David Cummings on Startups

Connecting Software Engineering to Revenue

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David Cummings

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After a startup has achieved product/market fit and a repeatable customer acquisition model, one of the common entrepreneur questions is “how do I connect software engineering initiatives to revenue?” Demand on the engineering team grows from sales (new features!), from support (fix bugs, make it easier!), from product (beat the competition!), and on and on.

Some questions arise:

  • Is our engineering team working on the most important things?
  • Do we have enough engineering output to meet our goals?
  • What new features will increase our win rate, generally? By how much?
  • What new features will increase our win rate against certain competitors? By how much?
  • What new features and bug fixes will increase our renewal rates? By how much?

Unfortunately, I haven’t found a solution to this challenge. What I have found is that connecting engineering to revenue goals is critical. Sure, everyone knows that adding certain functionality and fixing bugs makes the product better. Now, take it one step further.

We’re adding this feature to increase our win rate by X% to hit our revenue goal of Y this year.

We’re fixing this user experience to increase our renewal rate from X% to Y% to hit our recognized revenue goal of Z this year.

We’re doing _________ to achieve _________.

The more everyone is aligned, the more team members make micro, incremental decisions that help achieve the goals. While it’s hard to definitively guarantee engineering initiatives to revenue, it’s straightforward to tie goals to projects, and enhance the chance of success.

Comments

3 responses to “Connecting Software Engineering to Revenue”

  1. David Greer Avatar
    David Greer

    Hi David,

    My experience as both an entrepreneur and a coach is that alignment across a company is hard. Thank you for the clarity of your post and making easy to state alignment.

    Cheers,

    David

    Reply
  2. Ben Alexander Avatar
    Ben Alexander

    Every year I’m looking at what others are using for their system, or metrics to track, or how much Product should own a revenue number.

    But basically it comes down to every quarter (our release cadence),

    what are the enhancements to help win a new customer that has an RFP, doing a trial, or a POC?

    What updates will keep customers happy;

    sometimes real time decisions on helping keep a customer;

    or provide an at-risk customer incentive to stay with us and not move to another new shiny platform that C-suite is pushing.

    Always bug fixes, and getting the right mix of prioritization on bugs, or poor UX vs. providing work arounds.

    And with current customer projects, what enhancements will help reduce implementation time and costs.

    It’s easy to have major initiatives or 10x-type product updates on the longer-term roadmap, but takes discipline to make sure you move the needle on the roadmap when forecasting what future prospects will need, or different slices of our target markets.

    Reply
  3. Troy Winfrey Avatar
    Troy Winfrey

    This is what user research excels at. Get the critical data your analytics miss. Use that deep insight to prioritize backlogs and build features your users will really care about. We’re seeing this take off in SV: it’ll be table stakes everywhere else in five years.

    Reply

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