Managing revenue performance is a complex task for any revenue operations manager (or above), requiring one to sift through and structure a plethora of data points to identify those that truly impact the business. In addition, the RevOps function often owns cross-functional metrics, so gathering data-points from multiple sources in multiple formats and making sense of it all isn’t always straightforward.
Once you have a set process in place though, it’s magic in action and you’ll be smiling ear to ear.
In most growing SaaS organizations, you will always have sales, marketing, customer success and partnerships specific metrics and you want to really make sure you don’t step on any toes. Avoid double work by owning the same metrics.
For example, sales might be particularly interested in the “meetings booked per rep” or the “outreach to discovery conversion percentage”, marketing might be focused on the “cost per acquisition” and customer successes’ north star metric might be “time to value”. A case can always be made for how each of those impacts revenue and should fall under the purview of RevOps, but it’s best to be strategic and efficient.
What impact can RevOps have on operational metrics?
According to a Revving Up Go-to-Market Operations in B2B report by BCG,
“RevOps, the concept of centralizing operations teams from marketing, sales, and customer success, has emerged as a high-impact way to accelerate revenue growth and go-to-market (GTM) operations efficiency through tighter alignment of these functions. Top B2B technology companies, led by software as a service (SaaS) providers, are reporting substantial benefits, including:
- 100% to 200% increases in digital marketing ROI
- 10% to 20% increases in sales productivity
- 10% increases in lead acceptance
- 15% to 20% increases in internal customer satisfaction
- 30% reductions in GTM expenses”
Which metrics fall strictly within RevOps?
It’s tempting to want to know it all, but you really want to make sure you focus on your goal to empower the commercial departments, and let them do what they do best. Think of RevOps metrics as holistic, helicopter-view metrics that help the business understand, track and optimize revenue goals.
The exact set of metrics that RevOps owns and influences varies drastically across companies depending on a myriad of factors, so I’ve listed the top 10 that RevOps is generally answerable for. To make things a little more fun, let’s take the example of a factitious company, Coffee Mania, and get right to it.
10 foundational RevOps Metrics
1. Customer Acquisition Cost (CAC)
The CAC is a basic yet crucial metric because it helps determine the investment required to gain a new customer, influencing the budgeting, marketing and sales strategies.
Formula: CAC = Total costs associated with acquisition (including marketing and sales expenses) / Number of new customers acquired.Assume Coffee Mania spends €60,000 on sales activities, €40,000 on marketing activities and gains 100 new customers. The CAC Coffee Mania is looking at is €100,000 / 100 = €1,000. So it costs €1,000 on average, to acquire a new customer.
2. Customer Lifetime Value (CLV)
Very simply, the Customer Lifetime Value is how much revenue you can generate from a customer on average, over the course of their business relationship with your company.
The CLV can be looked at by segment (e.g. small, medium, large), to further optimise spend and customer success performance.
Formula: CLV = Average Customer Value* × Average retention time**
Note:
*Average Customer value = Average value of a sale × Number of repeat transactions
**Average Customer Lifespan = Average time a customer is active / Total # of customersIf Coffee Mania’s average customer spends €600 annually and stays for an average of 3 years, then CLV would be €1,800.
3. Lead Conversion Rate (LCR)
The Lead Conversion is one of those metrics that marketing and sales often need to work in tandem to improve. Quite simply, it tells you how many of the total leads you’re able to convert into paying customers. If both inbound and outbound sales are prevalent at your company, make sure to highlight the differences in conversion percentages of both approaches.
Formula: (Number of new customers / Number of leads) * 100
Coffee Mania, who has a thriving brand reputation generates 1000 leads every month, but only get 50 new customers, so the LCR would be (50/100)* 100 = 5%.
Note: If you don’t have any historical data to go on, do some research to understand averages for your industry, set a benchmark and use that as a baseline to keep improving upon.
4. Customer Churn Rate
The Customer Churn Rate is a fantastic metric for the long-term health of your business. It reflects the customer satisfaction and product stickiness. The churn rate tells you what percentage of your customers you lose in a given period of time and so you want to keep this as low as possible (if at all possible, aim for 0%!). A high churn rate is often a big red flag and can indicate unsustainable growth because of customer dissatisfaction, a bad onboarding experience, a disconnect with the customer success team, etc.
Formula: ((Number of customers at the beginning of the period - Number of customers at the end of the period) / Number of customers at the beginning of the period) * 100Assume at the beginning of FY 2024 Coffee Mania had 1000 customers and of these customers, 900 remained at the end of the period. The churn rate is then (1000 – 900)/ 1000 * 100% = 10%.
5. Monthly Recurring Revenue (MRR)
MRR is a simple metric that’s like the pulse of the business that should always be top of mind. It’s important to closely watch this metric for future planning, especially when the company is taking risks and experimenting to grow.
Formula: Total number of customers × Average revenue per user. With 500 customers each paying €50 per month, Coffee Mania’s MRR is €25,000. The annual recurring revenue (ARR) then, is €25,000 * 12 = €300,000.
Way to go Coffee Mania!!
6. Sales Cycle Length
The Sales Cycle Length tells you on average, how long it takes for the company to close a deal. In other words, from the initial contact to the time that the contract is signed, how much time (generally in days) does it take? With deeper analysis, you’ll generally find that the sales cycle length for inbound vs outbound leads, as well as deals of different sizes vary significantly, so it’s worth sementing these to identify bottlenecks for each type.
Formula: Deal close date - Initial contact date (in days)Coffee Mania gives potential customers a 30% off when signing up for any monthly coffee subscription, so on average, it takes customers only 2 weeks to take up the offer. The sales cycle length for Coffee Mania on average then, is just 14 days.
7. Sales Pipeline Velocity (SPV)
While definitely a core sales metric, this is one that as RevOps, you always want to be on top of. Sales Pipeline Velocity tells you how quickly leads move through your pipeline, and exactly how much revenue you’re on track to make per day at that velocity.
Formula: (Number of deals in pipeline × Deal value × Win rate) / Length of sales cycle.
Coffee Mania is a fantastic business, with 300 deals, an average deal worth $50, a 35% win rate, and a 14-day cycle resulting in a pipeline velocity of €375 per day.
The reason it’s important for RevOps to stay on top of this metric is because of the big-picture vision, allowing RevOps to influence levers and quickly improve the SPV. Example, Sales might myopically be focused on just increasing the average deal value, but you as RevOps, might identify low hanging fruits in marketing campaigns to help increase the number of deals in the pipeline and decrease the average sales cycle length, to drastically improve the SPV.
8. Revenue Growth Rate
Any business is always striving for growth and as the RevOps function, your main mission must be to positively influence the company’s Revenue growth. A great metric to track then, is the Revenue growth rate, which tells you at what rate your revenue is growing compared to a previous period. This is one of the best leading metrics to prove RevOps’ efficacy, especially when backed by initiatives that influenced the result.
Formula: Revenue Growth Rate = [(Current Period Revenue - Previous Period Revenue) / Previous Period Revenue] × 100Luckily for Coffee Mania, the craze around Coffee keeps on growing and one of their latest products, “Coffee Tonic” was a home run. Coffee Mania did €400,000 in sales this year compared to €300,000 last year, resulting in a respectable 33.33% YoY growth!
9. Customer Satisfaction (CSAT) Score
The Customer Satisfaction (CSAT) Score is a critical metric for the customer success team, saying a lot about the long-term health of the business and often acting as the starting point for uncovering a lot of underlying issues. The CSAT Score tells you what percentage of your customers are satisfied and/or happy with your company’s product and service.
As RevOps, it’s important for you to keep track of the CSAT, to ensure that all the hard work to generate revenue and customers isn’t going to vain, and that customers are being converted to long-term fans and generating recurring revenue for the business.
Goes without saying, you should always aim for a 100% CSAT score, because this heavily drives organic growth, customer lifetime value and creates true fans of your company, who in turn will fuel business growth with referrals, and all for free!
Formula: (Number of satisfied customers / Number of survey responses) × 100Knowing that Coffee Mania’s customer success team does a stellar job and always goes above and beyond for their customers, with 98 out of 100 customers indicating they’re extremely happy, Coffee Mania’s health CSAT score is a whopping (90/100) * 100% = 99%!
10. Net Promoter Score (NPS)
The Net Promoter Score (NPS) assesses customer loyalty and the likelihood of referrals, which are critical for organic growth. A high NPS score is often inversely related with the Customer Acquisition Cost, meaning the higher it is, the lesser the company spends on acquiring new customers on average.
A simple explanation of how to understand and measure NPS by Customer Guage is the following:
You ask customers the following question:
“On a scale of 0-10, how likely is it that you would recommend [company name] to your friends, family, or business associates?”
Customers that give you a 6 or below are called Detractors, those who give a score of 7 or 8 are called Passives, and those who give a 9 or 10 are Promoters.
You then take these results to calculate the NPS score, using the simple formula below:
Formula: % of Promoters - % of DetractorsIn a recent NPS survey, Coffee Mania found that 90% of its customers are promoters, 5% passives and 5% detractors, resulting in a NPS of 90% (promoters) – 5% (detractors) = 85%. Not bad, but we know Coffee Mania can do better!
Wrapping up on RevOps metrics
You will rarely find 2 companies with the exact same set of RevOps metrics, but these 10 foundational metrics are the heavyweights you’ll see throughout your career.
Managing revenue effectively is essential in SaaS, where RevOps managers navigate complex data to identify impactful metrics and foster cross-department collaboration.
Key insights from the BCG report emphasise the transformative impact of RevOps, noting substantial increases in marketing ROI, sales productivity, and customer satisfaction, alongside reductions in go-to-market expenses. These gains highlight the pivotal role of RevOps in not just supporting, but advancing the commercial aspects of a business.
By examining these foundational metrics through the lens of our hypothetical star company Coffee Mania, hopefully you’ve understood the impact of each, and appreciated the interplay between metrics of different departments and RevOps as a whole.
Remember, there is no hard and fast rule for which metric is strictly RevOps, so be curious, and always challenge assumptions if the current business setup and status-quo isn’t making sense.
