Today I wanted to talk about revenue,or sales or turnover. So it’s what income or what money your products and services bring in for you. Understanding your revenue calculation is one of the most important steps in effectively managing your business cash flow.
Now with the new year fast approaching, I thought it would be relevant for you to start planning out what is that number you want to achieve. Normally, I would say, think about what your full year number is going to be. You are probably thinking, “Androulla, how do I determine this?”
Well, start by looking at what you have achieved in the past and ask yourself, “Is this what I want to achieve moving forward?” If the answer is no, then set a realistic goal for yourself. You might want to add a certain percentage, or whatever suits your business, but it has to be realistic. At the same time, push the boundaries a little, because you never know, you might actually achieve it.
Then the next question becomes, “Androulla, I know what turnover I want to achieve, but how do I go about doing this?”
Breaking Down Your Revenue Calculation for Better Business Cashflow
Well, let’s break this down for you right now. What you’ve got to consider are the products and services that you offer your customers or clients. You might have 2 or 3 of those products, and you probably already know which one is performing really well. So what you do is start breaking those down and ask yourself, “How many of each product or service am I going to sell over the year to generate my overall revenue calculation?”
Then we break that down by month, and this is critical, because you need to factor in two things:
1. Is your product or service seasonal? Depending on what you offer, there may be certain months where you experience peaks and other months where you experience troughs.. This directly impacts your business cash flow throughout the year.
2. When are you taking holidays? If your product or service depends on you being there, then you need to take that into account, because during those times, sales might drop.
So to recap, number one is setting a high-level target for the year. Number two is deciding which products and services you are going to provide and what is the pricing for each of those. Number three is breaking that down month by month, so you know when those sales are likely to occur.
Now, how do you do this, what platform do you use?
To start with, I suggest getting a blank piece of paper and working through those three steps I just mentioned. Another option is Excel. It’s a great tool. You can enter your products and services, the quantity, the pricing, and it will calculate total dollar value for you, helping you manage your business cash flow with more clarity.
In conclusion, taking the time to plan your revenue calculation properly will give you greater confidence, clearer targets, and stronger business cash flow management as you move into the new year.
EmpowerBeyond – Business Performance Solutions, focusing on people, process, products, and services and improving productivity and cash flow.
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