Whether you’re just starting out or well-established, there’s a lot to think about while running a business! In this blog, I’m going to focus on revenue. It’s one of the most important factors in maintaining the health of your business, and you probably spend a good amount of time trying to maximize it. How’s that going? How do you know?
It could be that you have a sense things are going well or a hunch that something is not working as intended. But is using guesses, feelings, emotions or subjective opinions the best way to gauge business health? NO!
As a manufacturer, you wouldn’t “eyeball” a tolerance or guess on the amount of material needed for a new injection molding project. If you underestimate the cost of the production of a widget, then go on to make thousands of widgets, you’re not going to be happy with your profit and loss statement at the end of the quarter!
Precision and a systematic approach are critical to profitable production, so why are sales and marketing efforts, designed for lead and deal production, notorious for working off of feelings and guesstimates?
How many times have you heard vague but well-meaning statements like these in your sales or marketing meetings?
- I think the project will close within the next month.
- I had a great meeting with Joe the other day and he is really excited about our proposal. He may be going with us.
- At the trade show, there will be thousands of prospects coming through the aisles - all we have to do is land one or two and we will get a good return on our investment.
It’s pretty hard to forecast cash flow against these, wouldn’t you say?
Why do business people tend to make sales and marketing decisions using hunches and feelings, when we would never make an equipment purchase, personnel hire or infrastructure investment the same way?
Let’s resolve to end this practice now!
I’m here to tell you that you can measure your sales and marketing efforts in much the same way as the other aspects of your business. This enables you to determine, for every dollar poured into the marketing and sales funnel, how much you’ll get out of the other end. It’s called Revenue Performance Management.
Revenue Performance Management (RPM) is the key to precision in sales and marketing
Your task is to create a cycle that you can use to measure and predict revenue based on real data. Fair warning – it’s not easy! However, if you make the effort, you can streamline your sales and marketing efforts with one goal in mind – revenue!
This process, also known as the revenue cycle, can be broken down into 9 steps:
- Find leads/be found by prospects. The market has changed and it’s time to get used to the fact that the buyer is in control. Get creative!
- Capture leads. Clean, manageable, and actionable sales lead data is critical to your success. If your new prospect is not captured, tracked, and nurtured, they will quickly fall into the “Lost Opportunity” bucket.
- Track. Following a sales opportunity in an organized, clearly-defined manner will streamline your sales process and help you distinguish true opportunities from those who are interested but not ready to buy. How often has someone in your sales force lost focus because their hope that a sale will close overpowers the evidence?
- Acquire. The hardest thing to do is “get the contract” and convert the opportunity to an actual sale. We all want customers and closing is the most important part of the process!
- Onboard. Your prospect is now a customer! Ensure a smooth, efficient, and seamless delivery of your product or service and keep that customer for life.
- Measure. Throughout the process, measurement is critical. If you cannot accurately measure how many revenue dollars you generate for every business development dollar (i.e. sales and marketing) spent, you will never understand how to target and retain your best customers.
- Optimize. Once you begin to better understand your sales process, you can make it more efficient.
- Repeat. Obviously, once you have optimized, you then want to repeat those best practices (and always remember to keep measuring along the way)!
- Scale. Scaling your business is where true growth begins. Once you are bringing those profitable dollars into your business in a measurable and process-driven fashion, it’s time to scale and start the 9 Steps all over again!
Download our free ebook about measuring your sales efforts, and watch for more blogs in this series too. We’ll break down each of the 9 steps and provide insights and concepts that will help as you justify your business development efforts. Stay tuned!
Editor’s note: This blog was originally published in 2014. It has been updated for accuracy and comprehensiveness.