How to measure Revenue Operations

Measuring Revenue Operations and Sales leaders on revenue alone might be the mouse great trap. Let’s remember that revenue is a lagging indicator. Building a high growth engine requires us to identify the metrics that matter. Leading indicators if you will.

In the early days of a company, startups will be quick to develop an MVP, minimum viable product. Way back when, this could have been enough to secure a seed or even an A round. Times have changed. Since then, investors have asked for user growth. And now, early stage founders are finding themselves in positions to prove they have revenue traction.

The bar keeps getting higher and higher. Call it a function of competition if you will.

Companies must first solve Product Market Fit. Many folks, myself included, believed that revenue is the primary indicator we've solved it. After all, customers wouldn't buy our products if we hadn't! We’re on the path to a $1 Bn valuation right?

Then customers start churning.

We peek under the hood to find out we have indeed solved Product Market Fit. But often times Product Market Fit for a smaller segment than we had hoped. Early adopters will often buy from founders based on them betting on you, not necessarily on the product. Then we move on from “founder selling” to building up true Go To Market capabilities. Our Product has an identity and we have identified the profiles of our customers. Top to bottom. Top meaning Ideal Organization Profile and Bottom meaning Ideal Customer Profile.

But do we really have all of the Customer profiles addressed with our feature set and our overall Product portfolio. The logical next step is to choose a path. Along one fork in the road is to double down on what we excel at. So we start ramping up the product team to address the gaps. The second option is to add experiments into our roadmap. Start building the features to address gaps in the customer profiles we want to have in our base.

If it were up to me, I would defend then extend. Build up an unassailable fortress then build up a moat. From there I’d send my knights out on a ranging party.

Let’s keep going. Some time has passed. Now we have product to ship, and the sales team is ready to fire on all cylinders.

Revenue grows!

All good right?

We peek under the hood as all good revenue leaders should do.

After some analystic alchemy we realize we're great at closing inbound leads but our outbound motion is taking way too long, for similar sized deals, and our nominal payback on customer acquisition cost is unacceptable. We have fallen into the great trap again haven’t we? Revenue is a byproduct, not the actual product.

Driving customer value is the real goal. We’ll cover solving for Go To Market Fit in another post. This was real fun talking about solving for Product Market Fit.

Here’s the LinkedIn snippet inspiring this post. If you’ve read this far, please consider signing up to my newsletter at revengine.substack.com. I am working on a new website with my great friend Kevin Lee, Head of RevOps over at Lob.com. Stay tuned.