How to Grow Revenue Using Key Success Factors – Part 1

I’m happy to say that my last blog posting generated some lively discussion! Several small business owners contacted me with requests for more information on Key Success Factors (KSFs), which measure progress against specific priorities. In today’s post, I’ll respond to the most popular topic, “KSFs for growing revenue.”

An approach that has been successfully used by hundreds of small businesses is to break revenue into its component parts, and track each one separately. The major components include:

• Number of customers
• Average revenue per transaction
• Average number of transactions per month

Increasing any one of the above components will grow the top line of your business, but which one should you focus on? Which one should be your KSF this month?

Let’s start with the customers count. Tracking this KSF ensures focus on adding new customers each month. Be sure to track total sales to your new customers separately from total sales to existing customers. Why? Because you’ll discover what contribution (in revenue and gross profit percentage) each segment makes to your business.

Suppose, for example, you don’t add any new customers this month, which means that 100% of your revenue and profit comes from your existing base (duh). The implication is significant: the only way you can grow your total revenue is by either increasing the revenue per transaction or the number of transactions.

Techniques to increase revenue per transaction and transaction count will be discussed in a later blog entry, but they may be harder for you to achieve than growing your customer count. Track the number of new customers your business serves on a monthly basis and you create an exciting new lever for the success of your business.