Every CEO strives to maximize revenue, but at some point, they face the difficult challenge of missing a revenue target. The target may be self-imposed or approved by a board, but in either case, one thing is clear: your current revenue engine isn’t delivering the growth you expect and something needs to change.
When setting revenue targets the key metric to consider is revenue growth. By looking at historical growth rates, you can more accurately forecast next year's numbers. Revenue growth is a top driver for exit valuation because investors, executives, and equity holders all want their equity value to increase. Additionally, revenue growth increases free cash flow that can be reinvested in the business, creating a virtuous cycle for growing a company.
Whether you are grooming your company for a life-changing exit, trying to maximize revenue, or grow your free cash flow, the underlying reasons for underperforming against revenue targets are often the same.
The top 3 reasons for missing revenue targets
You may expect the top reason for missing your revenue targets to be an underperforming sales team, but unfortunately, the problem usually isn’t that simple. After helping many companies overcome slow-growth issues, I’ve found that the underlying problems most SaaS businesses face are almost universal:
1. You are selling the wrong value proposition to your prospects
Finding the “Voice of the Customer” is the process of interviewing current customers and lost prospects to understand their pains, goals, and decision processes. By interviewing both types of people you can learn a lot about important factors that drive decision-making.
Unfortunately, most companies look to the sales team as the conduit between customer and product when making important strategy and roadmap decisions. This is a dangerous precedent to set as it gives sales undue influence over the product roadmap and can result in major strategic decisions being made because of one or two isolated data points. Remember that the sales team is driven by short-term quotas and is usually not focused on the medium or long-term growth of the organization.
Other companies rely on a small counsel or “brain trust” to make important strategic decisions. While each member of the brain trust is an expert in their own area (product, sales, customer success, marketing) they are often still removed from the end-user. They are not the buyers and users of your solution and have their own biases that will cloud their judgment.
Admittedly, planning and executing “Voice of the Customer” interviews is a challenging and delicate process, but it is absolutely vital to truly understand the value your product provides and how it should be positioned in the market. Hiring an external consultant experienced in this process is often the best way to get the facts and maintain objectivity through the process.
2. You aren’t communicating your unique value or product differentiation
Take a look at your website, your sales materials, and brochures. If they are filled with lists of product features and technical jargon then you may have a problem. To connect with your future customers, don’t hammer them with all the things your product does. Instead, create your content with the Voice of the Customer in mind. Put yourself in their shoes and think about what you care about when you shop for software. Customers are looking for solutions to their real problems, not lists of features.
If you haven’t crystallized your unique value proposition and differentiators, then you aren’t prepared to solve this problem. The Voice of the Customer process reveals customer pains, unique use cases, key stakeholders, and other important data. The results you gather should be directly applied to communicating your solution to their problems. You will likely find that your 5-page description of technical product features is not the compelling tool you think it is, and only serves to confuse your prospects.
The next aspect is to understand how prospects learn about solutions. Understanding this allows you to prioritize the materials you need and how to get them into the hands of your prospects. For example, in B2B SaaS you will often see the marketing team spending hard-earned money on Facebook and Twitter ads, but can you actually trace any of your closed deals back to either source? If you ask your prospects about how often they use Facebook and Twitter to learn about business solutions, you’ll get your answer. By identifying where your prospects hang out, what they read, who they trust, and how they shop, you can tailor your communication strategy to match the behavior of your customer.
Ultimately you should strive to create a shortlist of sales and marketing collateral that is value and use-case driven. This content can take the form of product datasheets, case studies, whitepapers, or blog posts and should reinforce your unique selling proposition. A potent blend of customer testimonials and consultative selling is a winning combination that will help jump-start revenue generation.
3. You can’t reach enough prospects who have the problem you solve
Unless your product sells itself, your sales team is vital to maximize revenue. If sales doesn’t get enough quality leads and pursue them effectively, then two things will occur.
1. The sales team will struggle to meet their quotas, and your company will miss revenue targets.
2. Your lead-to-close conversion rate will not be high enough to sustain company growth.
Velocity matters. You need an engine that can produce qualified prospects at an effective cost. Investors like to see customer acquisition costs (CAC) no higher than 30% of life-time value (LTV). Keeping sales costs low and scalable is important, which is why you need a data-driven SDR team that continually supplies your sales reps with qualified meetings.
Unfortunately, hiring and training an SDR team is both time-consuming and expensive. By outsourcing your lead qualification function to a turn-key company, you can immediately start hunting for your ideal prospects. This frees up your sales team to focus on what they do best, selling your solution.
The Voice of the Customer research, combined with potent, value-driven communications and collateral will arm your sales team with an arsenal of material they can use to effectively close the deals delivered by the SDRs. Your marketing team can also build on the research and share it with leads to help them progress through the funnel. With the right targeting, message, and materials, your close rates will rise. Your team will be talking to the right people in a language they understand about the problems they care about.
Maximize revenue and never miss another target
Missing revenue goals often leads to a lot of finger-pointing and falling confidence. When it happens repeatedly you need to take action to find the problem and correct it. The building blocks of SaaS revenue growth aren’t magical, they require several inter-related skills and a scalable process.
If your team is already running at full capacity, an external team can be the shot in the arm your business needs to get back on track. If you would like to learn more about how the SaaS Sales Accelerator can help increase revenue growth and drive qualified leads, contact us for a free assessment to learn if your company is a candidate. Email Jeff@thecuriepoint.com or call (949) 357-0678.