This post was originally published by Forbes on August 27th. You can view the original article here.
Recently, I came across a post on LinkedIn from Dana Therrien, practice leader of sales operations strategies at Forrester. It highlighted the growth of the RevOps role with titles like director of RevOps, chief revenue officer and chief sales officer. The growth of these titles is aligned with a movement toward bringing disparate operational teams responsible for growth together, at least organizationally, under one leader — the chief revenue officer (CRO).
The CRO is geared toward driving alignment across teams responsible for the customer life cycle experience: marketing, sales and customer success. The role has become prominent due to the shift toward the cloud in the tech sector, where winning the deal is only the start of the revenue cycle. After that, the real work starts. You have to earn revenue every day. Folks in traditional service industries like hospitality and retail have always understood this. Your customer wants to know “What did you do for me today?”Typically, the RevOps leader is responsible for driving the alignment of the operations teams across silos to ensure all operations functions are orchestrated in line with the customer journey. The goal of the ops team is to smoothen the customer journey from the time they first became aware of the service to when they are serviced. I call it a journey from “education to wow.”
To help with this transition, I created a framework to measure RevOps metrics. This framework drives alignment across every function in the company in support of the customer, from the traditional marketing/sales/customer teams to product/operations and partners in support of growth and revenue goals.So, what are the RevOps metrics that indicate alignment is working and every single team is aligned toward the customer experience? Below is the breakdown for the first part of the balanced scorecard for the growth-focused RevOps organization.
1. Revenue Metrics
• Book of business by product/geography: What is the total dollar amount of all opportunities by weighted pipeline for all your products and geographies?
• Revenue productivity (LTV /(CAC+CRC)): This will give you an insight into the dollar worth of a customer after adding costs for acquisition and retention
A company generating revenue but not growth is less than ideal. As such, I recommend teasing “growth metrics“ separately.
2. Growth Metrics
• Net new revenue/Qtr- Excluding recurring revenue: What is the net new revenue earned or booked /quarter?
• SaaS magic number tracking: This number reports what you get in customer acquisition for every dollar invested; for SaaS, if it is close to 75 cents on the dollar, invest in more sales resources
• Quick ratio: The net revenue month over month, factoring in churn; the ratio is a better way to compare apples to apples
3. Customer Acquisition
• Average contract value: This is your ARR or TCV value
• The average revenue per user/customer: This identifies segments that are more attractive than others; it will allow us to invest our best resources in the segment that generates the highest revenue
• Average lifetime value: What is the average revenue if a customer is based on the anticipated length of the contract?
4. Top-Line Key Ops Metrics
• Percent of market share gain: This is an important metric to track for more established firms; growing firms should ignore since taking market share from an incumbent is not a priority while in the growth stage; however, if you have multiple players and you are close to series C, then you need to start tracking this
• Operating margin: Every founder should track it to find the right segment
• Customer acquisition cost (CAC): What is the total amount spent on all sales and marketing costs (people + tools)?
Every CRO is accountable to these RevOps metrics. In the next part of the balanced scorecard, we will look at the top-line metrics each team should track in support of corporate goals. Traditionally, revenue metrics are tied to sales. More recently, organizations are looking to hold marketing accountable as well. However, I believe revenue is everyone’s business. To that end, in the next part of the balanced scorecard for SaaS companies, we will review the set of metrics to be tracked for growth for marketing, sales and customer success, channel partners, product engineering, and operations. Read more of Dharmesh Singh’s Forbes articles here.