Time To Revenue (TTR) is a crucial metric for businesses: it measures the time it takes to start generating revenue from a new product, service, or customer.
In this article, we'll delve deeper into the concept of TTR, how it's calculated, what factors influence it, and what strategies are useful for reducing this indicator.
Let's define Time To Revenue (or revenue readiness time) as the metric that calculates how long it takes for a company to convert a prospect into a paying customer.
In other words, calculating TTR requires tracking the prospect's journey from discovering the product until the deal is officially closed.
The first point of contact with the prospect (which initiates the calculation of revenue readiness time) could occur through the website, an ad, a lead magnet, or a demo request.
Monitoring TTR provides valuable data that helps better understand the business.
Helps understand the sales cycle
Monitoring TTR helps pinpoint exactly where the prospect's journey begins, making it easier to identify channels and stages to capture the potential customer's attention before they're ready to buy.
Helps measure product-market fit
Time To Revenue is an important metric to monitor because it enables adopting an approach grounded in intellectual honesty, particularly concerning product adaptation to the market.
Helps identify bottlenecks in the sales process
Measuring revenue readiness time helps identify potential issues in the sales process and pipeline generation strategies. This offers the opportunity to address them before they become larger and more challenging problems.
Now that we've defined Time To Revenue and discovered why its calculation is very useful for business sustainability, let's illustrate the main factors influencing this metric and how we can intervene on them.
Marketing, sales, and customer success team: Harmony among marketing, sales, and customer success teams is crucial. Alignment among RevOps departments can accelerate or hinder revenue readiness time. Consider, for example, marketing campaigns: if they're perfectly aligned with the target, they can lead to faster lead conversions.
Role of product offerings: The nature and complexity of the product or service offered can influence TTR: typically, the more complex the offering, the longer it may take for the market to understand its features.
External market factors: Economic conditions, consumer confidence, competitive landscape, and regulatory changes can influence TTR.
Customer journey and its stages: Understanding the customer journey, from awareness to purchase, is crucial. Each stage of this journey can influence TTR.
Fortunately, there's much we can do to reduce Time To Revenue: let's summarize some of the most recurring strategies together.
Understanding and optimizing the sales process
Companies with a deep understanding of their sales processes are better positioned to identify bottlenecks and areas for improvement.
Harnessing insights from sales metrics and KPIs
In an increasingly data-rich environment like today's, companies can access a wealth of information to guide their sales strategies.
Tools, software, and methodologies
The wave of digital transformation has equipped companies with a myriad of tools and software designed to track and optimize TTR.
Sorting individuals into B2B accounts
In the B2B realm, sales processes often involve multiple stakeholders within a single account.
The formula to calculate TTR is:
TTR = (Break-even point / Sales per period) +1
Where: The break-even point is where total costs equal total revenue, indicating no net loss or gain. Sales per period refer to the average sales generated in a specific timeframe.
Absolutely. A constant and optimized TTR can indicate a company's operational efficiency and its ability to adapt quickly to market variations. When a company consistently achieves a shorter TTR, it suggests that its sales, marketing, and operational strategies are effective. This efficiency can forecast the long-term sustainability of the company, as it indicates a solid business model and a keen understanding of market dynamics.
Startups, given their agile nature and the pressure to demonstrate their business model, often have a more aggressive approach to TTR. They focus on rapid market penetration, quick customer acquisition, and sometimes prioritize growth over profitability. Established companies with a well-known brand and customer base may have a more structured approach. They leverage their existing market presence and customer loyalty, and often have the luxury to focus on sustainable growth rather than rapid expansion.
While optimizing TTR is crucial, excessive emphasis can lead to potential pitfalls. Companies may rush product launches without thorough testing, leading to quality issues. There's also a risk of underestimating post-sale support, which can affect customer satisfaction. Overly aggressive sales tactics can drive potential customers away. Moreover, by focusing too much on short-term revenue generation, companies may miss the opportunity to build long-term relationships and understand evolving market needs. It's a delicate balance, and while TTR is essential, it should be considered along with other critical business metrics.
