Last week we discussed timely and accurate reporting methods in our becoming financially well organised series (business plan part 7). This week we continue with information on Driver 4: Revenue Strategy.
Most businesses have a two dimensional revenue strategy. This can be referred to as ‘squeezing the orange’. Profitability improvements are driven by minimising costs, and squeezing the margin out of sales and ad hoc sales and marketing activity.
People tend to focus on the results and the amount of sales, not on the five key activities that drive revenue. The correct revenue strategy for any business to follow is a five dimensional strategy:
Product = what you sell
Marketing = how you generate leads
Sales = how you convert leads to sales ($revenue)
Operations and delivery = how you build the product
Client relationship management = how you manage your clients experience so that they buy and buy again
Each activity requires different skills and hinges on each other for revenue to grow.
The growing revenue is simply a matter of maths. This is best described by using the Revenue Growth Formula:
New Clients ✗
Transaction Frequency ✗
Average Sale ✗
Where ✗ means ‘make it exponential’ every strategy you implement must work to leverage the activity so that it produces consistent growth.
To break the Revenue Growth Formula down a bit further:
Current revenue = current clients x transaction frequency x average sale x margin
This is your starting base.
To discover more about this, join us next week when we discuss some more significant revenue strategy components.
In the meantime, if there is anything we can do to make this process easier for you, please call us on 61 7 3833 3999, or visit our website atwww.financiallywellorganised.com.