Hello, friends. Welcome to a tradition unlike any other. This is the rev ops MBA with Brian Kreutz.

So what does that well, how does that affect the risk?

So on the left hand side, the buyer took all the risk, and now the seller's at risk. And so you can see that just over the last twenty or thirty years, the way the buying process has worked with different business models is that it's taken everything from the buyer risk to the seller risk. And so what does that mean? So on the left hand side, you know, old days, hardware support contracts on premise hardware or super long length, like, enterprise software.

The buyer takes the risk. Because if if they make a bad purchase and they can't implement it, they can't return it. Right? They're locked into a long term contract.

This is why these major players got so successful.

People used to say you're never gonna get fired for buying Cisco. Right? Cisco is the industry leader, and so they would just default to that because they knew it was a safe choice. And even if it wasn't quite the right product for them, no one ever got fired for it because it was at least a safe choice. If you took that new startup and it didn't work out well, well, you took all that risk because you're locked into an either in perpetual or a long term contract. So the seller seller would bring it in a whale of a deal because they know that this thing is gonna pump out revenue for the business over and over and over again.

As we move over to the subscription based in the two thousands, twenty twenty, twenty tens, twenty twenties, the seller is more at risk. So the buyer can walk away at the end and not take risk. How many times have you gotten deals to, like, the proposal stage and they just walk away and go silent at the end? There's no there's very little risk from the buyer. How many times have it has an implementation failed and that buyer actually got their money back a refund.

Right? Also, the seller takes months or even years before a profit is made. Right? The seller has the infrastructure, the services, all of this stuff here.

And so a lot of software companies, they're not profitable for the in for the first eighteen months because the customer acquisition cost is high. And so they begin to take a lot more of that risk. You can walk away before the eighteen months, and you're actually a negative value to the company because you didn't have hit that. Now, obviously, as we know, if there's, the lifetime value goes up, they become extremely profitable because it's much easier to support them long term than it is to onboard them and, of course, acquire them in the first place.

And then now the seller, now in these usage models, it's all at risk. The buyer can stop at any time. Like I said, I could sign up for Netflix and quit Netflix within the same hour.

And as you sell accelerate usage, the risk from the seller continues to increase. And so you'll see here that we go nineteen eighty, nineteen ninety to two thousand, and then two thousand ten all the way here, this, like, high, subscription usage space. And then twenty twenty, we're char starting to go back here. We've realized we took the risk all the way from the buyer all the way to the seller in a span of twenty or thirty years, and businesses wanna put that risk back on the buyer or at least even it out. And so you see we've gone through the entire semicircle, and then we're jumping back to the left to try to actually get a a heavier commitment from these, so that the risk isn't all on the buyer.