Wanna Become a Revenue First Company? Here's How!
Unless you are labeled as a 501c3, you're likely in the business of making money! And yet, we so often see businesses spinning their wheels on countless OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators) that do not add up to dollars. So here is the scoop on becoming a revenue first company.
ALL ROADS LEAD TO REVENUE
What we mean by “revenue first” is that when a company is planning annual goals and OKRs, it is important to point the entire company to ONE main objective, which should be a revenue generating objective if you are a Revenue First company. From there, each team and individual should have their goals that directly tie to that main objective for the company.
Company Objective = increase overall revenue by 10%
Sales team objective = increase existing client sales by 7% and obtain 10 new clients
Individual sales team member = Customer retention rate of 85% and of those existing customers get 25% of them to take on a new product
In the example above, the individual sales team member has a goal that directly correlates to the sales team objective which in return helps achieve the overall company objective.
Of course you are allowed to, and should have, other areas of focus, whether it be building the latest tool in technology or a company culture initiative. However, all of those efforts should ultimately lead to revenue generation tactics.
Let us explain. Hypothetically, your Human Resources or Peoples department wants to start an Employee Resource Group (ERP).
Before they plow forward let’s think about how this impacts revenue, both top and bottom line. This may look like additional meetings and events [Negative Revenue aka Expenses] but will lead to higher employee engagement and happier employees who are more productive, attracticting new hires, and retaining employees longer [Positive Revenue aka lowering costs].
Ultimately, we need to prove value or Return On Investment (ROI) when prioritizing work and initiatives within the company.
This brings us to our next point…
DATA DRIVEN DECISION MAKING
When making decisions, data should always be at the forefront. Let’s look at how you may determine if an investment is “worth” it.
Let’s say you are a restaurant owner and you are thinking about adding Ice cream to your menu. Before you go and purchase the ice cream machine you should take a few things into account like the cost of Ice cream machine, obviously. Then you should consider the number of ice creams you would have to sell and at what price you would need to sell the ice cream to recoup the cost of the machine. We have shared a simple table to show the variables below
In this case, if you sold your ice cream at $1 you would need to have 100 customers buy an ice cream to recover the cost of the machine and for 101 customers you would turn a profit on the ice cream machine.
Next, consider things like:
How many customers a day do we serve?
What percentage of those customers would be willing to pay and buy an ice cream?
Has our customer expressed interest in ice cream?
Will the number of customers who eat ice cream change by season?
What is the maintenance cost of the ice cream machine?
Does this require additional staff to serve the ice cream?
This will require some hypothetical assumptions but will help lead you to a quantifiable, data driven decision.
REGULAR REVIEW REQUIRED
We just made some assumptions and decisions– now we go back and review our accuracy of the decisions.
In the example of the ice cream, forecast your sales then track those sales going forward.
This is a best practice for any sales.
You should review these sales reports on a regular cadence. In fact, there are quite a few reports and numbers your business should review on a regular basis to ensure you are a revenue first company.
Below are some recommendations and review cycle
REVENUE FIRST RECAP
In order to become a revenue first company, essentially all decisions should start from the lens of “How will this impact revenue?”. Share overall goals with the teams and ask them to align their daily work and decision making to the One Revenue Goal for the year. Train the team to become data driven decision makers. And then review the numbers regularly and share them with the teams accordingly. This creates accountability and re-emphasizes the overall alignment to the revenue goal.
We LOVE talking revenue at TIENNE Consulting! Have an idea you would like to share? How about reports you use regularly? What else can you add to the conversation on how you are a revenue first company?