As the leader in Revenue, many CEOs, CROs and investors are reaching out to us, asking for guidance on how to best navigate these uncertain times. Most business leaders are worried about macroeconomic uncertainty. Some—like Lloyd Blankfein, Goldman's former CEO and current senior chairman—are even seeing a “very, very high risk” of a recession. And as an experienced Revenue leader myself (having lived through the .COM crash in ‘02/’03 and the Global Financial Crisis in ‘07/’08) I have a lot of scar tissue.
While we don’t know how things will shake out, I believe that tough times are coming— and not just for high-flying technology companies. Revenue leaders in every industry need to take action now to get ahead of the downturn and protect Revenue.
- Impact Thesis: Form a concrete thesis (and be intellectually honest) about the impact on the most important dimensions of your Revenue
- Renewal or NDR compression = Early Indicators: Look for signals of downward pressure on your renewals and churn.
- Calibrate the 3 C’s: Compare coverage, capacity, & conversions.
- Big Deal Pressure Test: Move now on SOE (Sequence of Events) against your swing deals to assess risk and upside against the plan.
1. Impact Thesis: Form a concrete thesis about the impact of macroeconomic conditions on the most important dimensions of your Revenue.
What do you think will happen to your Revenue this quarter, next quarter, and rest of year? You need data across multiple Revenue dimensions to frame up how the broader economy might impact your operating plan. You need to be intellectually honest and ask tough questions about each segment, region, and industry, and assess where you’re most likely to experience headwinds. Then pressure test that thesis with your Revenue leadership, your executive staff and your board.
This requires going deep, quickly, into the core of your Revenue engine, across every go-to-market team. We advised many clients on how to do this deep and fast work as recently as 2020, when the pandemic hit, and they all emerged a year later – stronger and more efficient.
2. Renewal or NDR Compression = Early Indicators. Look for signals that you may have downward pressure on your renewals and churn.
Build a rapid process to identify churn and expansion risk by getting a pulse from all customers that are up for renewal. Run a process against every customer account, getting an early read on renewal timelines, account health, expansion opportunities, and who may be interested in a multi-year deal — and who is already thinking about leaving.
Flag the customers that may churn prematurely for a deeper look at their account, and create retention strategies for them (like creative advertising strategies or discounts). You’ll likely get a response from almost everyone by the end of day one - aim to get it done in a week across the renewal base.
Their intentions - plus signal from your health metrics and stage progressions - can give you a strong signal of the impact you can expect on your business. It’s like seeing into the future — you don’t want to wait for data, you want to have the data that helps you get ahead of the trends.
Beyond any downward pressure on the business from changes in your customers’ buying plans, you need data to predict the future. Your team needs to understand your company’s pipeline coverage and the quota capacity this quarter, relative to the last four to eight quarters, so you can spot headwinds or tailwinds coming your way.
- What is your typical starting pipeline position for the last few quarters?
- How much coverage do you need in each segment?
- What are the historical conversion rates of that pipeline?
- How much quota capacity do you need to prosecute that pipeline?
Make sure your sales leaders run a process against every active deal, assigning a level of risk to each based on the account’s industry, size, and region. These insights about where risk is likely to exist serve as a means of prioritizing your executive team’s time. You’ll quickly identify the “swing” deals that will make or break your quarter, and can create bespoke plays to maximize your odds of closing that business.
You should already be tracking buyer engagement and running a tight process in later deal stages, with a sequence of events (SOE) that provides high visibility and accountability with leadership. However, in times of uncertainty, you need to start checking those steps to close now, especially for those make or break deals. Start with phone calls to your champion.
Not only will these conversations help you requalify and reassess that risk to segment deals earlier in the cycle, they will also give you valuable signals as to what your business may be facing in future quarters.
If an explicit step to get sign off from the buyer’s chief financial officer isn’t already included in your sequence of events—now is the time to add it. During periods of weaker business outcomes, CFOs often place higher scrutiny on new purchases. Make sure you can see if the CFO is engaged, and ensure your champion has presented their business case for the purchase to finance.
Finally, make sure you track why deals are slipping. This will provide relevant insight into your out-quarter forecast and operating plan. Build in requirements for data capture from reps when they push a deal from one quarter to the next. You’ll start to understand if you’re slipping deals for addressable or non-addressable reasons and can game plan accordingly.
Move fast (and yes, it will be tough)
Fast pivots aren’t easy. You’ll need to prep your staff, plan for more hours, and be prepared to examine every aspect of your go-to-market strategy. Make sure you agree on the required Revenue insights you need to make fast decisions. Help your team by sharing the context about why these actions matter now, and how they can help the entire go-to-market team be more successful.
In the coming days, we’ll share more insights into how Clari does this, and how you can too.