“It’s hard!” I hear you.
Growing a company is hard work.
There are many moving parts, and it can be difficult to know which levers to pull to generate the most impactful results.
What’s even more challenging is trying to decipher which metrics actually matter when making decisions that will grow top-line revenue.
The truth is, there are a lot of B2B SaaS metrics that could potentially matter – but only a few that will actually make a significant difference in your company’s top-line revenue growth.
So, what are these “magic” metrics?
Let’s take a look.
The Four B2B SaaS Metrics That Matter Most For Growing Top Line Revenue
The four B2B SaaS metrics that determine how fast you can grow your company’s top-line revenue are:
- Sales Cycle Length (Days)
- Win Rate (%)
- Average Deal Size ($)
- # Qualified Opportunities Created
However, most people are only focused on pulling the fourth lever – Qualified Opportunities.
“We need more leads!” – A phrase commonly heard in board rooms and company-wide meetings.
But what most of these decision-makers don’t realize is that cutting your sales cycle length by 50%, increasing your win rate from 12% to 24%, or increasing your average deal size from $15k to $30k – is just as effective (if not more) in growing your company’s top-line revenue as doubling your leads.
Not only that, but making decisions based on these metrics will also give you a much clearer understanding of what’s working and what’s not, so you can continue to make adjustments and grow your company even more effectively.
Let’s take a look at each of these metrics in a little more detail.
Sales Cycle Length (Days)
Sales Cycle Length is the number of days it takes to move a customer from initial contact to a closed deal, divided by the number of deals closed.
In other words, it’s the average amount of time it takes to close a deal.
The shorter your sales cycle length, the faster you close deals and the more revenue you generate. That’s why shortening the sales cycle length by even a few days can have a huge impact on your company’s top-line revenue.
Win Rate (%)
Win rate is the percentage of deals won divided by the total number of deals.
This is one of the most important B2B SaaS metrics for growing top-line revenue because it directly impacts the number of deals you close and it means that the leads you’re generating are actually sales-qualified and worth pursuing.
If your win rate is low, it’s a sign that you’re not generating enough high-quality leads or that your sales team needs more training on how to close deals effectively, but in most cases, it’s more because of the low quality of leads than anything else.
Average Deal Size ($)
Average deal size is the average amount of revenue generated per deal. It’s the total revenue generated divided by the number of deals closed for the set period of time.
Looking at your individual deals and understanding which ones are higher quality than others is important for a number of reasons, however, when it comes to growing top-line revenue, the average deal size is what you should be focused on.
Although the average deal size largely depends on your industry, product, type of customer, and so on, in most cases, there’s always room for improvement.
Even if it’s just a small increase, growing your average deal size will have a direct and significant impact on your company’s top-line revenue.
# Qualified Opportunities Created
Qualified Opportunities Created is the number of qualified leads that you generate in a set period of time.
A lead is only considered qualified if they meet certain criteria that you’ve set in order to be a potential customer.
For example, a lead is only qualified if they’re in your target market, they have a need for your product or service, they have the budget to make a purchase, and they’re ready to buy.
If a lead doesn’t meet all of these criteria, they’re not qualified and you shouldn’t too much time or resources trying to close them.
Creating more qualified leads is very important for growing top-line revenue, no words. But as we’ve seen, it’s not the only B2B SaaS metric that matters. Too many companies are so focused on generating leads that they’re not doing anything else to grow their top-line revenue, and the leads they are generating aren’t always high quality.
This is a much bigger problem than you might realize. Why? Let’s talk about it.
The Problem With Only Focusing On Generating Leads
In most companies, the marketing department’s primary responsibility is to generate leads and hand them off to sales. And in most cases, the only metric that marketing success is measured on is the number of leads generated.
This creates a few problems.
First, it leads to an over-emphasis on generating as many leads as possible, regardless of quality. This is because the more leads you generate, the more likely it is that you’ll meet your lead generation quota.
Second, it leads to a disconnect between marketing and sales. Because marketing is only focused on generating leads, they’re not thinking about what happens to those leads after they’re handed off to sales.
Because marketing is only focused on generating leads, they’re not as concerned with whether or not those leads are actually sales-qualified, which means that sales teams are often left to deal with a high volume of unqualified leads. Because of the high volume of unqualified leads, sales teams have a hard time meeting their quotas, which leads to even more tension between marketing and sales.
Also, companies in that situation think that the solution is to generate even more leads and hire more salespeople to deal with the influx, which only exacerbates the problem.
The result is a vicious cycle that’s all too common in companies where lead generation is the only metric that marketing is measured on. Luckily this starts to fix itself when you start to focus on the other three revenue growth levers.
And lastly, it leads to a lot of wasted time and resources. If marketing is generating a high volume of leads, but most of those leads are unqualified, that’s a lot of time and resources that could be better spent elsewhere.
Marketing spends time generating the leads, sales spend time trying to close those leads, and in the end, nobody wins because the leads weren’t actually qualified, to begin with.
Why Nobody Talks About the Other Three Revenue Growth Levers
If the other three revenue growth levers are so important, why don’t more people talk about them?
Well, it’s not hard to see why.
There are a couple of reasons.
Too much focus on short-term results
The first reason and most obvious one is that most people are focused on the short-term. They want results now and they’re not willing to make the necessary changes to see long-term success.
This starts at the very top, with the stakeholders, and the board of directors, and filters down throughout the company. The stakeholders and the board of directors want to see results now, so they put pressure on the CEO to deliver those results. The CEO then puts pressure on the leadership team to deliver results, and so on and so forth.
Difficulty of change
The second reason is that it’s difficult to change the way you’re measuring success if you’ve been doing it one way for a long time. It’s hard to let go of something that’s comfortable, even if it’s not the best thing for you. The bigger the company, the harder it is to change, because there are more moving parts and more people who need to be on board with the change.
Many companies are using “vanity metrics” such as “percentage of quotas met” instead of actual measures of success. As a result, they have no idea how much impact they could be having on top-line growth by reducing their sales cycle length, increasing their win rate, or growing their average deal size.
But if you want to see real, sustainable growth in your company, it’s the only way. You need to start measuring marketing on the things that actually matter, and you need to start making changes to your sales and marketing process to align with those metrics. Otherwise, you’re just spinning your wheels and going nowhere fast.
Difficulty of implementation
The third reason is that shortening the sales cycle, increasing win rate and average deal size are all difficult to do. Way harder than just generating more leads. It requires a lot of hard work and dedication from everyone in the company, not just marketing and sales. It means making changes to the way you do things, and it’s not easy to change the status quo as we already mentioned. But it’s not impossible, and it’s definitely worth it. Because when you focus on the other three revenue growth levers, your revenue starts growing exponentially.
What You Can Do To “Fix the Problem”
When it comes to fixing any problem, the first thing you need to do is identify the root cause. In this case, the root cause is that too much focus is placed on generating leads, and not enough focus is placed on the other three revenue growth levers.
The second thing you need to do is come up with a plan to fix the problem. This will require a shift in thinking for most people, and it will be difficult to implement at first. But if you’re committed to seeing real growth in your company, it’s something you need to do.
What change I am referring to is simple: stop measuring marketing only on the number of leads generated, and start measuring them on things we are talking about in this article.
But changing the things you measure is only half the battle. The other half is actually moving those B2B SaaS metrics up. And that’s where the real work begins and where we encounter another problem.
The problem again huh? Well, this time the problem is that most people have no idea how to actually move the needle on these metrics.
They’ve been so focused on generating leads that they’ve never had to worry about things like shortening the sales cycle, increasing their win rate, or growing their average deal size. And so, even if their start measuring the right things, they have no idea how to actually improve those numbers.
The good news is that we have a lot of articles on our blog that can help you with that, and if we start talking in detail about each one of those topics we would be here for days and this would probably turn into a book instead of an article, which we would probably write soon, but for the sake of this article, let’s apply the same problem-solving method we used above.
First, you need to identify the root cause of the problem. In this case, it’s a lack of knowledge. People don’t know how to actually improve these metrics because they’ve never had to focus on them before.
Second, you need to come up with a plan to fix the problem. You can fix this problem in two ways: either by doing it yourself or by hiring someone who knows how to do it.
It’s of extreme importance to mention here that, even if you do hire someone to help you, which is what we highly recommend, you still need to understand the basics of how these things work and you still have a big role to play in making sure the changes are actually implemented. You can’t just outsource the entire thing and hope for the best.
If you don’t know how things should be done, neither you can be sure that the company you hired is doing them right, or that you are doing them right if you choose to go the do-it-yourself route, and if you have someone above you that you need to answer to, you need to be able to explain what you’re doing and why it’s important.
Third, you need to execute that plan. This is where most companies fail. They come up with a plan, but they never actually execute on it. They get too busy with other things, or they encounter some roadblocks and they give up. You can’t expect to see results overnight.
What happens in most cases is, companies change the way they do things, they don’t see results immediately, and they go back to their old ways because they think it’s not working. They don’t see the lead number skyrocket after implementing the changes we talked about in this article, so they give up and go back to what they were doing before, which is generating leads without any regard to the other three metrics. You see the loop here?
If you want to break that loop, you need to be patient and you need to trust the process. It takes time to see results, but if you stick with it and you’re consistent, you will start seeing an improvement in all four of the B2B SaaS metrics we talked about, but most importantly, you will start seeing an increase in your top-line revenue.
Recap
So, to recap, the three things you need to do in order to grow your top-line revenue are:
First, identify the right B2B SaaS metrics to focus on. Second, come up with a plan to improve those metrics. And third, execute on that plan and be patient.
If you do those three things, you will start seeing results. It’s not going to be easy, but nothing worth doing ever is.
Growing a company takes a lot of hard work, but it’s also the most rewarding thing you will ever do. So, don’t give up and keep pushing forward. The only way to fail is to quit or to keep doing things the way you’ve always been doing them.
If you’re not sure where to start or if you need help with any of this, we can help. Schedule a 30-minute free consultation call and we’ll be happy to chat with you about your specific situation.
We are passionate about helping companies grow, and we have the experience and expertise to help you achieve your full potential. (You can read about our strategic approach to marketing here)
We’ll work with you to come up with a plan that makes sense for your business, and we’ll help you execute on it. We have proven frameworks and processes that we know work, and we’re not afraid to roll up our sleeves and get our hands dirty.
So, if you’re ready to take your business to the next level, we’re ready to help. Let’s chat.
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