Enjoy reading this blog post written by our experts or partners.

If you want to see what Databox can do for you, click here.

Sean Burke shares 7 areas where companies experience revenue leaks, and how to monitor and address them.

How They Move The Needle

Sean sees more companies moving from a “growth at all costs” mindset, to a “run efficient revenue teams” mindset, where they seek to capture every ounce of revenue they possibly can part of building an efficient revenue team is identifying areas where the company might be leaking revenue.

In other words, many businesses think about a few ways to increase revenue. They work on strategies to drive more sales, increase their total addressable market (TAM), or driving up-sells by rolling out new products or services. But all the while, they may be leaking revenue in various areas of the business and remain totally unaware of it.

Sean articulated 7 core areas where revenue leakage often occurs:

1. The deal itself.

Sean says, “in a lot of B2B sales, the way that you present your solution or the way that you sell, can automatically, right out of the gate, change the value of that deal.”

For example, you could approach sales with two broad strategies: build, or bust.

“Build strategy”: sell something (one tool or product), and build up the account over time, by slowly trying to get them to adopt more products or services.

“Bust strategy”: sell your entire “suite” of tools or services (the entire white space in the account) from Day 1, by packaging it as a comprehensive solution to permanently solve the customer’s problem.

So just in the way you bring your product to market, you can be making – or losing – hundreds of thousands in revenue. 

2. “Conversion dollar amount” from booking to revenue.

Here’s, you’re losing revenue in the gap between what you sell, and what you actually get paid for.

Say you sell a million-dollar deal, and the average time to implement is 6 months. The question is, how much of that million dollars actually turns into billable revenue within a certain time frame?

Sean finds that companies very rarely document, measure and address this.

3. How your compensation plan ties bookings to actual revenue.

You may be paying people commissions for revenue you never ultimately collect. Say you sell a $100k deal. The AE gets a 10% commission and walks away happily on to the next deal. But if you dig into the data, you might find that that deal only generated $60k of actual revenue by the time it was complete. 

4. Billing issues related to the complexity of the deal structure.

Not all deals you sell line up neatly into your billing system. In some companies, the more complex the deal, the more it almost “breaks” their billing system. Sean has found that it’s not uncommon for companies to have to manually bill a complex deal. And whenever that happens, there’s an opportunity for it to be set up wrong, and to lose revenue you should’ve had.

5. Relying on a usage-based pricing formula (e.g. selling API calls), based on client forecasts.

If you rely on usage-based pricing where your customer forecasts their use, you’ll find it’s often far higher than what they’ll actually end up using. This will naturally lead you to predict revenue that never actually comes in. Another problem is that in those cases, the pricing doesn’t scale for lower or higher use, but you’re stuck with it. Sean says that often, this may be the first time a Client purchases something like this, so their projected forecasting is even more wrong because they have no historical data of what they’ll end up needing.

6. Lacking data on Client “white space”: how much you have available to still sell to your existing accounts.

Your company should know how much value you could still add to your existing accounts, and the opportunity to sell them on additional products or solutions in order to bring them more value.

7. Customer churn. This one is obvious and much more tracked, but remains a huge source of revenue leakage.

Links

• Follow Sean on LinkedIn