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Good Revenue And Bad Revenue

by David Brock on June 20th, 2011

There’s the old — and still good — maxim in sales, follow the money.  As sales people, we continue to chase the money.  We’re measured on revenue, our job is to grow revenue, we  focus on orders.

When we qualify opportunities, one of the key things we look for is funding.  Do they have the budget?  Are they willing to obtain the funding?  If the answer to this is “Yes,”  along with our other criteria, it’s like a shark smelling blood–we’re off–we want to win the deal, we’re going to compete and get the order, get the revenue.

Hold on a moment — is the fact that they have money — that if we win we will get revenue — enough?

Will the revenue we get, should we win be good revenue or is it bad revenue?

“Hold on Dave, I think you’ve written one post too many!  Revenue is revenue, we need it, we’re going to get it.”

Well all revenue is not created equal.  We have to focus our efforts on generating good revenue, but what is good revenue?

Good revenue has a number of characteristics:  First, it’s profitable.  It’s from a deal where we can make the customer happy–we can solve their problem, we help them achieve the results we had committed.  It’s revenue from a customer we can support — reasonably and profitably.  It’s revenue we can build on — with the customer directly, getting more business from them.  We also build on that revenue with other customers—using the original customer as a reference within the industry or neighborhood.  Or they might even give us referrals.  It’s revenue that helps us grow and get stronger — in our markets, and with our solutions.  The customer is in our sweet spot, the orders from them enable us to reinforce and grow our position.

Bad revenue drains and diverts us.  It’s the order where the customer has expectations we can’t possibly satisfy.  Or we may have to commit a huge amount of resources to satisfy them.  It may be from customers that require too much time, too much hand holding, and attention to keep happy.  It’s revenue from that “customer from hell.”   It’s revenue we can never leverage — we can’t use the customer as references, it doesn’t enable us to grow our visibility share and presence in the markets.  It’s revenue from customers we can’t learn from.  It’s revenue from that deal where we priced our solution way too low — only to win the business.  It’s revenue way from outside our sweet spot — unless we’ve done it consciously to learn how to enter new markets.

Don’t get me wrong — sometimes we need revenue badly, we have to take bad revenue, but we must do it with our eyes wide open, understanding what we are doing, why we are doing it, and what risks we are undertaking.  But to maximize performance, profitability, and growth, we need to be focusing on good revenue.  Revenue that works as a multiplier for our efforts and those of our company.  Revenue that represents opportunity beyond the order itself.

Focusing on good revenue needs to be part of our qualification criteria.  We need to inspect the customer and the opportunity up front, asking, if we win this business, does it represent good revenue for us?  If it doesn’t, do we want to chase it.  Do we want to go to our manager saying, “The good news is we got the order, the bad news is we got the order.”

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6 Comments
  1. Dave, nice post… I think one of the biggest challenges is to manage the clients expectations… bad revenue is a nice way to put it.

    • Absolutely Mike! A great opportunity can go bad if you don’t manage expectations appropriately. Thanks for taking the time to comment. Regards, Dave.

  2. Why do you think it is that people tend to pay less attention to the quality of their efforts and so much to the quantity of their efforts? Could it be due in part to traditional compensation models?

    Managers do their people a great disservice by only rewarding revenue attainment, making no distinction over how it was obtained. It’s no walk through the park, but for those who will take the high road, as you’ve described, they are bound to experience greater success and more consistent profitability year to year.

    • Don, thanks for the comment. The quantity versus quality issue – in everything we do is an interesting thing. We seem to focus on activity, over doing the right things with the right people at the right time.

      I think the issue around good versus bad revenue is not necessarily tied to compensation or quota models. It’s not wrong to have a quota goal (in fact it’s critical), or to be compensated on the amount of revenue you get. I don’t think organizations or individuals spend much time thinking about what’s good business versus bad business. As a result, it’s never considered as part of the disqualification process, or as things change through the deal-we never think about walking away.

      Clearly managers need to set an example, they need to define the criteria. But within those boundaries, the sales person is still accountable for achieving their quota.

      Thanks for the thoughtful comment Don. As always, I appreciate your views and ideas.

  3. See my recent post to http://zen-of-sales.blogspot.com

    I completely agree with your article, however pressure to make numbers sometimes out weights rational thinking…

    Paulie…

    • Paulie: Thanks for the comment and the reference to your article. I’m totally aligned with your thinking.

      I agree, the pressure to make the numbers sometimes clouds our thinking. As leaders, we are responsible for making good business decisions for our organization. If we just chase short term revenue goals, we are doing the wrong thing for the organization. It’s our job, and we have to have the personal courage to do the right thing for the business—-or at least be fully aware of the consequences of short term decisions we may make.

      The big problem, is those managers that are oblivious to this thinking.

      Thanks for the great comment and the pointer to your article. Regards, Dave

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