How to Boost Business Revenue And Growth

Image by GettyImages; Illustration by Bankrate

Revenue, which is defined as total earnings before expenses are subtracted, is a key measure of your business’s success and an indicator of its potential for growth. Understanding how to boost revenue can help establish your business during its early stages, weather storms during economic downturns and eventually grow your business.

Factors that influence revenue growth

Many factors — both within your control and outside your control — can impact revenue growth.

Internal factors that can influence market growth

• Pricing.
• Customer base.
• Marketing and sales strategies.
• Product offerings.

External factors that can influence market growth

• Regulatory policies.
• Market conditions.
• Demand and competition.
• Global events.

How to measure revenue growth

There are multiple ways to measure revenue growth, and the best formula for you can depend on what insights you are hoping to gain.

Calculating basic revenue growth involves a comparison of revenue during one period of time against a previous time period. It’s calculated by the following formula:

Based on this formula, if your current period revenue was $50,000 and your previous period revenue was $30,000, your basic revenue growth would be 40 percent.

(50,000 – 30,000)/30,000 x 100) = 40%

Other revenue growth calculations include Compound Annual Growth Rate (CAGR), which calculates the average annual growth rate over a specific period of time, and segment-specific growth, which allows you to separate revenue measures by different segments like product lines or customer demographics and determine which are driving or holding back growth.

How to predict business revenue growth

Forecasting, or predicting, revenue growth is crucial for optimizing resource allocation, navigating external economic circumstances and potentially obtaining small-business capital in the future. There are several steps to predicting revenue growth:

1. Determine your timeline. Decide how far out you want to forecast revenue, whether that’s a few months to a few years. This may be determined by a specific insight you’re seeking, or whether this forecasting is to gain new investors or access capital.
2. Consider external and internal circumstances that could drive or impede revenue growth. It’s impossible to predict everything that could possibly happen, but you can use historical data analysis, analyze your competitors or segment your target markets to try and predict any external impact on revenue. Consider if there are certain events, seasonal changes or policies that could drive or kill revenue over the period of time you are forecasting. Think about how any internal plans to drive growth — such as expansion into new markets, the introduction of new products or services or technology investments — may be impacted by these conditions.
3. Estimate all future expenses. Get a solid estimate of any expenses you can count on over the period you are forecasting. Consider how these might change due to forthcoming external conditions, or how they may increase due to your efforts to drive revenue.
4. Estimate sales over the period of time you are forecasting. It’s easiest to do this by taking the average amount of revenue you make from each sale of your product or service, and calculating a total based on how many sales you can expect over the projected time period.
5. Assess any other future income. Consider things like cash returns, real estate income or even expected financing like grants and how they factor into your projected income over a period of time.
6. Forecast net revenue. Once you have calculated your income, you can subtract expenses to get an estimate of your projected revenue over the time period you are assessing. To calculate growth, use the simple revenue growth formula with your projected period and the current one. Make sure you test how your business might weather different scenarios by adjusting the internal or external variables.

How to increase revenue growth

Many strategies can help you increase revenue growth, all of which can depend on current external conditions and the nature of your business. Determining the best strategy starts with assessing where you are, where your competitors are and any gaps.

Optimize your pricing structure

If you’re looking to boost revenue, re-evaluating how you price your products and services can be one way to start. Assess whether each of your transactions is profitable for your business, and compare your prices to your top competitors. This will tell you where you may have room to raise or lower prices.

Once you understand how your prices compare, you can implement things like the following:

• Dynamic pricing that allows you to adjust your prices based on demand. For example, a retailer might consider raising or lowering prices for different seasons, or a cleaning service could offer different prices for different days of the week, depending on which days have the highest demand.
• Offering more price points for your products or services that might capture a wider range of customers. For example, a restaurant might add more meal options at lower price points to capture customers who want to spend less.
• Create bundles to add value and encourage larger purchases. For example, a salon may bundle a couple of specific products with its hair or nail services. This can also be a good way to expose your customer base to new or different products or services that they may not venture into on their own.

Add new products or services

Diversifying your product or service offerings is another way you can boost revenue, not only by selling more, but by potentially capturing new markets and customer segments. Start by assessing your current offerings, what your competitors offer, and think creatively about how you could expand without increasing expenses by too much. If your primary offering is products, consider what services you could provide, and vice versa.

Focus on expanding and maintaining your customer base

Invest in tools that can help you analyze customer data and maintain clear and easy channels of communication between you and your customer base. This ensures you don’t lose customers to bad service, and allows you to offer incentives or rewards to repeat customers. Building a strong and loyal customer base can also help you win new customers through word of mouth.

Diversifying your product offerings or advertising in new geographic areas can also help you expand your customer base, and ultimately grow business revenue.

Invest in marketing strategies and tools

Marketing your business can be a longer-term way to boost revenue. Consider investing in tools that help you analyze your current marketing strategy, and improve in ways that increase visibility and expand your customer base. If it seems daunting or time-consuming to do on your own, consider diverting capital to working with a third-party marketing service or investing in tools that make it easier.

Bottom line

Revenue is a key indicator of your business’s success and financial health, and revenue growth can be driven by a number of internal and external factors. You can boost revenue by expanding your customer base, adding new products or services, increasing your prices or marketing your product or services.