How Predictable is your Revenue?

bucket with holes

Want to know one of the ‘secrets’ of business growth? It’s almost impossible to grow your business (over the long run) without having predictable revenue.

Picture this – your business operates a lot like a bucket with holes in it. You have water (revenue) pouring in and then almost as quickly leaking out of those various holes.

Money In – Hopefully every month there’s more water that pours into your bucket either from new customers or from existing customers. Do you know ahead of time how much money is coming into your business every month?

Money Out – Definitely every month there’s money that pours out of your bucket. You’ve got your monthly overhead like rent, insurance, marketing, bank fees, etc. And of course your biggest expense is more than likely your payroll. You’re much more likely to know how much you’ll be spending every month vs. what you’ll be making.

Ideally you can predict what’s coming in and how much will leak out – if not, it’s likely you’ll have an empty bucket…!

What about growth?

Growth is where things start to get tricky. Growth generally means more overhead (more money out each month), but if you can’t accurately predict the money coming in every month then it’s even more likely that your bucket is going to run dry and that will put a serious crimp on your growth opportunities (it’s funny how people like to get paid).

Every business goes through a period where they grow beyond what the original founder or the original team can support – but if they want to successfully make the transition to the next stage of business then they will have to figure out how to drive more revenue…in a predictable fashion.

3 Ways to make Revenue Growth more Predictable

1. Find a new sales channel

People want and need whatever it is that you’re selling. As a small business you’ve made choices on how people can buy from you and if you’re growing, then those choices have served you well to this point. But if you want to increase your growth, one way to do that is by creating a new sales channel. An entirely new way for people to give you money in return for whatever it is that you’re selling. Effective sales channels will vary a lot based on the industry and type of business you have, but here are a few ideas that might spark something for you:

– Online sales – is there a component of what you do that could be sold effectively online…maybe through your website or through a site like Amazon, or eBay or Etsy?

– Strategic partner – is there a 3rd party who works with your best customers and could be a fit to sell your stuff?

– Retail – Do you currently have a retail presence? If not, would it ever make sense?

– New location – Could you expand to a new geographic area? What would that look like?

– Product – not exactly a channel, but if you’re a service company, could you also sell a product?

A new sales channel isn’t easy to launch, but if you have the rest of your business figured out, it may be a great way to increase your opportunities and be a nice way to even out the monthly variability of income.

2. Build a Sales Team

Bringing on a sales person (or growing a sales team) is one of the hardest things that most business owners will deal with. Often the owner is the rainmaker in the business and they find that role doesn’t translate well to others. However…if you can figure it out, a successful sales team can be a great way to create a predictable revenue stream. A great sales team knows that the right activities will generate the right results and over time they’ll be able to tell you (within a reasonable percentage) what they will bring in for the year or the quarter.

Once you have a repeatable sales process and you know how to find the right people, then predictable growth comes from building the sales team.

3. Upgrade / change your Business Model

The third option for generating more predictable revenue is to consider changing your business model (or at least part of it) and going to a subscription model. This is where a lot of software companies have gone – Software as a Service is all about finding monthly subscribers for their products and solutions. And once they have a fairly stable customer base, it becomes easy to predict what their revenue will be next month or possibly even next year – especially if they are doing a great job and keeping most of their clients.

However almost any business can adopt a subscription model. The Dollar Shave Club built a recurring revenue stream of men who were tired of overpaying for razors and were happy to sign up for a monthly payment in exchange for not having to worry about finding a new, sharp blade.  There’s a florist in New York City that caters to hotels, shops and restaurants who can choose to sign up for different monthly packages where new flowers are delivered to them on a regular basis. The clients get the fresh flowers they want and they don’t have to worry about anything – the florist gets a predictable list of repeating clients which allows them to operate very efficiently.

Could you add a subscription component to your business?

Are you ready to grow? Are you struggling to grow? It’s likely that your next step is finding a way to make  your revenue more predictable. Would any of these ideas work for you? We’d love to hear your thoughts – share them in the comments below.

Shawn Kinkade  Kansas City Business Coach

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