The Revenue Growth Formula

by | Sep 23, 2022 | Sales Motiviation

NOTE: I am running a guest article today from my friend Anthony Iannarino, author of the brand-new book, Leading Growth: The Proven Formula for Consistently Increasing Revenue. Enjoy!

By Anthony Iannarino

Revenue growth isn’t something that happens due to good luck, working for a great company, incredible products or services, weak competitors, or any other external factors one might credit for an increase in revenue. Growth only comes from strong and effective leadership and a team focused on revenue growth.

The formula for revenue growth is simple and straightforward. You start with your expected revenue going into a period and subtract the churn you expect before adding in the net new revenue you expect to acquire.

The existing revenue is what you are certain to capture from your existing clients and their commitments, contracts, and orders. Because these deals were done in the past, there is little you can do about the revenue you start with going into a year or a quarter. Every business experiences churn, and some part of that churn is beyond your control. The fewer clients you lose, the easier it is to grow your revenue. That leaves us with net new revenue, the area where what you do can create revenue or cause you to stagnate. In the worst case, not creating enough net new revenue can cause you to experience what some describe as “negative growth,” a euphemism for “shrinking.”

The revenue growth formula is simple, but it isn’t easy. There are three ways you can grow revenue:

1. Sell more to your existing clients.
2. Acquire new clients.
3. Raise your prices.

As a sales leader or a sales manager, you are responsible for the first two. You may also be charged with raising prices, but that decision may come from your executive leadership. However, if pricing is within your control, raising prices can contribute to revenue growth. Ideally, you pursue all three strategies simultaneously, especially if you have aggressive sales targets.

With a simple formula and only three levers needed, why is revenue growth difficult for sales organizations, sales leaders, sales managers, and their teams? If you’ve ever had the feeling that professional B2B sales is increasingly more difficult, you aren’t alone. There are powerful forces at work that make revenue growth more challenging than ever. Some of these forces are external, making it something outside of a sales organization’s direct control. These forces are going to require you and your team to adapt and evolve. There are also internal changes that plague sales organizations and make revenue growth difficult—or impossible.

Sales organizations unaware of these challenges will struggle to understand why revenue growth eludes them. For now, don’t worry about the challenges to growth, because all of them can be addressed by good and effective sales leadership. Let’s start by understanding what these challenges are so you can identify them, communicate them to your team, address them effectively, and grow your revenue.

External Challenges to Revenue Growth

The massive, disruptive, and evolutionary change in B2B sales is the result of changes in the environment that have made it harder for buyers and decision-makers to effect change in their company, as well as successfully completing their buyer’s journey, with over 54 percent ending in a decision to do nothing. The story here isn’t about how sales has changed, but how buying has become more difficult for your prospective clients. There are six major factors that can contribute to an inability to create revenue growth, starting with one of the greatest forces on the planet.

1. The Internet and Information Disparity
2. Uncertainty and the Status Quo
3. The Unforgiving Reality of the Consensus Sale
4. The Nonlinearity of the Sales Conversation
5. The Time-Based Nature of Sales Results
6. Competition and Its Impact on Results

Internal Challenges to Revenue Growth

The ugly list of external challenges is matched by this equally horrendous list of internal challenges. The upside of these monstrosities is that you can directly work to correct them. That said, they are not pleasant, and all of them impact revenue growth.

1. The High Cost of Churning Clients
2. Prospecting Problems: Too Little Opportunity Creation
3. Variability of Performance
4. Effectiveness Problems: Low Win Rates
5. Losing Time: Too Many Distractions

The combination of the difficult selling environment and the internal challenges of revenue growth require that you lead your sales force consistently and effectively, helping them change their beliefs and their behaviors when and where necessary. Leading growth is an ongoing effort, and it relies on finding your rhythm and staying consistent.

Anthony’s brand-new book, Leading Growth, is on sale at Amazon now.

Jeff Beals helps you find better prospects, close more deals and capture greater market share. He is an international award-winning author, sought-after keynote speaker, and accomplished sales consultant. He delivers compelling speeches and sales-training workshops worldwide. He has spoken in 5 countries and 41 states. A frequent media guest, Jeff has been featured in Investor’s Business Daily, USA Today, Men’s Health, Chicago Tribune and The New York Times.

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