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What is Revenue Operations (RevOps), and why does your business need it?

Much like a spider’s web, a company’s effectiveness depends on the integrity and alignment of the organization as a whole. As a business grows, it becomes harder and at the same time more critical to engineer structures and processes that keep the organization working towards the same goals; if one area breaks away, it can quickly scupper the effectiveness of the rest. This is where Revenue Operations, or RevOps, comes in.

What is Revenue Operations (RevOps)?

RevOps is a business function tasked with unlocking the full revenue potential of a business. It aligns and connects previously siloed departments, technology stacks, and processes, leaning heavily on automation. This ensures that from one end of a business to the other, revenue teams work together towards a common goal and that customer data across a business is structured in a consistent and accessible way.

Why is RevOps important?

RevOps means that revenue does not simply happen by chance, but becomes predictable. According to Boston Consulting Group, B2B companies investing in RevOps have experienced 10-20% increases in sales productivity in the last few years. Tighter alignment between disconnected teams (for example, sales, and marketing), produces even more tangible results:

  • 100% to 200% increases in digital marketing ROI 
  • 10% increase in lead acceptance
  • 15% to 20% increases in internal customer satisfaction
  • 30% reductions in GTM expenses

Benefits of using RevOps include increased collaboration and more predictable growth and forecasting. The data shows that companies that align their departments and functions outperform those that don’t. Public companies with RevOps functions saw a 71% higher stock performance than those without, according to research by Forrester in 2019. Forrester also concluded that companies using RevOps principles saw a 19% growth increase, and 15% higher profits than those who continued with a more traditional business model. 

What problems does RevOps solve?

RevOps aligns internal teams around a unified, coherent, and attainable revenue goal, transforming siloed departments into more coherent entities that work with, and not against, each other. Traditionally, businesses have struggled to effectively bridge the goals of disconnected internal teams, and their related technology stacks and systems.  Sales and marketing departments may previously have worked with parallel procedures and processes in place, leading towards divergent goals. This harms a business's revenue potential: It risks data disconnect, wasted time, and an increasingly difficult decision-making process across and between departments. 

RevOps attempts to tackle these issues by delivering increased transparency and information sharing; data in one department is made available in another. This transforms a lone-wolf approach into an ethos driven by departmental collaboration, which contributes to predictable and shared growth.

Another benefit of introducing RevOps is a reduction in manual efforts to leverage data. PWC has found that by introducing RevOps and its accompanying automation and behavioral changes, as much as 40% of time at work can be saved that was previously spent on trivial and manual tasks. These tasks include chasing up internal teams to find information on customers that should be easily accessible and inputting data into a team's system that is already available elsewhere. This leaves more time to focus on a business's big picture and study revenue data to discover insights that promote growth. 

Why have we seen an increase in RevOps?

In the last 18 months, the role ‘Vice President of Revenue Operations’ has experienced a 300% increase on job boards. Business leaders have always wanted to improve growth and profit. So why has RevOps emerged as a distinctive function so recently? 

The way customers purchase products has changed dramatically over the last decade, and some businesses have been faster than others to adapt to these new realities. Customers now expect a degree of continuation and personalization in their experience with businesses and brands as they move through their journey.  The massive growth of subscription-based models means that what happens after a sale is just as important as the sale itself. As such, marketing, sales, and services need to be looped in on the events and interactions each other's functions have had with the customer prior to a new touchpoint. Luckily, advances in digital transformation and automation have made it possible to measure, share, and merge datasets across the business to get a far deeper understanding of the customer journey and how it is affected by the work done by different teams. This is precisely where RevOps can make a difference.

Tangible shifts have also taken place in the ways companies think about their revenue process, with an increasing emphasis on transparency, accountability, and growth predictability, all the way from the boardroom to the business frontline.

Forbes aptly summarises why RevOps has taken on such an important role in businesses in recent years (and in particularly, B2B and SaaS companies):

RevOps was created as an end-to-end process of driving revenue, from the moment a prospect considers a purchase (marketing), to when you close the deal (sales), to their renewal and upsell (customer success). The result of this orchestration is faster growth and profit.

What are the key metrics for RevOps?

The aim of RevOps is to drive, measure, and forecast predictable revenue within and across all levels of a business. How do you measure this? Here are examples of key metrics which RevOps is accountable for and are used to assess the function’s impact here at Paddle:

  1. Monthly recurring revenue (MRR): The average of the trailing-three-month revenue.
  2. Annual recurring revenue (ARR): Four times the trailing-three-month cumulative revenue (annualize the MRR).
  3. Net revenue retention (NRR): The percentage of recurring revenue retained from an existing customer base, accounting for both revenue expansion and churn.
  4. Customer lifetime value (LTV): An estimate of the average revenue that a customer will generate before they churn.
  5. Customer acquisition cost (CAC): Cost of Sales and Marketing in a period divided by the number of customers won in the period.  
  6. CAC payback: The number of months it will take to recover the cost of acquiring a customer. 
  7. LTV:CAC: The ratio between average customer lifetime value and customer acquisition cost. It indicates the overall profitability of acquiring customers, whereas CAC payback is the speed at which we get payback from Marketing and Sales costs.

So who needs RevOps?

If you are a business leader, ask yourself these questions: 

  1. Are you struggling with transparency and accountability as you scale? 
  2. Are your sales, marketing, and customer success teams too siloed? 
  3. Do you question the accuracy of your business metrics? 

If your answer to any of these questions is yes, then RevOps is for you. 

In a complex business world, RevOps represents a business in its entirety: its people, its data, its processes and platforms, and its attempt to focus on one goal: sustainable revenue growth. The cross-functional collaboration that RevOps offers can help shake things up within a business for the better, creating a better understanding of the customer and revenue lifecycle. 

Companies can no longer operate as disparate parts passing customers from one place to another in the buying process: businesses must improve processes to power revenue and create a coherent, seamless customer journey.

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