If you’ve been in the loop as a revenue operations manager, you know this feeling; you’ve just been tasked to increase a company’s revenue and develop a strategy that helps achieve just that. Being confident in your skills, you gladly accept, but uncertainty arises when you’re told to consistently report on revenue goals as well as progress.
Revenue operations is a complex field. It operates by bringing together sales, marketing, and customer success teams to ensure smooth progress and higher revenue generation. You're not alone if you feel that tracking revenue operations metrics seems overwhelming.
Soon you’ll learn to love RevOps metrics as you gain a better understanding of them. They’re a powerful tool that provides quantitative data to assess the performance of revenue operations teams and anticipate future business growth. These metrics give you valuable insights into whether or not you’re making progress and well-informed decisions.
However, there are many other metrics to track in addition to revenue.
In this article, we’ll discuss what RevOps metrics are, the importance of tracking them, and the 10 essential RevOps metrics to keep an eye on in order to improve revenue operations.
What are Revenue Operations Metrics?
Revenue operations metrics are a set of measures used to track and monitor revenue operations. The purpose of RevOps is to break down barriers between departments and align sales, marketing, and customer success departments. This helps each department to be held accountable for revenue generation and drive growth to a business.
RevOps is gaining popularity as evidence from Boston Consulting Group suggests that RevOps leads to:
- 10-20 increase in sales productivity
- 15%-20% increase in internal customer satisfaction
- 100%-200% increase in digital marketing ROI
However, it’s nearly impossible to tell if you’re making any significant progress with your RevOps strategy if you don’t measure the impact of your decisions. As the great management thinker Peter Drucker once said, “if you can’t measure it, you can’t manage it”
This holds true for revenue operations as well. Using RevOps metrics to track and measure the results of your revenue operations will enable you to create a data-driven strategy proven to streamline results.
Importance of Tracking Revenue Operation Metrics
Collecting data can help you evaluate the performance of your RevOps strategy. Without data, it’s difficult to make well-informed decisions because you don’t have any way to prove its efficiency or impact.
Every manager would agree that creating a RevOps strategy without taking into account company goals won’t lead to positive results and benefits. To ensure teams stay on track, revenue operations metrics are implemented to assess progress toward broader business goals.
Tracking these metrics leads to many other benefits including:
- Data-driven collaboration
- Predictable business growth
- Lesser risk
- Better decision making
But tracking just the obvious metrics like revenue won’t help you. With business dynamics and customer trends rapidly changing by the second, managers must use a handful of useful metrics to assess the company’s performance in the long run.
10 Essential RevOps Metrics You Need to Start Tracking
Revenue is usually the top priority of every RevOps manager. But many other factors contribute to revenue, making it necessary to also track other metrics that influence the overall revenue generation of the business.
First, let’s discuss the most basic metric: revenue growth.
Revenue growth simply refers to the increase in revenue over a period of time. Managers measure it to see how much their revenue has increased for every source of income, including product sales, service fees, investments, royalties, subscriptions, etc.
Tracking revenue growth allows you to have a broader view of the business. Although it may make more sense to track earnings growth (revenue minus expenses), revenue growth allows you to see opportunities for improvements in revenue.
It may be easier to look at your earnings and decide to cut costs to maximize profit. But by assessing revenue growth you can make smarter decisions to increase revenue without compromising on the quality of your products/services. This acts as a better long-term solution.
For a revenue growth strategy to work, you need to make sure you track this metric with company goals in mind. Set both short and long-term goals for revenue and encourage team members to collaborate to find the best strategy for achieving those goals.
When revenue flows into the business, it can be easy to forget about developing your RevOps strategy to maintain a positive stream of revenue. As a result, when revenue generation becomes stagnant, managers are left wondering what the issue is.
Revenue growth isn’t as important as revenue retention, which measures how much revenue you manage to retain.
There are two ways to track revenue retention:
- Gross Revenue Retention - the percentage of recurring revenue over a period of time excluding upsells and cross-sells
- Net Revenue Retention - the percentage of recurring revenue over a period of time including everything like revenue expansions, upgrades, cross-selling, etc.
Tracking revenue retention metrics will help you understand your target audience better and enable you to tailor your sales and marketing processes accordingly. This will help you maintain your customer base and identify improvement opportunities to retain revenue for the business.
Customer Churn Rate
Customer churn rate is an important metric to track customer success as it shows the total percentage of customers who stopped doing business with you over a period of time.
When running a business, it’s natural for some customers to leave, but managing to keep the number as low as possible is vital to the company’s success.
A low churn rate indicates higher customer satisfaction. That’s because the longer people stay with you, the more they’re likely to trust you and buy from you, and there’s data to back this up. According to Semrush, an average loyal customer spends 67% more in their 31st to 36th month with a business than a new customer in their first six months of the business relationship.
Having a consistently low churn rate over the years may indicate that your business has a loyal customer base, allowing you to secure higher revenue in the long run.
Consequently, a high churn rate can be a cause for concern. Higher churn rates can take a toll on annual recurring revenue as it can be difficult to attain new customers after older customers leave. This may lead to a decline in revenue.
“Our growth is dependent on keeping our churn rate low. We know if it gets too high, it will cost us a lot more to bring in new customers. It just makes sense to retain the customers that we have.” -Reuben Yonatan, founder and CEO of GetVoIP
If you have a high churn rate it could be an indication of poor product offerings, a new update that users dislike, or bugs/errors. By measuring the churn rate monthly, revenue operations managers can prevent any problems from occurring that would prompt users to leave and retain revenue, increasing profitability in the long run.
Customer Acquisition Cost
Customer acquisition cost or CAC measures the costs associated with acquiring a new customer. It is calculated by adding your sales and marketing costs and dividing them by the number of newly acquired customers over a period of time.
This is an important revenue operations metric to track as it helps evaluate a company’s profitability. Investors may also be interested in your CAC as it helps them decide whether it would be profitable to invest in your company.
RevOps managers aim to reduce the CAC. A low CAC means it costs less to acquire a new customer. A high CAC can be primarily credited to poor marketing efforts, such as inconsistent branding, no clear target audience, unoptimized marketing campaigns, and inefficient marketing strategies.
To improve the CAC, RevOps need to work closely with the marketing team to develop effective strategies and target the right customers. Optimizing conversion rates, improving brand image, and having a better value proposition all contribute to a lower CAC.
However, measuring the customer acquisition cost may not be beneficial in and of itself. That’s because it’s difficult to judge how much is too much when it comes to the cost of acquiring customers.
For example, $100 may seem like a lot to spend on a product that’s worth $10. But, if the customers you gain from it are making you $1000+, it may be worth your while.
To measure CAC effectively, it must be combined with a relative metric like the customer lifetime value.
Customer Lifetime Value
Customer lifetime value or CLTV measures how much revenue is generated from a customer during their relationship with a business.
This metric helps estimate how much profit a company could make from a customer. By measuring the CLTV you can make better decisions when acquiring customers. This allows you to spend your resources primarily on customers that are profitable to your business in the long run.
It also helps you assess:
- The average CAC required to acquire an equally profitable customer
- Who are your most profitable customers?
- How much can you expect a customer to pay over time?
- What kind of customers are bringing you the majority of your revenue?
- What do your most loyal customers want and what’s keeping them there?
Sales Pipeline Velocity
Sales pipeline velocity evaluates the performance of sales teams and measures how quickly leads are moved to the conversion stage of the sales cycle. A high sales pipeline velocity means a faster process, assuring that customers quickly move to the conversion stage.
Businesses typically want a higher sales pipeline velocity to drive more buyer-ready leads to their business. However, a low velocity might indicate underlying problems in the revenue cycle.
RevOps plan to minimize bottlenecks in the sales process by identifying issues and organizing the structure of the sales cycle to optimize conversions.
Leads generated simply refers to the number of leads created over a period of time. Since leads are an indication of customers entering the sales funnel, it can be important to track the number of leads as a contributor to total revenue.
Tracking and measuring leads can help you assess the effectiveness of your lead generation strategy. It will also allow you to identify the cost per lead, enabling RevOps to collaborate with marketing and develop cost-effective strategies to drive more qualified leads to the business.
By tracking the number of leads generated, you’d also gain insight into other aspects of the customer journey, like identifying underlying issues with your product offerings, marketing channels, and value proposition.
Conversion rate is commonly measured to identify the percentage of leads that become paying customers.
A low conversion rate means you aren’t effectively turning leads into purchasers. This could indicate a problem within the marketing and sales teams and triggers the revenue operations team to step in.
There are usually two things that may be responsible for a low conversion rate: poor marketing efforts or ineffective sales tactics.
By targeting the wrong audience, running ineffective ad campaigns, and poorly executing marketing tactics, your conversion rate may reduce. Identifying RevOps diagnosis issues in the marketing strategy helps to improve marketing efforts to generate higher-quality leads.
As for the sales department, using outdated sales techniques or poorly managing leads may contribute to poorer sales efforts and lower conversion rates - despite having a marketing-qualified lead. RevOps would need to work with sales to train salespeople to be more effective at converting customers by targeting sales-ready leads first.
By increasing the conversion rate you can generate more revenue faster as buyers quickly make their way through the sales funnel and become paying customers. This will help you achieve your revenue goals and ensure a stable cash flow to the business.
Sales forecasting refers to an estimate of how much sales a business would be able to generate in a specific time period - usually measured monthly, quarterly, or annually.
Forecasting is usually done by the sales team. However, as RevOps get involved we understand that placing the responsibility of sales forecasting solely on sales leads is an ineffective sales strategy.
Since traditional forecasting doesn’t take into account other metrics like CLTV and Customer Churn Rate, it may result in a poorly executed sales strategy. By aligning sales, marketing, and customer success operations, sales forecasting can be used to make better decisions.
By anticipating sales, businesses can prepare in advance and avoid issues down the line by brainstorming solutions before a problem arises. This could mean introducing new product offers or accurately estimating how many staff members would be required to complete a task.
Time to Value
Time to Value or TTV measures the time it takes for your customers to gain value from your product or service.
As competition increases across all industries, your customers mustn’t face any delays in using your product or service. Customers expect processes to be quick, and if they feel that after buying your product there isn't any added value to their life, they’ll be quick to abandon it.
A short TTV allows customers to quickly start getting value from a product they recently purchased. This will reduce the churn rate and make your customers stick around longer, eventually becoming loyal to the brand.
Consequently, a longer TTV will prompt your customers to leave for your competitors. Measuring TTV will help you make well-informed decisions and ensure customers quickly receive the value they’re promised. In turn, this will contribute to a higher customer lifetime value.
For RevOps to work effectively, managers need to track revenue operations metrics that help measure the progress in revenue generation.
As businesses become more obsessed with data, it’s important to note that collecting multitudes of data isn’t useful in and of itself. Managers should analyze the data and set benchmarks for a revenue team to drive growth to the business.
This article discussed some of the most popular and important revenue operations metrics to drive growth to a business. However, you shouldn’t just pick and choose from the list of key metrics above. Rather, you should track metrics that will help achieve your broader company goals.