Revenue volatility – two words that hit close to home for any sales professional in this disruptive market. Maintaining consistent revenue has become a delicate balance of strategy and adaptability.
Explore key indicators of revenue volatility and outline actions you can take to help mitigate revenue fluctuations with confidence.
Picture the last four years: it’s been a whirlwind of challenges for sales professionals from all angles. The global health crisis, inflation, a potential recession, and intense competition are just a few factors causing instability. It’s no surprise that consumers and businesses are reassessing their spending habits, fostering a more risk-averse environment.
As if that wasn't enough, there is instability in the labor and talent markets. And companies are steadily decreasing their capital spending between now and 2025. It all leads to confusion over how to best lead and manage a business. Less than 50% of sellers in the past five years have hit their quotas. There’s uncertainty in where to invest, who to trust, and what’s going to happen next.
To shed more light on the issue, we took a closer look at the performance of Fortune 500 companies over the past decade. We examined their revenue volatility, measuring how much their revenue has fluctuated year to year.
Between 2013 and 2017, there was moderate fluctuation, with an average year-over-year change of 5.5%. However, from 2018 to 2022, you really start to see the spikes. The revenue volatility number more than doubled as external and internal factors became even more intense.
What does this tell us? It's evident that predicting or controlling revenue is more challenging today, than it has been over the last 10 years. And that’s really impacting sales leaders confidence moving forward.
So how can you be more confident in your planning and decision-making? The first step is try to get ahead of it.
To effectively tackle revenue volatility, it is essential to pay attention to the early warning signs. Harvard Business Review suggests when companies identify “trigger points, signposts, and metrics” to keep an eye on, it creates a competitive advantage. It gives you more agility to shift strategies before the competition is made aware.
Sales Key Performance Indicators (KPIs) that can indicate volatility:
The monthly, quarterly, and annual revenue numbers are your North Star. Consistently monitor them to spot trends and irregularities.
A dip or surge in growth rates over time can indicate potential revenue volatility on the horizon.
High customer churn rates may suggest underlying problems affecting your revenue stream.
Over-reliance on a few key customers can be risky. Diversify your customer base to mitigate the impact of sudden changes in their business circumstances.
Fluctuations in cash flow can disrupt your day-to-day operations and negatively impact revenue stability.
The number of deals in your pipeline and their stages provide a glimpse into future revenue. An unhealthy pipeline could signify potential trouble.
Accurate forecasts help you anticipate shifts in demand and plan resources accordingly.
Don't underestimate the power of customer sentiment. Early warnings from feedback and complaints can help you make necessary adjustments.
If the warning signs are there, here are 7 actions you can take to get back on track for predictable and sustainable revenue growth.
Leverage the wealth of data at your fingertips to make informed decisions. Use advanced analytics tools to identify patterns and anticipate shifts.
Watch for more insight into the importance of data-driven decision-making.
Reduce the risk of revenue concentration by expanding your customer base. This acts as a buffer against the impact of a single customer's unpredictable decisions.
Nurture a healthy sales pipeline. Consistent and strategic efforts ensure a steady stream of potential revenue, even when the tides turn.
Embrace agile forecasting techniques. Regularly update your forecasts based on changing market dynamics and customer demands.
Prioritize customer satisfaction and engagement. Happy customers are more likely to remain loyal, providing a stable revenue base.
Watch this clip to hear more about the importance of the customer journey.
Keep a vigilant eye on cash flow trends and customer retention rates. Detecting anomalies early allows for quick corrective action.
Encourage cross-functional collaboration between sales, marketing, and operations. Working together helps mitigate potential revenue shocks.
Stephen Hawking once said: “Intelligence is the ability to adapt to change.” The Fortune 500 data is clear – revenue volatility is real, and it's intensifying. However, challenges are the stepping stones to success. Data-driven insights, a customer-centric mindset, and a flexible approach can lead to predictable, stable revenue.