Every company wants to grow. At the end of the month, end of the quarter, and end of the year, we all look at our top-line revenue. How much did we grow?
What we need to be looking at is one level deeper. These are the the two drivers of revenue growth. Unfortunately, many companies do not look at these simple numbers.
What are the two two revenue metrics?
They come from the two sources of revenue. If you boil it all down, there are only two ways to grow revenue:
- Net-New: You get more clients
- Cross-Sell: You sell more to your current clients
That’s it. The problem is that most companies tend to be good at one or the other. Some are good at landing new deals. Others are good at developing client relationships. Rarely do you find a company that has the processes in place to do both well.
Here’s why that’s important. If you can show modest growth in net-new business and cross-sell business, you can experience exponential revenue growth. (Download the Revenue Growth Calculator, part of the Free Revenue Growth Tool Kit).
So, what are the two key revenue metrics:
- Number of Clients
- Revenue per Client
Number of Clients
First, you need to be able to answer the question, “How many active clients do we have?” This may take a little bit of work with your finance department, but it is a critical number to have. This becomes your base line. At the end of each month (or day) do the math. How many did we add? How many did we lose?
Revenue per Client
Second, you need to know your revenue per client. The math here is simple. Take your total revenue for a given period (month/quarter/year) and divide it by your number of clients. That’s your revenue per client.
Now, track these numbers. Put them on dashboards in your business. Show them in your management and team meetings.
Think about revenue growth in these categories:
- Set goals for number of customers and revenue per customer
- Build marketing and sales processes to drive toward these goals
- Compensate and congratulate based on these categories
Remember, if you drive modest growth in each of these two areas at the same time, you can grow exponentially, shortening the time it takes to double your revenue.