The Operating Model

for Recurring Revenue

The open standards outlined here can be applied to any recurring revenue business
in order to drive sustainable growth, using scientific frameworks and data-derived
models. Think of these frameworks as the formulas that help your Revenue teams
move away from working as siloed functions of Marketing, Sales, and Customer
Success, and instead become one Revenue team --- all using the same operating
model, the same frameworks, the same language.

Jacco J. van der Kooij

Founder, Winning by Design
June 2022
 Summary Points
● The growth patterns of modern-day recurring revenue business models are unique from
traditional business models; the typical 'sales funnel' framework does not apply to the unique
needs of recurring revenue businesses.

● To achieve recurring revenue, companies must deliver recurring impact to their customers. A
common operating system across Sales, Marketing, and Customer Success is needed to drive
sustainable growth.

● The majority of the customer lifetime value comes after the initial sale, yet many leadership
teams overlook the importance of CS motions in recurring revenue to successfully onboard,
renew, and grow their existing customer base.

● Success in optimizing revenue and increasing productivity includes the alignment of all GTM
teams to a common methodology, framework, metrics, and language, in order to deliver the best
possible customer experience.

The Scientific Models that Govern Recurring Revenue

MODEL 1 MODEL 2 MODEL 3

Business Model Data Model Mathematical Model

yy
X
MODEL 4 MODEL 5 MODEL 6

Go To Market Model Growth Model Operating Model

The Operating Model for Recurring Revenue 1 of 16

MODEL 1

The Business Model

SaaS
Subscription

Mul

Annual

ly
rter
ti-ye
Ownership

Qua
3-y

ar
4-y

ear
So
Pe

ly
ea

th
r pe
ftw

on
kly
tu
al
ar

ee

M
e

W ily
Da rly
Har u
dw Ho
wit
h s are ge
u
con pport Usa
trac
ts

Consumption
On-Premise
Hardware Impact
Pay Upfront
$ Freemium
No cure. No pay
Business Model

Recurring revenue businesses can have a range of ● Ownership: The most extreme example in
different business models, operating on an arc this category is where a company is
between two extremes: the ‘pay upfront’ model selling on-premise hardware, where the
on the far left side, to consumption-based buyer pays upfront (e.g., perpetual
business models on the far right side. Each model software license).
along this arc has distinct implications for the ● Subscription: Most typical SaaS
sales cycle, win rate, level of risk, and go to businesses fall in this category, often with
market model. monthly, quarterly, or annual contracts
paid upfront.
Business Models on a ● Consumption: This includes various
forms of usage-based pricing; an example
Continuum
of this is pay-as-you-go cloud computing
resources. (Footnote 1)
With the term ‘recurring revenue’, most people
● Businesses can move from left to right, as
typically think of software sold on monthly,
well as from right to left, along this arc;
quarterly, or annual contracts, yet recurring
doing so changes how the business
revenue models actually exist across a much
should price their product, as well as how
wider continuum. There are three types of
they sell it. It is crucial to be aware of
models along this continuum:
these necessary changes, and the impact
they have on the company's revenue
operation.

The Operating Model for Recurring Revenue 2 of 16

Key Impacts of the Selected and consumption models, the seller instead
carries the majority of the risk: their company
Business Model has made a large investment in developing the
software, while there is very little risk to the
Moving along the arc of this Business Model
customer for changing their mind.
continuum from left to right results in the
following key impacts: Trends in Business Model
The sales cycle has accelerated. The
●
Transitions
length of the sales cycle tends to shorten
as we move from a value-based proposal Some growing trends of how businesses are
with an upfront payment, to shifting their business models are:
impact-based performance with payment
(i) Launching a SaaS product
at the time of consumption. A
conventional B2B software sales cycle for A common trend among enterprises with a pay
perpetual software license is typically upfront model is to launch a new SaaS service
9-18 months, while the sales cycle of a that is aimed at capturing more market share and
SaaS contract with an annual contract a more predictable stream. This often happens in
value of around $50,000 is typically the SMB segment, but may also happen in an
around 20-90 days. With consumption enterprise business; one example is a hardware
models, the sales cycle is practically business that begins to sell a recurring support
instantaneous, with accounts often contract for the first time.
charged shortly after usage occurs. (ii) Selling to the Enterprise
● Win rates have fallen. Win rates for
In this scenario, an existing SaaS company that
upfront contracts are typically quite high,
sells platform software to SMB and mid-market
as the buyer has generally already
size companies will shift to selling multi-year
secured the budget internally; therefore,
contracts. This is typically due to the fact that
the win rate is about 1:3. With shorter
their customer acquisition and retention costs
SaaS contracts, the win rate is more often
are taking longer to recoup, and therefore a shift
1:5 or 1:6, because companies can usually
to longer-term customer commitments is
test the product with minimal
necessary. This scenario typically occurs in large
commitment required. Finally, in a
enterprises and educational institutions.
freemium business model, the win rate is
more like 1:8 or even less, because the
commitment required from the buyer is SaaS is not the only type of
even less, resulting in more unqualified recurring revenue model;
buyers and higher churn. virtually any business can be
The seller bears more of the risk. In a pay upfront a recurring revenue business.
model, the buyer bears the majority of the risk, as
it's much harder for them to return the product
and realign their organization around a new
solution. As we move further toward subscription

The Operating Model for Recurring Revenue 3 of 16

Key Findings usage model, the risk for the seller continues to
increase, and the risk for the buyer becomes less
FINDING 1. and less.
In addition to driving retention, CS drives
Recurring revenue is not exclusive to SaaS
companies. The principles of recurring revenue
apply to any business where they do not make a
profit on the customer's first purchase, and
therefore need to continue to sell and provide
recurring impact to the customer over time.

FINDING 2.
Businesses can successfully utilize multiple
business models at the same time. Businesses
typically are successful when they rely on one
model until around $10-20M in revenue, at which
point they often expand and deploy additional
business models to drive additional revenue
streams.

FINDING 3.
The chosen business model has an effect on the
sales cycle. As you move from perpetual to
subscription to consumption, the sales cycle
typically decreases from years (as in perpetual
hardware contracts) to merely hours (customers
paying as they go for cloud compute resources).

FINDING 4.
The chosen business model has an effect on the
win rate. The win rate of qualified leads
decreases moving from left to right in the
business model. This is a result of the level of
commitment that the customer needs to make in
each scenario. This makes leads for a freemium
business model the hardest to convert, because
the customer needs to make very low level of
commitment in order to engage with you.

FINDING 5.
The chosen business model has an effect on the
level of risk. There are radical implications for the
level of risk borne by the seller versus the buyer
as you move across the spectrum of recurring
revenue business models. As we move toward a

The Operating Model for Recurring Revenue 4 of 16

MODEL 2

The Data Model

Awareness Education Selection Commit Onboard Achieve Growth

Impact

The modern Data Model for recurring revenue is won), onboarded, ARR, and LTV. The exact
represented as a bowtie, aligning all Revenue metrics used will vary based on stage of the
capabilities with a consistent set of metrics. company (e.g., product-led growth companies
with smaller contracts may be using monthly
This contrasts with the typical 'sales funnel' or contracts, in which case they will focus on MRR
'marketing funnel' that many Revenue teams rather than ARR). [Footnote 1].
historically have used to measure their
performance across a sales process; that funnel (ii) Time metrics
has distinct shortcomings for enabling a
recurring revenue model. The Time metric most often used by Revenue
teams is the length of the sales cycle. Others
The Metrics often measured are time to go-live and average
length of contract. For a more sophisticated,
The Data Model for recurring revenue is granular view that can help pinpoint where issues
comprised of three types of metrics: are happening in the sales cycle, revenue teams
should be measuring the average time between
(i) Volume metrics each sales stages, rather than the length of the
entire sales cycle, so that they can determine
Volume metrics are typically what revenue teams which parts of the sales cycle need further
are most familiar with. These metrics often improvement.
include measuring the following (or similar):
prospects, MQLs, SQLs, SALs, commit (closed

The Operating Model for Recurring Revenue 5 of 16

(iii) Conversion metrics the customer makes their selection, that is not
the end of the customer journey; it’s actually the
Conversion metrics examine how many leads or very beginning.
opportunities move from one stage to the next.
There are a few classic metrics used by many In this way, recurring revenue teams typically
Revenue teams, such as Lead-to-Opportunity make the mistake of focusing primarily on their
and Opportunity-to-Close. But similar to the case own sales process to get to the commitment from
with volume and time metrics, Revenue leaders the customer, ignoring the rest of the customer
should be examining these at a more granular journey where the customer is focused on
level in order to diagnose where improvements achieving their desired impact. The sales process
should be made. After the customer for a SaaS product may take just a few months,
commitment, teams typically look at overall while the length of a successful relationship with
churn level, but they should examine this more that customer may last many years. Therefore,
closely, instead looking at onboarding churn and rather than a narrowing 'funnel' that ends with
usage churn, which will typically have very the customer commitment, the proper process
different rates. Similarly, in the area of customer and model for recurring revenue is far better
upsell, CS leaders should be looking at this on a represented by a bowtie, with the customer
more granular level as well, by measuring renewal commitment in the middle.
rate (to the same decision makers), resell rate (to
new decision makers), upsell rate, and cross-sell
rate. Recurring revenue is the
result of recurring impact.
An important note that becomes clear when
Revenue leaders start to visualize and apply the
Data Model is that there is a strong emphasis on Closed Loop
detailed Customer Success (post-sale) metrics,
beyond what most companies measure. The The modern Data Model, when properly applied,
reason for this is that improvements in the operates as a closed loop system, which means
customer success stages of a recurring revenue that there is a loop that feeds back into the
have a compound impact on revenue. For more beginning of the model in order to inform it and
information on compound impact, see here. improve it over time. In this case, a classic
example of the closed loop is determining who
The Principles your best customers are in the later stages of the
bowtie, and then feeding that information into
Full Funnel the beginning of the bowtie, where your
Marketing team can be informed of these
The typical buyer’s journey that a B2B customer customers and try to go find more prospective
goes through is often thought of as the general customers that are similar.
phases of awareness, education, and then
selection of the right solution for their business. Customer Centric
Similarly, the typical sales process that B2B
Revenue teams use to work with their customers There is a fundamental rule that drives

often focuses on those three phases. But once sustainable growth for successful recurring

The Operating Model for Recurring Revenue 6 of 16

revenue businesses: recurring revenue is the after the customer has made a commitment.
result of recurring impact. Examining the idea of
FINDING 4.
impact further, there are two kinds of impact:
Most revenue organizations have plenty of data
emotional impact (e.g., making a report easier to
at their fingertips, but are getting lost when it
build, or giving a manager more visibility into the
comes to how to interpret it. This results in the
activities of their team) and rational impact (e.g.,
incorrect identification of the problems, and
increase revenue or decreasing costs). Revenue
therefore the wrong actions being taken to
teams must think in these customer-centric
remediate the issues.
terms, truly understanding what impact their
customers are trying to achieve. [Footnote 2] FINDING 5.
Recurring revenue models can be optimized as
This way of thinking should be reflected in the
follows:
sales process as well. Many companies think in
terms of prospects, MQLs, qualified a) In the first half of the Bowtie, drive
opportunities. Instead, the sales process should exponential growth by making small
be thought of in terms of the customer: improvements at each of the key
expressing interest, engaged with us, committed moments in the customer acquisition
to a solution, ready to activate, achieving process
recurring impact, and growing further to b) In the second half of the Bowtie, drive
achieving maximum impact. When we start to compound growth by making small
use this customer-centric mindset and improvements at each of the key
terminology, we start to act in the best interest of moments in the customer success
our customers, helping them achieve recurring process (such as renewal, cross-sell, and
impact, in turn yielding recurring revenue over upsell)
time.

Key Findings
FINDING 1.
The typical 'sales funnel' or 'marketing funnel'
does not serve the needs of recurring revenue
business models.

FINDING 2.
The Bowtie is a more accurate way to model the
inner workings of a recurring revenue engine and
reflect the principles that define it.

FINDING 3.
Companies are placing an outsized emphasis on
the first half of the Bowtie, leading to a heavy
focus on winning more deals; most companies
have a great opportunity for growth by more
closely examining and measuring their metrics

The Operating Model for Recurring Revenue 7 of 16

MODEL 3

The Math Model

The Mathematical Model shows that growth in a and if no, the sales cycle ends there. In order to
recurring revenue business is based not on linear get to a win, each meeting has its own conversion
mathematical principles, but on exponential rate; if a meeting 'converts', then the next
arithmetic. meeting occurs. It then follows that the win rate
becomes the aggregate of all of the individual
Reexamining the win rate meeting conversion rates. Continuing along these
lines, the sales cycle becomes the aggregate of
The win rate is typically determined as the the time between all meetings.
number of wins compared to the number of
The sales cycle can therefore be thought of as a
opportunities. This is a linear function, and it
simple mathematical formula, where the win rate
implies that you need twice the number of
equals the multiplication of each of the individual
opportunities in order to achieve twice the
meeting conversion rates. Similarly, the win rate
number of wins. However, this way of looking at
formula can also be thought of as the average
win rate glosses over what actually happens
conversion rate per meeting, raised to the power
during a sales cycle, and how those moments in
of the number of meetings --- which is an
the sales cycle can be improved to achieve the
exponential relationship.
highly desired exponential rather than linear
growth.
By thinking about the sales cycle in terms of the
conversion from meeting to meeting, we then can
When we break the sales cycle down in terms of
start to see how small improvements can have a
activities, we see the the sales cycle is comprised
disproportionate impact on results. According to
of a series of meetings. At each meeting, the
this mathematical formula, the two key ways to
customer determines if they are still interested in
drive exponential results are (1)
the product; if yes, a subsequent meeting occurs,

The Operating Model for Recurring Revenue 8 of 16

decrease the number of meetings in the average that can be provided to all stakeholders, as
sales cycle, and (2) increase the average success opposed to needing multiple meetings to get all
rate for each meeting. [Footnote 1] stakeholders aligned.

FINDING 4.
Growth in a recurring revenue Companies can deploy asynchronous selling
business is based not on linear techniques in order to accelerate sales cycles and
mathematical principles, but increase win rates, in addition to realizing other
on exponential arithmetic. benefits such as decreasing customer acquisition
costs.

The true growth engine

It is a common misconception that the most
important fuel for growth is new leads,
opportunities, and closed deals; many
organizations place a maniacal focus on these
elements, while ignoring a much more powerful
and efficient growth engine. Instead, the majority
of the growth in a properly functioning recurring
revenue business comes from the compound
impact of existing customers, during their
lifetime in their customer journeys as they go
through the key moments of renewal, cross-sell,
and up-sell.

Key Findings
FINDING 1.
Recurring revenue models are built to take
advantage of exponential and compound growth;
organizations need to build their revenue
functions with these principles in mind in order
to maximize their growth potential.

FINDING 2.
Disproportionate impact comes from the
compound growth of existing customers.

FINDING 3.
In practice, the number of meetings in the sales
cycle can be reduced using asynchronous tactics,
such as sending a proposal with a recorded video

The Operating Model for Recurring Revenue 9 of 16

 MODEL 4

The Go-to-Market Model

VOLUME SPEED EFFICIENCY EFFECTIVE SELECTIVE

ALL-to-ALL 1-to-ALL 1-to-MANY 1-to-FEW 1-to-1

100,000’s PLG
INBOUND
Number of Deals per year

COMMUNITY
10,000’s 1-STAGE
PROSPECT
HELPDESK
1,000’s 2-STAGE
ABM
VOLUME
100’s FIELD SALES
TARGET MARKETING GTM
SEGMENTED
10’s NAMED ACCTS SALES GTM

ACCOUNTS CS GTM

$5,000 $15,000 $50,000 $150,000 $500,000

Annual Contract Value

GTM models of Marketing, Sales, and Customer ● Product-led growth: The product itself
Success are aligned based on number of deals per acts as the marketing and sales function
year and ACV, in order to deliver the best ● 1-stage: Entire sales process is handled by
customer experience at the right cost to serve. one inside rep, from discovery all the way
through to close/commitment
Aligning GTMs across ● 2-stage sales organization: Two roles
manage the sales process (e.g., an SDR
Marketing, Sales & Customer qualifies and hands off a lead to an AE)

Success [Footnote 1]
● Field sales: Reps are located in region,
and typically hold a few hundred
The GTM Model shows how the specific motions
accounts. They may be aligned by
of Marketing, Sales, and Customer Success can
geography or vertical.
be matched and aligned, based on two key
● Named accounts: Enterprise reps work on
factors: 1) the number of deals sold per year, and
a short list of large enterprise accounts
2) the annual contract value (in the first year of
the customer's contract).
Marketing GTMs:

The GTMs must be matched in order to achieve

● Inbound: Typically content, SEO, events,
maximum efficiency and growth.
communities. These marketing materials
and content are not highly targeted (i.e.,
Sales GTMs: These range from 'no-touch' to 'high
1:everyone)
touch'.

The Operating Model for Recurring Revenue 10 of 16

 ● Prospecting: Sending tailored messages deliver the best possible customer experience,
to segments of customers or personas, while spending an appropriate amount of money
based on firmographics and/or persona to acquire that customer.
characteristics (i.e., 1:many)
● Account Based: Targeting fewer accounts, Key Findings
but addressing more people inside that
account (i.e., 1:few) FINDING 1.
● Targeting: Contacting a very specific list Companies often have mismatched GTMs (e.g.,
of people with highly targeted messages using a two-stage sales process while relying
that refer to each person's unique entirely on inbound content); there is a need for
situation and pain points (i.e., 1:1) companies to examine what their current GTMs
are for each of the three functions, and to align
Customer Success GTMs: These range from them accordingly under one coherent strategy.
do-it-yourself to highly supported.
FINDING 2.
● Community: This is typically in the form Multiple GTM strategies deployed too early on in
of online forums where customers find the growth cycle of a company results in
support and answers for themselves. spreading resources too thin. Companies will
● Help desk: Often a combination of bots often start to build out a second and third
and human support who are available to strategy (e.g., selling into SMB and jumping to sell
answer questions via a ticketing system. into the enterprise), before having solidified their
● Volume: Accounts handled by CSMs, with revenue stream in the original strategy, which
each CSM handling hundreds of small can quickly lead to resource constraints.
accounts.
FINDING 3.
● Segment: Accounts handled by CSMs,
It is common for companies to move up- or
with each CSM handling a particular
down-market in order to grow; these movements
segment of accounts (e.g., mid-market
typically take far longer than anticipated to fully
accounts, healthcare accounts)
execute. This is because the growth engines
● Accounts: Accounts handled by CSMs,
across GTMs are based on different foundations
with each CSM handling a very small
(e.g., the growth engine for enterprise accounts is
number of large enterprise accounts
expertise-based relationships and brand, while
When we map the GTMs of Marketing, Sales, and for mid-market accounts it is typically coming
Customer Success to the axes of number of deals from events, content, and thought leadership; the
sold and annual contract value, we can then see growth engine for SMB is typically reliant on
how the customer acquisition cost and the reputation, user base, and product ease of use).
service the company delivers are being matched
FINDING 4.
together. As an example, in product led growth,
The DNA of selling a product is very different
the customer wants a low-priced product
from selling a service. At a lower ACV, customers
delivered to them quickly; with named accounts,
typically expect to buy the product, but expect
they are buying a high price point product, and
the service to be free (e.g., paying for premium
likely expecting high-touch, custom service.
24/7 enterprise support for a software product).
At a higher ACV, the customer typically buys the
By applying GTMs in this way, companies can
service, while they expect the product to be free.

The Operating Model for Recurring Revenue 11 of 16

MODEL 5

The Growth Model

sustainable
IPO

unsustainable

$100M E
Recurring Revenue

le
ab
al
sc
D

unscalable

$10M C
B

$1M A
Unrepeatable Repeatable
process process
S
t0 t1 t2 t3 t4 t5 Time t(n)
PMF Go To Market Fit ScaleUp Fit Grown-Up Fit
Price your product Find a repeatable process for a Go To Focus on scaling Growth by doing more of Shift of focus to profit.
based on the proven Market motion(s) that grows revenue what works, and stop doing what doesn’t Growth comes from
impact it provides. consistently. work. Multiple GTM motions. existing customers.

This model is used to develop an understanding venture-backed companies raise a series

of what stage a business is in, and at what point it A round of funding, in order to find Go to
should move to the next stage to accelerate Market Fit as soon as possible.
growth and scale. ● Go to Market Fit: In this stage, the
company is now learning to sell its
The Stages product in an efficient and effective way.
Toward the end of this stage is typically
As growing companies move along the journey when venture-backed companies raise a
from starting up to scaling their growth, they go series B round of funding, in order to
through a few key stages: facilitate scaling going forward.
● Scale Up: In this stage, the company is
● Product-Market Fit: In this stage, the learning how to grow and scale the
company is finding its fit with the market business, applying what has been learned
(e.g., determining the right price for the in the previous stage in order to
product they have built, for the market accelerate growth.
they are serving). The company has a high
customer acquisition cost, as they learn Fundamental changes occur at all levels and
more about their customers - what they facets of the company as it moves through these
are willing to pay, what impacts they are three growth stages. In particular, many founders
looking for - and adjust the product based make the mistake of thinking that the team and
on those learnings. Toward the end of this skillsets used in pre-revenue stages will be the
stage is typically when same team and skillsets needed when the

The Operating Model for Recurring Revenue 12 of 16

company reaches the point of scaling. frequent reason that companies fail as they
progress through these stages is that they have
This does not imply that a different team is not achieved enough consistency in the GTM Fit
needed at each phase. Team members can evolve stage before raising more funding and starting to
and grow with the company, but founders must scale; they are scaling inconsistent results, and
think about how to plan and recruit for current therefore the company is scaling failure along
and future phases in order to supplement that with success. Essentially, the company delayed
evolution from the existing team. reaching their true GTM fit and started scaling
before that point was truly reached. This can

The most common problem for often result in a 12-18 month delay in reaching
the expectations that have been set by investors,
Series B companies: 'Scaling
as the rate of growth and efficiency needed
failure' happens when not
cannot be sustained. A common outcome during
enough consistency in
this turn of events is that Revenue leaders are
performance has been reached.
replaced, or that new levels of executives with
experience at later stage companies are brought
in with the intent of helping set the company
Generalized at a high level to illustrate this, the back on the right path.
following skills and traits will be crucial and
typical in each phase: FINDING 2.
Launching a new GTM requires the company to
● Product-Market Fit: Self starters and reenter PMF and GTMF. The launch of a new
proven superstars with reliable product, entry into a new region, or selling into a
performance. May dislike process and new segment requires that a company, even
structure. Will help to set the tone of the briefly, reenters the product development cycle
culture that the fonder is looking to to establish product, price positioning, and GTM
establish. Fit. Another common failure point is launching a
● Go to Market Fit: Creators and builders new enterprise product in the Scale Up phase in
who love to create a process and order to scale and grow revenue, without
document what they are building. Able to reentering that product development cycle.
listen and learn from what goes on
FINDING 3.
around them, enjoying working with and
Multiple GTMs deployed too soon will spread
learning from small teams.
resources too thin. Company management will
● Scale Up: Dependable team performers
often have a tendency to deploy several GTM
who love to execute process. May need
models before each one has matured and is
guidance and structure for creating new
scalable, with the goal of growing quickly and
process, preferring structure that is
capturing as much of the market as possible. This
already built.
error results in damaging the company's ability to
scale, as resources are now spread too thin
Key Findings across multiple GTMs, products, and teams.

FINDING 1.
Scaling failure happens when not enough
consistency in performance has been reached. A

The Operating Model for Recurring Revenue 13 of 16

 MODEL 6

The Operating Model

Provocative: As an
expert, you are telling the
customer what to do

When do you
C RITICAL
need this by? EVENT

D ECISION
CUSTOMER ENGAGEMENT .

CRITERIA
I MPACT
Consultative: Asking questions Ask how this What happens
to understand what the customer impacts their if you miss that
wants you to do, share use-cases. business date?

You heard what you wanted

to hear...You are excited and
Ask if you EMPATHIZE move on too soon.
got it right
If prospect starts
venting, ask to SUMMARIZE
prioritize Share a
customer story
P AIN P AIN
Max of A solution pitch

PI
2-3 closed often results in

TC
Resets disengagement

H
questions Perform the convo
ACE, Agenda research
and talk in context

SETUP S ITUATION S ITUATION S ITUATION TIME .

The Operating Model is a diagnostic framework before they were passed by SDRs to AEs.
for successful conversations and opportunities. At the same time, several other
methodologies are often used to help give
Issues with Sales structure later on in the discovery
process. Revenue teams have ended up
Methodologies using several methodologies at once, but
without being able to integrate these
Many sales methodologies have been developed methodologies together. The result is a
and put into the market over the years, and they very inconsistent sales process that
are very effective in bringing clarity and causes confusion between the functions
consistency to the sales process. However, there of sales, marketing, and customer
are a few common issues that occur with sales success, and a less than ideal experience
methodologies, which have become quite for the customer.
pervasive across Revenue teams:
2. Solution, consultative, or provocative
1. Too many methodologies at once. selling? These are often taught as
Companies are employing multiple sales mutually exclusive, and teams will adopt
methodologies for different parts of the one of the three based on what they feel
sales process. For example, BANT (budget, is most complementary with the product
authority, need, timing) became quite they sell. A problem arises in actual
popular in the Prospecting stage of the conversations with customers, where
sales cycle in order to qualify leads salespeople often need to employ all

The Operating Model for Recurring Revenue 14 of 16

 three of these methodologies in the same Revenue teams end up misaligned
conversation --- pitching them on their across stages because
solution (solution), diagnosing by asking methodologies were not built to
questions (consultative), or provoking integrate with each other.
them with another viewpoint
(provocative). Furthermore, these
methodologies provide guidance on what
needs to be accomplished, but without The SPICED Framework
providing the step-by-step directions on
how salespeople should go about it. By standardizing on customer impact, companies
can overcome these challenges and align their
3. Methodologies do not integrate. Despite teams to become customer-centric.
the fact that multiple sales methodologies
are often used in the same sales process, SPICED (Situation, Pain, Impact, Critical Event,

Revenue teams end up misaligned across Decision)is a diagnostic framework that provides

stages because methodologies were not the guidance for keeping the customer's desired

built to integrate with each other. Each impact as the ultimate goal, at the forefront of all

one has a slightly different focus, with conversations that occur during the sales cycle.

different terminology, and different

It allows for both a consultative and provocative
guidance on how to execute.
conversation, where the seller asks questions to

4. Helping forecast versus helping to sell. understand what the customer wants

Most methodologies end up being utilized (consultative), and encourages the customer to

by sales managers in order to help them think differently or see a different perspective

forecast, far more than they are used by (provocative).

individual salespeople to help them sell.

● Situation. Facts or circumstances

5. Methodologies focus on volume-based relevant to the customer that determine

performance management. whether the customer falls within your

Methodologies tend to focus on helping ideal customer profile and what is

reps win more deals (a focus on volume), happening in their world. Such as size of

rather than focus on helping reps with company, number of employees, software

what they should do in their customer they use, hiring needs, security needs, or

interactions (a focus on skills). Without revenue goals.

that type of guidance, sales reps are ● Pain. The problems the customer has

forced to figure it out on their own and purchased your product or solution to

form their own habits, which may or may help solve. This could include the need to

not be effective. conduct training or recruit, support a

global team, pass a security audit or stop
errors to happen in a process.
● Impact. The results produced by solving
pain. These are the outcomes the
customer is trying to achieve by
purchasing your solution. Impact can be

The Operating Model for Recurring Revenue 15 of 16

 both emotional, for individuals, and
rational, for companies.

● Critical Event. Any particular deadline by

which to the customer must achieve the
desired impact or suffer negative
consequences. Critical Events drive the
customer’s timeline for a purchase. This is
distinctly different from a compelling
event, which does not have a specific
deadline associated with it.
● Decision. The people involved in the
decision, the process they will follow to
reach that decision, and the criteria they
will use to evaluate the right solution

Key Findings
FINDING 1.
More than one sales methodology is often
applied at different points in the sales process;
however, different methodologies do not
integrate with each other, leading to confusion
and inefficiencies across the sales process.

FINDING 2.
Methodologies are often confused with
forecasting, and end up being applied so that
managers have an easier time forecasting, rather
than being applied to help clarify and guide the
seller along the sales process.

FINDING 3.
Aligning all Revenue capabilities and the full
revenue process is crucial for sustainable growth
in recurring revenue; the unifying thread for this
alignment is customer impact.

The Operating Model for Recurring Revenue 16 of 16