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.
Darrell Amy explains the two key revenue scorecard metrics.
Instead of beginning with your current revenue, let’s begin with the two key numbers:
These two numbers are critical as they form the foundation for measuring revenue growth:
Interested in learning more about this strategy: How Businesses Can Double Revenue In Less Than Three Years.
The next step is to set reasonable goals for each of the two numbers:
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.
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:
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.
Want to discuss this further? I’d be happy to talk!