More about Siva’s areas of expertise from LinkedIn. “B2B SaaS, Scaling GTM, Revenue Growth, Business and Revenue Operations”. He’s served as Director and Head of Revenue Operations at Freshworks and has a ton of consulting expertise on top of that. A worthy expert!
Here we go! Let's get this started.
Great to be here! 🔥
Great question! Previously, I ran the RevOps globally for Freshworks - I saw the journey from $30M to $200M and scaled the team to 25 members. But there were several areas in the RevOps journey that I realized were broken. One of them was commissions. It was this recurring busywork that we were looking to automate. We were surprised to discover that almost all vendors in this market had inflexible solutions that were not suited to the day and age that we are in. So I, along with a few other colleagues on the Revops team, decided to jump ahead and change it once and for all!
Amazing! So often, the best technology and innovation comes from the people who have had to deal with the problem every day. Kudos to you for taking the initiative to help solve it yourself.
RevOps to me is the central function that unites all the different customer-facing teams together and drives the strategic revenue goals of the company. RevOps, therefore, is the custodian of GTM data, the team that plans for the revenue goals and helps orchestrate the policies, processes, and initiatives required to get to those goals.
Beautifully put! I think it's really interesting that everyone's answer to that question is different (albeit very similar). It goes to show that this function is new + evolving quickly & different in every instance.
The first step, like many other things, starts with the goals you are looking to achieve. There is an overarching revenue number, but that gets broken into specifics based on the role that you are looking at. Like generating qualified leads for an SDR, generating revenue for an AE, and managing NRR and churn for a CSM. Those are the core goals that weigh the most in any commission plan. But then, there are the secondary goals that help define the QUALITY of that revenue. For example, in an AE's case that could be a component of a multi-year deal bonus, etc.
Defining the primary goal along with the secondary (quality) goal gets you the components of the commission plan.
The next step is the part around motivation - which is to define quota/targets and define bonuses or tiers for overachievement. That helps you drive performance.
The final part is adding guardrails like clawbacks in case there are things to be taken care off in the business.
So in that sense all plans are similar and contain these 3 steps. But based on the business model and the stage of the business, the actual commission plans can really be different.
Awesome. Thanks for laying that out. Regardless of what you're selling or what your deal size is, working backwards from your revenue goals is always a great place to start. I love the points on quality & motivation as ways to add context and depth to the plan + prioritize the best types of deals.
Great question. So, the first step to understand is the reason for the rebuild. Is it because the goals are not being achieved? Is it because the sales reps are unhappy? Is it because the ROI for the commissions are not optimal? Or maybe the reason is a combination of all of these.
Once you have the purpose, then look at the components and determine what will help you achieve these goals. So for example, if the goals are not achieved, look at your quotas and tier structure to understand what's missing. Maybe before you change the plan, you could introduce a short-term spiff program to determine if the constraints are within the system or outside of it. That will help you determine the right quotas and tier structures in that example.
Got it. So the key is to first diagnose exactly what we're solving for and build the solution from that. Might not have to tear down everything before rebuilding; maybe just a few pieces.
One of my favorite topics. Annual Planning. The answer is that it is never too early 🙂. Having said that, the mature organizations initiate planning by the start of Q3. And most organizations begin only by Q4. I think if you are a fast-growing organization, it is super important to kickstart the planning by the start of Q3 and lock-in by the end of Q3. If you are planning only in Q4, then you pretty much give up the chance of growing as fast in H1 next year, because you will be catching up to add capacity and ensure ramp happens for you to hit those high growth goals.
So what ends up happening is you keep H1 of the next year light and load most of the growth to the second half which is a recipe for disaster.
Hey Jen - as you said this varies by company. I typically see 4 levels of RevOps. First is the most junior which is the Analyst level, where the person is given directions, works mostly on reactive tasks from the manager and other supporting functions. Second is an associate role, where the person has moved beyond reactive stuff and knows some of the key initiatives that are needed to move the org to the next level. Third is the Manager role, where the person drives all the initiatives of RevOps and also manages the workload on the team. The final, of course, is a Leader role, where the person is defining the direction that RevOps should take in the first place to help achieve the organization's goals.
The titles might vary, you can add a "Senior" or "Junior" to each of these roles and you can create different designations. But the crux remains that there are four levels.
At Everstage, since we are still at an early stage, we are just wrapping our 2022 plans. But at Freshworks, it was better and in most years we were able to lock it in by October.
Hi Siva! Thanks for your time! I loved your definition of RevOps: uniting the different client-facing teams.
Hey Rhett, I think it starts off with analyzing your pipeline. By looking at 3 places - 1) where are the deals falling through, 2) where are we losing, and 3) where is churn happening more. These 3 define the fundamentals to drive the definition of the buyer and align across teams as well.
Hey Nicole, my preference is to do both and have them meet at some point. But the reality is in most cases, comp and quota is set top down. Even if that is the case, you should have the teams involved, share their perspectives and keep some buffer for adjustments. Because at the end of the day everything looks great on a spreadsheet but if it is not backed by reality, it is bound to fail.
That’s my concern with top-down though; if there are consistent issues with top-down I think it could probably be a combination of unrealistic expectations or hiring (unless there are very few hitting their numbers).
Yes, which is where RevOps comes in handy. RevOps is the voice on the ground that needs to align the CXOs to give them perspective was what's an ambition goal vs what's unrealistic.
You can start with industry benchmarks on churn and track yourself against that. It’s hard to establish a baseline for these early on as outliers or a big deal could mess up the numbers. When it comes to NDR, 120% to 140% are good to great numbers and you should track your overall account health against that. Dollar Churn shouldn’t be more than 20% to 30% per year in a healthy business pre-expansion. But based on high velocity and low velocity, this number can vary and sometimes be a little higher - around 40% for high velocity businesses.
Hey Cliff, typically with statistically insignificant data, it's not useful to analyze any metric, leave alone NDR and churn. Because with a small data size you can manipulate the data to give you the right perspective and it ends up not being useful. In such cases, I would be more curious to see the pattern of customer churn. Is it increasing or decreasing over time with the increased base of customers, what's the time period typically when churn starts to happen, etc.
I would agree in looking at a monthly cohort analysis and seeing where the cliff is makes sense. I’m just curious as to best practices in planning your fy22 forecast in this case, where there is not enough data. ie: only one customer has churned in the last 14 months.
With that as a case, and with churn, I would just do a simple extrapolation and study the increase in base and keep a buffer for planning purposes. So in the worst case you are covered and in the best case this is something that helps you cover in case there is some shortfall, say in new revenue.
Yeah, perfect. That's exactly what I’ve done in my planning.
We have actually published a series of guides for best practices on commissions across roles. Feel free to check them out here https://www.everstage.com/commission-plan-templates
Amazing, thank you!
There have been some great questions, some amazing answers, and I know I learned a lot!
Thanks again, Siva, for joining us and for everyone else who participated. Feel free to keep these conversations going here, in a DM, or outside of Slack. We hope this AMA was helpful!!
Thanks, Sebastien. It was a pleasure to interact with everyone today. Feel free to DM me in the Revops Co-op community for any other questions or thoughts you'd like to discuss, or you can reach me on LinkedIn. Cheers!
Thanks, Siva, this was great!!
We caught up with Erin Gondeck from Pigment to ask all the questions about end of year forecasting and best practices.
We had Andy Mowat step up to the Slack AMA Gauntlet! The crowd was active, and we got through a ton of great RevOps & Buyer Journey related questions.