Part Three: Prevent Revenue Plan Failure by Measuring Demand with Capacity

In this third and final installment of our three-part series from the webinar “Preventing Revenue Plan Failure,” our panelists delved into the hard-knocks take-aways they have personally experienced with balancing sales capacity – which includes modeling and tracking sales team hiring and attrition – against your demand and pipeline generation actuals. 

As Erik Swenson, VP of RevOps at HubSpot, and Jeff Serlin, Chief RevOps Officer at Revcast both describe, the current business operation focus on efficient revenue growth requires much more diligence in building accurate revenue plan models at the start (see Part 1 on revenue plan risks) along with enabling the ongoing tracking of your KPIs for those revenue plans each month, including ramp times covered in part 2

In the transcript below – and you can also watch the full 50-minute video presentation here – you will learn about how these revenue operations experts take into consideration all the variables around street quota that includes hiring, attrition, internal promotions, attainment, and must be weighed against pipeline and demand generation. You will also get a glimpse into how HubSpot’s RevOps team tracks important KPIs on a monthly cadence to ensure they are practicing “agile revenue planning.” 

Let’s hear what they had to say, prompted by moderator Eric Boduch, founder and CEO of the 24 and Up startup studio…

Eric Boduch, Moderator 

I want to jump on to hiring and attrition, and they're really two key assumptions that go hand in hand. Erik, do you want to kick us off? Maybe you can start talking to us about the important things to think about when you're building and managing your hiring plan?

Erik Swenson, HubSpot

Sure, I think this is applicable to companies of all sizes, but maybe how we primarily think about it at HubSpot: I think I have this expression of like we want to ‘grow responsibly’ and there's a responsibility that I feel and have always felt toward those hires that we are bringing into the org. You know, do we have enough demand for them to be successful? Are we putting these hires in a spot where they can achieve quota? And, you know, there comes a point where we cannot hire, we cannot hire sort of responsibly anymore, and we evaluate that on a year-long basis. 

And we're quite frankly also pushing marketing, pushing our demand gen functions to say, you know, we want to add more heads. Do you have enough demand? Do you have enough leads? You have enough meetings, etc, in order for us to do this? And I think we've shifted really ironically, earlier in my career, you talk to a sales leader and they're like, “I want to hire 500 people, I would want to hire so many people.” And I think over the last two years, I've seen a real shift, at least you know, with some of my peers, and also here at HubSpot, where sales leaders are much more apprehensive about hiring in some of the demand-constrained environment that, you know, a lot of SaaS companies have moved in to – following sort of those great, great old days of Covid – if you want to call it that. There were immense tailwinds for many digital solutions, SaaS products that, you know, we experienced a lot of very excessive growth in those periods. And that sort of organic demand has slowed down post-Covid. 

I don't think I'm saying anything that's not news to folks here, but it's the – I would say the willingness to hire has really changed. And I think the sales leaders know that we should only be hiring up to the point where we feel comfortable that reps can be successful. And that's like I said, demand management, anticipating where demand is, territory optimization, number of customers that we can give to newly hired reps in order for them to have some easy wins to go sell to, some friendly faces to go sell to as they're ramping in here.

Eric Boduch, Moderator 

Jeff, you want to jump in and add some perspective on attrition in particular?

Jeff Serlin, Revcast

Yeah, I do. I, you know, since you know we started Revcast, and I've been here for the last two plus years. I've talked to dozens if not hundreds of folks and looked at many, many plans, and the majority of them do not even consider attrition. And by not considering attrition, you are not going to get your hiring plan right, and you're not going to get any of the things around actually making those hires right, because you're going to have to add all of them, and you're going to lose three quota, and you're not going to get out of it.

Or if they have attrition assumptions in planning, they use technically the right formula that says your attrition rate is X percent a month. But you're never going to be in a state where you're losing two reps a month or five reps a month. That you have to look at your attrition by month, and it's typically seasonal in sales. You know, for example, end of the year, they get their last paycheck for the year, you usually have a little bit more attrition than you do in, say, the second or third month of any fiscal year. You have to consider this when you create your hiring plan for the year after, and you have to add the back-fills in there, and ideally you're adding them in there a couple months or a ramp-time length before you anticipate that attrition. You can always pin that headcount if you don't have the attrition, and you just are hired a little bit forward of, say, a later headcount, which doesn't cost you a ton, but it's better than than losing street quotas. So not having attrition is a singular way in which your plan will fail, and not considering it will lead you to that failure. 

And I also want to mention that there's two types of attrition. One is people leaving the company, either voluntary or they’re involuntary. The other is promotions, you know, small business reps become mid-market reps. Mid-market reps become managers, or become enterprise reps, etc. And this is managed attrition, and it should not be random. At Intercom, we put in a process where there are only certain times during the year when promotions from one segment to other would start. Therefore you knew when that was going to happen. We generally knew if you had four roles to fill, roles to fill that two would come internal and two would come external. And that would allow us to manage the backfilling of it, so we wouldn't put the small business team at a deficit and make it harder for them to get to their number, because the mid-market team was randomly pulling somebody every time they needed to fill a spot. I mean, if you do this, if you publish it, and you work against it, you're at least significantly reducing the risk of the attrition that happens for a good reason, you know, internal promotions. And try to consider that when you're planning, when you're executing your plan as well. 

Eric Boduch, Moderator 

Erik, you wanted to add some thoughts?

Erik Swenson, HubSpot

Just one thing, if I could go back 15 years in my career, I think what Jeff said, I would have loved that advice 15 years ago. I'll quote myself 15 years ago, developing a sales plan, and it would have been, yeah, we've got 125% quota coverage at the street, and we're going to use that extra 25% buffer to mitigate against attrition. That is a very lazy way to plan right? 

And I think, Jeff, I'm guilty of what you're sharing here where you know forecasting and getting this right is really hard. So what I early in my career made the mistake of just assigning quite the large buffer of quota out in the plan and expecting that to bleed down as the year progressed. I would encourage everyone here on the call to be a little bit more detail oriented than I was 15 years ago. Plan for that attrition, recruiting into that attrition schedule that you have, so they know when to be expecting to hire folks and do a better job than I did 15 years ago.

Jeff Serlin, Revcast

I learned it from making the same mistakes. Erik.

Eric Boduch, Moderator 

We probably all did. Let's shift and talk a little bit about pipeline capacity. Jeff, your quick thoughts on pipeline capacity and how revenue organizations should think about it?

Jeff Serlin, Revcast

Yeah real quick, we've mentioned it a little bit, you know, but you also often think of capacity in terms of sales reps, you know? What's their quota in their capacity to close deals? Erik mentioned this in his opening when we talked about ramp, your ability to generate the pipeline that the sales reps need in order to deliver. It is just as important, and this is how much pipeline do reps have to deliver? Most companies say they should deliver some. Most companies don't set a target or don't measure against it. It has to do with the different types of BDRs you may have. How much pipeline can they deliver? It also has to do with organizations, say a partner organization which is supposed to be delivering leads directly to the AES, you have to understand and consider their capacity to deliver, as well as any direct capacity that doesn't flow through SDRs, from marketing or referrals or from some other teams. 

So if you don't do this part of the equation, you're going to over-hire, the reps are going to be starving, or you're going to continue to hire when they don't have enough capacity. Or it works the other way around. If you're actually generating too much you don't have reps to handle good quality leads, you're in a situation that also isn't as good. So we talked about about linking these and integrating these across, you know, teams and the go-to-market supply chain – pipeline capacity is just as critical as sales ramping.

Eric Boduch, Moderator 

Erik what would what would you add?

Erik Swenson, HubSpot

No, I think that's really well said. What I would just maybe contribute here is – and HubSpot has really taught me this – if anyone's familiar with HubSpot, we are very SMB in orientation in terms of our target customer that we sell to. Therefore we have very fast sales cycles, and so we have an element of our pipeline that exists on day one of a fiscal period, but we create and close a very large percentage of our business sort of within that sort of fiscal period that we're talking about here. 

So I would encourage folks to understand that dynamic, encourage and say: All right, on day one, I'm going to make up numbers. I have $100 of pipeline on a sales target of $30, but I know that I'm going to go find $10 of new pipeline that's going to create and close in period that I don't even see yet in terms of a deal record in my CRM. So understanding that long cycle pipeline dynamic versus the short cycle, I think, is so, so critical, especially if folks on the call here have inside sales teams that may have faster sales cycles. For field-based enterprise sales teams, it's probably okay to ignore that. But if you've got high-velocity inside sales teams, understand that dynamic of create and close in period. We call it short cycle here. I think it's a good name for it, and it helps us understand our dynamics of pipeline progression throughout the period. 

Eric Boduch, Moderator 

That’s awesome. So let’s jump into quota on the street and to attain it. We left an era of growth at all costs, right? It seemed like companies grew a ton of quota on the street, and there wasn't a lot of thought given to how to feed them pipeline, and probably, frankly, less thought given to attainment cost and those pesky efficiency metrics. Jeff, let's start with you. How should we think about quota on the street in today's environment, or today's world where, frankly, money isn't free?

Jeff Serlin, Revcast

Yeah, it's, you know, the old adage of the Mother Bear, you need just the right amount, you know, at the right time, at the right place, I guess Goldilocks. It's so important that you plan for this in the right way. We've talked about that a lot, but it's also so important that you stay on top of this. Do you have enough capacity to get to your goals? 

But the attainment needed is the one that tends to fluctuate. If your attainment is going down, your actual attainment over the course of the year, then you might want to pause or delay some hiring and figure out how to get that back up, because you have unused capacity. Don't add the cost. Figure out how to get reps, reps producing more. And if you start to see that your attainment to quota is going up, especially above where you plan, then it's a good signal in order to add and think about adding more street quota, maybe even you're pulling ahead some of the things in the plan to do this. 

So the amount of attainment that you put into your plan, I did put together a blog post, I think, about a year ago, with a table on the different amounts and how much over assigned or under assigned or risk and even cost rates. The more or the lower that you put that attainment factor needed in your plan to de risk the plan, say we're going to plan at 60%, the more costly and inefficient that plan is. If you make it too high, at 85% or 90% you're quickly going to lose that through attrition or like hiring, or something else going on, and you're going to put yourself in that deficit. So you have to almost create a grid of the different levels and see how much reserve capacity you have relative to how well your reps are producing, and determine that right place within that grid of the risk-reward. Are you going to be more aggressive? Are you going to err on the side of capturing more growth at the expense of productivity or efficiency? Or do you really want to optimize towards that efficiency? And you're going to be a little more conservative. 

Those two things work in tandem all year, and you need to think of them far beyond planning, and you need to constantly monitor them throughout the year and constantly get to that right end and make those decisions as to what that right balance is between these two.

Erik Swenson, HubSpot

A small chime in here, I think we've actually gone to reporting rep attainment as sort of a separate metric, side by side to how the company's performing, and we're looking at rep attainment through the kind of the tenured lens of, hey, our ramping reps are performing here, our mid tenured reps are performing this way, and our tenured reps are performing this way. And we're looking for those pockets there. 

And I guess what I would say is, I would challenge folks here to not be bound by your company plan and company target. We've made some very intentional decisions to either accelerate quota assignment or quota growth. We've also made some conscious decisions to decelerate it or not assign a quota increase when we had planned to. Just going back to that thought that I had here of being equitable with our reps and coming back to first principles to say we want X number of folks to be above quota, and we want average attainment to be Y percent of goal. I think if you, I would encourage folks who are on the call here to visit RepVue as a company that's a great follow, and they publish a lot of data on average attainment and percentage of reps at goal for almost every tech company that has a sales org out there, I would study their data and figure out what works for you, culturally at your company, and keep coming and orient back to that as first principles. 

As you think about it, is when you ask yourself the question, is rep attainment, healthy or not? I think those should be first principles that you agree on at the start of the year for the teams.

Eric Boduch, Moderator 

Think those are, those are great points. How do we, I'm going to jump forward just for time reasons, and let's talk a little bit about touch on briefly execution. And then also allows me to quote Mike Tyson. So Erik, you know, everybody has a plan until they're punched in the mouth, as Mike would say. What do you do in reality, as different plans for your revenue organization? 

Erik Swenson, HubSpot

I’ll just maybe set the scene for what I'm about to share here. We had to, we'll take HubSpot for example but I think we were definitely not alone in this, with this massive digital acceleration pull during that period of Covid, and then the dreaded word of macro has really kind of slowed things down, kind of post that Covid period here, and we were, we've been asking ourselves here at HubSpot, are we hiring? Are we growing fast enough? 

And that's shifted to say, are we growing responsibly here, and so we adopted this program called agile planning, where we're constantly, I would say, reevaluating our plan, and that's done, actually, on a monthly basis. And we're looking at various KPIs here. I can show you the scorecard that we use in second (see screenshot image below from webinar). And we're asking ourselves, are we hiring enough, or are we hiring not fast enough when we need to put more people in seat, right, because our plan is locked, usually by January 4, and may feel entirely differently by March or April. And we need to be conscious and understanding that we're not going to get it all right in January. We're just not going to do that, and we need to build a process that allows us to adapt. 

It may mean, you know, in an example, hiring less corporate reps and hiring more small business reps instead, because we're getting a demand shift towards small business, it may mean hiring less reps in EMEA, more in JPAC, for example. It may not necessarily mean adjusting the whole plan, but how you get there, the small Lego pieces of the plan. We're constantly tinkering with that throughout the year. 

And if you can flip to the next slide, Eric, I'll just show my kind of a sample of the scorecard that we use for the team.

HubSpot agile planning supported by tracking and scorecarding of KPIs on a monthly basis. Source: Erik Swenson/HubSpot

These are, well we look at a little bit longer list, but just for the sake of this audience here, we're looking at it through that lens of demand, capacity, execution, things from rep head count down to close rate and ASP. These are the big six things that we're looking at and saying are – and you'll notice I've got some just fake stop lights in here, red, yellow, green – are we yellow or green on these metrics? If we are, we can continue hiring. If we've got a couple reds, let's talk about them. Let's talk about what we need to fix them, and ask ourselves, should we slow hiring in certain parts of the business until we can kind of resume the concept of, you know, hiring responsibly and making sure our reps are set up? 

So that is something that's a lot of work. You know, planning is already a lot of work as it is, but this is something that we do really in the in the first, I would say Q1 and Q2 just to make sure that the plan is as calibrated as possible for us.

Eric Boduch, Moderator 

Jeff, so we can grab your thoughts on execution, too, and then we'll jump into questions.

Jeff Serlin, Revcast

I think, you know, Erik and I have a perfect mind meld on this being agile and the way that he described it, and show you on the scorecard exactly how everybody should be doing this. And it is difficult and challenging to do, but there's many ways to get to your number, and what Erik did not suggest is, to be perfectly clear, is that you adjust your number. You're just thinking about the different ways that you could potentially get there just because your plan says higher five mid market reps. If that segment's underperforming and your enterprise segment is over-performing, you might want to shift some of those resources to enterprise and still get to your number. 

And it's not just measuring, you know, the key elements in the plan. I mean even though you have high level ones, it's having a mechanism and infrastructure to measure the drivers of those. You know, what's the recruiting velocity, are all of my reps and seat late because they don't have enough recruiters, or I don't have them prioritized enough. So it's understanding the drivers of those things, when they start to go yellow or when they start to go red, but most importantly, having a framework that Erik showed in order to say, okay, everything's good and green. So let's think about actually getting ourselves beyond the number, or we're starting to signal some things that we need to dig into. We might not have all the answers now, but at least we know where to look and we can come back with some insights and some recommendations. Is exactly what you should be doing ideally. 

You know, if you have a team or the infrastructure, looking at this every month. At Marketo, we had something called metrics Monday, the third Monday of every month, we put together a scorecard like this with massive, massive amount of effort because it was all spreadsheet based. But this is very, very important. Planning doesn't end just because of the year. Starts executing to the plan, adjusting the plan. 

Eric Boduch, Moderator 

I fast fingered to the slide a little bit earlier, and I wanted to, but, you know, I, Erik talked about this. You know, I'm a recovering engineer, so I love the idea of moving from lengthy, long term planning processes to quick, agile revenue organizations, right? It feels a lot like engineering has changed too. I know, Erik, you talked about this slide, you know, in this approach and this idea of agile, but Jeff, what are your thoughts on it?

Jeff Serlin, Revcast

Yeah, and as it mentioned, it's exactly what you should do. Just because your plan says you have to do something doesn't mean you have to do something. And the earlier that you can consider how we're performing and project where you're going to perform, and bring those insights. 

And within the RevOps team, I think our role is to provide suggestions, but also being able to get the people that ultimately have to deliver into the right conversations being data driven, then you can start making those adjustments. Again. It's not about changing your number. It's just about the different pathways to get there or readjusting priorities. Maybe our priority needs to be competitive win rates. Maybe it doesn't. Maybe next quarter needs to shift to velocity, or maybe the quarter after it needs to shift to better understanding our create and close, as Erik mentioned, within their business. So being agile and constantly assessing this, I think, gets you out of firefighting, but it gets you to be data driven in terms of where to focus and where there's risk and where there's also opportunity.

Erik Swenson, HubSpot

Yeah, and then just to jump in there, I would say it also creates a really organic accountability across functionally, right? If the BDR org, for example, is not performing, boom, it's calling it out. If we're not getting enough leads from marketing, boom, it's called out. If recruiting is not hiring fast enough, boom, it's called out. So it's great at identifying potholes before they become giant – I'm from Boston – giant Boston-sized potholes or little holes. We can fix them, but once they get big, they only get bigger.

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