Revenue Operations Metrics: Chapter 2

RevOps metrics explained

RevOps metrics provide visibility into your predictable revenue and also help identify any inefficiencies and bottlenecks.

They also serve as a common language for different departments in an organisation, including sales, marketing, and customer success. 

As Mollie Bodensteiner, the leader of revenue operations at Sound Agriculture, said:

"Having a table of contents on your metrics so that they’re clear at all times is so important."

"Your C-level should know what you’re considering a customer and what you’re considering NRR, NDR and any key metrics. They should be able to explain the metrics and be a part of signing off on them."

This ensures that everyone works toward the same objectives, fostering collaboration and cohesion and streamlining your reporting processes.

Failing to do so can hinder your data and understanding of what works and what requires improvement. Molly said:

"If you’re constantly changing definitions and pivoting your KPIs and what you’re measuring against, it’s really hard to scale and build repetition in things that are working, and then test against that repetition to optimise further…"

"You shouldn’t be changing your fundamental MQL definition every month, for example,  because then you won’t have strong historical data."

Metrics, therefore, provide businesses with the means to evaluate the performance of different initiatives, strategies, and campaigns and enable organisations to make informed decisions by basing choices on measurable outcomes.

How to set the right metrics for revenue operations?

1. Clearly define your business objectives 

The first and most critical step in setting the right metrics for operational managers.

Common RevOps objectives include increasing revenue, improving customer retention, and optimising sales and marketing processes.

If your objective is to increase annual revenue by 20%, your metrics include lead conversion rates, average deal size, and customer retention rates.

2. Understand your customer’s journey 

Identify critical touchpoints and milestones in the customer journey, from initial contact to purchase. Develop metrics that track performance at each stage.

According to Charlie Saunders, Chief Revenue and Operations Officer at CS2, your funnel is one of the most important places to look. He says: 

"When it comes down to looking at pipeline creation, revenue creation, and all of the things that lead up to that, the funnel reporting is such a key pillar.’ 

"Look at the volume of people and accounts moving through your funnel, the conversion rates and the velocity through your funnel.’

"Funnel reporting is really good at showing you what is capturing demand."

At the top of the funnel, you should be looking at the number of MQLs, SQLs, conversions and pipelines.

3. Identify the key revenue drivers for your business

These drivers are the activities and factors that directly impact revenue generation.

For example, if you’re a SaaS company, key revenue drivers may include customer acquisition, churn rate, and upsell/cross-sell opportunities.

4. Select metrics that align with the drivers

For customer acquisition, you might track metrics like lead-to-opportunity conversion rate, cost per lead, and sales cycle length.

5. Select a mix of leading and lagging indicators

Leading indicators are predictive metrics that help you anticipate future results, while lagging indicators measure past performance.

A balanced mix of both is essential. For example, website traffic (leading) and conversion rate (lagging) are valuable metrics.

6. Understand the health of your customer relationships

Set customer-centric metrics - but before you set them, you must establish, define and ensure a cohesive understanding of what a customer is across your organisation. As Mollie Bodensteiner said: 

"The next step is defining what a customer is. What is the difference between new and existing business?

'You’ll get different answers depending on who you’re talking to. You must define the process that generates the output that indicates that somebody is a customer.”

Don’t forget to incorporate customer-centric metrics, such as Customer Lifetime Value, Customer Acquisition Cost, and Net Promoter Score. These metrics help gauge how well you serve your customers and their loyalty.

Measuring the amount of revenue you retain is also just as important. These help you understand if you are targeting the right customers, supporting and onboarding customers effectively, and doing enough to identify potential upsells and cross-sells.

There are two critical revenue retention metrics to track:

Net revenue retention calculates the total revenue minus revenue churn (contract expirations, cancellations or downgrades). This measures your ability to retain and expand customers and can be measured monthly or annually.

Gross revenue retention measures a company’s ability to retain customers and maintain revenue. To calculate this, you add up your total revenue and take away churn from downgrades, cancellations and expirations. Then divide by your starting amount and multiply by 100 to get a percentage figure.

7. Prioritise your metrics based on their significance to your business objectives

Not all metrics are created equal. Prioritisation ensures that you focus on those areas that will have the most substantial impact on your revenue.

8. Establish a routine for reporting and communicating metric results across teams 

According to Mollie:

"You need to build the dialogue and get that alignment on what we’re reporting on and what our standards, KPIs and metrics going into our data pack are and how we are going to use them."

Transparency fosters accountability and encourages collaboration.

9. Set clear targets or benchmarks for your chosen metrics 

This is essential. Targets provide a basis for evaluating performance and progress towards your objectives.

Be realistic, considering historical data and industry benchmarks.

10. Use data tracking and reporting systems

Implement tools and B2B technology to capture and analyse data accurately and in real-time. Ensure your teams have access to dashboards and reports displaying the relevant metrics.

11. Monitor your metrics

Regularly review and shift your metrics and KPIs to ensure they align with your evolving business objectives.

Your organisation isn’t static, nor are your customers, industry trends or targets.

Ping Del Giudice, VP of Revenue Operations at Leapsome says:

"It is okay to have those definitions change, because sometimes your buyers journey could change, and if that’s the case you should redefine your stages to match the changes in the buyers journey."

Metrics that were effective in the past may become obsolete or less relevant as circumstances change, so remember to change them when necessary.

RevOps metrics for marketing 

1. Leads generated

The number of leads generated reflects the effectiveness of your marketing efforts and market interest in your products or services.

2. Conversion rate

A high conversion rate from leads to marketing-qualified leads indicates the success of your marketing campaigns in engaging and qualifying potential customers.

3. Cost of acquisition, Cost per lead, and Cost per opportunity

These metrics help assess the efficiency and cost-effectiveness of marketing campaigns, ensuring wise allocation of resources. A high CAC suggests there might be something wrong with your marketing strategy, for example. To calculate this, divide your total marketing spend by the number of customers acquired.

4. Click-through rate

This is the number of times an ad, website or link is clicked on per impression. 

5. Bounce rate

This is the percentage of website visitors that leave a page without taking any action. This indicates that your content is not keeping potential customers on the site.

Sales operations KPIs

1. Win rate

This measures the percentage of sales opportunities that become closed-won deals. Measure this by dividing the number of closed-won deals by the number of total opportunities.

2. Sales process velocity

This refers to the amount of time it takes for a lead to become a customer. Understanding how quickly opportunities progress through the sales process enables you to identify bottlenecks.

3. Sales pipeline ratio

This ratio equals the total value of your sales funnel against your revenue targets. This is crucial when monitoring quotas and allows revenue operators to monitor sales forecasts and identify reps that may need coaching.

4. Average customer lifetime value

This presents the total revenue a customer generates for your company. You can calculate this by multiplying the average purchase value by the average purchase frequency and customer lifespan. 

5. Sales Revenue

This is the most relevant sales metric and can provide salespeople with a good insight into their performance. They can track revenue by territory, product or the average revenue per user account to determine which segments are the most profitable.

Customer Success Operations Metrics 

1. Speed of the implementation process

Faster implementation ensures that customers can use your product or service promptly, leading to quicker value realisation and satisfaction.

2. Renewal ratio

A high renewal ratio signifies customer satisfaction, which is vital for recurring revenue.

3. Time to value

Tracking the time it takes for customers to gain value from your offering measures the effectiveness of onboarding and support processes.

4. Customer usage frequency

Monitoring customer usage frequency helps you identify power users and areas where customers may need additional support or training.

5. Customer satisfaction score

A CST score measures how well a business meets customer expectations. A high CST score generally correlates with high customer retention.

6. Net promoter score

This metric measures a customer’s willingness to recommend your product or service to others

Closing thoughts

Setting the right revenue operation metrics enables you to align teams, evaluate performance, make informed decisions, and drive continuous improvement.

By following the steps outlined in this guide, you can establish a robust metrics framework and contribute significantly to your organisation’s revenue growth.