Todd:

Well, welcome, Paul, to the podcast. I appreciate you taking some time to to talk with us.

Paul Lemberg:

Hey, Todd. Thanks for having me.

Todd:

Yeah. That's great. Well, maybe we could start with just a little bit about your background. So I know you're a business coach. I know you've helped a lot of software companies over the years, and we'll talk about some concrete examples of what you've done in your methodology, but maybe just give me a a small snapshot, couple minutes of kind of your background and and how you got to this point.

Paul Lemberg:

So how I got here is actually kinda weird. I have a fine arts degree. I went to, school and studied photography, and I got out there. I didn't think I was that great an artist, and I didn't wanna starve for what I felt wasn't great at all. And I said, what did I do instead?

You know, I went to art school. I wasn't trained to do anything. And, I got out. I didn't know what to do. I started a software company.

And, actually I went into the software business. I was programming. And, I had learned a really interesting thing, which is that I had no training in software. I had no training. I had no education.

I had basically nothing. And somehow financed myself a job. And, at the time, there were people who had finance backgrounds and music backgrounds were considered good for software. Yeah.

Todd:

You have to be creative.

Paul Lemberg:

So I so I leveraged that into a job and walked in and kind of knew what I was doing immediately, which is makes no sense. I don't really understand it. You know? I feel like I got gifted that by the powers that be. And, you know, so that's something I can really explain.

But once I understood what had happened with that, which was that, oh, I can just sort of do anything. And, and that's really how it worked. So I found myself in the software business. I was working for General Electric and had the impression that they were never going to give me the top job. That was just how I saw it.

And I said, well, what am I gonna do here? And I ended up starting a software company. Basically, I wrote software that ran some of the world's largest banks. And we all ran that badly. A lot of people sell their companies not out of success, but out of failure.

And, we had this great software and we had a great customer list, but it was costing us, and everybody should pay attention to this, it was costing us more to get a customer and onboard them than we were making from them. Oh, that's nice. So we were in that situation where the more customers we had, the faster we were losing money. And people who who listen to me say that and think that that's a really strange thing, I think you need to really pay attention because it happens. And I've seen it happen over and over again where people are losing money on new customers.

They're just not making you know, they don't know what it's costing them to bring a customer in. And we were doing all sorts of customization on our software for new customers.

Todd:

And

Paul Lemberg:

it was costing us a fortune. We didn't realize it. We were running out of business and going bankrupt and weren't clear it all. Trying to raise some capital which you couldn't do. This is in the early eighties, the early nineteen eighties.

The people weren't investing in tiny software companies at the time. Yep. And we ended up sapping around for money and ended up getting bought instead.

Todd:

Okay.

Paul Lemberg:

Which, you know, which is not a bad thing.

Todd:

No. No. Well, it's good. And so then how did you turn that into kind of a consulting practice?

Paul Lemberg:

Well, we, I we sold that company. I I say we. I had a partner. And the two of us sold that company, and I got fired by the, the guys who bought me, which is also not unusual. Right.

And, I got fired, and they, in doing so, ended up groping my non compete. So I ended up starting another company in the exact same business Yep. And ultimately sold that one to a large German bank.

Todd:

Okay.

Paul Lemberg:

Went through the day it's for a while and realized that this wasn't gonna be my future. And I went into I ended up getting a job in in the consulting arena for giant technology companies. And, I learned a time there. So this so this basically, what I was selling was consulting and market research to giant technology companies, companies like Dell computing, what was then New York Bell, and EDS, and, like, IBM. I could go on for a while.

Yeah. I did this work. It was as far as jobs go, it was a great job. I was getting paid a fair amount of money. I was traveling all over the world.

I was working with really interesting people, and I was learning a ton. So it was like, as far as jobs go, it was great. But I woke up one day, and I realized that the people I was serving weren't really my tribe. And I realized that we figured out a hundred million dollars to Cisco's bottom line, and the guy who managed that got fired. Yeah.

And I was like, this isn't really how I see it. You know? I could add a a million dollars to your personal bottom line, and it would make a difference. Sure. And I wanted to be working with people that, you know, the work was really changing their lives.

So I went from being a consultant, you know, a large company consultant, to wanting to support entrepreneurs.

Todd:

Okay. Great.

Paul Lemberg:

And that's you know, when I had that idea, it was like this big, like, you know? And the was transformative because so I have this personal slogan. My slogan is changing the world with an entrepreneur at a time. And that's the thing that drives me on a daily basis. You know, in some work that I'm doing, making a difference to somebody, and in terms of their work and their life and their family's life and their community's lives and all the people who work for them, changing their family's lives and their community's life and so on.

And that's that's what I'm driven by.

Todd:

Well, it's good that and that's a, you know, it's a huge impact if you can do that. Right? The trickle down effect to all those different people. So maybe, you know, it's like I spent a little time prepping for this and it really I was looking at your YouTube channel and basically a lot of the themes or the I think maybe your framework that you came up with that you use pretty consistently is the no strategy strategy. So maybe you could talk a little bit about, kinda maybe some of the premise and some of the, framework of that, because I think it's kinda interesting and I think it really does fit to a lot of startups.

This kind of iterative tinkering type of mentality that you have, an approach. It's,

Paul Lemberg:

it's really very simple, Todd, which is that the idea is that there are things in businesses that give you tremendous leverage. And and I'll give, like, a tiny example. Three is what is the long term value of of a customer? And if we can improve the long term value of a customer, we can transform the entire business. And to do that is not a big it's not like a big swing and and something that you can really mess up.

You can't mess this up. So you improve the long term value of a customer by selling them more things, and selling them more things at a higher price, and selling them things that fit with what they've already got, so whether they're upsells and cross sells. And we can look at that particular thing as a small, tiny change. And what's our strategy? Our strategy is we're gonna improve customer value.

Right? I mean, that that's really pretty straightforward. So there's a handful of there's a handful of things inside of every I'll say every software business, but it's truly every entrepreneurial business, and they cover every business. So I do behind the no strategy strategy is the strategy. There is a strategy, but it's it's super simple.

And the strategy is making small changes that relate to each other.

Todd:

Okay.

Paul Lemberg:

And you can make tremendous changes to a business. So I have a product called Formula five. That's all that in Stanford, it's this it's all about this this idea. And people can really do max gains in their business. Two times gains, and they can gain four times gains because you can do in one, and they can gain o times gains and so on.

Like, I don't know how to I don't know how to improve a business by ten x. Yeah. You know? How am I gonna ten x a business reliably? The role I do in this, I say, let's figure out how to double it, and then we double it, we double it, we double it again, and then we grow it a tiny bit more, and it's gone up ten x.

Yep. And Yep. It's foolproof.

Todd:

And maybe what you're saying though is it's a series of incremental pivots, based on kind of the data you have. Right? Whereas, you know, like, thinking about, like, a ten x, they're looking for, hey. Just launch this new product or change one thing, and we're gonna get this ten x return, which is high risk, high reward. And what you're saying is do, it's almost like Bayesian theory, right, where it's like, I have a set of hypotheses.

I'm gonna take a change. And then basically, as I get more data, I'll make another pivot. As I get more data, I'll pivot and then basically continue to a point where I've ten x my business.

Paul Lemberg:

And exactly. And each of these pivots are small. And you said at the moment ago, you said high risk, high reward. What I'm getting people to work for is high reward, low risk.

Todd:

Low risk.

Paul Lemberg:

Yep. Low risk. So even for these changes, and the thing about these changes is they compound on top of each other. If I was just doing a little bit of arithmetic, and I figured out that if we had five things that each related to each other, so that something in increasing, long term customer value and increasing the number of new customers, those two things relate to each other. So what we do is we look for things which relate to each other and gain small incremental changes, call it fifteen percent in each of these five areas, and fifteen percent in each of five areas gives you double.

Todd:

Right.

Paul Lemberg:

And it's just this is the terrific

Todd:

thing. Do you think, like so, you know, we work with a lot of startups too, and I I guess sometimes the level of maturity for the data that's real to get to what the incremental changes are gonna be is difficult. Right? And so, you know, we look at finance as a as a starting point where, you know, a lot of times a company that maybe is doing a million, two million dollars, maybe the maturity of the reporting on financials aren't great. And so figuring out even a CAC value, customer acquisition cost, or lifetime value, maybe they have some barometers to it, but usually it's not as specific as you want.

Do you feel like you have to go back in to make sure that foundational data is good to identify where those pivots and opportunities are?

Paul Lemberg:

A very single time. Yeah. Because yeah. You you said it well and you say it very nicely. But firstly, if I walk into a new customer and I say, what he does margins across the board, they can't tell me.

What? Simply don't know. Right? And if I say, what's the average value of a customer over time? And they simply don't know.

And basically you don't know any of those things, which is why, and you ized it in my list of what things do you look at first. And the first thing you look at is to start to normalize your data.

Todd:

Okay.

Paul Lemberg:

And understand your metrics and figure out what things that you're actually gonna look at. And I just threw out a couple of them casually, which are like, what's your average gross margin and what's your average net margin? I'll tell you a really interesting thing about net margin, which is that if we figure out that we have a ten percent net margin, and that's kind of the average across all American businesses, if we have a ten percent net margin and we raise prices by ten percent, we've just doubled the profits. And I tell people this in a crowded room that everybody goes, how how can that be true? How can that be true?

And it's really simple, and I'll give you just the tiniest example, which is if we're making, if we're selling something for one hundred dollars and we have ten percent margin, it means that we're keeping ten dollars And if we raise the price by ten percent, so it's now one hundred and ten dollars the costs are still ninety, they haven't changed, and our profit has gone up to twenty dollars from ten dollars What's that? Oh, that's double.

Todd:

Right.

Paul Lemberg:

And and the math works out every single time. If we bring these places by the net margin, we double profits. Yeah. And it's not a hard thing to do.

Todd:

Well, I I I guess I've been in a bunch of businesses and I'm sure this is kinda tracks with yours. Right? So at the very beginning when you don't have a lot of customers, your price, you know, you're discounting hard, you maybe you're below your competitors, you don't have all the features, and so you go kind of the through this continuum of, like, I'm super cheap to I'm getting to, like, list price without discounting. And now I just wanna make sure that I don't churn these customers. Right?

Because I feel like if I basically do either net new, and basically, I'm gonna not it'll slow down my sales cycle. Or if I apply it to the base, then basically, I'm gonna my churn rate's gonna go up. So and and I think, you know, when you talk to entrepreneurs, you gotta figure out how sticky that thing is before you actually do some of that. But I'm curious on some of the things, like, is that a trajectory that you see with a lot of customers? Because, you know, even the company I worked at Concur, we raised the rates.

We are always the most expensive in the market. And there wasn't and it was a it was just a hard tool to get out of once you got in, and it was part of your workflow and it touched all these different, you know, parts of the organization, you didn't wanna rip that thing out. And so there was play price elasticity that we could actually do and basically but then you see some other ones where, especially in the SMB space, if you're working in the SMB space, there's a lot more price sensitivity. And if it's an easy product to swap out with a competitor, you have to be careful on the pricing.

Paul Lemberg:

Yes. You absolutely do have to be careful. You can't do this sort of willy nilly, but you can do it. And there's a number of different ways to justify your price hike, which is basically you're adding features or you're adding some kind of service level where you're adding something to it. But did you find that when you raised prices that your closing rates here went down?

Todd:

Generally, no. But it's like everybody says it upfront. Right? They get all freaked out that, like, basically the either the sales cycle is gonna elongate or I'm gonna lose some deals because of it. And then basically when you do it, it's usually not bad.

Like, nobody really bla bats an eye. And so but it's it is like, it is hard to get startups to, like, continue to increase their price. One of the things that I found that actually works pretty well is put in your contract, just a CPI increase because then when it's not a question, right? Legally when they sign their contract, you know, your your consumer price index, if that goes up two, three points, then you're getting that increase every single year. And so in that one, it seems like if they negotiated upfront, they don't even bat an eye.

And even if you don't do the price increases, you're getting it through at least keeping up with inflation.

Paul Lemberg:

That's a brilliant idea that I've never ever considered it. I like it. Yeah.

Todd:

You can see that. It's all yours.

Paul Lemberg:

That in my tool bag right away. I'm that's I've learned something to this. Great. Thank you, Tom. Don't say that's fine.

Salesman still in my career. But I'm pretty you know, from maybe two years into my career, I became a salesman. I I turned a load of them. I didn't wanna sit in front of a computer screen all day long, and I'd rather be out with people. What I find is that salespeople, and you know this, that salespeople who are concerned about price are usually bad salespeople.

And what they don't know how to do is figure out what the ROI on an investment is. And the ROI on an investment doesn't change that radically if we raise the prices. We just have to do the math and let them one of the things that I do, this is really a useful tip for people who are selling anything, is that I am never telling the prospect what something is worth. I outline how we get to whether it's worth something and then ask the customer, ask the prospect what they think it's worth. So if we say, oh, we're gonna sell them a tool, and it's gonna move for the easy way to cook for them to close customers.

So I don't tell them, well, with this tool, we're gonna be able to close twenty five percent more customers. I say, with this tool, do you think you'll be able to close more customers? And they say, yes. And I say, well, how many more do you think you you'll be able to close? And they say, I have no freaking idea.

And you just just legitimate, because nobody have any idea. But you ask them to guess. And the whole point is to get some vendors on the table, and if they just guess and they go, gee, I don't know. And I'm like, well, well guess. And they guess at something, and that something becomes truth.

Whereas if I guess that it, it's just me trying to sell them something. Whereas if they guess at it, it's truth. If it comes out of their mouth, it's truth. So I walk them through the entire calculation process, asking them at each step what that's gonna be worth to them. And they'll just outline what this thing is worth and we compare that to the newly raised price.

We just have to go through one of the elements that go into figuring the valuation and let them think about each one of those those and walk through the whole process. And if we have a positive ROI, they can't complain about the price. This is kind of my thinking, that greatest prices almost never cut down sales ability. They only cut down sales ability from bad salespeople. So it's really worth it.

You know, if your salespeople push back on you and they'll say, like, oh, we can't do that. We'll rule sales. Then we just need to figure out how they go out go about their sales process because we can work around that.

Todd:

Yeah. I mean, I think there's a natural tendency or there's a natural tension. Right? They have a bone they have a they have a, you know, they've got a goal that they're trying to get to, an OTE they're trying to get to. And if you're doing anything that makes more resistance to it, they're gonna push back.

Right? Like, you know, I've been around sales most of my career as well. And so, and so, you know, like, I think just in general, just on principle, they're gonna say you're making my job harder. I don't wanna do it. Right?

And so I'm gonna scare you in saying, I'm not gonna be able to deliver those numbers you've I promised you. And so but but I I do think so taking some of this that I think is really good. I think there's maybe an element to what you're saying about ROI driven, which is really value driven selling, really is what you're talking about. And so what you're trying to do and I what we've kinda preach a lot is there's a lot of work on the discovery side to draw out what the pain is. Like, what problem are you really trying to solve and then quantify it.

Right? Like, quantify, like, if you if you can't close these sales ones, what's that mean to you? Like, is it way more effort and your conversion isn't right versus the product that we're talking about, like your example saying I would close x amount more, then they basically self serve to solve the problem that they already said they have. And basically, they're already down the road of saying, I don't really care what it is. That's important to me to go solve.

Okay. And so I do think that a lot of times entrepreneurs in particular sell features and not value. And I think one of the key things that you're talking about is sell on an ROI, sell on a value, but you can't sell on value until you understand completely what their problem is.

Paul Lemberg:

I sell my pitching services ranging price from about eighty to a hundred thousand dollars on an annual basis. I'd love to sell that based on value. But by no ordinary metric, if we try to feed you that dollars per hour, it's a really nasty number. And you can't sell on that metric, but if I sell on, we wouldn't expect to get out of this relationship. And what do you think is gonna impact your bottom line?

And that call it that hundred thousand dollars if we drop an additional million into their bottom line, and that's I know it's going for that. And if you have an additional million coming into your bottom line and it costs you a hundred thousand dollars of your lease, That was a pretty big deal, especially when we get to that million and we say, well, what year do you think that's gonna work for? And they, you know, they have some big number. We'll multiply it by that. And and so That's exactly where I was going was.

Yeah.

Todd:

Yeah. That's where I was going was I think the multiple in in these SaaS businesses where, you know, on the low end, it's five or six, and on the high end, it's ten to twelve to fourteen. And so I think your talk track is right. If I can help you, you know, add thirty percent to the the enterprise value of your company for a hundred grand, that's up to you. Right?

Is that it seems like a decent ROI if I can help you get there. But The

Paul Lemberg:

ROI is tremendous. I once had a I once had a customer's partner. So my client, the guy who I was working with, who was the CEO, and he wanted a partner who was a solid, semi silent partner who was putting in money into their business. And the guy wanted to know why they were charging us while I was charging them so much money. And, like, he was sort of shocked by the whole thing, and he had figured out what the dollars per hour was, then he was sort of shocked.

And I said to him, well, what do you think is gonna happen in your business if risk is successful doing all the things I promised you? And he looked at me. He just looked at me and he says, oh, I get it. And that was it. That was the end of the whole conversation.

It's like Yeah. Let's think about value instead of comparing it to

Todd:

So maybe talk to me a little live. Go ahead.

Paul Lemberg:

Yeah. Pardon? Have you say that? Who's ever listening. You can apply this statement to you every new style and all of the stochastic if you're looking at the natural value that's being provided.

Todd:

Yeah. And maybe I drill a little bit, like, this is more of a pet peeve of mine is I think that entrepreneurs and and early salespeople go to demos way too fast. I think you gotta hold that sucker back. Right? You gotta mine and understand what their current process is, what competitors they're using, where are they having deltas, and then you start to do enough discovery where then you can build kind of a custom demo to meet their needs and say and and do you do all the anchoring.

Right? It's saying, here's what I heard from you the problems. And if the if our solution could solve those problems, that's valuable to you. Yes. Get them to anchor.

And then you go through the product and said, this is the scenario you said. Does it solve your problem?

Paul Lemberg:

Yes.

Todd:

And then you get them to, like, get to a contract. And so it just it's one zero one, but I think so many times they're so proud of the features they built. And it's the conception of the problem that they see, not the customer. It's their idea of what their problem should be.

Paul Lemberg:

That's very right, mate. And, you you know, when I was saying, back in South Korea, all the demos took three weeks. And that that's why I didn't hear that. That's sort of underlines why we were going back up pretty soon. Yeah.

That's just tremendous. And I once I know what I know now, because I didn't test exactly what you described it, we didn't notice that. My features were so exciting. I mean, we had to just sell them and demand these features instead of going through the inquiries. Like, what would test for me a bank?

Todd:

So maybe, Paul, like, I guess the next piece, you and I have some some parallels in this. Right? Like, I don't have your framework, but I have a lot of similar pieces to this. And so, maybe I'll just keep hitting on things that I have problems with after you tell them. So identifying problems in a startup is not hard.

Right? There's a lot of them. And so and then finding the number one that'll move the needle, you know, takes work, but it's not, you know, it's not rocket science. The next question is, how do you align the organization to actually go do it and execute and get the benefit of it? Right?

And so a lot of times you got smart people that are saying, Todd, I totally get what you're saying. That totally makes sense. But then the operational challenges of actually doing it are not trivial. And and, you know, and and, like, they don't have a lot of resources. Right?

And there's priorities that are conflicting. And so I'm just curious as you talk with entrepreneurs and you come up with these kind of pivotal ideas that are moving the needle incrementally, how do you create, an environment of execution that basically creates accountability for the recommendations that you make?

Paul Lemberg:

So the simple answer is I I really work with the chief executives. I don't work with any of these, not the chief executive at all. And the reason is because they can't make decisions that impose them on the company. The key value of coaching is not necessarily the information that gets provided, but the key value of coaching is somebody who can come along, who has the teaching experience to lobby the senior to take the action? Mhmm.

It's like, I can't do that for people in the library. Yeah. When I come in, I like so much experience that I can talk to the senior to take the action, but that's a lot of where the value is.

Todd:

So I guess so I think you're totally dead on and I do the same thing. I think there's more usually a forcing function. Right? Either somebody like an investor's pissed off, because of performance, you're running out of money. There's a there's a, a clarity lens that that's that's looming that basically people are like, I need to solve this problem now.

And so then there's clarity and focus. I think sometimes when you are coaching and you're telling them and things are going okay, it's just harder to get the cross. Like, you need to there's bad days coming and you need to, like, tighten up all this stuff. You're kinda fat. You your your percentage of revenue versus the number of employees you have is is kind of out of line for your in your in your industry.

And so I'm just curious if if that that resonates with you or if, like, you have different experiences.

Paul Lemberg:

So it's usually not it's it's what it's like. You've held it a four two function, which is a very interesting way to put it. And what I find is that the way I built people set up, so we start with a deep dive into the business. So we and we write out what's going to be the implementation strategy, which is battle short term. I look at it across a couple three months and not necessarily over that because I find that what did they say?

You know, no battle plan survives first contact with the enemy. Right? And the only long term strategic plan is bound to fail. So I write in there. The other thing is that the fact that you're putting a lot of money into point of leverage.

You know? You're telling me, what's going on here? Don't if I think you're on a drifting too much for your guys. Yep. I'm wondering if that's I have a great I have a great example of something that happened, whereas these guys went consulting from for hospitals.

They helped the emergency room teams and the surgical teams communicate them so that patients didn't die. The only thing where they run out their ad and say, it's this arm and then they'll write it's not this arm. Right? Like that, it's not this arm, it's yellow dyesha. And the idea of the idea of right around people, this comes from how, not create crews communicate, and that's what they call it.

They call it clean resource management. So these guys have this thing that we wanted that did the job, testimonials are less than them because nobody wants to say, oh, we're killing this many people and now they're killing this few. So they don't wanna do that. Okay? So I was trying to teach them how to sell because you have to make this sell.

If you have to make this deal with the chief of medicine, you can't get like a doctor who's gonna come with me and sell it to the doctor and you have to be sold to the chief of medicine, but they couldn't do that. That's nice thing to try. So I have a process for doing it that I got from a sales trainer named David Sandler, which he calls Right. Wood Junction. And Wood Junction is a brilliant place to be.

So I'm teaching this guy is this thing, though, and this guy was the alien. When I met him, he pulls cowboy boots up on his desk. He said, at one time, I was the top pilot in the US Navy. And I was like, wow, that's impressive, you know? And it turns out this guy was a top gun instructor.

So we know he was like real right there. So I'm trying to get him to go to Jim Johnston and he's kinda wimping out and he's not doing it. This goes on for a year. And every day, I'm hammering him about, did he blow up a dice? And he's like, no.

We didn't make sale. We didn't make the sale. He finally started doing it. And all of a sudden, he looked at it, the closing of those of these deals. And deals went from taking weeks and weeks to close to a week.

So we really did this tremendous damage in the business. So we got I finally got them after the course of better part of the year to do this, to change the way they were selling. And I also had been doing a PR program, which had with this poor luck, we landed on the front page of the Wall Street Journal. That helps the Wall Street Journal. Yep, Still landing in there and changing the way we're solving, we got an 8X jump that year.

Went from a rolling year of profits to eight million a year. And it was really like, you know, unbelievable. So I'm an email on that all the time, which is that I know that there's pushback and I don't really care about the pushback. I just keep pushing against the pushback. So when you ask, it's how do I do that?

It's really just force of will. You know, it's my flexibility and force of will. And I think that's that who's having letting the snow has got to do what I'm telling them to do. You just have to. And when they finally do, we get tremendous results.

Todd:

Sure.

Paul Lemberg:

Yeah. That's good.

Todd:

So they're under like, what about what other scenarios have you seen? You know, like customer attention, churn rates, like, is there any how does your model kind of apply to some of that? Because I think, you know, I think, I see startups that basically focus on sales and they get better at it and that's kind of a drug. It's like I get better and better, but then they forget about their existing customer or they say, you know, I'll just let support deal with it. Right?

And so they don't really take the customer through a customer journey, which is, you know, my experience in year one versus year three, year year five, I should be getting different value out of your product over time. And a lot of times, I think they're slow to kind of implement some of that. And so and that can increase attrition at times. And so I'm curious on is that a problem that you've seen and what sort of, coaching do you do around some of those topics?

Paul Lemberg:

Yeah. One of the things we need to do right now when we go in this conversation, that long term value of a customer. Problems of long term value is how long you make your study model review. Yeah. And that's to whether it's a SaaS company or whether it's a I don't know what the opposite of a SaaS company is.

What do we call that? Like brick and mortar.

Todd:

Probably brick and mortar. Yeah.

Paul Lemberg:

Brick and mortar. I remember a lot about we had to like to ship updates. And SaaS is, like, such a better model for the for the owners of the company. But the whole thing is one of the key values, one of the key methods that we have to track. And just like everything else, it strategy strategy model is returning our attention to the next piece of the business that we're gonna work on.

So we're gonna work enticing. We're gonna work on margins. We're gonna work on the long term customer value. These are the types of things that we're gonna work on. We're gonna work on product mix and so on.

And so one of the things that we're gonna work on is customer retention. So we start to do a deep dive around that and find out what most companies aren't doing is they're not finding out why you left. They have some cursory little survey that doesn't really give them any information and we make it in such a way that it doesn't get filled that well. So we have no idea why customers are moving. Whereas if we do a deep dive, I'm a big fan of, oh, talk to the customer.

I think people would know about it once. They they the private states will be only one of the problems that's why he's leading. And I say, well, what's the parliament? What's the password? And they're not, I don't know.

I mean, I haven't talked to he's saying, like, why is it anything? I had a client who we were talking about in implementing some intelligence. I don't even remember what they want. And he said to me, you haven't you know, I understand if there would work, and I still don't know the size of your customers. You have to do with your intelligence.

And I said, who's that you, Christopher Elder? And he says, for me. Since you're gonna sell them software that nothing is very interesting. Do you think you can ask them those questions? And to me, it's a funny thing.

It's like you just didn't really conceive of being able to ask the customer what their revenue is.

Todd:

Right.

Paul Lemberg:

So, you know, they touch on their wings. It's like, oh, why are they leaving? And what could we do to get them to stay? We do that and we go through that cycle, you know, we get you to stay with someone. We've had enough times, we start to develop a lot

Todd:

of information. Yep. You're starting to see patterns and then you can figure out ways to triage and fix it.

Paul Lemberg:

It's not exactly the idea of not asking the customer. It's anything that you need to know. It's kind of shocking to me. So when I look at what people don't do and why they're not doing when you ask about accountability getting them to execute, it all boils down to, alright, what are the things we have to do to make this work? And what are the steps?

And get them to be in the steps. And it's like you say, it's like, they don't execute. Take a look. Do you think there's a reason that you should be executing? Yeah.

What is he trying to do here?

Todd:

I I mean, I I think that your point's well taken, especially on the customer side. I think that, early on when you're building your first product and you're outselling, especially the founders, I think they tend to know their customer pretty well. They've done some customer discovery. They're building an MVP and then they're iterating on it. As the company starts to scale, I do think they drift away a little bit.

Right? Or they basically assume the problems and the way that the customer used it when I first started is exactly the same as when I'm in kind of mid career of my company. Right? And it's like, no. That's changing.

Paul Lemberg:

The in

Todd:

you know, the industry is changing. The competitors are changing. And your ability to get back to knowing the customer, I think, is a key theme all the way through that success.

Paul Lemberg:

I wrote a piece I don't know. Two, three months ago, I wrote a piece that was the argument that you have to grow. But after just another reason, there's no argument that you have about it that you don't wanna grow that makes sense. And you just say it. If you're not growing, it's a good bet that your customers and your competitors are.

It's a good bet that your customers are doing, your competitors are growing, the people on your team are on the ground. There's all sorts of reasons, you know, the the world is changing, technology is shifting, the with the technologies that you're working on are changing, they're all changing. And if you are not oriented towards growing with those people's growth, you can get a thought.

Todd:

Yeah. Yeah. I totally agree. I think that's a really good point. So maybe, you know, I think we've talked about some of the elements of your no strategy strategy.

Maybe now it's time to talk a little bit about maybe some of the use cases or some of the the examples that you've done and you've worked with to kinda talk about how you implemented it. And then, you know, it was this a total kind of running through all of these elements? Did you use some of them? And maybe so just maybe give me a use case of one that you've applied this to that was a software company that had some success and and maybe the problems and then the outcomes.

Paul Lemberg:

I had people who were doing this. They had written software that was kind of a stake evaluation. And the way they were selling it was primarily through one affiliate, one institution's partner. My attitude was we have to we don't have to do thing regeneration. We're just gonna take what we're doing and we don't actually do those things.

So I've said to me this this thing with my husband and wife too. And I said to them they they were like, how are we gonna go? I said they said we have all of our sales, and some more of our strategic partners. And I said, okay. That's incredibly dangerous.

Yes. And there's no obvious way to deal with that strategic plan there. I said, the solution is let's get another one. Let's get no way of those. And they answered me like I had three heads, you know?

And they went out and they went out and found, so they had them them to be able to come back with somebody who was like those. I had them map out the key distinguishers for that particular company who was their strategic partner. So what distinguishes and they use that to look into the community and find a couple other people who might relate to who would be able to do the same kind of thing, who would get the same strategic value out of the partnership. So they actually found two million dollars and when I spoke to them like six weeks later, they had a three x jump in revenue. Yeah.

You know, on a daily basis. And that's like, that's just the simplest thing in the world. It's like, let's find more. Because I think that he chose, oh, my, you're taking real institutions, you're putting it. How can I draw their risk?

It's like, you're finding money on me. Damn, and they swing at the investors, but they were actually really they were happy.

Todd:

Why didn't they why don't why do you think they didn't come up with that themselves? Right? It seems super apparent, and, you know, they're smart people running their business. They understand the industry. What's the resistance to doing that?

Do you feel like they felt some loyalty to the first strategic partner? Like, what it like, I mean, again, it's not rocket science and I I know like an objective person coming in with fresh eyes certainly helps, but like, how do you get founders to kinda like not overlook the most obvious things in their business?

Paul Lemberg:

Well, they overlook them. That's why they need to hire people like me because they need a business. And I asked long ago, I never stopped asking why they were doing these things. You know, he's afraid of when I was talking about it. This guy's entire company, the entire manager of this company were composed of doctors, flight surgeons, fighter pilots, astronauts.

Then we speak English doctors. They're all very thinking of very smart, very, very, very, very aggressive people, and they just didn't see things. And the other thing that they were doing the cost plus, they applied that to the entire company and what they were doing was overstating their overnighter. And the overstaying overhead is actually it to look like they made me money. Like, they've been figuring it out.

I don't wanna figure it out by studying words. So financial pain of it, I I'm not an accountant. I mean, I went to business school and I studied data accounting with business school. And accounting's pretty easy. Yeah.

The laws are complicated, but the actual arithmetic is pretty simple. Right. So I looked at it and go like, why didn't the accountants do this thing? And the answer is because he wasn't looking for it. And I think that you're where the question is why don't people see what's obvious to them where they could make those changes?

And I have no idea. Because none of your people deal without anything that varies with it. They're all lazy, they're all crazy, they're all doing what they're doing for years, and they overlook the most obvious things. My job is to come in and see those obvious things. That is what I do.

I'm good at studying stuff, and that's you know, you see, like, you can never see your light in dancing. It's like, why can't you see it? Because you're not standing behind you. But I walk around the back part. I'll say, oh, did you notice that thing right there?

Todd:

They're like, Paul, I didn't want it. You didn't need to tell me that. Thank you. How about another one? I you know, in your notes here, you had one on kind of hospital records.

Is that one we've talked about already, or is that a different one that No.

Paul Lemberg:

Yeah. Not in house, Corey. They were they were probably, and they weren't looking money and their revenue. And it was pushed a relatively reduced increased prices and we don't face their product offering. And this is also this is how digital is because I realized this.

It's not cancer in children but they don't realize it. But one of the things that happens when you have the right, is you have the bigger opportunity to make sales to this big deal. Because people try to tell them one thing, they don't buy it. You try to sell them something else, so they don't buy that. You try to sell them the third thing and they didn't buy that.

For all of a sudden we have great opportunities to make sales. So we replaced the offering, and we stratified the offering in terms of adding a high end to it and adding a low end to it. So one of the things about pricing is the price points that you have, the easiest way to make sales. To your end, single market, to whoever the collective people in your market is. So we we've stratified when we created, you know, kind of a pyramid to the seedling product mix.

So we have some relevant things and we still feel slices overall and we're in a forced sales force. And that was a young shift where it's enabling their Salesforce because they won't have much of a Salesforce. We had the various salespeople and I would talk to them how to run more Salesforce. One of my products is, oh, man, how to build the Salesforce from scratch. And it's four software companies.

Now if you have a typical product price of five thousand dollars or more, then you can always have a Salesforce cold calling. And you can work without without actually pulling them. You pull them the same data on results. So I built a an information product that shows you how to do that from scoop to nuts, and that screams a lot. So I helped them build their Salesforce, they didn't lose their Salesforce.

They had a leadership problem. They had a problem where most of the people who were part of this company, everyone from the medical industry, those people tend to be underpaid. So whenever I look at LinkedIn, like, okay, we're gonna do more of this and we're gonna add more of this here. And are they all they're kinda like the kind of decision makers do you want doing this? They're having a new wire on with their thinking.

And I took them through a deep dive of their own company and had them throw them films about their own company that they just weren't aware of. That became, that gave me a lot of leverage to help change how they were operating the business.

Todd:

Sure, I can imagine.

Paul Lemberg:

And so there's no, you know, I decided to do this last night and I shouldn't even say this out loud. It's like, I can't remember what half the things we did with half the companies are. And so there's I have a lot of freaking cameras. I have frameworks that I used, and I have a lot of things that didn't work, but I don't tell them to a customer or to a client with a cookie cutter. I don't understand.

Well, I didn't say anything, it was like, everything will be like this. That never works. So I, it's been very big. That's why I can't remember from one to the other. It's like, why don't you deal with those guys?

Todd:

But don't you think there's some patterns that repeat? I mean, you know, like Oh, yeah. Maybe not the nuances, but the patterns kinda remit, you know. And I I see this all the time. I you know, we only deal with SAS companies.

And, you know, the industries that we work with are so diverse. But even if I don't know the domain expertise, you can usually see a pattern and say, I we there's there's a place to go poke here and, yes, there's a lot of context that's specific to their company, but I think, like, eighty percent of it gives you the direction. It's like, here's the north arrow to go find it.

Paul Lemberg:

That's really true. And when I look at the well, the most challenging strategy which comes from this, dialogue conferenterified. When the product itself, there's usually, like, one hundred different buttons to push. It's folded into five main areas. So I know that as the methodical soft car.

Todd:

Right.

Paul Lemberg:

I just look at it and say, oh, so if I know that long time customer value is an issue, and if I know that stick rate is an issue, I say, what's this what's that stick rate? I would think more for now. Think never know how long customers stay. Well, the third part is we go to the c r to the CIO, but we can find out really easily.

Todd:

Yep.

Paul Lemberg:

And I was charged to five people. I said, let's sit down and look at this CRM. Real data, and they're telling me, you know, the stick rate was, like, seven months. And I'm all like, it's not I'm telling you it's three minutes. And they're like, how do we know that?

I stick this on just three million with averages. You know? Yep. So the average is just three months. And then you go to this CRM, you start counting, and we do it in a lower number.

The regular things that I like to do is if I figure out what the stick is, then I end up taking whatever the monthly place is and multiplying it by the set. And while giving people a lifetime value of rather than a lifetime you need to think forever based on, like, the number that doesn't need a bunch of set times the without any bug for yet. Yep. One time. They just can make a long way.

I mean, you're always ready. The exact same amount of money you get to go. It's actually gonna make a lot of sales.

Todd:

Right. Yep. Totally with you.

Paul Lemberg:

Like, I didn't know. I just know this thing.

Todd:

Right.

Paul Lemberg:

Right. And that's really what it is. It's all about looking at where are these key points of leverage on. And looking at what the data is surrounding those key points of leverage. The key point of leverage is that we're gonna get how much time somebody is effective at working.

One of the things I did this face on research that I found out I did we did a survey of about five hundred small company CEOs. And since then, I've been talking to audiences ever since, and that's probably about fifteen years ago. What I figured out was that on average, that your typical studio works about two and a half hours on what I call A work. Now A work is work that creates value for the company, financial value for the company. Do work is work that's the best to all work.

Yep. Thing work is everything else.

Todd:

Answer in your email, go into meetings. Yep.

Paul Lemberg:

Yeah. It's just everything else. You know? It's all sorts of things. I got to tell you what their, you know, what's their stupid thing that they love to do that they know they shouldn't do?

What's their guilty pleasure? And I would have a guy who owns things and said, I like ordering supremace. And I was like, oh, man. It's two and a half hours. And it's on average, if I'm in a room and I'll ask them, at least a single time, the average comes out to ten and a half hours.

No doubt, how many people I asked? Now with three and a half hours, irrespective of how much time you work throughout the day, you have ten hourly days, you have two and a half hours. You have six hours a day, you have two and a half hours. And that's just how it works out. So I figured out that if we got a fifteen percent increase in the A work and turned it from two and a half hours into, like, two hours and forty five minutes, Well, that is for fifteen percent.

That extra fifteen minutes gives them the fifteen percent jump. And if we get everybody to do that, which is really, really easy, Yep. That it's pretty brilliant.

Todd:

Huge compound. Yeah. It's a huge compounding in the company. So, Paul, kinda wrapping things up. We're getting close to the top of the hour here.

Like, if you had to pick three things that basically out of your experience that you would say, for a founder to kinda really think about, what would those three things be?

Paul Lemberg:

Can you be listening? Think about quickly or think about long term?

Todd:

Yeah. I mean, I think they do enough quickly things. I I think it's more the long term things. Right? I think it's like, you know, I think, there's always a like, I always call it the fog of war.

Right? There's always things coming at you all the time. And I think where entrepreneurs in in general and founders as they scale, they forget to block some time to really think about working on the in the business or on the business and really moving it forward. And so if you and I think a lot of what you're doing is really trying to set the company up, to for longevity and scale. Right?

You wanna continue to grow. And so out of like, what would the three things be that you think, entrepreneurs should really think through in their own business?

Paul Lemberg:

So if I'm talking about a SaaS business, then the first thing I wanna know is what's our monthly what's the monthly revenue? That's really what we're bringing. And we can we can we can build revenue by increasing the price, and we can replace another thing by looking at the number of things that they can buy throughout the course of a month. What is you know, let's do upsell. I think we're looking at sales.

One of the things that people think about is people look at the upsells as being machine salespeople. And the definition that I have as an upsell is getting the customer more of what they really wanted when they come to make a purchase rather than keeping them. So if you get them to think about a thousand guest house, so what else can we sell this customer that's gonna give them more of what they're really looking for? You can think about how to make more money and what they don't think about is that it's gonna be more value for the customer, which is Sure.

Todd:

Makes more money. Yep. Totally agree.

Paul Lemberg:

Once you frame it that way, it gives you a certain way of thinking about your relationship to your customers. So I think it's very powerful. So if we look at let's do average possible value in a month, I mean, creating that in terms of having different plans to sell them and have a different higher price points. So that's an unfair. The best way is to get in for SaaS companies.

And for a specific dollar plan, it's getting to a SITO. Mhmm. But SIP time. How do we improve the time that they're gonna be the only customer? And doing a deep dive into that, which is we talked about this earlier, is why do people leave and then we're addressing that and doing something about that.

And if we if I'm a task company and I'm employed with what my average monthly is, which has an immediate effect on MLR. Right? So we're gonna increase MRR by improving improving what the average monthly is, and then we're gonna increase the value of the customer by enhancing strength and how long they're gonna stay for. And then we're gonna improve how we get even customers. We we don't especially at the same news, we have a sales system.

Don't shy away from this. A lot of sales a lot of senior leaders don't seem like they can manage the sales team very well And because they are salespeople. If they're salespeople, then they know they can manage the sales team. And the idea of closing the closing ratio, we spoke before about closing based on value. If you're not closing based on value, then the transition to closing based on value is gonna transform the close ratio.

Todd:

Yep. It's

Paul Lemberg:

getting a little more improved to close ratio. We wanna improve lead gen. And those if we worked on those three things, and then the sixth thing is simply the amount of time available that that the that the that the between the house to work on a link.

Todd:

Yeah. Well, it's good. Well, Paul, I think that's what's super helpful today. And so, it's been awesome you sharing your experiences and and talking a little bit about your framework. If people wanna get a hold of you, what's

Paul Lemberg:

the best way to do that? The simplest way to do is is let me pull this to Paul at dot com. Okay. It's my email address. And I can also go into the three w dot net net dot com, which is my my website.

We'll fix another contact since I'm in there in the context.

Todd:

Okay. Well, sounds good. Well, thank you very much for spending, some time with us and sharing your your experiences. I think it's been really, you know, it's been really fun, and, I think there's lots of nuggets here. So thank you very much.

Paul Lemberg:

Thurston, thank you for having me, and you're totally welcome.

Todd:

Okay.