Published in Queensland Business Review, December 21, 2010
As 2010 comes to a close, businesses should be discussing revenue strategies with their accountant to path the way for a prosperous New Year, according to leading Brisbane accountancy firm elliotts.
Managing Partner, Matthew Schlyder, says many business owners aren’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,” Schlyder says.
“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,” he says.
While many businesses try to improve profitability on efficiency gains and ad hoc sales and marketing activity, Schlyder advises you can only minimise costs and increase margin to a point.
In fact, he says 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.”
According to Schlyder, 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 says.
While each activity requires different skills and hinges on each other for revenue to grow, 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’,” Schlyder says.
“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,” he adds.
With the New Year just around the corner, Schlyder says now 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,” he says.
“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.”