TRIPLE Your Sales with This ONE Change

Jaco Van der Coy breaks down the 'Revenue Factory' concept, explaining why the 'growth at all costs' mindset is obsolete. He emphasizes managing growth, cost efficiency, and quality—measured via retention and expansion—through the Bow Tie Model to drive sustainable recurring revenue instead of just burning capital on top-of-funnel acquisition. The conversation shifts to the profound impact of AI on the sales process. Jaco highlights that the 'knowledge gap' has flipped—buyers often know more than sellers now—meaning AI is empowering buyers to bypass traditional sales motions entirely, as seen with tools like Google Notebook LM automatically synthesizing proposals and eliminating stakeholder meetings. Finally, Jaco predicts a massive shift toward outcome-based pricing (PPX) and a harsh reality for the sales profession. Only the top third of reps who become true domain experts and leverage AI will thrive, while those who just 'wing it' will be replaced by automated buying experiences.

Discussed in this episode

• The Revenue Factory focuses on producing volume, driving down costs, and maintaining quality via recurring revenue metrics.
• Founders misunderstand growth mechanics by not differentiating between compounding over frequency and compounding over time.
• The Bow Tie model illustrates that revenue growth comes from three distinct phases: acquisition, expansion, and retention.
• Customer Success teams should be treated as revenue generators rather than defensive mechanisms to prevent churn.
• AI is currently being used by sellers to do the same old things faster and cheaper rather than improving the buyer experience.
• The sales knowledge gap has flipped, with buyers now having more access to product and competitor information than sellers.
• Outcome-based and consumption pricing models fundamentally change sales cycles, win rates, and revenue predictability.
• The sales profession will split, with the bottom third being automated away and the top third evolving into AI-enabled industry experts.

Episode highlights

1. 0:00 — Introduction to the Revenue Factory
2. 2:00 — Moving past growth at all costs
3. 5:00 — The Bow Tie model explained
4. 9:00 — Making Customer Success a revenue generator
5. 12:00 — Why the traditional sales knowledge gap has flipped
6. 16:00 — How buyers use AI to skip sales meetings
7. 19:20 — The future for sales reps: Experts vs Wingers
8. 23:00 — The shift toward outcome-based pricing
9. 28:00 — Rapid fire questions and closing thoughts

Key takeaways

• Treat revenue generation like a factory.
• Growth includes acquisition, expansion, and retention.
• The knowledge gap has flipped to buyers.
• The bottom third of sellers will disappear.
• Outcome-based pricing (PPX) is the future.

Transcript

Folks, we better get ready because our customers want a different buying experience. And we are not catering to that right now. And the way we're using AI today is not doing anything better. We're just doing what we previously were doing, but we're doing it at a lower cost.

Welcome back to another episode of the Revenue Reimagine podcast. We have a super special guest with us today. We have the founder and CEO of Winning by Design, Jaco Van der Coy, who is an internationally renowned business and thought leader on all things revenue growth and strategy. We'll talk about the Oh, stop it.

You are. We'll talk about this revenue architecture book that I have back here. Um and someone told me, I don't know, an author of seven seven other best-selling books on driving growth for SAS companies, also a sales mentor across several VC firms where you help accelerate the development of sales teams across their portfolios. We are huge lovers of winning by design, huge lovers of Spice.

Uh we're super excited to talk to you today, man. Thanks for joining us. Oh, thank you. It's a pleasure and it is a treat as always.

Thank you for uh letting me be part and and for those of you at home or wherever you may be listening, welcome, welcome. It is the holiday season, all the best wishes for you all. Yes. Yes, all the revenue wishes in the world, right, Jaco?

Growth at the lowest cost and the highest growth rate is my wish for you. Yes. I love it. I love it.

So, we were talking earlier and there's there's a a term you coined called the revenue factory. I think this would be a great jumping off point for the podcast. Talk a little bit about the revenue factory, what that means to you, winning by design, and potentially for people looking to generate a revenue factory. Yeah, thank you for asking, Dale.

So, here's the thing is like, um, I am from a relatively small town, um, and by the way, and small town as it measured in a few thousand. When we go up to the next city that had 18,000, we would call it, we go to the city. We would go to the city, right? That was the big city thing.

That was 18,000 people in those days. Um, and so if you think about, you know, like my family, and we're all relatively entrepreneurs having different kinds of businesses, if you would tell my family, if they would run a $3 to $4 million operation, they would all think that they're running a factory. Right? And, and so with that mindset, I looked at the way how what many of the companies have problems with these days, the challenges that they have.

And I looked at that that primarily because they were not looking at it from a factory perspective. But then if you start looking at AI and the role it plays, it's very similar to the way robot plays in the 1960s and you you start to analyze and you go like, oh, what does an what does an agile software development do? What does uh uh all these forms of of manufacturing processes that they whether it's for software or hardware or what they have implemented. You quickly start to realize that there's a lot of alignment.

And I I'll start off with a simple one and then I'll give it back. So, first one is or the the first thing is to realize is that a factory has three three things that they focus on. They need to produce a lot. That's the nature.

Automation to produce a lot. They need to do it efficiently. So the cost needs to keep coming down. And the number three thing is, if you only pay attention to the first two, then the third one leads to a lack of quality.

So they have to implement a quality improvement to make sure that the first two don't become the primary focus. So there you have your three goals. Growth, cost, quality. They map perfectly to a recurring revenue business, right?

Like I want to create growth, revenue growth. I want to do it sustainably because growth at all cost no longer works. And I need a form of like like quality, which in our world is recurring revenue, GRR, NRR, as as as metrics are fantastic for that. Yeah, it it's funny you say growth at all cost doesn't work, and it it's actually not funny, but we still, Jaco, to this day have founders who think that the answer to everything is go hire a bunch of people, more people multiplied by what you think the quota should be is going to equal more revenue, and that's just going to solve all problems.

And there's no focus on churn. Um, there's no focus on either GRR or NRR. It's just go hire a shit ton of people. How and why do you think people still have this mentality?

Because we've been talking about growth at all costs is over for, I feel like over a year now. Yeah. Uh primarily where it comes from Adam is, the the main thing here is that people are not educated on it. And so that you know, like in our industry, you you don't go to a class where you get to be taught about how how to create a recurring revenue growth machine.

Um and as a result, you you think you know, but what we find out that most people really don't know, right? They don't know that there's three areas of growth, not one, three areas. Most people don't know the mathematics behind. They know a kind like, oh, it's compound, it's important.

But they don't know about what compounds over time is versus compounding over frequency, right? Acquisition compounds over frequency, number of meetings, number of emails, whereas expansion compounds over time, number of years, number of months and so on. And so, so they don't understand the difference between that. And as a result, uh the the analogy that I often use is that over the past decade we've been driving a motorcycle, but we've only pushed it into first gear.

And we go like, right? We are running that motorcycle in first. We have no idea there's a second and a third gear. We know, you know, push down people like, click twice down and you have a whole set of new gears.

They're not familiar with that. That combined with that most founders, um, do not appreciate processes, uh, in go to market, the same way they appreciate processes as part of what they're doing in their product. And so that mismatch, you know, leads to a lot of uneducated people, uh, running around on a motorcycle in first gear. I love that analogy.

Yeah. It's a really good analogy. And I I think they're rev the RPMs and they're not getting, uh, they're not going anywhere and they're wondering why. Um, and I want to twist this around a little bit, go back to a little bit to the revenue factory.

And you were the first really consulting group training organization that I ever saw really focus on customer success. Like you had the bowtie model and everything was like top of funnel. Everything was like, we're going to get people in, we're going to do these conversion rates, but no one really cared about the back end of the funnel, actually having happy customers. How do you create customer success to be revenue generators?

Like my big thing when I talk to a lot of founders now that are implementing a CS organization is let's let's create a revenue generating customer success team. And so on the back end of the bow tie, what are what are things companies can do today to become more of a revenue generator than a revenue sucking organization? So, and and I think all of us are old enough that we can go back to our parents' time and know that we lived at a different age when we go back to our parents. So like I'm the youngest of eight, so I, you know, my parents all have already moved on to the next gig that they're doing, uh, up there.

And but if I go back and and and to the early days, right, we were running, um, a French fry a fry store. And think of it more as that food stand, food truck that you see parked in front of a Home Depot. That's kind of like what we had, right? And uh, if you grow your businesses, this, like imagine using that as a as a as a base model, right?

Look, um, how do you run a factory, how do you run something like that? Well, you need to make more money than you spend. Right? One would hope.

You probably want to and in those days we got soft surf became a new thing, and then we had slush puppy became a new, we had all these new things. And you have to buy those machines, which you, by the way, lease, right? Okay, recurring revenue. And then you have to in in order to do that, you have to make an investment.

Oh, you you are having you acquire something and you have to keep it. And then you come to the conclusion is, where do my customers come from? Right? Like, how much do you actually start to billboard?

And you come very quickly on that end of the journey, you come to the conclusion is, word of mouth, word of mouth. Now, this is where I'm going to go with this this this answer to your to your question is, what we are seeing today that most of the channels that we have historically been communicating with customers are overwhelmed with noise. They become too noisy. So, link if we go email, too noisy.

Text messaging, cannot do that. I have, you know, high high fear factor, you know, high uh penalty of failure factor. LinkedIn, folks within six to 12 months, LinkedIn is going to be too noisy as well, right? It's already noisy, but within six to 12 months, you know, like, so that that is not going to work.

And so, where do these customers come from? These customers come from successful other customers who talk about you. And so, more and more do we need to focus on letting our customers partake and becoming our marketing and sales organization, and that means that that right side of the funnel of the bow tie is essentially the key part of the of the bow tie. Where did you come up with the bow tie framework in your head?

Was it like because you saw infinity signs? Like I used to work at Oracle, it was like infinity signs, like what what sparked the bow tie in your head? Yeah. You actually there's an uh you can you can still find it.

The original is still on YouTube. You can Google Jaco, Prezi, SAS, and you're going to get I created a Prezi. It was an uh the predecessor to Canva. I remember Prezi.

Yeah, Prezi, yeah. Yeah. And so I created a Prezi and I wanted to create a circular motion because if you think that you see the bow tie, right? People say, oh, but it's it's it's it's not a growth loop.

But essentially the right side of that right side and the left side of the bow tie are meant to connect in a circle. So if you see that and it connects the circle, then you got the the the thing. Anyway, regardless, the other way you can see it is you can see it as three windows. But, you know, like, but where did it come from?

I drew circles. I was drawing circles and I'm going like, okay, I had this circular motion because I felt like a customer got stuck in the awareness mode and they circle through that. And then they go to the education mode and they circle through that. And so I kept building these circles, and I go like, hey, there's needs to be a whole new series of circles.

But in that Prezi, you see me literally explain it. You almost can see it on the fly how I came up to be that way. Um, yeah, that's uh and I think it was called something like uh doesn't make sense how SAS can make money. And I used Brightcove and Jive as as examples on how they were building, you know, how they were getting spending like $10 million on growth, while only acquiring like half a million dollars.

And I go like, this doesn't this doesn't make sense, people. Like like at all. At all, right? I was hoping I was hoping the bow tie had something to do with the French fries, but I guess not.

No. There is a concept, uh, originally by a gentleman because when I came up with it, I needed to verify if I was the first one or something like that. And so I verified, and then I found there was a guy in the, uh, late, no, sorry, in the mid-1990s, who came up with a similar concept and used the bow tie actually for it, bow tie format for it, but related it to, um, the selling of tickets, and then, you know, like, uh, luggage fees, upgrade fees, seat fees, and everything that was, uh, he used a form of a funnel and a bow tie concept. So he, but I I've been since trying to look for it and I've not been able to re-re-refind it.

But anyway, that's where it's come from. But the the the key here is this, what the bow tie tells us is there's three places of growth, not one, right? Acquisition, growth from acquisition, growth from expansion, and growth from expansion. And growth from retention, sorry, growth from retention, growth from acquisition, and growth from expansion.

And growth from retention, we often don't recognize as growth, while it adheres to the same principles. It has a high win rate, it has a very high ACV, almost within range, and it has an um, a short a short and known sales cycle. What what amazes me and what I find fascinating is a a lot of what you just said, but we talk about leveraging your customers, right? We talk about leveraging folks who are happy with the product and using the product and having them sell for you and embracing that.

And this is now being thrown around as this new term called go-to network that everyone's coining is like this brand new thing and like, use your customers and leverage your relationships and like, you were very much ahead of the the curve if you will, where now this is super popular. Like, I can tell you whether it's B2B SAS, whether it's a car, whether it's an oven in my house, like, I don't think I've ever bought anything without checking with people I know who actually use the product to make sure that they like it and love it. It's why sites like Trip Advisor and Yelp and all these things exist, right? Because we want to talk to customers who have been there.

Why do you think just now in going into 2025, this is finally becoming so popular of, oh shit, let's leverage our customers? Because the other side was too easy, too simple to think about. And it it's not because people are ill ill-willed or anything. It's because, you know, like entire systems have been set up.

A simple question, I'll and then I'll give you where the next one goes, okay? So please. since we're now know where we're going, I can tell you where a year to two years from now we will be as well. Um, so the the the I want you to think about the concept of how much dollars do I spend on acquisition versus expansion or retention, right?

And most companies who say is like, no, no, we have customer success. I go like, yeah, but having a customer success person by itself is not a solution. Most people look at customer success as saying, please don't lose the deal I just won. That's the mindset of customer success.

100%. Right. Right. And that is, and that is an an an a short-sighted approach to to sales.

Obviously the tool vendors early on, the known tool vendors really facilitated that conversation and were never willing to take on the revenue profit nature of of it, right? We wrote a paper, um, two or three years ago and asked one of the well-known vendors there if they wanted to do it with us. They go like, no, we don't believe in that, right? And it was a topic about growth as a profit center.

Now, I can tell you they are now talking about it all on their website. Now it's all like like, yeah, we knew that was had it there. Um, but the but the topic here, you know, like is that people misunderstand and they follow things blindly. And I can give you a point where where they are going to be wrong again and why they're going to be wrong and why we believe that that that that is going to be the case.

And it now involves AI and the role that AI plays. We today have a have a perception that, you know, like in the future, uh, you know, like we will not going to be that human beings will prefer continue to prefer to buy from human beings. And I go like, that is an, you know, like if I apply that to taxis or to hotels and say like, yeah, if I'm in a taxi, I would never have thought of an Uber. And I've if I'm in an if I'm in a in a hotel, I cannot see, right?

Neither of those industries were disrupted from within the industry. Both of them were disrupted from outside the industry. So too the case here, and I'll give you an example. Folks, we better get ready because our customers want a different buying experience.

And we are not catering to that right now. And the way we're using AI today is not doing anything better. We're just doing what we previously were doing, but we're doing it at a lower cost. Sure.

Right? At higher volume, uh, uh, and so like, so we're not doing anything different. We think that they're We're just redesigning the taxi cab by installing an uh credit card. Remember that taxi cab for the longest time wouldn't accept credit cards?

Yeah. Okay. Finally they installed a credit card machine. I can now pay with my Apple Pay.

Fantastic. Folks, that doesn't make the cab any different of an experience. Right? Yeah.

And that is what we are currently surrendering to our customers with AI. So, let's, uh, let's double click on that a little bit, Jaco. So, in your opinion, where do you think AI is going as it relates to the bow tie? So, top of funnel, back of funnel, where does AI have its biggest impact immediate like in the next five years?

And what do you think that looks like? People buy from people. That's why companies who invest in meaningful connections win. The best part, gifting doesn't have to be expensive to drive results, just thoughtful.

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com. Okay, fantastic question. So I'm going to I'm going to give you the answer, um, give you the solution to that answer and then you can apply that correctly, right? So I'm going to ask you at the back end, now if you know that, how do you think it would change?

Now, I'm going to use the story of my wife being stung by uh three wasps because she stepped on a on a wasp hive. Yep. And uh and uh yes. I've done that too.

Her friend got stung 10 times. Friend got stung 10 times. Uh but my wife had an allergic reaction, and as she had that allergic reaction, um and including breathing constriction in her breathing, uh she had to see a doctor a few days later. But of course, as, you know, like as as many of us do, and and her knowing, you know, particularly, she went in and did extensive research on what is it venom, how does it work, why breathing and all that stuff.

So we showed up at the doctor, general, uh doctor. And the experience was very underwhelming, right? Because, you know, like, the doctor said, here's an EpiPen and always have an EpiPen, have a second one with you, and this and that, right? But didn't know actually what was going on.

And so my wife was pinging her, but how about this and how about that? And as we walk out, on one hand, we were disappointed, but on the other hand, you know, there there's a waiting room with 20 other people who had something over the weekend. They too research their topic, and they too know a lot of about that topic. But general practitioner can never know can never spend the time on all that.

What you'll see is that the knowledge gap has flipped. The knowledge gap previously favored us sellers. Now, when I was selling in the 1990s and, you know, like Philips flew me around the world in order to to to to sell impact to here, I was an expert. I flew to that location and I was an expert.

I knew the people in the industry. I knew every competitor. I knew where the market was going technology. And so, the knowledge gap was very much in favor of me.

That created a need for my customer to trust what I was saying. Hence, brand name super important, trusted resource, technology background, right? That's why in-person visits were super important. Will this person be here for me when I buy that?

That knowledge gap today, for various reasons, in our industry has flipped industry-wide. Our customers that are buying SAS products generally know more about their market, generally know more about their competitors, generally know more about your competitors, and it is not uncommon that they know more about the product that they are buying from the seller than the seller knows about their own product. And believe me, I've now run this example a couple of times and everybody's shaking their head like, yes, like, right? The knowledge gap has flipped.

What AI is doing for the seller, it is also doing for the buyer. And that knowledge gap flip changes the acquisition process. It will affect all throughout that acquisition the same way how when I when an Uber told me that I could see when the driver would be coming how far it is away and the same way how it it changed the relationship between the volume of buyers and the volume of sellers and it created the marketplace. That changed with the new technology called mobile, GPS, and cloud.

Now, AI is flipping the knowledge gap. And that means that it's changing the industry. I would argue the knowledge gap is already flipping, um, and AI has just accelerated it. So it's like it was already there.

Now they can get data much faster and more efficiently. So the so how do we as sellers like close that knowledge like, what do what should we be doing to close that? To like, because it's pendulums, right? I think every market is like a pendulum.

And they'll go they'll swing one way and then swing the other way. How do we swing it the other way? I'll give you an example of it, you know, like, let's say I'm doing a um in this case, I'll use a practical example. We were selling a $400,000-ish software services contract.

And I had written uh the the the contract out, and it was a a high-profile name, you know, like I had written it myself, right? And explained it carefully. And it was about like an 8 to 10-page proposal, uh uh a written proposal, not like a deck, but a written proposal. Right?

Now, in that case, I had had gone through the first discovery call meetings, adjusted that, all that stuff. But it's a $400,000 proposal. So I'm in deep enterprise sales territory in this case, right? I'm not it's not an SMB sales technique which oh, you're show a few things, you demo a few things.

So I'm running into the stakeholder meeting, and the executive, you know, like that runs into that uh is asking me, hey, give me the documents so I can review it with the team. And then we'll we have a stakeholder meeting next week. Okay. Now that executive uploaded the document into Google notebook, created a 25-minute uh podcast out of it, send it to the rest of the team to review it.

He calls me on Monday, says, we can cancel the meeting. We're good to go. I kid you not. Right?

Why? Because Google Notebook LM has a podcast, has an ability to query it, and all the answers that everybody was playing with already answered the questions, right? This is a high-tech company, they know what they're up to, right? But as a result, we no longer I kid you not, we no longer needed the the the the stakeholder meeting, and the deal closed within I think within 24 hours after he sent me the message.

Something really quick. Why? Because the the the the information flow is different, right? Trust no longer comes just from from me knowing my stuff, it comes from the brand, which is the reason why I think that moving forward, new brand names, although they may be more innovative, are not as trusted, right?

You you want trusted brand names. You want people that, hey, I, you know, like if we want to do consulting, we're going to go with winning by design because we know Jaco has been there for 12 years and he will be there for another 12 years, right? We know we can trust that brand. I think that that is that's becoming the new trust factor in it.

You're trusting a brand, no longer just people, because people change quickly these days. Yeah. So what does that mean for the future of sales? Because I I agree with you 100%, and I think I agree with both of you, Dale.

I think that it's been easier than ever to get information for years. Um, I think buyers are showing up more educated than ever. Um, often times in the wrong way where they think they know what they want, but they don't because they've, you know, read a Google article or like Dr. Google as I call it in health care.

Um, but nonetheless, buyers are definitely more educated than ever, and they're coming to sales meetings that they likely don't want to have, um, to check a box that the company says they have to have. And it's like, okay, Jaco, I did my research, this is what I want, this is the pricing I want to pay. I know that this customer is getting this pricing, so don't tell me you can't give it to me, because I I've done that myself. What what does this mean for the future of sales reps?

And sales as an industry? Yeah, a few things. People no longer buy on budget with SAS and with the upcoming, uh, uh, um, topic of, uh, outcome-based pricing, which is a whole topic separately and equally in interest, probably more popular than AI. I may add, probably more disruptive than AI itself.

Although they're both connected. But with with this, you know, like, like, we're not based on budget, and we're not buying on ROI. Why not? Everybody has budget to buy a SAS service, it doesn't matter how big you are, and everybody every SAS service or subscription service or whatever, consumption service, folks, it is built from the get-go to have a 10x ROI.

So, like, and everybody else has also a 10x ROI. So, like, what the heck are we doing? This whole ROI thing is the only thing you're now selling against is priority. Is this important right now?

Now, in order to learn to to pull on the thread of priority, you need to know what the customer is going through. So, what this means, uh Adam, for, uh, for what the world of what it means to to the the to sellers is the following. We're going to see two groups. Uh, the one group is the one the 1/3, 1/3 will become experts and will continue to be experts.

They will use AI to enable that expertise and they will move forward. The other 2/3 will not move forward. Of that other 2/3, the bottom 1/3 can already almost discard it immediately. They're purely their level of work and and productivity is actually setting the entire group back.

That middle 1/3, some of them are are are are will make it to the top 1/3 and most of them will not. This is not like, um, this is not like, I don't want us when you hear listen to this, you go like, oh my god, like this is like what? What's happening? Right?

Okay, I want to before we go there, I want I I need to finish this thought so that because people will right now start freaking out like, Jaco says 70% of the sales team will be replaced by AI. Yes, something like that. Let me tell you why that is in context. If I go back 200 years ago and I'm digging a hole, I'm going to need like 2,000 people to dig a hole for for a castle that I'm willing to build.

Yeah. Okay. Today, I use four excavators. Nobody that stands there with a shovel in their hand is going to strike against the arrival of the excavator because they go like, you know what, I really want to break my back you manually shoveling this this this hole every year, right?

And so excavators replaced human labor, right? And that was a very natural thing. You see this, for example, in farming. In farming, we have replaced human labor every every evolution cycle, every new technology.

You're not going to strike up against that. You're just moving along with that. Now, people that previously were digging a hole are now doing something different. What we have unlike any other trait in sales.

We have a large volume of people who have not studied to sell. They're not using proven processes. They just show up every day and wing it. And you can we can all kind of like like joke around that, but we all know it's true.

1/3 of the group just wing it, doesn't even enter anything in CRM. Hence the reason why we're all focused that we need a CRM automation tool. No, you do not need a CRM automation tool. If people simply would enter key concepts of the call into the data.

Now, it gets more accurate with annotation tools. I get that. But the fact that we needed the tools in the first place was primarily due to the lack of skill set because people were simply showing up, doing their thing, and getting back home. They didn't study for it.

They're not passionate about it, and many of them when they get fired, they don't go back into a job in sales. Okay? That 1/3 will be out. The middle 1/3 have to fight and become experts.

We don't need the hundreds of sellers that we have right now. Like it's ridiculous. Now, obviously, we have hosted those people and they will find a new job elsewhere in the next gig, and they will be extremely valuable in that role, the same way how they previously were valuable in SDRs, AEs, and CSM roles. But let's not kid ourselves.

None of these people studied for their job and did that. The experts of that, of course, you know, like I have friends, John Scags, this like, these are world-class sellers that I've learned from a lot. They made it. They embraced it.

They studied it. They learned it. They lose the latest in technology. Like, of course, they're going to continue to be successful in the job.

I think, um, I I I almost want to have a separate conversation with you about outcome-based pricing because I think that is a super interesting topic. Um, we won't be able to get to all the pieces of outcome-based pricing. And I do think it's it's challenging because it's challenging on one way because it's hard for people to digest it. Buyers think they want it, but when you actually start generating outcomes, the amount of money that they spend back on outcome-based pricing can be much higher.

Then they get to a place of like, why am I paying you all this money? It's like, well, look at the outcome that we drove for you. Well, we we say this all the time. Like in our world, people ask us, well, how many hours are are for your monthly retainer, how many hours am I going to get?

Right? How many hours are we going to get? And my response is a version of what you just said, Jaco, is, we don't trade time for money. We trade outcomes for money.

If I could do it in one hour, you should be a shit ton happier because that's more hours that I'm spending to do other stuff for you than if it takes me 40 hours or 20 hours or whatever. So I love this idea. I don't think people know what to do with outcome-based pricing, um, or even how to structure it. Okay.

So I'll give I'll give you know, just for a taste before we start on that. Outcome-based pricing, if you think of a continuum, on the left, we call it the monetization strategy. If on the left of the monetization strategy, we pick, uh, upfront perpetual payment, we call it ownership. You buy something to own.

In the middle, it's subscription, and on the right, you think of that continuum as in consumption. As you move from the left to the right, every metric in data changes. For example, sales cycles on ownership based long. Sales cycle on, um, uh, consumption, low, short.

Um, win rate, high. Why? On on the left. High on the continuum of of ownership.

Why? Because buyers qualifies themselves if they are looking to spend $5 million paid up front. Um, if you see win rate on the right, you can go all the way to freemium, infinite, meaning very bad. Conversion rate from freemium to paid, very bad.

And so, what you would say is like, well, if we lower the price and we make make it outcome-based, the win rate should go up. Uh, it has proven that it doesn't go up. Why? Because the amount of unqualified buyers that are jumping in because they want to start cheap, actually brings the win rate far down.

So win rate, um, if we look at it from an ownership model, one in three. Win rate in a subscription model, one in five. Win rate in a consumption model, one in ten, and it can go all the way down to one in twenty. If you go further down, you can go to one in a hundred.

You enter the world what in ad they call insertion orders, where everything needs to constantly be renewed. Okay. So in that world, on the right, another unique difference is subscription is recurring. And what do I mean with recurring?

The time frame that the new order comes in and the size of the new order is in context of very predetermined time frame and a very well-known order. 90 in the 90 to 1.1 time range of the previous order. What we see with consumption, it is a recurring revenue stream.

Not recurring, recurring. Time frame, not known. Could come in a month, could come in two months, could come in a day, could come in 20 days. And the volume that it would come back in, we don't know.

It could come back in in a million, could come back in $10,000. So, the nature of that is very different, right? So when you say, Adam, I feel very insecure about what it is, that is what you're responding to, right? You go like, okay, we're going from recurring to reoccurring.

I don't have a secure time frame and I don't have a secure dollar figure. So I feel like, you know, like, that's where that nature comes from. Now, how we're going to solve for that, and it is being solved in the past, is we're going to see that the industry will move to pre-buys. It will say, oh, you have to pre-buy 50,000 leads, or you have to pre-buy 50 or 5,000 discovery calls, or you have to pre-buy half a million dollar in revenue that I'm generating, but you pre-commit to that, and that pre-commit needs to be taken over 12 months.

Now, why that is needed for the seller is because it has upfront cost it needs to absorb. Yeah. Right? And so historically, the challenge is as follows, if I buy $5 million worth of Cisco routers, I, the buyer, have to amortize the cost over five years and write that off.

If I now take on that risk, right? I have to commit to AWS an annual commit. I have to commit to my whatever AI provider a certain amount of volume. I'm taking on all that risk.

I need to amortize that too. And so I'm going to amortize that by based on the volume that you're committing to me, right? And then, you know, obviously, on my end, I'm going to calculate what the risk factor is, what the chance of renewal is, and so on and so forth. Then I can then come up with something meaningful.

That's where, uh, uh, consumption-based pricing comes in, or outcome-based pricing comes in. Now, we call it PPX because it's price per impact, price per action, price per outcome, price per click, and so we go like, okay, forget all these PPP, we just make it PPX, right? Price per something. I, uh, we could do a whole another show on this.

Um, and and and likely likely need to. Um, thank you for breaking that down. I, uh, I I'm a fan. I think that it will be where the industry goes.

I'm excited to see when and how. Um, but for today, we are just about out of time. And before we wrap, uh, we would like to keep a tradition going and do some rapid fire with you if you're game. Yeah, let's here's what I before we do that.

Here's here's where I want to point out to your audience. What you'll see in the way I reason is based on scientific frameworks. Is creating a line with a continuum, is creating that is revenue architecture. I am, you know, I've been told too often, sales is just something you do.

You can do or you cannot do. And revenue growth is just something you, you know, your product is dependent on product. And I go like, no, I don't think of it that way. There's plenty of successful products that fails, and there's plenty of really bad products that succeeds.

So, there is a difference. And that difference is into go-to market nature. And I believe when I look at the go-to market, similar to way how products can be engineered, product go-to market can be engineered, designed and architected. Will it be a guarantee of success?

Absolutely not. But we can double, quadruple success rates of companies by creating it. And that's what the book revenue architecture is about, right? That's the mindset.

It's like, hey, and that's why there are frameworks and the things that I'm drawing from. Thank you very much. Yeah. That's what I'm drawing from.

I'm going like, look, like, as an engineer, I can engineer this. And yeah, and some people believe in it and others do not. And they go, yeah, and then either way, you know, it's fine. I From But but you're right.

And I I I I love the mindset. Um, the days of, oh, sales is, you know, just show up and figure it out and it's not a science is wrong. Like, is there a human nature? Absolutely.

People buy from people they like. Make no mistake about it. Um, but the most successful sales organizations that organizations that we've worked with, um, are certainly the ones that put some science behind their sales process. Okay.

I I like to refine that. For you're not wrong, when people buy from you a good product, they buy from people they like. When people need a product to save their lives, lives, they buy from people they respect. Ooh, I love that.

Respect does not equal like. I love that. I will use that moving forward. All right, here we go.

Jaco, early bird or night owl? Uh, early bird. You are the youngest of eight children. What other, uh, profession that you would have taken from the other seven, uh, siblings that you had?

Which was which was the one that you would you would have gone with if it was if you weren't you? Oh, easy enough. I used to be a carpenter. So, we're all tradesmen, painting, carpeting, roof laying, electricians.

I'm a carpenter. Nice. What is the first app you check when you wake up? LinkedIn.

But it's getting way too noisy, so you're going to have to find a new one pretty soon, so. No, the the for me, why LinkedIn works is because I I look up for mentions. So, I quickly see if uh what you know, like, like, over the past days, I got the you know, on that topic of of of um consumption based pricing, the article is going nuts, right? And so I every morning, I go like, I wait what did it?

I wonder what it did last night. I love it. Awesome. Uh, one tech gadget you can't live without.

iPhone is easy enough, uh, but if I say, uh, that one, I have my van, my SpaceX enabled, drive around California van that I that I work from almost every day. I've heard about I I've I've heard about this van. Um, I find it very, very intriguing. What, uh, Jaco, what's your favorite guilty pleasure snack?

Oh, dude, like, like say it with me, people. Say it with me. Red Bull. One a day, two on a two on a hard day, one on a easy day.

It gives you wings, right? Oh, it does. Like those of you who know me, yes, it does, absolutely, gives me wings. Last one, last one as we wrap this up.

Dream vacation destination. This is tough because you've been everywhere, but dream vacation destination. It has it okay, let me describe to you. This is actually a way of thinking about life.

You can think about vacations or you can think about experience. I'll give you my dream experience. Blue sky, mid-80s, for Europe that is high high 20° C, mid-80° F. Wind slightly blowing breeze through.

Doors are open, the the like slightly the the moving the curtains, right? Like, um, you walk outside, you hear birds, and you see a lot of green. Uh, food is delicious, and and and people are people who serve you don't serve you because you pay them to, but they serve you because they believe that's where they are the happiest in doing so. Like you're part of a culture where where that is a mutual and then you feed them after they served you, you sit together and you have dinner.

Like I that's for me Bali, Indonesia, pretty much, right? What I just described. But um, that's the kind of like the life. But other than that, here in California is pretty freaking awesome as well.

Mhm. I love it. I love it. Jaco, thank you so much for joining us.

It was a pleasure having you on the show. Folks can go to winningbydesign.com, I believe, is that correct? Yep.

And of course, you can find Jaco and all of us on LinkedIn. Jaco, thanks for joining us, man. Thank you for having me. It was a pleasure, it was a treat.

Thank you, Dale. Thank you, Adam. Have a fantastic holiday period.