Sep 11, 2023 | Growth & Scale

What is the secret to making your revenue predictable?

Q. Dear Zenagos,
I have been running my social media business for a few years, and things are going really well. I want to hire some employees, but I’m afraid because some months I make a lot and other months I make nothing. What is the secret to making your revenue predictable?

When your revenue goes up and down from month to month in a way that you can’t predict, it is scary to hire employees. This is a common problem for small business owners who got off to a fast start in a hot field. How can you be sure you can pay your employees every month, when you’re not even sure if you can pay yourself?

You need to track your sales pipeline
Business people use the image of a “pipeline” to describe their potential deals – the conversations that are in development. As each conversation develops, the deal moves further and further down the process. Some of these potential deals will sign and become paying customers who produce revenue for your business. Start tracking your sales pipeline. You will need to name the stages in your sales process. For example, if you have someone’s contact information, call that prospect a “lead.” Once you have indications that they are interested in buying and capable of buying (such as, they have a big enough budget available), then move them into a new category called “qualified lead.” Put as many steps in your sales process as you need to track deal progress effectively.

How long is your sales cycle?
Once you have developed the habit of tracking your prospects’ progress, see if you can determine your “sales cycle,” which is the average time between when you first start talking to the prospect and when that prospect becomes a paying customer. Some businesses have a short sales cycle – you may be able to close a deal the same day that you meet the customer. Other businesses have a long sales cycle – it may take two or more years of conversation before you can close a deal. Once you have a sense for how long your sales cycle is, you will know how long it will take you to make changes to it. If you have a two-year sales cycle, then making your revenue more predictable will take at least two years.

You need to develop steady sources of leads
Most small business owners start their business through networking. They get the initial contacts that build their first year or two of business based on conversations with people they know (or from people within one or two contacts of those initial contacts). However, most businesses need to develop steady sources of leads beyond their owner’s personal network in order to grow consistently.

You need to make your sales process repeatable
Once you have developed some steady sources of leads (which usually means you have developed some advertising channels or marketing partnerships), you can focus on making your sales process (your “pipeline”) repeatable. Once you understand your sales cycle and how to get leads steadily, you will be able to plan your activities to spread your sales efforts in order to smooth your revenue. (Or, you will understand your business’ seasonality and be able to keep cash reserves that will accommodate the lumpiness in your revenue.)

Creating predictable revenue is an advanced business skill, so don’t expect that you can develop it overnight. It is wise to find a business mentor who has experience launching a number of entrepreneurial ventures from scratch and can serve as a sounding board while you work to make this leap. (You can get a free mentor from SCORE.) When you accomplish this growth in your management skill, you will be able to hire employees, accelerating your growth and the security and sustainability of your company.

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