The Revenue Operations Benchmark Model

This analysis seeks to provide the large audience of investors and managers that buy, own and manage privately held business assets a more  financially valid and actionable means for valuing, measuring, protecting and growing the value of small, privately held firms.

The problem is that private equity investors and portfolio company managers are largely unable to take advantage of the vast and growing body of academic research on the marketing-finance interface. These allocators and manager of capital lack exposure to the research, find it difficult to put into practice, and need a way to reconcile how marketing assets and actions interact with other functions, stakeholder, systems and assets within the business to create firm value.

This paper presents a practical and actionable framework – the Revenue Operations Benchmark Model – which can help investors, owners, accountants, and managers leverage research on the marketing-finance interface to understand the sixteen operational levers and forty six specific drivers of firm value in their business to improve their ability to value business assets, report performance, allocate capital and resources, and govern commercial assets, processes and fiduciary risks.

A primary outcome we seek is to significantly expand the adoption and impact of the vast body of research created on the marketing-finance interface to a much larger and vested audience private investors and analyst and the management and accounting teams within the businesses they invest in. In addition, we hope this framework will help scholars, accountants and practitioners to contribute or direct new research that fill key gaps in knowledge and practice, develop operational benchmarks, and structure “test and learn” experiments that continuously improve the return on commercial assets and investments.  This analysis does not seek to recommend better ways to value commercial assets or advocate for changes in financial, managerial and acquisition accounting standards.

The objective of this analysis is to provide a comprehensive, practical and actionable framework to help investors, owners, boards and managers better forecast, predict, quantify, assess, benchmark the future growth potential of a privately held business and direct and inform future research that connects commercial assets, investments and actions to firm value and financial performance.  The research seeks to build upon and communicate the growing body of academic and commercial research in the field and increases the use of more accurate models and methods of assessing in industry. This research paper:

• Aggregates, affirms and builds on the increasingly intangible nature of commercial assets over the last forty years – and the gaps in management and accounting practices across financial, managerial and post transaction accounting in quantifying the true value of a business assets (brand, internal software development, R&D, New Product Development, Design, Training, Process know how).
• Incorporates new research on the increasingly interdisciplinary (marketing, sales, success and finance) and asset intensive (commercial data, brand, and digital channel assets) nature of revenue growth from research conducted in the book Revenue Operations.
• Informs investors, owners and managers of the gaps in accounting, due diligence, management reporting, and governance practices currently in use in quantifying the true value of the commercial assets and growth capabilities (brand, internal software development,  R&D, New Product Development, Design, Training, Process know how) within the firms they are buying, governing, protecting or growing - particularly given the lagging nature of traditional due diligence (quality of earnings) and the inadequacies of current accounting (GAAP and FASB) practices and reporting standards.
• Catalogs and contextualizes the different approaches, models and methods developed in academic and commercial research for better assessing the impact of commercial actions, assets and investments on firm value in the proper context (value based, customer equity based, asset based and revenue attribution based).
• It suggests a practical and actionable (conceptual, theoretical) framework (The Revenue Operations Benchmark Assessment) - that will allow (private company) investors, boards, and owners of businesses to use the growing body of academic research on the impacts of commercial actions and assets on firm value in their investment, fiduciary and capital allocation decisions.  (Other options are too slow, expensive, theoretical, and subjective)

The ultimate goal of this analysis is to provide private company owners, investors and boards an alternative evaluation model  - the Revenue Operations Benchmark framework - that better reflects the true drivers of value and growth after decades of an entrenched reliance on Financial Engineering and Quality of Earnings analysis in firm valuation. And it seizes on the rising focus on revenue engineering in the private equity and investment field, as the traditional financial engineering playbook used by Private Equity for decades has run out of steam as interest rates rise, and markets start to finally understand that organic revenue  growth is the primary driver of firm value.