For far too many businesses, scaling the company has come to mean adding headcount. Although growing your business can certainly entail growing your team, it’s a mistake for leaders to think that hiring more employees is necessary for scaling.
They can fall into the easy trap of hiring more reps to support more customers, only to have hired too many employees too fast, leaving them with a bloated workforce.
It is my perspective that most companies do NOT understand technology and strategy enough to scale properly. Economic downturn aside, hiring too many reps has always and will always add a ton of bloating to your processes and inefficiencies to your P&L… hence the #1 leading reason for turnover in rev ops and sales leadership.
Internally built revenue engine programs: AK Operations
Business leaders need to remember that the ultimate purpose of scaling is to bring in more revenue, which is why leaders should look at their processes and their great people. First, let’s augment our great people with strong processes - then hire like crazy (and confidently) into a well-oiled revenue engine. Now, that’s scaling.
Our world has tricked us into thinking growth and scaling is in artificial success metrics like headcount and the number of locations. These "posture metrics" frustrate the hell out of me as a business owner. I drink my own Kool-Aid here: I have a tight team of badass women with an incredibly strong process for sales and operations, but our growth (in terms of press) is totally under the radar.
Aside from our own journey of repeatable profitability, we’ve served so many companies who have stayed lean from the beginning or went through massive layoffs and re-calibrated with us. That’s why I’m breaking down what scaling actually requires, so growth-mode companies can drive their profits even through these economic uncertainties.
The (Timely) Rise of Rev Ops
Rev ops is an undeniably hot topic and the #1 job talked about on LinkedIn right now. Rev ops depends on data and metrics like unit economics to determine the health of the business. Every growth-mode company understands its unit economics and SaaS metrics.
I’m not going to pretend to be the authority on unit economics or SaaS metrics, but I'll touch on it briefly because I want to share the massive oversight of the process and programming in marketing and sales that effectively and efficiently support the CRO's metrics.
Unit economics are a powerful tool to help forecast profits and assess market sustainability and essential for all revenue leaders to know like the back of their hand. Sam Jacobs, Founder and CEO of Pavillion, has a great, legacy article on LinkedIn and recently covered these principles with hundreds of revenue leaders in CRO School, which I am fortunate enough to attend every week:
- Customer acquisition cost (CAC)
- Gross margin per customer
- Payback period
- Lifetime Value (LTV) (Gross Margin/Churn)
- LTV : CAC
Once you calculate the revenue health of your org, you understand the current cost of acquiring new customers. This is the pulse of the health and success of your current sales org. Now, leveraging that data requires good marketing and sales operations (or as I refer to it, a Rev Engine program) to maximize profits, roll up the strategic data you need, and enable your great people to work the right opportunities. Without this “machine,” your unit economics are just that… data.
…Rev Ops meets Rev Engine.
Salespeople are the most expensive way to generate demand.
Without a demand engine supporting our sales org, we’re relying on our people to generate demand… which always fails, never scales, and can be complete chaos. People do not create demand - content and nurture, awareness and education create demand. And a process of automation makes the experience meaningful and consultative.
Unfortunately, I see this happen all too often: startups begin with a few initial reps that are successful at closing deals. Then, they rapidly hire a couple more reps and don’t see the results they were hoping for but now have additional salary and benefits to pay.
The bottom line is that businesses need to build a program that enables their sales reps to hit their targets.
A good revenue engine relies on math.
A good marketing/sales leader loves math. Math works. Math makes us confident. Math tells us where we are and where we’re going - good or bad.
Some GTM people are really terrible at the discipline of calculating the math to validate a strategy, identifying their true targets, and then designing a demand program to enable the sales teams. This is why most startups fail. I see Seed to Series A companies fail at this all the time. They're crucified if they don't know how to do it or if they do it wrong.
The key to scaling is a good Revenue Engine, the top funnel program that combines both operations of automation with creative campaigning and enablement of the sales reps. The rev engine program contributes to the efficiencies of your sales team and maximizes your company’s repeatable and profit growth.
Rather than pluck numbers from thin air and expect sales to create demand and hit these goals, companies need to start with realistic math. Starting first with their Total Addressable Market (TAM), the entire prospect pool for a revenue opportunity. This should, at minimum, include every member of the buying team as well as influencers from all the companies that fit within the industries you serve best.
Then you need to figure out your Sales Addressable Market (SAM). These are the “middle of the fairway” (as Sam said) targets for your sales strategy. This is a segment of the buying team from the companies and industries you serve best. Remember, especially in enterprise sales, the initial contact is rarely your signer. They both matter a ton to the strategy, but your SAM will include prospects who likely live the pain you solve so much that they’re the ones to get the partnership started. Then, good reps penetrate the entire team in a consultative manner by building rapport and nurturing the full buying team.
Remember, if you solve a real problem and you’re targeting the right people, you’re not selling, you’re solving - you’re not a rep, you’re a partner. Once you’ve nailed your SAM and the rev engine is flowing, start pivoting 10% off the fairway with little tests. This will help you determine the most profitable, promising direction to go next.
Once you have realistic goals to hit, you can work backward through your revenue engine and calculate how many prospects you need throughout the marketing and sales funnel. A good revenue engine relies on the math to direct strategy pivots, giving leaders ultimate confidence in their processes.
Hit goal conversions % throughout (Lead % MQL % Meeting Booked % Qualified % Late Stage % Win), and now you have a repeatable program. Dial in your best channels and people—now you’ve achieved repeatable profitability!
Stay Leaner, Longer
I’m a firm believer that math dictates strategy.
We all know a great company is not those posture metrics, but rather one that can be profitable and repeatedly generate a return on invested capital. AK Operations’ place in the market is strong because we base our entire approach on profitable scalability..... and math. Our partnership allows our clients to stay leaner longer and grow based on math and metrics. It takes a unique partnership with a ton of urgency, an obsession to win, and discipline in our GTM techniques, but these are the reasons clients have coined us the “best money” they’ve ever spent.
Interested in chatting? My calendar is below.