How We Doubled Our Revenue with Predictable Revenue
When we started Ruler Analytics, my co-founder Dan and I had plenty of years of experience selling to businesses behind us.
We couldn’t help but feel that with a great product, the sales would be flocking in, and we’d be hitting the ground running in no time.
We know what it takes to find customers and sell to them.
Networking, reaching out, and becoming part of our local business community had always been methods we could rely on.
But Ruler Analytics was different.
Ruler was our first time building commercial software to scale.
Previous version of the Ruler Analytics dashboard 2013
Unlike our previous experience, growing Ruler Analytics didn’t mean getting 10, 20 or 50 customers.
It meant getting thousands. And for all our confidence, the idea of having to find and convince thousands of people that our product was the right solution for them was unchartered territory.
Getting Our Initial Customer Base
Luckily, our previous experience has always been in the marketing sector, so there was some crossover with the audiences we’d previously built and the market we were aiming at with Ruler Analytics.
Reaching out to people we already had relationships with provided us with our initial handful of users.
This was straightforward.
The idea for the product had been a result of the consistent need for a solution that provides more clarity around the business value of marketing.
For a lot of people we worked with, simply reporting on an arbitrary figure like conversions wasn’t enough.
They wanted to know who the person was, how they’d contacted the company, and how much revenue their campaigns were contributing. But this pool of people was quickly saturated, and with the cost of advertising beyond our means.
We’d bootstrapped Ruler Analytics out of our own pockets for the majority of it’s life.
Latest version of the Ruler Analytics dashboard
We had to turn to ways outside of our usual methods to turn our start-up into the thriving business it is today.
Scaling Our Customer Acquisition
In their book, Predictable Revenue: Turn Your Business Into a Sales Machine with the $100 Million Best Practices of Salesforce.com, co-authors Aaron Ross and Marylou Tyler wrote:
An important part of enjoying work in a company, whether you’re an executive or an employee, comes from creating predictable income and sales, and freeing yourself and your team from the day-to-day slog of constantly wondering where each new customer will come from.
This book introduced the concept of predictable revenue: the idea that a company’s sales framework should be based on a process and formula, not sweat and guesswork.
Instead of marketing and selling to all potential customers, predictable revenue advocates:
- Using data to identify promising customer segments.
- Focusing marketing and sales efforts on those segments.
- Transitioning from random revenue spikes to ongoing revenue generation.
By following the principles of predictable revenue, companies can achieve consistent year-over-year revenue growth.
In fact, Ross used predictable revenue at Salesforce.com to increase revenue by $100 million, then taught the idea to other companies — Responsys, WPromote, and HyperQuality.
Resulting in doubled or even tripled new revenue growth.
At Ruler Analytics, we’ve recently implemented the predictable revenue process, and it’s enabled us to add the same number of customers in the first half of 2017 as we did for the whole of 2016.
Here’s how we did it.
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Step 1: We Formalised Our Sales Process
Before adopting predictable revenue, our sales process mirrored some of the ineffective processes Ross describes in his book.
Our sales activity was ad hoc and unfocused.
We used tools like Trello to record and reach out to leads, but it was chaotic and unproductive.
The first thing we did was move to a customer relationship management (CRM) platform.
The CRM we chose was Pipedrive, because it was both affordable and easy to use.
Pipedrive allowed us to access detailed reports on sales team interactions with leads and customers.
We could identify where leads were falling through the cracks, losing us revenue, and we could also quantify leads to determine our most valuable opportunities.
With Pipedrive in place, we could finally get a picture of how successful we were at moving leads through each stage of the sales pipeline.
Step 2: We Modelled Out Our Sales Pipeline
The ability to run reports on customer and lead interactions with sales team members allowed us to identify the steps of our funnel that most often led to conversions.
The ability to visualise this information allowed us to define our sales pipeline, formalise it, and establish a nurturing process.
Ultimately, we found that the following pipeline stages were the most effective:
Of course, we didn’t find the ideal process immediately.
We iterated a few times, adding stages in and removing stages.
Using Pipedrive, see what percentage of deals progressed through each stage and how long it took them to do this.
From, Lead Discovered 100% of deals would flow into Contacted.
80% of the deals in Contacted would progress to Demo Arranged.
70% of the deals in Demo Arranged would progress to Demo Complete.
90% from Demo Complete to Pending Payment and 90% of these would convert into a closed won deal.
In this example, our overall win rate would be 45%.
Meaning that for every 100 leads we put into our pipeline, we’d get 45 won deals.
This allowed us to create a formula for predictable revenue.
We finally understood exactly how many new leads we had to get each month to meet our goals.
However, this data didn’t give us the insight that we needed to make real changes to our sales and marketing strategy.
To use our new pipeline to grow revenue consistently, we needed more insight.
Step 3: We Segmented Our Leads by Source
Pipedrive allows you to add custom segments, so we connected it with Ruler Analytics to significantly expand the amount of data we were capturing for each lead.
We setup a “Source” segment and passed data from Ruler Analytics to identify the channels leads were coming from: inbound, outbound, partnerships, or business development.
One benefit of this expanded data was that it allowed us to identify what marketing initiatives were generating not only the most inbound leads, but also the most won deals, that were most likely to deliver us customers.
We could also see which initiatives outside of marketing were the most likely to convert.
We tracked whether a lead was sourced from business development, partnership and outbound activity as well as our marketing activity.
Some findings were common sense.
Inbound leads are unsurprisingly more effective than outbound leads, but there were some surprises that lead to tremendous growth which we wouldn’t have uncovered without following this methodology.
Step 4: We Segmented Our Leads by Company Type
The connection between Pipedrive and Ruler Analytics also allowed us to identify what industries, segments, and company types were the most likely to convert.
Using these reports, we discovered that a certain segment of our customers were 1.4 times more likely to convert than other segments.
With this information, we could amend our sales outreach and marketing strategy to make sure we were targeting customers that we know would get value out of the product.
We knew this because we’d delivered value to existing customers in that segment.
Step 5: We Narrowed Our Focus
Our company has been growing at an amazing rate, so we were a little hesitant to act on the information this new data had illuminated.
Would we jeopardise our growth by narrowing our focus from an entire industry to a single segment within that industry?
In the end, we decided to go all in to see what happened.
We changed our marketing approach to focus on this new segment 100%.
We don’t even entertain the idea of producing content for other segments, for example.
The result: our monthly recurring revenue grew 2.5 times faster in the following two months than the two months prior.
The data told us a story we wouldn’t have discovered on our own, and the end result was a tremendous success.
We’re sure that in the future we will expand our targeting, but we’re also confident that focusing on a specific sector will help us achieve our growth targets quicker than spreading ourselves thinly over multiple markets and segments.
Achieving Predictable Revenue with a Core Skill-Set Focused on Data and Optimisation
One thing we learned from this experience is that, although it’s a sales rep’s instinct to try and land as many deals as possible, there are ways to approach leads smarter and achieve dramatically better results.
This is the core of the predictable revenue approach, and for us, it’s been a game changer.
Now instead of running into things head first, we take the time to ensure that everything can be correctly measured, analysed, and optimised.
We make sure that our teams never waste time on systems they aren’t utilising properly.
This has increased sales and overall team morale.
Sales technology, when used properly, can create huge company-wide efficiencies.
Although, when people aren’t trained or don’t understand the value, it serves as little more than an annoyance.
Even if our current approach begins to falter, our systems will show a decline in growth.
This will allow us to adjust our approach, identify a new viable market quickly, and take steps to scale new growth.
If we had simply continued our original, confusing, and misconstrued approach to sales, that would have been impossible.
Luckily, the data and technology guided us to a place where we can focus our efforts on the most promising and qualified leads, and use that to grow revenue in a predictable way that should lead to long-term success and consistent growth.
How Predictable Revenue Has Impacted Our Business
Ruler Analytics is now 18 months old as its own company.
Prior to adopting the predictable revenue mindset, we’d grown our business through blood, sweat and tears for 12 months.
We’ve already surpassed that same number in the first 6 months of 2017, with half the stress.
What we like about predictable revenue is that it isn’t a hack or tactic that promises to deliver instant growth.
Instead, it’s a framework that allows us to remove some of the mystery about what’s driving the growth of our business so that we can make better decisions about where to prioritise our efforts. And although there’s still the occasional throw of stress as we try to make targets, our efforts are now focussed on what’s important: the selling of the product.
Predictable revenue has freed up our cognitive energy to focus on the important aspects, because it’s provided order around our operations — something we lacked.
With our business on course to triple in its second year, we can let out a little sigh of relief and keep our fingers crossed that we’ll maintain our course to becoming a truly world-class SaaS product, built in the heart of the UK’s industrious North West, and a true representation of what the city of Liverpool stands for: hard work, strong character, and incredible diversity.
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Originally published at www.ruleranalytics.com on July 5, 2017.