How revenue leaders can influence the metrics that matter
I just came off an insightful webinar presented by Dave Kellogg and Michael Lavner of Balderton Capital, in which they shared an operator and investor’s view of the ‘SaaS Metrics that Matter’, and how some metrics have become more important in today’s economic climate.
You can access the slides here.
Here are the metrics that Dave and Michael walked through, with the purple stars indicating the ones with increased focus.
Dave Kellogg presents the Metrics that Matter
We’ve moved from a world of growth at all costs, to a world of efficient and sustainable growth.
Revenue growth on its own it not enough - companies need to grow efficiently.
All of the five starred metrics have an element of efficiency in them.
Dave and Michael do a deep dive on each of the metrics in the webinar so I won’t recreate that here.
What I do want to focus on is some practical ways your revenue teams can influence these metrics and help your company be more investable for your next round.
Sales and Marketing makes up anything up to 50% of a company’s burn as you scale up through Series A and B.
This expense directly affects four of the five starred metrics: Free Cashflow Margin, Rule of 40, Burn Multiple and ARR per FTE.
Revenue teams have to consider how they can continue to scale ARR growth, but with less additional expense - and that typically means with less people.
Create higher quality pipeline through buyer enablement and partners
Yes salespeople should prospect. But salespeople do not create demand for your product.
If your sellers do not have a packed calendar with customer meetings then you have a demand problem not a sales efficiency problem.
Buyers are looking to self educate themselves on the problems their business is facing, and they’ll do that through first and third party content, discussion and events.
They will speak to their peers, join role-specific Slack communities, visit product review platforms like G2, connect with analysts and ask their trusted existing partners (tech vendors and consultants).
They want someone else to validate the problem and shortlist the possible solutions they should connect with.
Focus on ensuring your existing customers, your partners, and the analysts you work with are filling these channels with their own opinions of the problem you solve and how they have solved it using your tools.
Channel partners were the default for companies like Cisco and Microsoft in the 1990s - their time is returning.
Remove duplication of effort in your sales teams
The SDR model only appeared in the mid-2000s.
The SDR model enabled teams with large amounts of demand to separate the initial qualification and ‘pitch’ from the strategic proposal, negotiation and closing activity - allowing the more expensive AEs to be increasingly efficient with their time.
But in a world of lower pipeline you’ll find a lot of duplicated effort where AEs without a blocked calendar are joining SDRs on the early calls to support the qualification or assist the handover.
You don’t need two sellers drafting the same email.
You don’t need two sellers on the same call.
It makes the already very expensive SDR model totally uneconomical.
Consider in which segments a separate SDR team really is necessary (because your AEs don’t have any time to speak to new prospects) and if not, reposition your SDRs as full cycle SMB reps.
Remove manual work from your sales reps
The technology exists today to remove much of the manual repetitive administration from your SDRs and AEs.
Emails can auto log into CRM. Call recordings can automatically create next steps and follow up emails. Forecasts can be auto-created.
Sellers are spending just 20% of their time in front of customers. 80% of their time they are preparing for a meeting, wrapping up a meeting, or busy in training or other non-customer facing activity.
Spend time shadowing your reps in the field. Ask them, “What are you trying to do now?”
Listen and ensure that the seller workflow you have designed removes complexity and manual effort.
Think of a wheel. How can you increase the percentage of time your seller is in contact with the road?
Reduce AE attrition
In the webinar Dave Kellogg talked about ramping reps being a drag on efficiency metrics.
They are an expensive cost to the business while they deliver near zero incremental ARR.
On average a SaaS AE takes 5.3 months to ramp, but then they only stay ‘productive’ for 22 months before they leave.
Put another way, reps are ramping for 25% of their productive tenure - inefficient.
And why do reps leave? Because they aren’t earning or learning.
Reps that are busy, hitting their accelerators, and getting to work with interesting clients will stay for longer, which reduces that percentage of tenure ramping.
The pipeline generating activity from marketing and partner teams is critical to ensure your expensive reps are drowning in opportunities and can see a path to the OTE you sold them on.
Align compensation along the funnel
Comp your sales team on churn in their accounts.
They won’t like it. They will grumble that they don’t have control over what happens six months or a year after they sold the deal.
But they do have control.
They can do a better job of ensuring the customer is a good fit
They can do a better job of understanding the customer’s industry and business.
They can do a better job of recording their calls and handing over their customers to onboarding and CSMs
They can do a better job of joining the kick off calls and CSM QBRs
Once you comp sellers on what happens after they close the deal your Gross Revenue Retention (logo and revenue churn) metrics will see an improvement.
Just like the adage everyone is in sales, everyone is in churn prevention.
Winning is fun
Efficiency can have negative connotations - “we want you all to work harder”.
I see efficiency another way - “we want you to win more”
I’ve worked in teams that win - and winning leads to more winning - winning is fun.
Stripping out inefficiency is a benefit to the founders, the leaders and the individual contributors themselves.
I definitely recommend going through the slides and the webinar recording - some really valuable insight, and for anyone in a revenue leadership role it shines a light on the importance of running a lean revenue engine to support your CEO as they speak to investors.
Get started
Whenever you are ready, there are three ways that I can help you accelerate your revenue.
Buyer Experience Audit - I’ll impersonate a buyer researching your segment and company and let you know what I find. Ideal for planning your Revenue Operations strategy.
Business Model Design Workshops - I’ll work with you and your team to design or refine a business model for a new or existing product.
RevOps Impact Playbooks - I’ll help you implement one or more tactical processes across your revenue teams - content, referrals, testimonials, adoption and more.