Do You Have a Predictable, Profitable Revenue Strategy?
Chief Revenue Officers Understand Profitable Revenue Is What’s Important
Our clients come to us looking for an immediate lift in revenue, but what they really want is predictable, profitable revenue, which consists of two things:
1. Instant revenue acceleration.
2. Improvement in margin, both cost of revenue-produced margin and cost of goods sold.
They are two sides of the same coin. On the one hand, you can’t cut your way to growth. On the other hand, you can drive yourself into bankruptcy driving up revenue. That’s why the Chief Revenue Officer, focuses on the balance between acceleration and the optimal cost of revenue produced across the entire business ecosystem (marketing, operations, communication, culture, sales, and service). This requires broader vision, better integration, and more-continuous alignment between all those revenue-related areas.
Creating Predictable, Profitable Revenue Strategy
And it requires a revenue strategy for how you create the most predictable profitable revenue from your ideal client profile. We start by asking the following questions:
1. What’s the percentage of revenue resources required as a percentage of the top line? We ask this question to get to the next one, which is even more important: how do we reduce that percentage as the top line grows? After all, it doesn’t do us any good if they both go up.
2. What’s the percentage of revenue resources required as a percentage of the bottom line? We ask that question to get to this one: “Is there a way that we can decrease that percentage as the bottom line grows?”
3. Based on last year’s model, what choke points, barriers, and roadblocks can we remove to increase profitable revenue? This question implies that the leadership knows what parts of their revenue are profitable. But you’d be surprised how few businesses actually chase that number down—and this can be a major problem.
For instance, we discovered that one of our clients didn’t know their new client acquisition cost or the gross margin to fulfill the services they sold. The result: the sales team, far from being profitable, was being subsidized by the revenue brought in by the reoccurring maintenance team. Armed with this knowledge, we restructured the sales department so that both teams were profitable, providing a much-needed acceleration to the company’s income.
4. Based on the last year’s model and organization-wide processes, what are the overfunded parts of the business that have additional capacity that can be reduced?
5. Based on last year’s model and organization-wide processes, what are the overfunded parts where we can reallocate money to the underfunded parts to increase profitable revenue
6. Based on last year’s model and organization-wide processes, what are the parts of the business and/or processes within units that we can leverage to increase profitable revenue?
The life and health of your business depends on asking and answering of these questions—and if you’re not sure of the answers, we’re standing by to help!
Your ZFactor Group
Want to go deeper? Click to Schedule a Visioneering Session.