This Formula is YOUR Secret Weapon to Creating Massive Revenue

This Formula is Your Secret Weapon to Creating Massive Revenue

The following is adapted from Levers.

Have you ever found yourself asking how you can create more value in your company and ultimately increase revenue? If so, you’re not alone—it’s a question that almost every entrepreneur out there has asked themselves at one point or another as they’ve worked to build their business.

There’s a formula that will help you answer that question. I think of this formula—which I call your revenue formula—as your secret weapon. Once you master it, you will be poised to create massive revenue. 

If you’ve never heard this term before, that’s okay. It’s new to most people, and if you have heard it, you likely think about it as a sales formula. It’s not—but it is hugely important to your company’s success. Let’s define what a revenue formula is and then walk through how you can find yours.

What is a Revenue Formula?

A revenue formula is the mathematical equation of your business. It’s how you turn your product, sales, marketing, technology, customer service, and every other department into math that makes sense as you run and grow your business.

Identifying your revenue formula is absolutely critical to building and growing your business because it gives you maximum control of the drivers that matter in your business. I may be stating the obvious here, but I’m going to do it anyway so there is no confusion. Without a revenue formula, you cannot build a repeatable business.

When you figure out your revenue formula, you will have the ability to truly understand, measure, prioritize, focus, and leverage the most important parts of your business. It becomes the common language at every level in your organization. 

It gives each member of each team a clean and clear direction on what they should be working on and why it matters to their job and the business. Equally important, it becomes a framework to ignore everything else (yes, even those bright and shiny new ideas).

I’ll go so far as to say that even if you are already very metrics-driven but don’t truly know your revenue formula, you’re likely to fail—or at least never achieve your optimal potential as a business. The revenue formula allows you to put your metrics into context—to understand the real levers in your business and what matters most for generating growth.

Finding Your Revenue Formula

Figuring out your revenue formula is nothing short of a quest. Not a simple exercise, not an adventure, but a long journey. You’re going to have to do a lot of hard work. You’ll hit tons of obstacles that you’ll need to navigate through or around, and you’ll need to be prepared to be wrong a lot more than you are right. 

The steps of the quest are simple, but that doesn’t mean they’re easy. First, write down your current theory of your revenue formula. As you do, envision me sitting next to you asking you (over and over) one question: “Why do you believe that to be true?” Once you feel like you are at a decent starting point, then look one level deeper and identify all of the drivers of each value in your formula. Then take it yet another level deeper and identify all the subdrivers of those drivers. 

It might help to look at a revenue formula from another business. This example is from Chowbotics, a company that sells robots that make food. Their customers are hospitals, schools, and public cafeterias.

Chowbotics’s revenue formula is Number of Units x Cost/Unit/Month x Months Installed = Revenue, where number of units is the number of salad robots deployed. Cost/Unit/Month is how much Chowbotics charges, each month, for their salad robot to be deployed at a customer location. Months installed is the number of months that a customer has a salad robot deployed at their location.

Let’s say for simplicity’s sake that Chowbotics had one hundred customers who each had three units. That would be three hundred units deployed.

Now let’s say the cost of each unit is $1,000 per month, and on average, a customer had their salad robots for thirty months. In this case, Chowbotics would make $9,000,000 in revenue (300 units x $1,000 per unit x 30 months installed = $9,000,000 revenue).

Putting It Together

As you can see, the revenue formula clearly shows how you make money. However, the formula itself isn’t just about sales or the sales team. Instead, it’s a full, mathematical view into how each of the departments contribute to growing revenue.

It will take time and a lot of work to find your own company’s revenue formula. However, the payoff is that when you do, you’ll be able to scale your business, because you’ll understand exactly how each piece of your company fits together to create revenue on a massive scale. 

For more advice on how to create your own revenue formula and massively increase your company’s revenue, you can find Levers on Amazon.

Amos Schwartzfarb has been growing businesses for twenty-five years and investing in startups for the past ten. Since 1997, he’s helped build companies that sold to Yahoo!, R.H. Donnelly, The Home Depot, plus over sixty more as Managing Director of Techstars Austin. He's also the bestselling author of Sell More Faster. Trevor Boehm was a writer before finding his way into building companies. A serial founder, he has also invested in more than forty startups, many of those through Techstars’ first Impact accelerator and as Managing Director of Alexa Next Stage, a program run with the Amazon Alexa Fund. He is currently at the venture fund Saturn Five. Learn how to apply Levers to your business at leversbook.com.