I have had a bunch of exits in my career. But all has not been smooth sailing. From talking with other marketing leaders about their failures, and also thinking through the issues I have had over my career, a lot of the issues have come about when as a new marketing leader, you fail to figure out fast enough where marketing is actually driving revenue. This is critical, since if you don’t understand what is actually working down to the details, it is very difficult to figure out how to pull the right levers to get growth going. Pulling those growth levers takes time, and time is something you may not have depending on what is actually happening at the company. Many CEOs without marketing experience assume that you can just spend your way out of everything. That just isn’t the case.
So here are my six steps to use to understand what is actually happening with revenue and the impact on marketing.
- Ignore the sales forecast – To start this exercise, you need to ignore the sales forecast no matter how glowing it might be. The sales forecast is at too high a level to do you any good and can lull you into a sense of “everything is ok” when it is not.
- Understand the five funnel cohorts – Starting from the bottom of the funnel, start to work backwards seeing what you can understand and not understand from the data presented to you.
- Get to the true nature of revenue generation – it is important to get to the true nature of revenue. The following list of items might be getting reported as “revenue” or “sales growth” but in fact can mask underlying issues:
- Bookings – bookings can mask all kind of issues especially when bookings are multi-year, or for products that aren’t shipping yet. It is OK to tie marketing to bookings, but be careful that you understand what you are actually tracking. Bookings make me nervous since boards may not care about them.
- Bookings backlogs vs. actual shipments – especially in hardware companies, you can take bookings for future products. This can mask the actual effectiveness of your operations.
- Expansion of existing opportunities vs. net new revenue – There is a huge difference here between landing net new logos or divisions of existing companies and just getting more licenses into an existing account. Unless you are careful here, you can fool yourself into thinking that marketing efforts are driving net new revenue.
- Multi-years – Sales teams love multi-year deals especially if they get comped on all of it upfront. Be careful here to really understand what is happening with revenue generation and be careful to split out what is a multi-year rollup from net new logos driven by marketing.
- VAR sales, demo sales and other non-customer revenue sources — careful about sales to channel partners obfuscating actual revenue growth
- Get to the source data – When you are doing #1, #2, and #3, make sure you get to the source data to prove to yourself you can show causation between marketing efforts and some portion of the revenue. This will also make you get personal with the data structure and the amount of data you have available to work with. Modern B2B teams are data rich, but poor in analysis. By the end of this exercise, you will understand your blind spots. There are always blind spots requiring some assumptions but getting everyone on the same page of revenue scoring is critical. This is perhaps the toughest item to accomplish since it involves getting finance, sales, sales ops and marketing on the same page.
- Decide if you are in a growth, turnaround or steady state situation – This is probably the most important decision you will make and it must be based on all the above factors. No matter what the sales forecast is saying, you need to determine what is actually driving revenue and make the call on how you will be operating. Sales is looking quarter to quarter for revenue from any source. Marketing needs to be looking several quarters out, understanding exactly what is driving revenue.
- Get the CFO, the CRO and finally the CEO all aligned on what is happening. Only then can you take action and move forward.
You have about 90 days to raise any red flags you see in this area and to come up with a plan to correct operations.