Hi Operators ⚙️

In the words of the late-20th century philosopher-poet Rick Ross, “I’ve got money on my mind.”

Spreadsheets, complex modeling, existential crises - what’s not to love about business finance?

This week, we’re going to simplify some fun financial concepts that you might run into in your day-to-day as a COO.

We’ll try and keep it light 🥲

⚙️ Here’s what we got going on today:

• You Should Be Using Virtual Cards  → Keep it simple by keeping it virtual

• 4X Cheaper Revenue → Let’s talk expansion revenue

• How to Measure Your Sales Team → Your new “North Star” metric

Let’s dive in.

But first…

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5 Operator’s Library Links

• Here’s a super insightful conversation about how to scale a company differently at $10M, $30M, and $100M in ARR.  

• The richest people were once oil and real estate magnates but are now founders of tech companies. 

• While learning every financial ratio in the book might make you feel smart, it’s more useful to ask intelligent questions about financial statements.  

• If you need a pep talk because your product metrics are sagging, give this essay a read.

• How to reduce your CAC (Customer Acquisition Cost) in 3 steps.

I. You Should Be Using Virtual Cards

Insight from CJ Gustafson

Think about how many cards are used across your team.

Raveena has an AMEX with Bank of America. Nick uses Chase. Laura puts all of the Google Ad spends on her Capital One card. 

By some miracle (and hours of passive-aggressive reconciliation via a 50+ message Slack thread), Finance figures out a way to piece it all together. Or, in some cases, they don’t.

You know it could be easier, right?

I’m going to let you in on how I streamlined my company business cards using virtual options.

ALL recurring expenses go onto virtual cards, with ONE bank.

I like to organize the card numbers into categories to make Finance’s life easier: rent for our co-working space, paid ads, software licenses, etc.

You can also turn the cards on and off whenever there’s a personnel or vendor change without waiting for a physical card to make it through the mail system. 

I now spend way less time scrutinizing multiple accounts – a quick glance at the category lets me see the expenses and know if we’re on budget.

What else could go on a virtual card?

• Online ad spending (broken up by platform, if you’re fancy like that)

• Cloud storage fees

• Business phone plans

• Cybersecurity tools

• Access to training courses for your team

It’s all recorded and categorized. Neat and tidy.

Learn more: A complete guide to virtual credit card numbers

II. 4X Cheaper Revenue

Insight from Appcues

We’ve talked about spending money, let’s dig into making more of it. 

I don’t know about you, but I’m all about spending the least amount of money for the biggest payoff. 

That’s why I love expansion revenue.

It’s all about generating more income from customers you already have. Think upsells, cross-sells, and add ons.

It’s actually 4x cheaper to do this than to acquire a new customer. I’d rather sell existing customers new value-adds than hustle for new business any day.

So let’s crunch some numbers.

The quick math: add up revenue from upsells, cross-sells, and add ons at the beginning of the month. Do the same at the end of the month. 

Subtract the end-of-the-month number from the start-of-the-month number. That’s your Expansion MRR (monthly recurring revenue).

Expansion MRR = end of month expansion revenue – start of month expansion revenue

To find out if that number’s good, do this calculation to find your percentage:

Finmark says most Saas businesses consider 10-30% as good.

Where are you at?

Learn more: 30%+ of your revenue should be expansion revenue

III. How to Measure Your Sales Team

Insight from OnlyCFO

Let’s take a step back: before you can expand your revenue, you need someone (or a team) to sell your product.

But how do you know if your sales team is killing it? 

Most companies use what’s called a quota:OTE formula with a target of 5x.

(This means your sales rep brings in 5x more sales than their total compensation)

If you’re not already measuring this, you absolutely should be.

And it wouldn’t be The Bottleneck if we didn’t make things a little bit easier for you, so here’s a link to a free calculator 😀

Learn more: A free quota:OTE ratio calculator

Something Fun

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