What is Revenue Operations?
Revenue generation in a company is a function of many departments such as marketing, operations, and customer success. Traditionally all these departments have functioned as discrete units with different goals and disconnected analytics.
This leads to unsatisfied customers, underutilized potential, and siloed workspaces. There is a lot of money lying on the table, which nobody picks up as they are all stuck in different rooms. Revenue Operations solves this.
Revenue Operations have many definitions.
Revenue Operations (RevOps) : Definition
According to Chargebee, the goal of Revenue Operations is to achieve strategic alignment throughout all your revenue-driving functions — marketing, sales, operations, finance, and customer success — across the entire customer lifecycle, to drive uninhibited growth and exceptional customer experience.
Essentially it is the alignment of all revenue-generating teams in a company under common goals and connected processes. It helps streamline the process with a singular goal, i.e., increasing revenue generation for all teams involved and making them accountable to each other.
Revenue Operations: The New Kid on the Sales Generation Block
According to a report by Forrester, Centralized revenue operations have gone from 15% to 40%.
This signals a fundamental shift in organizational structure. The curious thing is this has not come from changing organizational patterns but from changing customer needs.
The Buyer’s journey has evolved over the years. Most B2B buyers are already 57% of the way through the buying process before meeting with a representative.
As the duration of the Buyer’s journey from Awareness to Decision reduces, it has become more and more important for the teams involved in each stage to work together for a seamless operation.
Revenue Operations is an end-to-end process: From the moment a client considers a product to the finalization of the transaction, follow-up, and renewal. It aims to remove the delays due to inter-departmental communication and make the revenue generation process faster and smoother.
What is Sales Ops?
Sales Operations refers to the process and strategies that help the frontline sales teams sell more efficiently by reducing friction. It helps salespeople become more productive and increases the frequency of sales in the company.
A sales operations team focuses on making sure the sellers can focus on the actual selling by taking control of the administrative activities involved in sales. It creates data-driven insights, strategy plans, sales forecasts, and efficiency reports.
This is more of a strategic role while sales representatives perform the customer-facing function. It helps in providing enough space and time for specialization and improvement by freeing up space on both fronts.
Sales Operations in a Nutshell
What constitutes Sales Operations differs from company to company. But, some functions form the core of sales operations, such as:
1. Data Management and Analysis
While the specific metrics and KPIs to be tracked by the Sales Ops team vary, the process of digging into data and finding actionable insights to boost sales is key to any sales operations role. The most common things to be tracked are:
Customer Acquisition Cost (CAC)
This is the most important factor that can be used to measure the efficiency of each rep individually.
Lifetime Value: The total value generated by each customer during their interaction with the company should always be tracked and studied to promote consumer behavior that increases it.
2. Sales Forecasting and Strategy
Based on the results of the data analysis, the sales operations teams have to prepare the monthly sales forecasts and strategies for achieving them. This can help in identifying issues before they arise and help in risk mitigation for sales reps.
3. Training, Evaluation and Performance management
Monitoring and promoting the career growth of the sales representatives is a responsibility of the sales operations team.
As they have access to all the data, the sales Op team should identify the areas of weaknesses for each rep and help them overcome them through proper training. This requires consistent monitoring and documentation of rep efficiency and constant management of performance.
Sales Operations Vs. Revenue Operations: Which one is right for your company?
While Sales Operations teams have been a part of companies for a long time now, Revenue Operations are still new for many of them. Before deciding on a structure for your company, you need to understand the processes involved and the goals achieved by both of them.
Sale Operations is narrower and focused. It involves only the activities involved in pure sales functions and doesn’t interact centrally with the associated processes such as marketing and customer success. It is a subset of revenue operations and primarily aims to improve customer conversion rates and sales efficiency.
On the other hand, Revenue Operations is the central alignment of sales, marketing, and customer success functions around common objectives. Instead of pitting these teams against each other and giving rise to unnecessary internal competitions, it changes the fundamental organisational structure to ensure cooperation.
Rise of RevOps (Revenue Operations) Trends
Revenue today is not an outcome of internal processes but a process in itself. The perception of revenue in business has changed drastically with the rise in technology and thus the rise of revenue operations.
The customer-company relationship today doesn’t end at the first sale but begins at it. With the growth of SaaS as a popular business model, many revenue models are now increasingly subscription-based. In such a scenario, retaining revenue has become as important as generating new revenue.
With new-age customers making informed and researched purchases, the user experience has become a distinctive factor in retaining customers. The previous funnel system of revenue generation in silos, which put the customer at the bottom, has now been replaced by a flywheel with the customer at the center.
This centricity with the customer necessitates a central working of all departments that interact with the customer directly, and thus revenue operations are the structure of the future.
While Revenue Operations as a concept is not new, the formalization and naming relatively are. We see more and more organizations hire a Chief Revenue Officer, working directly with the CEO with all marketing, sales, and customer success teams reporting to him.
If you are a subscription-based company, you should move to RevOps. If you are a product-based company, you may want to stick to Sales Ops.
The Benefits of Revenue Operations
The first and foremost benefit of centralized revenue operations is that it creates a better experience for the customer. Here are some other benefits of revenue operations which may help you make a choice:
Each department has its own goals and priorities in a segregated organizational structure, thus changing the team’s vision. In revenue operations with central goals and objectives, everyone is working for the company’s success rather than the team’s success.
The company and the teams need to make plans and grow. In revenue operations with central metrics and tracking processes, it is easier to look at its overall health.
Technological incompatibility between teams can be a big hurdle for companies to achieve targets on them. Under Revenue Operations, when the entire team is linked through the same revenue management software, it is very easy to leverage technology and deliver results.
The day-to-day administration of the office would improve dramatically if all the held to a higher level of responsiveness and a standardized system for all to follow. This limits miscommunication between teams and overrides hierarchical hurdles.
Reduction in Operation Costs:
Revenue operations encourage sharing between teams and eliminate redundancies in the process, thus optimizing the cost of operations.
Sales Operations Vs. Revenue Operations: 4 Key Differences
|Sales Operations||Revenue Operations|
|Teams divided into disconnected silos||Centralized and interactive working of teams as a whole|
|Data gets buried in different departments||Data is seamlessly shared between teams|
|Encourages inter-departmental competition||Build collaboration between teams|
|Each department has different deliverables.||Each team works on a different process for a common deliverable: revenue generation.|
In this table, we can see the main differences between Sales Operations and Revenue Operations.
Revenue Operations involve everything about Sales Operations along with adding marketing and customer success.
While in traditional setups, Sales Operations are defined by finite boundaries, in revenue operations, sales, marketing, and customer success get to interact in a meaningful manner and optimize revenue and team efficiency.
While there is considerable overlap between the two, Sales Operations are geared only towards sales growth. In contrast, Revenue Operations aims at increasing revenue by boosting all sales, marketing, and success metrics together.
How will RevOps affect the future of sales?
RevOps has the potential to transform sales in the following ways:
Reduce Grunt Work:
Most of the time, sales and marketing teams spend their time doing mundane grunt work – verifying customer data, fixing faulty data, making reports, etc. But, with the centralisation of operations, it is easier to leverage technology to do the grunt work and increase the time spent by the teams on revenue-generating work for sales calling and copy generation.
Better suited to customer journey:
The customer journey today is not a linear progression. Customers are hopping from all over the funnel stages, and RevOps can help companies benefit from this fact.
Make Sales an inclusive function:
Instead of sales being a function exclusive to salespeople, in revenue operations, departments can share leads and increase sales, the duty of everyone involved.
4 ways to Optimise your Business with Revenue Operations
Revenue Operations are a very strategic organisational structure in theory. But as Peter Drucker has famously said, “Culture Eats Strategy for Lunch.” Before introducing the Revenue operations team structure, there are some cultural changes you must try to bring to make it easier and effective for everyone.
Bring sales, marketing, and customer service on the same page
In Revenue Operations roles, all the three teams occupy the same level. Before introducing Revenue Operations Team Structure in the company, you must bring the teams closer.
Here are a few ways to do this:
Organise community events for all the teams to participate together to promote a shared culture between everyone. The events can be anything ranging from sports competitions to official celebrations. Just make sure there is enough opportunity for inter-team interaction.
2. Conduct inter-team meetings
Conduct regular inter-team meetings to allow the members to talk out their differences and also for you to gauge the spectrum of disparity between the teams.
These processes together will help bring all the teams to the same page.
3. Ensure Collaboration
Collaboration is not something that can be forced upon teams. Forced collaborations will often have a more negative impact than positive. To encourage organic collaboration between teams, give them something other than regular work to complete together.
You can make the gradual shift to a revenue operations organisational structure, the first collaborative project for the concerned teams. Let them work together on this and notice the key characteristics of every individual. Instead of strengths and weaknesses, observe how individual efficiencies are affected in certain groups and create groups where individuals can thrive through collaboration.
In the case of employees who are solo players, allow them time to work alone on some projects so that the projects that require team involvement are not affected by their resistance.
Data and KPIs
Marketing team KPIs
The marketing team is responsible for generating interest and demand in the customers for the product. It tells the customers that the company exists and can alter customer lives in beneficial ways. There are various ways to measure the performance of the marketing team. But most ways fall into two categories of marketing:
- Marketing for generating interest
This is done in the initial days of the product to introduce it to the customers and create a sense of familiarity. The key metrics that can be used to measure the success of this category are:
- Organic Impressions: The number of customers that saw the advertisement/ marketing content. This is a very important KPI for the early days as it gives a fairly accurate measure of the reach of the marketing team.
- Engagements: This involves customers liking your social media posts, tasting a free sample, or signing up for a free product. It can tell which customers are interested in the product enough to use it when it is offered for free. A detailed analysis of the customer data obtained during this process can help figure out key demographics of potentially paying customers.
- Marketing for driving Sales
This is the marketing done after a while from the product launch when customers are fairly familiar with the product. The main indicators here try to capture the cost of marketing for bringing customers:
- CAC: The amount spent on marketing for being a single customer is called Customer Acquisition cost. It is very important to gradually lower the CAC to build a sustainable revenue operations structure.
- Customer Reach Outs: The number of customers reaching out on their own to buy the product is called customer reach outs. High customer reach outs is a very good indicator for the performance of the marketing team.
Sales team KPIs
While marketing focuses on increasing demand, sales focus on converting that demand into revenue. All the organic impressions that the marketing teams get cannot be converted into sales but identifying those with higher probabilities of being in the sales team’s job. The performance measure of the sales team can be:
Sales Qualified Leads (SQLs):
Sales qualified leads are the number of marketing leads that can become potential customers. This can be calculated by analysing how many people interacting with the marketing content belong to the targeted customer base of the product. This is an important number as it becomes the pool from which the sales team can drive sales.
Sales Conversion Ratio
The percentage of SQLs that end up buying the product is called the conversion ratio. It is a direct measure of sales performance as the customer has already shown interest in the product. Now, it depends on the processes of the sales team to sell the product to the customer.
Revenue per lead
This is the revenue that comes to the company after an individual buys. This can vary from customer to customer, but an average value gives a birds-eye view of generated revenues.
ROI: This the ratio between the cost spent to acquire an average customer and the revenue generated from an average customer. This is the most important metric as it can tell us directly if the product is profitable.
Customer success team KPIs
In today’s ever-changing world, customer retention is key to survival.
The major metrics for measuring this are:
1. Churn Rate:
The number of customers leaving the company after the first transaction helps us know if the customer is happy with the product delivered.
2. Retention Cost:
The lower the cost of retaining a customer, the higher the team’s efficiency.
3. Number of Tickets:
It can be a measure of two things:
A. Flaws in the product
B. Customer Engagement with the product
Revenue Operations tie all these teams together, and to measure the efficacy of the system; a few collective KPIs should be measured, such as:
Sales & RevOps Techstack
Integration of technology is one of the main benefits of RevOps. It helps in quickening up the process and establishing common operating procedures and technological standards across departments. There are a lot of options for Revenue Operation Software in the market.
Here’s a list of some tools that should form a part of your RevOps techstack:
1. CRM Software
A Customer Relationship Management software accessed with all three teams would provide greater insights into consumer behaviour and make conversations here. If a Customer Success member can access the marketing and sales conversations that helped the customer buy, he/she can use that information to generate higher user retention.
The RevOps team should use a central database to store all information to help the other functions leverage the knowledge available with a specific function.
3. Revenue Intelligence Software
The collective data of all the teams is of no use if it is not analysed and used properly. You should use revenue intelligence software powered by AI and ML to anticipate revenue at each stage and perform accordingly.
Three factors to consider before deciding on a Tech Stack for your Revenue Operations Team Structure:
1. Ease of Access: People in the marketing, sales, and customer success teams may not be technically savvy. Choose a Revenue Operations Software with a lower learning curve that can be used by everyone easily.
2. Culture Fit: Choose software according to your company’s specific needs and your company culture. Involve your employees in the choice so that they are comfortable with using the Revenue Operations Software daily.
3. Flexibility: Revenue Operations Software should serve both your current and future needs. Choose one that is flexible and customizable.
This is how you can optimise the tech stack for your Revenue Operations Team Structure.
Is Revenue Operations just a trend?
Revenue Operations is not just a trend but a consequence of changing consumer behaviour and the growth of subscription-based revenue models. It is also not something completely new. Smaller companies have been operating with Hybrid teams and people attaining different functions as per requirement for ages.
It is not a trend but a critical structural change that is here to stay.
Should we move to Revenue Operations?
Most teams would benefit from having a centralised RevOps structure. But, if you are doubtful, talk to your team and take their feedback.
Involving the entire team in the decision and the process can help make revenue operations better for your company.
How do I restructure the current teams?
You should gradually bring all the teams under a central infrastructure over a considerable period and not restructure everything overnight. Talk to the leads of the various teams and discuss possible hurdles that may come in the process. Only after identifying the solutions should you move forward with restructuring.
RevOps is a comprehensive alignment of objectives, processes, and analysis of marketing, sales, and customer success teams. Many organisations are rapidly moving towards RevOps as it is most suited to the current customer behaviour and revenue models.
That said, before doing any kind of restructuring or adopting the RevOps Team Structure, you must do your research. Conduct User Surveys and study your customer behavior.
Also, keep in mind the compatibility of Revenue Operations with your revenue model. After taking all these factors into account and talking to your team, you can move towards Revenue operations.