Definitive guide to Revenue Architecture: Part 4 - Revenue Architecture in Practice
Definitive guide to Revenue Architecture: Part 4 - Revenue Architecture in Practice
How to put frameworks to work in your day-to-day
👋 Hey, Toni from Growblocks here! Welcome to another Revenue Letter! Every week, I share cases, personal stories and frameworks for GTM leaders and RevOps.
This is the final part of a four-part series on revenue architecture. Through these posts, I’ll provide structured outlines, core frameworks, and models that will help you grow in today’s new SaaS environment.
Part 1: A framework for recurring revenue
Part 2: Metrics matter (until they don’t)
Part 3: Your model defines your motion
Part 4: Revenue Architecture in Practice - This post
Want the whole series in one place? I’ve put together the entire first draft for you. Get your copy here.
When I began writing this series, my ultimate goal was to help you build a better GTM engine and company. And the feedback so far has been overwhelming.
The previous posts focused on providing you with some in-depth theory and some context to leading GTM frameworks today (and how they work together). But with my goal in mind, this series is missing one final piece: How to actually apply these frameworks in your day-to-day.
That’s what this final chapter is about.
Where to start?
Shantanu Shekhar from Gong once told me that in order to figure out how to climb Everest, you first need to figure out where you are today. Are you at base camp? At the bottom of the mountain? Or already halfway to the summit?
So let’s start with exactly that.
Take your GTM and start by unblending it into separate GTM motions. An example could be a simple 2x2:
Now, calculate the CAC Payback for each of those motions. To get a head-start on how to actually do that check out my guest post here.
Depending on your ACV and the ARR of the motion, you can place these dots on the plot chart above. Yes, Insight Partners doesn’t have the data to split it out into motions, but this is still super helpful for you.
In essence, this exercise tells you if you have GTM-fit for each of your motions.
Chances are that some of your motions will not compare well to the benchmark in the chart above. When they don’t, this will be a great place to start.
You can do all the above also with LTV-to-CAC. But I suggest to start with CAC. It’s easier but already hard enough.
Let’s move to impact things
Congrats, you now know where to focus. But that feels like a SystemAdmin RevOps achievement. You can’t stop before you’ve moved the needle.
In the next step, take each motion and break it down into its bow-tie fundamentals: their operational metrics (volume and processing). To do that follow the logic of how CAC and ARR is being broken down as a metrics tree.
In its simplest form, ARR really is:
Opportunities * Average Contract Value * Win Rate * Time = ARR
Now, in order to get more ARR for each of your motions, start thinking hard about how you can impact each item in this formula.
Many of you might point out that there are also steps before Opportunity. That is correct, please feel encouraged to add these to the formula above. ALL of these metrics can influence ARR.
In the end, this will roughly look like this:
Next, the “easy” but expensive solution: Add more Volume.
This usually means more ads or more outbound reps. But in today’s world that can’t be done infinitely anymore. And it most likely will only partially improve your CAC Payback for that motion.
The “hard” but cheap solution: Improve processing Metrics
This usually means looking at all your processing metrics, of which you will have a lot - if you write out the formula to its full extent. Then, look at each of those metrics by motion to figure out how you could improve them.
Then attach real-world initiatives to move them. Those initiatives can be as simple as implementing a discounting hierarchy to fight bad discounting habits. Or it can be as hard as releasing a new feature that helps improve your conversion rates.
But generally speaking, improving your processing metrics comes with very little (or sometimes no) costs - at least when it comes to CAC. And what's even better, these changes continue to benefit you long after you implement them (Though the downside is that it usually takes 12 months to see those improvements).
And if you do this famously 7 times for 10% improvement across your motion, you will double its output without adding a dollar to produce more volume.
One massive challenge here is obviously fetching and crunching those numbers, and usually not only once but ongoing.
We know what to do, now what?
Unfortunately, you still haven't gotten anywhere. Crunching data is not having an impact, and even running wonderful executive meetings won’t solve anything. The real impact comes from execution.
This is where Marketing, Sales, and CS Leaders really need to be brought on board.
If you as a CRO or RevOps want to achieve anything, these folks will be the ones actually doing it—if not their reports further down the org.
So how do you do that?
You need to get them into your thought process. Make them part of it. This sometimes requires them to understand the bow-tie logic - and sometimes this can be a challenge. But as you hit or go beyond $10M - likely these execs will understand that you are closer to being a factory than an artisan shop.
What you’ll do now, is actually decide which initiatives you as a team want to drive. Usually at this stage, everyone will have many ideas.
Here I always encountered two separate issues: 1) time for RevOps to help execute and 2) figuring out which of the initiatives drives the biggest value.
For me, the first point always ended up getting me budget from each of these departments to hire more RevOps folks - so maybe you copy that approach.
The second point was always a struggle especially since not everyone has a GTM engine in their heads to figure out how much money this could maybe be by when.
So we decided to solve this with Growblocks. We made it super easy to run a what-if on initiatives impacting the funnel. Be it tons more MQLs, or improvements on CVR or ACV (or really, any other metric).
Once you have gone through this process and locked in what the team wants to focus on, you will want to make sure you track what has been agreed upon.
I myself - many times - walked out of those sessions happy about the outcome, just to see little to no follow-through afterward.
This way - when executing - you have the overview of what you want to do and what is expected to drive how much of your revenue.
And finally, you are about to enter the messy middle of getting from basecamp all the way to the summit of Everest.
The Messy Middle
You know what needs to happen, you know who needs to do it. You can even track the specific improvements. But now, you want to make sure you can keep following the progress each of the motions are making. This means you will want to follow along with how each of the bow-tie metrics connected to each is performing.
What’s worse, while you’ve spent a lot of time figuring out what needs to happen, you’ll get nervous about them. Sure, they may be in the green for now… but will they stay that way?
I at least had that paranoia creep up on me many, many times.
It resulted in me and the team checking and rechecking 100s of charts almost weekly. Really making sure nothing and no one is dropping the ball while we are all super focused on moving the needle on those 2-3 projects we selected.
Because, don’t forget: While you are working on those improvement projects, 95% of the revenue will still come from all the work you have already done for years.
While failing improvements may break you eventually, messing up what is currently working will definitely result in disaster. So far, many teams try and use several reports, dashboards, and spreadsheets to try and tame the chaos. All the while working up some serious anxiety about potentially missing something that will hit them hard later on.
At Growblocks, we decided to bring all the pieces of the funnel together in one simple view:
This tracks everything in your GTM engine and flares up red when something is not going as expected. It can either be your projects you are focusing on or the bread and butter you took your eyes off for too long.
At least for me, having this tech run in the background would have helped me as a CRO sleep a lot better. And as CFO, I would simply be less surprised. Which is worth a million bucks in the current environment.
At Growblocks, we obviously decided to go even further than this. Using our prediction engine, we can even give you alerts for issues that haven’t even happened yet, giving you and the team more time to jump in and fix things.
Do it all with Growblocks
The uncomfortable truth is that getting these fundamentals right is not just a luxury anymore. It’s crucial in this current SaaS environment. We compiled this series so you and your team might have an easier time.
But I’ve also done all of this work myself, so I know how hard it can be to apply it to your daily life. It’s the reason the team and I built Growblocks - a solution I wished I had when I ran RevOps.
Growblocks does three simple things for you
Bring all your metrics across the full funnel into one place
Predict your revenue and your metrics to make big decisions earlier
Make it super easy for you to identify performance issues and their root cause
If you want to see how that works in detail, we’re going to be hosting a group demo next week on April 18 @ 11 am CEST
Sign up here to see Growblocks in action.
Keep Reading
None of the information (or very little) in this entire series is truly new. It is merely a collection of the incredible work other people have done already. Hopefully, it’s enough to help you apply these theories and frameworks to your GTM and company in your day-to-day.
But of course, there are plenty of other resources if you want to keep digging. Here are a few I recommend: