How to Become a Post-Sales Revenue Leader

The role of Customer Success (CS) has undergone a huge transformation in the wake of the Zero Interest Rate Policy (ZIRP) era. Today, CS leaders find themselves with a heightened expectation to speak the language of profitability and drive tangible bottom-line results. Yet, for many without an MBA, staying abreast of these demands can feel overwhelming.

To help with this, we brought in Jan Young, executive coach who transforms post-sales leaders into revenue leaders.  Jan coached us through the need to know metrics,  benchmarks and strategies  to master the language of profitability and own your team's contribution to the bottom line. 

It was a lot to unpack in just one Webinar! So we’ve summarized the key learnings below. 

1. Know Your Influence

If you do not already think of yourself as a business leader and a post-sales revenue leader, make this your mantra moving forward. CS is at the intersection between the customer and the company which makes it a highly strategic and influential position to be in. It’s why CS leaders become CCOs, CEOs, investors and board members. To progress, you have to own your impact as a post-sales revenue leader.

1. Know Your Era

Between 2008-2015 and  2020-2022 startups benefited from the ease of raising funds because money was cheaper to borrow. The Zero Interest Rate Policy (ZIRP) during these periods created a Growth At Any Cost approach. It literally created more Venture Capitalists, and prompted investors to pump money into tech startups so they could grow as quickly as possible– even if it meant throwing people at a problem. For example, instead of building reports that the customers can easily use, why not fill the gap with a CSM? 

When the US federal bank started raising interest rates, investor behaviors shifted. It was no longer feasible for them to pump money into tech startups because money became more expensive to borrow. The new norm– for the foreseeable future–  is Profitable Enduring Growth. This means a company needs to be both profitable and grow. This is why we need to get creative by doing more with less and prioritize what we do to ensure it impacts our customers and our company.

1. Basic Facts to Know Your Odds

• 80% of tech startups fail  

• <5% of startups break even on cash flow

• Scaleups are (generally) companies that have three consecutive years of 20% growth.

• Recurring revenue models (generally) take a lot of upfront investment to get to growth.

• Limited Partners (aka LPs, investors) look for a return on their money within 7 years 

• General Partners (GPs) manage Venture Capital (VC) investment injections into startups and are responsible for guiding the funds to successful return 

• Investors utilize metrics and benchmarks to figure out which startups to place their bets on
  

Understanding what investors are looking for helps you understand what your CEO and Founders are aiming to achieve. It also helps you understand what your customers are trying to achieve. This is why it’s critical to think of yourself as a business leader and a post sales revenue leader. 

Investors use metrics to determine if they want to invest and to identify how the companies they’ve invested in are doing. By familiarizing yourself with these metrics, you can be proactive in your approach and lead your customers, your team, and your company to success.

1. Know Your Benchmarks

i) Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) 

This metric helps investors understand revenue. Investors like it because it strips away a company's ability to hide losses through accounting techniques that deduct the cost of business over time. 

ii) Rule of 40  (Growth % + Profit %) = Score

In 2015, a well known VC called Bessemer Venture Partners created this metric to measure the value of a SaaS business through its growth and profit. The idea is that the calculation should result in a Score of 40. For example, a company with 20% YoY Growth and a 20% Profit Margin would meet the Rule of 40. Meanwhile, a company with a lower 10% Growth but higher 30% Profit Margin would also meet the Rule of 40. Anything 40 or higher would be considered a strong investment candidate.

Note: You may hear how the Rule of 40 has been amended to be “Rule of X”. Rule of X is generally more focused on growth and may also be specific to your industry profile. Also to note, This metric generally applies to Scaling Startups that have achieved Product Market Fit and Go-to-Market Fit. Startups in GTM Fit stage will be looking ahead to achieve this metric if possible, and Scaling Startups will be more valuable if they have achieved it.

iii) LTV: CAC Ratio (LifeTime Value ÷ Customer Acquisition Cost)

• Customer acquisition cost is the total amount of costs spent in sales and marketing to acquire a new customer. 

• LifeTime Value is an estimate of the average revenue a customer will generate throughout their lifespan as a customer. 

Investors are typically looking for at least a 3:1 as a good ratio, meaning for every $1 spent in sales and marketing, $3 is generated by the customer. 

A similar metric called CAC Payback period can be used to determine how quickly a company recovers the money they spent to acquire a customer. <12 months is generally considered to be a great CAC Payback period, although this may be higher for early stage companies. 

1. Know Your P&L

P&L stands for Profit and Loss Statement which tracks the amount of profit that remains after a business subtracts all the costs from its revenue during a specific period. Costs within a P&L are typically split under 2 main categories: COGS and OpEx.

i) COGS= Cost Of Goods Sold

For a tech startup, these typically include hosting expenses, internal engineering salaries, third party costs and post-sales activities that are retention focused. COGS are sometimes referred to as above the (gross profit) line costs. 

This is important! Companies who want to improve profitability need to reduce COGS expenses. Support, Onboarding, and non-commercial Customer Success teams are categorized under COGS.

ii) OpEx= Operating Expenses

Meanwhile, OpEx includes costs for sales, marketing, product development, general administrative costs and post-sales activities that are revenue focused. OpEx are sometimes referred to as below the (gross profit) line costs. 

Sometimes post-sales efforts are split, showing in both COGS and OpEx. For example, if part of your post-sales team is retention focused, providing onboarding, adoption and support, they could be classified under COGS whereas the other part of your team that’s focused on revenue activities like renewals and expansion will be OpEx. 

Again, the important thing to remember is that costs under COGS weigh down the profit of your company. If your CS team is part of OpEx (or SG&A– Sales, General & Administrative), they will be a part of other metrics that measure efficiencies in revenue investment. 

1. Know Your Break Even Point 

Customer Break Even Point takes CAC Payback a step further by adding costs of Onboarding, Support and CSM to the Sales and Marketing costs of acquiring a customer. In this way, if your customer contract value is $10,000 and your total costs are $25,000, you’ll need 2.5 years to break even. The ideal here is 12-18 months.

7. Know Your Cohorts 

Jan recommends calculating your break even point across different types of customer segments, so that you can drive better decisions to move the needle on retention. By doing this, you can clearly demonstrate which customers are ideal (short break even point) and which customers are going to make you go out of business (long break even point). Jan recommends taking this feedback to product, marketing and sales so that you can influence acquiring the right type of customers.

Furthermore, Jan recommends glorifying the amount of revenue under your management. The new customers that are celebrated by the Sales team may seem shiny and exciting for the company (gongs and all) but they do less to impact the bottom line than the current customer base. For example, the average Series B startup has 75-95% of their revenue made up of existing customers. Post-sales leaders are effectively keeping the lights on, taking care of the largest volume of money for the company bottom line.

8.  Know It And Show It 

Last but not least, Jan urges post-sales leaders to take initiative with bottoms up projections. These can be used to influence and adjust the quotas that are laid upon you. So the next time you are handed a quota of a zillion dollars, you can provide a projection rather than a question mark over whether that quota is achievable.  Jan recommends setting up ways to attribute your team's ability to generate revenue, such as CSQL systems as a data point for projections. In essence, if you’re not communicating the work your team does and rallying people behind the part they play in bringing customers to achieve their business goals, you are less likely to be seen as empowering your company to achieve their business goals. 

By embracing this ethos and leveraging the insights shared by Jan Young, post-sales leaders can emerge as indispensable architects of organizational success.

Register to listen back to the full recording of this webinar at your own pace.

For further insights into mastering revenue leadership, explore Jan's comprehensive guide at JanYoungCX.com/7-steps-revenue-leader.

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