What is RevOps planning? Why is it important?
Your Annual Operating Plan directs your growth activities for the year – planning encompasses everything that happens before your customer-facing teams are in seat:
- Headcount, hiring and quota planning
- Sales territory and Customer Success book of business planning
- Compensation planning
Planning distinguishes a reactive RevOps function and a proactive, strategic one – this transition from a support function to strategic partner is not a given and requires consistent proof of value to the organization. Operations need to earn their spot at the table and demonstrate the value they bring to the organization in these planning sessions.
What is “the fiscal year flip”? How do you pull it off?
The Fiscal Year Flip is a proactive approach to ensure readiness for the new year – the Fiscal Year Flip is all about doing the work to be ready for the first day of the new year. It’s about ensuring that all the tactical decisions align with the strategic direction of the company and giving employees the confidence that they are being set up for success. Instead of waking up two or three months into the new year with unresolved issues and unanswered questions, you aim to plan for it in the first three days. This requires months of planning and preparation.
Pre-planning and a coordinated announcement ensure that employees start the new year with confidence and clarity – the fiscal year flip is a branding exercise to set the tone for the rest of the year in a moment of transition. The new year brings uncertainty and doubt; employees will be concerned about whether systems will work, whether their accounts will be effective, and most importantly, whether they can make money at the company in the coming year. Use annual planning to roll out your plan and communicate to employees that the company is committed to setting them up for success.
When do you need to create your strategic and tactical plan?
Get serious in Q3 or Q4, depending upon the size and complexity of your organization – you’ll plan leading up to the new year as part of annual planning– if you’re going to launch your plan in January, then you need to give yourself time to iterate before you launch it.
Planning is an ongoing process – it’s not just an annual event, but a continuous, iterative process that happens throughout the year. You might take a new look at your plans every time someone gets promoted or leaves. This could involve reassigning territories, redefining roles, or reassigning customers. You can’t lock the plan in and expect it to work for the next 12 months.
What do you need to have prepped or in place ahead of time?
Identify who will run the process – planning should be a specialized role with someone to manage the constant changes and ripple effects, it’s beneficial to have someone on the team who is exclusively focused on planning. This specialization can help to design a well-functioning operations team.
Decide on which market segment(s) to target – this is a strategic decision that needs to be made at the front end of the planning process. This involves deciding on the selling motion, whether it will be more inbound or outbound, direct or channel. It also involves deciding on the industries and geographic regions to target.
Ensure you have good data – before you begin any planning exercise, it’s crucial to have good data. If your data is flawed, your planning will be too. It’s a case of garbage in, garbage out. Confidence in your database setup and the source of your enrichment data is key. Consider:
- Shore up your database setup – your database should be set up in a way that ensures accurate and reliable data. This includes getting rid of duplicates and ensuring your data enrichment is up-to-date. If your planning process starts in late Q3 or early Q4 for the following year, you need to be shoring up your data enrichment in Q1 and Q2. This sets you up for success when the planning exercises begin.
- Enrichment data – information about the accounts and contacts in your database is crucial. This could come from sources like ZoomInfo, Apollo, or Clearbit.
- Understand Parent-Child Relationships in your data – knowing how companies relate to one another is vital. For example, if you don’t know that Google owns Looker, you’re setting up the account owners for failure. Understanding these relationships, as well as geographical and firmographic information about accounts, is key to successful planning.
Tip: Take a long-term view during planning – the longer the time horizon you can take, the better. Each year, your planning process should improve incrementally. If your team is constantly turning over, or people don’t have the context for why decisions were made last year, it will be hard to make improvements. Some planning decisions have multi-year arcs, so understanding the historical context is important. Respect past decisions and assume that the people who came before you made decisions with the best information available to them.
What is the order of operations to create a strategic and tactical annual plan?
Step one: Identify strategic shifts and bets – the first step in planning for the upcoming year involves identifying the strategic shifts or bets your business will make. This could include entering new markets, moving upmarket, or adding new products to your offerings. These strategic decisions will guide the design of your operating plans.
Step two: Gather feedback from previous year – interview all the people who were part of the previous year’s operations. Ask them what worked and what didn’t. This feedback will help you make incremental improvements on this year’s planning process over last year.
Step three: Plan for your sales organization – this involves working your way down each part of the sales and marketing funnel for every single business unit in your business. You need to consider the conversion rates at each stage of the funnel and whether they are likely to stay the same, get better, or get worse.
Step four: Plan for your post-sales organization – similar to the sales and marketing funnel, you need to plan for the post-sales side. This involves considering your retention numbers and how many customers you have up for renewal in each quarter.
Step five: Sales capacity and quota planning – once you have your rough targets for bookings and retention, you can start to transition into the people part of the plan. This involves determining how many people you would need to support the plan. A great way to think about this is through productivity per rep. This can help you determine if you need to make incremental improvements to your sales enablement.
Step six : Post-sales capacity and comp planning – on the post-sale side, you need to consider the books of business and the capacity required to service them. This involves considering whether every dollar gets the same level of service or whether you want to stratify it based on the size of the accounts.
TIp: Ensure you’re documenting the bet you’re making throughout – throughout the planning process, it’s important to document the bets you’re making. This will help you articulate the plan to your internal stakeholders and empower them with the levers they need to pull in order to make the plan a reality.
What should go into your operating plan?
| Operating plan | ||||
| What it is | The roadmap for where a company is today and where it’s going | |||
| Who contributes to it | Include key stakeholders in operations and finance – those are the people building the plan from the ground up. Finance will probably put together the first draft and be the ultimate owner. Every single function in your company will contribute – operating plans are an extremely collaborative exercise. Bringing in leaders at each stage gives them an opportunity to give feedback. | |||
| What a good one looks like | Build it by segment and break it down by activity – you’ll break it down by activity like leads, meetings booked, meetings held, and bookings. Then you look at each to see whether you’re going to stay the same, get better, or get worse. Have a top-down and bottoms up version – it will show the growth path for you to hit your targets. The top-down version will set those growth targets. A bottoms-up would be each team coming together and talking about where growth can come from within their budget to get growth. It’s important to do both. | |||
Notes on building your operating plan:
Reconciling the top-down and bottoms up will help you create a happy medium – you come up with a plan that’s both ambitious from an executive strategy level, but also realistically attainable for the people who have to execute on it. If you only do top-down, you can end up with a plan that’s overly ambitious and impractical—if you only do bottoms-up, you can end up with a plan that is too conservative.
What should go into headcount and quota planning?
| Headcount and Quota Planning | ||||
| What it is | A model that demonstrates the quota and attainment expectations for every seller | |||
| What a good one looks like | Three key inputs: • Target – bookings target for the time period you’re looking at • Quota – how much quota do you need to give out to hit that number • Productivity – expected quota attainment Have a 20-30% quota allocation above the bookings target – if you plan for every rep to hit their quota, you’re setting yourself up to fail. People are going to underperform, leave, or be ramping. Plan with this overage in mind. You’ll probably have different quotas for different roles – you need to have higher quotas for folks that sell higher deal sizes, etc. Try to figure out a world where 75% of reps hit 75% of quota – and 50% of your reps are hitting 100% of their quota. That’s the gold standard for an amazing sales organization. Account for the ramp time of each new hire – if you are hiring an enterprise rep with a $1M quota, they’re not going to book that in their first year. Build a ramp plan that starts at zero and works its way up to the final quota for the rep. This sets the person up for success from day one, and avoids planning mistakes. Build your hiring plan on a month to month basis – adumbrate how many people you’ll hire each month—so that you can accurately account for how their ramping quota will contribute to your revenue number for the year. | |||
Steps to building your headcount and quota plan:
Start with historicals as a simple way to figure out what quotas should be – look at last year’s productivity, relative to quotas and account for significant changes to roles or territories. Then see if those quotas would allow you to hit your benchmarks. That’s a good gut check for the quotas you’ll set for next year.
Then, consider whether you have enough people on the team – do you have enough people in each of the roles to hit those quotas. You’re interfacing with the finance and recruiting team to figure out what the hiring plan is going to be.
Look at everything on a per business unit basis – it’s perfectly acceptable to hire in enterprise sales if they’re thriving while you’re putting the brakes on hiring in commercial. Productivity per rep will show you where to make hires.
Notes on building your headcount and quota:
New rep ramp time varies by deal type – reps with smaller quota and more transactional deals can have a shorter ramp time; reps with a bigger quota, a larger ACV, and longer sales cycle require a longer ramp time.
It’s easier to adjust your hiring plan than to improve rep productivity – this is why productivity per rep is such an important northstar metric: it can be used as a gate to decide whether or not to keep hiring. If you have an enterprise team with productivity/rep of $250K/quarter and you’re not hitting that target, then don’t hire. Stop, figure out what’s broken and improve the productivity of the people you have. Once you’re back in the green, you can start hiring again.
On the customer side, it’s a similar exercise to create your capacity plan – work backwards from the total install base of customers, the dollar amounts, how many people you need per segment, the roles of individuals covering those segments. Then you build a ramp and hiring plan for CS—similarly you can’t drop $2M in customers on someone on their first day.
What should go into your territory plan?
| Territory Planning | ||||
| What it is | Assigning territories to your reps (applies mostly to outbound sellers) | |||
| What a good one looks like | You want your territory planning to get better every year – it’s perfectly fine to take a crawl, walk run approach. You don’t need to start with perfectly designed territories that have detail down to the zip code. Take into consideration the following as you mature: • Firmographic scoring – to tell you which accounts are most likely to become customers of your product. This is a good place to start and can be a scrappy approach like assigning points to a few firmographic factors and grading accounts A-E. You might only send As and B’s to your team and never include C’s and lower in their territories. A sales organization should have the goal of the highest quantity of the highest quality activities—prospecting into C and D accounts is probably not time well spent. • Geographic factors – if you’re in North America, this is easy and you might not even need to worry about geography yet. Then you might base your reps in different parts of the country and have 4 regions instead of 50. Start small. • As you mature, you might get industry-specific – if you sell to tech, manufacturing, healthcare, etc. you’ll benefit from reps who work in specific industries, learning the language and expertise to speak to the people who work in those industries. | |||
Notes on territory planning:
Consider how to create territories that are equitable – regardless of how you slice territories, how do you create equal likelihoods for different reps to succeed? You need some sort of dollar amount that you can assign to each account, so you can see what the SAM, TAM, SOM etc. value dollar of the territory is. Each account will have a dollar value assigned to it, and you can assign them out and say that everyone gets $10M worth of A’s rather than just giving A’s
There’s a lot of debate about stacking the deck for the best reps – when you’re hiring and ramping people, it’s hard to not set them up for success. If your company is going to make a new strategic bet, expand into a new vertical or geography, it may be in your best interest to put the best people on the new problems. If you’re trying to break into manufacturing you might tell one of your best reps that you need someone to break into that industry and they’ll get every A manufacturing lead.
For inbound motion, have a plan for distributing incoming leads – you can tweak distribution rules and who gets what accounts as new inbound hand raisers come in the door. You can put your fingers on the scale a little so that your best reps get the best leads.
What should go into your compensation plan?
| Comp Planning | ||||
| What it is | How you will compensate your revenue org (a combination of base salary and tiered commission) | |||
| What a good one looks like | The Quota:OTE ratio is the crucial number to base your quota on – it’s important when designing quotas, comp, staff, and salaries. A best in class B2B SaaS should target 4-5x quota:OTE. You might be in the 3’s on your first comp plan, but you want that to be your north star that you can work to over multiple years. Accelerators and spiffs need to be easy to understand and digest, and exciting – imagine the moment when you’re rolling the comp plan out to sales or the customer team. You want them to be excited to go after those targets in a way that you can clearly articulate to them. Don’t think about comp as the numbers on the spreadsheet – the decisions you make around comp impact people’s livelihoods and the dollar amount that shows up in their bank account. You have to take that really seriously—because if you don’t it will show and you want to treat this with the respect that it deserves. | |||
Notes on compensation planning:
Before you start with numbers, think about three factors in comp planning:
- What are the guiding principles of the comp plan – what do you want to be true about the comp plan? Decide as a team what you want those guiding principles to be. It might be:
- Simple and easy to understand
- Transparent and everyone knows where they’re at against their goals at all times
- Everyone feels they have the ability to impact what they’re comped on
- What are the behaviors you want to incentivize this cycle? – make a list of the behaviors you want to make sure make it into the comp plan based on your strategic initiatives. If you’re moving from month-to-month to annual contracts, how are you incentivizing that? IF you’re focused on retention, how is that incentivized? If you want top performers to feel they’re out-earning their variable meaningfully, how are you incentivizing overachievement?
- What are the levers available to incentivize those behaviors – it could be someone’s normal commission rate, a spiff, a cliff, accelerators, etc.
Building compensation for your Customer Success Organization:
In CS, you see a 15-20% of their OTE is in variable – though sales it typically a 50/50 split between base and variable, this should not change your approach to building CS comp—you still want to talk about the principles, behaviors, and levers that will underpin the plan. CSMs are a different profile than sales—but just because their variable comp is smaller, they don’t take this any less seriously than sales does. It’s easy for CS to be an afterthought; put the same level of preparation, planning, and intent into CS comp as you do with sales.
Figure out as many leading indicators for retention as possible – as opposed to just using lagging indicators. It would be very easy to comp CS on gross retention or renewal of their book of business—but by the time retention outcomes happen, the leading work that leads to that outcome has already happened. If you just comp on Q1 renewals, you won’t incentivize the right behaviors for all their accounts that aren’t renewing in Q1.
For example, you could comp on a health score – if you use a red, yellow green health score, ⅓ of variable comp might rely on 60% of accounts being green this quarter. Or, you could say that everyone gets an MBO saying that 1 ⁄ 3 of the variable depends on 90% of install base getting a QBR this quarter.
Design comprehensive comp plans that are complementary to another – you want each role’s comp plan to be a check and balance on the other role’s comp plan. You don’t have to comp everyone on the net growth of existing customers. Maybe the comp managers are comped on that, and the renewals team is comped on gross retention. Now you have two teams that are incentivized to keep customers, but there is a good healthy tension on each other for the outcomes that you’re trying to drive for your company.
Be transparent around how different teams are comped – It should not be a secret what one another is comped on. That can breed insidious assumptions. You have to be the mythbusters and show how comp is incentivized to do what’s best for your customers.
How do you communicate your strategic and tactical plan across the organization? What’s important to get right in rolling out your plan?
Invest time, energy, and effort – the importance of dedicating sufficient time, energy, and effort into planning the rollout, communication, and enablement of your annual planning process cannot be overstated. This is a critical investment that will significantly impact the success of your organization’s plans. The goals is to ensure everyone feels set up for success.
Involve functional leaders and frontline managers early – engage all functional leaders and frontline managers in the process well before it launches. Their feedback will be invaluable in refining the process, and they will become your best advocates and ambassadors for the plan to their teams. Their involvement ensures that they have ownership over the process and can effectively communicate the rationale behind the plan when you’re not in the room.
Communicate strategic initiatives and their rationale – clearly communicate what the strategic initiatives are and the rationale behind why they were chosen. Also, explain how the company is implementing these initiatives tactically and putting them into play.
Transparency is key – be incredibly transparent about the numbers, the bets being made in the operating plan, and how to hit the operating plan. This includes being clear about quotas, comp plans, and the behaviors you’re trying to incentivize.
Create opportunities for follow-up – After the initial rollout, create opportunities for follow-up. No one will absorb all the information at once, so provide additional trainings, office hours, and resources that people can refer back to as often as they need. This could be broken down on a per business unit basis or a per role basis.
What are the most important things to get right?
Embrace the iterative planning process – strategic and tactical planning is not a one-time event, but a continuous process. You don’t have to be perfect the first time you do it. Instead, focus on improving year over year. This approach allows for flexibility and adaptability, which are crucial in a rapidly changing business environment.
Engage a broad range of stakeholders – successful strategic and tactical planning is a cross-functional, company-wide exercise. It’s essential to bring your stakeholders along with you in the process. If you’re working in silos or going off and doing it on your own, you’re setting yourself up for failure. Engaging stakeholders ensures that everyone is on the same page and working towards the same goals.
Prioritize communication, enablement, and rollout – you can’t spend too much time on the communication, enablement, and rollout of these types of plans. It’s crucial to think about it through the lens of the ‘why’ for every single member of your audience and design everything with that in mind. This approach ensures that everyone understands the purpose of the plan, their role in it, and how it benefits the organization as a whole.
What are common pitfalls?
Not learning from past experiences – it’s essential to reflect on the previous year’s experiences and learn from them. Conducting a post-mortem analysis of the past year can provide valuable insights that can guide future planning. If you don’t take the time to learn from the past, you’re likely to repeat the same mistakes.
Overcomplicating things – Planning is inherently challenging, and adding unnecessary complexity only makes it harder. For instance, if you’re designing a compensation plan for your Customer Success Managers (CSMs) with multiple components for just 15% of their On-Target Earnings (OTE), you might be overcomplicating things. Always refer back to your guiding principles and ensure your plans align with them. If simplicity is one of your principles, then a complex plan with numerous components might not be the best approach.
Inadequate preparation for planning – the phrase “planning for the planning is real” underscores the importance of having a solid foundation before you start planning. If your foundational data or databases are flawed or inadequate, your plans will likely be flawed as well. Therefore, ensure you have accurate and reliable data before you start the planning process.
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