A Story Block Guide: 

Understanding &  Achieving
REVENUE GROWTH

Live and breathe revenue growth through this mega-guide.

Six in-depth chapters on analysis, strategy, and forecasts around the oh-so-important metric

Put simply, revenue growth, or the official label for the act of getting more cold, hard cash in your organization’s bank account, is and has always been the driving objective of business.

Sure. There are non-profits with awesome missions and there are B-Corps with environmental sustainability tied into their values, but even their existence is based on their ability to earn more money every single quarter.

This guide can serve as a masterclass, breaking down revenue growth into six comprehensive chapters so that you can understand and achieve it using the latest tactics, data, and technology.

Chapter 1

what is revenue growth formula

What is revenue growth and its formula?

Definition:

“Revenue growth is the increase (or decrease) in a company’s sales from one period to the next. Shown as a percentage, revenue growth illustrates the increases and decreases over time identifying trends in the business.”

-- The Business Literacy Institute

In more basic terms:

Basically, revenue growth is the change in the amount of money that your company brings in from month to month, or any time period. It doesn’t even need to be said –increasing your revenue is important. It allows your organization more opportunities and resources. From an operational point of view, it decides your short and long term strategies.

Having an eagle eye on how much you are growing is an important and healthy practice that will better prepare you to make the difficult decisions around hiring, budgeting, scaling, and more.

Calculating revenue growth is dependent on the time periods being measured. It is displayed as a positive or negative percentage.

The formula is as follows:

Current time period’s revenue minus prior time period’s revenue divided by prior time period’s revenue.  

revenue growth rate formula

Let’s say your company made $125k in 2017, and $210k in 2018.

You would like to see how much your sales grew in 2018.

The formula would be (210,000 - 125,000)/125,000 = 0.68. So you experienced a 68% growth in revenue in fiscal year 2018.  This formula can be used for smaller or larger time periods, from a couple of weeks to many years.

When shooting for revenue growth, aim for sustainability and predictability.

The amount of revenue growth that is considered “good” can vary based on its size, its industry, and market. In fact, not all revenue growth is a great thing, as failing from growing too fast is a well known trope in the world of startups. We will continue to discuss what sustainable revenue growth is and how it can help your organization scale.

Chapter 2

use revenue growth calculator

Use the Revenue Growth Rate Calculator  

Get the free Google sheets template in your email right now.

  • Calculate, visualize, and analyze your revenue growth.
  • Take a load off: no need in building out your own spreadsheets when you can just use our template
  • Includes charts and conditional formatting applied automatically to any data you fill in
  • Bonus templates! Calculate your sales pipeline velocity in the same document as well.
Revenue growth calculator spreadsheet- vertical

Chapter 3

revenue growth strategies

Revenue Growth Strategies

This chapter may as well be titled "Ways to Make More Money".

But we won’t go all ‘Glengarry Glen Ross’ on you, because times have changed. We’ve moved on from the Always-Be-Closing mindset. Increasing your top line is no longer about having killers in your sales department. 

It’s about meeting your leads where they are and pushing them to the next stage in your sales cycle as fast as possible.

We aren’t just talking about revenue, the dollar amount. We’re talking about revenue growth. That means we’re looking at two factors.

Today’s best Revenue Officers and Sales Leaders are able to look at their top line analytically.  They understand that the objective factors you need to improve are money and time. Taking these factors into account, you can more accurately conceptualize and diagnose the issues in your cashflow.

how-to-improve-sales-results

Read on for the quick-and-dirty on objectives to attack when implementing strategies to grow revenue. Below we list the tactics that might fit your current situation. Jump down the page and get more detail.

increase money- revenue growthObjective A: Increase money brought in.

Tactics to achieve this:

  • Increase prices
  • Sell your product to more people by working more leads
  • Sell new, different products
  • Sell your other products to different existing buyers

decrease time - revenue growthObjective B: Decrease time.

Tactics to achieve this:  

  • Optimize the final deal stages
  • Optimize the lead qualification process
  • Invest in sales enablement
    • Create cleaner handoffs between marketing, BDRs, and sales reps
    • Create better content to move leads towards a purchase more quickly 

The Tactics

Objective A: Increasing Money Brought In

Tactic 1: Raise prices. This increases average deal size.

Average deal size is the metric that states how much money you pull in, on average, from any given deal. We don’t need to explain why you want this number to be big. One of the least resource-intensive ways to do this is to raise your prices.

There’s another benefit at play here besides the obvious one in which your organization makes more money. Price can be an indicator of quality. Higher prices can actually cause a consumer to perceive greater quality and value, especially when comparing other options during the buying process. (Source)   

But be careful: there are some caveats and best practices to follow in using this strategy.

  1. Give your current customers plenty of fair warning. Explain to them that your prices are going up and give them ample opportunity to air grievances or opt out. The bad blood is not worth the extra cash you might sneak out of your current happy audience.
  2. Provide a discount or a grace period to current customers. Keep your user base happy, and it will pay dividends.
  3. Sell on value, not cost. Explaining the in’s and out’s of your overhead and revenue predictions doesn’t often resonate with people. Reiterating the value and return on investment your product provides gets your audience on board with the change.
  4. Justify the price increase with tact. Give a reason that makes sense to your audience.

Marketers-REVENUE-STACK

Tactic 2: Sell your product to more people by working more leads.

Yep, this is the primary objective of pretty much all businesses, but it must be included. The sales metric that will improve here is average number of closed deals per sales cycle.

The key activity here is to get more leads in the top of your funnel. The more qualified people who are aware of your product, the more will trickle down to the next stage of your sales cycle, and so on and so forth. Lead generation starts with an investment in your marketing department and it takes time, but developing this strategy is crucial to a healthy sales pipeline.

Leads can come from all over the place, from search engine marketing to blogs, and more.

Tactic 3: Sell new, different products. Diversify your offerings, and thus your sources of revenue.

We write about this strategy in our post, How to Increase Sales Results without Burning Out Your Team. It can be healthy move to hedge your bets and spread out the ways your company brings money in. Consider that this is a high risk, high reward tactic. It puts an initial strain on your marketing, product, and sales teams as they create and introduce a new product to your audience, but if you successfully fill a void in your market, the sales will come easy. This can also serve to highlight your organization’s versatility and might allow you to penetrate new markets.

pros and cons of hiring outside marketers-01

Tactic 4: Sell your other products to different, existing customers.

We’re talking about cross-selling and up-selling your current clients and customers. This isn’t a slimy move, just a smart one: repeat customers spend 67 times more than new ones on average (source). In fact, up-selling and cross-selling is about providing more value, so it leads to deeper business relationships. When you can find more ways to help your current customers, you build both trust in your own brand and awareness of your offerings.

Optimize your business' processes, from paid search to sales.

Download the E-Book: Over-Optimized 

Objective B: Decreasing Time

Tactic 1: Optimize the final deal stages

This tactic requires reducing any friction a lead experiences in the final stages of your sales cycle. This is a strategy focused on decreasing the time it takes to close a deal, but it improves other factors in the revenue growth equation as well. As your sales reps close deals more quickly, it opens up time for them to work on other leads and to provide more value through the process of acquiring their business.  

This is made easier using a CRM to visualize your sales pipeline. A Customer Relationship Manager can show you which prospects are in which stage of your sales cycle. You can set your company up for even more success by performing sales pipeline analysis, where you can identify who dropped off in your sales process, what information helped convert leads, and what conversations are necessary to close the deal. ins-outs-sales-pipeline-management-1

Tactic 2: Optimize the lead qualification process

How speedy-smooth is the handoff between your marketing and sales departments?

If your marketing engine is providing a healthy quantity of leads but your sales team complains that the leads are no good, then it’s time to get everyone on the same page. The foundation of your qualification process is laid within the definitions of your MQLs and SQLs. Get in a room with your CMO and your Sales Director to define the qualities of leads that are a) qualified to receive marketing materials, and b) qualified to receive communication from the sales team.

With this foundation in place, work with your marketing team to denote which processes and signals help them flag the leads that fit your buyer persona and are warmed up enough to speak to your sales team.

When your marketing team is in-tune with what your sales team needs in their leads, sales reps work with warmer leads, average close times go down, close-rates go up, and everyone is happier.

Tactic 3: Invest in sales enablement

Success in the above tactic 2 is one facet of this strategy. Sales Enablement is the formalized process of setting your sales team up for success. This means your whole organization is providing them with content, insight on previous communication, tools and automation technology to help them close deals more effectively.improve sales scripting - increase sales results

One aspect of sales enablement is the handoff of leads. We already spoke of the importance of passing on leads that are truly ready for sales, but another way to increase accountability is to properly define the Service Level Agreement between marketing and sales teams. We speak more on this in “Chapter 5: How to Forecast Revenue Growth”, but the gist is that your marketing team is on the hook for how many mutually agreed-upon SQLs are handed off, and your sales team is on the hook for trying to close them in a specific amount of time.

As your sales team begins to accept more leads that suit their needs, you will want to ensure a quick and effective handoff process that has these qualities:

    • Inform the sales rep of any relevant communication
    • Politely introduce the lead to the next team member
    • Set the lead and the rep up for success by letting them know what kind of next steps they can expect

Another way to enable your sales team is to create content that moves leads towards a purchase more quickly. Usually, this kind of content is inspired by the data found in your sales team’s conversations. Map the content to the stage of the funnel that the lead is in:

  • If the lead is still unaware of all of your services, provide them with top-level branded content that helps treat the symptoms related to their main problem. Videos are great here.
  • If they’re considering their options, make it easy for them by providing product comparison tables and highlight where your product takes the edge.
  • If they’re getting ready to decide on your service, level up to the pricing discussion or show them case studies that involve organizations with similar problems.

Related Read: 5 Ways to Increase Your Sales Conversion Rate

sales pipeline analysis - reviewOne size does not fit all

If you have ever received an email that says “Earn 10x revenue this year doing this one simple trick!” you probably banned that sucker straight to the spam folder. This chapter does not presume to know your business, your goals, or your opportunities. We have a great team that does that. These are strategies that work for many, but finding the strategies that fuel your record-breaking quarters take time and testing.

Success comes gradually, so stick with it. At Story Block, we try lots of things, we fail often, but we fail fast. We double down on what works and improve what falls flat.

Want to talk about your Revenue Growth Strategies?

Book a meeting with a Story Block Genius below.

Chapter 4

Revenue Growth Analysis

The deeper your analysis, the better off you are. 

Analyzing revenue growth allows you and your company to objectively see how much your sales in lines of business increase from time to time. Done well, this activity can help you see what marketing, sales, and product efforts produced the most revenue, so that you and your team can determine upcoming strategy with confidence.

revenue growth analysis

Understanding Top Line Growth

You likely have an idea of what a sample profit and loss statement looks like. Your top line will say something along the lines of gross sales, or gross revenue. Underneath are all your company’s expenses and costs and overhead - all things to subtract from the money brought in to see your final profit margin. 

This is all par for the course in the world of accounting, and each line in these statements are what keeps CEOs and COOs up at night. In fact, it can be hard for them to zoom out of that single P&L statement but that’s the support that Chief Revenue Officers and Sales Directors can provide.

It takes a village-banners-01

The blunt truth of where the business is heading lives in between statements, within that top line.

Finding trends, attributing growth factors, and determining real growth over nominal growth are the activities that should guide budgets and the efforts of entire departments. 

Finding and Following Trends

Seeing where you’re heading from a sales perspective begins as you’d expect: start by seeing how much revenue you brought in for a specific time period. Repeat this process for earlier periods that span the same amount of time. Lay this data out in your spreadsheet software so that you can work with it more effectively.

Once you have enough data points (the more the better), you can begin the process of seeing trends in your revenue data. Here’s a sample set of data showing revenue earnings at each quarter for three years.

revenue growth data 

We’ve placed a column to the right that shows change between each quarter using the revenue growth formula from chapter one. We’ve also included a section at the bottom to show how much growth has occurred from year-to-year.

Use our free templates for calculating and analyzing revenue growth

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Turning this data into a chart can make it easier to understand for you and your team. Next, add a “Moving Averages” trendline to show the direction of growth visually from quarter to quarter.

revenue  per quarter graph
Already, we can start to pick out some trends in this data set. Comparing the changes between each quarter provides us some insight. However, the real value of revenue growth analysis comes once you recognize the trends and find the right questions to ask.

For instance, in this sample data, the company sees an average of a 23% decrease in revenue earned in Q3, compared to Q2. Next, the savvy analyst can start identifying causal factors that lead to drops in revenue in Q3.

Questions more helpful than "Why is this happening?" that start to send us down the right path: It takes a village-banners-02

  • Is there anything in the company’s sales process that causes sales to drop in Q3?
  • What sort of environmental factors might affect the buyer during Q3 that cause their sales to perform differently every season?
  • Does marketing do anything differently between the super-productive Q4’s and Q1’s?
  • What pain points do leads have during Q3 that they don’t have during other quarters?

Related Reading: Sales Pipeline Analysis Made Simple

Responding to trends

When you see your revenue growth line start to drop consistently, then it’s time to start making some major changes. The sooner you can see these problems, the better. It’s why we recommend keeping track of your revenue in a clean manner as early and often as possible. Uneven jumps or drops in your numbers might mean that your business is just victim to trends in the market that are out of your control. As an analyst or business leader, your job is to mitigate that which you can’t control ahead of time.

Projecting forward

When you have a reliable set of data and you see steady growth or decline, you can project forward and make cautious assumptions about what your revenue numbers might look like next quarter, next year, and more. If you see jumps or drops that you can’t confidently include in your projections, identify the reasons for them and correct them as best as you can in a quantifiable manner. Using historical data, you can create a smooth line that has followed your past performance and extrapolate forward using the growth percentages you already calculated.

5 Ways to Increase Your Sales Conversion Rates

Attributing Growth Factors

So, at this point, you’re able to see which direction your revenue is headed and how fast, and you can start to guess why on a global level. Let’s dive even deeper by attributing the growth factors in your business.

Dividing into your Lines of Business

Breaking up your revenue number into its contributing factors is a key aspect of successfully analyzing revenue growth. One way to achieve this is to segregate your revenue number by the lines of business, products, or services that added up to it.

Look at all the revenue from each line of business comparatively. Which ones stand out? What are your worst performing offerings?

Boil it down even further by accounting for marketing costs per line of business. Add up the costs of advertising, sales and marketing wages, commissions, etc. that you can confidently assign to one product. Divide this number by units sold to see the cost behind each sale. This can help show you which of your offerings are most profitable.

Using this insight, you can confidently direct your company strategy toward the most profitable, highest revenue producing products.

Determining Real Revenue Growth

It’s important not to let your revenue growth be the only number you’re looking out for. Obviously, costs are just as equally a part of business as sales, but profit is the number that should be on every CRO’s mind. If you lower your prices just to raise your revenue with no foresight on how this plays into your profitability, then you’re playing with fire.

Revenue growth does not equal profitability, the line that makes and breaks all companies down the road.

For example, a company drops its prices by 10% and in turn, sees a revenue growth of 5%. This drop in price usually affects profitability across the board and the revenue growth can’t offset that drop. It may not need to be said, but it’s important that we at least mention this.

Take time and care to understand how each line in the Profit and Loss statement might affect each other and you’ll be in great shape.

Chapter 5

how to forecast revenue growth

How to Forecast Revenue Growth

Warning: This chapter isn’t for the bright-eyed and bushy-tailed college grad making his startup’s pitch deck.

If this is you, no hard feelings – we just recommend heading back to Google to see what Forbes or Entrepreneur have to offer. As far as we're concerned, these articles don’t actually provide any insight on projecting the change in your top line, aka your actual revenue, from quarter to quarter.

They offer sound advice in general about projecting growth, future expenses, and presenting your case in pitch sessions, but there is actually zero actionable information on how to forecast revenue growth with the data in your sales systems.

This chapter is for those of you who see the leads entering your sales pipeline and want a reliable projection of the revenue you’ll earn from them.

Revenue growth should be forecasted using a few key pieces of data:

  1. The potential deals in your pipeline
  2. Your team’s close rates
  3. The length of your sales cycle
  4. Your company’s historical data – If you don’t have historical data, research your industry deeply, reach out to peers, and see what your competitors expected in similar situations.

revenue forecast projection

Weighted Deal Forecasts

This was once the go-to method of forecasting revenue for companies that could easily see who is in their sales pipeline. It’s a bit simplistic, but very valuable in terms of prioritizing your sales team around what are the most important leads to work. It works like this:

Look at each potential deal in your pipeline. Multiply the deal size ($) by the percentage of its likelihood to close. The result is a dollar amount, and your team can prioritize around the largest amounts, i.e. the cross section between biggest tickets and most-likely-to-close.

This is a more realistic look at the potential impact on revenue that the deals in your pipeline have. Streamline the process by assigning a ‘likelihood-to-close’ percentage to each deal stage in your pipeline.

sample pipeline deal stages analysis

Here’s a sample pipeline with deal stages and close probabilities:
  1. Nurture awareness and interest 10% likelihood to close.
  2. Solutions Meeting Scheduled 35% likelihood to close.
  3. Proposal Built & Sent 65% likelihood to close.
  4. Proposal in review –75% likelihood to close.
  5. Closed | Won – 100% likelihood; closed.
  6. Closed | Lost – 0% likelihood; closed.

Let’s say you have Deal A in stage four, worth $15,000 and the prospect is reviewing the proposal. You have another deal, Deal B, worth $45,000 in stage two; you’re getting ready to meet with the prospect.

Using the weighted deal forecasting model and this sample company’s close probabilities:

  • Deal A’s weighted forecast is $11,250
  • Deal B’s weighted forecast is $15,750

This means you need to get your team’s ducks in a row around Deal B. Don’t forget about Deal A, because that’s in closing range, but through this model you can see that Deal B will have a huge impact on your business even when adjusted for probability to close.

 

Sales Pipeline Velocity

Sales Pipeline Velocity is a nifty calculation that takes into account the time that passes during your sales cycle, the current average value of the deals in your pipeline, and the overall likelihood that you’ll close on those deals. It shows you how much money is traveling the length of your sales pipeline everyday.

The Formula 

Number of sales-qualified leads in your pipeline times the overall win rate percentage of your sales team times the average deal size (in dollars) divided by your current sales cycle in days.

sales pipeline velocity formula

Know that you want this number to be big. Like, really big! We’re talking about how much cash-mulah your company is conceptually raking in everyday.

So, how is this different than the weighted deal forecast method?

It takes into account the larger picture of your entire pipeline and the time involved in closing deals. This provides us a more detailed, composite metric with which we can better understand our revenue growth.

How we forecast your actual revenue growth lives within the comparison of this stat from one sales cycle to the next.

Run this equation often and regularly, and track the changes in this value. As your pipeline velocity goes up or down, look for trends. These trends allow you to project the direction of your revenue growth with it.

Related: The Ins and Outs of Sales Pipeline Management

Predictable Revenue Systems: Work backwards from the revenue benchmarks you need to hit

If you know the amount of money you need to bring in to keep growing, start there.

Look realistically at how many deals it would take for you to hit that mark, and then break that down even more using your close rate. This will show you how many leads you need to work that month, which is how many leads your marketing or BDR department should be on the hook for delivering. In the biz, we call it a Service Level Agreement.

If Lucy ran her business with data-backed growth in mind...

lucy-van-pelt-psychAs an example, let’s take Lucy van Pelt, of Peanuts lore, running her 5-cent psychiatric help stand. Assume that:
  • She needs $10 of revenue this month to keep scaling up.
  • Average deal size is $0.05.
  • Lucy closes one deal for every 3 leads (33% close rate).

The math looks like:

  • $10 ÷ $0.05 = 200 deals needed
  • 200 deals x 3 leads for every deal = 600 leads to work

So, Lucy’s marketing department should be on the hook to deliver 600 workable leads.

Let’s say her marketing team only gets her 500 leads. We can predict that Lucy will only close 33% of those, resulting in 165 deals. The revenue from those deals (at average deal size = $.05) gets Lucy to the revenue mark of $8.25, and now: 

Lucy needs to find a way to cut $1.75 out of her expenses this month. 

levers of sales pipeline velocityOr she can use this as an opportunity to adjust the other levers of her sales pipeline velocity. Through this exercise, Lucy will see that her average deal size is too small to succeed with her current flow of leads. If I'm Lucy, I'm upping my prices to 10 cents and blaming inflation!

This is the beauty of a predictable revenue system. When you have visibility into every facet of your sales and marketing funnel, you have a reliable picture of what your top line will look like at the end of the sales cycle, the quarter, or even the year. You can scale up or down accordingly, with confidence and clarity.

It’s a puzzle that starts with getting an accurate handle on the statistics in your sales pipeline.

From there, you optimize and streamline the process continuously, making the metrics between each stage more and more reliable. Once you know the hard data on what your sales team needs, you can empower your marketing team to serve those needs.

Chapter 6

What is a good growth rate?

Simply put, a positive one.

A good revenue growth rate varies according to industry, revenue, internal goals, startup stage, and sustainability outlook.

If you’re looking for a more concrete and specific number, you should probably curb your expectations a bit. There’s no plain and simple answer here.

what is good revenue growth rate

No Easy Answer

In the world of SaaS (Software as a Service), For Entrepreneurs reports that companies pulling in over $2M averaged a 32% revenue growth rate in 2012. Those smaller companies still pulling under $2M in revenue ran the gamut, with some expecting over 100% in revenue growth.

This goes to show that revenue growth isn’t as easy to compare across industries. Geckoboard claims that companies generally report between 15% and 45% revenue growth. That’s quite a range.

revenue growth rocket ship-1

Keeping Up with the Start Ups

In the hyper-charged startup world, the co-founder of Y Combinator, Paul Graham, thinks companies should strive for 10% revenue growth from week-to-week. This makes sense in the very early conceptual stages, TechCrunch notes, but literally no company has maintained that pace. They tracked 70 tech companies that went public around 2013 and noted that on average, they reported over 100% growth before they consistently earned $25M in revenue. Once they hit the $150M to $500M marks, they grew at a more reasonable, but still impressive 32% mark.  

A good revenue growth rate should take into account the quality and sustainability of the revenue received.

It checks off the boxes of:

  • Likely to reoccur
  • Scalable
  • Beats out competitors growth rates
  • Comes from happy customers
  • Didn’t jeopardize profitability

With these qualities in mind, work with your team to define internally what a high-growth year should look like from the stats perspective.

Calculate your growth rate with our free template!

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Let's Connect

Thanks so much for reading.

Now, you're ready to inspire your own organization's revenue growth out-the-wazoo. Just make sure you're tracking the hell out of it. Need more guidance? Sweet, that just so happens to be our thing.
 
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