Revenue Resilience: A Simple Guide

What is revenue resilience?

-         Not all revenue is equally certain.  A business which relies on winning a small number of large contracts each year may well earn the same revenue and profit as a business that gets its income from a large volume of contracted subscriptions and a third company that gets all its income from ad-hoc repair and maintenance across a moderate number of existing customers

o   In theory, the riskier nature of the project business should result in higher profit margins (returns to the shareholders) and the stable nature of the subscription business, lower - but this is not always the case in practice

o   Don’t confuse spreading payments for a project with spreading both the cost and the income by using a different business model.  The first impacts cash flow and actually increases risk – so should require an even higher return.

-         All other things being equal, businesses should strive for as much locked-in recurring revenue as possible

How can you translate one-off into recurring revenue?

-          Some examples of spreading payments are

o   A photocopier which is paid for by charging a small amount for every copy made

o   Mobile phones, where the phone is given free in return for a fixed term monthly contract

-         Each of these relies on a higher total income over the life of the contract to cover the cash flow hit and the risk of default.  It is also necessary to build in a compelling proposition to renew the contract before it expires in order to build revenue resilience

-          Some examples of additional recurring revenue are

o   Software license maintenance

o   Membership of a user group

o   Subscription services

o   Service and maintenance contracts

-         An alternative way of looking at this is separating future income from resource or asset limitations

o   Translate a single consultant’s time into a course to be sold online in perpetuity

What is the proposition for the customer?

-          Possible benefits that would induce a customer to sign up for a long-term contract are

o   Access to a continuous stream of new content

o   Access to special offers and discounts

o   A known fixed charge covering all repairs (a form of insurance)

o   The right to free future upgrades

o   Continuous tuning and maintenance of the original product

Customer concentration

-          One final source of revenue risk is over-reliance on a single or a few customers – avoid this

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Are you indispensible?

Does every business decision have to be taken by you?
Are you unable to get away from the business for even a short time without things going wrong?

Ambitious business owners overcome many challenges to grow their business - but sometimes the biggest challenge is to make their business work without them. After the business reaches a certain point, owners find that their time, effort and knowledge is the main constraint on future growth.

They struggle to delegate anything meaningful to their staff, or develop their staff so tha they are ready for more responsibility.

This seminar "The Owners' Trap" will tell you how to break free of these constraints.

Learn how to raise your game by visiting my website.

Feeling the management strain?

As your business grows it doesn't just get bigger. It gets more complicated. More staff, Bigger, more demanding customers. More rules. Trying to manage through other people. Delegation.
You'd go mad trying to run it the way you used to run a small business - or give yourself a heart-attack. And you'd fail, and go back to being small.

There is an alternative. Learn how to manage a bigger business at this business advice seminar.

Or take a look at our business advice website.

Looking for investment?

Are you looking for a bank loan or business angel to fund your business growth plans?
Do you understand the kind of things they look for in a company before they will invest?

Do you know what government finance is (still) available and how you qualify?

These are big issues. Succeed or fail issues. Don't leave it to chance - talk to us.

As a first step, get yourself on this business advice seminar or take a look at our business advice website.

Clear business direction?

Clear direction - a vision, mission and strategic objectives - is essential for any successful business. Business owners ned to know:
· The importance of a motivating and guiding vision for any business and how to construct one
· Ways to turn your Vision into a compelling Mission for your staff and customers
· How to identify and set concrete Objectives that will keep you on track towards your goal whatever happens
· Why growth is not optional - and why unplanned growth will damage your business – and why growth itself brings challenges
· What successful business owners spend their time doing – and not doing

If you'd like to learn how to do this then this seminar is a must: The Journey to Success

More information on my website: http://www.nickbettes.co.uk/

8 ways to your unique proposition

Price

-          This can be low price if you have a unique process or advantage that will always keep your costs below the competition’s.  If not then competing solely on price is suicide

-          This could be high price if you have a luxury product which is in demand by people who want to be seen as able to afford exclusivity 

Speed

-          This can be fast (for example food or deliveries) as long as you have a process which always delivers faster than anyone else

-          This could be slow (for example fine dining or whisky) as long as the wait is seen as part of the pay-off for the buyer.

Newness

-          In the technology or gadget market some people buy things simply because they are new.  Some businesses compete on performance (for example computers or phones) so they need innovation from their suppliers

-          Oldness can also be a selling point – think antiques, or retro, or reliability

Convenience

-          Petrol stations can charge more for essential items than supermarkets because they are next to the road and have parking.  Convenience could also mean opening hours or home delivery or anything else that makes it easier for the customer

-          Being a one-stop shop

Range

-          Both breadth of range and numbers stocked can be a powerful USP.  If a customer is pushed for time or in a fix they look for the place that always has what they need on the shelf.

Expertise or specialism

-          The ultimate is to be seen as a specialist in a field of one.  This is really what defining a niche is about; making yourself a specialist.

Quality and Service

-          Never the word “quality” or “service” but a deep understanding of what attributes represent quality and service in your market and a proposition which not only delivers on these but uses these terms to resonate with the customer. 

Reliability

-          This is about understanding your prospects deepest fears about your product and addressing them through a unique guarantee, your longevity or testimonials

Find out how to get more great business tips here

Find out more about increasing the value of your business here

Do you have a clear direction?

Clear direction - a vision, mission and strategic objectives - is essential for any successful business.

Business owners ned to know:
· The importance of a motivating and guiding vision for any business and how to construct one
· Ways to turn your Vision into a compelling Mission for your staff and customers
· How to identify and set concrete Objectives that will keep you on track towards your goal whatever happens
· Why growth is not optional - and why unplanned growth will damage your business – and why growth itself brings challenges
· What successful business owners spend their time doing – and not doing
If you'd like to learn how to do this then this seminar is a must:  Business Owners - Your Journey to Success

More information on my website: http://www.nickbettes.co.uk/

Are you still serious?

It's simple. There are two different types of business owner. Those who think it's their job to produce widgets (or build websites, or fit boilers, or sell insurance...) and those who think it's their job to build a business.
The first type are really just self-employed. The second type are the true business owners. They are focused on driving their business forward. They spend time thinking about how they get to the next step. They invest in their company and themselves so that they can achieve that next step - because they know that it will take a bigger strategy, a better plan, a tighter operation and more teamwork.

These business owners will spend time planning for when they come to sell their business. Or maybe they're wondering about getting money from a venture capitalist, business angel, government agency or bank to fund growth plans. They recognise when they reach the point where they and their management team become the limitation on the company's growth and they need to step back and change the way the busines operates. Success in any of these scenarios requires them to raise their game.

If you're one of the second type (true business owners) then you recognise the value of getting expert help and this event is for you https://www.eventelephant.com/businessownersyourjourneytosuccess

You have a business plan - so use it.

So you have built your business plan.  What now?

Assuming that you built the plan in order to provide a routemap to your business goals then the plan should form the basis for your management reviews from now on

-          In order that you can use it to manage the business the plan should contain

o   A detailed month-by-month budget for the first year

o   Monthly sales targets

o   Monthly marketing targets

o   A small number of other monthly KPI targets covering customers, operations and staff

-          The monthly management review should

o   Be attended by the staff responsible for the above areas

o   Follow a set agenda

o   Be scheduled and diarised for the year ahead

o   Take place as soon as possible after the month end once the necessary figures have been produced for the previous month and year to date

§  Management accounts

§  Sales figures

§  KPI performance

o   Identify variances from plan, identify causes and specify remedial actions

o   Record actions against an owner and deadline

o   Review progress against previous agreed actions

-          The quarterly plan review should

o   Revise the forecast outturn for the year based on performance to date

§  In bigger businesses this may result in a revised budget against which to measure in future management meetings

o   Identify any significant remedial actions required to align with the new forecast, such as redundancies or new premises

o   Be scheduled, minuted and followed-up as per the monthly meetings

-          The annual strategic review should prepare the new business plan

If you'd like to know more about developing a business plan then this event is for you.

Get more great business tips on our website.

Is your business plan STILL insane?

In business planning, sensitivity analysis is a way to sanity-check the assumptions underlying your plan

-          It identifies the variables that have most impact on the outcome of your plan (for instance, sales volume or materials price)

-          In this table, your plan is shown in the “base case” column

	Previous year	Base case	Variance	Best case		Worst case
				Variance	£	Variance	£
Volume of sales	600	660	10%	12%	672	0%	600
Average unit price	£9.09	£10	10%	10%	£       10	-5%	£         9
Sales income	£5,454	£6,600	21%		£ 6,719		£ 5,181
Average unit cost	£6	£6	0%	0%	£         6	10%	£         7
Direct costs	£3,600	£3,960	10%		£ 4,032		£ 3,960
Salaries	£1,800	£1,800	0%	0%	£ 1,800	0%	£ 1,800
Rent	£720	£738	2.50%	0%	£    720	5%	£    756
Net profit	-£666	£102			£    167		-£1,335

-          The best case assumes that you can achieve the best possible values for all the main variables (volume of sales, materials prices and so on) given all you know about the market, your competition and other relevant factors

-          The worst case assumes the opposite and that you achieve the worst possible values for the same variables

-          A credible business plan will be based somewhere in the middle of these two outcomes

-          A credible plan will specify what arrangements you have in place to

o   Ensure that you achieve the best values you can for the variables identified

o   Minimise the impact should key variables go against you

If you'd like to know more about developing a business plan then this event is for you.

Get more great business tips on our website.

Is your business plan insane?

In business planning, variance analysis is a way to sanity-check the assumptions underlying your plan

-          It compares the planned or forecast figure to the equivalent figure in a previous comparable period – usually the previous year

-          It expresses the difference as a percentage

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	Previous year	Budget year	Variance	Assumptions
Volume of sales	600	660	+10%
Average unit price	£9.09	£10	+10%
Sales income	£5,454	£6,600
Average unit cost	£6	£6	0%
Direct costs	£3,600	£3,960
Salaries	£1,800	£1,800	0%
Rent	£720	£738	+2.5%
Net profit	(£666)	£102

-          Your wider business plan (strategy, market positioning, sales performance, supplier management and so forth) must then provide an explanation for any difference

-          This will expose any assumptions you have made and the potential impact on your business should they prove to be wrong

-          In the above example, the plan is based on increasing the number of sales as well as the price whilst holding unit costs and salaries to the previous year’s level

-          These might all be reasonable and achievable but a credible business plan must explain how and why these things are going to happen

  If you'd like to know more about developing a business plan then this event is for you.

Get more great business tips on our website.