June 2013 – The 2-Qs of Revenue

The 2-Qs of Revenue

You’ve heard of the 4-Ps of Marketing, but how about the 2-Qs of Revenue?  Quantity and Quality.

Growth is good (Quantity), but equally important is the profit-making sustainability of your revenue (Quality).

In a recent HBR blog, venture capitalist Anthony Tjan describes the 3 attributes of High Quality revenue (click here to read more):

  1. Predictability – What is your retention-rate of existing customers?  If a vast majority are not returning year after year, your “churn” is likely too high to satisfy the Predictability-test of Quality.
  2. Profitability – Which customers and products/services actually drive your profitability?  Once you’ve identified your pools of profit and can answer that question, focus your efforts in the higher-margin areas.
  3. Diversity – Do the bulk of your sales come from just a handful of your customers?  If so, your revenue stream may be hinging too closely on the fate of those customers, adding an unnecessary element of risk to your business.

As always, we welcome your ideas and comments.