Revenue Moneyball: Drive predictable outcomes
I mentioned in my last post that any org that’s operating without the right metrics tracked and monitored is immediately behind the curve.
But, what if you’ve already got that covered? Does it mean you’re automatically set for success?
Of course not!
Business metrics need to drive action, otherwise they’re (literally) useless.
In this article, we’ll dive into one of my favorite ways of making data useful through a concept I call “Revenue Moneyball”. If we've worked together before, you’ve probably heard all about it 🙂.
Here’s how it works:
Step 1: Go watch the movie Moneyball (or read the book by Michael Lewis!)
Great book, great movie, great stuff.
Step 2: Implement the same principles in your organization.
Done! It’s that easy.
Just kidding.
While I do recommend reading the book or watching the movie, you don’t need to in order to apply the principles we’ll discuss here.
The basic concept behind Moneyball is to systematically break down your intangible goals into actionable bits and pieces that can be easily executed. The idea is that, by taking an ultra-practical approach, one can achieve virtually any goal, even if it seems unreachable at face value.
How it worked for the Oakland A’s (roughly)
In 'Moneyball', Billy Beane was striving to make the Oakland A’s a championship-winning baseball team in 2002, with a fraction of the resources of their competitors. Seeing that the odds were very obviously stacked against them, he broke things down. He found answers to questions like:
- How many runs per game are needed to make it to the World Series?
- How many RBIs/home runs are needed per game to be a championship team?
- How does a batter’s on-base percentage impact this?
- How many strikes/outs does a championship-winning team get per game?
- And probably dozens more
The outputs of these data-driven questions were used to break their big goal into something more tangible. In other words, they no longer needed a “championship-winning team”; they needed to be reaching X runs per game, Y outs, and so on. The championship part would just come naturally.
And, by applying this strategy, the A’s turned their sh*tty record around to become one of the best teams in the MLB. The Red Sox quickly adopted Beane’s strategy themselves and went on to win the World Series in 2004, breaking the “Curse of the Bambino”.
Btw, this was all before there was great software for this kind of analysis.
How it works for revenue teams
Most revenue leaders are some version of Billy Beane in 2002.
Their team may not be in “last place” like the A's were in 'Moneyball' (heck, they may even be in the lead!), but they’re likely dealing with a number of hard-to-control obstacles that make achieving goals difficult. By this, I mean obstacles like:
(a) a smaller marketing budget than they’d like,
(b) fewer sales reps than they’d like,
(c) a less-great product than they’d like, or
(d) fill in the blank.
Luckily, with the right business metrics tracked, leaders can take control in many ways. This is where the “Revenue Moneyball” concept comes into play. And, unlike in 2002, there’s an abundance of tools and resources for making this easier.
With “Revenue Moneyball”, a team no longer needs to achieve $XXX in revenue; they need to be creating X opportunities, booking Y meetings, and sending Z emails. They need to be winning A% of opportunities at an average deal size of $B, and they need to be engaging C% of leads.
I want to emphasize here that this idea can be applied in MANY different ways throughout your organization.
But, in order to keep things digestible, I’ll explain the concept using a (very) simple example of “Revenue Moneyball” for a hypothetical sales team.
Here’s the scenario:
You are the head of sales with a revenue target of $10M for a given quarter.
And here are some of your team statistics:
- 10 sales reps
- Currently forecast of $7M
- Average deal size: $100K/quarter
- Win rate: 40%
- Ratio of opportunities created to meetings booked: 70%
- Ratio of meetings booked to emails sent: 5%
Now, let’s break it down:
- With a target of $10M and a forecast of $7M, you have a gap of $3M to goal
- With an average deal size of $100K/Q, you need 30 deals to close the gap.
- With a win rate of 40%, you need 75 opportunities in the pipeline.
- With an opportunity-meeting ratio of 70%, you need 108 meetings booked.
- With a meeting-email ratio of 2%, you need to send 2160 emails.
Put it all together, and you’ve got a fairly straightforward list of action items for each sales rep:
- Close 3 deals
- Create 8 opportunities
- Book 11 unique meetings
- Send 216 emails
This is a bit more tangible than telling the team to “find $3M”, right?
Of course, it isn’t always as simple as the example I outlined above.
You may have noticed that I left out the element of timing (i.e. by when does all of this need to happen?). This can be calculated as well but, for simplicity, I decided it was best to leave it out.
Some will say, “sales isn’t just a numbers game”. I’ll address this in another post. 😈
Bringing it home.
Once you’ve got the right metrics tracked, you need to put them to work. Applying the principles of Moneyball to revenue generation is the basis of revenue and sales operations today and, frankly, is the basis of any modern sales organization.
To get it right, you need reliable metrics and a systematic way of putting them into action. Usually, you need a combination of software for producing data and a high quality RevOps / Biz Ops / FP&A / similar function to drive it to action.
The best way to drive action with data is to allow it to dictate your to-do list (like we did in the example above). Once you have your to-do list, any revenue goal becomes easier to achieve. It also becomes easy to understand whether you’re on track to achieve your goals.
That’s about it.
I’d love to hear how you are putting metrics to work in your organization. Are you using the concepts from Moneyball in your revenue team today?
Share your experiences in the comments or shoot me a DM.
- Tim
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