Formulating revenue strategy for business growth

Irrespective of the nature of your business, here is a simple step-by-step guide to help you formulate your revenue strategy.

Step 1 – Bull’s eye

While businesses may have revenue growth targets, the sweet spot in focus is what I am referring to as the bull’s eye. To achieve your bull’s eye, you must ensure your revenue is higher than your costs by the desired profit.

So if you want to achieve a profit of 100 and your costs are 1000, then your revenue should be at 1100, which should be your focus.

Alternatively, if you know your costs are at 2000 and you want a profit margin of 10% on costs, then the revenue should be at 2200. So essential to arrive at your desired target.

Now that you know what you want to achieve, make a basic plan on how you will go about achieving it.

Step 2 – Pricing

It is important to arrive at the right pricing for your offering as it boosts your revenue. Especially if you are a new player in the market, it is vital for you to know the best price that you can sell your products / services at. While the pricing is directly under your control, some factors are beyond your control like inflation, perceived value by your potential customers, the market value of your offering, etc. You can refer to Chapter 3 for the different ways of pricing strategy.

Step 3 – Sustainability

Once your pricing is in place, ensure that your revenue is sustainable. Ask yourself how you can set the revenue in auto pilot mode so that you have a recurring amount as revenue every month. Your main source of revenue or main stream revenue should ensure that your business is sustainable.

What can you do to get to that level? While it is good to rely on the 80/20 principle, what happens if your major customer is no longer your customer for whatever reasons? It may be good to have an alternative in place.

Step 4 – Optimisation

Your business may have many resources – like human resources, machinery, equipment, office space, etc. As an entrepreneur, how are you leveraging on these to optimise your revenue? Yet another important resource that most people tend to overlook is time. How are you keeping a tab of time and its impact on your revenue? Remember, the more the delay, higher your costs and later your revenue.

It is essential for a prudent entrepreneur to utilise all your available resources extensively, thereby leading to your revenue growth.

Step 5 – Scalability

Your revenue has to be scalable. You can look at various ways of scaling like cross selling to your existing customers, to newer ones, entering new markets, newer territories, etc. for your growth. Have you considered mergers, acquisitions, collaboration, forward and backward integration to ensure growth?

Should your business grow exponentially, are you in a position to handle the inorganic growth? Your revenue strategy needs to feature the scalability aspect.

Step 6 – Different sources

When digital cameras were introduced, within no time the non-digital cameras were gone. To avoid falling into such traps, like McDonalds, it is crucial to have revenue coming from various sources irrespective of the fact that you only have one core business or many businesses. Since some businesses like to specialise only in one particular type of offering and offer it as a niche rather than diversifying, what can be the other potential sources of revenue? If you do not want to diversify, other sources of revenue could be interest income, investment income, rental income etc.

What will happen to your business if the core activity of your business is shut down? By having multiple sources of revenue, you will have something to fall back on and also give you time to recover and get back into business at the earliest.

Step 7 – Innovate

What are you doing differently for your customer base to grow? What will make your potential customers flock to you? By spending time on this, you can identify your unique selling point. By doing something differently or offering freebies to your customers you may have a strong potential to grow. Classic examples of this are most social media platforms like Facebook and also portals like Paytm, where the masses tend to utilise these platforms. There is no charge and at the same time, the business grows rapidly.

What is the problem that your business is solving? Think about how can your business address the unmet needs of your potential customer.

Step 8 – Awareness

What have you done to create awareness about your offering? If someone is looking for a product or service similar to yours, how will they know that you are offering it? A good idea would be to make sure that you have a good marketing plan in place and thereby convert leads to potential customers. If your offering is unique, the prospect may not even be aware that such a product or service exists.

So what are you doing to reach your potential customers? Reflect upon creating your brand and creating awareness to your target audience about your offering.

Step 9 – Minimise risk

While you may be happy with your sales numbers, have you realised the amounts from your customers? If you are not into cash business, you can never be fully sure about your income till the time you receive the money. Even in cash business, if you were to customise specifically for your client, you may have incurred specific costs in doing so. What happens if your customer does not pay you? So safe guard your revenue from such instances and mitigate revenue risks.

Reflect on all the possibilities to keep your risks at a minimum.

By running through each of the above steps, strategize to build and grow your revenue accordingly. Assuming that you have indeed managed to succeed in all the above steps and achieved your revenue growth, think about your plan to ensure that your revenues are all utilised efficiently.

The above is a snippet from the book - “Where’s The Moolah?” (Financial growth hacking for business profitability).

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