B2B Revenue Acceleration
B2B Revenue Acceleration

Episode 129 · 1 month ago

129: The Recurring Revenue Bow Tie Model w/ Shari Johnston

ABOUT THIS EPISODE

Many business leaders have their goals focused largely on customer acquisition - yet this is only the tip of the iceberg when it comes to staying profitable. 

When it comes to the SaaS industry, revenue really lies beyond the acquisition stage in customer retention and expansion. Neglecting customer success and recurring impact means forgoing the often easiest opportunities for business growth and profitability. 

After all, it’s often less expensive and time-consuming to expand the relationship with a current customer than it is to acquire a new one. 

In this episode of B2B Revenue Acceleration, our host Aurelien Mottier (CEO and Co-Fou nder, Operatix) sits down with Shari Johnston (Partner & Bo ard Member at Winning by Design). 

They discuss the Recurring Revenue Bow-Tie Model, detailing what this strategy entails, the benefits of introducing it and the importance of aligning your business around recurring revenue. 

To hear this interview and many more like it, subscribe to B2B Revenue Acceleration onApple Podcasts, Spotify, our website, or anywhere you get podcasts.

You are listening to be tob revenue acceleration, a podcast dedicated helping software executives stay on the cutting edge of sales and marketing in their industry. Let's give him to the show. This podcast is sponsored by Gong Gong and powers your entire go to mark your organization, but operationalizing you almost followable asset your customer interactions, transform your organization into a revenue machine, or unlocking reality and helping your people reach their full potential. Get started now at Gong dot Io. Hi, welcome to be to be a revenue acceleration. My name is Aldi Muti and I'm here today with Sharry Johnston, but no, and bod memberd winning by design. How are you today, Sarry? I'm great. Thanks for having me. Thank you so much for coming. So today we will be talking about the richurring revenue boat, tie bodor. I can't wait to hear about it. But before we get started, would you mind just introducing your set of Sharry, giving us a little bit of background as to who you as an individual, but also the company you represent, winning by design? Sure happy to yeah, named Cherry Johnston. I reserve former BDV CMOS as leader and it's several the grind startups in the last prayer to joining when in by design and then joined about three years ago to help spearhead our Markley practice and then more recently lead up our Revenue Academy. Yeah, I'm super passionate about helping clients achieve impact and so that shift of taking my bb fass experience across different startups and being able to apply that and help difference US company scales since then really rewarding and largely what I do today. My My side Gig is also a holping run a nonprofit called that I founded, called women in revenue, which is focused on helping elevate with it the tacket, the stray across market. It's that's great. That's one. Thoughtfully. Yeah, I'm herrying about a lot of these groups being created. You know, I was listening to a Bodcat Sectrios long ago, who's another ladies support seeing women to become bold mendels, because it's not enough about membells, and I think that's that's wand off. Where I'm going to get word of the girls. I took paratics to check that out. So today we will be talking about the ricurring revenue boat type BOO door. All right. So before we get into the topic, could you please explain to audience the concept of the model and and how it's comes to life with the SAS industry? Sure, yeah, I have stay, diardard. If we think about the BDB model and in what is typically a funnel approach right where we have revenue generated in the profits and and really focused on that close both and about time at all. What we really want to support it is flipping that model on its side and having equal, if not more, importance on the recurring revenue pro portion. Most of the time, when you get to close in a in a SASS business, you're actually not profitable. Look this marketing and sales cost are so...

...high that we celebrate the clothes to so much of the degree, but is that really where the successes there are secret success in terms of probability really comes in and that reoccurring revenue that you received from your customers. So flipping it on its side and having a funnel equal of importance on continuing to provide reoccurring impact to your customers so that they do remain a profitable part of your business, is the real crux of a bow tie and making sure that that company is aligned around resources and allocation to what is most profitable and having an eye on that right side. Okay, so basically it's about avoiding boning catch through acquiring new customers dignity. Well, yeah, I think it's, you know, making sure that there is equal weight and tracking in of your revenue throughout your entire customer dirty right, if funnel approach right, just really focuses on acquiring new customers, not on continuing to provide them and cut impact. Continuing to understand how our metrics evolved into customer retention, customer expansion, which is, in sapt's businesses, really where the revenue is. Yeah, I'll just posted living in fact, we we wearing most mow and more fault client. Speaking about nut for vine, your retention, you get seen more from my existing customs that, even if it's Shawn a few which I think you know, Chinese, easy, invitable, right, I'll do whether they'll sticking whim me, investing, molding my solution. So that makes pulf make sense. The means to be all of those, the the the the modor impact, the way company said, and the Middle Enugiad be used to said, do you have to find any for them and didn't make some changes? Absolutely no. I think that, you know, the initials funnels are providing guidance for organizations to think about how to unify and have them or data driven revenue model, and we thought about conversion rates throughout the funnel. But what the boat I allows you to do is really think about aligning your organization not only to the funnel metrics to close, but what about close and expansion and and, as you alluded to, the networtension rates that are so important to our business. So so not only is it important to align your business around those growth metrics, not just the top of Donald to close metrics, but also aligning your resources and team design around reoccurring impact. We often see very under invest in customer success teams, customer expansion teams, less emphasis on renewal and expansion, which can often be the most profitable and easiest path, easiest paths to growth. Then on the top of the funnel and acquiring the customer. Yes,...

...the good all say is probably easier to expand a relationship and carry on a relationship and keep a customer acquiring a new one sectually quite expensive to acquire a new one. So is there a specific stage? Because we also tend to with all the conversation while being in most of our clients. We see it. You've could Seri ABCDIPO, very large company and obviously people are a different stage of their lifestyle, of the life cycle, a different stage of the life cycle. They may need the difference aspect on things. I guess you know the model from what I'm marrying. The model is probably more for a sery, BCD or going anypo type of organization versus someone who is really starting to figure out there that good to market model and be not of customers. Is there? Is there a level of maturity for which you would say that model becoming very pertinent? And it because I'm trying to get you know, all the people listening to us as that. Okay, that's great, that makes sense. I want to control my gust. If I can be profitable, if I can make sure that, you know, the cost of setting an acquiring customer is less, is less than what the customer is baby, it's fantastic. We making money. Investor, would love that value of the company goes off because that value of me sure olding goes up. CONTASTIC, but the question of the stage or the question of the maturities is what what I'm curious about. So why? Yeah, great question and I think it helps companies at different stigons and your point I would a hundred percent agree. where the huge benefit comes into actor. You you achieved product market fit right and you're ready to really scale and and really acquire new customers and and have that reoccurring impact if you haven't had product market fit yet. We have had a lot of our early stage customers start out with the bow time methodology and rather business on that one day one you can before product market fits so that when they are diagnosing even early on how to scale their business, they have very distinct metrics that they can drive through. So, for instance, using usering our conversion rates throughout the funnel, you can really pinpoint where's your where your bunnel is leaking, where where you need to apply skills, where you need to apply resources so that you are getting not only to close but all such that reoccurring impact. And so why haven't that Base Foundation early on? At our customers have found it super helpful to communicate success and progress with our investor as well as set themselves up for success to when they do have product markets in and are ready to really run with it and scale that funnel all the way through. But they have the base foundation of systems in place and processes to really help accelerate that engine. Okay Akusha to should have probably as jolio on. How do you come up with the name? Well, what's the was this process being the bow tie? Well, I guess visually is it looks like a boat tire. So really and I'm blet see infinity...

...going around cycle. I guess you know, you always go around there. Yeah, so you know, I think that the philosophy of the traditional funnel here were we're flipping it on its side and and also making equal weight to the retention expansion piece of it. And then, I guess and has a little aspect of plan a bow tie in there. So yeah, and it's you know, it's something, I think that that is really helping recurring revenue businesses and so really kind up think about that that full and in customer journey and in a way that's more helpful and than a traditional file. So that's just so. You just mentioned Gustomel Journey, which is well, what's going next. So I've got the fantastical, though, something as to what it means for in town or what you can do. Obviously the value you can get for your investils the village, you can ring for your cus ear force for yourself. Physics, time spells and because probably marketing, Bellson and everybody's most successful, the company's growing in order that. Can you be a bit more specific as to how you impact the customer? John Need and was the objective of the mode or from a customers ten point? Yeah, no, great question. And to this point we sort of talked about the bow tie, as it is helpful for internal planning resources purposes, for scaling. However, I guess equal or more enduring Jear to my heart is is using the bow tie to look at it from an external perspective, from the customer, and what we do is applying my wins that matter across the bow tie. So what we look at is not only is there, you know, it for internal proper purposes, we might call it conversion rate one, the conversion rate to so hands on lead become a qualified appointment. Not Not Super Sexy and not super interesting, but for a customer standpoint, the moments that matter maybe that you have developed an amazing online demo that is enticing the customers and connecting to replevant details that are impactful to that and that is a huge moment in the particular life cycle for them in the bow tie. And so we were we teach in our recurring revenue courses may on not only how to apply these metrics to the bow tie but also how to look at it from the extra customers point of view and apply these moments that are really moving your customers through that journey. That's that's the acquisition felt right and I think the big pot of the model is that trickering venue and expansion and reviewers. So we did translating moments that you expecting customers success his team to to lead, you know was involved in actually bring me to life and appreciate that it's probably a diffusion because each clients of feels may be different, but we would, you say, is the best group to actually debread that strategy and and could you give a small example of this moments that you are creating? I love the concept. I think you when you create this moment, as you create an...

...emotional attachment to create something. I think it's important to think about them. I think it's important to scale them and I think it's important to not lead it to a good account manager or a good customer success spell said, or good insight says or a good sets gay to their own. I think it's important to tell them look after streemones, you should do that, you should shack in if we've got an initially this is what we do. So in time of on all ship and maybe more example of the moments about the course. Could you tell us a little bit more about that? Yeah, absolutely, and you know you chucked on something that is absolutely something that customers struggle with. Your rule in this supportient problems that matter across the entire customer journey. There isn't x clear. Oh it's always owned by x Y, and see that very much changes. This is a very overused example, but I think in the BC world we often think about a great company that has done an amazing job of having moments that matter across the entire customer experience. Is Apple. Right there. They're cut, their products are incredibly easy to use. The moments that matter. You Open the phone and you have hello and bunch of different languages. You open the packaging and it's amazing experience as well as the stores are just have a very different approach to helping you buy somethings that I had in the store. You don't have to good of cauterister source. So they created all these moments that matter, but it really creates required their organization to be set up to someone, you know, ste jobs in this case, having a vision of those moments that matter over the entire in our product customer packaging, in person customer experience. So applying that same lens to agree b cycle in. The customers that we've seen do it successfully either just have great collaboration between their C sweets, so cro CMO and chief customer officer, or, you know, there is someone like the CEO who's very involved and passionate about that entire customer journey. Could help be that architect of how do we really understand a little bits that matter to our customers and how do we improve that so that they don't just have an amazing customer experience at one part of the bow tie but lagged in another end and that that could very much be the reason that they're not really little more providing that what we call reoccurring impact that's good and in some of the consistency, because I'm probably to see you that you know, you just mentioned like literally twenty seconds ago, repassionate about custom mel, Johnny. And you know what, will we? I believe we can be perfect. Everyone you know, and some things we still bring customers display of fact we make any fault in finding the rate when we may find someone that's not the right feet, for some reason things don't walk out. I'm a big Benevo that even if people don't enjoy something or whatever, you want them to almost feel nostalgic about the fancies that being walking. Know you at least you want them to think good. You know...

...what, if I had to make a decision again, I would, I would, I would do the same and I would go with those guys right and and, but maybe something else thought walked out or whatever. One of the should I face, and I'd love to go through to sell this business to see if we, if you're but a model orso make sense for service is for service businesses. But one of these should, I think, is is we face in scaling organization is keeping it consistent. So where does the process leave? Would it be CR we did be how do you get this? Remind us for the moments and how do you because I guess you kind of need to remind people. It's okay if you measure what or two customers, if you manage twenty, thirty, forty. So what does the process leave? What would you suggest to your clients to make it leave? Yeah, that great question and it must are common, you know, realistically, for the size of organizations that were helping with, which are usually two hundred people in above SAS start up stutters are scaling quickly, the single point of failures difficult, right. So we need to move beyond the CEO really into the sea sweet. So that requires alignment across the executive go to market executive team to really have that Voice of the customer in integrated into the way that they operate. And you know, I think the the key to it is just really listening. You know, I guess I can more passionately talk and more specifically talk about my own company where I own our Revenue Academy, and so I to listen all the time to trying to understand what is standing out to our customers. That is there all hall moments. Is Part of the training that they get, between emails, training, engagements, certificates, etc. Probably a hundred and fifty different touchpoints that they end a that they get from us, but only some of them are super impactful to them. That really deep an impression, and so I think for me it's in and most of our customers it's really keeping that inert to the ground and really understanding what stands out to the customer. So for our customers as well as my own process, I recommend we agree, we read all Urg to grap reviews in great detail. What are people saying? What stands out in our keys? People love that we have freeing works that we teach against in our training, and so that really stands out to them because it provides that ability to retain the information that they have in their training. The other thing that stands out to them is that we are traitors use like very progressive technology to help train them, using light and words and digital engagement tools, since we're all remote. So those are the things that I listen for and and try to make sure that, to your point, that there's consistency and in those in those moments that matter across all of the team. It is a little bit of a challenge to get everything consistent. But if we at least get those real moments that matter and make sure there's consistency in that, in the things of our mean the greatest impact on our customers actually go a long way. Okay,...

...so that's, I guess what was about to ask you. The question how would you translate the model into a selvice business? Is that so feel you think? I mean, I guess you are doing it for your Si Fin. Technically you guys our helf his business rights. Yeah, and it's a great question. And you know we don't have a real you know, we're not as SASS business. We are are a services business that that serves as sauce companies. But you know, I liked that you do you propose this question because I think you know we're we're challenging ourselves with this. The same idea of Hail. We focusing too much on the cloth with even if, though, we don't have a subscription model, the idea of goes back to that reoccurring impact. How can we provide reappring impact so we do have more longevity with our customers, and that's the key to it, whether it's a subscription or or not. If we're providing all going impact for our customers, are going to one stay with us. So it's up to us to figure out. We know, how do we make sure that we can continue to after that training or after that consulting engagement, continue to provide value to our customers so that we have equally that right side of the boat tie and our services business. Yeah, one last question for you, Sherry. I think I'll businesses are for limited. It did, ever, bring a different limit of service, but probably to the same group of people in the same industry. We serving the same clients. Always were looking at charms because, like you, will lose. We lose a clients we want on Duston hy okay, so we classified Chum and and I was wondering if there is a notion of classification of charm in the revenue both a model. So when I'm saying by that that I think there is two categories of charm from high level perspective, which are what's in our control and what's outside of our control. Okay, so for you and I, we probably are working with the most not volatile, but if I was technology, I who are going fishing, we probably a fishing tunas you know, when some of the people would be fishing whales or big of fish, we're fishing the web. That go very quick, that quite small Le Goal very quick and are lots of them. And why is? It can be very rewarding to catch chin out. Devolved very quickly and in fact, you know, I think last yeah, it was pretty much thirtaty of our clients. So I think salty a lot of hundred and forty or whatever that we started with at the beginning of the year. They just got a quiet, they got a cowld and we only manage to stay walking with five of them. Okay. And why? Because sometimes you've got an acquisition, people say, okay, carry on as normal for six months a year. We don't that sort of people just replace you and then you've got the other are bit more little. Well, it's all right, see you later, guys. We just wanted the technology of the clients. Now you move on it. In fact, you know, everything that is a spin of marketing or says improvement and things like that could be cut...

...off pretty quickly. And it's funny because sometimes they come back to month, six months later, but it still get off a shot. And then the reacquisition of a new company, technically so, but without going in too much detail. Is there all consideration of them, if you can? Could it the quality of showw the the classification of Chun in in the modul or do you see such company and Services Company going in to that sort of trying to reallyunderstand and classify the Choun to do something about it, because I believe that it's a very wrong question at I'm asking you. I should have thought about it before, but I to believe that if you want to increase retention, do all the great stuff that you've got in the room that we discuss about the revenue both a model. The essence is, although something why you using glance in the first space if you are losing some right? Yeah, I know, I mean, I think it. There's definitely nuances and and churn in our companies can be, you know, an average church for company servicing as and B is different than Churn Servicing Enterprise, which I think is what you're getting at. And going back to it, it is still around hays or ways, even though because I with you and we have maybe the accosition isn't quite as common for US ins exactly the churn right the exact that our champions chart on cop common race as complic there's a very provolving door of I know pet leader Cros going to other places and so but there are things we can do about it, like, again going back to reaccurring impact. If we're if we're better multi threaded within organizations to make make sure that we were not single threaded with our champion, that we are providing indeed reoccurring impact to then regardless of the executive, we still have the ability to impact that particular turn in some cases. Yet of course there's there's some that are just going to be inevitable. But what you keeping are your to the ground of understanding why? What could we do about it? Even with these anomalies that happen in the business, has helped improve turn in our customers and our own business as well. But US will go for thank you so much for you in sight. shorry. I'll bring under the conversation now if anyone listening to us once to pulls you the conversation with you. All you know on Gage, we's winning by design and was the best way to get told of you. Yeah, sure, you know. I'm available on linked in. Feel free to follow me, or winning by designs great content than our T hoast on helping with adoptable time model and reagreeing revenue in general, or if you reach out to me directly, it's as AH ARII as winning by signedcom that's Fund off who we thank you so much for coming on the show today. Thank you. You've been listening to be tob revenue acceleration. To ensure that you never miss an episode, subscribe to the show in your favorite podcast player. Thank you so much for listening. Until next time. This podcast is sponsored by going. GOING IMPOW is your entire go to mark your organization by Operationalizing...

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