Ep49 The Emperor Has No Clothes – Declaring War on Inefficiency
Welcome to the Inside: Sales Enablement Podcast Episode 49
It’s a given that the sales and marketing engine is full of waste and inefficiency. Despite the best intentions of very smart people, something is still not quite right. How do we know? The Commercial Ratio tells us that most companies get .15 cents of growth for every dollar they spend on sales and marketing.
Scott and Brian are joined by Kunal Mehta from the Private Equity firm TCV. Kunal shares a behind the scene view of rolling out the commercial ratio to all TCV portfolio companies. What were those discussions? What was the focus? What happened?
Find out why the commercial ratio is such a great starting point for addressing sales and marketing challenges and how you can use the metric to engage more strategically with your executive team.
You can find out more about the commercial ratio at www.commercialratio.com
Let us know what you think!
Welcome to the inside sales enablement podcast. Where has the profession been? Where is it now? And where is it heading? What does it mean to you, your company, other functions? The market? Find out here. Join the founding father of the sales enablement profession Scott Sam Tucci and Trailblazer Brian Lambert as they take you behind the scenes of the birth of an industry, the inside sales enablement podcast starts now.
Scott Santucci 00:33
I’m Scotty NTG.
Brian Lambert 00:35
I’m Brian Lambert and we are the sales enablement insiders. Our podcast is for sales enablement, leaders looking to elevate their function, expand their sphere of influence, and increase the span of control within their companies.
Scott Santucci 00:48
Together, Brian, I’ve worked on over 100 different kinds of sales enablement and issues as analysts, consultants or practitioners. We’ve learned the hard way what works and perhaps what’s more Important, what doesn’t?
Brian Lambert 01:02
This podcast is focused on you and being a great orchestrator. We’ve had a lot of episodes on orchestration and being orchestrated elevate your role. And on this particular episode, we’re going to talk more about the commercial ratio. But before we do that, Scott, do you have a centering story for us?
Scott Santucci 01:18
I do. I’ve got a I’ve got a little short one up. Actually, a lot of us are going to be familiar with this. The story it’s a children’s tale from the mid 1800s, from yawns, Christian Anderson. And really, it’s about the Emperor’s New Clothes. And if we remember that, if we remember that story, some swindlers go into this into this village, and they say we’ve got this amazing new fabric, and it’s the most amazing, comfortable, glorious new fabric. And here’s the deal. What’s makes it super amazing is only smart people can see it. The dumb people can’t see or appreciate how valuable this fabric is. And the emperors like wow, I want to do that. And all the Emperor’s aides would look at this, look at the progress that these guys were doing after they set up their loom and make the Emperor’s New Clothes, his new outfit his new wardrobe. And they watch his progress because of course, the Emperor wants to see his advisors. And none of them wanted to admit that they didn’t see anything at play. because keep in mind, these guys are scam artists, right? But no one wanted to admit that they couldn’t see it because by admitting it that they couldn’t see it. Guess what was happening? They were saying that I’m stupid, right? Because only stupid people can’t can’t see it. So Wow, that’s fabulous. And then the other a would be Oh, you’re right. I see how fabulous it is to It’s
Brian Lambert 02:43
amazing. That’s looking great.
Scott Santucci 02:45
That’s looking great. So everybody sort of kicks the can down the road and the Emperor does. He puts the clothes on and the the charlatans mind mine out putting it on as close to the Emperor doesn’t want to admit He can’t see it too. So he just assumes everybody else’s. And he walks out and parades out. And of course, no one wants to say anything to the Emperor until the little kid says, Hey, he’s got no clothes. So that’s that’s the moral of that story. And that’s our centering story.
Unknown Speaker 03:20
Unknown Speaker 03:21
Unknown Speaker 03:23
So what does that have to do with sales enablement?
Scott Santucci 03:26
we’re actually talking about really the the premise of that fable and sometimes simple. The simple things i’m not i’m not available to us. And what we’re talking about is really the commercial ratio. And really what we’re, what the commercial ratio is, is more or less the kids saying, hey, there’s no close here. In sales and marketing. We spend tons and tons and tons and tons of money and tons and tons of energy and throw tons of headcount at trying to drive more sales. But is it productive and whole idea of the commercial ratio is a simple view to say, does the sum of the parts or do the sum of the parts? Are they greater than the whole. So it’s a simple idea. But unfortunately, a lot of us don’t want to bring it up, we want to be the ades because we don’t want to upset the Emperor. So is that as a frame of reference, I’m delighted to introduce canol Mehta, and he’s been really sort of advocating and developing this, this this commercial ratio concept. And what we’re going to do is learn from him, what some of the experience experiences he’s had, as his company, TCB private equity firm has rolled out the commercial ratio to their portfolio companies. So can all please introduce yourself and sort of set the tone a little bit what is commercial ratio and why is TCV so interested in it? And how are you guys rolling out some of your portfolio members?
Unknown Speaker 04:56
Thanks Scott, and Brian, and again, my name is Ken Math I head up the Center of Excellence for sales and marketing at TCV. And the commercial ratio is is really a it’s it’s a center of gravity for internally how we talk at TCV about driving efficiency across sales and marketing. And it comes naturally inside of TCV. But but there’s certainly more work to do when we introduce it inside the portfolio company and, and and I love the story you tell Scott I, I was watching a YouTube video this morning and I have no idea how their algorithm works for serving up videos to me, but there was one that came up on hand gliding, and I’ve never clicked on anything hand gliding, related or have any interest whatsoever in hand gliding but this guy, I clicked on this one and Chris Goertz, he was the guy who was in the video, and he had signed up for this class in Switzerland and that the the instructor for that to strap him in. And he took off. And the video was about this guy holding on for dear life for about two minutes and 14 seconds. And that’s all he could think about. And I feel like when we roll this out into a portfolio company, if they just trust the system and hold on for a brief moment, I think they’ll see the value in the commercial ratio really quickly. But there is that moment or they just gotta, they got to overcome that and see how it’s worked at other companies and kind of get get rooted in the process. There’s, there’s it’s something that every company Ultimately though, though, comes to to talk about more naturally over time with TCP.
Scott Santucci 06:50
So that’s awesome. One of the things that I’m thinking here is I love using stories and I know you do too, to introduce a brand new idea. And I know that a lot of our members and our listeners just say, Yeah, like just get to the point you just get to the point. I think the point here is that I think what you’re saying canol is that commercial ratio, it’s like flying. And it’s something different. If you never hang glide before, the first step is stepping off that cliff and just hanging on for dear life. That fear factor, let that last for a few minutes before you go, Hey, I’m flying. You got to be willing to take that first step off the cliff in the first place. Is that more or less what you what you’re trying to introduce to us? That’s correct. Yeah. So that I think then what I’d like us to do is let’s, let’s review. What is the commercial ratio commercial ratio is a is a metric. And it’s a metric that simply is it’s a, I can’t keep stressing how simple the calculation is, and how complex most people want to make it most most non finance people But it’s taking it’s basically its revenue growth, which is calculated by, say the annual revenue growth that you’ve got this year subtracted from the revenue growth from last year at your revenue growth. And it’s subtracted by, well, that’s the top, that’s the numerator. And the denominator is the total spending that you’ve had for sales and marketing for that period during that period of time. That’s it. And that’s what the ratio is. That’s what it is. So cool. Why is that so important? And why is that such a revealing metric for say, investors and CEOs and CFOs? What does that tell us?
Unknown Speaker 08:41
Yeah, so it’s, it’s it tells us about the efficiency of sales and marketing. You know, from a private equity perspective, we use we view that as as a single function of driving revenue. What you often see though, is those two functions don’t operate very well. cohesively together. And that shows up in the ratio and shows up in a much lower ratio the more kind of divorce from each other that they are the the the ratio itself if you if you’ve ever watched the movie Moneyball it’s it’s the number that they came up with his on base percentage and how, you know, how do we drive that number up to generate more wins? Who are the what are the type of people we need to bring on to the team that are going to drive that number up and ultimately generate runs which generates wins. We’ve the commercial ratio is very, very similar in that regard. We want to look at the company through the eyes of that ratio, and what they’re doing to drive more efficiency on that ratio. And any private equity company that you look at certainly will also want to look at efficiency overall, it’s so funny when we could be making peanut butter and jelly and jelly sandwiches and we weren’t Do it as efficiently as possible, even against their own kids. So they the way the the ratio works, it just gives us a real quick sense of how that revenue engine is working inside the company now, and then where we can we can, you know, looking through that lens, we can look for opportunities then to introduce projects that help improve that ratio. And it certainly drive companies to work closer together inside of sales and marketing.
Scott Santucci 10:28
That’s awesome. So let’s keep it this top down view from an investor standpoint, and let me share with you so we you know, as you know, we’ve been we’ve had a webinar on the commercial ratio, we’ve got commercial ratio, comm as a site to share this information. So we’re getting a lot of feedback. And some of the questions really arrive at Well, why would you just focus on sales and marketing to focus on growth, really sales is involved in driving all Revenue. Why would you just track it that way? That seems like a stupid metric, which is these are exact quotes I’ve heard. So why would Why are we not factoring in all looking at all of the revenue growth and assigning the sales and marketing in there because if you look at sales barking through that lens, the return on investments tremendous
Unknown Speaker 11:20
the way we’ve calculated it, and the way the way you guys are talking about it, we’ve used sales and marketing primarily as the the biggest lever to driving growth. I don’t think it’s any surprise to any of your listeners, that the relationships between those two functions just just are often poor. So what’s the fastest way to move the needle is to build a metric that combines the two two groups together and focuses them on projects that if they don’t work on together, they’ll they’ll never move the needle on efficient So, you know, an example of that might be if we’ve chosen and we know, the companies that have the highest likelihood to buy, why wouldn’t we focus sales on those named accounts, but also marketing on on providing air cover and ground cover specifically to those accounts? As simple as that sounds, you know, the majority of companies don’t don’t actually have a systematic way about going, going and doing that.
Scott Santucci 12:30
So, you know, you and I had had the great opportunity to introduce the commercial ratio, even before we did the did the webinar to a handful of some of your leading portfolio companies. Can you give our audience a flavor of some of their questions, and, you know, you have a huge advantage being the owners of businesses, you get to sort of say this is a metric that we want you to do. The rest of us are going to have to bubble that up and do it. So How How would you describe, though the introduction of the commercial ratio? And how Yeah, about doing it? And, you
Unknown Speaker 13:10
know, it’s a, it’s such a good question, I think I think one of the big lessons learned is, is um, with, with folks at TC, the finance and metrics come very naturally to them. And and we potentially get ahead of ourselves and how we used to communicate that to companies and and, and they may be might not have been ready for the message because it you know, while something so naturally comes to a finance person, it might not come that naturally to a sales leader or marketing leader. So we’ve had to really sit down and kind of explain the ratio in the meeting that you’re talking about with kind of the sales ops leaders, I think there is a combination of a little bit of fear, a little bit of vulnerability and and then ultimately, it’s like Ha, I get it. I get it. I think what TCP is doing as we onboard, certainly new companies now, it’s we’re spending much more time walking through how we think about efficiency, how we measure this metric and kind of what can move in needle on value creation. And certainly this metric and the number.
Scott Santucci 14:21
Yeah, so I want to add some add some color to this, because I can tell you and I have been working on this concept for eight, nine months, right. I mean, it’s been a while. One of the things that, that I’d like to highlight is how do we arrive at the the metric we were interviewing general partners in your company, and what do they look for? And I remember one in particular, where we asked I love starting out asking open ended questions. We asked that one open ended question and one of your general partners to started listing out I think I lost track. I couldn’t keep track enough.
Unknown Speaker 14:57
exactly what you’re talking about. Yeah,
Scott Santucci 14:58
I know. Right? I know. You do. Right, cuz I remember us talking about it. It was like, could you keep track of all them? Like 3037 different very specific metrics that he was just rattling off in his head? Yeah, he’s able to connect the dots in his head. Remember that? Could you cut? I
Unknown Speaker 15:14
totally remember I took him like a minute, like even a minute to and he just kept going.
Scott Santucci 15:18
Yeah, exactly. We had to sort of Whoa. And then what we have to recognize is that everybody has their own unconscious competence. And to be able to get all of those metrics down into one thing is really empowering because I know a lot of us are going to want to focus on all the individual details. But then when he when we asked so while those numbers, he got to one looking at productivity, I’m looking at I want to figure out the levers of how we get. So really, you’re looking at this thing is it well, that’s how I’d explained it to other people. You just ask me how I do it, right. And it’s really funny and it’s natural. Because that’s the way human beings are. But I think if what what is very hard to realize is, that’s what he does for a living. He helps you see the future and say this is where your business is going to be the most valuable in the future. But where you are today is your companies, the client companies, the portfolio companies are dealing in the present in most cases, the past because the data that they’re looking at, so it’s a big shift. And I think that’s one of the things that we need to be more understanding of, so that we can appreciate what our investors are looking at. So can all we’ve talked then and so as this as we’ve gotten simplicity around the the ratio with inside your your portfolio, your general partners, now the question becomes, how do we get the portfolio companies CEO CFO, so why is it that your leaders believe the CFO is the person to introduced this metric to,
Unknown Speaker 17:02
you know, I it’s, there is a, if you look at the leader that the leader inside a TCV, I think he became frustrated with over the years of saying, looking at, like, we’ve made these gigantic investments in sales and marketing and it often falls short of what was originally promised. And it led to it led to really him as the leader kind of declaring war, which is why this magic number two Ruta TCP, declaring war on efficiency effectively and how do we, how do we drive these two teams to work together? And this was the metric that every general partner was already using in a slightly different way, but it was what they were using to, you know, try to drive the teams to work together. Other what they didn’t have and where we’re portfolio ops at TC v kind of starting to move the needle overall, is building these these sets of projects that that more scientifically move that needle. But But you know, if you look at the evolution of why this matter to TCP, it really came down to a lot of companies were made promises early on in terms of sales and marketing and how, how much it’s going to deliver. And, and they just got really, the leaders inside of TCV just got super frustrated that they never saw that. And they easily saw both teams weren’t working together. In some cases, the way we asked for the metrics, often propagated that because we asked for marketing metrics and sales metrics. So now we’ve even taken a step back and we look at the numbers specifically. And then how are we moving the needle on the overall commercial ratio?
Scott Santucci 18:55
So I think so let me translate this to our audience of why I think this is so Powerful. And so it’s simple, but it’s transformative. What is the highlight? Is it for all my years in b2b sales and marketing? I’ve heard about sales and marketing alignment. Right? We’ve heard about that. And guess what? those departments haven’t aligned on their own. So what’s powerful about this metric is we the investors aren’t going to ask you about sales and marketing anymore. We’re interested in your commercial process of which we’ve used sales and marketing is two sides of the same coin. They’re both the same thing. So that’s one thing that’s one way that you guys are definitely looking at it right now.
Unknown Speaker 19:41
Yeah, that’s 100 I think you you articulated way more effectively than I did. It’s one it’s
Scott Santucci 19:46
two sides of the same coin. And well, this is the this is the advantage of doing things together as a team right? You are immersed in all those details and the amount of I mean he’s gonna canal is gonna have to get on a call and go through intensive amount of detail through the rest of the code for the rest of the day. Right? So this is the advantage of doing things in partnership with a collaboration. That I think one thing that’s so cool, that’s that’s highlight that’s being highlighted here is the accountability that’s associated with that metric, because that’s one of the things that anybody who’s been in sales and marketing or sales ops is seen is the lack of accountability for across those departments. So another thing that’s happening is that your leadership are saying we’re going to hold somebody in your business accountable. Yeah. Tell us tell me about how that conversation goes.
Unknown Speaker 20:39
And yesterday, so I love the way you explained it two sides of the same coin like it once we get the two teams to see that how do you win the war within, you know, so to speak, when you have so much muscle memory working against you? It often requires that objective party which I think was your original question. CFO kind of naturally speaks the language of private equity, and, and has, whether it’s the CFO or the CEO, that they have the power, certainly to get both teams to work together and be held accountable to that ratio. So it’s almost like an objective referee who’s accountable that can that can, you know, not for horses the wrong word, because I think once they see it’s two sides of the same coin, they work together, but there is a war within because the two departments typically have not worked together and there’s so much muscle memory, that that’s working against them and so much connective tissue that just needs to be built, that hasn’t built before so that the role of the CFO or the CEO is held accountable, kind of provides that objective third party to keep them keep them moving on track.
Scott Santucci 21:54
So I love that you call the CFO a referee. That’s such a great That’s such a great illustrated concept. Because as the as the referee, they’re interested in making sure the rules of the game are being followed right and right, one of the rules that we have to do is we have to make sure we’re we’re doing profitable growth. And if we’re spending too much resource to, if we’re spending way too much sales and marketing resource to drive revenue growth, then we’re not following the rules of how we’ll be evaluated. And I think as part of that referee, referees are inherently fair. And I think one of the things that people in sales and marketing do is because they don’t have a good mastery of we’ll call it financial language. They’re intimidated to ask for help with CFOs. But really, if you just do a little bit of work and meet them halfway don’t CFOs try to help connect the dots isn’t that what you see more often than not, instead of just Eliminate budgets 200
Unknown Speaker 23:02
with Scott, I think I think the role of the CFO like
Unknown Speaker 23:08
is they’re extremely committed, I think to to understanding the business and working with the business. You know, met many times, other departments are intimidated by that. But it’s like that hand gliding example that we just started with, it’s like they’re, they’re a partner in your success. And if they don’t understand what you’re doing, they can also be a partner and, and, and cutting too fast, because that that’s a natural tendency for a CFO to do so. You’re gonna want them on on your side either way.
Scott Santucci 23:42
So look, we’ve got two minutes left of your time and then Brian and I will we’ll wrap up. What would be some? Knowing what our audience is because you were one of us before can all right before you became a private equity person, you’ve been a sales enablement Sales operations person, what advice would you give past Kunal? You know, and what advice would you give about embracing the commercial ratio? What steps should you go do immediately to start helping the business? What would you do? Would you? Yeah,
Unknown Speaker 24:16
yeah. So ultimately the role of sales enablement is to drive revenue more efficiently, right? So so we’re aligned on the definition. That they are, they are a productivity engine, they their projects focused on you know, making the sales rep more efficient or more effective in front of the customer. I think earlier on in my career, the the prescription was a lot of activity. And there was many, many of those mason jars that you’ve used in the past that’s that goes into just driving all sorts of activity around what we thought would drive you know, better knowledge of Product Solutions, make make reps more efficient. But ultimately, in the end, when we got asked to prove out the value, and the the, it became, you know, over over time, it was easy for anyone who’s sophisticated to see how superficial the connection was between, you know, an enablement activity and the ultimate effect on on revenue. Um, you know, what, where I believe, you know, you’ve evolved to with this ratio is you can actually do less and have less activity and be, you know, work on projects, that you have much more confidence on where and how it’s going to move the, the the efficiency needle overall in the company. And I think that’s, that’s a better place to start from, from an enablement perspective. They can they, you know, an enablement professional can have much more precision over why something’s going to work, and they can have much more precision with working with the car. follower and others on, on on, you know what they’re going to do to impact that ratio over a one to three year period versus just, you know, being focused on so much activity. And, and and potentially even propagating more complexity then then then they should.
Scott Santucci 26:21
Brian Lambert 26:22
So let me jump in here real quick as Scott, one of the things that that this discussion is bringing up, in my mind is the idea of proactive versus reactive and what does that really mean? The commercial ratio, is it is it a reactive or proactive metric in your mind?
Scott Santucci 26:47
I, it’s it’s neither it is what it is. That’s what we have to do. It’s it’s a metric that says here’s how we’re doing. Proactive or reactive is a choice. It’s not a measure of either. It’s a measure of how well you’re doing.
Brian Lambert 27:08
Yeah, I love that. And I, the reason why I’m framing it that way is I think so much of sales enablement, is considered either reactive or proactive. We’re either doing or you know, tactically or for taking time for strategy. And most of the time people are in a reactive mode. And when you think about it that way, perhaps that’s been some of the struggle that our listeners have had is this metric is what it is, but what am I supposed to do with it? What problem do I solve with this? And that stance of what problem do I solve? Is how how people are really wired in sales enablement, actually, sales and marketing. Great. You’re showing me a metric Now am I supposed to do about it? What I think this metric does, what the commercial ratio does. In my mind, I’d love your take on this but it actually moves into There’s a more of a discussion in the gap that between strategy and tactics, you know, stratification that is more around. What do we need to prevent? You know, what problem do we need to prevent, and support as opposed to what problem do we need to solve? The metric is what it is. But what do we need to do to start moving the needle over time?
Scott Santucci 28:21
Well, I think I think that’s right. I think the way that I would characterize what you’re talking about is, in business, we all know that immediately people want to start prescribing action. I want to take action, you know, you hear it all the time.
Brian Lambert 28:37
So right, it’s read, I’m supposed to do something go, go go.
Scott Santucci 28:41
Right. Go, go, go, go go. And part of the difficulty though, is when you take action without any any strategy, guess what happens? You get random acts of enablement and you drive down your commercial. Yeah, it gets worse, it gets worse. So what the commercial ratio really is As a way to center, let’s take five minutes here to talk about the implications of what we’re doing. That’s it. Let’s frame out what are the cause and effect relationships here? And wouldn’t it be great if we could do three things that are going to have 50% impact? rather than do 50 things, they’re going to have a 3% impact. And that’s really what we’re talking about. Many of us know, this is the 8020 rule. Some of us know this is systems thinking. All of these things, though, are the same thing. You have unintended consequences when you go off and do stuff and taking that time to figure out why are we doing something? And then what implications do do we have are we going to have and where we want to get to in the future, rather than just doing something right now to make a short term pain go away? That’s That’s really what the the value of the commercial ratio really brings to bear. And it starts to create the space for a theme that we’ve been talking about over and over and over again, on our podcast, where the idea of orchestration, the orchestrator role of a sales enablement person can actually take shape. If you don’t create the space for it, those seeds are never going to blossom. So you have to be able to create the space to do it. And part of creating that space is just carving out that five minutes of can we just agree on what we want to accomplish?
Brian Lambert 30:34
Yeah, that’s great. And I think the interesting thing about that when you carve out that space, and you say, Look, I’m gonna I’m going to help orchestrate that. declaring war on any efficiency comment that Kunal made I love that and I think that should be the title of this podcast. Because it’s it is it that is a proactive statement. That is a a mission to achieve. That’s a bit of a rally cry. I mean, who’s who do you know, that’s that’s declared war on any efficiency other than, you know, a handful of people, including yourself included. Right. So that concept to me is is when it’s needed in sales enablement, because we you know, I’ve been on a lot of calls, well, you know, our processes are not aligned, or we have old legacy technology, our Salesforce instance doesn’t even allow for multiple opportunities. We have all this stuff wrong training is doing this wrong. Marketing is doing this wrong. People know. There’s inefficiency. I mean, if that’s if people disagree, there’s any efficiency. I really want to talk to them. I mean, it’s it’s a given to the most people I talk to, but what are you going to do about it?
Scott Santucci 31:47
Well, I think there’s a there’s a couple things, right, I think number one is, if you’re listening to this, please go visit commercial ratio.com and if you have questions Ask them. And then let’s try to get more of a dialogue. I love canals metaphor about the hang glider. You have to you just have to take that first step and trust the hang gliding equipment and know full well that the first time you jump off that jump off that off that cliff. It’s gonna feel scary as heck because you’ve never flown before.
Brian Lambert 32:26
Yeah, trust your own strength and trust that you can do it.
Scott Santucci 32:28
Yeah. Well, I think it’s it’s also trust the tool trust there. Right. So if, if the hang gliding equipment that can all talk to is the commercial ratio. And, you know, take confidence in it. You could say, Oh, it’s theoretical, but you’d be wrong. It’s been rolled out to 57 companies. It’s been shot for months to get just right within private equity, general managers, the fact that there’s that kind of discussion, do you think private equity gonna roll out a metric that isn’t accurate. I mean, come on, let’s be. Let’s be real here.
Brian Lambert 33:06
CEO approval to canol. Did CEOs have looked at it inside of the portfolio companies? I mean, this has been not
Scott Santucci 33:12
no not looked at it. Yes. Make sure they not use. They are mandated to be accountable. That’s a big difference. Yeah. They are mandated by their investors to be accountable for that metric. This isn’t, I like it, I use it. You are going to be held accountable for that number is the CEO going to take that take on that accountability? Are they going to find somebody else inside the organization to pin it on, the chances are going to put find somebody else to pin it on and then with that accountability comes authority. So just follow the chain here of logic and power and authority. And all that other stuff. I think that’s that’s the key point is pay attention to. And the more you map to the metric and the work that you’re doing, you’re going to find a power base inside your company, whom you can partner with. And by partnering with that power base person, that’s why we spent the time painting the tapestry, the CFO is the referee. If you’re not building relationships with the CFO, you’re not building off of the power base, because the person who has the power with this or at least keeping score of it is is for the most part going to be the CFO, you have a friend and finance, learn some of the terminology. If we’re in this space, and you don’t, don’t know the terminology, or worse, make sure that you’re using the right terminology. Some of the feedback that we’ve got some people don’t really understand the basic accounting rules of what what numbers go into cost of revenue, and what numbers Go into sales and marketing expense, and why those things are that place and why that accounting matters. It matters a lot, because you have to know what kind of numbers are actually in the scorecard that you do. And the reason that you need to know those things is because those are the specific levers that you need to pull. It isn’t complicated. It’s just intimidating, because it’s not accessible. Admit that and then find people who can help you connect the dots on that. But those are things that we need to do. And I think one of the things that we need to do, Brian is, you know, make provide a very simplistic, here’s the basics of an income statement. And here’s what the numbers mean. And then this is what it means to you.
Brian Lambert 35:43
Yeah. So you’ve outlined a couple of things. Let’s use this as the wrap up. One, go to commercial ratio com. Another thing that you’re suggesting is definitely have a friend and finance understand the balance sheet. There’s also this this angle of looking at it Almost look at look in the mirror and tell yourself one, this is real, too. This is validated. Three, it’s coming. And ask yourself, why not you? You know, you’ve talked about this on the webinars. Some of our listeners may not have actually attended the webinars. But if not you Then who’s going to do this? Right. So what other advice do you have for folks that want to get started? How do they get started in digesting this as an orchestrator?
Scott Santucci 36:27
Well, I think step number one is, before getting started, find some way to check whether or not you understand it. One of the things that I’ve noticed is there are a lot of people who will launch it and think that they understand it, but they don’t have somebody to check their accuracy. And there’s it’s one thing to finance CFOs or financial analysts. Let’s just not talk about the guy who manages your budget. That’s a different person in finance, but a CFO is pretty forgiving on inactive data inaccuracies if the structure of the information is correct. But what I mean by that is if if your revenue number is inconsistent with his revenue number, but you’re following the right kinds of principles, like revenue goes here and, you know, cost of sale cost of revenue goes here and you know how you’re the format that you’re doing, it’d be pretty easy for them, they will be appreciative because they’ll know your data and accuracies have much more to do about the operating data and less to do about your structure. But if you show up and you’re you’re trying to lump cost the sales in with sales and marketing budgets, you’re going to be not it’s going to be very frustrating, because you’re basically saying, I don’t know how income statements work. And then I want you to Do things for me, but you’re not meeting them halfway. It would be like somebody coming in and telling you, here’s how you should sell. It’s pretty offensive. And many of our, our listeners are making those kinds of mistakes.
So find somebody first to make sure. At the simplistic level, you’re knowing which buckets are being put in what I think the second thing that you need to do, in terms of getting started is finding somebody that you can roleplay out what the message looks like, because how you deliver this message is really important if you deliver it. tone deaf to not to not to your different audiences, what’s going to happen is you’re going to offend or you’re going to get the treated with a lot of pushback. And then the third thing is before you go pitch it, make sure you have a plan, because what’s going to happen is once you pitch it immediately you’re exactly They’re gonna have some questions, and they’re going to frame them out, you’re going to think of them as intense, what’s really happening is they’re just trying to understand. So make sure you’re prepared to deal with that and not, not take it personally. And then the second thing that you’re going to need to do is they’re going to ask you for recommendations. And if you don’t have recommendations there, at least have a great message of saying, Here’s why I needed the time to do it. Next week, I’ll provide recommendations, and it’ll look like this. You have to anticipate all of those things before you pitch it, which means you have to go through all those steps make sure that you’ve got you know, your your dots connected in the structure of what the financial rules are associated with income statements, number one, number two roleplay it out for different roles. It’s not about whether you understand it or not, it’s about are you connecting it with the CFO? Are you not alienating the head of sales? Are you not alienating the CMO? And does the CEO understand it? And then the third thing would be, so what’s your plan? You need to be able to do all three of those things. So my suggestion is start with one, then do two and then do 3123.
Brian Lambert 40:19
Right? Anything else you want to share before we wrap up?
Scott Santucci 40:23
Now I just think of that thank you so much. We think Kunal, hopefully that was valuable. My suggestion definitely is listen to that over and over again, there’s a lot of insight really captured in the lessons learned from from canal being on the inside of an investor. Number two, visit commercial ratio.com and three, make sure that you get a chance to watch the webinar around using the commercial commercial ratio to really move the needle moving the needle using the commercial ratio. Joe is the title of that. It’s chock full of a lot of information, you probably want to listen to it again. You can find that on commercial radio.com. And please share your stories. What are you wrestling with? Tell, tell Brian or I what you’re wrestling with. Or if you’re following the steps where you’re struggling with, tell us your story so that we can tell other people in our community so that all of us have the opportunity as inside our nation to grow and be proactive and skate to where the puck is headed.
Brian Lambert 41:35
Right. Thanks. And thank you canal and Thanks so much everybody for tuning in. We’ll see on the next podcast and as always check us out at inside se COMM And make sure you send us your feedback. Thanks so much, everybody.
Thanks for joining us to become an insider and amplify your journey. Make sure you Subscribe to our show. If you have an idea for what Scott and Brian can cover in a future podcast or have a story to share, please email them at engage at inside sp.com You can also connect with them online by going to inside se comm following them on Twitter or sending them a LinkedIn request.