Top Metrics for CROs at sub-$10M ARR
In the past some considered bringing on a CRO at sub-$10M in ARR a ludicrous idea. Couldn’t the founder continue to sell? Couldn’t they just get away with bringing in a hands-on Sales Director or Sales VP? Let them punch above their weight and be done with it?
Well that thinking has clearly changed. According to a cursory ZoomInfo search there are 6,840 CROs at companies of $10M or less in revenue. Reasons for why this trend caught on:
Accelerated revenue growth
Coordination across specialization
Deeper candidate pool
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Let’s look at each one really quickly.
Accelerated revenue growth. C-suite officers are quite expensive. What growth rate would you need to justify bringing in a CRO at sub-$10M? If you’re growing sub 50% then it would seem like a questionable decision. Perhaps more so a luxury. If instead you’re gunning for a doubling of top line then you might consider bringing in a veteran resource to guide through that breakneck growth.
Coordination across specialization. Different sales roles may be required to have the entire GTM engine humming. Sales Development leadership for building pipeline and fielding inbound leads. Sales VPs to close business. Account Management and Customer Success to manage the customer base. Companies need someone who can relate to these functions and coordinate across them all. That’s a tall order unless it’s someone steeped in generating revenue.
Deeper candidate pool. SaaS officially came into play with Salesforce back in 1999. That was a long time ago! There are a lot more seasoned veterans who have been there and done that. We need someone who has seen this movie before. The pipeline for highly ambitious CROs is aplenty these days.
Leaving little wonder as to why companies at a smaller scale now have CROs at the helm.
RevOps at sub-$10M
Does a company need RevOps at sub-$10M? Well I would hate to be a CRO with very few to zero resources to supporting GTM infrastructure, strategy, and execution. Everything would fall on the shoulders of the CRO. They would have to beg, steal, and borrow resources from other departments and bring in consultants. The former is a tax on the rest of the organization and the latter can be redeeming but often not a long term solution.
What does RevOps look like at this revenue bar? For me it’s mostly about the plumbing. Making sure that all of your data is one place. Making sure that your pipeline reflects reality. Making sure that you can ask surface level questions and get answers rather quickly out of your CRM. Noah Marks created a scalability cake a few years ago which I’d like to share here because I think it’s highly relevant to my own view.
Verbatim from his original concept starting at the top of the cake and moving down. If you’re looking at the visual above bottoms-up then I suggest reading the fourth bullet then moving to the first.
Scale requires predictability.
Predictability requires repeatability
Repeatability demands efficiency
Efficiency requires cross-functional integrity across systems, data and policies
Integrity over efficiency. Isn’t that interesting? When most folks talk about Revops we’re usually talking about efficiency.
Instead, the argument is that integrity comes first. Efficiency comes later. Logically that makes sense. You can’t manage what you don’t measure as they often say. I’m also a believer that at sub-$10M companies can often reach the 10-bar with sheer brute force. A founder can go on the charm offensive and bring in the bulk of the early customers. Selling a vision and a dream can help you get there but pushing past that is going to require GTM efficiency.
Given a choice between a strategic VP RevOps or a Salesforce Admin I’m of the belief that a company at this scale is going to shoot for someone that can connect all of the plumbing. A salesforce admin with a penchant to build business acumen is likely going to provide more benefit than a hands-off VP RevOps at this scale.
Metrics that matter
Conversely, the systems and the data should provide you with the data required to successfully operate the business. What metrics matter? At a well defined organization you’re likely to see a metrics pyramid. The pyramid would have front-line sales reps and SDRs at the bottom and progress through managers to directors to VPs to the CRO. At each level of the pyramid different metrics would prevail. Taken together, the organization might easily track dozens of metrics.
Mind boggling for anyone parachuting into the organization blindly.
So what metrics matter the most? Subject to opinion here but here’s my take.
Number of customers (logos)
Average deal size
Average sales cycle
Win rate
That’s it! I’ll explain.
Number of customers
In the early days the team needs to see points on the board. When the movie The Social Network came out they had a scene where the company displayed the user count on a large screen for everyone to clap their hands. Companies at the early stage should be doing the same thing. Rally around the customer base. Find a metric that’s meaningful for you. Perhaps it’s expected number of customers needed to reach $10M. So if your average deal size is $45,000 then you would need 222 customers. That’s not a nice around number so I would aim to celebrate every 25 customers until 225 is reached. Pop some champagne when you reach 225. Then get back to work.
Average Deal Size
What is a solution worth to a customer? Without a true measure of intrinsic value you’re left with price. What’s the price paid for your solution? What were you able to charge for your solution? And what price did the customer accept? Your average deal size is a barometer of the value customers see in you. Over time as you prove more value you should be able retrench your average deal size upwards with both new and existing customers. Price increases are much easier to pass onto new customers then existing ones. At least that’s what I’ve found in my experience.
Sales Cycle
In the early days a company a sales motion can be messy and ill defined. This is often the transition from founder-led selling to a sales team. Founders/CEOs are still in the pitch up to the $1M mark. As they should. They know the product and vision best. It’s their baby after all. At this spot the focus on logo acquisition and developing referenceable customers is critical to warrant the founder’s time.
The issue is that this doesn’t scale much further. They are after all only one person. Building a team around an stage CRO or a VP of Sales is a more suitable approach. One risk to watch out for is not to over hire and not to misfire on your hires. Sales people are costly. You’ll know the expense side of your investment but the ROI is much more uncertain since your sales motion is undefined.
Now raise your hand if you’ve seen a sub-$10M company have very little sales resources or playbooks for the team to use? I have!
So the first priority is to develop the playbook. Very similar to the integrity build up above for systems you’ll want to do the same for the sales process. Don’t worry if you see if the sales process is constantly adapting. It’s meant to be as the business identifies what works and what does not. Experiment early and continue sharpening that knife.
It’s one of the reasons why you’ll see a lot of chop in the average sales cycle for every $1M in revenue gained up to $10M. By the time you get to $10M you should start to see inklings of a playbook that can propel you to the next $10M in revenue.
Tracking the sales cycle over time will enable the CRO to understand if they’re moving in the right direction for a scalable playbook.
Win Rate
Win rate and sales cycle can go hand-in-hand. I’ve often seen a high win rate under founder-led selling then a drop once the baton is passed to a sales org. Over time that win rate rebounds as the sales team starts to figure things out. In my view you should see fewer deals lost to ‘no decision’ and more to ‘competition’ and ‘pricing’.
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