The “Missing Link” and the Revenue Calculator
“Leverage the Power of Satisfied Customers + Harness the Geometric Power of Compounding to Accelerate Your Company’s Revenues”
A special welcome to those of you who read my August, 2009 article in SmartCEO magazine
entitled, “Revenue Riddle Revealed… the Four Fundamental Drivers of Revenue
.” It was a special treat to stand in as a guest author for my friend and business colleague, Verne Harnish. Verne is the CEO of Gazelles, an international Executive Coaching organization, of which I am a proud member and certified Coach. In addition, Verne has been recognized by Fortune Small Business Magazine as one of the world’s most respected experts on Fast Growth Companies.
If you did not have a chance to read the article and wish to learn more about the “$100.00 Challenge”, please visit the magazine. It is free and is filled with terrific content that is considered “Required Reading for Growing Companies” in the greater Washington, DC, and Baltimore region.
“Revenue Riddle Revealed”
It’s not exactly a secret that the big challenge in this recessionary economy is how to make money
. What is a secret however, indeed one that is known by very few business leaders, (hence, the $100 challenge”) is this: Do you know the Four Components that make up the Revenue Equation?
Revenue = # of Customers x Frequency of Purchase x Transaction Size x Price
Although most executive teams are attempting to drive Revenues by simply focusing on getting more Customers, they actually have three additional and equally powerful levers at their disposal. Because Revenues are the source of Cash, the very oxygen needed to sustain the life of your business, you need to get creative on ways to proactively drive more of it.
The article references some of the things that management teams can do to improve each of the Revenue Components and encourages them to spend some time dedicated to brainstorming additional solutions. This webpage will take a slightly different focus to shed light on two important and related concepts.
The Missing Link
The first is this. If there is just one thing
that I would advise a company to do to positively impact each and every one of the 4 Revenue Drivers it would be this:
Do Whatever It Takes to Improve Your Current Level of Customer Satisfaction!
When customers are already feeling challenged to spend money on anything that is considered to be even remotely discretionary (like your offerings and the products and services of most companies) you really don’t want to be giving them any additional reasons to Not Buy from you! I suspect that most readers will agree with this, however, in all probability, many of these same people have no clue as to what their customers really think of them.
What every company needs is accurate, continuous, and real-time measurement of the Satisfaction and Loyalty of their Customers. This is one of the few honest Leading Indicators of where your business is going over the next 12 months. As the axiom goes… “If you aren’t measuring it, you aren’t’ managing it.” The bottom line here is that if you are not on top of this measure, you are simply flying blind, and are in danger.
A lack of measurement also suggests that your company and the management team simply don’t place much value on keeping your customers Satisfied or Loyal. Please consider the possibility that if Customer Satisfaction is not important enough for you to monitor, it is quite likely that your Customers are “Not Feeling the Love.” Unless you work hard to ensure that your customers are “very satisfied”, research shows that they are highly susceptible to leaving you. Long before they leave, however, they will quietly punish you by not buying as much (Transaction Size) not buying as often (Frequency) or not buying at all, unless there is a sale, discount or some other (Price) incentive.
The more staggering fact is that even those companies that dutifully commit themselves to deploying Customer Satisfaction Surveys are at risk. The Problem is that traditional Customer Satisfaction Surveys have become an outmoded tool that are literally more trouble than they are worth. Many executives have come to this realization and have simply stopped the craziness. We don’t blame them.
There is a powerful new methodology for developing highly productive Customer Surveys that go beyond the measurement of mere “Satisfaction” to actually reveal a far more important metric – Customer Loyalty. If you would like to learn more about utilizing this powerful new system, one that is both turn-key and low cost, please contact us.
The Revenue Calculator
When Albert Einstein, arguably the greatest brain of the 20th Century was asked, “What is the greatest invention of all time?”
he answered, “Compound Interest.”
Returning to your challenge to improve the Four Drivers of Revenue, there is a wonderful prize that awaits the person who can improve on all 4 measures. You see, this actually leverages Einstein’s “compound interest” and puts it to work for your company.
To fully appreciate the astounding “geometric power” of compounding, we invite you to download our Free “Revenue Calculator Tool” and have fun playing with the possibilities. You can experiment with different growth rates to determine just exactly how long it will take for your company to double its Revenues! Get creative on building each of the four Revenue Drivers and enjoy the fruits of your labor!
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