The Unicorn Fallacy: Ditch the Growth-or-Die Herd and Build a Company That Lasts

By Chris Cabrera

Is your growth-at-all-costs mindset costing your company too much?

Many executives have chased the same dream for years: to become the next unicorn and exceed $1 billion in v

• Language: English
• Publisher: Lioncrest Publishing
• Release date: Oct 31, 2023
• ISBN: 9781544544953

Chris Cabrera

Chris Cabrera, the founder and CEO of Xactly is a seasoned executive with experience with early-stage and public companies. Cabrera is an expert in sales performance management, incentive compensation, and employee motivation. He has won numerous awards, including being named a Top 50 SaaS CEO for three years running. He was also named the "Alumni Entrepreneur of the Year" by the Lloyd Greif Center for Entrepreneurial Studies at the USC Marshall School of Business. In addition, Cabrera has been featured in the Wall Street Journal and the New York Times, and is the author of Game the Plan, a popular book that helps business leaders understand the motivations behind sales compensation.

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Copyright © 2023 Chris Cabrera

All rights reserved.

First Edition

ISBN: 978-1-5445-4495-3

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I would like to dedicate this book to my wife and love of my life, Marla. For thirty-three years Marla has been by my side, through great times and also through challenging times. She has helped guide me through every major decision and has always encouraged me. She lifts me when I have been down and has kept me centered amidst it all—meaning she can slap me into line and will not tolerate anything but my best. I am eternally grateful not only to have her as my wife, but as my truest and best friend.

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Contents

Introduction

Part 1: The Case for Intelligent Revenue

1. The Unicorn Fallacy

2. Introducing Intelligent Revenue

3. Prepare for Change

Part 2: Optimizing for Growth and Sustainability

4. Get Out of the Stone Age

5. Fix Your Comp Plan

6. Stop Being a One-Trick Pony

7. Ditch the Hero Culture

8. Forecast with Confidence

9. Stop the Attrition

10. The Future of Intelligent Revenue

Conclusion

Acknowledgments

About the Author

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Introduction

We’re All in the Same Storm

Things are going great. We’re absolutely crushing it right now.

I wasn’t expecting my friend to answer my question so enthusiastically—especially since Xactly, the company I ran, was decidedly not crushing it.

I couldn’t square the difference. On the face of things, our companies were very similar. We were both in the software-as-a-service (SaaS) business, we both catered to a similar clientele, and we both managed similarly sized workforces.

And yet, despite all these similarities, our experiences in the market couldn’t have been more different.

While he was killing it, we were in the middle of a nasty storm. None of our buyers wanted to make any decisions. They all kept pushing out. We couldn’t get them over the finish line. As a result, we’d just come out of our second rough quarter in a row—with no end in sight.

I ended the call and sat staring at the wall. What was going on here? How could we be struggling while his company seemed to be thriving? Were we doing something wrong? Was there some weird quirk in the market? Were we not as strong of a company as I thought we were?

Perhaps not.

A few months later, I got a call from that same CEO friend. This time, when I asked him how things were going, he was singing a much different tune. Terrible, he said. Everything you told me about your last quarter is happening to us this quarter!

They weren’t hitting their numbers. Their sales reps weren’t happy. They were having a tough time paying their bills. Prices were going up. And to top it all off, their best people were quitting.

It’s a nightmare! my friend exclaimed.

My friend wasn’t the only business leader to describe a sudden change in fortunes. After all, we’re living in especially volatile times. In just the few years leading up to the publication of this book, this business world has been rocked by storm after storm. First, there was the COVID-19 pandemic, then there was the Great Resignation, then there was the massive spike in inflation, and so on.

Each storm brought new challenges—challenges that I naively assumed everyone was experiencing in the same way. Same storm, same problems, right?

But after speaking with my friend—and many other business leaders like him—I realized I was wrong. Yes, we all navigated the same storms, but we were in different boats.

We each experience every new storm in a different way. If you’re a small business, even a small storm could seem catastrophic when compared to the experience of a larger business. Sometimes, a large storm could devastate a larger business but leave their smaller counterparts unscathed.

That’s why I love asking business leaders how things are going in their company. Not to compare our own relative success to theirs, but to see how they’re weathering the current storm—and to see whether they’re prepared for the next one.

Unfortunately, I’ve discovered that very few are.

Rudderless and Adrift

If you’re reading this book, it’s because, quite frankly, you’re rudderless in the storm.

Maybe you’re lost at sea in a market that rapidly expanded and then contracted around your business.

Maybe you went all in on growth and are now faced with an economy that no longer supports such a gung-ho approach.

Maybe you’ve played it safe and focused on building a quality business but have recently begun to suspect that the traditional ways of doing so are starting to feel outdated.

Whatever the case, you aren’t sure how to weather the storm currently facing your business. You haven’t failed, but you’re not doing as well as you’d like either. Something has to change.

Here’s the good news. Yes, each storm may be different. Yes, each storm may bring unique challenges. But the best way to navigate your company out of any storm is almost always the same: focus on building a quality, sustainable business.

I know what you’re thinking: No shit, Chris. We’re all trying to do that.

Fair point.

We’re all trying to build great businesses. In all my years interacting with other business leaders, I’ve yet to meet someone who didn’t genuinely want to build a quality business.

But I’ve met far fewer who actually believe they’re doing it. Most likely, you’re one of them.

Don’t believe me? Here, I’ll prove it.

Look at the current state of your revenue operation. Do you trust your numbers? Do you trust your product? Do you trust your market? When you look at your sales engine, do you see a well-oiled machine, or do you see a thousand unknown, undefined problems that could capsize your whole operation?

If you answered yes to any of those questions, then there’s your problem: you don’t have a quality revenue operation. To create a quality business, focus on quality revenue.

Yes, there’s more to building a quality business than just revenue alone. You also need to deliver a quality product, support your organization with the right systems and structure, and grow a winning organizational culture. Those are all important things—and I certainly encourage you not to ignore them. However, without revenue, any other initiative you might be considering is dead in the water.

A quality revenue operation is the engine that drives the rest of your business. However, most organizations don’t give their revenue operation the attention it deserves.

That’s too bad.

First, building a quality revenue engine—just like building a quality organization—is an evergreen move that makes sense in any economic climate for any company. In a bullish, investor-friendly climate, a quality revenue operation will only improve your valuation. In a bearish climate, it will help you demonstrate that you are both stable and profitable.

Second, a lot has changed in the world of revenue—both in terms of how leaders think about it and the tools they use to drive it. It’s no longer enough to chase the most revenue, to grow at all costs even if you aren’t profitable. It’s no longer enough to manage complex (and costly) revenue calculations on clumsy, error-prone spreadsheets. It’s no longer enough to blindly call the ball on your forecasts and white-knuckle it through the year to see if you were right. Those approaches might have worked for your predecessors, but today, we have the technology and tactics to push well beyond that.

How do I know? Because at Xactly, the company I founded with Satish K. Palvai in 2005, we’re leading the charge. A better way is possible, and we’ve made it our mission to revolutionize the way businesses manage the revenue arm of their business through an approach we call Intelligent Revenue.

At its core, Intelligent Revenue comes down to three things: tech, tactics, and alignment. With robust data and machine learning tools, today’s organizations can generate unprecedented insights into how they’re generating revenue. Then, with the right tactics, these organizations can work to maximize value at every step. Of course, all the tech and tactics in the world won’t amount to much if your people aren’t on board with the plan—which is why alignment is crucial to any effective revenue operation.

This is the rudder you’re looking for to stabilize your ship. Sure, every organization is different and has different needs. However, the fundamentals of a healthy revenue operation are largely the same for any company. Master those fundamentals, and you will position your business to weather any storm.

That doesn’t mean giving up on your dream business, but shifting to a concept that’s more stable. Such a shift can be difficult to wrap your head around. I would know. For a long time, I was in the exact same boat.

Don’t Let the Game Play You

At this point, some of you reading this may be feeling a bit blindsided. Most likely, you’ve been playing the game you thought you were supposed to play, racing after that billion-dollar valuation with a growth-at-all-costs strategy so you could attract as many investors as possible and achieve unicorn status in the business world.

If you’re one of those readers, I get it. There’s an aspiring unicorn in all of us, even if, as we’ll discuss in Chapter 1, being a unicorn isn’t all it’s cracked up to be.

The truth is, I used to chase the unicorn dream too—in fact, I was encouraged to. I was the CEO of Xactly for fifteen years before anyone asked me about our company’s EBITDA (earnings before interest, taxes, depreciation, and amortization). All our investors wanted us to do was grow, grow, grow—so that’s precisely what we did.

If I’m being honest, this growth-at-all-costs approach never sat well with me. In fact, in many ways, it went directly against what I had come to know and value.

My father was an entrepreneur who immigrated from Colombia and had a thick accent. Some people had trouble understanding him at times, but he cared about the people he employed and worked tirelessly to show it. I still remember riding along with him every year on the day before Thanksgiving as he delivered turkeys to all of his employees.

Through my father, I learned the importance of putting people first. He was a master at this, even if he wasn’t quite as shrewd when it came to growing his business, where he took a far more conservative approach. Rather than seek financing to grow his operation, he bootstrapped everything. This led to a feast-or-famine childhood for me and prevented him from taking his business to the next level.

My father may have thought financing was a four-letter word, but business school taught me differently. Perhaps more importantly, though, it taught me that my father wasn’t entirely wrong. There is a right way and a wrong way to pursue financing—and a growth-at-all-costs strategy was firmly in the wrong camp. While that aggressive approach worked for some, it was disastrous to most.

If only I had listened.

When I first founded Xactly in 2005, and for several years afterward, we aggressively pursued a growth-or-die strategy in order to attract investors and raise capital. In some ways, we had little choice. Especially at the time, all our investors wanted to talk about was growth. Growth got them larger valuations, which in turn put them in a position to turn a profit on their investment more quickly.

And so, best practices be damned, Xactly played the game and gave our investors the growth they desired. But I also never gave up on what I knew was right. I didn’t just want a business that grew. I wanted a business that was profitable. So, outside of a few growth-intensive years, we worked to build a business that would last.

Then the market shifted, and the game changed.

Overnight, all those would-be unicorn companies—dozens of them—that had received billion-dollar valuations were struggling. They couldn’t earn a profit, and they couldn’t deliver what they promised. As a result, they couldn’t attract new investors. Because they had raised money on outsized valuations, raising additional money would result in a massive down round.

Even Xactly—which was a profitable company—felt this shift. In 2021, we reported 86 percent growth at our company. Just a few years prior, that number would have investors salivating. Instead, they all came back to us with the same concern: Where was the profit to match?

Since founding Xactly, that was the first time I’d ever heard an investor ask that question. Finally, after all these years, investors were speaking my language.

Sure, it meant that we had a ways to go to convince these investors that we were, in fact, a profitable company. However, because we had always been at least somewhat focused on building a quality company with a sustainable, Intelligent Revenue operation, we were far better positioned to weather the storm than many competing organizations.

For many of those organizations, the early years of the 2020s have been a humbling experience, to say the least. As a friend to many of their leaders, it was painful to watch. For years, these companies had been cruising in the unicorn fast lane, chasing higher and higher valuations to secure an ever-growing share of venture capital (VC) money. And then, all momentum came screeching to a halt. With no more investors, these CEOs all became obsessed with the same thing: retaining capital.

All they needed now was a plan.

Reinvent Yourself

The Intelligent Revenue framework outlined in this book is designed to help any organization build a predictable, stable, and sustainable revenue engine. This is not a strategy for doubling down on a growth-at-all-costs strategy, although many of the practices outlined in this book will absolutely help you grow your business.

But if growth is all you’re after, then I’m sorry to say this, but you’ve fallen for the Unicorn Fallacy—and eventually, you’re going to wind up extinct.

There’s a reason why only about 25 percent of founders are still the CEOs of their companies by the time they go public: they fail to transition from startup mode and focus on long-term success.1 Growth is an important strategy when you’re trying to get your first five clients. If you’d like to stick around for a while, though, eventually you’ll have to turn your attention to building a great business.

If you’re already focused on building a quality business, then two things. First, hallelujah, you’re ahead of the curve! Second, don’t let up on the gas. Here is your chance to get your revenue engine running at peak potential.

To help you get the most out of this book, I’ve divided it into two parts.

Part 1: The Case for Intelligent Revenue. Here, we begin by diving deeper into the Unicorn Fallacy and why the go-for-growth mindset is so destructive for business leaders. Then we’ll introduce the concept of Intelligent Revenue, discussing how technology, tactics, and alignment work in synergy to bolster