Know Your Numbers as a Revenue Operator

This is an edited extract from The Revenue Operations Manual.

Where to start

As an Operator new to an organization, where should you look to get a handle on the numbers of your new company? That will depend on the current stage of your company.

If your company is public, start with its annual report and, in particular, the “Management Discussion and Analysis” section. Any level of Operator should have already read this before they inter­viewed at a company, but now is the time to read it in detail along with any supplemental information you learned from the interview process. If external analysts write about your company, review what they are analyzing and what questions they ask during earnings reports. Earnings releases are excellent sources of information on the top-level concerns and success barometers for your company. Each type of business will have different strengths they highlight, which will give you ideas on what should be tracked.

There is also likely a quarterly internal reporting package that is produced and a company meeting presentation that will provide excellent insights into what the key metrics are for the business and what the goals are for the company. Your objective in reviewing this information is to understand which go-to-market areas are being monitored and how actual results compare to the goals set. You can start to form theories on where the areas of concern are and which metrics might offer opportunities for improvement.

If you don’t have a lot of experience with financial statements, ask someone in Finance to walk you through the financials of your new company. You can begin to develop that relationship from the start by understanding what finance believes the most important company metrics are. You can also learn a lot by asking which additional go-to-market metrics they don’t currently have visibility into but would like to better understand.

If the company is not yet public, there will be a wide variety of what might or might not be available. Your job is to consume as much as you can get your hands on. Board meetings, internal report­ing packages, dashboards that are used by executives, company meeting slides, annual kickoffs and quarterly business review presen­tations are all excellent sources of understanding what is tracked, what is communicated and how the company is currently performing against its goals. In some companies, there will be hundreds of metrics monitored closely; in others, there may be tracking but no goals, and in some, the absence of metrics might be why you were hired in the first place.

You’ll notice we didn’t initially advise you to ask what your Operations team currently produces. Yes, of course you will also want to ask about that. But we believe it is important to start first at the company level. It is easy to perpetuate the siloed mentality by focusing on just what your team already does. That would miss out on the big picture and how all of the company parts (and goals) fit together. If we take the “revenue machine” mentality of Revenue Operations, we need to first understand how the full machine works before we begin.

What to look for

Once you have compiled all these sources of information, it’s time to put the puzzle pieces together. Your objectives should be to articulate what your company’s key success drivers are, how you are currently performing against your goals, and how well your organization can articulate why your performance is what it is. Each of these areas will start to form your roadmap of where you can focus your efforts. For example, if the goals aren’t clear, that might be the first order of busi­ness. Sometimes there are so many metrics, you can’t tell which ones are the most important. In other cases, articulating why something isn’t working may require investment in an analytics function.

Some questions to consider include:

• What are the key metrics of focus? Revenue? New business vs. expansion? Margin? Costs? Customer satisfaction? Customer retention?
• Is it clear what the goals are for each of these and how the company is performing against those goals?
• What are the sources of revenue?
• Are there obvious leading indicators (meaning they will tell you if there are problems/success headed towards the company)?
• Are there obvious lagging indicators (meaning the problems/ success already happened)?
• How important are margins, operational costs and overall spend to the company’s current stage?
• Do you have departmental spending targets and where are they discussed?
• Do you understand what the goals are for each go-to-market function?
• What are the specific goals for sales? Marketing? Customer success? Services?
• What are the current areas of concern? How do those tie into what the go-to-market teams do, impact and are measured on?
• Is there a current understanding of why the company is above or below its targets?
• How well is performance articulated and understood in the information you have gathered?

What are the world clocks of your business? What are those key KPIs that would actually move the needle of the business? The Operator’s objective is to create that world clock wall for the business, ensuring the right clocks are on there and that the attention is on what will drive results.

Benchmarks

When you have a child, there are many, many benchmarks available to assess how your child is progressing. There are age milestones for sitting up, crawling, walking, speaking, smiling, letters, numbers, reading, etc. You can measure growth and weight against averages at every month marker.

If only measuring companies were as easy!

We would never assess a puppy against those baby benchmarks. You have to be in the same species for the benchmarks to be useful. The same is true for companies: find what your company’s species is to figure out your benchmarks.

In a mature industry, you will likely be able to compare yourself to public companies whose financials are publicly available. If you aren’t yet public but your competitors are, you at least understand what your older siblings are measuring and achieving.

In a private or emerging company, you may have some guideposts provided by private equity companies, investment bankers and venture capital firms. An example would be the “Rule of 40” for software-as-a-service companies: you want the sum of your revenue growth and profit margin to exceed 40 percent. You can have nega­tive profit as long as your revenue growth makes up for it (and of course, they also want to know the time to profitability). Asset utili­zation is often used as a benchmark for manufacturing companies. If your company already has a relationship with a venture capitalist group, they may have a set of benchmarks they have gathered from their portfolio companies. Find your appropriate benchmarks for your company’s maturity, size and industry.

It’s beyond the arithmetic: It’s the WHY

Perhaps you are lucky enough to be able to remember all of the numbers and to recall not only last quarter’s revenue, but also the prior four, the targets and what percentages of attainment you had. Perhaps you can do calculations in your head to say what 104 percent of your goal would be down to the penny. If so, congratulations; you have a gift that will help you in an Operator’s world. If you can’t, that’s okay. That’s not what we meant by “Know Your Numbers”.

An Operator needs to know:

1. Which numbers are important
2. What those numbers “should” be
3. How to calculate them in detail
4. What can cause those numbers to veer off course
5. What actual results tell you to do differently

Many Operators will stop at the first three. World-class Operators push to deeply understand, communicate and impact the last two. Understanding what the drivers are for a business will help you track the right things. Understanding what the indicators are telling you about your business is how to create a high-achieving, predictable and scalable revenue machine.

Knowing your numbers is actually understanding the why of your numbers. If revenue is flat, do you know why? Was it a particular segment? Was it volume? Was it price? Was it new business or exist­ing business? The answers to these can help guide you on what to evaluate or possibly change.