales team and commercial team and partnerships team. On what sort of happening. And then sometimes needs to be talked to off a ledge by somebody who’s not in the day to day it, which is like my spidey sense tells me when his stress is normal or his stress is warranted. The spidey sense for me is that I can read our team very well and their spidey senses, they can read the market very well.

KP: But is there like is there like a metric that governs?

SN: A metric that governs?

KP: Like for Alimin and Bryn Like I’m pretty sure sales efficacy is what govern your sales and marketing spend, right? 

AM: Yeah, I think about it in three ways. There’s pipeline creation, opportunity creation. Like do we have a shot of hitting the number. Attainment. Are we hitting the number. And then, you know, sales efficiency, is it efficiently hitting the number. And so the pipeline creation piece for me, like starting with that, it’s an indicator. Okay. Is that picking up quarter over quarter? Are we adding because you’re always trying to balance the demand piece and the bottom of the funnel, the closing piece. And so we have all these reps, AEs, these salespeople who are there to take things to the finish line. And we’re generating opportunities in multiple ways. So you’re trying to balance this equation all the time. So for us, like in terms of indicators, okay, quarter over quarter, what is the pipeline, new pipeline creation? Are we adding $1,000,000 of pipeline every quarter is a flat or is it increasing? The other piece on that is just like, do we have enough coverage? That’s something I pay a lot of attention to. Like my bff at Posch is the head of Rev Ops, we work together every single day. And so part of what you’re saying that sticks out to me is like, do you have your ear to the ground? He’s looking at demos. He’s looking at call to list ratios. He’s looking at a lot of the things in the field that allow me to understand what’s happening and then see how many that might have domino effects on the business. One of things that you said that stuck out for me was, you know, for example, you may realize it’s a positioning issue, not even something that you can model out. And so that is probably why conversion rate is down. So we’ve got to invest, you know, the kind of space and you go invest in product marketing probably to be able to bring that up. But yeah, the pipeline creation is that’s got to align with what your goals are for the quarter, right? If your you’re AE has $1,000,000 quota, do they have $3 million worth of pipeline? If you’re assuming a 3x coverage, meaning everything that’s sitting in pipeline has not reached a decision of close to one or close last yet. You assume that a third is going to actually turn into deals. The other one, the productivity piece, you know, okay, what is the quarter attainment, the ramped rep core attainment? Because now we know we had a shot of hitting that if we had a shot at hitting that number, and then the sales efficiency what is all of the sales and marketing costs against all of the new AR that we’ve added? And you got to phase it because sometimes, at least for us, we got six, seven month sales cycles. So I’m looking at it in a phased way from what was our sales and marketing expenses, you know, two quarters out plus the last quarter and then, you know, in the current quarter, what was our AR at because you’re funding sales market activities that are going to lead to closed one business in your current quarter?

KP: Exactly. Let’s get into R&D. Now, R&D has always been a big hole and product has been a big hole in the budget. Right. So I want to hear your thoughts. Alimin, you and I have always spoken about R&D and like we always talk about three buckets, right? New features, you know, maintaining what is current today and then on the backfill, right? Like when you’re building a budget, you got to think about what are ROI’s now like one of them could be churn, reduce churn. The other one is how to increase your gross margin and the other one is just like net new sales. Right? So I’d love to hear about that for everyone here. And if Sampler, you know, you guys are I’m pretty sure there’s a lot of technology in the background. You got to do a few. But I love to hear about that because I think that’s always a big a black hole for every single budget out there.

SN: I think the word black hole is in a sense dramatic because it just kind of means that you probably need to have better translation between your developer, like your engineering leadership and your product leadership with the rest of the business as to the value of what they’re building. Because yes, they have a very different language and very different metrics. But ultimately, the best product and engineering leaders understand how to connect their process of, you know, sprints, whatever those sprints might look like into delivering value for the business. And we’re fortunate because like our chief product officer, 20 years, you know, in media companies work through an exit understands does not come from a tech background originally which is really interesting. And I think that his sales background actually helps him be an incredible product leader with a pulse on our space. And so when I think of product and engineering, specifically, the leader of our team is able to kind of translate very tangibly, hey, we’re talking about a feature that is, you know, machine learning driven and helps accelerate how brands look at their ratings and reviews because it highlights exactly what the sentiment is across everybody who tried your product in a particular cohort. And when you’re talking about a feature like that, he tells us this is going to take 80 dev hours for this part of the project. And, you know, approximately 20 dev weeks for this part of the project. Then you’re actually able to assign a cost to the development of a feature. And then we bring out the ROI because we don’t build features unless we’re actually having the conversation on the commercial side as to what is the client telling us they want or need about this and what is their propensity to pay for it. And that’s the key piece. It’s not a black hole necessarily. It’s are you really showing the ROI if you’re engineering team? And it took us a minute to understand how to do that and figure out how to bridge those gaps internally. But once we did, I think about how we’re prioritizing roadmap. We, you know, have a really strong mix of how do we make the rest of the team efficient through our tools, how do we build our stronger partnerships and client focused features that help them, you know, see more value and stickiness in our platform? And then a certain portion, as always, is technical debt. And, you know, personally, I think it’s important to consider the technical debt as its own investment in making your engineering team much more efficient. And so like, I mean, some financiers may not see it as anything but a cost on and optics line, but depending on the kind of business you’re in, it’s really like how you are able to generate revenue because the sales reps need something to sell. I mean, more things to sell.

AM: How have you approached the ROI piece? Right. Because, you know, you have to take qualitative factors and we want to take quantitative factors into our roadmap prioritization gets done and so, okay, we have this much space allocation within our R&D and our engineering team to work on this many hours of features and you understand the cost but the ROI. I’m curious, is it hypothesis this many users or this many of our clients are saying this. We believe we have this much confidence that it’s going to have this kind of you know, it’s like some people. Right, scoring, reach, impact, confidence, effort. I’m curious how you actually go about that and get conviction behind it.

SN: So I’ll give you a specific example. So there was a feature that hindered a repeat sale. So for us, it’s not you know, we’re not SaaS, so we can’t say this is going to have a net retention dollars score from 110 to 130 on 80% of our existing clients, because that’s not how our business runs. But for our business, we look at average deal size, we look at repeat rate because it is to an extent b2b transactional. And then we look at how often are they going to refer us to other brands in the portfolio if they like. We look at those types of sales metrics because ultimately we may not actually charge a dollar for some of these features and maybe included in the original price that we would have. But it’s helping us get much more deep momentum with specific clients or deep stickiness, and that’s how we kind of look at it. And stickiness is a can be a little bit more qualitative because how do you quantify the benefit of the fact that a client may be able to export all of the data they’re collecting through the sampling programs that Sampler into their CRM, directly organizing their data, their ontology? We’re not an integration company, but integrations are a key part of how we deliver that service and stickiness. So for us, we look at the ways to kind of demonstrate that a client is finding increased value in how they work with us. And that may be indirect or maybe qualitative. And then we just say, is that worth the investment.

JL: Maybe just to kind of wrap it up, I know we talked a lot about the ROIs and the spidey senses. Maybe you guys can give an example, maybe Bryn you can start off of you had a moment where get a nightmare of a budget and everything went so well, but there’s just random variables that came up. Can you walk us through an example of that?

BK: My gosh, guarantee there’s a lot I can tell you, actually, at BenchSci when I joined, we actually had built our product as a marketplace so that a that was like our bread and butter was, hey, we’re going to let scientists find the reagent they need and then checkout on the platform will be like the Amazon for reagents.

SN: Sounds compelling.

BK: Yet awesome. It’s like that’s why I.

SN: If I understood what this meant.

BK: So just think of it as like think of it is a scientist is going to run an experiment and they need a bunch of ingredients. And so one of those ingredients is a reagent and or an antibody is reagents or like think about an antibody and that’s where we started. And it’s like they need these to run their experiments and we’ll help them find the right one and then they’ll check out like literally we would have a checkout and they were click and then go, so we like so I don’t, we’re building this whole plan and it’s like, yeah, we figured out how to dropship and think about it as you have to keep a reagent cold. So it was like we had this whole thing like, oh yeah, they’re going to be in these boxes that are basically coolers and you’re gonna ship and you’re going to real time and it was like someone orders, it’s like they needed within this time. And so we built this whole thing, whole cost model, whole rev model. We’re selling it, you’re going and then we realize as we were and this was actually the end of 2018, we were hitting so many walls with procurement and challenges and trying to get them because you’re trying to overcome like incumbents and incumbent systems and you realize the insanity of pharma in terms of like they all do things differently even in the same industry, and you’d think they might use the same system, but it’s all different. And so that was a that was a bit of a nightmare in terms of like, oh my gosh, we’ve got to change this model. And luckily for us, because again, we were hitting out road and it was like this is I think the takeaway of being flexible and adaptable is we couldn’t put our head down and then like we raised a bunch of money, we told our investors we are going to do this. We hired at that point 50 people, 45 people to all do this mission. And we could have just kept going. Yet, we realized alongside that that we had customers starting to go, wait, we will just pay you a subscription fee because we like the platform pointing us to the right region. We don’t need the purchase side, we got that, we need this. And we actually signed a contract right at the end of that year, like a six figure contract for a year where we all of a sudden like it was that step back and go, Wait, I think we’ve got to rethink this. And so I would say like it was a nightmare, like legit for like for like 6 to 8 weeks thinking like I’ve made a huge mistake, like I’m doing this company for change in our model. Like, what do we do? I built this whole model that’s telling us what we’re going to do. And then you’ve got to go into a board meeting and tell your investors, like, We’re gonna change this model and redo all of this stuff. Obviously, in hindsight it worked. But yeah, I would say like that’s a thing, right? Like where you could have just stuck to wait, no, this is what we’re doing. Let’s keep doing it. But we didn’t.

SN: What I love about what you just said, though, is that budgeting or that budgeting nightmare wasn’t even about the budget. It was about what was happening in the business. And that’s just like in one sentence, what budgeting is about. Budgeting is not about budgeting. It’s like there is no spoon and right. Like, you know, there is no budget. It’s what is happening in the business. And how can we kind of forecast that and understand it and explain the levers to the people who have to actually drive the behaviors to make those numbers come to life. And that’s nothing to do with the budget thinking.

AM: Think you nailed the line of the episode, budgeting isn’t actually about budgeting.

BK: There you go

KP: All right. We’re going to have to end it here. That was a great first episode for The Operator’s Den. I feel like there’s so much more to talk about this budget thing, but I think we’ll hold off for our second episode. I want to thank all my co-host, Jeff Liu, Bryn Knox and Alamin Malik and our special thanks to Shonezi Noor for joining us today. It’s been great having you here.

SN: Thanks so much. I learned so much.

BK: Great.

KP: Thanks for listening and we’ll see you at the next episode.