Time to Review your Revenue Practices
Firms become complacent, they continue the norms and assuming revenue will remain the way it always has. This is a dangerous thought process to fall into, and many firms step in and out of this mentality. With a slowing market in professional services sectors predicted over the next five years, “Legal” being one of the worst followed by “Accounting”, now more than ever is a good time to review and agree upon your practices revenue strategies. Remember HOPE is NOT a strategy.
Types of Revenue
The first place you start with any revenue strategy is coming back to the type of revenue your practice is generating. Revenue can be broken up into three high level categories.
- Recurring revenue
- Reactive revenue
- Proactive revenue
Proactive revenue is known revenue from year to year. For accountants, this can be your annual accounting services. For Lawyers, this can be retainers that you may have in place with your key clients. For Pharmacist, this can be your recurring prescriptions.
Whichever professional services industry you belong to, this type of revenue is controllable and quantifiable, it is the amount that may change from practice to practice.
Reactive revenue is revenue that walks into your door. Regardless of your Revenue targets, the customer comes to you. They may have purchased from you in the past, or it may just be convenient or circumstantial. This is revenue that is not controllable or quantifiable. You must factor this into your revenue mix, but you cannot rely on it to occur.
Proactive revenue is revenue that is controllable and quantifiable but requires resources to generate. Resources of both time and money. You need to create product and then you need to market a funnel for a said product while nurturing the qualifying process. Depending on your product and industry this may require more time and effort but less product to market, or vice versa. Using myself as an example. I specialise in advising professional businesses. I have defined what industry I work with and the range of services for the industry. I have a multi-channel marketing approach to reaching my audience. And half of my marketing activities can be quantified.
Focus on what you can control
Your practice needs to shift its revenue strategies to activities that can be controlled and have the potential to be quantified in some way. For all professional services industries, the activity categories can be separated out as follows:
- Production and delivery
- Client relationship management
The first three activities are related to winning the work, with the final activity ensuring the client comes back for work to be performed. This is the important activity in my opinion as it is much easier to sell services to existing relationship … so make sure you build one.