You’ve just closed a big deal.
That’s great news. But before you break out the champagne and cigars, do you know where the next one’s coming from?
For many companies, sales is a never-ending cycle of boom and bust.
One moment you’re a hero; the next, you find yourself frantically trying to fill an empty sales funnel.
Revenue operations aims to stop all that by creating a predictable stream of revenue.
Evidence suggests it works, with research from Boston Consulting Group revealing that top B2B tech companies are seeing a host of benefits from implementing a RevOps approach, including:
- 100% – 200% increases in digital marketing ROI.
- 10% – 20% increases in sales productivity.
- 10% increases in lead acceptance.
- 15% – 20% increases in internal customer satisfaction.
- 30% reductions in go-to-market expenses.
Its effectiveness stems from aligning the revenue-generating departments within your organization.
But none of those benefits will happen by chance.
To maximize your RevOps strategy, you need to ensure you’re tracking the right revenue operations metrics.
Why are revenue operations metrics so important?
Revenue operations only works if you have the data to back it up.
Without hard numbers, it’s hard — or even impossible — for RevOps teams to make smart, strategic decisions.
But using a single metric to measure the success of your revenue operations strategy just won’t cut it.
From the cost of customer acquisitions to the speed of your sales pipeline, you need to track numbers that cover the length and breadth of RevOps, including:
- Sales metrics
- Marketing metrics
- Customer success metrics
However, not all metrics are created equal.
Some will provide the insights you need or give you an at-a-glance view of your revenue operations performance. Others will only cloud your judgment or lead you to make the wrong calls.
We don’t want that to happen, and neither do you.
That’s why we’ve given you a helping hand by pointing you in the direction of eight revenue operations metrics you can’t afford to ignore.
8 top revenue operations metrics to track
Let’s start with the obvious stuff.
Any revenue operations function should be tracking the amount of money the business is generating. Otherwise, how do you even know if you’ve built a consistent revenue stream?
So far, so simple. But it’s important to note that measuring revenue can look different from one business to another. For instance:
- SaaS businesses typically track monthly or annual recurring revenue (ARR).
- In telecoms, it’s more common to focus on average revenue per user.
- For eCommerce brands, average revenue per order or average revenue per user (ARPU) offers the most meaningful measure of revenue growth.
Your challenge at this stage is to define the revenue metric that means the most to your business.
If you have a large customer base and high acquisition costs, your most obvious path to growth could be increasing average items per transaction and ARPU. Or maybe you’ve barely scratched the surface of your target audience, so it makes more sense to target revenue from new customers.
2. Revenue retention
Of course, growth isn’t just about the amount of revenue you bring in — it’s also about how much revenue you retain.
After all, there’s no point winning a bunch of new customers if they’ve all stopped paying a month or two down the line.
There are two critical revenue retention metrics for your RevOps team to track:
|What it measures
|How to calculate
|Gross revenue retention
|The percentage of recurring revenue you keep hold of each month after taking into account things like cancellations and subscription downgrades. Importantly, it doesn’t include revenue expansions (such as upsells).
|Add up your total revenue (excluding upsells etc.) and take away churn from downgrades, cancellations, and expirations. Then divide by your starting amount and multiply by 100 to get a percentage figure.
|Net revenue retention
|The percentage of recurring revenue from existing customers that you retain over a given reporting period, typically measured monthly or annually. Takes everything into account, including cancellations, downgrades, upgrades, and cross-sells.
|Subtract lost revenue from total revenue, divide by your starting amount and multiply by 100 to get a percentage figure.
Measuring revenue retention helps you understand all things about your sales and marketing processes, such as:
- Are you targeting the right customers?
- Are you pitching your product in the right way?
- Are you onboarding new customers effectively?
- Are you adequately supporting customers when they encounter problems?
- Are you explaining new products and features in a way that resonates with your customers?
- Are you doing enough to identify potential upsells and cross-sells?
3. Customer acquisition cost
Unfortunately, however brilliant your product is, attracting new customers costs money.
Take marketing as an example. You might have to pay for:
- The salaries of your marketing team.
- Support from freelancers.
- Agency fees.
- Advertising costs.
- Marketing automation software.
- Content promotion.
And lots of other things besides. And that’s before you’ve even factored in the costs of your sales team and customer support functions.
Clearly, you can’t afford to spend an infinite amount on winning new business. While everyone wants to attract new customers, it doesn’t make any sense to spend $100 promoting a $10 product with a customer lifetime value of less than $100.
That’s why customer acquisition cost (CAC) is one of the most important revenue operations metrics. Calculate it with the following simple formula: CAC = Total costs of customer acquisition / Total number of new customers acquired
How to calculate Customer Acquisition Costs
A high CAC suggests there’s something wrong with your marketing. Maybe you’re not communicating your value proposition effectively; maybe you’re reaching the wrong customers; maybe your messaging is missing the mark.
But what does a “high” CAC look like? Is $100 too much to pay for a new customer? Or is your desire to achieve a CAC of $100 actually holding back your long-term revenue growth?
There are a couple of ways to answer those questions:
- Compare CAC to customer lifetime value (the revenue you generate from an average customer over their “life” with your company). On a very simple level, your customers should be contributing more money than it costs to acquire them.
- Track your payback period (the length of time taken to recover your initial outlay). The shorter your payback period, the sooner you can invest revenue from new customers back into your business without hurting cash flow.
4. Sales pipeline velocity
Wouldn’t it be fantastic if every prospect who landed on your website bought from you immediately?
Sadly, that’s just not the case.
The average B2B sales cycle lasts 84 days, but in some verticals, it’s a whole lot longer. Indeed, Gartner surveyed more than 506 technology buyers and found that buying teams spend more than 16 months on completing a new IT purchase.
You don’t need to be a rocket scientist to realize that the faster you convert prospects into leads and leads into paying customers, the more likely you’ll be to achieve your growth goals.
(Well, as long as you retain the revenue you generate — which shows how all revenue operations metrics are ultimately linked to one another.)
This brings us nicely to our next metric: sales pipeline velocity.
It shows how long, on average, it takes leads to go through the sales funnel and convert to paying customers.
However, the pipeline velocity rate is not measured in time but revenue.
How to calculate Sales Pipeline Velocity
To calculate pipeline velocity, you need to multiple the qualified sales opportunities in your pipeline, the average deal size, and the overall win-rate of your sales team and divide the result by the average time of your sales cycle.
For example, let’s say a sales rep has 5 qualified leads, the win rate is 10%, and the average deal size is $1000. The current sales cycle is 30 days.
According to the formula, the sales pipeline velocity of this rep is $16 per day and $480 a month.
High pipeline velocity suggests that your sales and marketing teams are closely aligned, with marketing-qualified leads becoming sales-qualified opportunities and closed-won deals without weeks (or months) of back and forth.
If the opposite is true, it’s up to your revenue operations team to identify the blockages and speed bumps in your sales cycle and take steps to eradicate them.
5. Customer churn rate
As we’ve already noted when discussing gross and net revenue retention, churn is a vital element of the revenue equation.
This is why you absolutely need to track your customer churn rate — that is, the percentage of customers who stop paying for your product within a given period of time — as one of your revenue operations metrics.
Again, this isn’t brain surgery. If your churn rate is through the roof, you might be doing an amazing job persuading people to buy your product, but you’re not doing enough to convince them to stick around.
That’s a big problem because the higher your churn, the less you can afford to spend on acquiring new customers. If you spend $1,000 signing up a customer, but they all cancel before you’ve seen a return on your sales and marketing investment, you’ve got serious problems.
Churn rates vary from industry to industry. According to Recurly, they hover around 5% for SaaS brands, rising to more than 10% for subscription box companies.
If you’re seeing a high level of churn, that’s a pretty clear indication that your customer support function isn’t delivering the goods. Perhaps they’re not effectively onboarding new subscribers or highlighting valuable product features to existing customers.
Whatever the case, it’s up to your revenue operations team to get to the bottom of the issue and come up with a solution before it starts to hamper your growth plans seriously.
6. Sales forecasting
Sales forecasting is about defining how much individual salespeople and your sales function as a whole will sell in a given period — typically monthly, quarterly, or annually.
Traditionally, companies have been happy to leave the job of sales forecasting to the sales team itself. But there are some pretty significant flaws in this approach.
In particular, if your sales, marketing, and customer support teams aren’t closely aligned, there’s a good chance your sales forecast will ignore a whole bunch of crucial factors, such as:
- Marketing spending.
- Customer lifetime value.
- Customer churn rate.
This means your carefully planned forecast isn’t worth the spreadsheet it’s printed on.
As the glue that binds sales, marketing, and customer support, your revenue operations team is best placed to create more meaningful sales forecasts, track your progress toward them, and course-correct as required.
You can use reporting tools in your CRM or simpler formulas to forecast sales in your organization. For instance, the sales velocity rate we discussed earlier is a great way to forecast sales volume in a given period.
7. Renewals, upgrades, and cross-sells
Did you know the average customer spends an astonishing 67% more in their 31st – 36th months with a company than a new customer in their first six months with a brand?
In other words, if you can persuade customers to stick with you for the long term, you’re in a much better place to upgrade their accounts and cross-sell them complementary products.
This is where RevOps comes into its own.
Revenue operations teams track users throughout their entire lifespan with your company — covering their customer journey from anonymous website visitor > lead > paying customer. All of which means they’re uniquely placed to develop strategies that help:
- Your marketing team to engage existing customers based on behavioral data.
- Your customer support team to target opportunities for upsells and cross-sells based on a customer’s pain points and business goals and identify customers at risk of churning.
The more renewals, upgrades, and cross-sells you secure, the higher your customer lifetime value will be.
And, as we’ve already noted, that means you can afford to spend more on customer acquisition, making you more likely to hit your growth goals.
8. Conversion rate
Conversion rate is the percentage of leads who move down the sales funnel and become paying customers.
On the face of things, that doesn’t tell you much. Does it mean your sales team is failing? That your product demo isn’t up to scratch? That your pricing is too high? Or maybe all (or none) of the above?
Revenue operations brings real value to your conversion rate tracking.
The big picture across your sales and marketing functions helps you understand why you aren’t converting more leads into customers.
Not only that, but it opens the door for honest conversations between sales and marketing. Are you focusing too much on the volume of marketing-qualified leads you generate at the expense of lead quality? RevOps can find the answers and provide a solution.
Numbers aren’t the be-all and end-all.
It doesn’t particularly help you to know that your churn rate is 7.5%, that you convert 20% of leads into customers, or that it takes you an average of 90 days to close a deal.
Is that good? Bad? Indifferent?
What matters is having a RevOps team that’s able to make sense of those numbers and use them to ensure that your sales, marketing, and customer support functions are doing all they can to drive a consistent stream of revenue for your business.
Learn more about metrics
- Forget Website Traffic & Adopt These 6 Revenue Marketing Metrics
- 18 Sales and Marketing Analytics You Should Consider Tracking
- 11 Email Marketing Metrics You Must Track In 2022
- How to Measure the Success of Your Email Campaigns
- 13 Marketing Automation KPIs to Track to Propel Your Business
- What Is Revenue Intelligence and How to Use It to Increase Your Sales
- Understand the Revenue Operations Responsibilities to Build an Effective Rev Ops Team