Published in Australian Institute of Building
Businesses should be discussing revenue strategies with their accountant, according to leading Brisbane Accountancy firm, elliotts.
Managing Partner of elliotts, Matthew Schlyder, said many business owners weren’t aware that accountants are there to assist with putting steps and procedures in place to help them achieve their goals, and not just end of financial year tax accounting.
“Doing ‘the work’ is a primary focus for many business owners. This focus means you are restricting your potential revenue growth because your behaviour is based on production rather than generating revenue,” he said.
“I’ve seen businesses grow from $800,000 to $5,000,000 in revenue over a period of three years where the business owners focus on the key activities for growing revenue.”
“Many businesses try to improve profitability on efficiency gains and ad hoc sales and marketing activity; however you can only minimise costs and increase margin to a point.”
In fact, Mr Schlyder said the revenue activities that drive revenue growth come from product, marketing, and sales activities, not the ‘factory’.
“The ‘factory’ or your production and delivery activities are where your product is built and provided to the customer, not where the sales revenue is made.”
Mr Schlyder said successful businesses have separated the key revenue activities in order to minimise the impact of variables on its daily/weekly/monthly/quarterly and annual revenue targets.
“For a business to truly be successful it must adopt five Dimensional Revenue Strategy elements, including your product/service, marketing (how you generate leads), sales (how you convert leads to sales), production and delivery (how you build the product/service) and client relationship management.”
He said that each activity requires different skills and hinges on each other for revenue to grow. But each activity requires a different strategy so that the action plans are clear.
“To build revenue growth using the 5 Dimensional Revenue Strategy, you need to understand and apply the Revenue Growth Formula which is ‘Target Revenue = (current customers + new customers) x transaction frequency x average sale x margin.’”
“Businesses need to prioritise their actions around three priorities. That is, firstly to provide existing products/services to existing customers, providing new products/services to existing customers, and finally providing all products/services to new customers.”
Mr Schlyder said that in the legal industry for example, as with most of the professional service industry, the owners focus on achieving their revenue targets by purely concentrating on how many team members they have, how many hours they charge and then this ultimately determines how much they bill.
“This is the production and delivery aspect of their revenue generation. They fail to recognise that this is simply the method of how they produce their work. How they drive revenue must be aligned to the key activity drivers of revenue: product, marketing, sales, production and client relationship management.”
Mr Schlyder said that by implementing these five key strategies by focusing on providing existing products and services to existing customers, and ensuring that revenue strategy is built using the Revenue Growth Formula, business revenue will grow in a structured and sustainable way.
He said the start of a New Year is the perfect time to become financially well organised and put in place a strategy to stay that way for the rest of the year.
“Being financially well organised means assessing your business and personal goals and developing a plan for achieving these. Your action plan should give you confidence that you will obtain financial security for you and those important to you, now and in the future.”