Meaningful Metric October 2021 | Revenue as a Metric

There is a saying that when the tide rises, all boats are lifted. When the tide recedes, beware of the underlying rocks. Revenue is like the tide. High revenue will cover up a company’s potential inefficiencies. But when revenue is lower, it can expose all sorts of rocks that can hurt a business owner, such as too much inventory, low cash receipts, and high fixed costs. 

Because of the importance of revenue, it should be tracked each week and published to the entire management team. All hands need to be on deck to ensure that revenue meets plan and does not drop. The sooner a revenue trend is identified and addressed, the more time there is to correct the course of revenue for the year. The below schedule is an example of a report that shows weekly, month-to-date, and year-to-date revenue compared both to plan and the previous year.

As soon as there is a revenue trend contrary to your business plan or last year’s results, a root cause analysis needs to be conducted and corrections made. Regardless of their “position,” each team member should be involved in the discussion to identify the reasons for those trends. Is a particular customer purchasing less; and if so, why? Is there a particular inventory item on backorder? If so, can shipments be expedited from the supplier or is there a comparable item that can be offered to the customer. Has the sales organization stop making customer calls or did the cutback in marketing create the lower customer demand?

Company value is another compelling reason to focus on revenue on a weekly basis. If you are looking to sell your business, increasing revenue over time vastly increases the value of your business. By keeping revenue front-of-mind within the management team, it will be treated with importance and goals will be reached unless there are factors outside the control of the business.

How We Can Help

At the Florida CFO Group, our partners have a proven track record of assisting owners to be successful by suggesting the tracking of metrics like revenue. Contact us so we can work with you to elevate your business!

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