We sat down with Lauren Vaccarello, VP of Customer Experience at Box to talk about the Four Horses model of attribution. Lauren has a proven track record of accelerating revenue growth at companies like Salesforce, Adroll, and Box. She was a member of the Google Tech Advisory Council, is a popular speaker at industry events, and co-authored two highly-regarded books on B2B marketing.
An Attribution Model for High-Growth Companies
The Four Horses is a way to create alignment across the go-to-market (GTM) organization. I worked with this methodology during the early days of Salesforce and now at BOX. It keeps your Sales and Marketing teams better aligned, and allows your organization to holistically understand how you’re performing by program, department, geo, and Horse. This is crucial knowledge for any high-growth SaaS company. If one Horseman is going to miss their number, you need to know where you can double down to help fill that gap.
“The Four Horsemen is a model of attribution that keeps all of the GTM organization on the hook for Annual Recurring Revenue (ARR) pipeline contribution.”
Who are the Four Horses?
The Four Horses are Marketing, Alliances, Inside Sales and Outside Sales. All pipeline and revenue come from one of these Four business units. It helps solve the challenge many organizations face: how do you ensure everyone in the GTM org is driving towards the same goal? This is an especially difficult challenge for high-growth companies that experience the highs and lows of rapid growth.
Step One: Reporting
If you’re looking to adopt the Four Horses, make sure everyone is working from the same data set. That’s step one. To understand what moves your business, Sales should not only know Marketing’s target but have complete visibility into how Marketing got that number and vice versa.
BOX pulls all Salesforce data into Tableau and builds a standard set of reports across all of GTM. A centralized team built the initial dashboard and the initial set of reports, so everyone started on the same page. The Marketing dashboards and reports are in the same place as the Sales numbers, so each Horse has complete visibility into the others. This is key to prevent Marketing and Sales from relying on different figures.
Aligning Sales and Marketing
The second thing you want to do is get Marketing in sync with your Sales Organization. At Box, we learn the goals of the Sales Organization by asking questions like:
- Are you going after net new customers?
- Are you going after customer upsells?
- What are the verticals you are going after?
- What are the geographies you’re going after?
It’s easy for Marketing to be order takers for the Sales department. Instead, we try to develop targets as a collective unit. After all, sales and marketing successes are tightly related.
How to Set Targets
We all get paid on revenue, but pipeline is your leading indicator for ARR. Each Horse has an ARR target, and you use the Four Horses model to start building out your pipeline target. To do this, each Horse starts by looking at time to close, win rate by channel, and win rate by geo.
Start by looking at your data by individual or segment; don’t look at blended averages. Looking at blended averages will skew revenue forecasts.
- How long is your sales cycle?
- What is your win rate now?
- What does your win rate need to be?
- What is your pipeline coverage ratio?
- Close rate by lead source.
- Close rate by type of sales rep (SDR, BDR, ISR/AE).
- Time to close by type of sales rep (SDR, BDR, ISR/AE).
Then, look at Marketing Qualified Lead (MQL) to Sales Qualified Lead (SQL) conversion and SQL to close by geo and by Horse.
What if a Horse Will Miss Their Number?
The metrics I discuss above are important to set realistic targets, but they’re also necessary to understand how you can fill gaps when times get tough. People often forget to factor in win rates and time to close when they look at how to supplement for a Horse that’s struggling. For example, if Marketing deals close at a 25% higher rate than the Channel team, and the Channel team needs to make up for a deficit in Marketing’s pipeline, you know it needs to be 125% of the Marketing team’s pipeline target.
How Often do the Four Horses Meet?
It depends on the organization but somewhere between weekly to monthly. If you’re not meeting monthly, you might as well not be doing it – it’s too reactive. Meeting every week may be too often but some organizations choose to use the weekly check in to dive deep on certain issues. Even though the numbers might not change dramatically on a week over week basis, you can use the hour to go deep on upcoming obstacles facing each of the Horses.
Structuring Four Horses Meetings
Look at this quarter plus two-quarters out. A lot can happen over the course of a year, even if your average sales cycle is nine to 12 months. It’s a balance between looking out far enough so every time you discover a problem you aren’t in dumpster fire mode and not looking out too far. If you can detect a problem that will happen next quarter or in two-quarters, that’s when you can start to think a little more strategically about how to shuffle things around to hit your overall number as an organization.
A Fifth Horse?
Something I’ve been thinking about a lot lately is how Customer Success fits into the Four Horses model. Customer Success is technically still part of the GTM organization. However, they’re usually sort of an afterthought. Status quo is when Customer Success orgs don’t have a pipeline or an ARR target. However, I think as SaaS evolves we’ll see this shift.
Customer Success contributes to pipeline via renewals, upsells, and cross-sells. To just think about net new pipeline as a subscription-based company is ignoring a very profitable portion of your business. I think there is a next wave of the Four Horses model coming which will see the CS function with a much bigger seat at the table.
What to Consider Before Adopting the Four Horses
One of the biggest challenges companies face when adopting the Four Horses is getting everyone to make the emotional commitment. If someone misses their number, it’s easy to point fingers and lay blame on a specific team. That’s not the purpose of the Four Horses.
The purpose of the Four Horses is increased program and department visibility, so your organization better understands the problems you’re trying to solve. Which in turn, forces Marketing, Sales, and Alliances to think as one unit.
I’ve heard, “well, if everyone works for a CRO, shouldn’t that create alignment?” It can, but often you’re still missing the measurement and individual accountability component that just being part of the same reporting structure won’t achieve.
With high-growth companies, there will be good times and challenging times. The purpose of the Four Horses is to create visibility, so challenges are handled collectively. This requires a deep sense of trust but yields the best results.
Like what Lauren had to say? Check her out on Twitter here.