Allison Caggia
Risk Vs. Revenue- Contracts as a Tool for Revenue
Today, Hemanth Puttaswamy, Co-Founder at Malbek, will be speaking with David Ledgerwood, managing partner at Add1Zero LLC and podcast. Host David shares how to use the risk and reward you uncover in your contracts from a revenue point of view. He has been a sales leader for over a decade, helping software and services companies grow revenue. He is an advocate of tech enablement and is a seasoned thought leader for revenue growth. So now it’s time to relax. Grab a glass of wine and let’s talk contracts.
Hemanth:
David, thank you for joining me today. Let’s hear a little about the services that you provide.
David:
The company is Add1Zero LLC and it comes from my history of running sales, sort of early-stage sales divisions for startups. What we discovered in that process of having to grow companies into millions was there’s a reasonably standard playbook. And this goes back far enough that I don’t remember anybody talking about the chief revenue officer back then. So, we built a company that could walk into someone else’s company, and provide what is essentially a chief revenue officer, fractionally. Also, provide all the Rev OPS sales, run everything, and provide sales enablement. That’s a whole other piece there that typically disconnected in some way from the marketing materials and functions of sales intelligence so that we can look at and say all right, every sales call that happens is a customer interview. So, what do we do with that information and feed that up and down the organization? Sales intelligence. And then closures as a service. So, we take every call and try to turn those into deals.
What’s interesting to me then is from what you all provide, we very often must deal with contracting and that’s huge. Piece the back-and-forth touch points that happen on the close and the sell side. Some people do that tremendously well and tremendously poorly. So, I see the need for solutions.
Hemanth:
That’s awesome. So, from your perspective, with what you’ve seen so far, do you think the companies can manage from the time they got the lead to the close? What percentage of them are ready to have a smooth operation from the lead to the close?
David:
Oh, none of them are. And that’s the nature of it, we intentionally walk into and look for companies in the early stages. We’re talking about companies that have not broken the six-figure revenue mark yet. Or rather, broken out of it so they haven’t broken into the set. We find that interesting. That’s a point where you could do a rapid scale from over a couple of years. Let’s say you’re 500,000 to and get pre-funding, so get that 500,000 to 5 million, maybe 10 million type of mark. These founders have figured out how to make sales up to a certain point that we have proved viability, but that’s about it. And now, how do we take it out of the founder’s head and make that into a scalable operation where it’s no longer? Just figure it out as you go. And then very often that will lead the way to having to scale and fix operations around finance. It’s customer delivery, customer success marketing, all the things. Revenue is the Hub, it drives everything, right? That’s not to say we should be money-hungry and break all the things just to score revenue, but if you don’t have it, it’s not a whole lot to talk about in the business.
Hemanth:
That’s very interesting. There was a myth that contract lifecycle management was only for big companies, the companies who are making 50 million dollars, $100 million in revenue, and beyond then you need a contract management system. So, from what you’ve seen with and without a CLM, what would be the difference that you would be able to see some examples that you can give?
David:
Yeah, absolutely. Do you know what the worst thing is for us? We use certain systems, and every company has a different one that they want to work on from the revenue perspective, so it’s easier for us to walk into companies and say let’s use Google Workspace. Let’s use HubSpot. Let’s use Slack. However, most of them, either before or after we’re done, are selling on a mega scale. And in almost every case, those companies are on Office 365. Hopefully, it’s not an old version of that, and all kinds of stuff going round and round and round. I mean it’s a huge frictional point. So yes, you need that at every level. It would be brilliant for clients to be able to say, “We’re going to deploy this contract here. You can get into the system and do all the things you need to do. There’s version tracking and then we can finally agree on something and sign it”. We can only hope that if employees were introduced to a solution that they could work in, and not have to open a Google docket, then maybe they’d be amenable to it.
Hemanth:
Absolutely. So, it’s interesting that an organization of 10-30 people will grow into 50 people-100 people; it just keeps growing. But if you don’t put the right infrastructure in place, then your growth is hindered, right?
David:
Oh absolutely.
Hemanth:
So, visibility is key, right? Who you’re assigning to, what the touch points are, and how fast you can close a particular deal. It’s all about starting and getting the deal done as quickly as possible with the best terms under the circumstances.
David:
Yes, you want to think about cash received really. Particularly a small company and knowing that large companies might drag you out to net 90 days, so you have a significant problem if you’re starting to go up into these types of things. At that scale, you must deliver things before you get paid for them if you want to have larger clients. And I see that at the small company level.
Let’s figure out how to carve 10 days off that review cycle so you can have space to pay for things, otherwise, you’re borrowing against your cash in the bank at that point. I think that’s the place that makes a big difference.
Hemanth:
Makes sense! From their perspective, from the executives, the CEOs, the CFOs, and others, do they see the need to move into the 21st century and see the importance of how to use some of the solutions available to them?
David:
The nice thing about working with small companies is they know when we’re thinking about the cloud-enabled. It’s not unusual anymore that everything runs on point solutions and SAS integrations, which is the biggest question there- does it play along with the other things that we use?
And I think some of the solution buying perspectives are that SAS can quickly become death by 1000 cuts where they question if they pay by this seed or have a license. I liken it to when you thought you didn’t have a cable bill anymore, but now you have 16 different streaming services that cost more than what your cable costs. So, you must pay attention to that as you’re building up the stack, but there’s no question that I see a willingness to do that, and certain solution points make a lot of sense. I think from the SAS provision perspective, you want to build something that rolls up a few in-point solutions so that people can say that accomplishes a need they had, and it integrates where it should. That’s the buying consideration and that’s a good thing for a SAS provider because you can say which providers target providers, MSPs, solution providers, channels, or referrals and say we integrate with that system and that’s the one that they recommend. I think this is a business development strategy right there.
Hemanth:
One of the interesting things is if you don’t have your system together if you don’t have a good solution ready to go, it shows your customers how disorganized you may be. So, contracting is not just an internal function. It’s an external function. Do you agree with that?
David:
Oh, absolutely. The degree to which you make it easy to buy and even pleasurable to buy from and finish that with their customer. I want people to resonate with it. If you have a nasty process, you’re going to require your salespeople to say that it will be great after the fact, but we just need to get over this miserable setup process, and no one wants to hear that. You force your salespeople to say our solution is great and dealing with the customer service people is great but dealing with our finance and legal kind of sucks. And I’m sorry, I’ll do my best. Don’t make your salespeople do that. These are all touch points that can be beautiful and smooth.
Hemanth:
When we started our company, our thought was contract lifecycle management is for everyone, not just the bigger companies and not just the mid-sized companies. It’s for very small companies, too. Even companies with just five people. ten people, who are just starting to get their $1,000,000 in revenue so there is interest because they think they can do about 50%-70% of the work that way. And you don’t have to redo it again and again because you would have gone to external counsel and gotten certain positions. What are the top three things that you would like to see in an ideal solution?
David:
I would want to make collaboration amongst departments on both sides much easier. You’d be surprised how hard it is to get anybody to sign up for a new system of anything. And make it as simple as possible to open something in a browser and just say, “Let’s collaborate on this”. Also, I think understanding all those user personas is important and lastly, I would want to set risk tolerances for which things I’m willing to accept or not.
If you want to compress the deal, reduce the risk, and get it signed as quickly as possible with no friction to the external world, you will have to get your internal act together. Those are the building blocks.
Hemanth:
I would say number four is that integration point. “Yeah, I’m running on some kind of financial system. The RP, QuickBooks Online, what do you have?” Our bill pay systems integrate properly. Our CRM integrates properly. And we have a project management system and everybody who is on the delivery team needs to know what’s going on. Then you could say, “How exactly do I put this now executed document in front of the people who need to do things with it because it needs to turn into a billable event and a billable schedule and a delivery schedule? And what did we agree to? Are there any terms out of the normal packages that we have changed to get that deal done?” You care about the delivery and customer experience side so that whoever does the onboarding call knows exactly which things were negotiated in what way. The only way to do that is to go through and make a recording for the onboarding team from sales. But, if they do that, they’re not making deals. They’re not on the phone. And then you make a mistake, and your delivery people get on the phone with somebody who’s already onboarding. And then they want to know why you aren’t aware that they already had a conversation with sales. Huge things can be accomplished with that integrated point, and it all comes back to the contract.
David:
Integration is a great thing, right? I mean, you said integration and collaboration. So, think of having Slack within Slack. You want to be able to collaborate on the contracting system so bring that enterprise all together to a place where they’re comfortable.
Get those APIs to automatically bill that contract, and send that invoice out right away. Oh, that would be nice. Do you know why? Because that drives faster commissions. And we like that too.
Hemanth:
Thank you so much, David. This was such an insightful conversation. We learned a lot from you. Anything. Is there anything else that you would like to tell our viewers from your perspective?
David:
Well, first, I hope all the viewers are booking enormous contracts so that they need to start thinking about this problem. So, the first thing I wish for you is a great deal of volume. And, if anything I’m saying resonates with you and you have a business that is driven by a founder somewhere in the six figures and you don’t know how to get to the mid-sevens, that is the place that we enjoy working. I post all kinds of fun tidbits, videos, and podcasts on LinkedIn. You can also check out the leaders of B2B podcasts where I am one of the hosts and we interview B2B executives and founders just about their journey and finding out best practices. Lots of fun stuff, always happy to share insights and learn about fantastic new opportunities for business process excellence.
