Building a RevOps structure to increase revenue and customer LTV
Author: collin stewart
Erol Toker and Rachel Haley join Sarah Hicks on this episode of the Predictable Revenue Podcast.
Erol is the founder of Truly.co – the automation platform that makes manual data entry for your reps a thing of the past. He’s spent the last 8 years working with ops teams at hyperscale companies like Square, Wix, and Zocdoc, learning how data can lead to better (or worse) outcomes.
Rachel is the co-Founder of Clarus Designs. She started her career in portfolio management, market analysis and financial modeling, and more recently she was the Senior Director of Sales Operations and Strategy at Snowflake, where she helped the company grow from 300 people to over 2,000 and more than 10X-ing in annual revenue.
WHY YOU SHOULD CARE ABOUT REVOPS
For Rachel Haley, co-Founder of Clarus Designs and a recent guest on the Predictable Revenue Podcast, RevOps serves as a radar screen for companies when they’re flying what she calls the “revenue plane.” This function allows you to gather predictable insights and be more thoughtful when planning for the future in terms of how you’re going to hit specific goals and all the milestones along the way. It’s the amalgam of the behind-the-scenes work that helps a company grow and scale at a sustainable rate.
For her fellow RevOps expert, Erol Toker, RevOps is at the crossroads of revenue and digital transformation. It’s the new evolution of what used to be known individually as sales, marketing, and customer success operations – an aggregate of all the customer-facing systems in an organization. Product companies have long deployed resources and analytics into their product, which is tied to both customer experience and revenue. Companies are now starting to think about the systems their teams are using that are also touching the customer, and how RevOps can unify them. Essentially, companies are bringing the software discipline into the revenue organization. One customer moving through one, unified experience = more revenue.
DOTCOM BOOM 2.0
Erol thinks back to the 1999 film Office Space, a comedy satirizing the workplace goings-on of a late 90s software company. Before Google came around and the internet became commonplace, software engineers were not highly sought-after professionals. Quite the opposite. They were boring, back-office, admin types (sorry, guys). When the dot com boom went into full swing, there was suddenly an engineer shortage and the position was suddenly infinitely more important. Google set the bar by creating a culture that celebrated engineers and put them up front and closer to the customer.
A similar seismic shift is happening for RevOps people. The RevOps role is still very loosely defined and people are starting to specialize, much like software engineers. As companies realize that their CAC and LTV are out of whack, the only thing they can turn to is data and analytics. The more competitive markets get, the more important this becomes, and the only people who can get the job done are RevOps people.
Rachel notes that the more companies become tech-focused and digitally advanced, the only way to set themselves apart will be to invest more in RevOps in terms of both time and money. Companies need to establish this from the beginning as a foundation upon which to scale, knowing that will truly become their competitive advantage.
GETTING REVOPS WRONG
The biggest oversight Rachel has seen in her experience working on the RevOps arm with companies from Fortune 500 right to startups is investing in it too late and hiring people that are too junior. She maintains that RevOps, as it continues to evolve, is soon going to be seen as a strategic pillar to the revenue-generating organization. It will have a seat at the table and probably a C-level title. Hiring someone tactical and junior means that your RevOps activities will be reactive. You need someone thoughtful, analytical, who knows how to grow a team and a department that will help the company scale now, in 2 years, and in 10 years.
Rachel has spoken to leaders at countless public companies who wish they had set up the RevOps function years ago before they were public. But she’s also constantly running into startup leaders who say they don’t have the capital to invest in this function at this stage. It can be hard to sell board members on the operations function because it’s not directly selling or building your product, but it is vital for your infrastructure.
Erol sees RevOps departments often under and misused for simply adding fields to salesforce and pulling reports, rather than acting as an independent function with an independent mandate. That mandate should be to oversee key business metrics, help the revenue org to understand them, and help to push them in the right direction. In most cases, early-stage companies are more interested in scaling their sales teams than their operations teams. But Erol has seen that when salespeople hit a ceiling, the only thing that can break through it are systems created and maintained by RevOps.
HINDSIGHT IS 2020
If you don’t invest in RevOps early, it’s hard to see the opportunity cost until you’ve already missed the mark. Rachel has seen companies who were scaling quickly, hitting $15, $30, $50M in less than 6 years, suddenly stall. After 3 consecutive quarters of missing their revenue targets, execs are fired, employees are laid off, and only then do these companies realize they had an operational issue. NPS scores were high and churn was low, but new customer acquisition cost was the problem and the systems and data were a mess.
But it’s difficult to convince leaders that this is destined to happen in the early days when they’re consistently hitting their revenue targets. Leaders are wary of redeploying capital away from their teams who are hitting targets and towards the team that will supposedly help them keep hitting revenue targets. She sees it as the opposite of the sunk cost fallacy. If set up properly, RevOps is preventative. It will help you avoid this stall but also get to revenue milestones quicker and more cost-effectively. It will increase your reps’ ramp time and give you better overall profitability metrics.
Erol agrees. The companies that are scaling exponentially will plateau at some point when the market catches up. And those that are scaling are doing so in spite of themselves, not because they’ve nailed operational efficiency. He also feels that companies’ lack of interest in RevOps is a marketing problem that needs a few champions to shepherd it into best practice. There are a lot of wildly successful companies whose excellent RevOps-fuelled growth is conflated with product-led growth. A good product certainly helps fill the funnel with leads, but their RevOps system distributes them in the right way to all the right places. RevOps must fit into the broader narrative of customer acquisition and customer lifetime value.
HOW TO BUILD REVOPS FROM SCRATCH
According to both Erol and Rachel, while there is no one right answer for every single company when it comes to building RevOps, the most important thing is to strategize first.
From Rachel’s perspective, this comes with hiring a senior RevOps person first. They will come with a higher price tag but will have a strategic vision as far as how the team and function should scale. Especially in a high-growth, early-stage company, the role will fluctuate, and the RevOps leader will need to be growth-oriented so that they can not only do the job they’re hired to do today, but the job they’ll be required to do in 9-12 months. They’ll also need to coach and develop the people they hire into the new roles that emerge. This RevOps leader needs to map out the company’s annual objectives, make sure everyone on their team is aligned, and ensure they have the right people to support those goals throughout the year. This team should include a systems person who designs how all the data flows and the analytics to make it meaningful – which could be the leader themself or a second hire.
2 TACTICAL FRAMEWORKS
Erol maintains that there are 2 pillars to RevOps: automation and insight.
On the automation side, the engagement drivers you’re looking at for your revenue team are identical to those you’d be looking at in a product management org. “Are people using it?” If yes, that’s a positive engagement driver. If not, it’s a negative engagement driver.
On the insights side, you need to look at every dashboard and report you have and do the following audit. With each chart, graph, or list you have on this report/dashboard, for every state it’s in, what is the immediate action that the viewer takes? If you don’t know, it’s too complicated.
When you look at the speedometer on your car dashboard, you know exactly what to do. If you needed to go look somewhere else to interpret the data on the speedometer, that gauge would be useless. Treat all your dashboards like a car dashboard. Simplify to 2 or 3 meaningful, revenue-driving metrics and track the sh*t out of them.
Any central database is good enough for tracking all your data. The issue is that most people don’t know how to analyze it, so they’re sucked in by various tools that make sense of data for you. As long as there is a strategy behind what you’re looking for and a strong RevOps person to help you execute, any old tool will do.
The better you understand your customer, the more you can educate them and stay relevant. Erol asserts that the more you analyze your customer-facing data, the more proactive you can be about solving potential problems. Aside from your product itself, these are the most important drivers of LTV. Customer retention is historically reactive. You try to fix problems quickly, but you can’t see the big picture. RevOps will help you break the barriers between your product and retention by helping you derive insights from your customer engagement data.
As far as Rachel is concerned, it doesn’t matter how much is coming into the top of your funnel if it’s leaking out the bottom. Revops is the safety layer that exists between the customer and your company. This arm will give you feedback on what actually keeps your customers around for the long term.
If you don’t recognize the importance of revenue operations and invest in building it the right way, early, you’re going to be stuck with stalled revenue growth. Not only that, but you’ll be swamped with meaningless data, siloed communication, long ramp times for revenue employees, and plenty of human capital churn. Erol Toker and Rachel Haley are both big advocates of the RevOps function and have plenty of hands-on experience to back their claims. Remember kicking yourself back in the 90s when you just missed your chance of hopping on the dot com bandwagon? RevOps is your next big break!
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