Too many business owners think one dimensional when it comes to revenue production. Their focus and their goal is ‘increase revenues’. And while this can serve a specific purpose, this approach can also limit how you think about revenue – and ultimately, have you reduce your ability to exceed revenue goals.
The three pillars of revenue generation include:
- Increase in new customers
- Increase the transaction amount
- Increase the transaction frequency
When you think about these three pillars of revenue generation, you start asking more specific questions about your marketing and sales plans. You also expand the possibilities of when each of these strategies is most effective.
For instance, as a start up, your main focus should be on Pillar #1: Increasing new customers. Worrying about increasing prices will come later once those new clients are recurring clients. And obviously, focusing on increasing the transaction frequency isn’t the best use of a start up company’s resources.
As your company moves from start up to more growth, depending upon your size, you will want to refocus your marketing and sales efforts to the other two pillars, Increasing the Transaction Amount and Increasing the Transaction Frequency.
REVENUE GENERATION IS ABOUT:
- Defining a revenue focus in your culture
- Developing an aligned strategy (corporate and revenue) that runs through the office of the CEO to every corner of the organization
- Creating a structure efficiently and consistently execute that aligned strategy
- Implementing best practices to guide the implementation of revenue tactics
- Using metrics to track and adjust with confidence
- Documenting learnings for continuous improvement
- Leading a lifetime of reliable and profitable growth
Revenue generation is the total amount of money collected for the duration of a specified time. This amount of money is taken into consideration when analyzing the overall profit made from sales. Subtracting expenses from revenue provides a base number for profit margins. It is necessary to ensure that all expenses are included when subtracting from revenue generation. If not accurately subtracted, profit margins are drastically affected.
An accurate understanding of revenue generation also affects how a company is run. The number of employees, company supplies and physical assets affect how much revenue the business generates. Before calculating the net income of a company, the aforementioned expenses need to be subtracted from the revenue generated from sales.
Good bookkeeping is essential to ensure that all revenue generation is properly noted. Revenue generation affects the various types of government reporting and insurance requirements that companies are required to comply with. This also affects taxes that are owed to the government based on revenue. Documentation is key to reporting a company's revenue.