Tuesday, February 14, 2012

Factor #1 of 10: Revenue


Source of the revenues (Repeat/recurring/individual)

In the Self-Assessment, we asked you these questions:

  1. Our business generates revenue by charging:
    1. over $10,000 per transaction.
    2. $1,000-$9999 per transaction.
    1. $100-$999 per transaction.
    2. $1-$99 per transaction.
    3.  based primarily on an hourly rate work.

  1. Our business generates:
    1. 100 or more invoices per month.
    2. 50-100 invoices per month.
    3. 10-49 invoices per month.
    4. 1-10 invoices per month.
    5. invoices seasonally, or some months we don’t generate any invoices.

Business models which generate $10 per transaction and do 1000 transactions a day are considered more valuable than businesses which generate $1,000,000 invoices once or twice a year. While higher revenues initially attract more attention, the reality is operating expenses happen every day.  Having reliable and regular cash flow to cover those ongoing expenses tends to be perceived as less stressful for the owner.

Business models which engage a client/customer once in a lifetime are perceived to be of less value than businesses models where clients return for services on a regular basis. For example: While everyone eventually requires a funeral home the best situation for that funeral home business owner to find new business is to provide such a high level of service for each ceremony, visitors develop a positive impression for future reference. This can be a very long business development cycle. Or, in the case of selling and servicing a product like a home furnace or water heater, customers will require timely and regular service and maintenance.

As long as you provide a quality service for a competitive price, the client will most likely continue to use your company providing your business with recurring revenues.

TO DO: What three priorities can you identify to improve your revenue model?