With the widespread development and adoption of cloud-based marketing and sales software in recent years, coupled with the exponential growth in big data and data intelligence trends, there are countless tools and solutions available to analyze and manage revenue. However, while the growth in these areas is exciting and empowering to business leaders, the immense amount of data and software solutions are not necessarily focused on providing the clarity needed to understand the fundamental revenue drivers that are the strategic levers to steer organizations toward their revenue goals.
Filtering out the noise to fully understand an organization’s unique revenue drivers and the behavior of those drivers over time can establish a common language and understanding of the pulse of the business among marketing, sales and finance teams, allowing each to do their part in driving the business forward.
Revenue Drivers and Metrics
Determining unique revenue drivers for your business requires attention to what activities immediately or eventually translate into revenue. Do more sales dials correlate with more sales or are dials a waste of time? Does a specific marketing email campaign drive more prospects to your website or to the unsubscribe button?
Recognizing which activities correlate to sales is the first step to truly knowing what makes your business tick. However, beyond knowing your revenue drivers is understanding their behaviors or the metrics attached to the drivers. How does a specific revenue driver perform in terms of conversion and velocity? How does that driver’s conversation rate change over time or across segments?
Revenue Drivers for Finance
By utilizing true revenue drivers, finance can build driver-based models for revenue goal-setting and forecasting exercises. Driver-based modeling ensures revenue drivers and assumptions around those drivers are incorporated into all financial plans. This enhances the accuracy and meaningfulness of revenue goals and financial projections.
However, the real power of utilizing revenue drivers at the finance level lies within the ability to develop meaningful reporting to explain the “why.” When an organization under or over performs against their revenue goals, finance can drill down into their financial models to understand how the actual revenue drivers and behaviors differed from the assumptions built into models. This allows them to pinpoint why there is a variance to plan.
Revenue Drivers for Sales and Marketing
With an understanding of the “why,” sales and marketing leaders can dive deep into the specific drivers leading to results to better manage and coach their teams. If finance, sales and marketing work together in real time to monitor how revenue drivers are performing compared to plans, finance can identify and communicate trends giving sales and marketing the ability to formulate strategies to course correct or capitalize on positive trends.
With a common and collective knowledge of the organization’s revenue drivers and how they are performing, finance, sales and marketing can work together to respond to trends and quickly take action to achieve the results they desire.
Putting Revenue Drivers Into Practice
Your business is complicated, and complication makes the ability to have a common understanding of revenue drivers and shared visibility into your revenue funnel across finance, sales and marketing challenging. One step an organization can make to overcome this challenge is to adopt the Revenue Funnel Science Framework.
Revenue Funnel Science is a methodology where companies view revenue as everyone’s responsibility. It makes managing the revenue funnel a unified responsibility, and allows everyone a top-to-bottom view to increase accountability.
This approach has the ability to unite finance, marketing and sales into a revenue leadership team, whose joint concern is formulating and executing the right strategies to meet revenue goals. This team establishes a common language and appreciation for those revenue drivers that most strongly correlate to revenue results.
By championing a shift towards this methodology, finance, marketing and sales can forge a deeper alliance to answer critical questions:
- What are the true revenue drivers that move our business forward?
- What are the metrics around those revenue drivers; how are they changing; and what does this mean for my business?
- What strategies can we employ now to speed up growth?
- How are we pacing against our goals and why do we have a variance from the plan?
With this deeper understanding of the business and the knowledge that plans and strategies are built around revenue drivers, all three teams can work together to begin to drill into the details and identify where to make adjustments or build upon successes. These three teams can work together to:
- Set more accurate, detailed goals
- Monitor the pace of business
- Create more realistic forecasts
- Identify challenges and develop appropriate, timely strategies to course correct