What is a Revenue StatementTM?
In any growth-oriented business, driving profitable revenue growth is one of the most important business goals. However, as we dig deeper into this topic, we find that most companies lack clarity into accounting for what is really working and not working, and “how” to systemically make informed business decisions to optimize profitable revenue growth.
For example, we use Financial Statements to manage the financial health of our business. The Income Statement provides an accounting for “past” revenue that has been generated for a given period and may have revenue further segmented into territories, product/service categories or industries segments. However, what is missing on the Income Statement is “how” revenue is being generated.
In addition to just generating revenue growth, successful businesses are also seeking ways to generate and optimize profitable growth.
The purpose of the Revenue Statement is to provide revenue leaders a standard way to report, assess, plan and optimize revenue for growth.
How Can Profitable Growth be Achieved?
An inexperienced operator may tell you that you just need to sell more.
When analyzing an Income Statement, an experienced operator knows that many levers can be turned to make profitable growth occur. Levers could include selling more into channels and product categories that generate higher gross margins, reducing the cost of goods sold (COGS), and/or reducing expenses.
What is missing on the Income Statement is “how” we can systemically assess, plan and optimize profitable revenue growth.
The “how” can be found in the Revenue Statement.
In our view, revenue is generated through a collection of Revenue Funnels for both net-new customer and existing customers.
For example, a Revenue Funnel for organic website visitors could be viewed as follows:
Provided that the marketing and sales processes, systems and data are fully integrated, cost and revenue can be attributed, measured and reported for this Revenue Funnel. In addition, adding the conversion rate percentage (Conv%) for each stage of this Revenue Funnel, this information provides an experienced operator with a number of levers that can be turned to improve profitable revenue performance for this Revenue Funnel.
Depending on your business, net-new customer Revenue Funnels could consist of organic website traffic, paid advertising, sales prospecting, trade shows, traditional media and more. Existing customer Revenue Funnels could consist of various campaigns targeting different customer segments for renewals and/or up-sell opportunities.
The Revenue Statement
The Revenue Statement provides a standard report, just like an Income Statement, accounting for Revenue Funnels across your entire business for both for net-new customer and existing customer Revenue Funnels showing you “how” revenue is being generated across the entire business.
Below is a simple example of a Revenue Statement:
Like an Income Statement, a standardized Revenue Statement can serve as a powerful tool to assess, plan and optimize profitable revenue growth.
If you are interested in learning more about how to build, assess, plan and optimize a Revenue Statement for profitable revenue growth, download the eBook below.