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Do You Understand Your Revenue?

February 20, 2017

Happy Finance Friday!

 

Hope you have had a good week. Thanks for checking in today.  This week we are going to look at Revenue.  As a business owner, your revenue is pretty important. Without revenue, your business would not be able to survive very long.  In speaking with different business owners and managers, I found many businesses do not understand their revenue streams. Today, we are going to give you some information that will help you in understanding your revenue better.

 

The Basics:

 

 

 

 

 

Revenue is the inflow of assets to your company through the sale of products or services.  The inflow of assets typically means cash.  When you make a sale of your products or services to your client, you have generated revenue for your business.  

 

What Kind of business do you have?

 

Every business has a unique business model.  The business model is looking out how you do business. Do you sell products? Do you sell services? Do you sell a combination of products and services? Are you in a brick and mortar store? Do you sell online?  These questions help to understand how your business is set up. 

 

Revenue Streams:

 

Once you know the type of business you have, you can then look into what revenue streams you have. A revenue stream is just a fancy term for different product or service lines. For example, if you own a bakery you may look at your desserts as different revenue streams. You may have cupcakes, cakes, pastry and coffee. Each category could be reviewed to understand your sale by revenue stream.

 

When you start to break your sales into revenue streams, you may find that not all areas are contributing as much revenue as they need to.  When you understand the complexities of your revenue, it gives you the unique opportunity to make a strategic plan to increase your revenue. 

 

Objective Review:

 

You should look at each product and service objectively. Just because you love a product or service does not necessarily make it a good business idea. By looking at the numbers, you can take a step back from your business and review the facts. Are your cupcakes bringing in enough revenue? Does your cake make more than pastries? Are your pastries pulling in the breakfast crowd?

 

 

 

With the quantitative data related to sales, you can now work to target a specific market to increase sales. You can look for new products based off of what is doing well. You may decide to customize your marketing based on your clients buying patterns.

 

Remember that revenue is only part of the story. To understand the full picture of how your business is doing, you will also need to understand your expense.  In two weeks we will look at the expense piece of the business. 

 

Call Finergy today for help understanding your revenue. At Finergy we can provide both the bookkeeping and the analysis you need to understand your company's financial position.

 

Next week we will look at the other side of the sale which is the cash collection and tracking your accounts receivable.

 

 

 

Thank you for stopping by!

 *We hope you enjoyed our blog.  Please note that the intent of this blog is to provide general information and should not be construed as financial, financial tax, accounting, legal, consulting or any other type of advice regarding any specific facts and circumstances, nor should they be construed as advertisements for financial services.

 

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