Generating revenue is essential for the monetary success of your business. Understanding your business revenue drivers is vital.
A healthy business produces revenue through its usual business activities, including:
- Making sales
- Paying invoices, and
- Collecting cash from paying customers.
The better you are at selling your products or services, the higher your revenue levels will be.
But what are revenue drivers levels and how can you take control of them? This article will explore just that: what revenue drivers are, and which things you should consider when identifying your own.
What Is a Revenue Driver?
Revenue drivers are the actions you take or the investments you make, that boost your income. Some examples include marketing activities, sales processes, or hiring practices. At the end of the day, anything that has a tangible effect on positive revenue is a revenue driver.
Understanding Your Income
You need to understand where your cash is coming from. As a business, you face multiple challenges: global recessions, shifting consumer trends, changing buyer expectations, and more. The better you understand your revenue drivers, the more flexible you can be in generating your income.
When identifying your own revenue drivers, consider:
Revenue Channels
Where does your revenue actually come from? Do you generate income through retail sales in a brick and mortar store? Online sales and eCommerce? Wholesales to other businesses?
Your answer to this question might be that you focus toward just one channel, but it could also be a mix of two or even three. Always start with three or four channels.
Revenue Streams
A business’ total revenue is made up of different ‘streams’. Say you’re a coffee shop: your revenue streams might include coffee sales, cake and pastry sales, coffee bean sales, and more. Each stream is distinct from one another.
Understanding which revenue streams you rely on – which are the most productive and return the most revenue – will allow you to make better business decisions. For instance, if 80% of your income is coming from 20% of your products, it might be a sign you need to tighten up your product range and oust some of the poor sellers.
Product/Service Split
The product/service split involves understanding which products or services are the most profitable in your business. This might include products or services that have been particularly resilient to market changes, or which have adapted well to shifts in the industry.
Determining your most productive or adaptable products helps you provide constant and evolving revenue for your business.
Value vs Volume
Ask yourself: is your revenue based on selling a high volume of products or services at a low margin, or a low volume at a high margin? Based on your answer, could you shift your margin down to develop a more attractive price point for customers? Perhaps there are ways to boost your volume, shifting more units and increasing your total revenue?
By diversifying your channels, streams, or products/services, you can better balance value and volume to boost sales and raise your income.
Talk to Us About developming Your Revenue Drivers
Identifying your revenue drivers can be tricky without the help of a professional. That’s where we come in. If you want to boost your revenue and increase your overall profitability, get in touch with Accountants 2 Business today. We’ll crunch the numbers, help you understand your revenue drivers, and give you proactive advice to help enhance your total revenue.
The information in this article is general in nature and might not be right for your circumstances. Please arrange a meeting with one of our Accountants to discuss your particular needs. Accountants 2 Business Ph (07) 3823 2344
