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That feeling of hanging up the phone, knowing that you made a mistake or that you ruin the call is something that everyone in sales has experienced. But then I realized that from the organizational perspective, it’s really expensive. Every time a sales rep secretly hangs up the phone and then turns over his friend and says, Yeah, kind of blew that one that’s costing the organization thousands of dollars. And it’s at a scale where it’s happened to every rep on so many calls throughout the day.
Jay Clouse 0:27
The startup investment landscape is changing. and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to upside.
Eric Hornung 0:55
Hello, hello. Hello, and welcome to the upside podcast with the first podcast finding upside outside of Silicon Valley. I’m Eric Hornung, and I’m accompanied by my co host, Mr. Eyes and ears himself Jay Clouse, Jay. How’s it going? Man?
Jay Clouse 1:10
Head and Shoulders, Knees and toes my friend
Eric Hornung 1:13
Head, shoulders, knees, toes, eyes, ears, also elbows. That’s a song I just made up?
Jay Clouse 1:19
Yes, well, I have two eyes. I have two ears. I also have a nose and a mouth. But relevant to what you’re saying, I think is this sales framework that I’ve been noodling on and putting together that I’m calling the eyes and ears method.
Eric Hornung 1:32
Were you a little self conscious about it. When you first put the acronym together? You don’t usually ask me for advice on on your naming conventions.
Jay Clouse 1:39
I struggled on this. So for background here, I have like an anecdotal theory of how I’ve explained to a lot of freelancers or client based business owners how to do sales. And it’s the same advice for just about every one of them. And I thought I want to put this in a formula in a framework. And Eric, I know you appreciate framework
Eric Hornung 1:59
I do. It’s amazing that you’re putting something in a framework
Jay Clouse 2:02
You appreciate things with pillars, but wanted to put it into a framework so that I could kind of coin it and talk about it. And I figured out an acronym eyes and ears which spoiler I’ll share it with you guys. establish your elevator speech. Empower advocates to refer sales, eyes and ears two step method works for business owners who are client based and man I love talking about sales.
Eric Hornung 2:26
Well, that’s good, because today we are going to talk nothing but sales,
Jay Clouse 2:30
Nothing but sales. We are speaking with Marc Bernstein, the CEO of Balto, Balto help sales service and account receivables reps win as much revenue as possible from every phone call, teams use Balto’s artificial intelligence software to analyze phone calls in real time live while the call is still happening, and instantly provides reps recommendations on how to communicate as effectively as possible.
Eric Hornung 2:53
What do you love about sales?
Jay Clouse 2:55
I guess part of it is I like the game of it. But when you go into sales, you have understand that there is not really a winner and a loser. It is a winner and a winner or you’re selling a product you don’t believe in or at a price point that you don’t think it’s fair. So it is like kind of goal oriented, which I like. And there’s there’s just something fun about, you know, the little cha-ching of securing the bag. As Blake Lawrence told us in an interview recently.
Eric Hornung 3:26
When someone signs up for Unreal, do you get a little cha-ching notification?
Jay Clouse 3:30
I get it a little bit of a notification from the payment processor but I think this goes back to the days when Alex and I at TechStars were selling tickets and every one of those a little bit of a cha-ching because you’re basically selling a commodity and it was just exciting when you made a sale because like you know that you’re selling something at market value that people are going to enjoy but now money’s coming into the bank you made a little bit of money we had big sales you know we did send a message to each other just said boom, which I just like really looked forward to
Eric Hornung 3:58
see I just imagine the doc Prescott Doritos commercial bell. Do you remember that?
Jay Clouse 4:03
Eric Hornung 4:04
So every time a bag of Doritos is sold this bell rings across the office and at the beginning it’s like bing bing . At the end you just have like people hiding under desks and stuff from this bell sound anyway, don’t know why that came.
Jay Clouse 4:17
A lot of stores will have like a gong in their office that they ring when they have a big sale. The problem is like most people just think about sales, like I said as kind of a zero sum where if you made a sale, then you trick somebody into buying something and that’s just not the way sales are any good product is worth more than the money that is being traded for it to that person. And so I love flipping that switch for people and getting them to understand that because once you stop being afraid of sales, it just becomes kind of a fun component of what you do. And at the end the day if you’re good at it and you’re enjoying it, it means like a better quality life.
Eric Hornung 4:52
What if you like what you do, and you’re good at it, but you’re legitimately selling snake oil,
Jay Clouse 4:57
then screw that guy.
Eric Hornung 5:02
Alright, alright, that’s a good answer. That’s a good answer. So Jay give us some more facts on Balta What’s going on here?
Jay Clouse 5:08
Facts company was founded in 2017, based in St. Louis, Missouri, introduced to us by then Ben Mizes of clever who we interviewed recently on the podcast, I think Episode 39. they’ve raised about $1.3 million to date. And yeah, that’s that’s all I’ve got on Balto.
Eric Hornung 5:26
You know what genre of movie just has the best like sales scenes?
Jay Clouse 5:31
Eric Hornung 5:32
Wow, that was a super vague genre. I was thinking more specific. I was thinking like Wall Street movies. So many great sales scenes in Wall Street movies.
Jay Clouse 5:39
I don’t think Wall Street is a genre of movies.
Eric Hornung 5:42
Wall Street is my favorite genre of movies. It’s not true, but I’m saying it just dig my heels in here.
Jay Clouse 5:47
Eric Hornung 5:48
Oh, good movie Glengarry Glen Ross.
Jay Clouse 5:51
You know more about it than I do. I just know it’s related to sales.
Eric Hornung 5:53
Always be closing. That’s where that comes from ABC. Second place you get steak knives their place Get out of here.
Jay Clouse 6:01
Alright guys, well, we’d love to hear your thoughts on this episode with Marc as we run through. You can tweet at us at upsideFM or email us firstname.lastname@example.org and subtle plug. If you want to learn more about the eyes and ears method go to unrealcollective.com, and you can see that for free. All right, Eric ready to jump in?
Eric Hornung 6:19
Yeah, let’s do it.
Jay Clouse 6:22
But before we do that, let’s bring in our friend Rob McDonald, a partner at Taft Stettinius and Hollister to teach us about private placements and fundraising Taft Stettinius and Hollister is a law firm known for assisting entrepreneurs across the Heartland. As a reminder, the following remarks by tax attorneys are for informational purposes only and are not legal advice. This information is not intended to create and receipt of it does not constitute an attorney client relationship. No person or organization should act upon this information without first seeking professional counsel. Rob, welcome back to the show. Happy to have you here. How are things at Cincinnati?
Rob McDonald 6:55
Fantastic. Great to be back on upside.
Jay Clouse 6:58
What are the preferred instruments for raising capital, for example, convertible debt safe equity, and are there others?
Rob McDonald 7:06
Honestly, the preferred instrument is whatever instrument the lead investor wants to use. These days, it’s very common to see all three tools used. safes are generally viewed to be more friendly to accompany as compared to convertible debt. And of course, equity is seen as the most basic place to start negotiating over equity rounds can be quite expensive in terms of fees complete, because it’s a lot more paper and a lot more negotiating and convertible notes and sage.
Jay Clouse 7:30
Super helpful. Rob, if people want to learn more about Taft or yourself, where should they go?
Rob McDonald 7:34
They can check us out at www.taftlaw.com or my Twitter @rwm.
Jay Clouse 7:46
Marc, welcome to the show.
Marc Bernstein 7:48
Eric, Jay, thanks for having me.
Eric Hornung 7:49
Great to have you here. On upside, we like to start with a background of the founder. Can you tell us about the history of Marc?
Marc Bernstein 7:57
Sure. So I’m actually originally from the Washington DC area, one of the suburbs outside called Chevy Chase about a mile from the city. And I got to St. Louis after going to WashU. But when you’re at a university like that, you don’t get to always experienced the city like you wish you could. So I was on campus for the full four years of undergrad. And then afterwards, one of my mentors at WashU in entrepreneurship. I asked him what is the best possible way that I can start to build the skills to have a successful business. And he said, probably the number one skill you could build is sales. Because you’re either selling new employees to join your team, or founders to join your team. You’re selling customers who are going to be taking the first bite of whatever you have to offer, or you’re selling investors to get financing. So I started working with a tech company here in St. Louis, he connected me with them pretty quickly. And then, as young companies sometimes tend to do, they ran out of financing very quickly. So here I was in St. Louis, right after graduation about four or five months in, hadn’t been getting a paycheck for a couple months. I said, Man, I need to find something. But meanwhile, I’d moved my entire life out here at an apartment, I start making friends and you guys know that you know, after you get out of school making friends take some time. So I looked for other startups here in St. Louis. And meanwhile, over the past four to five months, while I was there, I was really starting to like it. It’s very different than Washington DC and that there’s generally in any given moment, less happening. there’s fewer events to choose from, there’s fewer people on the streets, there’s fewer companies in the city. But that means that your interactions that you have on a day to day level are more meaningful, because you’re not one out of 10,000 people walk into a shop, you’re one out of thousand one out of 500 and that allows you to build relationships where they get to know you so I love the city stayed here and then worked in sales and tech for a few months until or a year and a half rather until Balto.
Eric Hornung 10:13
Jay, Does that sound like depth versus breadth to you?
Jay Clouse 10:16
It does Someone once told me speaking about Washington DC, that it’s a city where you can meet anybody but No, nobody.
Marc Bernstein 10:24
That is pretty true. Except I had only gotten to know the city growing up. So I wonder, okay, now if I in my mid 20s went back there, what I have a different perception. And my guess is you have to put in the effort to get to know people anywhere. But boy, do you pass a lot of people? And can it feel fleeting at times?
Eric Hornung 10:44
You asked this question to your mentor that is very specific about building a business. But how did you even get the idea that you wanted to build a business in your head?
Marc Bernstein 10:52
I think unlike some other entrepreneurs, it wasn’t the sort of thing where I was six years old and said, I’m going to start my own company one day. It wasn’t as though I said, that’s the only path for me. I’m an entrepreneur. I think for me, it was an understanding that I wanted to build something. And there’s a bunch of ways to build something, you can build something in a huge corporation, you can build something in a tiny five person company. But when I looked at the different options of how can I build something, I realized that to go from scratch, to have a team in place that’s all working toward a common goal is a really beautiful thing. And that that is the kind of thing I wanted to build. And that’s the sort of insight that I had toward the end of college where everyone’s going to the career fair, which they call that business school meet the firm’s. And I didn’t want to meet the firm’s I wanted to build a firm.
Jay Clouse 11:47
I hate that phrase. Something about that just feels gross to me.
Marc Bernstein 11:50
Yeah, it’s you can you can hear the dress code in that phrase.
Eric Hornung 11:57
Jay, did you ever go to a career fair besides business builders?
Jay Clouse 12:00
I did. I mean, I did. I did all the standard things. I went to the career fairs. So Marc, he said most transferable skill you could learn is sales. What experience in sales? Did you have up to that point,
Marc Bernstein 12:11
The only experience I had had in sales up to that point, was trying to make it in a couple businesses that I had started. And it just so happens, we do a lot more sales than we realize. So in high school, I started a charitable group that raised money and then invested that money in the stock market and then donated the proceeds to various charities. And it just so happens, getting a whole bunch of high school students to be interested in stock trading is not always the easiest thing. And then you say, Okay, well, how do you build these relationships in the community? Guess you got to go around a bunch of the local grocers and the people who can make donations and say, Would you like to support a student organization, maybe we can send some traffic or some parents your way as well. So it started there. And then I started actually a personal fitness company. In college, we’re actually was the last year of high school called doorstep fitness. And the premise was personal trainers, wherever you are, so goes direct to home, office, or Park. And the understanding with that businesses, one of the big limitations people have in working out is not having the time and having to transition to work out. But what do you know, if someone knocks on your door and says Knock Knock it’s workout time, you tend to do it. So in building that customer base, we built a network of we had at our most five trainers, working with a client base of over 100 different folks in the DC area. And that was probably my most direct entrance into trying out sales, because people would call an offer website and say, I’m looking for a personal trainer. And instead of me telling them all about our personal training, I would learn to take a step back and say, Well, what kind of trainer you’re looking for, let’s see if we’re the right one. And that was probably the most practical experience, the start that I had into learning what sales was and what it can do for a small organization.
Jay Clouse 14:12
And what did you learn then, in the role that you got introduced to in St. Louis, about sales,
Marc Bernstein 14:17
I learned that not being intimidating, when you’re selling is a really important thing. And that in sales, a lot of us want to go go go and make the pitch and go for the hard close. And that’s important. But there’s, it’s equally important to make sure that the other person is comfortable. And to use a little bit of a softer tone to say, I don’t know, I don’t know what the answer is. I couldn’t. But I can ask you a couple questions. And we can try to figure it out together. And coming from that place of doubt versus a place of I have the best solution for you. You can’t wait to hear it kind of puts people’s defenses down a little bit allows you to have a conversation where you get to the need not to get to your solution.
Eric Hornung 15:01
What do you think about? And this is kind of getting away from your story, but it kind of has some relevance to your real life? What do you think about kind of sales gurus? Is there validity in some of it, or none of it? or all of it?
Marc Bernstein 15:15
Yes, sales gurus. That’s a really interesting term. Because I think that when you hear it, everyone has a picture of what it means and feels something. And I think that when you think of a guru, you think of someone who’s pitching advice that has a huge digital presence or a lot of awareness, but that you kind of sense this is emptiness and the advice where you go, I don’t really know if, if that’s practical or useful. That being said, I think that in sales, there’s a science to it, for sure. There’s an art to it, for sure. But there’s also the stuff that we all just know is true. The stuff that we know how to communicate, because we’ve been communicating as a species for millions of years. And we know that when you ask someone a question and asked him to think about stuff, that’s very different than giving them a statement, and telling them something you believe. So I think that a lot of the sales gurus are repackaging tried and true advice, which is going to evolve and going to be tested and going to have some flaws in it. But by and large is probably in the right in the right vein, and on the right track. So I actually, I don’t have any hate for sales gurus at all.
Jay Clouse 16:24
Obviously, Balto is a tool for sales representatives. So help us close the gap to leaving that company, first company in St. Louis and starting Balto?
Marc Bernstein 16:34
Yeah, when I was at that first company here in St. Louis, I had as a sales rep, experience, the feeling. And that feeling is when you get out of a coaching session, you just talk to your manager. And your manager says, Here’s how you can improve, you should try A,B or C and you walk out that coaching session, usually you feel kind of enlightened, you’re like, Great, let’s do it. Then you get on your next call, you finish the call, you hang up the phone and go, Oh, I didn’t do any of the stuff I was supposed to do. And that’s because there’s this gap between knowing what you’re supposed to do or having learned something, and then actually doing it. And that feeling of hanging up the phone, knowing that you made a mistake, or that you ruin the call is something that everyone in sales has experienced. But then I realized that from an organizational perspective, it’s really expensive. Every time a sales rep secretly hangs up the phone and then turns over his friend and says, Yeah, I kind of blew that one that’s costing the organization thousands of dollars. And it’s at a scale where it’s happened to every rep on so many calls throughout the day. So what if there were a technology that helped reps while they’re on the phone, do the stuff that they know they should do or learn something new about a better way to approach things, try a new strategy, something that is backed in both science and intuition. So I actually had built an Excel macro, where on my computer, in Excel, I would type in various topics as the conversation was going on. And this macro, which I called sales prompter six, kind of a play on seal team six, would pop up information based on that topic. So the person would say, I don’t have any budget for this, I type in budget, and it would bring up my budget scripting, they would say, Tell me about your implementation process, I type of implementation to bring up implementation information. But one of the other people who ended up becoming a founder at Balto, one of my part to one of my three partners, Chris Qantas, he saw me doing this work and I macro and said, Marc, that is probably the stupidest thing I’ve ever seen. You are sitting there heads down vigorously typing stuff into a macro versus having a real conversation. If you want to try to achieve this, you got to have some sort of passive presentation of the information, where you’re not typing in stuff, but instead being presented stuff that maybe you missed in the first place. So maybe speech analytics could be the right tool for that. told a friend about it, who was coming to visit Davidson Gerard is our third founder. And we’ve known each other from the DC area since we were six years old. Davison said, Marc, I haven’t been out to visit you at all in St. Louis. It’s about time, let’s hang out comes out to St. Louis. I briefly show him the macro talk about the idea. And when I got home from work, he had built a prototype. He said check this out. I use the Google Speech API plug straight in your macro automatically pops up the information in your macro. And I saw that and said Holy crap, I think we have something.
Jay Clouse 19:44
I need more friends like that.
Marc Bernstein 19:47
We all do. Great companies are built on friends like that.
Jay Clouse 19:50
That’s crazy. So did you put that to work? Did you start using that through Google speech?
Marc Bernstein 19:56
I did. And it’s funny actually, when I first did it, I had that I made that mistake that a lot of new entrepreneurs make, which is worrying that everyone’s going to steal your idea. So I’d kind of go in the corner and secretly have my rack macro and make sure no one could see me but very quickly learned the lesson that no one’s going to steal your idea. Because you’re the most passionate about your idea than anybody else’s in the entire world. And when it’s good enough that it’s developed is when there’s a threat that someone else is going to try to build off it. But when it’s just nascent, there’s that threat is very small. So started working on business planning, actually with Chris, who had pointed out to me that the macro was probably not the way to go. And he had come to me as an almost as a joke, probably the month before and said, Marc, I want to build a billion dollar company, billion dollar company billion dollar with the B. And he would kind of throw that out at me every few weeks. And then I said Chris, I actually a timings good, I might have billion dollar company for you. So we started working in coffee shops over the next five or six months fleshing out the plan. Which, by the way, if you ever flesh out a plan without making a phone call, you’re not really fleshing out a plan. So we called over 80 different sales leaders and said, if there is something that helps your folks handle objections, make sure they’re listening for pain and business challenges, and not talk too much. Would you use it? And they said, Oh, yeah. So we actually once we left, the previous company we were working at went quite literally across the street, because the building that we were working at is across the street from a tech incubator called T Rex. And we went right across the street next day rented an office. And they were we’re in January of 2017, starting on Balta.
Jay Clouse 21:51
Now with your macro, and even with the super powered version of it, did you see tangible, measurable results for your your efficacy as a sales rep?
Marc Bernstein 22:01
You know, not really, I think when I was using the macro, it was the sort of challenge that you can almost have an MVP a minimum viable product, that’s too minimum, and when putting when you’re putting in specific keywords that you want your technology to recognize. And you’re manually taking 30 minutes to change around your scripting, you don’t have those cycles, where you can iterate fast enough that it’s really useful. So there were a couple times where I looked at and said, ha, I that’s a good response. I’m gonna try that one. And it worked. But while I was at that stage, I didn’t think that the product we that I had in that macro was really solving the need. And that told us early on, we have to actually validate this with real customers. Because when we went to start that company, it was not yet validated. What did v2 look like? v2 was a command prompt. So you could launch it up in a terminal on your computer. And it had two lines, one on the left one on the right, the left was a red blur that said customer and the one on the right was a blue blur that said Rep. And it was showing you the waveform as a blur going right down as these two columns as the call is going on. And it would pop up a very quick answer that would come up from the bottom of the screen when something happened in the calls. And that was the version when we saw those blurs. We said if we can make it so this technology isn’t distracting, because the blurs things are changing on your screen the entire time. If we can make it as not distracting, and only telling you things when you need it to tell you things, then you’re going to find that this is useful. So we got rid of the blurs made it so it only popped up information when it needed a pop of information. And that was the point where we actually started seeing real results come from it was telling us on our calls, don’t talk so much try these questions. And we would demo that to our customers. So they’re seeing Balto recommend us to turn the conversation back to them. And it clicks. They go, Wow, you were just on a two minute rant. I just saw a Balto give you a recommendation that said hey, turn it back to the other guy. And now the conversation is moving in a different direction. This is awesome. So that was the moment when we saw that we really had built something of value there.
Eric Hornung 24:31
Is that the most common command out of Balto, Hey, you’re talking too much?
Marc Bernstein 24:37
You know, I think actually the most common command at a Balto is going to be a response to a customer objection. Because there’s so many different types of objections. And the best way to apply those objections, there’s a bit of fear that happens when someone says no, and that’s where reps tend to fumble. And every sales manager sees this across the sales floor all day and thinks themselves. Man, if our sales team, were doing a better job overcoming these objections, then, boy would our conversion rates go up. So because the objection is so closely tied to the end result of the call, and it’s almost a moment, a make or break moment, that’s probably the most used part of the application is helping people overcome objections,
Jay Clouse 25:26
How much of the application needs to be on boarded per company versus standard selling advice and, you know, scripting that is more ubiquitous,
Marc Bernstein 25:37
The application is almost entirely customizable. So we don’t recommend out of the box content for the most part. There are a couple things, for example, where if you say okay, why don’t we set a tentative time for sometime next week? We recommend that when reps talking about a tentative time, and have them double back and say no, actually, it’s it’s a real appointment. If you do need to reschedule, you can call me. We are looking forward to that appointment, though. So we have some best practices we recommend, but it is almost entirely customizable. Meaning we were pressured early on to say how can we make an implementation that’s entirely customizable, as quick and easy as humanly possible. So we ended up building out what we call our playbook builder, where super easy, you pop in the content you want your reps to see, you choose from the different ways that Balto can figure out which content to show them when almost business logic, if you will. And then outcomes, the recommendations on the live calls. So we because we made it so customizable, had a very early pressure to make sure there was also easy to implement.
Eric Hornung 26:52
What’s the uptime on that?
Marc Bernstein 26:54
takes about two to three weeks on average. From your kickoff call, we’re going over what metrics you’re trying to drive to go live. The reps are seeing it on their screens, helping them on their calls,
Jay Clouse 27:05
Are we customizing the customer input as well as a sales rep output,
Marc Bernstein 27:10
You’re customizing both the input and the output. But they can choose from what we call our AI library, which has over 140 different topics that we have trained Balto to recognize, that tend to be applicable across customers.
Eric Hornung 27:26
Talk to me a little bit about you guys as a company, what are your KPIs? How do you know that you’re doing well, or not?
Marc Bernstein 27:32
For our company, we know that we are doing well. When we are onboarding as many new customers as humanly possible. And hearing from our customers, this is changing my business. Those are the two things we look for. Because if you can onboard new customers, and then keep new customers, you’re building a healthy and successful business.
Jay Clouse 27:52
What is the feedback? Let’s say I’m a company, I’m employing Balto. And I’m the sales manager. What is the moment that I as a sales manager realize that this is changing my business.
Marc Bernstein 28:04
The moment as a sales manager, you realize this is changing your business is when you are walking down your sales floor and you hear something you don’t like you hear a mistake. And you go Hmm, what if I could change that you walk back to your computer, you type in what you heard and didn’t like, you type in the replacement what you wish happened instead. And then the next day, when you walk down that same aisle, you see the rep take the advice that you had typed in without ever having to actually have an in person coaching conversation. And that’s the moment where you say, Man, I just saw that happened for one rep. That’s going out to my entire team. It’s going out in an instant.
Eric Hornung 28:50
Do you have any pre and post Balto conversion statistics? Does this lead to higher conversion?
Marc Bernstein 28:57
all the time, most of our customers are getting between 15 to 25% increase in revenue. They have a bunch of other metrics they care about, like improving the customer experience, where you know what percent of the time our customers coming back and saying, Wow, you were really helpful. Thank you for that. And we can show that some of our customers are getting 1.9 times as many customer compliments, as they were so almost twice as many customer compliments. We can also show they’re collecting email addresses, because instead of saying, Do you have an email address you want to leave on file? They say we might have some good promotions, we can send you what’s the best email for you. And we can watch that spike. So those are some of the lagging indicators. But the leading indicators include things like how many questions are your reps asking? How many times are they remembering to go for the close? What percentage of the time Are they giving the right disclaimers or disclosures where they have to tell you the call is being recorded? That’s the sort of thing that we can show on a graph. In front of the managers eyes watch how this is going up.
Eric Hornung 30:02
What’s your team makeup look like?
Marc Bernstein 30:04
We are eight engineers, five account executives, two founders, I’m on the customer success side, meaning helping our customers get up running and stay happy. The other founder, Chris is on the marketing side and doing lead generation, then that leaves our customer success manager, our operations specialist so we’re let’s say 8,5,2,2 uh 17 right now.
Eric Hornung 30:36
Do your account leads use Balto?
Marc Bernstein 30:39
They do on every prospecting call and every demo. And we have that level of transparency where when we are demoing, the customer can watch us using Balto and will pointed out will say hey, Walter, just recognize you’re interested. I’m probably going to take a second and take Walters recommendation. So let me ask what in particular interested you. So it’s almost a little bit of a meta scenario, both reception. Oh, I hate that.
Jay Clouse 31:10
I love I love that as an idea, though. So what is the conversion percentage for Balto on the sales calls?
Marc Bernstein 31:16
The number the percentage of opportunities, meaning you’re qualified, you’re interested, you say you know what? I think I want to keep talking This is good. That end up becoming a close customer is about 23%.
Jay Clouse 31:30
What is industry average for opportunities to close?
Marc Bernstein 31:34
Tough to say. Usually you’re looking between the 20 to 30% range. There’s a lot of factors that go into it to like lead quality, or how established your solution is. So for example, if your Google and you have a lead come in that says I’m interested in Google Cloud, that’s probably going to convert at a higher percentage than if you’re Balto it say I’m going to change your world, though you’ve never heard me and I got you on a cold call. So there’s a bunch of different metrics that go into it. But I’d say you’re looking at the 20 and 30% range in general.
Jay Clouse 32:04
I had a Google rep trying to sell me this past week that email and it was I thought it was bad. I’m like, I understand how you’re using sales advice here. But like it’s just not coming through to me very well.
Eric Hornung 32:14
Yeah. So take that. Take that Google take that.
Jay Clouse 32:18
What what are the objections that you hear at Balto, when people get on and decide not to close or like considering not,
Marc Bernstein 32:24
usually when people decide they are considering not closing or decide not to close? It’s other priorities. And that’s the thing is
Jay Clouse 32:32
Other priorities than more sales?
Marc Bernstein 32:35
Actually. And that’s the thing is, you can generate more sales in a 1000 different ways, you can double your close rate, right, where maybe your close rate goes from 15% to 30%. Or you can double your lead flow, you can have the same number of leads, but doubled the quality of them, by perhaps investing in a different lead source or having ads with a higher pay per click. So there’s a bunch of different ways you can achieve the more sales goal. And what we have to demonstrate is that Balto is just a more sales, because you can do that in a million ways. Balto is about giving your organization, the ability to make sure that the messages you want to deliver to your customers are the messages that are actually getting delivered to your customers. And the second you decide, you know what, I think I want to switch this up, you hit a button. And now that new message is rolling seamlessly.
Jay Clouse 33:36
There are lots of ways to make more sales and you just listed a couple of them in my mind isn’t closing a higher percentage of your leads the best way to do it since you’re already having those conversations anyway.
Marc Bernstein 33:46
I’d say so.
Eric Hornung 33:47
Yeah, man softball question there Jay Hmm.
Jay Clouse 33:50
Well, you know, I’m selling myself on the idea.
Marc Bernstein 33:53
I’ll give you a counter example though I’ll give you a real counter example. One of the customers that we’re working with right now, is trying to figure out whether they want to expand Balto to 175 new reps, or keep Balto on a 20 person team. And their stated goal is more sales. And I asked what’s the biggest obstacle? What’s the biggest thing that’s making you think that you don’t want to do Balto and that you would want to do something else. And he said, I wonder if my reps had more at bats, more pitches, maybe they’d be less rusty, maybe they wouldn’t sound so bad, because they’re doing it 10 more times a day. And they’re not just doing it once a day. So that’s a really good example of trying to increase close rates through increasing lead volume. And of course, what I end up saying is, hey, when they increase lead volume, they’re also going to butcher a higher number of total leads. What if you could make sure they had the lead volume, and they had Balto? So there’s a sort of budging decisions that it ends up coming down to sometimes.
Jay Clouse 35:02
Is this? Is this like a license fee for like, per seat? Is that how your model works?
Marc Bernstein 35:08
Yeah, exactly. It’s a SAS model per rep per month.
Jay Clouse 35:11
What does that figure per rep per month
Marc Bernstein 35:13
Varies according to the customer could be as high as maybe $120 per rep per month. And then for large enterprise organizations is a fraction of that.
Jay Clouse 35:25
And what where do you tend to fall Do you work with mostly like fortune five hundreds or small companies?
Marc Bernstein 35:31
Right now we tend to work mostly with, I would call it mid market contact centers, where you have 100 to 300, maybe 500 agents on the floor who are doing sales, but you’re not the master cards of the world who have 20,000 agents. And the simple reason is that those customers, those enterprise enterprise customers, have a whole lot of requirements you got to break into and going up streams hard. So we want to do it, we plan to do it, we think that that’s a real opportunity. Because if you have 20,000 agents, your coaching problem just gets more difficult at scale, you have to hire more managers, there are more ladders on the hierarchy, down which you have to pass a new message or get something approved. So being able to hit a button and have everybody on the same page is more impactful with 20,000 folks, just a matter of making sure that we can show that we are enterprise ready. And for any technology company, that means audits, that means new layers of security, it means layers of compliance that most of us don’t even think of on a day to day basis. So there’s a lot of hoops to jump through. But we’re jumping through.
Jay Clouse 36:47
I’ve worked at some small companies, and obviously sales are lifeblood companies, and you want good salespeople. But we were often hiring people who didn’t have much or any sales experience prior. And we were hiring like, you know, maybe a dozen people. So in these mid market contact centers with hundreds of people, how much sales experience to those reps have coming in? And what is coaching like at companies like that, how do they even get these people competent?
Marc Bernstein 37:15
The lack of sales experience is one of the reasons why we are targeting the contact center market, we asked ourselves where’s the highest volume of not so great conversations, that being said, these reps, that contact centers work very hard, and the managers work very hard to coach them up. But there’s a lot of factors at play that make it really difficult to be good at your job, including perhaps not having any prior experience, including being in a classroom of 20. Folks, when you’re getting trained up, and then having once a month coaching sessions, it doesn’t exactly make it easy to be successful. So one of the actually surprised benefits that we found from our software is customers are finding that they are no joke. ramping agents 65% faster. Because on day one, instead of saying let me put you on hold and then running up to your manager who’s talking to someone else, and saying, hey, this customer has a question. Boom, pops out right in front of your eyeballs. And that’s integrated into the conversation where you can store it away next time.
Jay Clouse 38:24
Could you almost make this is almost me spit balling. But could people use Balto with pre recorded objections and just practice with the software?
Marc Bernstein 38:34
We’ve we’ve heard that my thinking is and the way that the company thinks about it is the most important thing is we can impact and drive live conversations. And that’s actually one of the disruptions that we are posing to speech analytics. Because speech analytics is an established field. And I remember when, you know, I was in elementary school, we had dragon speak and Microsoft dictation, and all those tools were coming into play and it was amazing. And then Siri came out. And then Alexa came out. So speech analytics is an established field. And we’re not new, where the development and speech analytics are not new. What is new is the ability to not after the fact not when the call is done, search through and try to figure out how you could have made it better. But in real time, while the conversations going on, guide the reps to make sure they’re doing the stuff that everybody wants to be doing.
Eric Hornung 39:33
You mentioned earlier that one of your KPIs is your customer saying this is changing my life? Let’s go on the other side of the coin. Do you have any examples of customers who had negative or maybe highly critical reviews?
Marc Bernstein 39:48
Every company is going to have somebody who’s going to be critical? And Balto is no exception period? I think that the question is not does it ever happen? Because sometimes that happens. I in the question is, are the responses getting flipped? Are you starting to notice that the you know, people who are critical that you do a new cohort, and the next cohort has way fewer critics and way more fans? And that’s exactly what we’re noticing. So, you know, in the beginning, yeah. Especially when you get started with something that’s totally new, that you know, quite truly the world has not seen before, you’re going to have to figure a lot of stuff out. What that means is that now we’re in a really good place. Because we’ve had some of those early hard learnings about how do you take a technology that’s totally new to reps and totally new to managers, and make it something that is appealing to human psychology? Because if you think about it, never, no other time in our lives, is somebody tapping us on the shoulder saying, hey, try saying this. Hey, hey, you’re talking too much. So we had to be real gentle with that in the wording that we used in the user interface and making it something that was rewarding. So when reps take a Balto recommendation Balto, give them a quick bit of positive feedback and say nice, you did a good job. And those little things have made a ginormous difference in the way that Balto is changing organizations we work with.
Eric Hornung 41:22
Why did you call it Balto? Why didn’t you stick with sales prompt six
Marc Bernstein 41:25
sales prompter six? Well, first of all, have you guys ever seen the Disney movie Balto?
Jay Clouse 41:30
No, but I seen Iron Will.
Marc Bernstein 41:35
I can’t blame you can’t blame me because Balto came out. Two weeks before Toy Story I think. And toy stories are way better movie Steve Jobs to view. Brilliant masterpiece, never going to beat it. But Balto is based on a true story. which is I think the year was 1925. I love this story. So have it almost memorized here. And there was an outbreak of a disease in the northwest corner of Alaska, Nome, Alaska was the town called Diptheria. And Diptheria was the super deadly toxin that you needed a specific antitoxin to cure very rare and the nearest cure was over 500 miles away in Anchorage. So in the 1920s, you couldn’t fly any toxin to Nome, Alaska in the winter because the conditions were too blizzardous and the engines would freeze the plants. The seas would also completely freeze over so you couldn’t use a ship. And the way that they got that antitoxin to Nome, Alaska, and save the town was with a relay of dog sled teams. 20 different dog sled teams over 500 miles brought that antitoxin. Balto was the leader of the last dog sled team. We think about it as an analogy for sales, because Balto is leading that last dog sled team. But he’s really not in charge. The mushers in charge the human the guy on the back of the sled is the one really making the decisions. Balto is scouting ahead for danger, using his sense of smell that the mushers doesn’t have to make sure everyone arrives safe, and make sure that they get there as effective as possible. And that’s what we try to do with sales.
Eric Hornung 43:22
I had no idea about Balto until I went to New York and Nikki who was one of my roommates in New York, and also a big supporter of the podcast is obsessed with Balto, there’s a Balto statue in Central Park, and Balto himself is taxidermy in my hometown of Cleveland. So I learned a lot about Balto. And I was curious if that was the reason.
Marc Bernstein 43:44
It is us through the founders at Balto. We made a pilgrimage to the statue in in Central Park. And I imagined a pilgrimage to Balto in that Museum in Ohio is going to be one of our next stops as well.
Jay Clouse 43:58
What was the moment? I love that story? What was the moment that one of you threw that out there like Hey, have you ever thought about Balto as a metaphor for sales?
Marc Bernstein 44:04
You know, there wasn’t a moment, it was actually me on a giant piece of paper doing something called mind mapping, where you start with a core concept that or feeling that you want to try to get at with symbols, words, phrases, images, and the feeling was actually mastery. That’s what it was, was mastery. And when I backed mastery through all the different words, images, phrases that lead to mastery, ended up on that piece of paper was a guide dog, sled dog, and then Balto
Jay Clouse 44:41
Eric tried to do a similar thing. But it led us down a path of almost naming our podcast after cows. It was a horrible exercise that I’m glad we did not follow through on
Marc Bernstein 44:51
What was that name going to be?
Jay Clouse 44:53
Oh, well, we started with cheddar and then we got into some real esoteric components of making cheese.
Eric Hornung 45:01
It was there’s been a lot of movement since then.
Jay Clouse 45:06
Boo. So Marc, something that’s non trivial in a SAS world is coming up with a pricing model, this 120 price point that you threw out there. I’m sure you guys have like, played around with that a lot. And in a lot of ways you can make the argument that this software pays for itself to some degree. So how did you guys land on that
Marc Bernstein 45:27
120 is the highest price point. And the way that it works practically, is we have a pricing calculator, were depending on the number of seats you have, depending on the length of the agreement, if you’re doing a one year or multi year, depending on your payment schedule, because in the SAS world, in the startup world, paying up front is a huge bonus, depending on all those things accommodate the price. And the way we actually did it was could have been the wrong way. I’ll tell you how we did it. And you guys can decide that was we started with a price that was too low, which you go read the marketing textbooks, they’ll say penetration pricing, we had a goal of making sure nobody said no because of price. And that’s because we were selling the software, no joke, two weeks after the first iteration came out, which was in February. So in January 2017, we started February, we had our first iteration of software, we were doing it on terminal and command prompt. And we’re demoing that thing, saying, Hey, we just made this, would you buy it, and we wanted every no that we got to be a no, because it didn’t accomplish a need that the customer wanted us to accomplish, not a no because the price was out of the out of their realm. So we didn’t do any free trials, we had the philosophy of if this is something that you really think can help your organization, you should be willing to pay for it. And that’s a signal to us that somebody invested and that we really did find a need. So we didn’t offer any free trials was only paid deals. And we worked our way up until we get to the point, which is where we’re at now, where people go seems kind of high. It’s it’s reasonable, but it’s high. That’s where we want to be. Because that means that we have a price point that is giving ourselves the justice of the amazing technology we built. And at the same time, not unreasonable not out of the ballpark of what people can spend, and something that they have budget for. So that that’s that’s the price point you want to be at.
Eric Hornung 47:44
How did you get from too low to reasonably high? Was it incremental steps over time? Or was it one big jump?
Marc Bernstein 47:54
Incremental, and it was incremental, based on no joke, people telling us, hey, you know, your pricing is way too low, our customers would buy it and go, Ah, I got a total steal. Guys, your pricing is too low. And we’d say okay, obviously, you won’t pay the future pricing. But if you had to come up with pricing on your own, what do you think your peers would pay for this? And that’s where you hear the new number and you go, Okay, great. Let’s try that one, you bump it up to that number. And then you still hear prices too low. Guys, you’re giving this away, you keep bumping it up until you get to the point where you don’t hear that anymore.
Jay Clouse 48:28
So you guys have raised just over a million dollars today started in 2017. It seems like you probably cash flowing fairly well, your team is 17 probably not that huge. Are you guys, you know, are you guys in a position where you’re not even worried about raising anymore.
Marc Bernstein 48:41
We’re always worried about raising. But in the way that all eyes are on the a round, we have an opportunity to capture a huge market. There’s over 6 million Americans just domestically who working contact centers. And that’s in contrast to 4.4 million Americans who work in computer science. So if you think about it, and in 4.5 million work in retail, and specifically, I’ll clarify that last bit 4.5 million, our retail sales people. So every time you go into a store and you see a salesperson, there is another person that you don’t see in a contact center waiting for your call. So the markets huge. And we have truly produced the technology that the world’s never seen before. Something that can transform the way that organizations communicate. And when that happens, you need to pour as much cash on to your development as possible in order to seize an opportunity. That doesn’t wait.
Jay Clouse 49:49
You’re in St. Louis. And actually I wanted to ask so your addresses on Washington Avenue, you’re from Washington DC, is that intentional? Or is that by chance?
Marc Bernstein 49:57
Now it’s by chance?
Jay Clouse 49:58
Marc Bernstein 49:58
That would that would be nice. The best way to choose an office.
Jay Clouse 50:02
But the level the level of intention, you seem to put in a lot of things. I thought this might just be a fun little intention. What has St. Louis meant to building Balto, you know, you moved out there for a different opportunity. You said you started like it because things are slower. And you get to know people more? How has that proven to be as a headquarters for this company?
Marc Bernstein 50:20
St. Louis is a ginormous advantage for us. In St. Louis, you are one step away from every resource that your business needs. Right, the floor above us is one of the biggest VCs venture capital firms here in Missouri, one floor above us. We bump into them all the time, I was giving a presentation to some high school students that came in yesterday and wanted to learn about entrepreneurship. And what do you know, one of the VC partners walks in, that’s the sort of super close tight knit community. And by the way, we had already met known each other and you said, Wow, I really liked your pitch, we should talk. So that’s what it means to be what people here in St. Louis will call a big small town. It also means that getting attracting talent is pretty easy. Because the metro area is 2.8 or 2.9 million people. And there’s not a ton of cool new exciting tech companies. There’s definitely there’s definitely a handful. But we’re one of a few. Which means that when we can make a pitch to the the job market here and say, Hey, guys, you decide, you have the opportunity to work on something that is really, really exciting. People respond to that. So we get a lot of a huge number of inbound applicants to work with us, which you guys know that talent, having a super talented, motivated team is the core of building a company. And we have one step away from any of the investors or financial resources we will be looking for. And we also have a community that’s rallying around trying to build great things here in St. Louis, and great things in the Midwest. Which means that when we go to one of the local papers and say, Hey, do you guys have any opportunities where you want to feature a new exciting AI company in downtown St. Louis, they say absolutely can put you on the cover. And I can tell you that probably would be more difficult in a city that’s not St. Louis. Not to mention, hey, this is a really, really affordable place.
Eric Hornung 52:22
You mentioned that Chris came to you and said that he was looking for a company to be valued at a billion with a B how does Balto what are the key milestones for Balto getting to that billion.
Marc Bernstein 52:35
We’re going to need to go up market, that’s for sure. Meaning we’re going to need to be continuing to attract larger and larger contact centers. Because right now our average deal size comes in around 50,000. And getting to billion dollars in valuation would probably mean 200 million or so maybe a little less than revenue. And $200 million less revenue on 50k deals is not easy. So we’ll need to go up market. What that means, though, practically, is that we need to build an incredible sales team here such that our customer account skyrockets. And that’s not an easy thing to do. So I think that, you know, practically speaking, it’s going to be funding, it’s going to be multiples of our sales team right now. And that ends up when you look at the billion dollar vision being something like a 300 person company with something like 100 sales folks or 80 sales folks is the is what’s in the financial plan. But you guys know that projecting that sort of stuff out is both a good estimate and a best guess.
Jay Clouse 53:46
Awesome. Well, you’re going to have a chance to dog food yourself on your product. Pun intended.
Eric Hornung 53:53
No, no lovin the pun. Come on. Eric, you didn’t even get a giggle from either of us
Jay Clouse 53:58
Not no, just just stone face. It’s fine. I’ll keep practicing my puns. Marc. This has been awesome. Thanks for coming on the show. If people want to learn more about you or Balto after the show, where should they go?
Marc Bernstein 54:07
They should go to Baltosoftware.com. We have a web chat where we’re on it all the time. If they want to check us out and see the software live, they can actually watch it analyze the conversation that they’re having with us by filling out a demo request form. Anybody wants to talk to us. We’re a sales focused company. So we want to talk to you too.
Jay Clouse 54:31
All right, Eric, we just spoke with Marc Bernstein of Balto. And before we dive into our third segment here, brought to mind a lot of themes that I heard and learned about from a friend and mentor of mine, David Geiger. David Geiger is the vice president of sales at team dynamics. I worked closely with David when I was at crosschecks and learned just about everything I know about sales from him. So before we go into the deal memo, I thought it’d be good to bring him in and get his perspective as a sales leader, and someone who has built sales teams on what a product like this might offer. So here’s a quick conversation with David Geiger. David, welcome to the show.
David Geiger 55:11
Hi Jay, thanks for having me.
Jay Clouse 55:13
You and I got to work together a little bit a couple years ago in a business development capacity. But your career in sales started long before that. So can you give for the listeners a little bit of context on your career in sales?
David Geiger 55:26
Yeah, actually, I’ve been in sales my entire life. It actually started when I was six years old, and I had an RC Cola, stand in my front yard and selling RC colas to people who are visiting the new Washington carnival. And my friends at the time criticize me for selling RC Cola, instead of selling Pepsi or Mountain Dew. And the reason I sold RC cola is I had a higher profit margin in a captured audience. So the joke joke was really on down but I made more money on RC cola. But yeah, so I as an entrepreneur, As a child I sold RC I sold bioworks I sold Garbage Pail Kids. Sold Cabbage patch, Cabbage Patch Kids, and just always had this business mindset of selling. went to college had a couple internships in sales, including one selling Yellow Page advertising. So this kind of dates me Yellow Page advertising for the Ohio State University phone book with a company by the name of university directories and I wound up selling the majority of it but 95% of the yellow pages in the Ohio State University phone book, and I just knocked on doors around campus and around Columbus, Ohio, after graduating high school went on to work for Black and Decker and Dewalt and I sold power tools. And it was at that time I was recruited to sell prescription drugs. So I went from drills to drugs recruited by a company that eventually became Pfizer. And so prescription pharmaceuticals for about seven years, really enjoyed selling prescription pharmaceutical had a great territory sold about 17 different prescription drugs at Pfizer, and wound up launching a company by the name of eBay healthcare was an offshoot of a company by the name of CashNet. And then I led the sales, marketing and development Business Development at eBay healthcare as employee number one, spent about five years there traveling around the country eventually moved back to Columbus, Ohio, from San Francisco where I was working out of my home. And at this point is when I met you through a startup weekend, I believe. And I that’s where I met up with Sean Lane, Sean brought me on as VP of sales at Crosschecks, which is now Olive spent four years there, through that organization grew the sales team there. And that’s where you and I connected fast again, when you came on to work with us at Crosscheck. So that’s a little bit of my history in a nutshell, if you will, going from you know, fireworks, and RC colas to Crosschecks. And now for the past year, I’ve been working as a year and a half or so I’ve been working as a VP of sales at team dynamics. So I’m back in Cashnet back in higher ed, like I was at Cashnet selling software as a service as an IT SM project portfolio management solution into higher ed, as well as state local government, and K through 12.
Jay Clouse 58:18
So we’re talking really about a lifetime of selling here, which is awesome. At what point did you realize that what you were doing was quote, selling? And how did you start to be more intentional about how you learned the practice?
David Geiger 58:34
You know, it’s interesting, as I was kind of telling you my story there, I never wanted it. I really think of it as selling I think along the way, it’s always really been problem solving, whether it was a problem that I had when I couldn’t pay my healthcare bill online, or trying to solve the problem of the passerbys the people who passed by the front of my house and sell them ice cold RC cola. I think at that time, I was also trying to solve the problem how to how to buy us Sega Genesis game by making a little extra money. But I’ve always kind of thought of it being an entrepreneur as as problem solving, even probably more so than selling.
Jay Clouse 59:08
When you and I were working together. And I was learning from you, something you had us do. And I was a new salesperson at this point, something you had me do was role playing with some of the other sales reps. So as a leader of new sales reps, what do you think is the most important way for them to learn? Is it practice through things like role playing? Is it having a mentor who’s listening on their live calls? What do you recommend for a new sales rep to kind of learn the craft?
David Geiger 59:37
I think that was ingrained in me at Pfizer, at Pfizer, we did a lot of role playing. The philosophy that I take when it comes to training is actually a philosophy that they have in nursing and it’s see do teach. So when they’re bringing on new nursing, new nurses and healthcare, they have the nurses See, and they observe. So they watch another expert or another nurse, do the task. And then they actually do so it’s hands on. So they’re they’re thrown into the deep end of the pool. Obviously, they’ll start them on cases that are lower risk. And then they have nurses teach. And so they are now the nurse instructing other new nurses and and what I found throughout my career is the see do teach methodology works really well and is definitely applicable to sale. So it’s beyond just having them observe because if they observe and they never do, they don’t get the the muscle memory of actually what it’s like to fall down what it’s like to fail what it’s like to learn on the fly. And if they just are constantly being scripted and just reading a script, they also don’t develop that that muscle memory of of how to respond and how to think on their feet. And when you’re presenting to someone else, it puts a little bit of accountability on that individual to be prepared. And to show them you know what works well and what doesn’t work well. So I’ve always followed the mantra of see do teach.
Jay Clouse 1:01:00
On our show today, we talked to the founder of Balto software. And this is an artificially intelligence recommendation engine for sales reps that listens in the background to the call itself and provides real time feedback on how the sales rep can respond. I’d love to just ask an on the nose question of what do you think of that concept? And does that have any red flags for you?
David Geiger 1:01:23
Yeah, it’s really interesting, you know, I’m approached almost on a daily basis through LinkedIn or through email, with different technologies, different vendors peddling different solutions, right? Whether it’s AI, or people selling lead list or lead generation tools, I have yet to come across this one, I find it really interesting, but I see two sides to it. Number one, where I see a benefit is if you have a team of sales reps, and you want to get them up to speed quickly. And you want to teach new sales reps, how to be effective and what to say in what situation, I think a tool like this potentially not knowing much about the tool. But a tool like this could be helpful with training with new sales reps. Now, I would caution anyone that’s tries to get a senior sales rep to use this tool. I think the tool would probably work better with your green sales reps, your rookies, those that are you know, have had one or two sales jobs and their early in their career. I think putting a tool like this in front of someone later in their career, it would be more of a challenge I not knowing anything about the tool, I’m not saying it’s not going to be effective, I think it would be more of a challenge. Now, the take that senior sales rep or the devil’s advocate perspective on this, my concern with a tool like this would be that you are limiting one’s capacity to think on their feet, and you’re giving them a crutch and it’s almost like spellcheck and we know how spellcheck works. When you start using spellcheck, then eventually, you don’t know how to spell. So I think in certain situations, you can be efficient with things but you can’t always be efficient with people. And sales is truly a place where you need to be efficient with people. And it interjecting a thing or a tool telling someone what to say if that provides the wrong approach one or two times that person will probably never use it again. So I think you just have to be really careful with where you choose to use it. And I want to closely monitor with how effective it is.
Jay Clouse 1:03:29
Last question for me, David, if you were to put on the hat of a manager of a sales team that’s mostly green new reps, people in a call center is actually Baltos target market right now. And they came to you and said, Hey, would you want to put this in front of your team? What questions would you be asking Balto, to determine whether or not this would be a good fit for you as a manager of a team of new reps?
David Geiger 1:03:54
I think my my question would be just like, any other person’s question that purchase something for me, is I’d want to see it in action. I would I would want to learn more about where have they had success? Where have they had failures? Where does it work best, right, and I want to speak to those individuals. So basically, you know, a proof of concept, a reference, that is relative to what it is that I’m selling. If I were a guinea pig, I would want to test it out in an area where I know that there would be limited risk, right. But prior to even testing it out, it sounds like this company has been around for a while. So I’d want to learn more about where they’ve had success and where it’s an ideal fit.
Jay Clouse 1:04:38
Actually, I lied. I have one more question.
David Geiger 1:04:39
Jay Clouse 1:04:40
One of Bartos value propositions is basically your reps, if they do not have a ton of experience, and they don’t have something that can help them get through the calls and close at a higher rate. Your business is suffering the loss of a lot of sales all the time. So just anecdotally, I’d love to hear your perspective on the risk of having green sales reps, and what types of thoughts you have around conversion on sales calls like that.
David Geiger 1:05:08
Yeah, I guess my immediate thought on the risk of having green sales rep is the only thing worse than putting no sales rep on it would be putting a green sales rep on it, right. So especially if it’s outbound, direct sales, where they’re potentially contaminating a future customers opinion or perspective on your brand or on your company. So I would want I want to make sure, and I it is also dependent on how big of a target market you’re working with, you know, if you have an infinite number of prospects, then it the risk is probably low. But if you’re working in a market that has a limited number of prospects, and it’s a big enough total contract value, then there’s some level of risk by putting an untrained sales rep out into live fire. You know, I always tell the team you know, we practice off the field, I would prefer not to have them practice on the field where there’s some level of risk there. It is a surefire way to learn, but yet you risk potential future sales. So that would be my concern. But I think again, it really comes down to how big of a target market we’re talking about.
Jay Clouse 1:06:16
Awesome, David, thanks for coming on the show.
David Geiger 1:06:17
Hey, thank you, Jay.
Jay Clouse 1:06:22
All right, Eric. Now we’ve talked to both Marc and David. Let’s dive into our deal memo here and talk about Balto as an investment opportunity. Would you rather start by talking about Marc, the founder, Balto, the company? The market opportunity? I’ll leave that up to you.
Eric Hornung 1:06:39
Let’s talk a little bit about the company and the market opportunity. I am not familiar with the traditional sales. Like I have no first person experience with sales. Do you have you ever had a sales job? I know you have sales experience.
Jay Clouse 1:06:53
When I worked at Crosschecks with David, that’s definitely besides, you know, selling my own products and services, which is huge sales experience. I mean, basically, if I don’t live sales, I can no longer be self employed. But as far as like a more regular sales job, I definitely perform that for a short period of time at Crosschecks. And it is a it’s an experience that I would recommend everybody have in their life.
Eric Hornung 1:07:20
You’re giving me career advice now?
Jay Clouse 1:07:21
Eric Hornung 1:07:22
Okay, great. Yeah, I haven’t done it. I’m sure that it’s something that eventually I will do. Because no matter what you do in the world, you will eventually have some sort of sales role. But yeah, I don’t have a lot of experience here. I do have some numbers on how big this space is, though, to run through those. So there are 14.5 million people in the United States who work in sales, according to the Bureau of Labor Statistics. That’s a lot of people.
Jay Clouse 1:07:51
A lot of individuals. Yeah,
Eric Hornung 1:07:52
that’s what 3% of the US workforce no the workforce, only half of the population. So it’s 3% of the US population. But like almost 10% of the US workforce works in sales.
Jay Clouse 1:08:04
Ok. Ok. So a lot of individuals and Balto’s model is $120 per rep per month. But I’m going to guess that that’s not the math, you think we should go down right now?
Eric Hornung 1:08:16
No, I don’t think so. I think that I mean, that’s a huge market opportunity. If we just take 14.5 individuals times 120. That to me doesn’t seem right, for a lot of reasons. One, you have the idea that Balta was really only targeting these call centers, which I don’t have the greatest success on from a headcount perspective. But according to IBIS World, telemarketing and call centers in the United States, is doing revenue of somewhere around 28 billion. There’s about 30,000 businesses, it says that the industry employment is about half a million people. So that number changes things a lot. If we said that every call center employee in the United States was on the Balto system, that’s you’re $120 per month, times half a million. So that gives you $16 million a month in total addressable MRR multiply times 12, but $720 million a year. Why I don’t think that’s right is a few reasons. One, this isn’t going to be for every call center rep. I think that we heard from David, he was talking about how your more senior reps aren’t going to need this, it’s going to be a challenge to get them to implement it. I don’t know how true or not that is. But I think that if you have some high performing reps, they might not use this or you might not see the incremental value add from using it. So that’s an adjustment downwards, I also think the pricing of Balto is a little low for the value that it could potentially add, or they claim that it adds. So I think that’s an adjustment upwards. So we have a general idea that this is something around a 700 million to $1 billion total addressable market. That’s what I’ve come up with,
Jay Clouse 1:10:00
And Marc even mentioned, he said, to get this to a billion dollar company, we’re gonna have to go up market to larger contact centers, right now, their average deal is about $50,000 per customer, they need to get to $200 million or so in revenue, and they need to skyrocket their customer account. So I think you’re landing in about the right math. Anecdotally, a lot of the junior level sales people that I’ve met and work with have zero training or background in sales. So I do think that there’s real product market fit here with this product in the non senior reps side of things, because, I mean, it’s intuitive, but both Marc and David said it. And I would say the same, that there’s a lot of money lost in conversations that really just need more reps, and not representatives, but more shots on goal of practicing the conversations and overcoming objections and lining things up in the right way and listening. So I think that there’s real product market fit here and real market opportunity. And if they raise their prices, the level that it sounds like even their customers are saying is worthwhile. This is a pretty big market opportunity. So I would check that box. I would agree.
Eric Hornung 1:11:12
I think it’s kind of interesting how this company and we’ll get to the founder in a second. But this company is essentially like, and I know they don’t use this wording, but it’s it’s like augmented reality for sales. I imagine in the future, you know how you always see those shows where people are wearing glasses, and it like tells you like, what’s going on who this person is who’s in your line of sight, some details about them. That kind of augmented reality for having human conversations, it kind of feels like this.
Jay Clouse 1:11:40
I think even in this Monday’s episode with Amy Nelson of venture for America. She called Balto AI for sale. She talks about Balto being one of the companies that they have fellows in and her saying that she was really excited about this company, but I’m pretty sure she actually referred to it as AI for sales.
Eric Hornung 1:11:57
Are there any flags, whether red or yellow, that kind of stuck out to you? Any shadows Jay, let’s bring back a good old good old upside term, blah,
Jay Clouse 1:12:07
my only shadow and we’ve said this in the past is just how good of an opportunity this felt like to me through the interview. I mean, Marc is a consummate salesman. It is his job, it is his company that is doing that. And he was doing and saying all the right things in this interview, he was being very upfront about some of the things that he thought were limitations. He was really playing to us as interviewers as to what we wanted to hear. But he seemed to have all the answers. And my only shadow is that I didn’t have any questions that led to a shadow, which means I wasn’t asking the right questions, probably, or this is a amazing opportunity. You know, and even when things feel like an amazing opportunity, and you have an amazing founder. Now we can go a little bit deeper here, Eric and talk about the team. Because if you think the market opportunities there, you think the founder great question is, is he building the team to execute on that vision right now a very small team, which I also think is a good thing relatively, I mean, said eight engineers, five account executives, two founders, a customer success manager. What I love about this is that this is dog fooding as they are selling people on the on the phone on this product, they are using the product and they’re transparent about that, and they even let the person see what’s happening about that. That level of show instead of tell has to be such a compelling sales pitch. If you are on the other side of that line, getting the read like you and I were this I was through this interview of these guys are saying all the right things and really convincing me here. There’s no better testament to a software that helps us sales than feeling yourself being sold by that software.
Eric Hornung 1:13:51
what’s what’s dog fooding mean,
Jay Clouse 1:13:53
dog fooding is this phrase that I think originates from coding more than anything else. But it’s, it’s a phrase to basically mean, Dog fooding is short for eating your own dog food. So if you are offering a product or service to somebody, you should be using that same product or service in your work if you expect other people to use it if it’s applicable to your role. So this is very much that.
Eric Hornung 1:14:17
Do you think that Marc was using Balto to answer our interview questions?
Jay Clouse 1:14:21
I don’t think so.
Eric Hornung 1:14:22
Yeah, me either?
Jay Clouse 1:14:22
I don’t know, though. It was he should have shared his screen and showed it to us because that would have been awesome.
Eric Hornung 1:14:28
I don’t think so either. I don’t know if it’s set up to work like that. But I guess if it’s just a conversation, why not? Yeah.
Jay Clouse 1:14:34
So let’s talk about Marc, as a founder.
Eric Hornung 1:14:36
I love the MVP, minimum viable product nature of the beginning of this, like learning Excel macros. And that first iteration of creating something in Excel like I had, I had a vision, I’ve like lived in Excel, I had a vision of what that looked like. And man, that would have just been so clunky and laborious to make. But he did it. And he did it. And he got to a point where it was like, working enough. I love that I love those initial concept stories.
Jay Clouse 1:15:08
I love that he was also basically like, we’re like, well, how would that work that work really well. And he was like no. And things have changed and evolved and gotten a lot better. He says they have 140 different topics at the AI library currently matches, that they can bring in a new client in two to three weeks of uptime to kind of pull in responses that are specific to that customer. But back to the founder, I really liked Marc as a founder, because I’m on the side of the fence that I do think I’m leaning towards the market, first founder second side of things if I’m looking at being a venture capitalist, but when I’m looking at the founder, I want that founder to be good at sales, and not necessarily just sales of selling their product, but selling themselves selling their company. And it’s hard to find a stronger salesman as a founder than someone who is selling sales software. And I really think that he passed that sniff test with flying colors, because I also didn’t feel like I was being intentionally you know, quote, unquote, sold. He was just answering our questions. And he was answering our questions in a way that satisfied the questions to me and erase the doubt any doubt that I really had. That’s incredibly valuable from a founder who is probably going to, you know, raise more capital at some point, if they want to really blow this up. And I want to know, as venture capitalist that the founder is going to be able to raise from other people besides just me. And I think Marc passes that test,
Eric Hornung 1:16:37
I would agree that raising venture capitals, just sales, right, you need to be able to sell your vision. And I would agree Marc definitely is able to sell the vision, and is able to communicate some of the shortcomings as well, and where they can get better. Any shadows from you, Eric, we didn’t really hear much about the makeup other team outside of the three founders who from what I can gather, and I think this is something we’ve been a little bit more thoughtful about lately is that they’re just three white guys from the Midwest. And it’s not anything against them. But I think to be able to expand everywhere you need to go, you need to have some more misuse the word diversity, and I hate that word, but diversity of experiences, diversity of background, and maybe that exists in the rest of their team. And I just don’t have vision to it. But something that I’ve kind of picked up on lately, from talking with a lot of VCs and doing this podcast is that teams that have a bit more diversity, seem to be able to differentiate themselves a little bit better?
Jay Clouse 1:17:46
Well, it seems like we have a pretty good read on this as far as opportunity, the founder, let’s look forward a little bit and talk about the next six to 18 months from Balto, what are you looking forward to? are what are you looking forward from Balto, in the next 18 month.
Eric Hornung 1:18:02
Pricing? It’s far and away the number one thing I’m most interested in? I think that I mean, if I was going to invest here, I would obviously be calling customers and doing a little bit more due diligence and asking them like, what do they see? What do they think? How do they feel about the product to make sure that this product market fit that we’ve been sold on is a real and true thing. But assuming that’s the case, like we do in all of these interviews, I would want to hear about their experiments and pricing, and where they think they can get this thing up to or where it can move to because right now they’re doing the traditional underpricing themselves to increase market penetration. And I think that there’s a lot more being left on the table, that they’re under selling themselves a bit.
Jay Clouse 1:18:46
And I’m looking at the speed and aggressiveness of their growth. You know, you found that statistic of 14 and a half million sales reps. Marc told us I should have mentioned this earlier, I just saw this note. Marc told us that there are 6 million calls center reps in the United States. And for them to get to that billion dollar company. The question that we asked, you said they need to Sky skyrocket the customer account by building a big sales team. So what is Balto doing to build that big sales team? So they had a target of a 300 person company with around 80 to 100 sales folks? What does that look like for them? If they are already ramping up agents 65% faster, as he said, why not ramp up the team? Why not really go big and hit these companies, which is just to my knowledge, but it sounds like smiling and dialing sounds like getting demo setup and getting on the phone. If they have all the customers they say they do now. Sounds like product market fit is their time to grow. And that’s what I’m looking for from Balto in the next six to 18 months. Alright guys, we love to hear your perspective on Balto and what you’re looking for in the next six to 18 months. You can tweet at us at upside FM, or email us email@example.com. Otherwise, we’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guests. so shoot us an email at firstname.lastname@example.org or find us on Twitter at upsideFM. We’ll be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on Twitter and let us know. And if you love our show, please leave us a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there are a couple things we wanted to share with you at the end of the podcast. And so here we go. Eric Hornung and Jay Clouse are the founding partners of the upside podcast. At the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinions of Devin Phelps LLC and its affiliates on no collective LLC and its affiliates. Or any entity which employs This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not been your specific financial situation, nor provided any investment advice on the show. Thanks for listening, and we’ll talk to you next week.
Jay Clouse 1:21:22
Your top advice for sales?
Marc Bernstein 1:21:25
Top advice for sales. Number one is start out with a structure or agenda seriously, the last thing you want to do is having two people sitting across the table not knowing what they’re talking about. Second, every single time you have the opportunity, ask a question, the less talking you can do, the better. And then the third would be don’t show anything that your buyer did not explicitly asked to see. Meaning every bit of your product that you demo, every feature you’re talking about, should be something that they said you know, if I had this, that would really make my life better. that overcomes the curse that a lot of sales reps face of showing until hopefully they hit something good.
Jay Clouse 1:22:11
If I’m an individual, I don’t have Balto. How can I improve sales,
Marc Bernstein 1:22:16
The best way to improve its sales is going to be to have a mentor. Because listening to your own call recordings. Not only is it painful, but you’re going to miss stuff. Having somebody listened with you. They can hit the pause button on the recording and say, Hey, hey,hey did you hear what just happened? They can back it up 15 seconds? Because when you have somebody who has practiced having good sales conversations, they’re going to hear things that you don’t hear?
Jay Clouse 1:22:48
And how about any misconceptions as it comes to sales from people who are not in sales?
Marc Bernstein 1:22:53
Biggest misconception of sales is that it’s a mystic trickery art form. And that you’re supposed to wrestle the other person into falling on the floor than saying yes. And that’s not what sales is about. In sales, you should be spending your time actually trying to understand what the person wants. And not just in a way where you can then throughout your next closing line, but seriously understand, what do they want. And that sometimes means letting them know, you know, the thing you want is not the thing that we have. So I’d recommend going to this other resource instead. So it’s less of a wrestling match and more of a taking a backseat, letting the other person express what they’re trying to achieve and what they care about. And then giving them options about how they could achieve that need with what you have.
Jay Clouse 1:23:48
One last one. What are any common major mistakes that people make while selling?
Marc Bernstein 1:23:54
The biggest mistake people make? is honestly getting nervous and talking too much. It’s having someone on the other end of the phone who says okay, yeah, I get it, and then thinking that that means you should continue to talk. But if someone says, Okay, uh huh, yeah, I get it. That means you should stop and say, Hey, where you add on this? Do you like it? Should I go in a different direction? I don’t just want to keep talking. Like imagine you were having a real conversation with a friend where they were reacting that way. You probably take a step back. So I would say don’t try to talk your way out of a problem. Listen your way out of a problem.
Insight begins: 54:30
Debrief begins: 1:06:20
Marc Bernstein is the CEO of Balto. Balto helps sales, service, and accounts receivable reps win as much revenue as possible from every phone call. Teams use Balto’s artificial intelligence software to analyze phone calls in real time – live while the call is still happening – and instantly provides reps recommendations on how to communicate as effectively as possible before it’s too late.
Here’s a preview on what’s in store for you on this episode:
- Ad: Knowing the right tools for raising capital. (07:06)
- The recipe for a successful sale (14:17)
- The story behind Balto (16:24)
- New sales reps should learn a methodology in order to be successful (59:37)
- Top advice for sales (1:21:25)
- How important it is to have a mentor in sales (1:22:16)
- Things to avoid during sales (1:23:54)
Balto was founded in 2017 and based in St. Louis, Missouri.
Learn more about Balto: https://www.baltosoftware.com/
This episode is sponsored by Taft, Stettinius & Hollister, a full-service law firm known for assisting entrepreneurs across the Heartland.