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What is Revenue Generation?
In any business, there are normally two types of business activities – non-revenue-generating tasks and revenue-generating tasks. Any and all activity that results in the creation of income or the ability to drive profitability fall under the latter.
It’s important to keep in mind that revenue generation is so much more than just about marketing and sales. Over and above this, activities such as operational plans, strategy and process that have been put in place to enable an increase in revenue for the business.
- Income generation
- Revenue-generating process
The Revenue Generation Process
Revenue generation is the overarching process whereby businesses find ways to drive income and increase profitability. The implementation of a revenue generation process enables the sales team to know how best to go about increasing the business’ profit and income. It also offers the business a clear view of all revenue streams, so it’s easy to know where income is coming from and where changes can be made to drive an increase.
While a revenue plan refers to a series of steps a business should follow to improve the financial health of the business, the process can vary from business to business. A typical revenue generation process – as outlined by Icorporated.Zone – will look something like this:
Step 1: Outline Targets
Upfront, it’s crucial for the business to unpack what their goals are and when they would like to achieve these goals. This will give the business a clear view of what needs to be done. Ideally, a business should map out short-term, mid-term and long-term goals to make the task more achievable and focused; with key deadlines in mind.
Step 2: Internal Team Alignment
Once the team has defined the business’ sales targets and has sight of revenue thresholds, the sales team will need to work with the marketing team to build a plan of action to ensure the business is able to meet those revenue targets. This is done through the implementation of a marketing rollout plan across various channels, aimed at your target audience. Campaign, content and performance marketing plans all fall within this stage of the revenue generation process.
Step 3: Set KPIs
Ensuring all stakeholders are moving in the same direction, it’s pivotal to set up and define key metrics to measure progress and success; as well as guide when changes need to be implemented.
While marketing and sales are the two key departments responsible for driving revenue, other departments are also key to the success of the business and should be kept in the loop around how the revenue generation process is going.
Step 4: Analysis and Adjustment
Pivotal to the success of any revenue generation process is evaluation and realignment. Taking time – with all stakeholders involved – to assess success and failure is crucial. Once the teams have an understanding of what tactics are – and aren’t – working, they can make adjustments to their next steps to improve the likelihood of success overall.
Who is Responsible for Revenue Generation?
It’s no longer satisfactory to say that the sales team and marketing team are solely responsible for the revenue growth in any business. According to The Growth Engine, the digital transformation has widened the scope when it comes to revenue generation.
Looking at the process from an even broader perspective, achieving revenue KPIs and goals needs to become a cross-functional effort which spans across multiple facets of the business; including sales, marketing, operations, finance, and customer success.
Sales and Marketing Alignment
Fundamental for any business is a close working relationship between the sales and marketing teams. Without a solid marketing strategy in place, the lead generation in the business will slow which means less prospective customers for the sales team to talk to.
Overall, sales and marketing are the 2 key players in the revenue generation process and will drive the majority of the income and revenue for the business. A sustainable content marketing strategy will ensure your marketing team is able to constantly drive new leads through the top of the funnel; where they’ll be qualified and then handed over to the sales team.
Sales and Customer Success Alignment
Another key relationship in any business should be that between the sales team and the customer success team. This relationship becomes extremely important for the retention and growth of the business’ customer base in order to ensure sustained revenue growth throughout the financial year.
Once the sales team has pushed a sale over the line, it becomes important for the customer success team to pick up this relationship, ensure the customer is happy and keep them coming back for more.
Revenue Generation Strategies
A revenue generation strategy can be defined as a plan of action for increasing a business’ income by focusing on short- and long-term opportunities for sales throughout the business.
Fundamental to the development and rollout of a good revenue strategy is using insight and context from previous experiences to develop a way forward for the business. This is the only way to ensure the process is built on fact and keeps previous successes in mind for the way forward.
According to Masterclass, there are very many different types of revenue models, and which one a business chooses to implement is dependent on the business. A revenue model is a guide that shows how a business can earn revenue from standard business operations, and how it will pay for operating costs and expenses.
They go on to explain that a revenue model is a business model is a KPI for a company to understand and measure its profitability in line with its pricing strategy and sales but that this model can vary from business to business.
When considering what type of revenue model to use for your business, it’s important to keep the following in mind:
- Value of your Product
It’s crucial that the revenue model you choose connects to your business’ value proposition. In essence, the value that your product delivers to a customer should be reflected in your chosen revenue model.
- Your Customers
Getting a proper understanding of the customers that consume your product is fundamental when mapping out your model. For example, a single customer might prefer a subscription model whereas larger companies may prefer something like licensing for their agreement.
- Your Competition
Getting a solid understanding of your key competitors, how they position themselves in the market and what their goals are is also important to consider in this process.
Pricing your services and products can be really tricky, especially if you don’t have sight of competitor pricing models. Charge too much and you could chase potential customers away, but price too low and you could be selling yourself short and impacting your bottom-line.
A pricing strategy should account for various business factors; including revenue goals, marketing rollout plans, and product attributes. Getting a solid understanding of all the factors that impact your pricing is fundamental for knowing what to charge your customers.
Hubspot have mapped out key pricing strategies for businesses to use, which take into account various internal and external factors.
How to Increase Revenue
(terms to include: revenue goals, annual revenue targets, marketing team, sales channel, target market, strategic plans, customer acquisition costs, cross-selling opportunities)
There’s no doubt that every business’ goal is to increase their revenue and grow their bottom-line, but the reality is that it takes a lot more than just targeting more customers. Overall, there are key ways for businesses to increase their revenue but it’s also important to keep in mind that this takes time, reflection and tweaking over time.
One key way to focus on increasing revenue is to have a solid view of your goals so on-the-go analysis and review is possible for all key players. Without a view of what they’re trying to achieve and by when, teams across the business will struggle to know what to focus on for what period of time; which is a waste of time, effort and resources.
An effective marketing plan which targets your key audience on the channels they’re engaging already is fundamental for the health of your lead generation model. Having a constant flow of qualified leads coming into the sales funnel for the sales team to access is crucial to the growth of your business and your bottom-line.
While there’s no doubt that new leads are important, a business also needs to spend significant time nurturing relationships with their existing customer base. A business would be short-sighted to only focus their effort on new leads when they already have a base of individuals who are converts already and are likely to spend more money on your products or services.
Fact of the matter is – if prospective clients don’t know what you sell and what this product or service has to offer, then your marketing and sales strategy is dead in the water. Fundamental for the success of any business is adequate investment into the marketing of your core products and services. This can be done through a content marketing strategy or even through product demos and presentations.
Analysis and review is something your sales and product development team should work together on consistently in order to ensure your pricing model stays competitive but still drives revenue growth for the business.
Upsell and Cross-Sell
Lending to the notion that customer retention is key to a healthy bottom-line, cross-selling and upselling are key tools a sales team can use for the growth of these existing customers. For example, once they’ve closed a deal with a customer, they’ll have other opportunities to sell products to them to solve existing problems. Building a relationship with the customer is a great way to ensure you’re able to openly chat to them about possible additions to existing products and/or bulking up their order with a useful product.
Investing in tools and software to automate your sales proposal process and surrounding processes is a sure-fire way to drive revenue performance. By getting rid of tedious manual processes and ensuring your sales team are able to focus on the bigger picture, you’ll have money, time and resources which will have a positive impact on your revenue stream.
Where possible – and if it doesn’t impact your income too heavily – it’s advisable to offer discounts to sweeten the deal. In most cases, a sales team will do this when they know there’s an opportunity for long-term investment or upselling further down the line. Offering a discount shows the customer that you’re willing to work with them to build a mutually beneficial relationship.
Optimize Sales Process
Another point of your revenue generation process that requires analysis and review. Working with your sales and marketing team to tweak and adjust your sales process is key to keeping up with trends, changes and shifts in the market. If you notice that something is no longer working or adding unnecessary roadblocks, remove it and try something new. The only way you’re going to know what works is through trial, error and learning.
People Also Ask
Why is sales revenue important?
Sales revenue is fundamental for the overall success and health of any business. Without growth of your bottom-line and income on a continuous basis the business will not be able to grow their workforce, pay bills, enhance their offering and introduce new products.
What are the 3 main revenue sources?
In most businesses, common revenue models include subscription, licensing and markup. Having a revenue model in place helps a business determine which revenue source to focus on and how best to price these sources.
What are examples of revenue-generating activities?
There are very many ways for businesses to generate revenue but typical revenue-generating activity can increase an increase in prices, finding new customers, cross-selling and up-selling to existing customers, offering promotions on your products, and expanding to sell in new markets.