It’s sometimes really hard to realize that something is missing until you experience the lack of it vividly for the first time.
For example, before I had kids, I didn’t think that “sleep” was an important concept. You got some when you were tired—end of story.
Now, having kids, you start planning your sleep.
“Do we dare watch one more episode, or do we rather take the safe route and go to sleep?”
Cool, Toni. But I thought this is a “revenue” letter…
Well, when I was responsible for the full revenue number the first time, I slowly freaked out.
The CFO very calmly explained to me that it was all figured out already. There was a line item in the budget showing the revenue targets. Nicely progressing month by month. And I had a comfortable CAC budget of $10-15M.
What took me a while to wake up to was the fact that there was a very, very large gap between my CAC budget and my target number.
There were also a ton of people with different roles, projects, campaigns, hires, fires and all happening everywhere around me at the same time.
How was I supposed to make sure that all of this added up to that big revenue number we planned?
That was my “wow, I need to plan for sleep” moment.
I realized I needed to build a pretty comprehensive plan across Marketing, Sales, and CS, orchestrating hundreds of people and dozens of projects, initiatives, and campaigns that together get us to our revenue number.
That’s when I realized that what we had wasn’t enough. You really need a “revenue plan” connecting your CAC budget with the revenue target you want to achieve.
Everything else in the budget – the nicely progressing monthly revenue numbers – was REALLY just a progress bar.
It’s not a plan, despite what you might tell yourself to calm you down at night. Just because it can tell you exactly when you missed your numbers, it does not help you one bit.
So, how do you build a “revenue plan”?
Well, you need an operating model. Basically a digital twin of your revenue engine. It needs (in principle) to behave like your actual revenue engine. But just in a model.
I covered how to do this in another letter, and Mikkel and I went over it in detail in this week’s Revenue Formula podcast.
And then with that model. We could plug in hires, expect leavers, and see and roughly estimate the impact of projects and campaigns.
Now we would understand how important timing is and how to shave off CAC-dollars without hurting revenue.
We basically ended up having a very, very long to-do list.
That was the plan.
Now we “only” needed to check each item off one by one.
While the execution was 80% of the work. It got a ton easier having a solid plan to base it on.
The Ops-persona in me could now breathe without choking again.
And maybe, more importantly, sleep.
Want more?This post was originally written as part of Toni’s regular Revenue Letter. If you want to be one of the first to receive content like this straight in your inbox, sign up here.