The Exchanges

Q Yeah, bribery goes a long way, dude. Uh, listen, I think there's a moment when people fall in love with sales. Can you take me to, when did you fall in love with sales and realize that this was the career for you?

A You know, candidly, I've been, uh, I think in love with sales since I was, you know, selling wrapping paper in fifth grade in elementary school, and I think for me, uh, it's always come from probably some part of competition, you know, wanting to, uh, to sell stuff and, and kind of be number one on whatever leaderboard it was, and believe it or not, that's, They get you primed for that in elementary school when you're selling wrapping paper or discount codes to your local stores or whatever. But then all the way through college, I was selling hot tubs and appliances at Sears and Cutco knives and really anything you could, you could think of that was a commission job. I was doing it from a pretty young age.

AI assessment note: “in love with sales since I was, you know, selling wrapping paper in fifth grade”

Q I'm, I'm fascinated. Before we drill down into the mechanics, you said that they don't know how to do it effectively. Again, teach me, you did it too late and you regret it. What are your biggest lessons in how to build an outbound function effectively?

A I'd say, I mean, one is a cheat code for us, which is that I hired Ashley Kelly, uh, who in my opinion is the best in the business. Hands down, it's not close. Uh, she saved my ass from, from waiting too long to do it. And, and I don't think anybody could have built it in the way that we did. Um, without, you know, her experience and our kind of previous relationship working together, but there's really two things that are important. I think the first is you have to have like a very deep partnership with marketing where you don't care about like credit. So for example, when marketing shows up and they generate a hundred percent of the pipeline and it's all inbound demand gen, you know, form fills, hand raisers, and they're flowing to your inbound team. When you start to spin up outbound, you're trying to create Like a new, like incremental, you know, pipeline, right? Like if you obviously hire a hundred SDRs and you end up with the same demos you had when you had inbound, like that's obviously a bad equation, right? Way more cost and like no more pipeline. Um, and so marketing, you have to like have such a partnership with them where a lot of the stuff that marketing does, it drives outbound success, right? And so when you schedule outbound demos, like you've got to also give marketing credit where credit's due. And I think a lot of companies, They break that. And a lot of time…

AI assessment note: “there's really two things that are important. I think the first is”

Q Why was that clearly a terrible model? Because that does the purity of the customer success and sales relationship.

A Because our sales reps are, are very like high velocity. They're doing a lot of calls in there and they're focused on, you know, if a new logo deal is 45,000 dollars, like an add on contracts for someone that signed up six months ago. Might be 5000 dollars or something. And so, you know, when they're caught, their calendars stacked up with deals that are 40, 50, 60 K, and then all of a sudden you throw this meeting on their calendar for a 5000 dollar deal. They're just not going to be able to give it the attention that it needs. And so we, uh, we split the team and we made, or we changed the function. We said, look, we need like account management. We need people who, you know, have had sales, carried a quota, want to be held accountable to quota and all that kind of stuff. And so at Rippling, we have new logo sales reps that like, you know, pass a deal over the fence. And then they have account managers who own the commercial relationship renewals. They still own like success, like unsuccessful companies will not buy anything new from you, obviously. And so they, they do have to make them successful, but they are much more, much closer to like a sales team than a support team, uh, for us.

AI assessment note: “They're just not going to be able to give it the attention that it needs.”

Q Why was that clearly a terrible model? Because that does the purity of the customer success and sales relationship.

A Because our sales reps are, are very like high velocity. They're doing a lot of calls in there and they're focused on, you know, if a new logo deal is 45,000 dollars, like an add on contracts for someone that signed up six months ago. Might be 5000 dollars or something. And so, you know, when they're caught, their calendars stacked up with deals that are 40, 50, 60 K, and then all of a sudden you throw this meeting on their calendar for a 5000 dollar deal. They're just not going to be able to give it the attention that it needs. And so we, uh, we split the team and we made, or we changed the function. We said, look, we need like account management. We need people who, you know, have had sales, carried a quota, want to be held accountable to quota and all that kind of stuff. And so at Rippling, we have new logo sales reps that like, you know, pass a deal over the fence. And then they have account managers who own the commercial relationship renewals. They still own like success, like unsuccessful companies will not buy anything new from you, obviously. And so they, they do have to make them successful, but they are much more, much closer to like a sales team than a support team, uh, for us.

AI assessment note: “They're just not going to be able to give it the attention that it needs.”

Q Matt, is it easier to sell a product where you are replacing an existing line in a financial model or in an expenses page or budget, or is it easier when you are a net new line item?

A I think it's way easier when you're replacing something. Um, in my opinion, um, when you're trying to create a category or, uh, you know, create budget for a thing that doesn't exist, there's just a whole bunch of different things that you have to go through. Um, I have always, For the most part, sold the product where you're, I mean, I think early on, I guess, in the early days back with San Juan, when we were at a EchoSign, um, you were selling an e-signature solution that was like net new. And it was hard because you go down an evaluation and someone at the very end would be like, nah, we're just going to keep doing this on paper. And you'd be like, how is that even, you know, a consideration? It's so crazy. I think today at Rippling, we're replacing another system every time. And I find that to be a lot easier to know that like, there's a deal to be had here. They're going to pick somebody and you really just need to beat. The competition, um, you know, and win the deal. I think, I think that's much easier.

AI assessment note: “I think it's way easier when you're replacing something.”

Q For the account managers, how are they incentivized? And is that aligned to the upsell that they, you want them to drive? Yeah.

A Um, you, you also have to do both. So when we first launched account managers, Um, they only had a new revenue quota. So the hundred percent of their focus in comp plan was tied to selling new products. Um, but then, you know, and, and so they, they, you know, they, they were, they cared about retention, but like they didn't own a retention number. And, you know, when you're high velocity, a little bit more down market, there was just a belief that like, you know, they would care and do the right things, but like you didn't need to incentivize them. And then we did that for like, you know, nine, 12 months and we quickly realized, okay, this doesn't make sense. And this year actually, Uh, we changed the compliance. I think, like, 70% of it is tied to selling new business, and 30% roughly is tied, um, to retention, specifically, like, dollar retention, and it completely changed everything in our, you know, like, have just, like, out, completely outlier, like, off the charts, low churn metrics, and so they gotta own new revenue and churn. Absolutely has to happen. Can't do it any other way.

AI assessment note: “70% of it is tied to selling new business, and 30% roughly is tied”

Q Matt, is it easier to sell a product where you are replacing an existing line in a financial model or in an expenses page or budget, or is it easier when you are a net new line item?

A I think it's way easier when you're replacing something. Um, in my opinion, um, when you're trying to create a category or, uh, you know, create budget for a thing that doesn't exist, there's just a whole bunch of different things that you have to go through. Um, I have always, For the most part, sold the product where you're, I mean, I think early on, I guess, in the early days back with San Juan, when we were at a EchoSign, um, you were selling an e-signature solution that was like net new. And it was hard because you go down an evaluation and someone at the very end would be like, nah, we're just going to keep doing this on paper. And you'd be like, how is that even, you know, a consideration? It's so crazy. I think today at Rippling, we're replacing another system every time. And I find that to be a lot easier to know that like, there's a deal to be had here. They're going to pick somebody and you really just need to beat. The competition, um, you know, and win the deal. I think, I think that's much easier.

AI assessment note: “I think it's way easier when you're replacing something.”

Q So we have like a top pipeline number and that is revenue. Like who sets that? How is it distilled down to the org?

A So, you know, the way that we think about a plan, there's, there's two different ways that I think, um, you think about a plan and for us, historically, um, we start with. Usually something that Parker is like, Hey, like if we want to continue to be in the top You know, one percent of SaaS companies out there. Like, this is the number that we need to go get next year. This is the growth rate that we need. Like, this is, this is what we need to hit to continue to be like, you know, an outlier in the market. And you look at that number and you're generally like, wow, that's, you know, that's definitely not an easy number to go hit. Otherwise, like, of course, why would it be an outlier? But then you go through like a ruthless, like, like detailed planning process for us at Ripley, we have 50 different Sub-segments, right? So you have, you know, SMB, and mid-market, and enterprise, and channel sales, and product sales, and all the different products, and so, if you think about, there's like, 50, you know, uh, capacity plans in the spreadsheet, and it's like, how many demos are we gonna generate? How many reps are we gonna hire? Like, what are their quota? And you go through that in great detail through all of the different teams, and you basically ladder up, and you kind of ignore the number. Like, you're not focused on the number that someone asked you to get to. You start from a…

AI assessment note: “Usually something that Parker is like, Hey, like if we want to continue to be”

Q Why are win rates so low, Matt? I'm an amateur. This show is brilliantly successful because I know very little, uh, and I ask dumb questions. Why are win rates 15 to 20% and you're just losing to competitors?

A You know, the, the number one reason why, uh, you lose a deal in most cases, at least at rippling, is indecision. Uh, people that are basically end up staying with whatever solution they have today. I mean, at least in our case, You know, we are ripping and replacing something pretty much every time, you know, we bring on a new customer. And so the overwhelming majority, and if you look at the pie chart of closed loss reasons, it's like, you know, almost half of them are, are basically like unresponsive, right? Or maybe a third of them are unresponsive. Like literally you do a few calls and it's going well and they just completely ghost you. Uh, some other big chunk of them are people who get back to you and they're like, Hey, we decided to hold off for now. You know, whatever, something in the company changed priorities, budget, someone left. And so There's a lot, like if I think win rates are different if you think about like a decision deal, right? Like a deal where they decided to go with you or a competitor, then I think you'd look at win rates that are, that are much higher in those cases.

AI assessment note: “the number one reason why, uh, you lose a deal in most cases, at least”

Q Do you think it's okay to be good with losing? Like, I fucking hate losing. I would, I would kill my kids if they ever said that they were okay to lose. It should hurt every time, in every way, and you should remember it so you never feel it again.

A Yeah, well, I think, look, like, loving, winning, and, and having, like, a deep hatred when you lose are, are kind of one in the same, in my opinion, and so as long as, You know, losing stings and motivates you and all of that. But I mean, if you think about in sales, I mean, even the best sales reps I know, depending on whatever segment you're in, you know, their win rates are anywhere from 15, 20%, maybe 30, 40% of the absolute highest end. And so regardless, like every month, every quarter, you're, you're losing the majority of the opportunities that you're in. So you got to be able to know how to, you know, lose an opportunity and come back and bounce back and, you know, focus on the wins and all that. So Yeah, you gotta be, gotta be okay with accepting a lot of rejection if you're in sales.

AI assessment note: “you gotta be, gotta be okay with accepting a lot of rejection if you're in sales”

Q How, how do you know when that point is, Matt? Is it when people go, oh, I'm not doing it, and then you walk them back? When is that moment of realization that you've gone as high as you can go?

A Yeah, um, first of all, like, I think the main thing here is, like, you, you've gotta, You should continue to inch it up over time until you, until that friction of like, hey, this is like, this is more expensive than I thought it would be. This is like outside of our budget. This is, you know, a hundred percent more than our competitor, two X the price of a competitor or whatever. Until you get people that are like, you know, walking away, then you, then like you haven't found the right amount of friction right when you get to that point. And, and again, you got to go up gradually because you never, ever, ever, ever want to like go back. Right. You don't want to like raise them and then be like, oh, nevermind. We're going to like lower our prices. Like that's bad. Um, and we don't do this by the way on existing customers. Like as we inch price up over time, like our existing customers that bought early on, like we locked them in pretty much forever. Um, but you, you, and you have to find that friction. And I think it's, it's, you'll squeak out a lot more revenue by finding if you raise your prices, 20% and like, you know, you keep winning, maybe win rates go down a tiny bit. Like that's okay over time.

AI assessment note: “until you get people that are like, you know, walking away”

Q Why are win rates so low, Matt? I'm an amateur. This show is brilliantly successful because I know very little, uh, and I ask dumb questions. Why are win rates 15 to 20% and you're just losing to competitors?

A You know, the, the number one reason why, uh, you lose a deal in most cases, at least at rippling, is indecision. Uh, people that are basically end up staying with whatever solution they have today. I mean, at least in our case, You know, we are ripping and replacing something pretty much every time, you know, we bring on a new customer. And so the overwhelming majority, and if you look at the pie chart of closed loss reasons, it's like, you know, almost half of them are, are basically like unresponsive, right? Or maybe a third of them are unresponsive. Like literally you do a few calls and it's going well and they just completely ghost you. Uh, some other big chunk of them are people who get back to you and they're like, Hey, we decided to hold off for now. You know, whatever, something in the company changed priorities, budget, someone left. And so There's a lot, like if I think win rates are different if you think about like a decision deal, right? Like a deal where they decided to go with you or a competitor, then I think you'd look at win rates that are, that are much higher in those cases.

AI assessment note: “the number one reason why, uh, you lose a deal in most cases... is indecision”

Q I'm, I'm fascinated. Before we drill down into the mechanics, you said that they don't know how to do it effectively. Again, teach me, you did it too late and you regret it. What are your biggest lessons in how to build an outbound function effectively?

A I'd say, I mean, one is a cheat code for us, which is that I hired Ashley Kelly, uh, who in my opinion is the best in the business. Hands down, it's not close. Uh, she saved my ass from, from waiting too long to do it. And, and I don't think anybody could have built it in the way that we did. Um, without, you know, her experience and our kind of previous relationship working together, but there's really two things that are important. I think the first is you have to have like a very deep partnership with marketing where you don't care about like credit. So for example, when marketing shows up and they generate a hundred percent of the pipeline and it's all inbound demand gen, you know, form fills, hand raisers, and they're flowing to your inbound team. When you start to spin up outbound, you're trying to create Like a new, like incremental, you know, pipeline, right? Like if you obviously hire a hundred SDRs and you end up with the same demos you had when you had inbound, like that's obviously a bad equation, right? Way more cost and like no more pipeline. Um, and so marketing, you have to like have such a partnership with them where a lot of the stuff that marketing does, it drives outbound success, right? And so when you schedule outbound demos, like you've got to also give marketing credit where credit's due. And I think a lot of companies, They break that. And a lot of time…

AI assessment note: “the first is you have to have like a very deep partnership with marketing”

Q I understand. So you set the pipeline number of, let's say, ah, fuck, I don't know, twenty million an hour. Okay. We want to add twenty million in ARR. I could add twenty one million enterprise contracts, or I could add, you know, 200, 100,000 contracts. Do you just leave it to your team to determine where it comes from? How do you think about that breakup, that segment breakup?

A I mean, it really depends on like the stage, right? So when you're early on, you actually start from a place of like, like, who are we getting demos from? Right. Like we're getting demos today, you know, like what do they look like? And, and, you know, and you're kind of, in many ways, like that is your segmentation. You kind of build around that. I mean, we had one sales team when we started, right. And then we branched off from there as you start to go up market a little bit, a bunch of things happening, you branch off. And so I, you know, I always tell people like, by the time you get to be maybe, I don't know, two hundred million or something, like your job as the CRO, it completely changes to essentially like head of sales operations. Like you have a great sales operations team, but At some point it transitions completely from like, can you close the deals and you know, are you the best sales person or whatever to like operational planning? And so you, you take the demos that exist. What did we do last year in all these different segments? And you kind of figure out like, where do I think we can do a little bit better? And you just kind of start to slot in all of the humans against those different segments. So Parker doesn't care. He's not like, Hey, we need this much revenue from all these different segments. He's like, we need this revenue. Like you go figure out how to …

AI assessment note: “you take the demos that exist... and you just kind of start to slot”

Q Do you worry about different customers talking about different prices? Hey, I got rippling for 20 pep em. Oh, you got it for 30? Wow. They overcharged you. Yeah.

A Well, I think a couple of things. So one is we have like an extremely consistent and firm like discount Policy. So it's not like a rep can just, you know, make up whatever they want to do. And so we'll tell a customer when they come in, like, Hey, here's what pricing looks like on a one-year deal versus a three-year deal, or like depending on your timeline or depending on the amount of products that you buy. Right. And so for us, you could come in and buy three products in a week, or you could come in and buy 10 products and take six months. And so there's a bunch of different, like, there's probably five different levels of how big are you? What are you buying? What's the timeline look like? You know, all these different things. Uh, but I'm confident that, and this happens, like, people definitely talk in the market, and you know, we've got 20,000 plus customers, and so for sure, people are talking and comparing invoices and whatever, but if somebody were to come back to us, which has happened before, and been like, hey, like, what is this bullshit? Like, that someone's quoted Rippling, and I got a different price than you, and when I walk them through, like, hey, look, here's, like, you might think these things are the same, but they're a little bit different. When you, as long as you can, like, walk through the policy and stand behind it, um, which in this case, it ended up …

AI assessment note: “As long as you can, like, walk through the policy and stand behind it”

Q Why is that so frustrating? Because that seems like it's out of the hands of the rep, They don't control the legal team. That seems like a very bizarre negative externality.

A Well, I think, uh, it depends on, so when, when, first of all, for me, when a deal pushes, what that fundamentally means is that, like, you forecasted it to come in, right? Like, you said it was going to come in, and it didn't come in. If telling us and rolling a deal up that, hey, this deal is definitely coming in, like, they just need to get Redline signed, and a lot of times when you pro back in there, it's like, look, Um, when did you send them the red lines? You know, they're like, yeah, they told me yes, you know, two days ago, and I got them the red lines the next day. And it's like, well, hold on. Like, there's your problem, right? Like, at the end of an evaluation, you should be asking somebody like, hey, what does the contract processing look like within your company? Like, who's involved in that process? Who signs off on contracts? Like, do you, you know, does your legal team do a review for contracts of this size? Whatever. And you want to, like, parallel track those things so that they're, they're someone's reviewing the terms of service. Like, a lot of times you'll get The like vendor of choice designation before someone gives you the like, yes, send me the contract. I'm ready to sign. So you have to parallel track those like legal things, budget review. You can't just like get a yes and then start all those processes over. And that's the number one reason why peo…

AI assessment note: “they just didn't run this in like, you know, uh, they didn't run these parallel tracks.”

Q Why be there a tool? Let's have this thought exercise. You have a lot of markets still to get in the US. You've got a lot of products that you can, you know, bluntly expand penetration across. Why the, why bother with Australia? There's no one there anyway.

A Um, because, uh, I think one, the, all of the U S non U S markets, like starting with Canada and, and for sure in Europe and, you know, an APAC, like their HR software landscape is at least a decade behind where the U S is like in the U S you have. You know, 10 plus, like, major public company payroll providers, right? Like, there's just an enormous, you've got all these IT companies, like, all the ramps and brexits of the world, like, it's a deeply competitive market, and when you go internationally, pretty much in every country, whether it's, you know, the UK or, or, uh, France or Germany or Australia, whatever, there's literally, like, two people at max that are in that space, and one of them is, like, a completely old, archaic, like, awful system, And one of them is like a brand new startup that's like modern and easy to use, but has like enormous, uh, you know, like, uh, issues kind of like supporting all the different various use cases, large companies, whatever. So there's just, those markets are like extremely ripe for disruption. Um, and I think we have a really strong product market fit. And then there's a bunch of other things where like, you know, we, we, we do really well with multinational companies in all of those markets.

AI assessment note: “their HR software landscape is at least a decade behind where the U S is”

Q You know, we talk about expanding in Australia now with, you know, the huge scale of rippling, but you were there from the beginning. Should founders be the one to create the playbook or should it be a revenue leader like you?

A Founders definitely Should, should not create the playbook. And I would say that Parker is, uh, Parker is like exceptional, like go to market CEO. In fact, I think one of his strengths is like, that he really like is the, you know, main product kind of roadmap guy, like his vision, you know, his product vision is, is really strong, but on the go to market side, like that guy can sniff out, you know, bullshit from anywhere. Like he knows just like all the places to poke all the weak spots, all the bruises. And so Parker is like involved in go to market from a, like, is this really working? Or are you like, you know, making it appear as though it is when it's not? Having said that, like he doesn't, he would never want to like, you need to do it this way, pitch people this way. And I think the reality is founder, Parker is the best at articulating, like why somebody should care about our product, like why they should want our product. Why did we build it this way? What is all, where are all the benefits of building it this way? There's no one that does that better than Parker, but he's, he doesn't think like our buyer, you know what I mean? Like he doesn't, he doesn't know how to transform his like brilliant thought into like a consistent repeatable sales playbook. He does know how to do that. Like that's not his thing. And so he's involved in like the direction, you know what I m…

AI assessment note: “Founders definitely Should, should not create the playbook.”

Q Dude, what's ACV size? What average contract value size is enough to justify outbound? Because if you're three to four people, and you're doing, like, I don't know if the ACV is on the three to four people, but they're not going to be huge. Yeah. You can't afford an expensive model. Yeah.

A What is enough? Um, so it's a good point. So, uh, when we don't do outbound for those type of companies, like that team is a hundred percent an inbound team. Um, we do outbound in our mid-market segment, which is essentially 50 to call it 250 employees. And then we do, you know, enterprise air quotes, uh, from like 250 to a thousand. And then we have a team that works from a thousand to 5000 personal companies. Now, one of the benefits of Rippling is when you buy Rippling, you're buying a seat for like every single person in the company. So like a lot of products, if you're buying, you know, Confluence or something, right? You get a seat for everybody, but it's like 10 dollars pep-em, right? If you're selling Salesforce, it might be a hundred dollars pep-em, but like, you're only getting, you know, five seats in a 50 person company, right? We are fortunate that you, everybody at Rippling, you know, you're getting a seat for everybody, and our average pep-em is like 60, 70 dollars pep-em across the customer base. So for our mid-market segment, selling to companies 50 to 250 employees, the average deal size is like 45 K. And so a 45 K you can easily build outbound. Right. And then going up from there, um, it just gets easier.

AI assessment note: “And so a 45 K you can easily build outbound.”

Q And that's so important. To what extent do you think logos are super important in driving sales versus just get early wins on the board?

A So I think it's interesting. Um, I think there's like an evolution in a few different phases. I think the first one is when you're a, you know, zero to one company, whatever, you're a million bucks, two million bucks, like early, early stage, like nothing matters. The only thing that matters is winning customers. It doesn't matter what they pay. It doesn't matter what their logo is. Like you need customers to, to validate that, like you can charge something for your product and that they'll buy it. If you look at what we charged at Rippling in the early days versus now, like it's, it's not even on the same chart. And so you need customers. I think founders make a mistake. They're trying to like maximize the revenue of one specific deal, which is crazy. It's like never, ever walk away from any deal, any price that's not free. Like you sign them up, right? I think the big mistake that people make as they transition to the next phase where they're at maybe five, 10, they're going to twenty million is people don't increase price into a point where they find friction. Right. And so you, you need like friction around price is good. And so to your question earlier, like I get this all the time. I'll talk to, you know, an early stage founder, who's often a technical founder, who's a referral from one of our, you know, VCs or something. And they're like, Hey, we have win rates that are …

AI assessment note: “It doesn't matter what their logo is. Like you need customers”

Q Final one for you, Matt, what company sales strategy have you most been impressed by recently where you've gone? Hmm. That's good.

A I mean, honestly, I think for us, Like you, like, it's more of like a macro strategy of like breaking up our, our, our sales org, right? Like at one point we had reps who sold all of the products at Rippling, and when we finally got to a point where we launched our, you know, spend management suite, and I had a rep who had like their 12th product that was competing against like a rep at Ramp or Brex, where like all they sold was that very specific thing, and just asking my rep to like be able to compete with that rep when they had 12 other products they needed to sell, It just became clear that like there's the cup is too full here. Like we can't put more knowledge in like the sales rep, you know, cup, and we need to basically carve off this kind of product account executive model and then build this like, you know, culture of like partnership in those deals so that when you are a new logo and you want to buy HCM stuff and spend stuff like, you know, there's two people working together and we kind of splintered that off now in a bunch of different places. And had we not done that, We never would have been able to compete in these kind of, like, hyper-competitive, like, vertical spaces like finance and global payroll, and, um, you know, we've done a really good job in those spaces, um, by being able to do that strategy, which is operationally very complex, but, like, my RevOps t…

AI assessment note: “carve off this kind of product account executive model”

Q For the account managers, how are they incentivized? And is that aligned to the upsell that they, you want them to drive? Yeah.

A Um, you, you also have to do both. So when we first launched account managers, Um, they only had a new revenue quota. So the hundred percent of their focus in comp plan was tied to selling new products. Um, but then, you know, and, and so they, they, you know, they, they were, they cared about retention, but like they didn't own a retention number. And, you know, when you're high velocity, a little bit more down market, there was just a belief that like, you know, they would care and do the right things, but like you didn't need to incentivize them. And then we did that for like, you know, nine, 12 months and we quickly realized, okay, this doesn't make sense. And this year actually, Uh, we changed the compliance. I think, like, 70% of it is tied to selling new business, and 30% roughly is tied, um, to retention, specifically, like, dollar retention, and it completely changed everything in our, you know, like, have just, like, out, completely outlier, like, off the charts, low churn metrics, and so they gotta own new revenue and churn. Absolutely has to happen. Can't do it any other way.

AI assessment note: “70% of it is tied to selling new business, and 30% roughly is tied”

Q Why not? Because that top of funnel that's inefficient can increase in efficiency over time. As you build word of mouth, local brand, network effect within nations, is there not a time where actually you spend always inefficiently at the beginning, as you did in the US, to get more efficient over time?

A Yeah, I think that, uh, that's certainly a way to do it. Um, I would say that, um, we are pretty disciplined in, in the kind of finance function at Rippling to, like, not You know, get the cheap thrill and go sink a bunch of money into these markets because like the reality, it's not just that it's inefficient. It's that like, we don't know exactly what works, right? Like it's not the same playbook. The growth playbook is not the same. And so, yeah, you could think that you could convince yourself that you could spend inefficiently. And of course it'll work because it works in the U S but like, you also might just light a ton of money on fire and like your whole strategy just might not work at all for a long time, whatever. And so I think really the answer for us as like outbound has been the thing that we've been able to scale the most because all of the growth demand gen stuff is expensive when you can't offset it with referrals and word of mouth, whatever. And so the outbound thing is working really well for us, but like you got to hire. 2030, 40, 50 outbound SDRs. You got to ramp them. You got to train them. Like it just takes longer to ramp the engine when you can't just go spend a million dollars, you know, on, on kind of, you know, paid advertising and get a bunch of demos that show up.

AI assessment note: “you also might just light a ton of money on fire”

Q Okay. How, how do you do that effectively? Yeah. You need marketing and sales to be like super tight. So then marketing get part of your comms when you get new customers and marketing financially incentivize that. How do you literally do that?

A Um, I think it comes from, I mean, first it comes from like the, the culture, uh, of the, of the org and generally from like the CEO, right? Like if I show up To a meeting with Parker and I'm like, Hey, we're going to massively with revenue this month, but like, it's all marketing's fault. You know, like they didn't generate the demos. They said they were, um, like that's like, I, I, I giggle at like the idea of that, right? Like that would absolutely never. Fly. Right. Like that conversation wouldn't be able to happen. And so you can't, you can't like blame marketing when you miss the plan because it's like, so what, like we have a plan, what are you going to do about it? And you can't. Take all the credit for yourself. When you build an outbound org and all of a sudden the pipeline splits and you've got fifty-fifty or whatever, you have to acknowledge and give marketing credit. And while they're not incentivized from like a comp perspective, it's like deeply built into the culture that like our marketing team has a pipeline plan that they sign up for. They don't have like a, you know, how many, you know, webinars did you do and how many content downloads did you get? Like those things are important, but like their goals are, are how much pipeline do you generate? Like that's all we talk about in our It's like, that's, that's what they're geared around. And so I think cultural…

AI assessment note: “our marketing team has a pipeline plan that they sign up for”

Q I get you totally. So we have like a 50, 60% on SMB. What is mid market enterprise?

A Sorry. Yeah. So, um, mid market is probably around, you know, like 20 ish percents. And then I think enterprise is maybe closer to like 15%. And I think the way you think, the way I think about this is it really depends on what you measure. Right. And so for us, like if you schedule a demo and somebody like takes the call and basically says like, yes, I would like a follow up email. Like, you know, we don't go through like, Do you have a budget? And you know, what's your timeline? I mean, we, we do that in a sense in the evaluation, but we're not incredibly strict about like, who do we bring into the pipeline? And so when we, you know, convert a demo, we call it stage two and S two, we measure win rate, like from S two, you know, all the way to a one deal, but that's going to be like a penalizing kind of win rate. If you've converted something to stage three, that means like they've engaged in like scheduling the second call. Right? Like, they actually have some commitment to, like, do a proper valuation, and if you measure win rates from, like, stage three to win, then, like, you actually have a much higher win rate, and I think companies do this in very different ways.

AI assessment note: “mid market is probably around, you know, like 20 ish percents.”

Q Um, Matt, what difference is the kicker? I just have so many people who will ask me like, what is the difference? Yeah.

A Um, it's gotta be relative to your, I mean, there's so much goes into like, the way I think about it is like, you know, what is your, you know, commission rate on a, on a new logo? And like, that could range anywhere from 10% to 30%, depending on like, are you outbound? Are you inbound? Like, you know, what, what deal size, whatever. And so you want to make sure that the kicker you're paying on a deal isn't much more than like, you know, let's call it like 10, 15% of the deal, right? So maybe if you're, if your commission rate is 20%, then maybe you're giving them an extra like two to three percent kicker for a multi-year deal, but you can't make it that your commission rate is 20% and then you sell a multi-year deal and you get paid 40%, right? Like that math doesn't work. And so it's, it's generally, I'd say maybe 1015, 20% of the original contract, like the year one Contract, like, or, or thinking of the commission rate, like that's the right way to think about it.

AI assessment note: “extra like two to three percent kicker for a multi-year deal”

Q How do you do deal reviews, and how has that changed over time?

A Um, I'll, I'll pick like our, you know, let's, let's call it our middle, you know, mid market team who's kind of like in the middle, but I think the main thing that you're looking for in a deal review is, uh, like reps get, you know, like salespeople by, by almost like definition are like optimistic, right? And so, um, oftentimes they like, they get happy ears and they hear things that, that they want to be true, that might be true, but they don't sometimes ask like the second, third layer question. To figure out if it is true. And so for me, deal reviews are all about like that. They're all about asking your rep, you know, who are we talking to? Who does that person report to? Uh, were they there when they bought this system? Like, you know, a bunch of questions around who are they talking to? How do these decisions get made? What do they think the timeline is? Like, you're trying to basically poke a hole in this per, if you're just sitting there and your rep is like, Hey, here's the next step. And here's who I'm talking to. And you know, it's all good. And you're like, okay, great. Sounds good. Like, let's go to the next one. Which is what a lot of pipeline reviews look like. That's like zero helpful. Like you, you got to create a relationship with your rep where you can poke holes at them. And they're trying to like, you know, prove to you why this is a solid deal. And there…

AI assessment note: “for me, deal reviews are all about... asking your rep, you know, who are we talking to?”

Q How, how do you know when that point is, Matt? Is it when people go, oh, I'm not doing it, and then you walk them back? When is that moment of realization that you've gone as high as you can go?

A Yeah, um, first of all, like, I think the main thing here is, like, you, you've gotta, You should continue to inch it up over time until you, until that friction of like, hey, this is like, this is more expensive than I thought it would be. This is like outside of our budget. This is, you know, a hundred percent more than our competitor, two X the price of a competitor or whatever. Until you get people that are like, you know, walking away, then you, then like you haven't found the right amount of friction right when you get to that point. And, and again, you got to go up gradually because you never, ever, ever, ever want to like go back. Right. You don't want to like raise them and then be like, oh, nevermind. We're going to like lower our prices. Like that's bad. Um, and we don't do this by the way on existing customers. Like as we inch price up over time, like our existing customers that bought early on, like we locked them in pretty much forever. Um, but you, you, and you have to find that friction. And I think it's, it's, you'll squeak out a lot more revenue by finding if you raise your prices, 20% and like, you know, you keep winning, maybe win rates go down a tiny bit. Like that's okay over time.

AI assessment note: “Until you get people that are like, you know, walking away”

Q For those that don't know, which is including me on this one, what do you mean by list price and net price?

A So, so let's say that, um, you know, your list price, meaning when you show up and you send, I mean, look, starting all the way with like some companies have a price on their website, right? If you're very SMB and down market and you have a bunch of like self-serve signups and trials and all that, you basically need to have like a price on your website where someone can see it and sign up, whatever. Um, that's not our business. Like for us, we are generally, you know, getting somebody on a call, understanding like, you know, what their pain points are, what products are they interested in because we have 30. And so for us, you know, we have a list price, meaning there's a book price for every SKU that we have. So let's say it's 10 dollars PEPM for a random SKU, but like the actual price point that we're trying to target might be, you know, eight dollars or seven dollars or six dollars. Like it depends on the size of the company. If you come in and you're 50 employees and you want to sign up in one week, Like, I've got a little bit more room to make that happen. If you're, you know, if you're 50 employees and you want to evaluate for three months, then like, you know, then, then it might be a different price, but like, it might depend on the different, you know, amount of products that you buy.

AI assessment note: “we have a list price, meaning there's a book price... actual price point”

Q Why is that so frustrating? Because that seems like it's out of the hands of the rep, They don't control the legal team. That seems like a very bizarre negative externality.

A Well, I think, uh, it depends on, so when, when, first of all, for me, when a deal pushes, what that fundamentally means is that, like, you forecasted it to come in, right? Like, you said it was going to come in, and it didn't come in. If telling us and rolling a deal up that, hey, this deal is definitely coming in, like, they just need to get Redline signed, and a lot of times when you pro back in there, it's like, look, Um, when did you send them the red lines? You know, they're like, yeah, they told me yes, you know, two days ago, and I got them the red lines the next day. And it's like, well, hold on. Like, there's your problem, right? Like, at the end of an evaluation, you should be asking somebody like, hey, what does the contract processing look like within your company? Like, who's involved in that process? Who signs off on contracts? Like, do you, you know, does your legal team do a review for contracts of this size? Whatever. And you want to, like, parallel track those things so that they're, they're someone's reviewing the terms of service. Like, a lot of times you'll get The like vendor of choice designation before someone gives you the like, yes, send me the contract. I'm ready to sign. So you have to parallel track those like legal things, budget review. You can't just like get a yes and then start all those processes over. And that's the number one reason why peo…

AI assessment note: “number one reason why people push a deal... they didn't run these parallel tracks”