Revenue Acceleration: How To Move From Alignment To Action

Welcome to the newest edition of the Marketing with a bit of Funk newsletter! Before we start, I gotta say that I appreciate all of you reading this, sending me messages to support me, and sharing it, of course.

Also, I gotta thank Aleksandar A. for helping me craft this.

And now, to our topic.

As companies expand, they typically end up with what is referred to as “silos.” This happens because each department in the company develops its own set of processes and priorities.

For any company looking to grow exponentially, this is an issue they need to address quickly.?

This article will show you how cross-department accountability can help your company break down these silos so everyone can work together more efficiently and create revenue acceleration.

Why Organizational Friction Is Hurting Your Bottom Line

In B2B organizations, the word “silo” is often used to describe a point of contention.?

They’ve created tension between departments that are all trying to achieve different goals and missions, and this has negatively impacted marketing, sales, and customer success teams.?

Over the past few decades, customer journeys have become more complex with an increasing number of touchpoints and channels. This complexity has made it harder yet more important for companies to remain agile while still achieving their goals.

However, a lack of alignment among teams adversely affects outcomes, preventing the companies from reaching their full potential.?

After years of being relegated to the back seat, customer service is finally taking center stage. As more and more companies realize that customer experience leads directly to profits, it’s no surprise that marketing, sales, and CS are now being called on to work in lockstep.?

Yet, many teams still struggle to align their efforts towards a unified goal: building an organization focused on digital experiences and sustainable business models for the future.?

This shift brings changes in how businesses interact with their customers.

One is that there is less friction between these internal teams as they work together to create amazing, seamless interactions for every person who interacts with the company.

For this reason, revenue functions have become increasingly important to help companies remove friction. These are Revenue Operations and Revenue Acceleration.

Revenue Operations & Revenue Acceleration

Revenue Operations, or RevOps for short, is the combining and aligning of sales, marketing, and customer success teams within a business.

With these three teams working together, a business can optimize its sales and marketing funnel, collect more high-quality leads, and make more money.?

Now let’s see what Revenue Acceleration is.

Revenue Acceleration is part of the revenue operations process.

Revenue operations focus on executing and aligning teams, while revenue acceleration provides tactics and tools for sales, marketing, and CS to take action in their day-to-day work to fuel growth.

Both revenue operations and revenue acceleration have the same goal: to introduce full-funnel accountability between the three revenue teams and provide more value to customers.?

With Revenue Acceleration, marketing, sales, and customer success teams merge to help customers achieve the value they expect from the brand.

The revenue team helps customers achieve the value they expect by connecting with them through a personalized experience that is tailored to their needs.

The studies showed that companies that align their revenue teams have a 19% faster revenue growth. These companies can do so because they act on the same insights and share the same goals, which means they have full-funnel accountability.

One of the best ways to get these teams on the same page is rallying them around their customer.?

This will give them a better understanding of what they are trying to accomplish, and help them be more efficient in how they work together, all while doing what’s in their customers’ best interest.?

After all, a good customer experience is like a gold mine. It not only pays for itself, but it also generates more revenue than any other form of marketing.

The key metric, customer lifetime value (CLV), is used to tie marketing, sales, and CS together. These teams each own a revenue segment that impacts the experience and success of CLV.

Once your team has a single source of truth around data, you don’t have to waste time debating who is right or why the numbers don’t match up. You can take action to:

• Identify deal risks and upsides
• Accelerate the current quarter pipeline
• And accurately predict revenue early in the quarter as well as forecast future quarters

By using the forecast and pipeline as a single source of truth, you can start looking two, three, or even four quarters into the future. This will help you to make better decisions for your company.

To create a more predictable, streamlined process for revenue, we’ll go over our framework and model for Revenue Operations and explain how to use this model to accelerate your business growth.

Accelerating Revenue

If you’re not set up properly, then you’re just throwing darts in the dark when it comes to your pipeline.

Unless you have a framework for guiding and prescribing the next steps for revenue teams, there’s still unpredictability involved with what happens next.

This framework has 3 parts: alignment,?actions, and outcomes.

First, we will talk about alignment.?

The framework begins by outlining your company’s operating plan. An operating plan is where your revenue goals are set and should be visible to the rest of the organization. Operations work with the finance to create a master document that serves as a guide for all sales, marketing, and CS goals for the whole year.

In alignment, we have 3 main phases:

1. Engage: In this phase, the revenue teams are tasked with a crucial responsibility. They need to ensure that they’re targeting the right accounts and using appropriate messaging in their campaigns for those specific individuals. The SDR team should also be active and prospecting into accounts with the right messaging for those important personas at this stage of pipeline development.
2. Execute: Here, you enable your sales team to convert potential leads into sales by guiding them through each step of the process. This stage includes all one-on-one meetings between reps and managers as well as forecasts for future quarters so that plans can be set in place ahead of time.
3. Expand: In this phase, Customer Success comes into play. CS is responsible for retaining and finding new customers. They do this by helping retain the current customer base, understanding where to expand their reach, and forecasting future churn.

When a company has a large number of accounts, they have to figure out how to manage them all while retaining existing customers. Customer Success does just that by focusing on product usage, retention, and expanding into white space in an account with expansion opportunities.

Actions are next.

They include a high-level process that will show the buyers and customers how to move through the funnel:

1. Engage with buyers/website visitors
2. Target potential buyers
3. Accelerate deal cycles
4. Grow customer value
5. Transform customer engagement

And finally, outcomes. Outcomes are at the heart of what your team is trying to accomplish. They are the end result that will help move buyers and customers through the funnel.

Now, we are going to talk about every part of this framework in detail, along with the following:

• The responsibility of marketing, sales, and customer service in accelerating revenue and growing CLV
• What metrics do the revenue teams use to measure their performance?
• How do companies use data to help revenue teams take action?
• Best practices for targeting and engaging buyers in an increasingly digital world

Engage

Technology has changed the way marketing is done.?

Consumers have become savvier and are harder to please, so marketers need to be even smarter about how they can better engage potential buyers with personalized campaigns and relevant messaging.

To do this, marketers need to understand how their efforts translate into ROI, but many of them are still struggling with that.?

In this section, I'll show you how to build a machine that turns marketing meetings into sales meetings and drives the pipeline by focusing on what really matters: the buyer experience.

Marketing Metrics & KPIs

No marketing strategy can be successful without performance metrics. Three pitfalls frequently affect marketing teams that are solely focused on lead generation:

• Lead quality issue?
• Failure to scale?
• Inability to effectively prove ROI:

So, what metrics and KPIs should you focus on in your marketing strategy?

Let’s start with the most crucial one:?

LTV: CAC

Ok, it's time that I tell you how I don't wanna talk about this one, for many the most important one, because of all the reasons Elena Verna mentioned in her post Stop optimizing for a CAC: LTV ratio of 1:3.

But I wanna talk about this next one: the payback period.

PAYBACK PERIOD

I learned from the best here, and I'll refer you to Lenny Rachitsky 's newsletter, from whom I'll borrow this part.

Now let's see what a good payback period is.

Broadly, the consensus is:

• For B2C businesses, a payback period of less than 1 month is GREAT, 6 months is GOOD, and 12 months is OK. And in exceptional cases, they can pay back their acquisition costs on the first transaction.
• For B2B businesses selling to SMBs, less than 6 months is GREAT, 12 months is GOOD, and 18 months is OK. Similarly, the exceptional cases get their customers to prepay their contract and recoup all acquisition costs up front.
• For B2B businesses selling to enterprises, less than 12 months is GREAT, 18 months is GOOD, and 24 months is OK. The exceptional cases can pay back their acquisition costs within 6 months.

Here’s a handy chart summarizing the findings:

What exactly is payback period?

The payback period is the amount of time that it takes to earn back the cost of acquiring a new customer. For example, if it costs you $100 to acquire a new customer (e.g. running FB ads) and you make $25 per month from that customer, your payback period is four months.

How do you calculate payback period?

To calculate your payback period, simply divide your CAC by your gross profit:

The biggest mistake founders make when calculating their payback period is looking at revenue, without subtracting the cost of good sold (i.e. margin):

“If a startup acquires a customer for $100, and that customer generates $10/mo in revenue, with 80% gross margins (or $8 of monthly gross profit), the payback period on a gross profit basis is $100/$8 = 12.5 months. Not 10 months, if you were just looking at revenue. As my former CFO used to say, ‘Revenue doesn’t pay our salaries—gross profit does.’ You have to take out the cost of goods sold, and many people do not.” ~ Brian Rothenberg

Also:

“Including brand search in your paid campaigns bucket will lower your payback period, and I’d consider that cheating.” ~ Elena Verna

Why is tracking payback period important?

The shorter your payback period, the more quickly you can reinvest your cash into growth, and the faster you’ll grow. If, for example, you spend $100,000 on growth and get paid back in three months, while your competitor takes six months, you’ll be able to spend twice as much money on growth without having to raise one additional dollar.

Increasingly, startups are focusing on payback periods over LTV/CAC ratios because accurately calculating LTV for an early-stage company is highly suspect. This is the same reason you don’t want long payback periods for early-stage companies:

“The way I think about it is the more data you have about your customers over time, the better you can predict actual lifetime value. An early-stage startup has very little data, so if it has a long payback period, it’s not guaranteed there will be a timeline that pays off at all due to all the assumptions. A late-stage company has over a decade of cohorts it can compare new customers to, to predict what they will look like in six months, one year, two years, etc.” ~ Casey Winters

Are higher payback periods OK?

Yes! There are a handful of cases where having a higher payback period is actually a good thing.

1. When you can confidently predict your LTV

“It is important to remember that what really matters is the ultimate LTV of the customer. If your product is incredibly sticky (i.e. more than 5-year LTV) or shows high growth in account (through additional usage fees/upsell/cross-sell), an 18-month payback period may be really good.” ~ Bill Trenchard

“Generally it’s the case with larger companies to have payback periods of 18 to 24 months. These are companies with large balance sheets, that can float it, in more competitive categories. They generally have a lot of data on their LTV curve and how it performs over time.” ~ Josh Buckley

2. When you’re a mature business and can think longer-term

“In some cases, with mature enterprise SaaS businesses that have predictable LTVs and renewal data, as well as multi-year contracts, I’ve seen payback periods stretch as far as 24 months.” ~ Yuriy Timen

“At different stages of maturity (5+ years, 10+ years), you can probably shift the OK, Good, Great designations from the summary above up one level because you have more confidence in the lifetime value and therefore the payback. Usually you have more cash as well. In those cases, let’s say a consumer business that is 10 years in and getting payback in one month, it should really be trying to grow more aggressively by extending its payback period, probably leaving a lot of profitable growth on the table by staying at one month.” ~ Casey Winters

3. When you’re optimizing for growth

“I’ve seen payback periods as high as 5 to 7 years. There are good reasons a company might tolerate that, such as much-needed fuel into a growth loop, it’s an investment into key target market segment, or it’s just early inefficiency that will take some time to optimize. Not every channel comes out of the gate with good payback period, after all.” ~ Elena Verna

“The payback period you choose to target is highly contingent on the stage of the business and how quickly you are trying to grow. Lower payback periods are not objectively optimal, because they may mean you’re leaving growth on the table.” ~ Dan Hockenmaier

“So much of it depends on how one is maximizing revenue vs. profit. The same company could be 8 months if it was profit-focused or 24 months if revenue-focused, and feel good about each.” ~ Darius Contractor

Thanks a ton to Lenny Rachitsky for doing what he does, he has one of the podcasts I listen to the most, and thanks to Elena Verna as well, I learned a lot from her. Follow both of them here on LinkedIn, and bo before we continue, here are 3 episodes where Elena was a guest on Lenny's podcast. This is gold folks!

Quarter-to-date pipeline created

This is volume. As previously stated, volume still matters, and it affects how other teams perform.

Quarter-to-date pipeline quality

High intent or ABM accounts typically fall under here.

Sales velocity

Sales velocity is a measurement of how fast you’re making money. It looks at how quickly leads are moving through your pipeline and how much value new customers provide over a given period.

Sales velocity has been shown to have a huge impact on businesses – and should never be taken lightly. The faster prospects move through our pipeline, the quicker we can close deals and bring in more revenue.?

At every point in your funnel, speed matters. So ask yourself these questions: How can you make self-service more efficient so that potential customers can pass through the funnel more quickly? How can you make it easier for sales to connect with customers?

Target account engagement

Account-based engagement is an evolution of account-based marketing (ABM) that encourages firms to double down on creating a cohesive and holistic customer experience.?

With ABE, the goal is to get closer to leads, so that you can create a personalized customer experience with them at all stages of their life cycle.

The idea of this strategy is to focus more on long-term growth than short-term gains.?

With this strategy, your team will need to be wholly customer-focused and ensure every touchpoint with the customer is personalized and highly relevant.

Pipeline coverage

This is the sum of your existing sales opportunities divided by your operating plan’s revenue targets.

This metric is particularly helpful early in the current sales period and even better for upcoming quarters. It alerts managers to which prospects to target, if they need more leads, or if they’re on track with meeting quota.

To be successful, marketers need to track their sales pipeline and optimize it so they can reach growth targets. A direct correlation exists between the way a marketer manages marketing leads and the ability to meet sales projections.

Here are some KPIs examples that will help you achieve your high-level metrics:

Decrease lead follow up time by 55% by EOQ

Increase meetings booked rate by 23% by EOQ

Increase conversations on product pages by 35% by EOY

Increase conversions from paid ads by 25% by EOY

The key to success is focusing on the metrics that matter and executing a marketing strategy with a great understanding of potential buyers.?

With this approach, marketers can work backward to identify how their contribution impacts quarterly goals and their larger marketing strategy.

Understanding Your Target Audience

Understanding who your audience is and what they will like is the key to everything you do. When working on campaigns, messaging, or channels, make sure you’re catering to that ideal customer profile (ICP).

Many don’t know who they’re talking to. They just want to sell, or they think their product is good for anyone and everyone. But it’s not that simple. If you want more engaging and high-converting conversations with buyers, you need to know your target audience in depth. This is the fundamental step in Conversational Marketing.

Conversational Marketing is all about getting the conversation started with your customers. To do so, you need to know who they are and how they’ve found out about your business.

Let’s see how we can engage website visitors.

We can engage website visitors by answering these questions:

1. Who are you engaging (Unknown, known, or returning)
2. Where are you engaging them from (website)
3. What page are you engaging them on (product, solution, pricing, blog, resource center, contact us)
4. Why are you engaging them/why are they engaging you ( new lead, meeting, sales/get help, talk to sales, learn more)

Identifying the touchpoints in a customer’s journey is also necessary for delivering a catered and personalized experience.?

It can be difficult to know what consumers want, but by understanding their needs at every point of contact with your company, you can deliver an experience that will keep them coming back again and again.

Engagement & Targeting

In today’s world, people are living in a constant state of “busy.” You need to consistently engage with your buyers, so when they have the time or intent to do so, they’ll be more than happy to engage with you! If not? That missed opportunity might cost you business.

The buyer is an individual with a set of interests and wants. You should know who they are, where they have been, and what they are interested in before you start marketing to them. Your communication should be targeted around this information in order to be effective. You can measure successful engagement in three ways:

Targeting: Your target market and segmentation should determine the level of personalization and the type of outreach you use. By segmenting your buyers into volume, target accounts, and top target accounts, you can better prioritize your channels, budget for campaigns, and focus your energies on top target accounts.

Relevancy: Understanding that most people are busy and have limited time during an interaction, think of how helpful your marketing message is when attempting to persuade them into making a purchase. How easy is it for them to get what they want during an interaction?

Timeliness: According to Salesforce, 71% of buyers expect companies to interact with them in real time. To accelerate revenue, the revenue teams must invest in channels that connect them easily with buyers.

Execute

The sales team is the backbone of any company. They are responsible for generating revenue, so they must be data-driven. If you want a consistent flow of cash, then you need to have a team that can track and act on performance metrics confidently.?

By the end of this chapter, you’ll be able to take a more systematic approach to forecasting, performance tracking, outreach, and enablement. So without further ado, let’s start.

Defining Sales Metrics & KPIs

The execution phase has two major steps: targeting potential buyers and accelerating the deal cycle. These are both measured through metrics to ensure success at the end of this phase.

Let’s take a look at a few key sales metrics commonly tracked in sales teams:

Sales forecasting accuracy

Sales forecast is the key determinant of how a company invests and grows. The more accurate your sales forecast is, the better you can plan for growth and success.?

Monthly recurring revenue (MRR) or annual recurring revenue (ARR)

MRR/ARR is the monthly or yearly revenue growth of your company.

Win rate

The win rate is the percentage of closed/won deals. It shows how well a company has been doing over time and can be used to forecast the amount of pipeline coverage needed to hit the target.

Conversion rate

This metric helps you assess how well your sales reps are converting their leads into new clients.

Average deal size

Deal size is the total revenue per closed deal. If you want to grow sales and move upmarket, tracking the size of closed deals will help you do this.

Sales cycle length

To accurately forecast company sales, it’s crucial to track the amount of time a sale takes from beginning to end. We recommend going even more in-depth by identifying how long a deal takes at each stage.

Quota attainment

This metric compares the number of closed deals (or revenue) in a given time to the chosen quota for that period.

Pipeline coverage

Tracking pipeline coverage will help sales management see the red flags and keep things on track.

Sale linearity

Linearity is a concept in sales that describes the pattern of revenue teams closing opportunities at a predictable rate throughout the course of a quarter. By knowing when the contracts will be signed, approvals will happen, and logistical roadblocks will arise before they happen, linearity allows for better chances to hit sales numbers by avoiding last-minute rushes.

Sales activity (productivity)

Successful sales reps are always looking for signs of deal velocity. They know that it tells them whether or not an account is actually engaged and the level of engagement in an opportunity. In today’s uncertain times, this is one of the few true ways to measure the health of a relationship with an account or to determine whether or not a deal is likely to close.

Deal slippage

Slippage rates are important because they show how many opportunities you had in the past that didn’t close within their forecast period. You can use this information to identify your slipped deals and make sure you don’t let them happen again next time.

Improve Sales Effectiveness Through Coaching

The key to success for high-performing teams is having top-notch coaching, and that’s exactly what we are going to talk about in this section.

A world-class sales team is essential to any company’s success, but it takes a lot more than just hiring great people. Knowing that a world-class sales team should be the ultimate goal of any business, you must invest time and resources into coaching your staff.?

One-on-one meetings are the best way to coach your sales reps. This type of meeting should be collaborative, strategic, motivating, data-driven, and tactical. Managers work with reps on deal execution, discuss current roadblocks and how to resolve them, and strategize the next steps.

Expand

With the rise of digitalization, customer experience and customer success have emerged as important factors for driving retention revenue, increasing revenue, and fostering strong relationships with customers.

Defining Customer Success Metrics & KPIs

Companies are taking a more active role in growing customer relationships and experiences. CS is developed to help businesses manage their interactions with their customers, while CX is designed to make the experience for customers more personal than ever before.

Let’s take a look at critical metrics for your CS and CX teams to measure and act on:

Customer churn %

Customer churn is the percentage of customers who leave you at the end of a given period compared to the ones you previously had. This could be measured monthly, quarterly, or yearly.

Revenue churn %

This is the revenue loss from churned customers at the end of a given period compared to the revenue from the previous period.

Net dollar churn %

This is the revenue loss from churn and down-selling, plus gains from expansion revenue. This indicates how the expansion revenue offsets those losses and can lead to a surplus in some cases.

Expansion revenue %

This is the difference between the revenue at the end of the previous period and the new revenue from upselling and cross-selling for a given period.

Gross revenue retention

This is the annual revenue loss from churned customers. This metric shows how well your company’s growth rate is going because it doesn’t take upgrades, downgrades, or other related revenue streams into account.

Net Promoter Score (NPS)

NPS (Net Promoter Score) is a measure of whether or not customers would recommend your company to friends and colleagues. NPS surveys ask users how likely they are to recommend the company on a scale from 0 to 10, with 10 being extremely likely. These surveys should be sent quarterly or before QBRs for them to get the best results.

To accurately measure sentiment, B2B companies need to develop a process for every contact. This way, they can see potential churn before it happens instead of relying on anecdotal feedback that comes too late.

Growing Customer Value & Retention

Now we’ll discuss why it’s important to transform your customer service from a reactive team into a proactive, prescriptive, and predictable one.

Proactive

We’ve found that a proactive approach to CS, such as continually connecting and reinforcing your business value to customers, can have a significant impact on the success of your organization.

Engagement is crucial for customer service. Customer service should start conversations with customers on their terms and make it easier for them to reach out in real time or answer their questions through self-service.?

Additionally, you should be able to identify where your CSMs spend their time by looking at activity metrics and account engagement so that you can take action if certain accounts are being neglected.

Prescriptive

CS has an integral role in forecasting future pipeline by analyzing customer churn, revenue churn, and net dollar churn. With shifts in the economy come changes that affect all facets of any business, including these three metrics. By looking at historical data from previous years, we can determine what level of change may be coming down the pipe.

Technology like machine learning can help us forecast future churn more accurately. However, if that’s not an option right now, CSM and renewal managers should work together to identify the red flags as well as expansion opportunities.?

Here are some of the best practices for improving forecasting, reducing future turnover, and following up on growth opportunities:

• Define healthy customer benchmarks
• Segment customers
• Have CSM and renewal managers work in lockstep
• Send a survey before the renewal
• Create next steps for churn and expansion

CS should continuously practice empathy with its customers. Not only does this help them build lasting relationships, but it allows CS to anticipate and offer predictive solutions for any problems that might arise.

Conclusion

B2B companies know that revenue generation is the most important activity, but few teams view it as an end-to-end process that can be optimized.

As companies strive for renewed confidence in this uncertain market, alignment across the entire revenue generation team will be essential to achieving sustainable growth.

We hope you find this resource useful when improving your market strategy now and in the future.?

Let’s take a quick look back at what we have talked about:

Businesses should double down on internal sales processes that operate alongside digital technologies for revenue operations.?

Revenue Acceleration allows revenue teams to communicate with buyers and customers in real time across channels once a clear process is in place.

Need help changing the system and aligning the teams in your company? Let’s talk.

If not, I'd appreciate a comment or a share. It will mean the world.

Thanks and keep it funky!