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Understanding your revenue drivers

Understanding your revenue drivers

Understanding your revenue drivers

For your business to make money, you need to generate revenue.

You produce revenue through your usual business activity, by making sales, getting your invoices paid, or taking cash from paying customers. So, the better you are at selling your products/services and bringing money into the business, the higher your revenue levels will be.

But what actually drives these revenue levels? And how do you get in control of these drivers?

Knowing where your cash is coming from is more crucial than ever

As a business, you face the multiple challenges of a global recession, an increase in online consumer buying and a ‘new normal’ when it comes to trading, markets and buying expectations.

The better you can understand the nature of your revenue and its drivers, the more you can flex, manage and control your ability to generate this income.

This helps your medium to long-term strategic thinking, and your decision-making, allowing you to be confident that you’re focusing on the business areas that deliver maximum revenue.

Important areas to consider 

Revenue channels

Where does your revenue actually come from? Do you create income from online sales and ecommerce, through retail sales in bricks and mortar stores, or through wholesales to other businesses? You may focus on just one of these channels, or it could be that you use a mixture of two, three or more.

Revenue streams

Your total revenue will be made up of a number of different ‘streams’. Knowing which revenue streams you rely on, which are most productive and what return they are delivering allows you to make decisions.

If 80% of your income comes from 20% of your products, perhaps you need to tighten up your product range and ditch some of the poor sellers. If you’re selling more services to one particular industry, perhaps you should focus more marketing in this specific niche, or downscale your sales activity in less profitable niches.

Product/service split

Do you know which products/services are the most profitable in the business?

Which products/services have been resilient to market changes (giving you some revenue stability) and which have adapted well to change?

The more you can dive into your metrics and find the most productive and adaptable products and services, the greater your ability is to provide constant and evolving revenue for the business.

Value vs volume

Is your revenue based on selling a high volume of products/services at low margin, or low volume at a high margin?

Based on this, can you move your margin down to create a more attractive price point (and more value for customers)? Or are their ways to push volume up, shifting more units and boosting total revenue?

By diversifying into new channels, new streams or new products/services you can aim to balance value and volume to create brand new sales – and higher revenue levels.

Talk to us about exploring and understanding your revenue drivers

We’ll review the numbers in your business, help you to understand your revenue drivers and will give you proactive advice on enhancing your total revenue as a company.

Get in touch to kickstart your revenue generation.

Do you have a business plan

Do you have a business plan?

As we continue to face challenging times, to make a success of your business you’re going to need a robust business plan.

With a one-page business plan behind you, your company has a real sense of strategic direction and a set of core goals to refer to and track against.

But what are the key elements to include in your one-pager business plan?

We’ve listed some of the foundational areas to cover, so there’s real purpose behind your business.

What to include in your business plan

Lots of online resources will suggest that a business plan is an easy document to create, but a good plan will take time and plenty of thinking to get right.

As business advisers, we’ll help you put together a plan that gives you a clear strategy for the next six months and beyond, with measurable goals to include in your plan. The resulting document will help give you clarity on your direction, and where to invest time and money.

A business plan will also be an essential document if you are looking for investors or external funding. Any loan providers or private investors will want to assess the risk in your business, your cashflow position and the underlying profitability of the enterprise – so bear this all in mind when outlining the financial details of your plan.

If you haven't written a plan before, a template is useful.

Start with the following headings:

Business description

Your business description should include a mission statement, your key goals and your objectives as an enterprise. A good mission statement explains:

  1. what you do
  2. why you do it
  3. who you do it for.

It should be short and to the point and be used to inspire your marketing and drive the everyday internal running, ethos and tactics of your business operations and team thinking.

Business profile

A profile section tells me how long you’ve been in business, the specialty products or service niches that you focus on, and the key strengths of the company. It will also outline your business strategy and how you aim to achieve your targets, increase your customer base and grow the business over time.

Business environment

This section sets out the environment that you trade in as a business. So you should outline things like the key trends in your industry, your close competitors in the market, and the size of your current customer base. You can also include any research or market research you’ve compiled regarding your intended market, industries and customers, to give your plan some factual foundations.

Business strategy

A SWOT analysis demonstrates the strengths, opportunities, weaknesses and threats in the business, allowing you to refine your business strategy and maximise your success. Identifying your key strengths and opportunities helps you to focus your efforts and resources in the most productive areas. And knowing your weaknesses and threats helps you look for areas of improvement, and where you may need to safeguard the company against specific risks, threats and competitors.

Financials

Your financials section sets out the basic financial drivers of the business idea. For new businesses, this will mean outlining your projected expenses, budgets, sales targets and profitability projections etc. For existing businesses, you can include your profit and loss, balance sheet, sales trends and projected budgets etc. Cashflow and revenue forecasts will also be essential if you’re approaching lenders.

Talk to us about creating your one-page business plan

We’ll help you create a tailored business plan, to guide you through the threats and opportunities that lie ahead, with solid financial management for the next stage in your growth.

Do you feel like a slave to your business

Do you feel like a slave to your business?

Feeling like a slave to your business implies the loss of control; thinking that you need to be available to your customers 24/7 and that your team can't cope without you.

It can also imply a victim mentality - that this is just what it's like to be a business owner and that it's not something you can change. Maybe Covid had a huge impact on your business and you're playing catch up.

There are lots of reasons why you feel like a slave to your business. In other words, lots of excuses.

The OARBED behaviour model tells us we must act above the line; taking Ownership, Accountability and Responsibility for our actions and the choices we make. Feeling like a slave to your business is a choice.

So, what can you do to stop feeling this way?

How can you get back in control of your business

First, review and update your processes. If customers are contacting you at all hours, put in place a timeframe for responding, e.g. within 24 hour hours, and communicate this with your customers. If cashflow is an issue, review your payment terms and ensure they're being enforced.

Next, if you don't feel like you can trust your team to run your business without you, establish why this is.

Do they need more training and support?

Have you given them the opportunity to step up and take on more responsibility?

Do you need to take on more team members or outsource some tasks?

Whatever your reasons - or excuses - are for feeling like a slave to your business, now is the time to reflect on what it is you wanted your business to deliver to you.

Set goals for what you want your business and personal life to look like in 12 months.

Break these down into 90 day goals and actions to achieve those goals.

Take ownership, accountability and responsibility for regaining control of your business.

Consider the following questions

  • Do you need to start going home on time every night?
  • Do you need to stop accepting work from people who don’t respect your payment terms?
  • Do you need to block out calendar time to respect your health and wellbeing?
  • Do you need to implement 10 strategies to grow your cashflow?
  • Do you need to train and empower your team to take on more responsibility?
  • Do you need more time to plan?

No more excuses - it’s your business, you make the rules, choose not to be a slave!

We can help you be the master of your business - get in touch to find out how.

"Success isn’t a result of spontaneous combustion. You must set yourself on fire."
Arnold Glasgow

What do you want from your business

What do you want from your business?

When you started your business, you probably dreamed about flexible hours and highly profitable, stimulating work.

Ideally, you would’ve adopted best practice and documented those dreams in a succinct Business Plan. Your plan would specify how much cash you need, your role, and the hours you’d be working.

In other words, what your business was going to deliver to you personally as an owner.

But that was all before the world turned on its head and most plans went out the window.

Whatever you previously dreamed of or planned for must be reconsidered due to the impact of Covid.

It’s likely that what you want hasn't changed, it will probably just take longer than expected.

Take the opportunity to reinvent your business to deliver what you want 


Trimming what you need personally from your business for the next year or two will give you the best footing to recover.

Consider the following:

  1. Can you still have the lifestyle you want with less cash strain on your business?
  2. A walk with friends, as opposed to a dinner out, is great for your health and easier on your wallet.
  3. Are there personal costs that can be avoided? Do you need that second takeaway coffee each day?
  4. Can you refinance your personal and/or housing debts to achieve lower interest rates or reduced principal repayments?
  5. Can you spend less on holidays or travel in the next 12 months?
  6. Can you modify your role in the business to reduce stress or workload?
  7. Will these needs be different in the medium term? I.e. can you hunker down for 12-months or until your business’s profitability and cashflow improve?

The best way to reduce the cashflow strain is to revise your personal budget. 

Your budget will identify potential savings you can make and provides a benchmark against which your actual spending can be tracked in the future.

 Your Business Plan and budget can then be built around how your business can deliver the level of personal cashflow you need.

There are no shortcuts here. 

The discipline of personal budgeting with ongoing monitoring of your expenditure is essential.

The good news is that the process is both empowering and enlightening at the same time. You’ll be amazed at where personal savings can be made and will feel much more in control of your business.

Contact us if you need help developing your Business Plan or personal budget.

“You must gain control of your money or the lack of it will forever control you.” – Dave Ramsey

5 signs you’re undercharging

5 signs you're undercharging

Are you undercharging for your services?

It can be hard to tell, particularly if you’re in a niche industry or you’re a contractor. Costs have been rising, so it may be time to rethink your own pricing.

Here are five signs that you might be undercharging:

1. Nobody ever questions your quotes

Do all your new clients accept your quotes or charges without asking any questions, requesting a breakdown or wanting a discount? It’s possible they’re delighted to be getting such a great deal.

2. You run off your feet but you can’t afford to get help

When you’re working yourself to the bone, but there’s not enough money left over to employ someone to help you, your prices are too low – or something else needs to change.

3. Your prices have been the same for two years or more

In most industries, prices increase just slightly each year. Leave your prices flat for too long and you’re not keeping up with the market; make sure you review your fees annually.

4. You’re overbooked

When business is booming and there’s no room for new clients, it’s time to raise your prices.

5. Clients don’t treat you as well as they should

When clients think they’re paying peanuts, they’ll often take you for granted. They don’t see your time as valuable, so they feel free to mess you around.

What should you be charging?

Finding your pricing sweet spot could take a little time. You’ll need to do some research, maybe ask around a little, and find out where your competitors are pitching their rates.

We can help

We work across various industries and therefore may be able to give you some indication of typical fees. So get in touch.

managing finances in your business

Managing finances in your business

Managing finances in your business

When you are busy running a business getting your head around effective financial management can be difficult.

If you get it wrong you could end up focusing on the wrong things that are detrimental to your business.

As a business owner, there are four basic areas that you need to consider when managing finances in your business:

Have a plan

It’s important to have a plan to you understand your business expenses, project your revenue and be able to track your finances.

Having a plan allows you to track and review your profits and losses, outstanding accounts, payroll expenses and more.

You should review your plan regularly so you have a clear understanding of your business financials and are able to forecast accurately.

We recommend using online software, like Xero. Online software helps you keep accurate and up-to-date records and is a more efficient and time saving way to stay across your financials.

Cash flow

We’ve said it before and we’ll say it again. Cash flow is the lifeblood of business.

By understanding and tracking your incoming and outgoing cash (or cash equivalent), you can gain insight into trends over time. This gives you more understanding of, and therefore control of, your cash flow.

And that means you can use forecasting tools, like Futrli, to identify opportunities to make adjustments to help prevent fluctuations in your cash flow.

Debt

If you have debt associated with your business, and let’s face it – most of us do, it’s essential to keep an eye on it.

Borrowing isn’t necessarily a bad thing, but it’s important to make sure the benefits of going into debt outweigh the costs.

On the flip side, if you’re owed money, it’s vital to closely manage unpaid invoices and secure any money you’re owed in a timely manner. Read more about having a watertight accounts receivable process here.

Growth

Growth is great, but it does need to be manageable.

When you are looking at growing your business or taking on new clients, work out if you manage the additional work and how it will affect your current setup. What additional resources, tools, personnel, financial investment will be required? And (like taking on debt), will the benefits outweigh the costs.

Successful financial management isn’t necessarily about the specific decisions you make. It’s about understanding the impact your decisions will have on your business.

Talk to us about the Apps and tools available to help you manage your business finances.

5 ways to improve your cash flow

5 ways to improve your cash flow

5 Ways to Improve your Cash Flow

In our last blog, we discussed ways of managing your cash flow. We know that cash is the lifeblood of any business, so here are 5 more tips to help you improve your cash flow.

 If the cash dries up, problems quickly begin to multiply. By keeping the cash running freely and you can continue to grow your business.

Here are five tips for improving your cash flow:

1. Have a system to manage your debtors. 

Come up with a clear, step-by-step way to handle outstanding accounts. This might include:

  • automated reminders on unpaid emails
  • a phone call or email when the amount has been outstanding for a certain period of time
  • a stop credit on the client when they exceed an acceptable payment time.
2. Be prepared for tax time 

One of the fastest ways to run out of cash is to find yourself short at tax time. Talk to your accountant about tax planning measures you can implement to ensure you can make your compliance and tax obligations. 

3. Try not to dip into business funds for personal spending

It’s always tempting to tap your business account for personal spending. Instead, try to keep them separate. If you’ve over-saved at the end of the tax year, you may be able to draw down a nice bonus. That’s much better than being caught short.

4. Sell old stock

Too much stock? Consider old stock, old furniture, machinery or even stationery: they can all be sold to free up space and provide a small cash injection.

5. Forecast your cash flow

Create a cash flow forecast (we can do this with you) and that will help you monitor and measure the flow of cash in and out of the business.

Need help with forecasting or cash flow management? We’re here for you. Feel free to get in touch.

Accessing business funding

Accessing Business Funding

Cash is the fuel that powers your business. But, does your business have enough capital in your company to actually fund your short, medium and longer-term goals?

Whatever your business aims are, you’re likely to need some additional finance at some point along the business journey. But, how does this extra cash then benefit the growth, scaling up and (eventually) the sale value of your business?

The value of extra capital in the business

Third-party business finance comes in many forms.

It might mean talking to your bank about agreeing an overdraft extension, or taking out a business loan from a business funding provider. It may even mean looking at specialist finance products, such as:

  • asset finance (for buying new equipment)
  • invoice financing (for quickly raising cash from your outstanding invoices)
  • government-backed grants and tax incentives for enterprising businesses.

Whatever finance route you take, it’s important to understand the impact that this extra capital will have for your business. And for your longer-term success.

Accessing business funding

Accessing business funding provides a number of opportunities for your business.

Boosts your working capital

Funding gives you the liquid cash needed to stabilise and expand your operations.

With enhanced working capital, you can overcome your post-pandemic cash worries and get your balance sheet looking healthy once again.

You can also take on new work, projects and customers, safe in the knowledge that you can cover the initial expenditure while waiting for new revenue streams to bear fruit.

Provides investment in your growth strategy

If you’re looking to expand your operations or scale up the business, extra funding gives you the capital to invest in this growth.

You have the capital to take on more people, to invest in equipment, plant and new technology, and to scale up the overall capacity of your business.

Strengthens your company's balance sheet

The health of your balance sheet is determined by the balance between your assets (the things you own, including cash, within the business) and your liabilities (the debts that you owe other people).

Additional funding in your business helps to:

  • increase your assets, which, in turn, helps to boost your working capital and liquid cash
  • enhance your asset performance
  • improve your capitalisation structure as a viable business.
Makes your company more valuable

With more cash in the bank and more capital to draw on, your company becomes a more valuable, and a more attractive proposition in the marketplace.

This healthy financial position is invaluable when approaching lenders for more funding, when buying out a competitor or even when selling the business and bringing your exit strategy into play as the owner.

However, if you’ve taken on private investors to provide part of your funding, you do have to consider that these investors will likely now own shares in the business – limiting your overall ownership and control of the company.

Whatever the next stage is for your business, the journey will be easier with a robust, tailored funding strategy behind your business plan.

Talk to us about creating a tailored funding strategy

10 ways to improve your margin

10 ways to improve your margin

10 ways to improve your margin

Improvements can always be made at the margin. Small tweaks to your processes or systems can make a massive difference to the end result. It’s the same with your business margin; a 1% increase in your gross margin on $500,000 of sales is an extra $5,000 on your bottom line.

The best part about improving your margin is that you increase your profit without needing to lift your sales.

Here are 10 ways to improve your margin

1. Negotiate better prices with your suppliers.

As they say, ‘the squeaky wheel gets the oil’, so if you don’t ask, you won’t get.

2. Update your pricing model.

Make sure you’re using the most recent supplier prices and that all costs are included in your price.

3. Back cost jobs regularly.

Review exactly what you spent on 2-3 jobs each month and compare the actual cost to what you anticipated the cost would be when you quoted the job.

4. Get rid of slow-moving items or work that has a poor return.

Selling old stock at cost will drop your margin, but if you replace those items or jobs with higher-margin items, you’ll achieve a higher return in the long run.

5. Set budgets and targets with your team.

Give your team something to aim for. Celebrate success when the targets are achieved.

6. Report your results on a cloud-based, real-time system.

You can’t manage what you don’t measure! Regularly monitor your most important Key Performance Indicators on your dashboard.

7. Reduce wastage and re-work.

What processes need to be updated to help reduce wastage and re-work? Or, if the processes are correctly documented, what training do you need to provide to your team to ensure the processes are being followed to reduce wastage and re-work?

8. Review your sales process.

Does your sales team know which products or services have the highest margin? Do they know how to upsell to those higher-margin products or services? Identify the sales skills gaps in your team and implement training.

9. Make a plan.

There are plenty of areas for improvement in your business. Unless you write them down, you’re unlikely to bring the correct focus to them. Make a plan to improve one area at a time.

10. Involve your business advisors.

Not only to help you with idea generation and building a plan, but also to hold you accountable to do the things you need to do.

We can help you lift your margin. Contact us today!

"To improve is to change; to be perfect is to change often." - Winston Churchill


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