In his presentation, Matt Wolach shares the three metrics that he considers the most important to track within the sales process. He explains the value of tracking metrics because of the differences that you can make by optimizing those metrics.
Matt Wolach has worked in sales for over 15 years which has since led him to become a sales coach. Matt is a Saas enthusiast, a proud family man, and a podcast host.
“If you don’t measure it, you can’t maximize it.”
“78% of customers buy from the company who calls them first”
Three important metrics to track:
- Your lead to first call rate
- Your CAC payback period
- Your LTV to CAC ratio
Hey, welcome, welcome demand gen summit 2022! This is awesome. Super excited to have you here. Thank you for coming to my session. This is going to be a fun one. It’s going to be high energy, it’s going to be fast paced. So be ready to take some notes. I’m going to throw a bunch of things at you.
And really what we’re talking about today, three KPIs, three really incredible metrics that you’ve got to be tracking within your sales process. If you really want to excel. Let’s jump right into it. Okay, so what are we talking about?
Well, first a little bit about who I am. My name is Matt Wolach, and I’m a family guy first and foremost. I have a beautiful wife and two awesome little girls who keep me on my toes and really, I enjoy my family life above all. I also have been in sales for over 15 years, I’ve been doing sales myself, I’ve run sales teams, I’ve managed sales divisions. I’ve run companies where my focus was sales. And so, it’s a really big passion of mine. And over the course of my career, I’ve done 1000s of downloads and 1000s of sales calls, and I’ve coached on them. I am a sales coach. I help people understand how to really really accelerate their sales and close deals much quicker. If you wanted to pinpoint me, I would be a closer coach, I would teach you how to have a call that is crazy impactful so you can close a ton of deals really quickly.
Now, my personal why, do I do what I do? Well, after starting some companies, growing them and exiting them. I was kind of sitting around doing what should I do now? Well, I had so much fun doing that. But then I saw some of my friends who were struggling with growth within their own companies. And they said Matt, Hey, how can you help us? Can you share with us what you did to get ahead and have those nice exits? I said, okay, that sounds good. I’ll do that. And I started to do it. And I started realizing this is a lot of fun. I love helping others learn the key formulas for success. And so that’s why I became a sales coach. So, one of the coolest things about what I do is when one of my clients comes to me and says, You know what, we went from struggling to now we’re seeing amazing results. That is what I do it for because it is the best. That’s absolutely my joy. Okay, enough about me.
Now. One of the best quotes that I love is when you talk about KPIs, you can’t manage what you don’t measure. And this was the incomparable Peter Drucker who said that well, I went too fast on that. Peter Drucker, he’s the one who said that really smart economists, consultant philosophers did a lot, but you can’t manage what you don’t measure meaning, if you’re not tracking something, then it’s really hard to make decisions on that. But I actually take it one step further. When we look at sales. If you don’t measure it, you can’t maximize it. And that’s me. You can put that one to me. I don’t think anybody’s going to put it out there like they do with Peter Drucker, but I’m looking at maximizing if we’re going to be tracking something, let’s make sure we can optimize it, maximize it, and get as much out of that as possible. So, let’s talk about these metrics.
Now. There’s a lot and when I work with my clients, we go through a lot of different metrics and KPIs we really want to focus on but for today, we only have time to discuss three of these. Okay, so, for today, I want to dive in on KPI number one. This is one that’s really critical that I’ve seen a lot of people not track. It’s your lead to first call rate, lead to first call. If you have a lead come in and not talk about it like somebody downloaded a white paper or watched a video. I’m talking about somebody who actually said Hey, I’m interested. If you have a lead come in, a lot of people call it an SQL. How many of those do you actually get on a call? Not how many books into a call, but how many actually show, because even though they say they’re interested, you might reply, oh, yeah, let’s set up a call and they never get back to where they set up the call and they never show up. A lot of those things can happen. So, we want to be able to track our lead to first call rates very important. Well, if you think and you asked me, why are we tracking this? Well, a lot of companies focus on getting a lead. They talk about let’s market, let’s go out there and do some lead gen. But once they get the lead, they don’t have a process. They don’t have a way to take those leads and efficiently get them into that call. And in fact, a recent study said more than half of the companies that reached out to put some leads out, they didn’t respond within five days. You might think that’s crazy, but they didn’t respond within five days. So, a lot of companies are struggling with getting these leads into calls.
How can you make sure that you’re not like them? Because you don’t want to have to have that happen? Once you grow? somebody’s missing something, something drops? That’s not good. Well, the way to do it is through process. If you have a great lead to the first call process, or some people call it a lead to the demo process, then it’s really really important. One of the best things to do is what I call speed to lead. The best way to have a great result with your lead to first call rate is to be fast to get to them as soon as possible. Speed to lead.
A lot of people think you know what, I don’t want to look desperate. If they throw it in, I happen to be at my computer and I see it. Am I desperate if I call them right away? The answer is maybe, let’s look into whether there’s some data behind this. So how soon should you contact your leads? Well, I want to ask you and have you think about it, what percentage of customers buy from the company who calls them first? Okay, throw out a few different leads. You go on the web, you put Okay, this one, this one this one? What percentage of people buy from the company who called them first? Why do you think a study showed that it’s actually 78%? You might throw in a bunch of different leads, but the company who calls first wins the deal more than three out of four times. Think about that. They win the deal more than three out of four times. That’s incredible. So, 78% of customers buy from the company who calls them first. So how do you become the one who calls first? What is that? How soon do you have to call? Well, if you call within five minutes, that’s pretty quick, right? If they submit something you call within five minutes, guess what? You have a 900% increase in connections. 900% of an increase in connections that’s huge its enormous.
So, a call within five minutes is critical. But can you be even better? Can we be better than that? Well, what happens if you call within the first minute Whoa, that razor thin lead comes in, jump on it right away. You call it in the first minute. Number is actually 391% of an increase in conversions. So, before we talked about connections just connecting with them, but you call in the first minute you actually almost 400% increase on your conversions on them signing up a Forex on signups. Speed to lead is of the utmost.
How does this compare how many companies are responding within even five minutes right? A study shows how many companies respond within five minutes just 7% only 7% of companies out there respond within five minutes. What’s that mean? Contact ASAP. Speed to lead. Get on them right away. And if you do it within the first five minutes, you’re already in the 93rd percentile of your industry. That’s phenomenal. What a quick way to get some extra business. Let me share with you something, a case study that we’ve done on this just to see if it really works within our ecosystem. So, I’m going to tell you about Dave, one of my clients. He’s a cost certified data great guy, Love Dave, but he came to me and said you know what, we got lots of leads, but very few are actually booking demos and it’s really frustrating. So okay, let’s figure this out. Let’s solve it.
So, what we did was we implemented a speed to lead process, a proprietary process that has worked really well for me and my company that we actually have implemented into a lot of my clients. It crushes what did it do with Dave? Well, with Dave, they saw a 371% increase in demos booked. That’s huge. They saw a 402% increase in revenue, because companies think that these people are on it, so they’re going to be better. And of course, sales reps getting more opportunities getting more business are very, very happy. Dave said Matt, we are flooded with demos. I absolutely love it. It’s so cool. When you do it right, you have all kinds of opportunities. You have all kinds of deals close. It’s so much fun. So, speed to lead- the name of the game.
Okay, is this is making sense? I want to make sure that you’re getting this now, if it’s not message me probably the best way to message me on LinkedIn. Go find me on LinkedIn, Matt Wolach, you’ll see me there. Just go ahead and follow me and then start messaging me and I’ll ask to answer any questions that you have about any of this.
Okay, so we got one now we have two more so KPI number two, the CAC payback period. Now I love this one every time I think of CAC payback, I actually chuckle a little bit inside, because it makes me think of what if there was a movie a movie, they took his family. Well, who took them? Mel Gibson. Mel Gibson is Jack payback. That just sounds like a movie right Jack payback.
He’s going to go and get these bad guys who took his family, but it’s actually CAC payback. So, every time I hear CAC payback, I think of Jack payback and Mel Gibson who go and get those bad guys who took his family.
Well, what does it mean? What is CAC Payback? Well, what is CAC? Well, CAC means customer acquisition costs, the customer acquisition costs, how much does it cost you to get one customer. What are you spending to acquire one customer? How do you calculate it? It’s very straightforward. It’s your total cost of sales and marketing, all those sales and marketing activities, all the people, all the advertising, all the money you spent on tools for your software all divided by the number of customers that you’ve actually acquired. So, you’ll look at this in a monthly period. Essentially, you could do it over a longer period, but a lot of people do over a month. How much do we spend this month on sales and marketing and how many customers are signed up? It’s very straightforward, but what’s this CAC payback period? Well, the CAC payback is now we have the CAC. It’s the amount of months it takes to cover the CAC based on your average revenue per account your ARPA, based on how much money you’re getting for each of those customers on average. Let’s do an example and make it really easy. So, if we have the total cost you spent on sales and marketing at $20,000.
Now I know some of you are laughing they’re saying we’re never going to spend 20,000. That’s way too much. And some of you’re saying Holy cow, 20,000. That’s tiny. We spend a lot more than that. This is just an example. So, $20,000 Now, if you closed let’s say 20 customers that month out of that well, that means that your CAC comes out to $1,000. Okay, 20,000 divided by 20 is 1000. But what you do then is you say okay, let’s take that divided by our ARPA, our average customer revenue, how much we’re getting per customer per month. Let’s say it’s 100 bucks a month on average. For each customer. That’s going to give you a calculation of 10 months. What that means is your CAC payback period is 10 months.
If you pay to acquire a customer from the money, they pay you overtime, you’re going to get the money back after 10 months. Now you’re breakeven and then from that on in the green, you’re in the plus the positive the surplus, you’re having a fun time. Now is that good? Well, Mel is happy. So Mel’s happy. That must be good. But why is he happy? Well, if you think about your benchmark for CAC payback, you want it to be less than 12 months. If your CAC payback period is 12 months or less. You’re going to have a very happy Mel that is what you want, because then you can get a return for what you’ve put out there to acquire a customer. But what if it’s over 12 months?
We got an unhappy Mel. It’s not good. You don’t want unhappy milk? Okay, there’s Jack payback, he’s going to come payback you. Okay, so, just a little bit from the experts to back this up- David Scott. Many startups require 15 to 18 months to recoup the acquisition costs on a new customer that’s not good, which puts an enormous strain on capital. Unless your investors are willing to keep pumping in cash. Focus on keeping your CAC low enough to be recovered in a year. So keep your costs low. Actually, David, that is one way that works but there are two ways to help your CAC payback, of course, lowering your sales and marketing costs is one of those ways. Or you know, you can actually sell better. If you sell more based on what’s done. You’re going to improve that CAC is going to come down. It’s going to get lower in terms of months, meaning you’re going to get paid back quicker.
So, let’s go back to that example. Let’s say we still spend the $20,000 but this time maybe I taught you some cool techniques. I showed you exactly how to sell and close better and you can set 20 you close 40 deals that month. That’s cool. We got a doubling of deals. That means your CAC now is only $500. And it’s only $500. Well that way again, let’s say you’re still getting 100 bucks a customer per month. In this sense. Now, look at that CAC payback for five months, the money you shell out to acquire a customer now it’s only five months for your CAC payback. That’s really good. And we got a happy Mel. We got a lot of happy Mel’s because that’s going to make him really happy five months really low. That’s fantastic.
And so, we look at this balance of if we want to improve that CAC payback, you cut costs, or you sell better, but think about it. If you’re running a company or running a division, which would you rather do- cut costs, which means get rid of people and maybe cut back on advertising and marketing meaning people they’re going to see you less they’re going to hear about you last year impressions go down. Cutting costs doesn’t sound like very much fun, but selling better, selling more, closing more deals. That sounds like a lot of fun. And so that’s the one that I would lean towards. Why don’t we just learn better techniques, better methods, and why don’t we close a lot more deals based on what we already have for getting those leads? Let’s close it. That’s why a lot of people come to me. Okay. It just makes sense.
We doing okay so far? Again, send me a message if you need some more guidance, more help.
Alright, we’re running out of time. I want to make sure you have all this. So KPI number three is your LTV to CAC. This is a ratio, your LTV to CAC. What is this? Well, these are both very important KPIs. In fact, Ryan Downey these KPIs should be included in almost every business plan and VCs will expect to see forecasts and analysis on the topic. So, it’s really really important but what is this LTV all about? It’s a new one for today. Now, a lot of you might know this, but that’s your lifetime value, your lifetime value, meaning how much is a customer going to pay you over the course of their life as customers with you? So, to calculate this one, it’s kind of simple. It’s your ARPA we saw that before your average revenue per account, what are they paying you per month divided by the churn rate how many are leaving every month?
So, if we look at that calculation, you can help your lifetime value by either increasing your RPM, increasing the average revenue per account, increasing the money they pay you every month, or decrease your churn rate to keep more customers, either one of those is going to make your LTV go up. So, the LTV to CAC ratio Now, we go back to that original example we’ve got $1,000 CAC, and then we look at calculating the LTV. Let’s say we’ve got the $100 per month divided by your churn risk 2% customers leave every month. That’s cool. Well, you’re going to have an LTV of $5,000 Okay. That means your lifetime value from your average customer. They’re going to pay 5000 over the course because they paid a 100 the first month another month 100, another month 100. All that’s adding up eventually is going to be $5,000 before they leave.
So, if we look at both those numbers, the LTV and the CAC and we pull those to the side, we say okay, LTV 5000. Your CAC is 1000 that creates a ratio and that is a five to one ratio. Pretty easy math here. Okay, five to one is that a good ratio for LTV to CAC, we’ve got a happy Mel, so that must be a good ratio. Okay, so what is a good ratio? What should you have? Well, if your ratio is less than one, meaning you’re spending more than you’re ever going to get back. Well, you’re not going to be in good shape. We got a dead puppy there. What if it’s one of you spending the same amount that you get back is that okay? No, you’re dead. You’re not going to do anything. I can make money in business because you have more expenses than just sales and marketing.
Remember, sales and marketing are the only expenses calculated for this. You have all kinds of other things including payroll of other people, all the other things you have to do. So, what if it’s 1-3 anywhere in that one to three range? Well, okay, you’re getting there, but you’re going to be working really hard, because you’re not getting a lot of money back for what you’re outlying. And what if it’s three to five?
That’s the golden zone. That’s where you want to be LTV to CAC, anywhere from three to five, for every dollar you spend, you’re getting three to $5 back that is a business, that’s how you do it. When it’s above five, why don’t you keep working to get better? Well, at that point, it sounds great. But it actually should tell you we need to do it, we have an opportunity here, if we’re getting let’s say $10 for every $1 Well, what should you do? How much money would you give me if I said Hey, you give me $1 I’m going to give you 10, How much you want to give me? Keep going to fuel your growth. Keep putting more money into sales and marketing. Keep fueling the engine to make it happen. Okay, so we’ve got our three KPIs, lead to call, our CAC payback and our LTV to CAC ratio. Now let capital says you’re going to get the most value from these metrics, if you track them over time, have a trend, track them, and if you track them, we got a very happy Mel. Mel is going to love it. He’s going to love your company, he’s going to be cheering for you. I’ll be cheering for you as well.
By the way, if you want to make it easy to track all this, I have a very simple scorecard called SAAS sales scorecard.com It actually allows you to put in your numbers, it’ll show you exactly what these KPIs are. It’ll read them if they’re bad, it’ll green them if they’re good. It’ll show you the benchmarks against what you should be at. Go ahead and go to SaaS sales scorecard.com This is free. You can download it. It’ll be an amazing way for you to track all this.
I hope you enjoyed. I’m Matt Wolach, thank you so much for coming to my session, and have a great time at the Demand Gen Summit.
Take care. See you.