When Do Startups Transition From Sales Targets to Revenue Ops?
Business-to-business (“B2B”) startups begin their journey by targeting potential customers for product fit before building out a pipeline based on product trials, pilots, or proof of concept (POC). This is an exhilarating time for founders working closely alongside the CEO, themselves serving essentially as the company’s chief sales officer (CSO).
The company next moves into a phase where sales executives are hired and regional coverage of U.S. markets begins. Sales energy is directed to the major customer segments, like banks in NYC and San Francisco, tech firms in California and the northeast, or large manufacturers in the Midwest (e.g., Detroit auto manufacturers). Additionally, these companies might target secondary clusters of tech companies—in particular MSFT and AMZN—located in Seattle, or organizations like Texas oil companies, Walmart in Arkansas, or Southern California tech companies and banks.
Strong networks, excellent products, a compelling value proposition, and strong compensation packages for their sales force can help a startup assemble a large stable of customers producing predictable revenues (“it’s all about the cash flow, baby”).
It’s impossible to overstate the importance of this transition to higher volume sales and growth of the customer base, not to mention the size and variety of their purchases. It’s a difficult milepost to achieve and requires strategy and the concerted efforts of marketing, customer service, and the F&A’s back-end. Boards of Directors often offer strategic and tactical suggestions, like adding a “deal desk” and transitioning to Revenue Operations (RevOps).
RevOps are data, software (especially “martech” and CRMs) and other systems (like data lakes) which maximize business revenue potential by combining technology and the unified management of marketing, sales, F&A back-office, customer service, and other processes. Its goal is to provide more personalized and efficient customer experience at scale.
Before the adoption of RevOps, two key operational systems empower the maturity of the emerging startups:
First, the “bottoms-up” forecast and a Go-to-Market (GTM) plan. These tools must be handled carefully, like a woodchipper: You don’t want to throw anything in that threatens to break the system, although generally they are very productive tools. Experience shows that these tools become easier to use each year while also becoming more complex.
Second, heavy involvement of investors and advisors in this early stage. Many early sales opportunities come from work-related and partnership networks, among other relationships at play. Some of these early customers are perfect for use cases, case studies, references, and ultimately customers. They often become so-called “lighthouse” accounts showing the way to increased market share and more customers of a similar type.
The shift to RevOps from sales targets and bottoms-up analyses is driven by the expanded requirements of finance, sales, and marketing as the company endeavors to scale. The friction that occurs between strategy development and actual sales also plays a role.
The sales target-to-RevOps transition is hard to time precisely but it is almost certainly post-Series A funding at the latest. Advance preparation – during the later seed stages – provides for smooth future transitions by readying the company for more rigorous sales administration and processes beyond one-offs.