3 Critical Factors That Improve Revenue Management

Written by Kymberli Cassidy and Matt Van Vleet

Revenue management optimizes when to sell your product for the best price. But when you’re running a services company, how is it different? Instead of selling a product, you’re selling your employee’s time, so optimizing their utilization is at the core of revenue management. The hard part is, you can’t make up for lost time if your people were sitting on the bench last month. You can’t over-sell their time for next month to compensate.

So then, how can you actually manage your revenue?

This is a question many business owners ask themselves. Especially in the beginning stages of your business, you have a small team, and you’ve probably already invested a lot of your own money to get your company up and running. Month to month, you’re focused on making ends meet and hoping you make enough so that you don’t have to lay off any of the people you already spent time training. It probably keeps you up at night worrying about winning enough business to keep your doors open and how you will grow while barely making ends meet. Not only that, you want to grow but aren’t sure how you can afford to invest more money in your business when you’re not making enough yet.

We’ve been there. We can help.

It may seem impossible to control your revenue. But, there are three critical areas you can focus on that will improve your revenue and give you better control over what’s happening in your business.

Improving Your Revenue Management

Factor #1: Centralized Visibility

A centralized system that gathers your sales, people, clients, financials, projections, utilization, and sales pipeline in one place allows you to optimize revenue management. Collecting and storing business data is already something that you do, but you need to be able to see it in a whole-picture view that will allow you to make decisions for your organization.

With a system that connects all these separate data points, you can better see how they impact each other. Most importantly, you need visibility in real-time. If you’re analyzing last month’s numbers, you are already behind. With the ability to see when projects are starting and what your people are assigned to or if they are on vacation, you can be more prepared to commit to your clients or increase sales initiatives if you have too many people on the bench. With this visibility, you’ll spend less time worrying if you have enough people or what decisions to make next regarding sales because you’ll have the story right in front of you to inform the best decisions.

Then, when you have visibility of the complete picture of your business, you will be better prepared to improve your ability to estimate projections, lessen variances, and optimize your people utilization—all of which directly impact your revenue.

Factor #2: Analytics

In addition to a system that allows you visibility, you need one that will give you access to tracking metrics that drive your revenue.

Projections

• Not just something you do once a year or quarterly.

• Prediction of what will happen next month, quarter, etc.

• Visibility of projects, people, and sales.

• Status of overall financial health.

• Check-in regularly to see where you are compared to your plan.

• Make plans that will get you to your projection.

Variances

• Projection vs. reality.

• Tracks how projections change over time.

• Understanding why they happened helps you make better projections.

Trends

• Are things getting better or worse?

• What changed and why?

• Is the trend in a particular market or overall?

• Trends can influence projections.

People Utilization

• Do we have the percentage of the bench we expect?

• Are we trending toward our target utilization?

• Do we need more sales or to hire and train to staff projects?

• Are we utilizing the best person for the job?

• Make faster commitments to clients when you know precisely where your utilization is.

These four areas must be monitored regularly to see what’s coming and change course if needed. The closer these are observed, the more you can control the outcomes and catch potential problems.

Factor #3: Establish Regular Touchpoints

Developing a regular cadence of checking on the above analytics is key to improving revenue management. If you are only monitoring these things monthly or quarterly, it’s too long of a time frame to be able to make an impact.

It may seem unnecessary to look at these things daily, especially if they don’t change day-to-day. But, if you and your teams check in daily, you’ll be able to see if something is not going to plan, see what happened, and decide in real time how to fix or prevent it as best as possible.

For example, if you’re looking at your projections and one day you see that you were projecting to hit $10k in revenue for the month of June, and suddenly that projection goes into the red—you can begin to analyze why that happened. Did you project to win a project that you didn’t win? In terms of what action to take, are there sales you can close in your pipeline to make up that revenue? If you hadn’t been checking in on these numbers, you might not have seen your projections go into the red until the month afterward, and at that time, it’s too late to change it.

Here are the cadences that we recommend setting up with your teams. Initially, it may seem tedious and like a waste of time, but the ability to be proactive in your business is worth the time investment.

Daily

• Update the system with any new information.

• Leaders meet with teams to check in about their clients, projects, etc.

• Leaders know precisely what is going on in their section of the business.

Weekly

• Observe how things have changed this week vs. last week and why.

• Plan for the next week to see what’s most important to pay attention to.

• If inventory (people’s time) expires, the worse you can be wrong is a week out.

Monthly

• What did we think we would do last month vs. what happened?

• What can we learn from this trend?

• Use this information to plan for next month.

Quarterly

• Roll-up of monthly meetings.

• Take care of financial reporting requirements.

• Adjust the plan as needed based on the current reality of your business.

When you set this cadence to check in, you ensure that you are worried about what you should be and that everyone is on the same page. By meeting regularly with your teams, you build trust, collaboration, and transparency and an environment where they can come to you with any problems without fear of repercussion.

In the long run, knowing what metrics to look at with a set cadence to review them will save you time worrying about how you will meet monthly goals. You won’t need to worry because you’ll know exactly what’s happening and have a plan to address it that your team will also help with. As your business grows, you don’t have to rely on yourself anymore; you have a team of people who can help you run your business.

How These Factors Impact Your Business

In terms of financial growth, these three factors will help you take control of increasing your revenue. Instead of worrying about making it monthly, you’ll have money to invest into your business where you couldn’t before. You can continue to grow and mentor your teams and know that you can provide them with a career path. With this environment of collaboration and transparency, your teams will help you develop creative solutions to problems and help to increase revenue further.

Overall, a system that supports these actions is essential. Looking at your data in real-time with a whole-picture view of your organization will allow you to make the most informed decisions for the benefit of your company. By planning ahead instead of reacting to the past, you’ll be able to lessen variances, tighten up projections, and have time to correct course if you see a problem coming. When you build a system and a culture that can adequately address these three critical factors, you have a system capable of optimizing your revenue and scaling your business.