According to Bloomberg, investors doled out about $621 billion to startup companies worldwide in 2021.
According to Crunchbase, over 12 months in 2021, investors put $329.5 billion (!!) into startup investments across all stages in North American startups.
However, there are visible signs of a funding drop in 2022 owing to the macroeconomic situation.
Per Bloomberg data, second-quarter funding fell 26% quarter over quarter. The funding stage most impacted last quarter was late-stage and technology growth funding.
No wonder the boards have gotten more analytical and request detailed information about business metrics.
In this blog, I want to take a stance on how conversion metrics are critical for venture-backed startups and, more so, in the current environment and how you break it all to build a GTM plan.
Amateurs Talk Strategy. Professionals Talk Logistics.
Amongst my absolute favorite quotes in operations is the one from General Omar Nelson Bradley, a World War II veteran of the US Army. He famously said:
“Amateurs talk strategy. Professionals talk logistics!”
If you take a moment to grasp it, what the General says makes sense. What is strategy without a concrete step-by-step logical & logistical plan on how to get to the goal? Nothing. And that is why businesses devised meetings. One of the critical weekly meetings in any organization is the sales and marketing meeting.
What happens in the Sales & Marketing meeting?
Before we get to what happens in a Sales & Marketing meeting (S&M meeting), let’s decipher what is important to each of the participants in this meeting.
For marketing, the ability to present where their efforts have gone in and how many leads, and how much pipeline and revenue came out of it is crucial.
Knowing if there are enough qualified leads for sales to generate a quality pipeline and deliver revenue is critical.
Traditionally by the very nature of how Salesforce and Hubspot - the two big CRMs evolved their product, it has never been possible to dissect the entire GTM funnel right from visitors on the website to deal closures in one place.
Marketing wants to know:
- Which Campaigns are working out well?
- Are the ICPs we identified working out?
- What happened to the MQLs they generated?
- Is the MQL to Pipeline conversion healthy?
- What Demand Generation activities are the most efficient?
- Which events are not working out?
- Are there new ICPs emerging in the data?
Sales want to know:
- I signed up for a million-dollar quota. Do I have enough pipe coverage?
- Historically, what were the win rates in the region I signed up for?
- What regions have the best SQL to SAL conversion?
- What contact titles have converted the best from POC to Pipeline?
- What industries have not worked out in LATAM?
You see, each of these functions has precise questions in the funnel. And they cannot be addressed on Salesforce or Hubspot. Your RevOps has to fall back to spreadsheets because there’s no way to answer these questions on an application.
Micromanage Your Business Metrics
If you think about it, you will see that if marketing and sales reps micromanage their lead gen and their pipeline, then marketing and sales leaders will micromanage campaigns, forecasts, and business metrics.
That is an excellent place to be, but hard to get to.
Your marketing and sales teams need the ability to see what is working and what is not. This is the role of the MarketingOps and SalesOps teams. Arm them with a tool to build insights and validate hypotheses, which is a win for the org.
Let’s See Numbers In Action!
CloudTrain has a $50M sales target for the year. Historically the company has had a 20% win rate. Their Average Selling Price (ASP) has been $18K.
Sophie joins CloudTrain as an Enterprise Account Executive in the LATAM market and owns a $5M target for the year.
Question: Did Sophie sign up for success or failure? Will she be able to hit the goal?
Here’s the catch. For you to be able to answer that question, you need to know a few precise numbers.
- What is the win rate for LATAM?
- What is the ASP for LATAM?
- What is the conversion rate from SAL to Win?
- What is the conversion rate from SQL to SAL?
- What is the conversion rate from MQL to SQL
- How many MQLs has DemandGen promised for LATAM?
Let’s say the RevOps team works through half a dozen spreadsheets to understand what the conversion rates for CloudTrain in LATAM look like and what the historical ASP has been.
Basis their budget and campaigns, marketing at CloudTrain has promised to deliver 4200 MQLs for LATAM.
However, using this information, we could calculate whether Sophie will hit her goal.
Take a look at the calculations on exactly how many SQLs, SALs, and Win deals Sophie will hit basis the current conversions.
Sophie has signed up for failure. She will see a shortfall of $455K from her goal.
We explained the math and also included a funnel simulator in this blog. There’s a funnel simulator (calculator), too, where you can punch in your numbers to see exactly how many deals you need to win, among other pipe metrics.
While the above math helps, there are two fundamental problems for any growth-stage company scaling fast.
- The above method is reactive. Your RevOps is spending days together to collate data from half a dozen spreadsheets to arrive at this math. By the time it was delivered to you, it is marginally stale from what is happening in your markets.
- This method delivers static numbers but cannot help you strategize where to focus. Sure Sophie’s going to miss her quota by $455K. How do you fix that? What levers to move? Are those even the right levers? Should marketing spend more to get more MQLs? Is DemandGen attracting the wrong ICPs in LATAM? Can sales better their pipe-to-win rates? Do we know which events performed best? Which campaigns?
All of that and more is impossible on spreadsheets. For a high-growth company, good data is an advantage. But what separates winners from losers is how fast you execute that data to action. And for that, you need very granular data that not even a four-member dedicated data analysis team can deliver. They would always act once the data is logged and not identify emerging patterns amongst hundreds and thousands of variables in your systems. It is humanely impossible.
Salesforce Research’s most recent State of Sales study highlights an important insight.
88% of reps say current economic conditions make it essential to anticipate customers’ needs. Across the board, high-performing organizations track these insights much more closely, using them to flesh out a holistic picture of who customers are and what they need.
Rigid deal terms that worked historically may need revision as customers buy more cautiously. Leaders recognize that flexibility is vital, rating it as their top tactic for success over the next 12 months. Despite some fears, AI isn’t displacing human talent in sales. AI-fueled sales teams are adding headcount at a faster pace than their peers!
At RevSure, we spoke with dozens of CROs, CMOs, DemandGen, and RevOps leaders. Predictability across every stage of the GTM funnel and insights on what is working, converting, and what is not are top of every leader’s mind. They all need a Robin to their Batman - a force that amplifies their efforts.
We heard them. We built it at RevSure!