5 Top Metrics that Matter for a Chief Revenue Officer

Live from Skid Anthony, New York, it's SaaS Talk with the Metrics Brothers, Growth and CAC.

And I'm Growth, better known as Ray Reich, founder and CEO of Benchmarkit.

And I'm CAC, better known as Dave Kellogg, independent consultant, EIR at Balderson Capital, and author of Kelblog.

And together we are the Metrix Brothers.

We go together just like Guinness in an Irish pub.

Well, Dave, that is an upgrade from the last episode where you talked about biscuits and gravy. But it does remind me I need to get into our CRM and close loss that sponsorship with Kelly O'Byrne's Irish Pub.

Oh no.

Oh no. But I hear there's a new one coming, which will be announced at some future date, I suspect. But what's on tap content-wise for today, Ray?

See what's on tap. I knew you were still dreaming about that sponsorship with Kelly O'Byrnes. But speaking of revenue, I thought an episode on the metrics that matter to a chief revenue officer might be a good topic here early in 2024.

I love the idea, Ray. And we can cover the metrics that matter to a CMO in another episode. Ooh, you've teed me up now, I guess.

You know, I knew you wanted to make sure you got that blog out there on the internet, which I think we're okay with now, right, Dave?

Yeah, it's true, it's true. The, the, the Metrics That Matter is out. Yeah, it's, it's fair. This is what I get for sight reading, Ray. You snuck stuff into the script.

You know, I, I love it. Heck, why don't we just go out there and talk about another episode I want to do over the next month, and that's the Metrics That Matter to a Customer Success Leader To celebrate our new presenting sponsor, Gainsight.

Oh, you signed the deal. Okay, I thought it might be a future episode. Well, that's great news for all of us, and really happy to be working with Gainsight and Nick. In fact, I'm so happy, why don't we hear a word from them?

The Metrics Brothers is proudly sponsored by Benchmarkit, the B2B AI and software industry's largest, broadest, and most contextualized benchmarking index. Dave Kellogg and Ray Groth Wright have put the Metrics Brothers podcast on hiatus for remainder of 2026. All episodes we have ever recorded are still available on your favorite podcasting app. You can reach Dave at Kellogg and Ray on LinkedIn at Ray Reich. Thank you so much for listening to the Metrics Brothers podcast. Okay, now that we've heard from our new presenting sponsor, Gainsight, let's jump to the metrics that matter to a chief revenue officer. But hey, Dave, before we do that, can I give a couple caveats to today's episode?

Please.

So first, I think there's got to be a clarification of what a chief revenue officer is and is not. So I'd like to propose that what we're going to be talking about for the next 20 minutes is not for a CRO by title only, i.e., they just are a VP or SVP of sales. My belief is the Chief Revenue Officer needs to have responsibility for customer acquisition, expansion, and retention. Does that make sense to you, Dave?

It can. I think it's a fairly common— look, I think there's 2 types. There's the kind of grandiosely titled VP of sales, and there's the person who owns sales plus success. So, I hear you. And it sounds like in today's definition, you want to talk to the person who owns Yeah, I think it's much better grounding.

And by the way, it's not that the majority of time that's the case. I still see the majority of the case— when I say majority, more than 50%— somebody with a CRO title, when you really dig into it, they only have customer acquisition and part of the time customer expansion.

Yeah, and that, frankly, that's perfectly fine with me depending on the situation, right? There are definitely times where you want sales out selling And you want the top person in charge of sales to just go and get new customers. There are certainly other times, typically when you're bigger, to be honest, that you want a more holistic view.

And I'm glad you said that because the other, the premise I also wanted to kind of share with the audience today is, you know, these metrics we're going to talk about and we're really going to focus on the top 5. It's really for a company that's a little bit larger. I'm saying $10 million to $20 million at least, which means they're well beyond product-market fit and they have established a baseline of repeatable customer acquisition in at least one target market segment.

Okay, Ray. So now that we've got it defined, so for a CRO who owns both customer acquisition and customer success at a $10 to $20 million ARR company, uh, what are the top 5 metrics?

Well, the first one is, I think it's the— I call it the keep your job table stakes metric. And that is all about ARR growth. And specifically that the actual performance of ARR growth is at or greater than plan for both new name ARR and expansion ARR. I just don't think any other metric matters that much if you're missing plan significantly.

So, so I'm hearing 2 messages from you, Ray, which is not unusual because you have a background in sales and you're going to try and get 2 for one. Um, you're— the words are saying the keep your job metric should be beat plan, and I agree with that. But you called the metric growth, which I thought would have been this year's actual over last year's actual. So, so which is it? Is it both?

Well, I love how great you are at the detail. No, it's really all about Your actual ARR that you bring into the company this fiscal year, combining new customer ARR and existing customer expansion ARR.

Versus last year versus plan?

Versus plan.

Okay. So it really is the keep your job metric. Okay. Got it. So you're saying number one, keep your job. I would call that ARR plan performance. But now that I understand what you're saying, I agree with the content.

Well, let me ask you though. Because you actually double-clicked on something I wasn't thinking about. I actually think ARR growth, maybe you call it net new ARR, which factors in new customer ARR, existing customer ARR, churn, and downsell. I actually don't think that's a very good top 5 metric for a CRO. Would you agree with that take?

Yeah.

And I'm—

and just to be clear, that's not what I was suggesting. I was just saying we can look at absolute growth. Like ending ARR, you know, end of this period divided by year ago period. That's what I would call ARR growth. And look, if I were doing a financial valuation of the company, that's a super important metric, right? It's typically the kind of the x-axis in most valuation charts. But you're saying job one, keep your job, which I agree with. I'm saying, look, for as a financial metric, ARR growth, it's mostly a nomenclature thing because you called it ARR growth. And I think what my— in my language, You're saying hit plan. Mike Moritz told me when I took over MarkLogic, make a plan that you can beat. And I absolutely agree with that logic because if you're missing plan, first, it looks bad for the board. Second, you're not in control of the company. And third, you're not in control of cash. And that can lead to very bad things. Yeah.

And the reason I did this, Dave, I got fired once and I hit every operating metric.

Only once?

Only one that I know of, or at least I want to share here on a podcast. But I had— my dashboards were so beautiful, my unit economics looked great, but they're like, Ray, you missed plan by 12%. I'm like, oh, I guess my dashboards and my mastery of all these other metrics don't make a lot of sense then, do they?

Or worse yet, I guess I'm bad at negotiating plan. Because if you actually were growing quickly, the actual problem there is you were not a great plan negotiator. So, okay, number 2, Ray. So, keep your job is number 1.

Okay, number 2. Now, you may— I don't know how you're going to respond to this one, Dave, but it's pipeline performance. And I look at 2 kinds of vectors on pipeline performance. The first is all about, do I have enough pipeline, i.e., pipeline coverage to make my plan? And that includes looking at, My pipeline generation. Am I generating as much as I knew that I needed? What are my conversion rates from qualified opportunity all the way down to close won, which really is my pipeline coverage ratio? So first are my pipeline coverage metrics because there's no way I can make plan without that. What say you?

Yeah. So we could debate naming and other things, but basically you're saying if job one is to keep your job, job 2 is to do the stuff to make sure you keep your job next quarter. So, it's hard to disagree with that as a philosophy. Normally, in my opinion, I would say, I would try to push these to the marketing person. It all depends on how much your pipeline comes from marketing versus sales. But, you know, I work with some companies where 85%, 90% of the pipeline comes from marketing. And even if only 65% came from marketing, I would try to push this onto the CMO. Because I, look, I like to make things simple, Ray.

Yeah.

And in my world model, marketing is the stage 2 opportunity generation factory and sales is the stage 2 opportunity closing factory. So, in a perfect world, I like to keep them focused on closing and close rates. But yeah, if somebody doesn't keep an eye on pipeline, we all know we're going to break your first goal, which is we're going to miss plan.

Yeah, well, this is where, you know, we agree on 80% of things. This might be one that we're not going to be 100% aligned on. Because even though I think this Chief Marketing Officer should be the quarterback of pipeline, that Chief Revenue Officer needs to understand where we are against that goal. They may even need to contribute to that goal if we have strategic account marketing or AEs have 20% or my CSMs have a, you know, customer success qualified lead. So, I want the CRO to be on top of this. Just as much as a CMO.

Yeah, you're not going to get an argument saying that the CRO shouldn't be looking at the pipeline. That's not one we're going to fight about. It's just all a question of what should be top 5. But look, I like your logic thus far. Step 1, keep your job because if you don't, nothing else matters. Step 2, look at the stuff that's going to help you keep your job, which is pipeline. So, what about number 3?

Well, it's not number 3. It's 2B. Now, this one could be a lot— be up for debate because we are in the era of efficient growth. And I believe the Chief Revenue Officer, who is a steward of the company's financial performance, should also understand how efficient they are at generating pipeline that becomes ARR. So, I like a CRO to know what their cost per opportunity is and the cost per dollar of closed won. Now, because I'm saying this isn't just a glorified VP of sales, it's not just a sales CAC ratio, but I think they should know the CAC ratio for the pipeline they're generating and closing.

Yeah, yeah. Uh, just because I've seen the notes, I know you've got CAC covered down below, so I think you're going to double count it. But, but let's, let's just say you think it's that important. Okay, they're not going to argue here again. I mean, look, pipeline efficiencies are important. There's huge— especially in these days, In 2024, there's gonna be a lot of downward pressure on the CAC because CACs have risen terrifyingly, by the way. I saw a study the other day, I think it was David Spitz's stuff, where it's gone from roughly— well, he likes to express it as a percent, I'll do it as a ratio, uh, multiple— but like from 1.5 to 2.5, I think roughly is what he was saying the median cost of a dollar in net new ARR was, is $250, which is really high. So, so there's definitely gonna be pressure to bring that back down.

Totally agreed. Now here's the third one. So, and it's net revenue retention, which is one of the top 3 financial performance metrics from my perspective. But I think that chief revenue officer, number one, they need to know this because it's a proxy for how much revenue can I get from every new customer over time. So can I retain them and then can I grow them? And that net revenue retention number actually is also critical to another metric we're going to talk about in a minute, and that's customer lifetime value. into CLTV to CAC. So I think NRR is critical for the CRO to understand and have a goal to meet if they have acquisition, expansion, and retention, Dave.

So have you read CJ Gustafsson's post called LTV to CAC, the Nickelback of SaaS metrics?

No, I haven't. And is Nickelback the band?

Nickelback the band, the band that everyone loves to hate. So he has a post on LTV to CAC where he calls it the Nickelback of SaaS metrics, and I can't disagree with them. But we'll come back to you on that. A lot of people use it. A lot of people know who Nickelback is. It's a pretty good metaphor. A lot of people use it. And certainly, it relates to NRR, and you're not going to find any disagreement here that NRR is a top ratio. By the way, and this is important, this is why you gave your disclaimer. If you don't own customer success, it gets a lot less important. But if you're kind of a quote-unquote true CRO, then this one needs to be up there.

Yeah, I'm a little worried that I may have to go cancel my Nickelback fan club membership.

Are you— do you have tickets for the latest tour, Ray? Like every show?

I hate to admit it, but no, I don't. Okay, well, now you already kind of busted me on this one, Dave, but my 4th top metric for a chief revenue officer is that CAC ratio. And just— we have another episode, I think, all about CAC ratio. But that's taking your totally fully loaded sales and marketing investment and dividing that by the amount of new logo ARR plus existing customer expansion ARR. And I think it's really important to know that. And a child of that is your new logo customer ARR. So how much of your sales and marketing investments being allocated to the pursuit of new logos divided by the amount of ARR for those new logos. What do you think about that for a CRO, Dave?

So, 2 things I'll notice when you have your CRO hat on. All of a sudden, sales and marketing expense is now sales and marketing investment. Very, very nice sleight of hand there, Ray. I will tell the audience that Ray goes to great lengths to hide the fact that he has significant sales management and sales experience. How many years did you have a quota for as a manager or a rep in total?

Oh, 25 to 30, Dave.

Yeah, yeah. Ray's a sales guy. He hides it. But, um, I think he thinks it hurts his metrics cred. I think it helps personally, but I just thought it was really funny to see sales and marketing because all of a sudden it's an investment now, uh, as opposed to an expense. So yeah, obviously I think for a CRO, you got to know the CAC ratio. You control usually 2/3 plus of it depending on your sales to marketing expense ratio, but normally you'd be directly controlling 2/3 or more. I've seen companies where they control up to 90% of it, maybe 100% if marketing works for sales. So, it's something you have a ton of control over and something that is being scrutinized by investors. And in some ways, this is one of those metrics where kind of a VP of sales could tell you their quota performance and plan performance and year-over-year growth, but they won't really care about the impact on key financial metrics. Whereas a CRO, this is one of those, like, what differentiates a VP of sales from a CRO. Some of it is scope, as Ray talked about earlier, but some of it is just philosophy. Like, the VP of sales is like, hey, I hit my number, I don't care about everything else. Whereas a CRO should be, hey, wait a minute, I hit my number, we did it efficiently, and we teed up pipeline for next quarter, and our CAC ratio is coming down, and blah, blah, blah. So, I think in some ways, it's not only a good sales metric, but a very good CRO metric and kind of an executive-ness metric.

And the other reason I love this, a lot of these metrics are Lagging indicators, outcome, right? I look in a rearview mirror and it's like, hey, how much did I spend to get a dollar of newer existing customer expansion ARR last year? But it's also predictive because if the CEO and CFO comes to the CRO and says, I need you to grow $10 million next year, then— I'm sorry, that's not a fair way to say it. I need $10 million of new ARR next year. I can say, oh, so it's $1.70 per, so I need $17 million of investment to do that. So what do you think about that little spend that this helps me predict how much investment I need to bring that much in next year?

Yeah, I'm not sure I'd use the word predict. I guess it is a prediction. I mean, certainly it tells you at the first order what it should cost. I guess that's a prediction. I use that same trick, Ray, but I tend to use it for churn. I always used to say, hey, if our CAC's $170 million and we churn $10 million, you do understand how much that's going to cost to backfill that. It's going to cost us $17 million. Couldn't we have spent $3 million to prevent some of that churn? So that's where I use— it's the same exact trick, but I just use it in a different context.

I really like that, especially when I'm fighting for budget at the beginning of the year as a CRO. That's a good one. Now—

It's a lot better than fighting about ARR per CSM, or even if you had success up, it's a lot better than the normal fights.

Yeah. Now you notice what I didn't say here. I didn't say that CAC payback period was a top 5 CRO metric. What do you think of that? Am I missing one?

Well, I don't know if I'd list these as my top 5 in general, Ray. I'm here to talk more metric by metric. We could do another episode on what Dave thinks the top 5 are. I would not put CAC payback period as a CRO metric. No, there's too much Look, marketing is already potentially outside their control. Maybe success is depending on the definition of CRO. Gross margin certainly is. So, it's getting to be a lot of stuff out of their control. Should they know what it is? Should they understand why the company is shooting for whatever goal it has? Yes, back to the kind of executiveness test. But if I'm trying to figure out whether to fire somebody or not, I got a lot of better metrics I could use.

Okay. Well, number 5, you're probably really gonna say that and CJ won't be happy either. But I did say that CRO should understand and communicate what their customer lifetime value to CAC ratio is. And I know that might be a little surprising, and maybe that's the CRO who's a CEO in training or a wannabe CEO. But I think if you're talking about how much I'm investing to get a new customer, if I can highlight the fact that, hey, since we retain and grow them so well, And it's going to deliver this much lifetime value on a gross margin adjusted basis over the next 5 to 7 years, it can help justify why we're willing to pay a little bit more to acquire each new customer. Because if I have a 3.0 CLTV-to-CAC ratio, it might be hard. But if I have a 5.2, then I can probably convince the investors and the CEO to invest a little bit more to acquire more customers. What say you?

Yeah. I mean, personally, I'd use a multi-year NRR on that or cohorts. Look, overall, I agree that a real, a true CRO, an executive CRO doesn't just care about acquiring customers. They care about acquiring good customers and good customers are people who stick with us and people who expand. And you'll see that in the LTV to CAC ratio. In fact, you usually don't capture expansion depending on how you calculate it. And there's a rat hole there. You don't always get expansion in an LTV to CAC ratio. It's often done off the year 1 ARR divided by the inverse of the year 1 churn rate. So trailing 1-year churn rate. So you'd miss it. And I do think the intent here is not just about getting customers to make plan, but it's getting good customers to make plan. Personally, I'd use a multi-year NRR, which we've never really talked about. Maybe we should do an episode on that, or at least a 1-year NRR. But I like the spirit of where you're coming from. And this also applies to marketing, by the way, that we should find opportunities. in patches where the customers will stick with us and grow.

You know what I just realized, Dave? We're at 20 minutes now, so we're going to have to wrap up, but we've never covered that CLTV to CAC ratio in an episode. We definitely need to do that in detail.

Yeah, we can do that. Starting with the name, I call it LTV to CAC, but we'll blow up right out of the launchpad with how to name the episode. But yeah, we've never done it. I have a blog post that has been sitting on my shelf for Probably 8 months at this point, Ray, called LTV to CAC Revisited. And CJ's post got me inspired to finish it. So I think it's very high on my list to go get that out.

Okay. Now, if I'm your CRO and you're my CEO, and I say, these are the ones I want to measure, measure from the Midwest, what would you say, Ray, you missed this one, you got to measure this one?

Other than there's no H in measure, what would I say? I don't know. You've got plan performance. I actually would have actual growth as a separate from plan performance because I care about, did you make plan, which ultimately tests your prediction and negotiation skills? Then I care about, are we growing? And in a perfect world, I'd use relative market share. It's not easy to get, but I want to know if we're growing faster than the competitors because that's your job. Your job is to make plan and grow faster than the competitors. I could hire a lot of clowns who can make plan and grow slower. So the company's losing market share, right? I need somebody who can make planning grow faster. The other ones are really about who you're acquiring because a good ICP, you should get a lot of that built in if we have a good ICP definition. And win rate, win rate, close rate, but it'll all come out in the efficiency ratios. So I would probably look at a win rate though. That's the difference. I'll let the CFO tell me about the CAC ratio. I don't want the VP of sales so busy talking about CAC that they forget to talk about win rate.

Oh, I want— I'm the CRO. I want my VP of sales talking about win rates.

Oh, delegating. Okay. Big company talk.

Well, Dave, I love this episode because I love CRO metrics, but I'm really looking forward to an episode when we talk about the metrics that matter to a CMO.

Okay. Well, let's do that, I guess, next time, huh? Okay, Dave.

Thank you so much. I appreciate it. This was fun for me.

Thanks, Ray. Glad you enjoyed it. I did too.

The Metrics Brothers: AI, SaaS, and More is a production of The Metrics Brothers Growth and CAC and a member of the Benchmarkit Podcast Network. By accessing this podcast, you acknowledge that The Metrics Brothers make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided or the humor content of the jokes told. Ray, information, opinions, and recommendations presented are, according to our spouses, probably wrong and provided for information purposes only. This podcast should not be considered professional or for that matter, unprofessional advice. We disclaim any and all liability for any direct, indirect, indirect, misdirect, incidental, special, ordinary, consequential, inconsequential, or other damages arising out of any use of, or God help you, reliance upon the information presented here. Ray Grothreich is based in New York City and available on X @RayReich. Dave Kellogg is based in Silicon Valley and available on X @DaveKellogg. Kellogg. Schedectity, which is French for unspellable, is not our actual production location. Thanks for listening.