Situation: A company experiences high revenue volatility from month to month, making it difficult to forecast expenses and personnel needs. The company has about 300 clients. Fifty percent of annual revenue is repeat business, with about 10 client projects ongoing at any one time. How do you boost revenue consistency and decrease month-to-month volatility?
Advice from the CEOs:
- What you describe is the norm in a service business. Averages across service industries are for 70%-80% of revenue to be from repeat business – more than you have currently. Boosting repeat business reduces your volatility by smoothing revenue across months and quarters.
- Ask how you got to this point in the first place. Here are some important questions:
- Look at your account development process. Are your account managers cross-selling to other potential customers within a given client to increase service penetration within the client?
- Are you talking to the right people within your client accounts? To whom do these people report – what are their most important needs?
- Similarly, look at your clients’ major customers and suppliers – is additional business available here?
- Do you have an account development plan for each of your major customers? Are there time and performance metrics to assure that the plan is implemented and monitored:
- Plan creation by the account manager
- Plan approval
- Number of new business development meetings with client
- Prospective pipeline of business within the account
- Are you using the right incentives? Adjust your incentive pay package to encourage business development within existing clients.
- How have your organized sales and service delivery? Consider two areas – delivery on existing business and gaining new business from existing customers vs. developing new customers. These require different skills and most likely different people
- As an example, one company initially combined key account management and prospecting as a single job. Under this scenario, new customer development was dismal. As soon as the company split the effort into existing account maintenance/expansion, and new account prospecting, new customer development jumped 10x. There was an investment up-front but it quickly paid off.