RevOps needs to move

The case for RevOps to work under finance

👋 Hey, Toni from Growblocks here! Welcome to another Revenue Letter! Every week, I share cases, personal stories and frameworks for GTM leaders and RevOps.

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• The definitive guide to Revenue Architecture series

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Before I get into the article today, I wanted to share some big news.

Growblocks has been featured on the RevGenius Next 50 GTM Startups list. It’s made up of killer startups changing the landscape of SaaS Go-to-Market.

And we got ourselves an award to show for it (even though we had to buy it ourselves).

You can check out the entire list here.

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I’ve always been a big proponent of RevOps reporting to the CRO.

But lately, I’m seeing more and more signs that make me believe that the CRO isn’t the right spot anymore.

Sorry to all my CRO friends!

The problem is simple, we’re still too focused on NewBiz. 

And it kinda makes sense. It’s what we’re being measured against and incentivized on in almost all cases. 

But the problem is, just because your comp plan is wrong (though, you should really fix that) that doesn’t mean you have an excuse not to adjust to the new times. 

Closing a new customer is great. 

BUT:

• Did we acquire that customer efficiently? → good CAC:Payback

• Is this a “good” customer to have? → good CAC:CLTV

If you either don’t know or don’t care, I’m sorry to say, you don’t have any business being a CRO in 2024. 

And since this is very much the case, I am starting to turn around and say that RevOps should maybe rather report to the CFO. 

An argument for the CFO

Every single CFO that I have talked to cares about those metrics up there. A lot. 

The CFO, often, just lacks a good enough understanding of the commercial side, something RevOPs can bring to the table. 

CFOs don’t only care about sales, they care about the end-to-end process. Again, a better place to live for many RevOps folks. 

And while the basics in the CRM need to be working, the CFO will ask you questions like:

“How can we improve our CAC Payback?”

“Do we need so many people to be efficient?”

“Where can we use AI to get faster or cheaper?”

While those questions sound innocent, they are actually quite strategic. 

And that is the main reason why I think RevOps might have a better home under the CFO: 

RevOps will be used in a MUCH more strategic way. 

And let’s take a step back to make a point here: 

Just take a look at how so many companies have been reacting to increasing CAC Payback numbers.

They simply start slashing CAC across the go-to-market. 

Basically saying, in order for us to get back to a somewhat healthy CAC Payback ratio, we need to decrease the cost rate by 20%, 30% or 40%.

So they go to every VP, and tell them they need to cut by 40%.

While this may be easy for change management, it’s pretty dumb in terms of revenue efficiency.

They’re not reconfiguring their go-to-market engine. They just decreased its size & output while keeping CAC:Payback exactly the same. 

If you had a revenue operations person in there during the decision-making, instead of 40% cuts across the board they could do a CAC Payback analysis.

Unblend their payback period and then split it by different regions, motions and channels, and then shift resources away from what isn’t working into what is.

This can get pretty complicated, and you can use a tool like Growblocks to help you. But I’ve also made a template spreadsheet to get you started.

Growblocks’ upcoming business metrics release makes CAC:PB analysis a breeze

“But hey, Toni, I am a CRO and I don’t want to lose my right-hand team. What would need to change?” 

An argument for the Modern CRO 

I think there is a way to turn things around for CROs. 

Step 1:

I think what CROs need to realize is that the CFO and CEO look at your function as a way to generate a customer base. 

That’s actually what they want: Customers and Revenue. 

Not the sales and marketing engine producing it. 

So if the engine is starting to produce a low-quality customer base that is churning a lot. Or an engine that is producing a customer base at an insane cost. 

Then they will look for ways to change that. Including the leader of those functions. 

Step 2: 

You need to chat with your CEO and CFO about changing your comp plan. 

Because you can’t be asked to work against your own interest. 

You simply need a comp plan that covers all of revenue. 

I can only recommend getting a “Net New ARR” metric as your comp target. Including Newbiz, Upsell, and Churn. 

Step 3: 

Understand what drives CAC:Payback in the right and in the wrong direction. 

It’s not about obsessing over budget numbers. It’s about knowing which changes in the engine will result in good or bad CAC:Payback. 

Step 4: 

Embrace the full funnel as much as you embrace your pipeline. 

Once you broaden your view, you will see so many more ways to improve the business to tweak up CAC:Payback and CAC:CLTV. 

And activate RevOps to help you with that. It’s the same thing CFOs are doing too.

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On The Podcast This Week

• We think we need RevOps because of systems, tools, and data. But there are a few other very important reasons out there, that not enough people are talking about.

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