 Hello. Hello, everybody. My name is Jordy and I'm going to talk about how three engineers built a saleslet company Before we start I want to give you a couple of numbers. I've got 27 minutes to give this talk 115 slides, so if you do the math 27 minutes 60 seconds per minute 115 slides, that's 14 seconds per slide. So it's gonna be a lot of content There is also 86 numbers in this presentation on the slides alone if you include the screenshots There are more numbers in this presentation than people in slash. There's over 17,000 numbers So we're gonna do numbers today first. Let me talk briefly about myself although my friends already introduced me My name is Jordy Romero. I'm founder and CEO at factorial factorial is an HR software company That helps thousands of organizations around the world mainly Europe to automate all of their processes We started the business seven years ago with three engineers and we built a very fast-growing business That's mainly sales driven with hundreds more than 600 people in our sales team Notice one thing that's missing in this light. And this is something I like to make fun of European founders I'm not the PhD MD X McKinsey game behind all the weird suffixes that people put on their job titles Because I'm a pretty simple dude and that's actually very important for this presentation We're gonna talk about simple concepts. So before how do I introduce myself as a sink as a simple person? Well, I'm a founder I'm also CEO I'm a dad. I'm a programmer I'm an investor. I have a coffee business in Barcelona. Actually, you're all welcome to come. I Also own a co-working business. I host a podcast. I like to sail. I Like to climb I do yoga and I do woodworking to relax myself and not be in front of a screen So that's a simple guy for you. So now in summary what I'm where I am is a nerd I'm a computer engineer. I've been a programmer since I'm 13 years old and I approach business the same way I approach everything by just trying to understand things like people call these first principles I just call it thinking hard understanding the problems from the basic fundamentals So before we get started about how we built a sales machine at factorial Let me give a couple of runs. First of all, everything you see on the internet is not true I guess you all know that but you founders many of you. I'm sure our founders tend to go online and read about how other companies did that and what their playbooks are and what their recommendations are and I Recommend you don't do that at all. The second thing you do as founders Is listen to the crap that we see is like to tell us and I highly highly encourage you to not do that Which is they're great They can give us some money and share some experiences connected to great people But it doesn't necessarily mean they know how to do our job so I would just warn you to not listen to everything that this is will tell you and I also want to encourage you to be aware that you probably know more than you think if you actually stop and use your Brain and stop listening the noise around you and do simple math. You can actually figure things out thinking hard That's a concept. I really like it just means stopping what you're doing right now and understanding deeply What you're doing while you're doing it How does it work break it down to the simplest smallest number you can come up with that's what I do as a nerd anyway And lastly what we do is hard building company scaling businesses is hard But for most of us is not rocket science for some of you it is but for me definitely wasn't so anyway back to the talk We are not gonna talk about PLG. You know what PLG is some people call this thing product-led growth For me product-led growth is the opposite of what I'm gonna talk about. It's a complex thing I ask this is made up this concept and I asked them what it means and they all give me really complex answers So am I is it self-service? Is it a virality product? Is it inbound? Is it what does it mean and then they just tell me a bunch of other complex words? So I'm gonna talk about business and business from my perspective is very simple You know what to me a business person is a business person is somebody who knows how to count Is somebody who understands their business to the simplest most basic numbers if you can do that You can run a business and that's what we're gonna talk about today more specifically We're gonna talk about go-to-market GTM So how we build a sales machine being three engineers being myself a simple dude that knew how to count so I'm gonna start with one of my favorite VC sayings and that's actually something I found online And then I met this VC and they told it to my face You cannot have a sales team if your ACVs are not higher than fifty thousand euros or dollars or whatever And I asked the guy Okay, why and they started telling me about these playbooks and rules of thumb and then a bunch of acronyms And I'm like yeah, but why can you can you explain to me with numbers? Can we do the math together and my conclusion is 100% bullshit? Like I don't agree with that and I'm actually gonna use that example that particular phrase from many VCs for many people many experts Online in why this bullshit and how to train you hopefully to do the simple math So in the world we have constraints Constraints are just part of nature the reality and we need to understand them But they are real constraints and they're made up constraints So I'm gonna start with the real constraints. You know what's one constraint that they use all the time Well, there's 12 months in a year, right? So we're gonna use this concept a lot this 12 months in a year That's real the way we count months and years. There's 12 of them. They're 20 days in a month interesting number There's sorry 20 working days in a month. There's 24 hours a day Most of us are only able to work around eight hours a day. So this is an important number 12 months 20 days eight hours People typically don't work for free So we need to embrace that there's gonna be some cost to these hours that we're gonna put towards building a company We tend to have limited money in the bank And if not, it's good to think that we have limited money in the bank and just try to scope our investments in a way That makes sense and then we have some other real constraints such as Gross margin in this case I put 85% that's our gross margin That's pretty typical software as a service or software business gross margin So I'm gonna tell you why this is important in a second But anyway, those are some real constraints when we plan or model out our go-to market And we can see if we can scale with sales people with an ACV and average contract value and your contract value below 50k then we need to have these real constraints now. There are some other made up constraints For example, one of my favorites sales people make 150k a year VCs say that in Silicon Valley can be true, but it can also be not true You know what's true the top 1% of workers in Finland make 91,000 euros or more the top 1% of the population make 91k or more Which means if you want to hire in your sales team the top 1% earners in Finland You need to pay at least 90k But if you're fine with the bottom 99% then you don't need to pay 90k So that's an important thing to keep in mind the top 1% in Europe is 46k It sounds weird because all of us are in tech but the reality if you look at the statistics is you don't need to make 150k to sell software and I'm gonna show you why Another one that I like is a bunch of acronyms the quotas versus AES OTE I don't know if you know what that means the quota is the objective you give a salesperson and AES an account executive is how we call sales people and OTE is on target earnings So it's how much the salesperson is expected to make or supposed to make if they hit the quota So that is one rule of thumb Which is that the quota should be five times their OTE meaning if you pay them 100k they should sell at least 500k But first of all, maybe you need to pay 100k and second of all, maybe that's bullshit Let's figure out another one Ratios, so there are a bunch of ratios SDR token executive SDRs is how we call sales development Representatives the people that typically find sales opportunities and hand them to an account executive So that's how a lot of sales teams work. Somebody somebody provides leads. That's typically marketing Somebody qualifies these leads that's typically an SDR and somebody closes these opportunities into customers That's an account executive and then if you care, there's an account manager that will take care of them But anyway, one-to-one SDR to AE ratio. Is this the right ratio? Somebody has an opinion on this. No, I see people saying no, maybe this is the right ratio Maybe this is our ratio. I don't know. I don't care But what I get about is there is eight working hours in a day I need to pay people money and there is limited amount of stuff you can do and there is limited money in the bank And we'll do the numbers bottom up. So anyway Back to LTV That's when you divide the cost of getting a customer by the amount of money this customer is paying you over their lifetime Interesting number. Maybe we'll see can't pay back period. That's how many months typically measured in months It takes for you to get the money back From an investment in acquiring customers. These are all made-up concepts. So again, we're gonna talk about go-to-market From force principles. I had that expression just doing basic math. So let's math together This is pricing 99 euros per month. This is a good pricing or a bad pricing Somebody has an opinion. I think it's like the worst pricing ever yet. It's super common But I'm gonna use the worst pricing ever in this example So we're gonna assume that our customers are gonna pay 99 euros a month Why is this bad because probably doesn't reflect the value we're delivering to our customers It doesn't take into account how much value we're giving them So maybe there is a usage pricing per seat pricing per module pricing that we could use But anyway, I'm gonna use the worst possible pricing. I see bdb sas companies use which is 99 euros per month Now 12 months in a year. That's a fact 85% gross margin. Maybe that's a fact. Let's assume that this is a fact So first math 99 euros times 12 months times 85% gross margin That means that each customer is producing roughly rounding the numbers 1,000 euros of Gross margin. That's like what you actually keep as a business after you serve your customers. Okay This pricing 99 euros a month times gross margin 1,000 euros Let's use this number as our ACB for the example again. It's pretty bad business, but we're gonna use that Now to get a customer you probably need to talk to multiple potential customers. We're gonna call them opportunities So in this example, I'm assuming you need to talk to four opportunities to get one customer So we call this a 25% conversion rate from deal to customer. Maybe that's the case. That's reasonable. That's what we do Now how many customers or potential customers? Can you talk to in a day? Let's say four. That's four demos for demonstrations If you're selling software like we do you do a zoom call you show the software you ask a bunch of questions And then if they like it then you eventually sell to that customer. Can you do four a day? Yeah, I think you can do 18 a day, you know 8 30 minute demos plus half an hour to kind of manage the next them on so on Let's say we only do four a day because we prepare them really well and we don't work that hard and we Don't want to pressure the people so they can do four demos in a day 20 days in a month again That's a fact more math for demos a day times 20 days in a month That's 80 demos in a month Let's assume we close 25% as we said before of these demos into customers That means one account executive one salesperson could potentially bring 20 customers in a month Now that's a bit generous. I'll give you that one person 20 customer That needs to be a very high velocity type of business. It can be done. We've done it It's not an average. Let's say they only do 10% conversion rate between a demo to a customer That means 10 meetings one customer instead of four meetings one customer is 10 meetings one customer That's very low. So if that's your conversion rate, I would say change something like this is not very efficient Maybe the problem wasn't the ACP to begin with maybe the problem is you don't know how to sell Maybe the problem is you're talking to the wrong people. So actually I would say that was something like a 20% conversion rate That's conservative in my opinion 20% means every five demos one of them is gonna end up being a customer That means one account executive will produce 16 customers in a month 16 customers in a month 12 months in a year math 192 customers per account executive now times 1,000. That's 192 K So this one account executive hypothetical was able to generate in this pretty conservative terrible pricing business 192 K of revenue I don't know if I'm allowed to say it but So 192 K now this is Martha's here the saying wait a second How can you do four demos in a day? Where are these demos coming from like it's somebody handing you these demos? Are you doing it yourself? Then you're not working at hours today. Then you're working more So let's assume there is an SDR a sales development representative that's feeding demos to this account executive So let's figure out. What does an account executive? Sorry. What does an SDR do? They do phone calls they do phone calls they do 60 phone calls a day They try to do 60 phone calls a day now out of these 60 phone calls Maybe 20% actually connect the other one people don't pick up the phone or they hang up or it's a wrong person or whatever So let's say an SDR is doing 60 phone calls a day Which is a very reasonable number out of those 60 only 20% actually mean something so that's 12 calls And there's 20 days in a month so 12 times 20 equals 240 successful calls in a month 40% success rate meaning we qualified we qualify sorry 40% of these 240 Successful calls that we did that means we're able to book 96 demos Now you remember how many demos that I can executive was able to do in a month. That was 80 for demos in a month 20 days For those in a day 20 days in a month 80 we get 96 from one is the R Which means one to one ratio is actually good in this month one is the R come pull off 96 demos one account executive can handle 80 and together they can generate 192,000 euros in a year But this martyrs is saying here wait a second to do 60 calls in a day. Who are you calling? Where these phone numbers coming from are there inbound leads? It is a database somebody needs to be feeding you that That's gonna cost some money. That's you know, that's gonna keep playing in the mouth So you're right. We need leads to be able to feed the SDR Now the problem is if I keep doing math this way all the way to the Visits to the website is gonna take me two hours and I only have 27 minutes 14 seconds per slide So I'm gonna change framework here. I'm gonna stop doing this basic math I assume, you know how to multiply and divide I'm gonna talk about payback periods, which is Made up constraint. They actually like it's a way to size an investment in acquiring customers So here in the screen you can see 24 little circles Each circle represents a month in this hypothetical case each month is 99 euros Which means that for every customer for every euro we spent to get customer We're gonna allocate them in months one example. This is a real example It takes us three months of payback period, which means 300 euros more or less and 99 euros a month To generate the lead that will become a customer So do the math conversion rate divided by the conversion rate and that's the cost per lead If you're paying at for example, you can see you need very cheap leads if you only spend 300 euros in marketing for this customer So that's a challenge with this pricing. We'll talk about that You spend 400 euros in SDRs to get this customer and you spend I think that 700 euros in account executives to close this customer So you understand this concept? We size our investment in acquiring customers in how many months of their recurring subscription It's gonna take to get the money back Simplifying if it's gonna take me 14 circles to get a customer like this case It means I'm gonna pay 1400 euros upfront and I'm gonna get 100 euros every month until month 14. I'm break-even Month 15 after making profit if you want to be super strict You can multiply this by your gross margin And then you have your gross margin adjusted payback period, which private equity likes But let's go back to the topic. This would be PLG. I guess I don't know what it is But in this example, we're spending seven months of payback period in marketing and then the user kind of figures out the product themselves There is no qualification. They're ready to buy. They just press a button and then maybe an account executive just negotiates the contract So that would be a hypothetical PLG Payback period. That's us. That's factorial in some markets Not all of them in reality. We spend three months Generating a lead. Why is that? Because we do organic traffic. We do things that are scalable and they're pretty cheap incrementally then we have a very efficient machine of hiding training and Working with SDRs and account executives in strategic locations So we're able to spend only one month in the SDR team and two months in the account executive team Again in some markets to get our customers now. This is also us factorial in different markets So traffic is more expensive. Maybe our SEO is not so good and we need to pay some money to Google Maybe the SDRs are harder to hire and maybe the account executives take longer to close So, you know, you adjust these numbers, but you can see 12 months payback period by the way in general pretty good 24 months. Well nowadays is not very popular Now that's also us. I don't only want to show the good stuff We started doing paid marketing paid marketing basically means you pay a lot of money to Google and Facebook and LinkedIn but mostly Google and Facebook and they start sending traffic to your website and then You keep spending money and they keep sending you traffic and the thing is it can very easily go nuts Which is what happened to us So we started generating this type of customers and then we realized and we stopped but you know paid marketing is dangerous learning for the future So if you torture the numbers everything is possible, but what's the point? Okay? Let me tell you the point You actually have to torture the numbers this document. I'm sharing here. This is a document We use internally is real. I blurred it a little bit We call it Samba because it's a cool name and it stands for sales and marketing budget and the A's in between So it's pronounceable. So Samba is the most important document in factorial It's a document that has close to 17,000 numbers as I said more than people in slash. Let me zoom out for a second That's Samba for one country. By the way, we operate in nine countries That's Samba zooming out and then let me scroll That's Samba scrolling so all of these numbers on their own They're very simple like each number is the atom of what we're doing How many visits are coming to our website? How many of these visits are giving their contact details? How many of them are being called by an SDR? How many calls? How many qualified opportunities? How many meetings? How much do we pay the account executive? How much do we pay for the lead all of these numbers each in themselves? They're very simple to understand five-year-old can understand these concepts So we use five-year-old numbers and it makes sense. It works. That's how we use to track our business So my advice to founders, especially founders that I go with numbers and I hope these all of them It just do the numbers just don't assume because internet or VC said something something's gonna work or not work So how did we do it should say with the right? Apography well first of all we started doing organic traffic Why because our pricing is not 99 euros our actual pricing it's complex But on average we end up making like four to five hundred euros per customer per month So it's better than 99, but it's not like 50k So we need cheap leads and what's cheap and scales organic traffic SEO content We are big believers in content So we started with organic investing very heavily seven years ago when we started a company first couple of employees were Engineers the next one was an SEO person the next one was a content person So very early on we believed we need to start building this asset We have software and content and these are our two assets The second thing we did is inside sales because we sell to HR managers and HR managers are not necessarily ready to just press a button Put the credit card and PLG they actually need someone to ask questions things are complex Is this law is this country is this whatever problem I have being solved by your product So we created an inside sales team that talked to the traffic to the leads that came from the online traffic and close them And actually surprisingly to me We even did outbound which means that we didn't use the free traffic that came to our website We created a team that found databases of opportunities and just called call these opportunities and believe it or not same payback period So if you can do it very efficiently if you prepare these databases feed them into your CRM and have a team That's very fast very agile and high velocity calling these databases and you have a product that helps a lot of people potentially So there's a lot of yeses and a lot of no's but a lot of yeses then you can make outbound work We made it work 25% of our growth comes from outbound with really small ACVs that blows the mind of all the VCs I ever met then we started doing pain paid and I said pain because that's what comes to mind when I think about paid we got into horrible pain We spent millions of euros in not generating millions of euros worth of business So we stopped doing paid we do a little bit of it, but only the the really profitable on and We now moved on to channel channel sales means other people's other teams sales people So instead of us scaling more and more and more sales people I told you we've got around 600 people in a sales team. We said where is this gonna end? We want to continue growing, but we don't want to have 10,000 sales people 60,000 sales people So we said a lot of companies out there have sales people and then they don't have enough stuff to sell Through that sales people so we started doing business development and strategic alliances and channel partnerships And it works This year we're gonna be doing around 20% of our growth coming from channel sales at the end of the at the end of the year So it's another way to make it scale again to the numbers self-service. That's something we didn't do Some people said that what we should do we try we're not very good at it. I think we'll try it again I think eventually we'll do it, but this is something that we're thinking about now. What metrics this this led to First of all, we've been growing 3x for the last few years It compounds to pretty significant growth from zero to many tens of millions in revenues We managed to get six months payback period in some markets not in all markets, but again extremely efficient We managed to get our customers to stick around for long and even upsell and grow with us with 120% net revenue retention in some markets Not all of them and it led us to 1 billion euro valuation an American billion of euros Unfortunately last year when we did our series C labia Tomiko of 120 million Where 1,000 people in the team still growing extremely fast all across Europe Latin America and North America and To close I want to touch on two more things one is this type of business the one that we created which by the way It's not for everybody it requires a certain company culture anything. That's very important as founders because You need to math and you need to really understand what your culture is not what you want it to be What it actually is and then be consequent This is a culture that requires high velocity all of these numbers you saw here You're gonna be slacking you need to be delivering moving forward all the time And when something goes off track, you need to cut it fast You need to make a lot of decisions and you need to make them fast, which I call high velocity You need to set pretty high goals Not high velocity there we go you need to set pretty high goals because you know You're pushing everybody to do what most people believe is not reasonable So you do the math it makes sense but people say wait, but you know and I can't exactly if you support No, but an SDR is supposed to I don't care. I did the math this can work. You will see This is very hard to get started When you get one person Actually doing the numbers that your spreadsheet show that's magic when you get two people You're done. You just need to keep hiding people putting them next to these two people and they balance themselves out Obviously the ones that don't work out they need to rotate out and replace them with somebody who will hit it This requires a highly educated team, but I want to highlight one point this highly educated team Needs to be highly uneducated before they come to us Because if they're highly educated before they come to us, they think they know everything and they know it wrong They know the playbooks and the rules of thumb and the things that are written on the internet and the VCs say So we need smart people that know how to count It's very easy and then we do the numbers for them and we say look, you know 12 12 months in a year 20 days And then they get it so we need to invest in helping people count That means that our profiles are quite unique We need people who are open-minded who are willing to break all the rules and do things that sound odd at the beginning And you know eventually make sense It also means that location is important Maybe San Francisco is not the best place to have 600 salespeople for a SME software business Probably not But there are other places in the US there are other places in Europe. There are places everywhere But again most of the population would be very happy with a fraction of the salary of a San Francisco Bay Area salesperson So don't constrain yourselves Make trade-offs That also means we cannot hire very senior people for some of those roles that scale because the numbers don't add up now At the beginning that was a challenge as we grow and you know the scale of the whole company grows Then we can afford to hire a few very senior people because we only need a few of them And we can amortize them among many many customers But the roles that scale meaning we have a lot of them then we cannot hire very seniors people We need to hire people that are early in their career Show them what's possible pay them very aggressive variable compensation and the good ones will make a lot of money and show the others that It can be done And it means that outside playbooks are forbidden when we interview for executives at factorial Which is a very hard thing for us to do because we need to kind of make them forget everything They think they know the first thing that we look for are playbooks and if we interview people that know all the playbooks They're out Because they don't work in our business. They need to create their own playbooks. So last learnings from as an engineer figuring out a bottoms up go-to market First of all 100% bullshit was true. You can have sales people in an SME software business. We have it It's profitable. It scales tremendously well Number two There are millions of people out there that are very talented that you can hire for 20 30 40 50k I'm talking European salaries, but it's true That's the majority of the people and I'm not even talking all the continents. I'm just saying in Europe So do we think these people are not smart enough? Maybe they just don't know what size is we can teach them It's very easy to understand what size is it's easy to sell if you're a smart person There is tons of talented smart people out there that you can hire and teach them what they need to know Now that said hiding is hard So you need to build your own proprietary Hiring methods and interviewing send hiding managers at the end of the day is a people business So you need to have people that are very good at smelling the right talent at detecting the raw talent because it cannot be proven Because if it's proven it's too expensive, but if it's raw then it can work and then they can grow with the company It's very important to teach people how to count Hopefully some of you will go back and say oh shit and ever counted and you're gonna start counting in your business So I'll be very proud if that happens and you need to build your own model again Samba very easy start with the bottom and just build it up 17,000 numbers in one. How's it called? tap of the Google sheet so Enclosing Three action items for you one give factorial a try if your company's not using factorial of course. I'm gonna sell factorial number two Come talk to me. I'm actually very shy Number three if you're also shy just follow me on Twitter and we'll talk there. Thank you very much. I hope you liked it. See you around