What Is Revenue Growth
There are so many metrics and variables that one can track when it comes to trying to improve your business. It can be hard to determine where to focus. Should you focus on sales? Marketing results? Customer satisfaction and retention?
You can actually do all of this and more all at once if you do something like track your overall revenue growth.
This article will talk about not only the definition of revenue growth, but how to view it as a strategy, and more importantly, why it may be worth prioritizing over other metrics and variables. After that, we will talk about several things like calculating your revenue growth, the ups and downs to anticipate, specific strategies for improving it, and also how to choose a platform to help you absolutely crush your growth strategy goals.
What is Revenue Growth?
It is more than just a cash flow forecast. and financial projections. As a very simple definition, revenue growth is the amount of money your company makes over a pre-determined time. This is then compared to the previous, identical amount of time. So, in this simple example, it’s exactly how much money you made this month compared to last month.
We need to clear up another misunderstanding of this definition as well. The term “Revenue” is very often confused with sales and earnings. We should take a quick moment to look at the differences:
- Revenue: Revenue is the amount of money made from all sources in your business. This includes sales, investments, royalties, fees, and more. It is also important to be aware that expenses aren’t considered when talking about strict revenue.
- Sales: Sales is to be considered the amount of money made from selling the products and/or services your business offers. Sales also does not factor in expenses either just like the term revenue.
- Earnings: Earnings is when you deduct expenses from the total revenue.
Another big difference between sales, earnings, and revenue is that sales and earnings both tend to be goal-oriented This is in contrast to revenue growth which should be considered a strategy as opposed to an end goal.
Revenue Growth as a Strategy
Having a detailed plan for increasing revenue over both the short and long term can be considered a revenue growth strategy. Every company has different needs, so each revenue growth strategy will be different. There is absolutely no one size fits all strategy here.
A good revenue growth strategy will involve ensuring your marketing, sales, and customer experience teams are aligned, communicating, and working cohesively. One efficient way to address this is to ensure your employees are generally satisfied in their jobs (more on that in just a bit) and involve them in your planning process to an extent. This helps keep communication lines good and can give you more valuable input form different perspectives.
Why Focus on Revenue Growth Over Other Types of Growth
An oversimplified aspect of revenue growth is that it allows you to have a bigger picture of what’s working, what isn’t, and much more importantly, how to fix things that are not working.
A revenue growth formula should guide strategies in several areas, including:
- Customer acquisition, retention, and success
- Human resources
- Marketing
- Pricing
- Professional development
- Sales
If your revenue isn’t showing the success you expected, you can more easily review the results of each area’s strategies to determine and address pain points.
Most business owners find it more tempting to look at total earnings growth as opposed to revenue growth. However, it needs to be said that while you should indeed look at both, you should generally evaluate your revenue growth first and foremost. This is because as we discussed earlier, earnings are revenue minus costs. Now, it is true that you can marginally improve your overall earnings by cutting costs here and there, but without growing more revenue, that simply is not a permanent solution you should focus on.
To sum things up, focusing on revenue growth is much more beneficial because it encompasses a bit of everything as well as determining the overall health and direction of your business. It allows you to locate inefficiencies, fix them, and continue to steadily grow your company’s earnings a bit more smoothly.
How To Calculate Revenue Growth
Let’s take this all the way back to math class and use a word problem.
In January 2021, the ABC Company made $100,000. In December 2020, they made $96,000. Using the revenue formula, determine their revenue growth rate from December to January.
If that made your eyes glaze over, that’s okay. I will give you a cheat sheet to use.
The revenue growth formula is as follows:
(Current Period Revenue – Previous Period Revenue) / Previous Period Revenue
(This works out to be the difference between the current period revenue and the previous period revenue divided by the previous period revenue.)
It sounds complicated but once you have used the formula once or twice, it doesn’t seem so intimidating anymore.
For our fictional ABC Company example, it breaks down like this:
(January 2021 Revenue – December 2020 Revenue) / December 2020 Revenue
That seems a little easier to comprehend already now, doesn’t it?
Numerically, this becomes:
($100,000 – $96,000) / $96,000.
Still with me so far?
This leads to $4,000 / $96,000 = 0.0417 (rounded up).
Because revenue growth is usually referred to as a percentage, we can say the ABC Company’s growth between December and January was approximately 4.17%.
Revenue Growth Trends to Anticipate
While it is called “revenue growth,” we need to be honest: Sometimes, your revenue may dip or remain stagnant.
All businesses can expect to go through stages, and revenue expectations are different in each of the following variables:
- Startup: You are still getting everything off the ground and you’re still figuring out how to run your business. Most business owners can’t expect to see revenue growth during this and, sadly, some will end up closing down.
- Growth: Your business is now established enough to have a business plan in place and hopefully enough time to focus on more than just the internal struggles. Revenue may be stagnant or shrink, can cause you to seek investment capital.
- Maturity: At this point, your business is now several years old, and you might feel secure in both your business plan and revenue growth strategy. This is when revenue is likely to become predictable, perhaps even increasing by around 5% per year.
- Renewal/Decline: This period can actually sneak up on you pretty quick. It is important to remember that revenue will rise and fall in any business. But if your revenue has consistently declined for at least three quarters, the problem likely began months if not even years earlier, and you (and your business) may be in trouble at this point.
- This period is actually preventable, but if you find yourself in this situation, with revenue consistently falling rather than growing, you need a plan to adjust quickly.
In other words, it can take years to reach relatively consistent revenue growth. So, continue to monitor your revenue growth, create new strategies, and always be willing to learn so your business can thrive.
That’s the big picture. Revenue generally fluctuates every month, quarter, or year, no matter where you are in your business life cycle. Instead of viewing the dips as negatives, view them as opportunities. How can you strategize to increase your revenue growth?
Keeping an eye on your revenue growth can keep everyone employed, customers and investors happy, and your business growing—even with short-term dips.
This is why revenue is a strategy and not a goal. You can’t necessarily control the market, but you can control your response to it—and that response is your revenue growth strategy.
How to Choose a Revenue Growth Consultant:
Getting an all-in-one revenue growth consultant to partner with can ease your mind, take some things off your plate, and help streamline your own strategies.
When considering the possibility of working with a revenue growth consultant, you should first consider the following:
- Your profit goals
- The support you need
- Necessary features
- Integration capabilities
- Trustworthiness
At TITAN Financial Pros, we help you grow your revenue by showing you where you’re making the most money. In order to know how you can grow your revenue and get a better financial projection, you have to know who’s making you the most money. Whether it’s a specific customer or industry that you should target or if you already have tons of revenue coming in, but your cost to get them is too high. We help you understand where you should place your efforts to get the best results. Call us today to find out more and let us provide you with a customized strategy for revenue growth.
These are just a few things to be aware of when considering revenue growth. Hopefully you found these helpful. If you would like to learn even more about how you can streamline the efficiency of your business finances, then you are more than welcome to contact us and we will take a look at your unique situation and offer some sensible solutions that would work best for you!
“TITAN Financial Pros provide an informational service only and are not responsible for any investments made applying this information. The results described are not distinctive and are not guarantees of future income. Any assumption contains risk and is 100% the responsibility of the individual to assess the risks/rewards involved. We bear no liability assumed or implied for your application of the information shared from this content. This information is for educational and entertainment purposes only.”
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