One challenge we have to fight is thinking that revenue alone is the solution to all that ails our organizations. In fact, sometimes top line revenue can be the ultimate problem that we are dealing with.
Why?
Well, in too many instances, we let top line revenue too easily stand in for profitable revenue.
The different between revenue and expenses is profit, but to talk with too many leaders in an organization, you wouldn’t know that this was the case because they are bowing down at the alter of REVENUE!
The key is to look at your revenue menu as a whole.
You need top line revenue, but you need to be able to maintain a profit margin…even in nonprofits.
To control your top line costs and ensure that there is something left over for the positive revenue, pay attention to these concepts:
1. Expenses:
Both direct and indirect.
If you aren’t careful, expenses can creep in everywhere you look.
That’s why it is important to understand all of the costs associated with how you do business.
So it isn’t as simple as just the parts, or labor, but you need to build in administrative costs, sales, marketing, etc.
Once you have an understanding of the true costs, you can do a better job of knowing if you are achieving positive revenue.
2. Price accordingly:
Quick, what kind of mobile device dominates the market?
The iPhone!
Now let me ask you if price was the most important factor in buying your phone?
I’m sure it was a factor, but was it the primary one?
In most cases, likely not…
How do I know this, because every year more and more people buy iPhones.
So what is the reason that people rush out to buy iPhones, even when they are the most expensive or one of the more expensive options on the market?
Value!
In too many instances, we forget that what we are doing is creating value for our clients and customers.
So we undercharge for what we do.
Stop that!
That’s a one way ticket to good or middling top line revenue, but bad profits.
Instead, charge for the value you provide.
Go back to the iPhone.
How much would it cost if you were to buy all of the comparable, individual pieces of technology that you can get in your iPhone?
Thousands of dollars, right?
Instead, Apple packages everything into a nice, neat package that we can easily use.
And, we both gain a lot of value from the transaction.
So bill like Apple.
3. Understand what your customers are buying:
Again, you may be selling one thing, but your clients are buying another.
This can eat away at your profit margin because if you don’t understand what you are giving your clients, they are not likely to pay the appropriate amount for the value you are creating for them.
How do you figure out what your clients are buying?
You can ask?
Do surveys?
Ask them on the phone?
In person?
Just get an understanding of what people are really buying and price according to the value you are creating.
The simple fact about the different between top line revenue and profit is that you can be doing extremely well with top line revenue and still be going broke. So it is important that you take a moment or two to tip the scales in your favor.