Introduction
Sasan Goodzari: We were born 40-some-odd years ago.
Brian Halligan: Right.
Sasan Goodzari: In the era of DOS. Right?
Brian Halligan: Which makes it even more impressive how well you guys have done.
Sasan Goodzari: And I would just say our success is when we were always in love with the customer problem and always willing to disrupt ourselves. And that’s so much easier said than done, by the way. So much easier said than done. But that’s why we’re still around.
Brian Halligan: Hey, welcome to the pod. Today we have Sasan, the CEO of Intuit. I’ve known and liked Sasan for a very long time, and I’ve known and liked Intuit for a very long time. They’re an interesting company that’s been around for many, many decades in a bit of a contrarian space, selling into very small businesses. And they’ve scaled to $180-billion market cap. So there’s a lot to learn from these guys, and I’m excited to dig in. I’ve actually met three different Intuit CEOs—and I work with tons of CEOs in my daily life. These are grownups. And I think there’s something to be learned from grownups. And we’re going to dig into some grown up topics. We dig into what does a grownup CEO operating system look like? What is Sasan’s hiring criteria which I did not expect and I think is pretty interesting. How do you build an indirect channel? Most of the QuickBooks revenue comes through an accounting channel that they built that’s fascinating. We talked about second acts and third acts and platforms—one of my favorite topics, and something they’re very, very good at. And when we talk about SMB, there are very few companies that have built with any scale in the SMB segment of the market. I hope you come back and we chat again after the interview, because I have a lot of takes on it. See you on the other side.
Main conversation
Brian Halligan: So Sasan, great to see you.
Sasan Goodzari: Very good to see you, man. It’s been a long time.
Brian Halligan: I know. I miss you.
Sasan Goodzari: You know, you look great.
Brian Halligan: You too, you too. You too. So I came on the campus today, and it reminded me of the first time I visited the Intuit campus, which was in 2010. HubSpot was four years old, and my co-founder and I were coming to visit Scott Cook and your CEO. And we were just sitting in the lobby and I just remember I wanted to throw up on myself, I was so nervous because we were a little tiny company. Really, I looked up to you. And we met with you guys, and we had a really good meeting, and you guys gave us a lot of insight. And at the end of the meeting, I was kind of taken with Brad Smith, your CEO, and I said, “Is there any chance you’d let me shadow you for a day?”
Sasan Goodzari: Ah, yeah.
Brian Halligan: And he said, “Sure. Come on back anytime.” Which I was delighted. And so about a month later, I came back, sat in the lobby, wanted to throw up on myself because I was so nervous.
Sasan Goodzari: [laughs]
Brian Halligan: And I shadowed Brad Smith, the legend. And it was a fascinating day. I learned a lot. He brought me to his Executive Leadership Committee meeting. All the executives in there. I saw how he ran it; it was really good, the founder was in there. Just went through the whole day with him, lunch, everything. The most interesting meeting was he had a performance review with someone.
Sasan Goodzari: And you were in the room?
Brian Halligan: And it was kind of a tough performance review.
Sasan Goodzari: Oh, wow!
Brian Halligan: And he’s like, “Nope, you’re gonna stay in the room.””
Brian Halligan: So I was in the room, and this guy, you know, he was one of those pluses and minuses. So that’s when I think back to Intuit. I learned so much from Brad and so much from you guys, and there’s so much Intuit inside of HubSpot. But we’re not here to talk about me, we’re here to talk about you. You’re becoming a legend running Intuit, doing so well. Tell me about when you first took the job. You took the job over from Brad. The building is named after Brad. What was that like? It’s 2018, Brad Smith has done a great job. He’s stepping down. They’re looking for a new CEO. There’s this—was it at all like the show Succession?
Sasan Goodzari: That’s a good one. So, you know, I did something very much like you. I’m just—I’m curious, and I’m always out learning from customers, from our product teams and external leaders. So one of the things I did, but I would just say more like an event, when I was announced, is I went out and talked to 15, 20 folks that if I were to name them you would know all of them.
And it was really to get advice. But the one person that comes to mind is—given your question was Steve Young. So quarterback of the 49ers, hall of famer. I went and met him.
Brian Halligan: That’s a legend.
Sasan Goodzari: He’s a legend. And the reason I went to meet him is he had to step in behind big shoes.
Brian Halligan: Joe Montana.
Sasan Goodzari: Joe Montana. It was the most unforgettable meeting, because he actually took me through the journey of when he became quarterback—I think it was when Joe Montana got hurt. And long story short, he said, “Listen, I was getting booed. People were like, ‘Bring Joe back,’ and we were having a tough time.” And he said, “I was on a plane ride back with someone famous,” that I won’t name here because he asked me not to ever name them. In essence, the person said, “Oh, you’re Steve Young.” And he said, “I was pouting and telling him how pissed off I was because I had taken a couple of days’ break.” And the person said, “You have been chosen as the quarterback of the San Francisco 49ers. You are not here to fill Joe Montana’s shoes, you are here to win. They picked you as the quarterback.” So he said, “Go be the best that you can be, and don’t try to follow Joe Montana.” And he said that conversation changed him.
Brian Halligan: Okay.
Sasan Goodzari: He said after that conversation, if you look at when he had the conversation and then his trajectory and then the 49ers’ trajectory, it completely changed.
Brian Halligan: Did someone have that conversation with you?
Sasan Goodzari: That’s the advice he gave me.
Brian Halligan: It does seem like there’s this—the ye olde CEO playbook seems to be changing. Like, Jensen Huang is doing all kinds of interesting things.
Sasan Goodzari: Yeah.
Brian Halligan: The whole founder mode thing. What are the non-obvious things that really work for you in the job that may not be part of the normal playbook?
Sasan Goodzari: Well, first of all, you’re right. I think there is no playbook, and it changes on a monthly basis. So if you try to stick to a playbook, you could be in trouble. The couple of things that have always kept me grounded is—the main theme is just curiosity. So I spend a lot of time with customers. They always keep me grounded in terms of what’s important, what are they trying to do with their life, what tools are they using, why are they using them? So that’s one. Two, I spend a lot of time also doing …
Brian Halligan: A lot of CEOs—if I just can push back a little bit. Every CEO does that these days.
Sasan Goodzari: Yes, you should do it. But I use that as one element of always being grounded. The second is I spend a lot of time with our frontline engineers to try to understand what’s getting in their way. Are there dependencies that slows them down? Because velocity is everything. So I’m close to customers, close to our front lines, because I think sitting in our shoes, a lot of stuff gets filtered. And so you have to be in touch with customers, you have to be in touch with frontline employees, and you have to be in touch with just your KPIs, like what’s working, what’s not. So one is just helicopter skills. And no matter what is going on, that’s one common thing that always grounds me.
Brian Halligan: I called it spelunking. Kind of you’re up here, and then way down and back up. Drove people crazy, by the way. But that’s kind of how I did it.
Sasan Goodzari: But by the way, I think every successful leader—you don’t have to be a CEO. Every successful leader has to be—has to have a method in which they operate. You have to be grounded in the details. You have to be close to the details, because if you just operate in the cloud and you don’t know what’s going on with employees, customers, products and your KPIs, then I don’t think you’re effective. So that’s—you asked about playbook.
Brian Halligan: Yeah.
Sasan Goodzari: That’s the common thing that always helps me be in love with the problem and how fast the world is moving, and not in love with what we’ve declared. I would say just second thing is I’m just big on principles and mechanisms. Like, what are the …
Brian Halligan: What do you mean by that?
Sasan Goodzari: Principles are like, for instance, we have a mechanism in which we run the company, but it’s really how I spend my time. And just even if I think about today, in one meeting we were talking about things that are coming around the corner and haven’t even been invented yet. And we’re contemplating what we should do, to doing a product review, to reviewing our dashboard, to meeting with a customer. So mechanisms are just about how do we manage short and long, how do we ensure that we’re really monitoring the things that we’ve said we’re going to do around product, around go-to-market. But also, mechanisms to invest time with thought partners that are very comfortable telling me, “Hey, I don’t think your strategy is right. I don’t think what you’re doing is right. Here’s what I think you should be doing.” So we have mechanisms in terms of how we run the company.
Brian Halligan: How long have those been around? Are those new or that’s, like, Intuit in the—you know, in the …
Sasan Goodzari: We changed it completely six years ago, but we’ve evolved them almost every year. There isn’t just one, but I would say the three or four that I would call out is we have a mechanism where the intent of the mechanism is question everything we’ve declared. And if today was day one, what would you do?
Brian Halligan: I love that.
Sasan Goodzari: And that just keeps us grounded. It’s the objective of the mechanism, so you don’t go into that discussion with the senior team protecting what you’re doing. You’re actually in there to blow up what you’re doing.
Brian Halligan: I love that.
Sasan Goodzari: The intent is outside-in, today’s day one you took over as CEO, as a leadership team, what would you do? That’s a very important mechanism.
Brian Halligan: And how often does that meeting or that context …?
Sasan Goodzari: That happens at least once a year. And I use the word “at least,” because situationally, if something is going on, we’ll impromptu have a conversation, which we’ve done twice in the last two years because of …
Brian Halligan: A lot going on.
Sasan Goodzari: A lot going on.
Brian Halligan: Yeah.
Sasan Goodzari: So that’s a very important one. The other one is when we actually review our deliverable. One of the—you talked about shadowing. I’m big on shadowing.
Brian Halligan: Oh, you are? Okay.
Sasan Goodzari: And so I had the opportunity to shadow Andy Jassy at Amazon when I was the CIO and he was running AWS. And there’s a number of things that I learned from Amazon. One of them that we copied is what’s called their “input goal system.” And their input goals are really around, like, what are the big products, go-to-market technology deliverables? So it’s the biggest decisions, investments that you’re making.
Brian Halligan: Yeah.
Sasan Goodzari: And with success metrics, that’s another mechanism I would call out that’s really changed clarity of the inputs that we’re focused on and how are we doing against them. And they expose where we have prioritization issues, resource allocation issues, talent issues.
Brian Halligan: I just found with HubSpot, just on the input thing, like, gravity pulls you towards lagging indicators, and trying to keep the company on leading indicators is just hard.
Sasan Goodzari: Hard. Which is why I love this mechanism.
Brian Halligan: Okay.
Sasan Goodzari: It’s not just a mechanism, it’s not just a meeting. It’s actually our entire process around input goals. I love that one. And the third one is we just—not only do I spend a lot of time with customers, but we have a sort of a customer experience review mechanism where we’re really talking about the experience, what’s working, what’s not. If I were to call out three—and there’s more than three mechanisms—those are the ones that I just think are—they’re game changing for us.
Brian Halligan: The third one I like, I called it the coal face. I wanted to get on the coal face and hear from the customers. So we had a customer at every company meeting. Once a month we had a staff meeting. We would have customer panels at the staff meeting, and the most lively ones were the customers that had canceled. That was always the best ones. And then we just had our board meeting yesterday and we have a customer panel at our board meeting. Those are terrific. So similar to HubSpot, trying to create mechanisms to keep the customer loud in our ear.
Sasan Goodzari: That’s right. And I love what you just said, which is, I think, the most powerful situations in our lives, right? Is when somebody is in a very authentic way challenging you.
Brian Halligan: Yeah.
Brian Halligan: You guys are the world champions of SMB. What’s working so well there? Why do so many startups get it wrong and end up going up into the enterprise? What is the magic to creating a company that really thrives in SMB? Because very few …
Sasan Goodzari: You know, Brian, first of all, I would say it’s a magic that Scott Cook created years ago that we’ve just been, over the years, building on. And I think the first element of the magic—this is going to sound real obvious, but they’re actually consumers. They behave like consumers, they act like consumers. The minute you put the word they’re a “business” in front of it, then you start thinking large business, large enterprise, and they behave and act like consumers. And so the obsessive focus that you have to have on, like, what problem can you solve for that business that doesn’t have the infrastructure that HubSpot and an Intuit has, but they’re two-, three-people shop. And, like, how do you help them with the basics? Like, get a customer, know which ones are profitable, help them get paid, cash flow, like, really narrow, narrow problems to solve, has really been the success of what Scott created and what we built over the years.
Brian Halligan: Is the follow-me-home thing that Scott invented, is that still a thing at Intuit?
Sasan Goodzari: Yeah, it is. And what we are coupling it with is a couple of things. One, there’s follow-me-homes and then there’s follow-me-homes.
Brian Halligan: Okay.
Sasan Goodzari: You can do a follow-me-home where you’re telling the customer, “Here’s what I’m doing,” and just you want confirmation bias. Then there’s follow-me-homes which is a real technique and you’re truly there to observe, learn and try to capture the a-has, the surprises. Because the big thing we’ve learned is customers don’t do what they say.
Brian Halligan: Yeah.
Sasan Goodzari: Right? And so really we have continued to invest in, like, the technique of a follow-me-home. It’s a thing, but it’s not the biggest thing.
Brian Halligan: Okay.
Sasan Goodzari: Because before data, before we were in the cloud, it was the thing when we were shipping CDs.
Brian Halligan: Yeah.
Sasan Goodzari: But now that’s coupled with data, right? And in the world of cloud, you have so much data so you can real time understand and see what’s the customer behavior, what are they doing, why do they get stuck there, why do they fall off? And so now we try to couple the two, but it is still a thing. Our focus is how do you do the thing the right way.
Brian Halligan: Now I spent a lot of time at Socii Capital. I spent a lot of time fundraising at HubSpot. Sand Hill Road is allergic to SMBs. Any business SMB, they’re allergic to it. Why do you think that is, and why do you think more companies haven’t pulled it off?
Sasan Goodzari: I think more companies are successful today serving businesses than they were before. You all are a great example of it.
Brian Halligan: Not a lot of examples of them, though.
Sasan Goodzari: There’s not too many. There’s not too many. I think it’s folks that really understand these are consumers, and really focus on, like, what’s a narrow problem that is big enough for the customer that you can go after and get started, and one that you actually can build advantage and one that they’re willing to pay for. That sounds—well, of course everybody needs to do that for any customer problem that they solve. But I think most people treat small businesses like they’re large enterprises, because they’re a business. And the reality is they are absolutely consumers that behave like consumers.
Brian Halligan: Okay. So I get follow-me-home in data on that side. Talk about just the go-to market, and how do you keep the CAC down, and how do you keep churn from not running away on these small businesses? Because the unit economics is, I think, something where so many companies fall down on on small businesses.
Sasan Goodzari: It’s hard.
Brian Halligan: I mean, how do you scale CAC and get so many customers? And then how do you control retention, like your gross retention, revenue retention?
Sasan Goodzari: It’s hard.
Brian Halligan: Of course. Yeah.
Sasan Goodzari: Let me just start there. It’s really, really hard.
Brian Halligan: On the CAC side.
Sasan Goodzari: I would say two big things: one is referral and our partners and accountants.
Brian Halligan: Yeah.
Sasan Goodzari: The better of a job that you do serving one business, the word of mouth is huge. So word of mouth is huge. And then accountants recommending it. And accountants only recommend things that they use, love and recommend. That’s how we’ve learned to keep the CAC down. Now what I would tell you is every time we’ve tried to go into a new country, CAC is very high.
Brian Halligan: Right.
Sasan Goodzari: For exactly that reason. You’re trying to get the first customer, get them to—you know, word of mouth to spread, then get an accountant to use it, and then get the accountant, and then you create that network effect. And we have found where we can create network effects. Like, we’ve done it in the US, in Canada, in UK, we can keep the CAC under control. But we don’t look at CAC holistically. We’ll look at it based on new product, new markets. [inaudible] toleration should be very different than, like, in the US where we have a big scale. But that’s—success is word of mouth and accountants.
Brian Halligan: Okay. I want—there’s a lot to unpack there. You do Super Bowl ads for QuickBooks and things like that. Does that stuff work?
Sasan Goodzari: Yeah. Yes.
Brian Halligan: How do you know?
Sasan Goodzari: Yes. Well, the …
Brian Halligan: Because we’ve talked about at HubSpot. It’s like we didn’t—I don’t know.
Sasan Goodzari: Yeah. First of all, we started doing them, and we primarily—you know, where we’ve been consistent is TurboTax.
Brian Halligan: Okay.
Brian Halligan: But you did do—you’ve done QuickBooks.
Sasan Goodzari: We have.
Brian Halligan: And I’m obsessed with QuickBooks, not TurboTax.
Sasan Goodzari: Yeah, of course. But just in terms of, like, Super Bowl ads, our consistency has been TurboTax. And it absolutely pays off. So we do a lot of work afterwards in terms of just what was the ROI? What were the number of eyeballs? What happened to our consideration? But ultimately conversion.
Brian Halligan: Yeah.
Sasan Goodzari: Did we get customers to convert? And can we associate it back causally to the Super Bowl? And I would tell you generally, it’s really been a great ROI. There’s been a couple of years here and there where it’s not met our expectations. But where do you get those kind of eyeballs?
Brian Halligan: Okay.
Sasan Goodzari: And it can go very wrong if you don’t do it right.
Brian Halligan: Just back on that for half a second. When it doesn’t go right, it’s because the actual ad itself just isn’t that good. Is it just very dependent on the quality of the ad you put out there?
Sasan Goodzari: It all comes down to the quality and the impact of the ad. Absolutely. Was it compelling to get your attention?
Brian Halligan: And do you make that decision? So lots of people are working on different, like, ideas for it. Are you the final decision?You look at seven and you pick it?
Sasan Goodzari: First of all, I have to tell you a story and then I’ll answer your question, because the story is about the Super Bowl ad. I remember vividly, it was a learning that I had when I worked for Brad. So the first Super Bowl ad we ran was when I was running TurboTax.
Brian Halligan: Was that your idea?
Sasan Goodzari: It was the team’s idea. No good idea is ever mine. It’s the team’s idea. And so Brad finds out that we’re running a Super Bowl ad. I never even thought to talk to Brad about, “Hey, we’re gonna run a Super bowl ad.” And so you know how kind Brad is. He called me and goes, “Sasan, I don’t need to approve the Super Bowl ad. But if you’re going to run a Super bowl ad, like, I need to be aware of it, because if it goes sideways …”
Brian Halligan: I don’t blame him, by the way.
Sasan Goodzari: The CEO of the board. So I shared that story with you. And he was so right, by the way. And so yes, I look at it, the team owns the creativity. I mean, the biggest thing I’ve learned about ads is everybody has an opinion, and most people, it’s an n of one, are wrong with their opinions. Whether they love it or not, you have to have a systematic way in which …
Brian Halligan: So you don’t pick it.
Sasan Goodzari: I don’t pick it. However, I absolutely review it before goes on air.
Brian Halligan: You get a vote.
Sasan Goodzari: I review everything before it goes on air. The big thing that I’m looking for beyond just how does it sit with me, which is the least important, but how it sits with me matters, is actually I’m looking for reputational risk.
Brian Halligan: Yeah.
Sasan Goodzari: Does this pass the bar of who we are as a company, the reputation we need to uphold? And so that’s really what I’m looking for in a Super Bowl ad. Of course I’ll give my opinion. “Meh, it’s not that great.” Or, “Wow, this is amazing.” But I’m really looking for the reputational element.
Brian Halligan: Okay. Sticking on CAC for just another second.
Sasan Goodzari: But you love CAC, don’t you?
Brian Halligan: I do. And it’s SMB. It’s how do you scale?
Sasan Goodzari: I’m not gonna give you my secret.
Brian Halligan: Yes, you are. Is it yield NPS? Is that how you measure word of mouth? Like, how do you know if you’re getting the word of mouth or not? It’s hard to go in the shop and see if Mary’s telling Joe that they should use QuickBooks.
Sasan Goodzari: A hundred percent.
Brian Halligan: Is it ye olde NPS or is there something fancier?
Sasan Goodzari: There’s a few things that we look at. One, we’ll look at product recommendation scores. That’s a big input. But it’s just one input. The other we look at is services, because customers may give you one NPS, but if they’re using more and more of your services, then that’s a huge indication. So we’ll look at are they using payments? Are they using payroll?
Brian Halligan: You’re upselling.
Sasan Goodzari: Yeah. Are they using more and more of our services? So that’s one thing that we look for. So it’s NPS, it’s the number of services. And then we also have …
Brian Halligan: And is it gross retention? Just like, how many—the number of [inaudible]?
Sasan Goodzari: Yeah, gross retention. Also just retention dollars that we look at. So we look at three, four things. Because what we’ve learned—this is probably the most important thing that I would pass on to those that listen, is if you just look at one metric, like, are customers recommending—is your NPS high?
Brian Halligan: Yeah.
Sasan Goodzari: You can have a very high NPS and no new customer growth. So you have to really look at multiple metrics. Again, we look at what I just articulated, to really get a feel for are the things that we’re doing working or not?
Brian Halligan: Okay. Lots of founders ask me about HubSpot’s channel program, which we lifted a lot of it from you guys. [laughs] And you guys kind of took accountants and turned them into resellers and software companies. We took website designers and turned them into marketing agencies.
Sasan Goodzari: Yeah.
Brian Halligan: Talk to me about—you’re advising a founder. He’s growing, doing great, wants to do a channel program. Like, how do you do it? What works? What doesn’t work?
Sasan Goodzari: I mean, the first piece of advice I would give is what problem are you trying to solve with a channel partner? Before you jump into how do you become great at channel partners? You know, in our case, really, our biggest partner is our accountants.
Brian Halligan: Yeah.
Sasan Goodzari: And we don’t have a bunch of channel partners. We have developers that will build apps on our platforms. We have partners, but we don’t have …
Brian Halligan: That’s what I’m talking about, the accountant channel.
Sasan Goodzari: Yeah, the accountant channel. And really, so why the accountant channel, you know, for us? Well, accountants also serve consumers and businesses, right? They’re helping them with their taxes, their books, their accounting advice. And the larger you are as a business, you may have them take care of your audit, you may outsource your payroll to them, right? It depends on who you are and the size of your business.
And they’re very influential in what a business uses, in every dimension possible. And so that’s a great example of, like, well, that’s a very important partner. In fact, one of the big things that we’ve really evolved in the last years, accountants are very important partners. They’re not—it’s not just a channel, it’s not a reseller. Like, they’re our partner. And we have to really up our game in terms of how we co-develop with them, how we think about going to market with them together, how we take their input. It’s an area we had to significantly improve in the last year. And really, to answer your question, for us, it was about, well, they play a very critical role in ultimately what businesses use. So not only do we have to be great at the products we build for the end business, but we also have to have a relationship with them, and they have to use our stuff, love it, and then recommend it. And that’s the biggest advice I would give when you’re thinking about a channel partner. Like, why are you doing it? Are you doing it because you’re trying to manage your CAC? And if you’re doing that, well, what does that mean to your overall economics?
Brian Halligan: The reason people want to do it is they want to grow faster.
Sasan Goodzari: Yeah. And then the question, though, is you grow faster, but what’s the economics look like?
Brian Halligan: Yeah.
Sasan Goodzari: And you have to think about those things. But I would just—the advice I’d give is be very clear about the problem you’re trying to solve. And it’s okay to throw some stuff at the wall and see what works, but if you just start with “I need channel partners,” I think you may make the wrong choice.
Brian Halligan: Okay, let me run some things we’ve learned about channel partners through HubSpot by you. And I’m just curious if it’s kind of the same.
Sasan Goodzari: Okay, yeah.
Brian Halligan: Stuff that worked early was we took website designers, a dying business, and turned them into an agency. And we taught them about this new technology and idea called inbound marketing—which is ancient now. And we taught them how to run a proper agency. Like, we ran a little university. How do you bill, how do you charge, how do you run your agency? That worked. Another thing that really worked is once these agencies started signing up lots of customers, they needed software themselves, so we funded a development team to help them manage all their customers.
Sasan Goodzari: Manage their own firm.
Brian Halligan: Right. And that was a pretty good-sized investment. Third thing that really worked for us was—and this is a Napoleon thing, Napoleon said something like, “It’s amazing what a soldier will do for another colored ribbon on his shoulder.” And my goodness, we have found that, like, we have, like, 10 tiers of partners, and they will fight tooth and nail to get up a level. So measuring all that, getting that benefit program, that has really worked. One of the things that at least for us has worked is there’s two ways to buy HubSpot. You do it yourself, you buy directly from us. You figure it out, we teach you. Or is do it for me. And that’s where the agencies come in. And that has worked for us. Does any of that resonate for you? Is that kind of some of the playbook?
Sasan Goodzari: Almost all of it resonates, because I could take that same what you just said and replace it with accountants.
Brian Halligan: Right. That’s what I figured.
Sasan Goodzari: Same exact thing applies. But I would just ask you: What problem were you trying to solve when you first started engaging these agencies?
Brian Halligan: We wanted to grow faster. Just be very honest with you, we wanted to grow faster. And I’ll tell you a funny story about it. It’s, like, two, three years into HubSpot, and our product was awful. Just awful. And we had a few sales reps, and we had a lot of leads from agencies who were curious about inbound marketing. What’s this HubSpot thing? We had a lot of buzz. And I told the sales reps, just leave those leads. There’s a pile of them over there. Don’t touch them. You know, they sat in HubSpot. “Don’t touch them. We’re not going to do the channel program. The product’s not ready.” And they kept asking me. “No.” And we had the thing, that’s a little bit like Google’s, you know, 20 percent time where we say, “You can do whatever you want nights and weekends.” So this guy, Pete Caputa, a great but really irritating sales rep.
Sasan Goodzari: [laughs]
Brian Halligan: He started calling nights and weekends. And then, you know, there’s a distribution of sales reps—let’s say we had five of them. And, like, it was usually a bell curve. Ours was like—Pete Caputa was, like, 50 times more revenue than the rest of—like, maybe we ought to call on these agency partners. That’s how we started it.
Sasan Goodzari: Fascinating.
Brian Halligan: Yes.
Sasan Goodzari: You followed the money.
Brian Halligan: Yeah. The other thing that’s interesting about our agency partners, if we look at our retention numbers, gross and net, the agency customers have actually better economics than our direct customers.
Sasan Goodzari: Interesting.
Brian Halligan: They actually take better care of our customers than we do.
Sasan Goodzari: So many similarities. Like, for instance, when an accountant recommends a customer to use this, particularly like larger customers that we’re now pursuing, what we call mid-market, the cycle time of flows is 10 times faster.
Brian Halligan: Yeah.
Sasan Goodzari: And we end up offering more services, payments, payroll to that customer than otherwise. So there’s so many similarities.
Brian Halligan: Okay. You guys—founders always ask me, too, you add an app. That was your first act. And then you created a suite. Second act. And then you create a platform. Third act. How’d you do it? Give some advice to that founder. She’s got a hundred employees. She wants to go from first act to second act.
Sasan Goodzari: Yeah.
Brian Halligan: You guys have mastered that.
Sasan Goodzari: First of all, a big part of it, as you know, comes out of necessity, right? You’ve solved one problem—well, accounting. And ultimately, what you realize is the customer can be far more—you can deliver far more benefit and be far more sticky if then you actually help them with creating estimate and invoice and getting paid. And then the next thing is well, wow, they have employees, we need the …
Brian Halligan: Payroll.
Sasan Goodzari: Payroll, et cetera, et cetera.
Brian Halligan: And so how far into like the QuickBooks journey did you start building other stuff?
Sasan Goodzari: Well, early on. But remember …
Brian Halligan: You’ve been around since the dinosaur ages. [laughs]
Sasan Goodzari: Yes, thank you. You said it more directly than I was going to say it. Remember, we used to ship CDs. And so when we were shipping CDs and we had a desktop platform, we had payroll, we had payments on desktop years ago.
Brian Halligan: I see.
Sasan Goodzari: But then in order to shift from desktop to the cloud, that was a massive transformation for us as a company, because we weren’t born in the cloud.
Brian Halligan: It was a hard one, as I recall.
Sasan Goodzari: Very hard.
Brian Halligan: Bumpy.
Sasan Goodzari: Very hard. And by the way, we’ve shifted to the cloud, but we still have customers on desktop that we’re trying to motivate to come to online. In some cases, they’re not very happy with us because they want to remain on desktop. But the reason I share that with you is that journey from going to desktop to online took a lot out of the company. And so when we then shifted to the cloud, we were once again only an accounting platform.
Brian Halligan: Yeah.
Sasan Goodzari: Because we had to build everything in the cloud. And then we started building out the same journey: money solutions, payroll, et cetera. So the biggest advice I would give a founder is first of all, everybody has an anchor—ours was tax and accounting. Then the question is: What’s the next problem you can solve for that customer that’s right next to that anchor? And for us after accounting it was well, we serve service-based businesses. They need to create an estimate, an invoice and get paid. So let’s build that out. And then let’s build out payroll, which is very hard, right? Because state, local taxes, country rules, regulations. And so it’s really being very intentional about what’s next to your anchor ,and is that a big enough problem to solve? Can you build advantage by solving it, and then really nail that and then go to the next thing? And then at some point decide, do you partner on certain things until you build it? Do you acquire? That’s why we acquired, like, a credit karma. We wanted to do more than taxes. We could have replicated credit karma. It just would have taken us five-plus years because of the data and AI capabilities. So that’s the advice I would give.
Brian Halligan: Okay. And this is self serving, so we built marketing and then we said we’re going to go into sales. We were kind of forced into it because Salesforce.com was coming into marketing. And then we went to service and we’ve added—I think we have eight of these application areas. We always debated—we always knew there was going to be eight. Should we [inaudible] all seven new ones, or should we really almost finish the second one before we go to the third? How do you think about second versus third versus—like, when did you—so your first one was paying people, right? Payroll?
Sasan Goodzari: No. Well, it was actually creating estimates and invoices.
Brian Halligan: And then your third one’s payroll.
Sasan Goodzari: Yeah.
Brian Halligan: When did you go two, when did you go three? What was it like? Do you look at market share before you go, or would—like what …?
Sasan Goodzari: So it’s a great question, because I now want to go back to your first question you asked me, which is playbook of CEOs.
Brian Halligan: Yes.
Sasan Goodzari: Or playbook of any leader. I think that playbook is very different today.
Brian Halligan: Okay.
Sasan Goodzari: Than it was when you were looking at things serially to decide what’s next. I mean, today—you know this as well as I—with data and AI, what we’re trying to do is build a system of intelligence where it’s no longer about what workflow do I build, what app do I build? It’s actually about learning from the customer, and with our data and AI capabilities, solving that problem for the customer. That’s really important, because I don’t think things are as serial today than they were years ago.
Brian Halligan: You can also build much faster now.
Sasan Goodzari: You can build much faster. You don’t need to be a serial as long as by the way, you have some element of data and AI capability. So I just think that playbook is very, very different today than it was four or five years ago. But the thing that doesn’t change, in my view, is being clear what customer problem are you trying to solve? Is it a big enough problem for the customer? And can you solve it in a way where you’re advantaged versus others? And you know, it can be a big …
Brian Halligan: Okay, let me press on this a little bit. I’m going to put the clock back—I don’t know what year, call it 2020. Your back office, which is the canonical small business back office. And then we’re gonna buy Mailchimp for the front office. You remember that very well.
Sasan Goodzari: Yeah.
Brian Halligan: And that decision at that point in time was that because, man, we’ve got 90-friggin’ percent of the SMB back office, we better go in the front office? We’re almost done with these applications. Like, talk to me about that.
Sasan Goodzari: When we observed customers and their data, they had created—our customers had created 20 billion records within our QuickBooks platform trying to manage their customers within QuickBooks.
Brian Halligan: I see.
Sasan Goodzari: So they were creating shit.
Brian Halligan: They were using QuickBooks as their [inaudible].
Sasan Goodzari: And so what we realized is we have to solve this problem, because customers are manually creating a bunch of records because they don’t want to use multiple different platforms. And sort of back to can we build it? Well, of course. Is this where we want to put our internal capital? Do we have the know how, the domain expertise, or do you go buy it?
Brian Halligan: Yeah.
Sasan Goodzari: That’s what led to buying Mailchimp.
Brian Halligan: Okay, got it. You’ve made a lot of acquisitions—not a lot. You’ve made a bunch. Some have been real dogs and some have been terrific. We don’t have to name names. And, like, HubSpot, we’ve started to buy a bunch of companies. What advice would you give HubSpot and any CEO about, you know, the lemon, the ones that didn’t work versus work? Is there some best practices or some things you’ve learned about how to do them?
Sasan Goodzari: A hundred percent. Well, let’s just put to the side the foundational stuff, which is you’ve done your homework, there’s real clarity of strategically why you’re doing it, you understand the culture that you’re buying, you have a plan around that, you’ve done your dilig—like, let’s put all that to the side, because that’s really foundational. The two big things that we’ve learned is the pace of product integration and talent. Where we moved fast on integrating the platform, I would use TurboTax and Credit Karma. I mean, Credit Karma is our absolute home run. Where we move fast to know what problems we’re going to solve and integrate the product so we can get to benefit for customers, which by the way, translates into growth, and then where we needed to either upgrade talent or make talent changes, when we do those two things well, what we’ve seen is—and by the way, little acquisitions that nobody asks about. And then there’s the big ones, right? Credit Karma and Mailchimp.
Brian Halligan: Did you leave the CEOs in place and leave them independent, or did you put your people in?
Sasan Goodzari: It was situational. Like, in the case of Credit Karma.
Brian Halligan: Not in the playbook.
Sasan Goodzari: It’s situational. You know, Ken and I had a great relationship. He wanted to continue to be CEO, a very effective CEO. And he and his team were in place for quite some time.
Brian Halligan: Okay.
Sasan Goodzari: Whereas in the case of Mailchimp, Ben actually told us and told me from day one …
Brian Halligan: He wanted out. Yeah.
Sasan Goodzari: We gotta get—we gotta upgrade the leadership team.
Brian Halligan: So you put your folks in there.
Sasan Goodzari: That’s right. But back to your question. It’s product integration and it’s talent. Those make an enormous difference in terms of success. And making the tough decisions up front is far better than waiting.
Brian Halligan: Okay. I want to come back to something you talked about earlier. You guys have been around a while. You were desktop software, and then you had to transit. And I think it was like client server, and then went to SaaS and went to AI. We’re kind of on a big shift now. You were one of few companies that made that shift pretty well—Adobe and SAP, not a lot of companies made that shift from client software to SaaS. What’d you do right there? Did you wait too long? Were you too fast? Like, when you look at that shift back then. My sense was you moved to SaaS, actually kind of slow.
Sasan Goodzari: First of all, your premise of your question is a really important one, which is we were born 40-some odd years ago in the era of DOS.
Brian Halligan: [laughs] Which makes it even more impressive how well you guys have done.
Sasan Goodzari: And I would just say our success is when we were always in love with the customer problem, and always willing to disrupt ourselves. And that’s so much easier said than done, by the way. So much easier said than done. But that’s why we’re still around. And it’s also why we were absolutely slow to move to SaaS.
Brian Halligan: Okay.
Sasan Goodzari: We were probably four to five years too slow.
Brian Halligan: Because your customers weren’t asking for SaaS.
Sasan Goodzari: Customers weren’t asking for it. They absolutely didn’t want to move to the cloud. And as much as we are a culture of disruption, that’s a very hard move to make.
Brian Halligan: Did you rebuild from scratch?
Sasan Goodzari: In many cases, we had to rebuild from scratch. And their service—but remember, it’s even harder than the way you’re asking the question. You know, we were a desktop company. All of our data was siloed across TurboTax, across accounting, across—back then when we had payroll, payments, every—a bunch of siloed vertical stacks and data. It was a mess to move to the cloud. It wasn’t a mess the way we were running it, but to move to become SaaS, that is so hard to do. Which is why we were slow.
Brian Halligan: Was it more a technological problem or a business model problem? Because the business model has totally changed, too.
Sasan Goodzari: Culture, talent.
Brian Halligan: Interesting.
Sasan Goodzari: Business model. It’s everything.
Brian Halligan: Got it.
Sasan Goodzari: That’s why you can look back and go, “Well, we were slow.” But when you’re in it, what we had to do was …
Brian Halligan: Is you follow the customer home, they’re not going to tell you to make a platform shift.
Sasan Goodzari: Of course. But if you want to keep growing, you have to make the platform shift. So yes, we were slow, but the degree of difficulty was very high. I would say we were—on reverse, we were very early in AI.
Brian Halligan: I agree. Talk to me about that. What’s going on now for you on that ship, and why were—you were like, “We’re an AI company” in, like, 2009, a long time ago.
Sasan Goodzari: Yeah, yeah.
Brian Halligan: Way before it was cool. Were you too early?
Sasan Goodzari: I would tell you, looking back, we absolutely weren’t too early.
Brian Halligan: Were or were not?
Sasan Goodzari: Were not.
Brian Halligan: Okay.
Sasan Goodzari: Meaning I’m glad we declared …
Brian Halligan: But you did all this AI stuff. Did any of it really work in 2019?
Sasan Goodzari: Well, let me first tell you why, and then I’ll answer your question. We did it for very practical reasons. When I stepped into this role, because I had the privilege of being in all the businesses, serving all the different customers, there were sort of two big things that we put in place six and a half years ago. One was we have to solve more problems in tax and accounting, and we have to become a platform so we can play a meaningful role in the lives of consumers and businesses. That was one big decision. We didn’t know how, but that was one big strategic decision.
Brian Halligan: Yeah.
Sasan Goodzari: The other big strategic decision was data and AI. For very practical reasons. Because the biggest thing I learned being in all these businesses is consumers and businesses want things done for them.
Brian Halligan: Yep.
Sasan Goodzari: It’s money, it’s confidence. Like, get my stuff done for me so I can manage and focus on my business or my life as a consumer. So we said the only way we could do that was data and AI. And that was the second big decision. And to your question about were you too early declaring it, a big heavy lift was all the work we did around data and data services, like cleaning the data, making sure it’s usable, making sure we can ingest data.
Brian Halligan: ChatGPT came along, you were ready.
Sasan Goodzari: Yeah. The AI part was actually the easier part. The harder part is all the data. And now that it’s usable and all the services we have to ingest data, that’s why I’m glad we started six and a half years ago, because now we’re far better positioned for what we’re doing today in the future.
Brian Halligan: And when you think of it, are you infusing AI into your current platform, or are you saying, “Hey, we’re going to start from a blank sheet of paper, and build an AI-native version of QuickBooks?”
Sasan Goodzari: I would say both. Everything—and I get asked a lot, so what’s your AI revenue? Like, the whole company sits on our data and AI platform. Like, everything from payments to payroll, the tax, everything sits on our data layer, data models and on our AI platform. So that’s sort of number one. Number two, you know, one of the things we launched in July of this year is a virtual team of AI agents that do a lot of the work for you.
Brian Halligan: Yeah.
Sasan Goodzari: A lot of that is AI native.
Brian Halligan: Are you going to put the accountants out of business by doing that?
Sasan Goodzari: No, we’re actually—our focus is how do we fuel their success? And we’re also very transparent with accountants, which is if you only have, you know, 50 customers and all you do is tax, you should really be part of our platform, our expert platform, because with technology and the supply issues, it’s going to be tough as you look ahead.
So we’re trying to fuel their success, but we’re also partnering with the large firms to really fuel their success because they’re trying to digitize, they want efficiency, they want to improve profitability, particularly the PE-backed firms. Our goal is partnership, because we believe in AI plus HI. We think human intelligence is essential for today and the future. Our focus is everything needs to be done for you. How do we deliver experiences that’s done for you, versus building more workflows and designing more product?
Brian Halligan: Okay. We only have a couple minutes left. I have a thousand more questions, by the way. I coach all these CEOs who are smart, they’re hungry, they’re between 10 and call it 500 employees. And they want to go from, like, startup founder to scale-up CEO. What CEO advice would you give to these people?
Sasan Goodzari: That’s a loaded question.
Brian Halligan: You’re a smart guy.
Sasan Goodzari: I would say really focus on winning. These jobs are hard. You know, I …
Brian Halligan: Do you like your job?
Sasan Goodzari: No, I love winning.
Brian Halligan: Yeah. Is the day to day—do you enjoy it?
Sasan Goodzari: There are a lot of days where I’m like, that was—no.
Brian Halligan: Yeah.
Sasan Goodzari: I’m not solving for joy. I think that’s the advice I would give is if you’re solving for just following your passion and defining how the day went by, joy and happiness, you’re not going to succeed in this world—as a CEO or not a CEO. So the advice I would give is focus on the customer and focus on winning. These jobs are hard. Be prepared, right? If you want to do this job, you got to have grit, you got to work hard, you got to have resilience. You got to understand that most days you’re not—it’s not about passion, it’s not about joy, it’s about winning. And what we do is very hard. And I just think the mental toughness. I think talent is overrated.
Brian Halligan: Okay.
Sasan Goodzari: I think it’s all about grit and it’s all about hard work. I will take anyone that has grit and hard work versus …
Brian Halligan: How do you know if someone—you’re interviewing someone, how do you know if they’ve got grit and hard work?
Sasan Goodzari: You know what? One of the things we have is one over one approval. If my team is going to hire anyone, ultimately I interview them.
Brian Halligan: Yeah.
Sasan Goodzari: And more than 50 percent of the time I go back to them and say, “I don’t think this is the right person.”
Brian Halligan: Grit.
Sasan Goodzari: Because it’s just—it’s the grit, it’s the hunger, it’s the passion. You know, sometimes …
Brian Halligan: What do you ask someone to figure that out?
Sasan Goodzari: I figure it out in the conversation. You can smell if somebody’s hungry, if they have grit, if they have perseverance. And I think that’s what it takes to do this job. Back to your question, the biggest advice I’d give CEOs is don’t lose sight of the prize. And it’s hard. Get after it, outwork everyone. Have grit. And if you fail, figure out how to get up and bounce back, and you’ll achieve great things in life. It may not be that CEO gig, but you’ll achieve great things in life. It’s the advice I give my kids.
Brian Halligan: You’ve done an amazing job here at Intuit. You’ve done an amazing job on this podcast. Thank you for sharing all your knowledge. You’re a legend. Appreciate you.
Sasan Goodzari: Thank you, my friend. Thank you.
Closing Thoughts
Brian Halligan: Okay. Hope you liked that interview with Sasan. I really enjoyed it. A couple of high level things: Both Sasan and his predecessor Brad Smith are very polished and very smooth, and they kind of rhyme with a couple other folks I’ve had on the pod—David Solomon from Goldman and Nikesh Arora from Palo Alto. And it seems like that’s sort of a common thread amongst the CEOs who’ve been hired in to replace the founder in a company. Kind of interesting that they have that in common.
Another thought. Like, I spent that day with Brad Smith, their CEO, a few years ago. Just my suggestion to all of you listening, if you’re a CEO or you want to be a CEO, that really worked and was really helpful to me. And so if you know a CEO and you admire them, ask. “Hey, can I come in and sit with you for a day and sit through your meetings?” The very worst thing that can happen is a CEO is very flattered and says no. And so you kind of win either way.
He asked a good question of himself. Every six months he asked himself the question, “If I join the company today from the outside, what changes would I make?” And that’s the question I always asked myself at HubSpot and I very rarely did it. So if that stuck with you, I recommend you do it. I like that he, and almost everyone I’ve talked to gets on the coal face with the customers, like, gets on support calls, goes and talks to customers, follows them home. And I think what kills a lot of startups, kind of between a hundred and a thousand employees, is you get some layers in there and you get all the feedback filtered, and you lose that sort of coal face touch with the customers.
One thing he talked about was this follow-me-home concept. And it’s—at least it used to be—it’s a famous concept in my mind where the founder of Intuit, they sell to very small business. And people typically run them out of their home. So he would go to someone’s home and watch them do all their paperwork and watch them do all their accounting and see how frustrating it was, and then kind of build for them. That was his sort of secret sauce.
And almost every CEO I speak with is really obsessed with understanding the customer. What I think people get in trouble with now is they look at the analytics for the customer, and they can see usage data and everything’s very wired up quite nicely for the CEO to see. But I think you miss something when you don’t actually do that follow-me-home. Because when you do the follow-me-home and you sit with—virtually or not—that end user, you can see not just what they’re using, but where are they cutting and pasting into other things, and where’s the messiness in the process?
I see a lot of CEOs who are getting away from that. I would encourage you all to stay there. I think a very common cause of death for companies going from a hundred to a thousand employees is they kind of lose that coal face with the customer. They get their information filtered heavily by their staff, they get reportings from analytics apps, but they don’t actually talk to those customers, and they don’t make their senior team talk to those customers. So I think that’s key.
And then we talked about the SMB segment—and we have this in common with Intuit, although we sell more to M than S than they do. What he says about S, I think, is right is you can’t treat them like mini enterprises, you have to treat them like consumers, like the individual is like a consumer product. You have to build it that way. And it’s a different mindset, and it’s very easy to get talked into building all kinds of other stuff for mini enterprises. So I like that they did that. The key in SMB is to keep your CAC low. If your CAC is relying on Facebook ads or whatever advertising model, it’s very hard to scale that. And I like that they focused on that. They worked through channels, they were obsessive about word of mouth and net promoter score. So I like that a lot.
And the other thing you have to do if you want to build an SMB business is you need a really solid LTB. You’re going to have churn, some of these folks are going to go out of business. Like, HubSpot will lose, call it 11 percent. So we start the year with $100, and then we end the year actually with $89, but then we upsell them up to $100, $300 and $400. You have to be able to fill that divot with your best customers buying more stuff. So I think they’ve kind of got it down how you build an SMB business. I think more companies should go after this target. There’s just like gravity on Sand Hill Road that everyone wants to go to the enterprise. But if you can think it through, man, you can build a huge business in SMB. HubSpot, Intuit, Shopify, they’re all cranking.
Okay, we talked about second acts in platforms. And lots of founders asked me about this. A lot of companies die because they can never figure that second act out. I kind of always thought of it in HubSpot, either you build a platform or you get eaten by a platform. And so we ended up building a platform. What they did and HubSpot did is they had their first app was accounting, and the second app, which is right next to it, was invoicing. So they didn’t go way into HR or something. They were just like, “We’re going to do invoicing.”
So that was the first act, second act. And then after a while they went into payroll, which is a little further away, but pretty close to that. So when you’re building a second act, keep it tight, keep it close. Very helpful if it’s the same buyer who’s buying both of those products—not always the case and hard to find that, but really important.
And then the other thing I would say is as you’re going to your third act, I think you want to be a little bit more serial than parallel in the way you think about this stuff. So you build your first act, and then instead of doing second, third, fourth app and peanut buttering it, really go after that second act and get to table stakes on there before you go to your third act, your fourth act, et cetera.
I really liked Sasan’s hiring criteria: grit. That’s the first. I’ve interviewed nine or ten of these really terrific CEOs. No one’s said that before. It reminds me of Sequoia’s hiring criteria for entrepreneurs. They look for that chip on the shoulder. I don’t think they always get it, but pretty much. And so he looks for that. And most founders are telling me these days we’re looking for slope or we’re looking for experience. But I like his grit. What’s your hiring criteria? What’s your throughline for all your execs you’re hiring? That’s a good question to ask yourself.
Okay, those are my, my takes on Sasan. I think there’s a lot there, and I hope you enjoyed it and I’ll see you on the next one.
