There are all kinds of metrics that business owners and leaders need to track… but none more important than revenue. And if I was a betting man, I’d wager that you’re tracking your firm’s revenue in three or four ways:
- Revenue this month
- Revenue year-to-date
- Revenue last year-to-date (for comparison)
- Revenue by sales rep (if you’re including sales commissions in their comp plan)
And there’s nothing wrong with those. What you learn from them is helpful in terms of the health of your firm, but there’s not much ‘actionable’ you can take away. Those measurements are good… but they’re incomplete.
For a more complete picture of your business and to provide a foundation to help you make some decisions for moving forward, consider adding these four revenue measurement metrics to your process:
Revenue by Industry Served
Unless your firm specializes in serving just one industry, monitor who you sell to ‘by industry.’ Are you doing better in some industries than in others? Are there new ones bubbling to the surface with an opportunity for growth? Does your website proudly say “Specializing in [insert industry here]”, but you find your business declining there? Do you need to staff up (or down) to increase (or decrease) support for certain verticals? And so on. There’s a lot to be learned from this simple analysis.
Revenue by Product/Service Line
The logic here is pretty similar to ‘By Industry Served’ above. And while you likely have some sense of how you’re doing with each service line, seeing the hard numbers can be eye-opening: Which service lines are your best performers? Are there certain ones that are starting to grow where you should consider focusing additional resources? Does your website proudly say…? Do you need to staff up…? Again, without the hard numbers to support this, your go-forward decisions are likely based on ‘gut feel.’
By Key Account
Keeping an eye on all clients is important… but tracking revenue for your key accounts (your largest/potentially largest ones) can ensure your firm’s ongoing existence! No, I’m not exaggerating!
All clients are important, but large clients matter more! You can lose a small client and you’ll be ok. But in the MR industry – where many firms have 40-50-60% of their revenue tied up with two or three clients – losing just one of them could be catastrophic.
Tracking Revenue Over Time
Tracking revenue as we’ve discussed (in general, by industry, by service line and by key account) is critical to your success, but even in those areas, most business leaders will still track only this year-to-date vs. last year-to-date. And that’s helpful, but it’s simply a single point of comparison. What you really need is to look at those revenue measurements over time.
- Imagine if you had the different revenue measurements from above over a 5-year period. Think of what you’d see… and learn… and the decisions you could make. You would see trends, gaps in the data and anomalies. Not just, “Oh, we’re up 12% this year.”
- Or, if the year-over-year-comparison showed a 5% decline in your business in the tech sector. OK, not good… but not horrible. But looking at that sector over the long haul, you might see a 5% decline every year for five years. Now that is horrible.
But because we tend to just look at year-over-year comparisons, we simply fail to see the larger trends.
Conclusion
OK, here’s the good news. These changes in revenue measurement are very easy to implement. It’s simply a matter of setting up your accounting system to track it. Every invoice should include a code for industry served, service line and sales rep. Then every month, every quarter – and especially at the end of the fiscal year end – you can run the reports to dig into this data.
And guess what? There’s plenty of time to get it set up for 2023!
Good luck and good selling.