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.