How to Grow Revenue Using Key Success Factors – Part 2
Topic: Double-entry Bookkeeping,Growing Your Business,How-to,Managing Your Business,Tips & Tricks | Comments Off on How to Grow Revenue Using Key Success Factors – Part 2
My last blog posting introduced Key Success Factors (KSFs) for growing revenue. It began by breaking revenue into its component parts:
- Number of customers
- Average revenue per transaction
- Average number of transactions per month
The focus of the previous posting was on increasing the number of customers served by your business, and today’s entry will outline methods for increasing the revenue per transaction.
The easiest way to tackle this KSF is by looking at your invoices. What is the average number of line items per invoice? Suppose the average number of line items per invoice last month was three. Adding just one more line item per invoice can have a dramatic impact on your revenue. How can you accomplish this? If you’re a product-based business, start by getting into the habit of asking your customers if they’re interested in adding related items to their order. If you’re a service-based business, consider creating some additional services that complement your primary offering, or testing the sale of books or other products that bolster your service.
The other lever that impacts your revenue per transaction is the average dollar value per line item. When is the last time you reviewed your pricing? If you’re like most small business owners, the usual answer is “not lately”! Most owners feel pressure to keep their prices low – and are surprised to learn that most of their customers are less concerned about prices than they are about the quality of the products and service.
Tackle this KSF by looking at the price of your most popular items. If the prices of your top-moving items are priced competitively, consider raising the prices of your slower-moving products by 10%, and slowest-moving products by a full 20%. You’ll find that this strategy can increase your revenue per line item significantly, which in turn will increase your average revenue per invoice – and your company’s revenue.