How RevOps Can Drive Efficiencies in a Down Market

You don’t need to be a financial expert to realize we’re currently experiencing increasingly volatile economic conditions. But to hear Gerald Celente—the market veteran who predicted both the crash of ‘87 and the dot-com bubble burst—say we’re facing a “market meltdown” in 2023 is pretty unnerving, particularly for investors.

In the tech space, a 10-year bull market, overly optimistic post-pandemic expectations, and a cultural obsession with unicorns have led to many companies being significantly overvalued. Meanwhile, as all that cash was flowing into the space, nobody was watching the bottom line (hello, FTX!). 

With interest rates now on the rise and fear of recession looming, many public tech valuations are down, which can be bad news for venture funds. The startups that raised gobs of money during the boom are now facing a bust. They need to raise more money, but it’s hard—and not a good look—to do that at a lower valuation.

In this article, we’ll dig into RevOps and how it can help drive efficiencies higher in a down market.

The consequences of unrealistic growth numbers

In the past five to ten-ish years, building and funding a startup became almost too easy. Any charismatic young founder with a half-decent product idea might have had multiple offers from venture capitalists, just champing at the bit to invest. And while you would think a global pandemic would have slowed things down, VC investment volume actually increased between 2020 and 2021, nearly doubling from $335 billion to $643 billion.

But while PR firms were busy releasing unprecedented funding announcements on the business wire, market experts were already warning of the coming bust. One early 2020 Economist article predicted tech startups were “headed for a fall.” 

Fast forward to today, and we’re seeing the impact play out in the headlines, with the world’s biggest tech companies laying off thousands of employees. Microsoft, Amazon, Alphabet, Salesforce, Lyft, and Spotify have all announced significant layoffs (just to name a few). Spotify CEO Daniel Ek blamed “overly ambitious pandemic growth” for the reduction in force. 

Like Spotify, many tech companies, big and small, set unrealistic growth goals, often overinvesting in sales and marketing to meet them. Instead of future-proofing their businesses with more efficient revenue operations (what we call RevOps), they just threw money at problems—without even knowing what the problems are. 

Southwest is a great example of what can happen when you don’t invest in systems and processes. They ignored problems with their aging systems (despite employees raising red flags) and ended up with a complete and very public meltdown. The ordeal ended up costing them an estimated $620million on an after-tax basis and a net loss for Q4 2022.

Many private companies in the tech sector now find themselves needing money, and it’s much harder to come by. They can no longer get that sky-high valuation, and borrowing from the bank is expensive. Most don’t really know how to reduce their burn rate because, frankly, it’s never mattered before.

Look at RevOps to reduce wasted spend and improve efficiency

For private equity firms, working with portfolio companies to cut expenses and create more efficiencies will be critical for the next six months to a year. In some cases, that might mean a reduction in the workforce—but not always. 

One surefire way to reduce cash burn and build sustainable growth is to take a good hard look at the company’s sales and marketing operations to find opportunities to streamline processes and eliminate wasted tech spend. 

Many CMOs and sales executives will blame “systems issues” for their revenue inefficiencies, while not fully understanding the scope of their architecture. Sales and marketing leaders are also not always on the same page about what the problems are or where bottlenecks exist. Instead of looking at the data to diagnose operational issues, many instead go out and buy the latest SaaS solution that promises to fix all their problems—without ever really understanding the root causes.

Uncover issues and opportunities with a RevOps diagnostic

To improve revenue efficiency in a down market, starting with a full diagnostic of the sales and marketing functions is critical. 

Think of a RevOps diagnostic like a trip to the doctor. When something doesn’t feel right, you go in for a checkup. You have things checked out and get a diagnosis, then work with your doctor on a personalized care plan. 

Similarly, organizations must understand the health of their marketing and sales processes and get to the root of problems before making meaningful changes. (Otherwise, you may be implementing solutions that treat the symptoms rather than the underlying conditions.)

There are four main areas to look at when doing a comprehensive RevOps diagnosis: process, strategy, tech stack, and people. Each of these comes with its own set of questions to consider. Here are a few examples:

• Process

• What’s your definition of a lead? Does everyone agree?

• How are the handoffs from marketing to sales?

• Strategy

• Is your revenue strategy documented? Is the entire team enabled on the strategy? 

• Are sales and marketing best practices being implemented (and followed)?

• Tech stack

• How does your current tech stack fit with your revenue funnel? Are there gaps (or duplicates) in your stack?

• Do your systems work together well? Do you have the right integrations?

• People 

• Do you have a sufficient headcount for RevOps? Do you have the right ratio of SDRs to AEs?

• Is the entire team enabled on your revenue funnel?

Just like every patient is unique and needs a different treatment plan, there’s no one-size-fits-all solution to optimize RevOps. Each business requires a different RevOps playbook based on current needs, internal resources, and maturity. If you’re interested in learning what is a RevOps Diagnostic click here.