The Power of Revenue Generation for Managers

When it comes to doing business, every place is different, even from location to location. And yet, there are aspects that are the same in all businesses.

These basic commonalities come to life in the idea of the Power of 3:

  • Revenue Generation
  • Business Processes
  • People

In our everyday vernacular, “revenue” is the top-line for location sales. The more formal definition is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. And for managers everywhere, this is the frequently checked indicator of their success or failure.

Revenue is a key indicator of business performance; it allows the manager and owner to keep a pulse on where they are headed, what is working and what to watch out for. Adding the cost of revenue completes the picture.

To maximize revenue, successful companies create objectives to drive the right behaviors in their business.  In the Power of 3 these are:

•              Customer Acquisition – attracting new customers

•              Customer Satisfaction – keeping the loyal customers coming back

•              Customer Profitability – making more money on each customer or transaction

According to Guarraia, Carey, Corbett and Neuhaus in “Lean Six Sigma for the Services Industry”, research shows companies that apply an upfront diagnostic to identify critical opportunities yield the biggest gains.

Revenue grows when you analyze the business and identify the biggest opportunities to increase profits, set performance goals as measured against internal and external benchmarks and prioritize areas of improvement and opportunities to yield the greatest economic benefit.

I am reminded of a client who owned a high-volume restaurant within a casino hotel.

To increase revenue, we first, diagnosed the operation and  all agreed we needed a strategy with tactics to increase the customer per person average check (PPA). That was more important than attracting new customers. Why?  Their average spend per customer was well below their competitive set.

By re-engineering their menu and adjusting prices on new menu items to match their competitors they could increase their PPA 10.08%. In addition, they eliminated a “loss leader” breakfast special resulting in lost customers. This was by design – the special was a lot of work for the staff with limited return.

After executing a comprehensive plan against  the Customer Profitability component of P3, the restaurant  exceeded their revenue goal while sustaining a modest customer count decrease. Success!

Examples of other tactics that could be employed include:

1. Customer Acquisition – Differentiation by distinguishing core offerings from the competition and the use of technology and social media to raise awareness

2. Customer Satisfaction – Innovation by enhancing the customer experience through raising loyalty and creating repeat visits

3. Customer Profitability – Adaptation by using deals and pricing while maintaining a value perception, allowing for greater per transaction or sales margins

By executing the Power of 3, companies and their management teams can compete for new customers, improve the customer experience and enhance the customer value perception. These companies benefit greatly by being on the right road to achieving greater revenue.

By, Debra Koenig, President of B2A Consulting | 30 years of experience as a  business executive with leadership and consulting skills in Fortune 500 and private equity portfolio companies.

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