How Pavilion CEO Sam Jacobs grew Pavilion to $11M revenue with a 5944 person team in 2024.

I'm Sam Jacobs and we're really going to be talking about uh this shift that I've been writing about on social media from growth at any cost to profitable efficient growth and what the tenants of profitable efficient growth are and how to achieve it for your business and a couple quick uh steps and hints because a lot of what we're doing and talking about we try to implement and embody within Pavilion the company in addition to Pavilion the community so raise your hand if you're familiar with pavilion the community all right so Pavilion is uh the world's uh largest goto Market Community for high growth Executives in the world it's 10,000 members all over the world it's a paid membership organization so people pay to be members companies pay to be members and we provide education we provide peer-based support we provide incredible inperson experiences not uh dis similar from this and hopefully we help people accelerate their careers by giving them the tools they need need to be best-in-class go to market operators so that's what that's what the business of Pavilion provides back to its members it's a recurring Revenue business it's not a software business but it is a recurring Revenue business paid for through primarily through membership dues and um you know again I've been talking my name is Sam Jacobs I'm the CEO and we've been in the shift from a world where investors were driving a lot of the value for organizations to a world where now customers are driving value because uh growth is driven uh for at least for us through profit and so our journey it should say uh investor value on the left um but over the last couple of years particularly in 2020 21 uh you know investors were driving a lot of the value creation for for Enterprises and that's because when Capital was not constrained when there was free money it meant that people could invest in businesses and growth at any cost and that's where this phrase comes from growth at any cost was worth something and the reason for that is because of not exclusively but because of interest rates because if you understand about the net present value and time value of money you understand that a dollar at 0% interest rates in 20 years is worth the same as a dollar today and as interest rates go up that Dynamic shifts it's not the only thing driving the compression of multiples in public technology companies and in private technology companies but it's part of it and we're not immune from that either uh I didn't think when I started this business that it would be a venture-backed business but it turned out three years ago that a company called elephant Ventures got in touch with me and they wanted to invest $25 million and so even though uh you know I lecture and write about go to market alignment online uh we immediately fell victim to all of the mistakes that we comment uh other people embody and employ so we were growing very very quickly through last year when uh when the tech recession ultimately hit us and uh we're not immune right so since the uh since the summer of 2020 run growth rate of public SAS businesses have been cut in half uh the cost of acquiring and this I just actually did a webinar today uh this is this is the mean right so on on average uh there's been a dramatic increase in the cost of sales and marketing spent to acquire one new dollar of annual recurring Revenue uh if you take out some of the best performing companies from the cohort that did this analysis which includes companies with Incredible net revenue retention like um like snowflake uh it's actually there's certain public companies that are spending five and $6 doar in sales and marketing investment to acquire $1 of new ARR so we're in a dramatically different environment and the cost of getting somebody's attention and converting them to a customer has conservatively doubled over the last couple of years if not tripled or grown forx while net revenue retention has also declined and uh that's particularly problematic because all of these fundamental assumptions are assumptions that underpin the idea from a couple of years ago that uh SAS businesses and software businesses are worth 10 times Revenue right and we used to hear that that was a conservative valuation and you could be M valued on a multiple of Revenue in today's environment the actual multiple is five to six times and that's provided that you have growth so even though we're moving away from a growth at any cost world to a world where efficiency is prized the reality is that growth is still worth 3x more than profit but even even in that environment it's not worth anything close to what it used to be worth and that's because the technology sector but particularly the SAS uh industry has faced so many different headwinds so we're moving and again I'm sorry about the uh the formatting but on the left it should say investor value and on the right it says customer value so what do successful companies need to do in this environment and none of this is going to be uh rocket science but I want to make sure that uh uh it's 35 slides in in 14 more minutes so I want to make sure I hit the bid so that my friend guy Rubin can speak so what do you do differently in this modern world and none of this should be rocket science but I want to underscore a couple things that you can do to align your business around profitable efficient growth what we know is that uh again no no uh nothing revelatory here retention drives all valuation for recurring Revenue businesses right and that sounds obvious and yet if we go into a boardroom most of the time historically we've been talking about the sales funnel uh all the way up to the point of sale we've been talking about uh new business acquisition new logo acquisition as the primary driver of Enterprise Value but when we do the analysis we understand that actual Enterprise Value from recurring Revenue businesses is excl not exclusively but primarily driven through retention again that's not surprising but it is surprising that we talk more about the pre-sale funnel in most board meetings and most Revenue meetings than we talk about the entirety of the customer journey and so one of the things that we need to do is we need to build up a goto market organization that is focused on talking about the entirety of the customer Journey that builds algorithmic customer Health scores that lead to retention so that we we can understand exactly the behaviors that are going to correlate to retention because retention is the thing uh that ultimately drives value so we are focused we were in a world where we got $25 million we spent it in a lot of different directions we lacked prioritization at the same time that we hit this Tech uh contraction and uh there's a big compression on Learning and Development budgets and that's why you've seen uh some flatness in 2023 but now we're growing again and how are we growing we're growing slower than we were growing from 2020 through 202 uh 2023 but we are growing and we're growing profitably and efficiently so over you know this is uh uh you know not public information Al though it is being recorded that's okay but really since we raised money uh we were we were we were a business that during Co had 30% operating margins and was growing uh 3x from uh 2019 to 2020 that growth slowed and we we weren't 30% operating margins we were generating significant amounts of cash from 2021 in February when we raised the round through last year we burned $8 million of capital um which we'd never done before uh now uh we are generating cash again and we are profitable again and we're growing so the question is you know what exactly uh did we do differently how do we do it um some tenants about profitable efficient growth all of it fundamentally is about priorization and Alignment so I can speak specifically about the things that Pavilion did but the most important thing that that I would say up on this screen is cap Capital efficiency is prized in the current market and what that means is doing more with less so this year we're making we're on uh our Top Line has grown 15% this year and we have half the people uh that we had a year ago uh if you look at uh the some of the stats that Alina and Nicola presented from chili Piper chili Pipers doubled their ACV uh cut their customer acquisition costs in half and also dramatically increased Revenue per uh employee up to $200,000 per employee all over the course of the last year so part of what efficiency means is prioritization and part of what efficiency means is really just understanding that you can do a lot of things with the same number of people using offshore resources using Ai and using automation that maybe you didn't think were possible so um a couple of the things that we want to focus on and that I want to focus on right now uh as we go through this so first of all understanding and ensuring that the team understands unit economics so profitable efficient growth which is the phrase that you know I sort of pioneered but I was inspired ired by Joo from winning by Design profitable efficient growth doesn't mean no growth it means efficient growth well to understand if you have efficient growth you need to understand your unit economics so a couple and it's this is frustrating because the fonts you can't see so um let's see if we can see uh what's next no dang it I'm sorry what you see here is customer acquisition cost gross margin lifetime value LTV to CAC payback period and churn right those are the the key metrics the point is um there's there's four fundamental assumptions that underpin uh you can't see anything it's a blank screen I'm I'm spinning a story here this is it this is the most important slide that you will see over the course of the next three years in your career and it's all in white so uh here's the point there...