When it comes to revenue growth, how are you setting your goals? What if there were a better way?
With the new year upon us, like most business owners, I’m looking forward to set goals for the next year. If you’re like me, revenue growth is at the top of your business goal list.
Most business owners set goals based on their current revenue number. They take what they did the previous year and add what they think is a reasonable growth percentage.
For example, if you did $10 million in revenue, maybe next year you set the goal of 20% to hit $12 million. That’s great, but where did you get that number? And, more importantly, how are you going to hit it?
I’d like to propose a different way to set your revenue goal. To do this, set aside your total revenue goal for a few minutes. Then, allow me to walk you through an alternative way to think about revenue goals.
1. CALCULATE TWO KEY REVENUE NUMBERS
Darrell Amy explains the two key revenue scorecard metrics.
Instead of beginning with your current revenue, let’s begin with the two key numbers:
- Total Number of Clients: How many active clients did you have at the end of 2019?
- Revenue per Client: What was your revenue per client? To get to this number, simply take your total revenue and divide it by the number of clients.
These two numbers are critical as they form the foundation for measuring revenue growth:
- Net New Revenue Growth is measured by the growth in the Total Number of Clients
- Cross Sell Revenue Growth is measured by the growth in your Revenue per Client
Interested in learning more about this strategy: How Businesses Can Double Revenue In Less Than Three Years.
2. SET GOALS FOR EACH OF THESE TWO NUMBERS
The next step is to set reasonable goals for each of the two numbers:
- Total Number of Clients: How many more net-new clients can we add this year?
- Cross-Sell Revenue: How much in additional products, services, and solutions could we sell to our current clients this year?
Let’s consider a real world scenario. Four example, we’ll use a $10 million company with 5,000 clients. Their current revenue per client is $2,000 ($10M/5,000).
By driving 15% growth in each of these areas, the total revenue would grow by 32% year-over-year.
3. BUILD A PLAN
Interestingly, if this business had simply pulled a growth goal out of the hat, they might have said 20% and then not put a plan together to hit it. By focusing on the two metrics, number of clients and revenue per client, it now becomes obvious where sales and marketing efforts should be directed
Your sales and marketing plan should begin with two questions:
- How can we get more net-new clients?
- How can we sell more to our current clients?
I believe that great businesses should grow. If you have a great business that treats heir employees well, gives back to the community, and provides exceptional services, here are some guidelines to get started.
What are your numbers?
- How many clients do you have?
- What’s your revenue per client?
How can you create an amazing buyer experience to drive net-new client growth?
How can you improve your client experience to drive more revenue per client?
ABOUT THE AUTHOR:
Darrell Amy is a growth architect, with a unique perspective on how to grow revenue. Most books are written from the perspective of either sales or marketing. Darrell brings both together to help companies develop and implement strategies to grow.
Darrell’s passion is to make the world a better place. Serving on the board of several non-profits, he has a front row seat to see the impact of financial gifts from successful businesses. Out of this, he helped launch the Grow4Good movement with the goal of helping 10,000 great businesses double revenue so they can grow employment while also giving back to their communities.
Over the past 25 years, Darrell has been deeply involved in both sales and marketing. He has worked with hundreds of companies ranging from Fortune 100 organizations to local family-owned businesses. During that time, he’s trained thousands of sales people, most recently creating solutions sales training for a global technology company. He’s started several digital marketing agencies, helping companies implement inbound marketing strategies.