Are you using the Revenue Equation? First, let's cover why it's important. In order for any sales and marketing tactic to work at maximum effectiveness, it must be implemented within the context of an overarching strategy. Simply put, you need to determine where your business is right now and where you want it to go. Then, develop a plan to get from point A to point B. That's your strategy.
Many sales and marketing teams pull the trigger on key decisions without having a clearly defined strategy in place. On the other hand, the most successful companies out there adhere to their core strategy in all major sales and marketing decisions. They have a firm grasp of what their sales strengths and weaknesses are and deploy their tactics accordingly.
At the end of the day, your company's strategy will determine the ultimate success of your sales and marketing efforts... which in turn will determine whether you hit your revenue and profitability goals. Thus, the ability to identify strengths, weaknesses, areas of misalignment, and adjustments that are "low-hanging fruit" is vital to sustainable success in your sales and marketing integration journey.
You may wonder: Okay, I understand all that, but how can I effectively identify those things and then make the needed changes? This is where an exceptional tool comes into the picture: namely, the Revenue Equation.
Why the Revenue Equation Is So Powerful
The Revenue Equation is a framework for sales and marketing organizations. It's an assessment designed to help understand the root causes of sales and marketing problems. Ultimately, the goal is to create systems that will solve those problems.
The true power of the Revenue Equation kicks in when all the stakeholders in an organization (specifically, leadership, management, and sales/marketing team members) get on the same page. When everyone in a company has a clear, shared understanding of what needs to happen moving forward, then everyone can work as a team to turn that vision into a reality. I talk more about the Revenue Equation in this recent audio interview.
How the Revenue Equation Works
The Revenue Equation consists of three core factors that paint a comprehensive picture of what's needed for revenue stabilization and growth. These three factors are:
For each factor, you'll need to assess where your company stands at the moment, especially in comparison to where you want it to stand. Everyone in your company should take part in this assessment. Remember: you want all stakeholders to be on the same page.
With that in mind, let's briefly list some questions that your assessment should include, taking it one factor at a time:
How well defined and understood within your organization are:
How well defined and used within your organization are:
How well defined and used within your organization are:
As you implement the above assessment throughout your company, you may indeed find several areas of opportunity that need to be addressed. However, don't forget about the flip side of the coin: you'll no doubt also identify several sales strengths that your organization possesses — advantages that your competitors may not have. So the Revenue Equation is not only a great way to identify bottlenecks in your sales and marketing process that is hindering progress; it's also a wonderful way to remind yourself of and solidify those aspects of sales and marketing that your team already does really well!
How the Revenue Equation Can Lead to Strategic Success
It should be noted that the Revenue Equation is not a "one and done" type deal. It can (and should) be refined and redeployed over the course of time, as your company grows and adapts to new opportunities in the market. Leveraging the Revenue Equation in such an intentional way can create accountability, increase efficiency, and optimize performance throughout your organization. It will help your sales and marketing teams become (or stay) aligned, and develop greater clarity around their role in propelling your business forward.
Let's briefly review what you can do to leverage the Revenue Equation into a sustainable growth driver:
It's true that investing in strategic development can be time-consuming at first, and it may be tempting to "skip ahead" to sales and marketing tactics. However, using the Revenue Equation discussed above can lay a solid foundation for all of your future sales and marketing efforts. It can help align all departments within your organization and ultimately improve your sales performance. Ultimately, it will increase sales!
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It's no secret that an organization has to enjoy alignment across all of its departments to really grow (or at least grow in a sustainable way). The problem is, it's common for departments, teams, sales managers, and even individual team members to be misaligned with one another.
In other words, they may have very different ideas about the value the company provides, the selling points that help to convert leads, and the typical journey that the ideal customer takes.
Misalignment can be a major problem for any business. Think about it: If one of your reps is selling based on price, and another one is selling based on customer experience, then where does that leave brand consistency? How can you focus on the prospects with the highest potential value if your reps aren't even sure who they are?
The point is, sales management involves working out any misalignment issues within your organization as soon as possible. It may not lead to immediate, explosive growth. But it will stabilize your processes and revenue stream. That is the foundation you need for your company to really take off. This is where the revenue equation comes into the picture.
What is the Revenue Equation?
If we were to express the revenue equation as a mathematical formula, it would look like this:
Sales Foundations + Sales Design + Sales Infrastructure = Revenue Stabilization and Growth
When those three key elements on the left side of the equation are completely aligned across the entire organization, the inevitable result is stabilization, and ultimately growth. The question for sales managers is: Do you understand the revenue equation for your company? And if you do, how about the rest of your team?
We've talked about these three elements in this recent blog post, but let's just remind ourselves what each component involves:
For sales managers, defining these three elements is the easy part. The trick is, making sure everyone on your sales team (and within your organization) is on the same page when it comes to these "pieces of the puzzle." If each sales rep has a different idea about what your company is all about, then many of them are selling for an imaginary company — the one that exists in their mind, not in reality.
Understanding the Revenue Equation is Vital to Sales Management
In practical terms, the main issue is how to get everyone on the same page. If you're the Change Agent, then you'll need to lay the groundwork for the Improvement Team to achieve that desired alignment. That means you'll have to dig in and ask some probing questions. Throughout this entire process, you'll also need to be guided by the three key qualities of the Change Agent:
Hold the Vision
Remember, the ultimate objective of your meetings with the Improvement Team is to work out any alignment issues. This is critical to stabilize and grow revenue. You can't forget that — and you can't let your team forget it, either.
Think of it like a family road trip. You need to figure out where you're going (not just the main destination, but any "sub-destinations" along the way). How will you get there? What's expected of each family member?
In the same way, with each meeting you need to be upfront and intentional about the main goal (your destination), as well as any "stepping-stone goals" along the way. Of course, sales managers also need to be clear about how you're going to get there, and what's expected of each team member.
Consistently Cultivate Trust
Depending on the dynamics of your company, you may need to do some pre-work before your team members start opening up to you. Create opportunities for them to express their true thoughts and opinions. This may mean multiple introductory meetings at the start, several one-on-one sessions, and even meetings without the team's direct supervisor (just to give the participants some space, and with the supervisor's approval).
Here's another thing to keep in mind: Sometimes team members, in the middle of a meeting, will experience what we'll call a "tangential epiphany" — a really great insight that has nothing to do with the topic at hand. It's important to handle those occasions with care. You don't want to derail the meeting. But you also want to demonstrate your respect for the team member's contribution.
The best way for sales managers to deal with that situation is to put the participant's idea "in the parking lot." Set aside time to loop back around to it at the end of the meeting. Alternatively, you could have a quick one-on-one with the team member afterwards to flesh out his or her idea. That's a great way to build trust, and gain more insight into your company's Revenue Equation at the same time. (In fact, sometimes those "tangential epiphanies" are the most valuable insights that come out of a meeting!)
Seek to Understand
Once sales managers have established a baseline level of trust, and everyone in the meeting knows why they're there, you can really dig into the details of your company's alignment issues. You can easily identify which areas need attention by simply having each participant rank, on a scale of 1 to 10, each of the following components is within your organization. The ranking should be done based on how well-defined each component is in the mind of each sales team member.
1. Sales Foundations
2. Sales Design
3. Sales Infrastructure
After you get those preliminary scores, you can explore the discrepancies and areas of confusion you find on a deeper level.
Effort Pays Off
It takes some effort, and it definitely takes some commitment, to work through this process. But the light at the end of the tunnel is a deeper understanding of where misalignment exists, and the beginnings of a game plan to fix those issues. If you and your team really understand the organization's Revenue Equation, you'll be able to work together to refine it, stabilize it, and eventually use it to improve your sales performance.
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