After enduring several long years of profound economic change and continuing uncertainty, many company founders and sales leaders find themselves assessing their revenue performance with outdated and obsolete data. The questions, "How does our performance compare to that of our peers?" and "What can we realistically expect?" have become increasingly difficult to answer.

To address this, we surveyed 143 companies across our portfolio and the broader startup ecosystem to identify benchmark data and trends. The findings we gathered confirmed our initial hypothesis – companies are indeed facing a challenging sales climate given the macroeconomic conditions.

In this post, we will unpack key findings and takeaways from the full report and provide practical recommendations CEOs and revenue leaders can follow to weather the storm. 

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Revenue Attainment

The ability to accurately forecast and reach revenue targets is essential for several reasons, including correctly calculating burn rates, understanding the overall health of the business, modeling potential growth scenarios, and showcasing a competency investors often look for during fundraising.

Across all initial sale prices, only 52% of companies plan to hit or exceed the sales team's 2023 revenue targets; this is up from 39% attainment in 2022. In the first half of the year, 63% of companies missed their revenue targets. Even more concerning, 27% of those companies missed their revenue targets by more than 21%, indicating significant challenges in meeting their goals.

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The most impacted initial sale price was $100-249k, where companies missing revenue grew from 68% in 2022 to a projected 76% in 2023. This is expected given larger deal sizes are under greater scrutiny and  often require additional C-level sign-off (particularly from the CFO).

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💡CEO/Revenue Leader Recommendations

• Continually re-forecast revenue. Revisit assumptions and the sales funnel monthly.
• Tie headcount to revenue attainment. Many Lightspeed companies have begun using revenue as a criteria for additional headcount growth. This ensures burn ratios remain at an acceptable rate.
• Find revenue expansion opportunities. Look to existing customer, including cross-selling into additional products, upselling into higher margin products, increasing upselling within the existing product, etc.
• Companies with growing ARR and the resulting market momentum, should continue to invest in growth.

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Quota Attainment

It’s increasingly difficult to acquire new customers. Across the board, sales rep quota attainment has declined annually since 2021, with only 33% of reps attaining quotas to date in H1 this year.

Companies with $100-249M revenue and >$250k sales price have experienced a significant decrease of 44% and 47%, respectively, in their quota performance between 2022 and 2023. This may indicate that high-cost products and companies earlier in their scaling journey need to achieve a “must have” status to gain executive purchasing approval.

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While the majority of reps are missing their quotas, nearly half of all companies surveyed, 49%, are keeping quota levels the same. Companies that decreased quotas had under 25% of their sales reps hit their goal. The decision to decrease quotas may be a sales rep retention effort and/or the impact of re-forecasting revenue targets.

Additionally, we analyzed companies that increased their quotas, 28% of companies, and found that at least 50% of their reps hit quota targets. Increasing quotas is common as sales reps become more tenured and the sales process becomes more established.

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💡CEO/Revenue Leader Recommendations

• Evaluate the bottom 10-15% of reps and consider a reduction in force to rightsize burn ratios.
• Create individual retention plans for the highest achieving reps. 
• Invest in sales enablement to improve rep productivity.
• Continually look for opportunities to up-level the sales team with new hires.

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Win & Loss Reasons

Effective sales leaders pay close attention to the reasons their team wins and loses deals. This qualitative data can provide insights into product market fit, competitive positioning, and sales process improvements. Many companies experienced a drop in their win rates with 42% reporting a decline and 30% of these companies declining by 11% or more. 

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The top deal-losing factors were “Lost Funding,” “Decided to Do Nothing,” and “Went Silent,” indicating a continued, cautious approach of buyers investing in new solutions.

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Only 25% of companies saw an increase in win rates, with the driving factor being “Features & Product Roadmap”. This implies that products that address the core needs of a customer will be able to increase deal win rates.

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💡 CEO/Revenue Leader Recommendations

• Deeply evaluate product market fit. In the current economic climate, only “must have” products will get through the procurement process. 
• If new revenue is difficult to acquire, it's critical to retain and upsell the existing customer base. 
• Ensure your sales reps understand a potential customer’s key priorities and how to adapt the product’s pitch to match their goals.
• If your product has market traction, consider continued investment to capture additional market share. 

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Sales Cycle Length

Winning new deals is not only more difficult, it’s also taking longer. Sales cycles increased for 53% of companies, with 46% of transactions over $100k taking 21%+ longer. Across our portfolio, we have seen deal pace slow largely due to adding additional executive approvals, particularly for large sale price products. 

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Large transactions take time, with $250k+ deals taking 69% of companies over 6 months. Even smaller transactions, under $99k, take 49% of companies over 4 months.

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Combined with sales rep ramp periods of 3-6 months and decreasing quota attainment, elongated sales cycles require careful planning to ensure there is sufficient rep capacity to achieve revenue targets.

💡 CEO/Revenue Leader Recommendations

• Ensure you have the right executive champions. Don’t get surprised by needing the sign off of one or multiple C-Level executives.
• Continually and realistically evaluate the sales pipeline. Watch out for reps being overly optimistic about the probability of closing a deal.
• Forecast using realistic timelines. Take a conservative approach to modeling when new revenue will hit the P&L.

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AI- Driven Sales Apps

Current AI-driven sales solutions still lack the user experience sales teams are seeking. AI-driven products face critical challenges, such as the inability to handle complex scenarios and user adoption. However, we believe the recent innovation in foundational models will enable a new generation of AI-driven sales apps that will address complex sales scenarios with a seamless user experience.

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While many companies are not currently using AI-driven sales apps, those that are have focused on SDR (sales development rep) enablement. SDRs are responsible for filling the top of the sales funnel with leads through outbound prospecting. SDRs are typically fresh grads in their first sales role. Training is time-consuming, the average tenure is ~12 months, and scaling productivity is linear. SDR work is largely transactional: researching customers, running outreach campaigns (email, cold call, etc.), and lining up meetings for sales reps. The work is not only time consuming and repetitive, it also takes a lot of managerial time to hire and manage the team.

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SDR enablement is also reflected where companies are currently seeing the most value – outbound prospecting and prospecting research. Our thesis is that the SDR function will eventually be replaced entirely by an AI-driven solution, like the one offered by our portfolio company Bluebirds, an account research automation tool designed to help reps personalize outbound at scale. It combines Large Language Models with powerful signals like customer job changes, 10Ks / earning calls, job descriptions, public profiles, prospect websites, tech stack, and more to provide a comprehensive research and lead generation solution.

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💡 CEO/Revenue Leader Recommendations

• Not all aspects of the SDR function are easy to automate in the near term, such as the ability to nurture and develop customer relationships. Evaluate which aspects of the SDR function may benefit from automation, such as customer research, email outreach, data entry and tracking, and reporting and analytics. 
• Promote an environment of experimentation within the sales team. Tooling is evolving rapidly and reps should be exploring ways to improve their workflows and productivity.