The 5 leaks: where revenue disappears

Revenue rarely disappears in one place, we often make the assumption that revenue is down because of our sales efforts. However, it often declines in small amounts at the handoffs between our customer-centric departments, such as Sales, Marketing, Operations, and Finance, which is why no single department reports it.

These are the five areas where the research shows the largest losses. Each one comes with a question for your leadership team.

Leak 1

How much of your sales team’s time reaches the right customers?

Your sales team is your highest commercial cost. Two things determine what it returns: how much of the week is spent with customers, and which customers get that time.

In most companies, administration, internal meetings, and searching for information take up most of the week. Accounts and regions are divided the way they have always been. Few companies have compared where their salespeople spend their time with where the market opportunity is.

• 28% of a salesperson’s time is spent with customers

• 42% of salespeople reach their target

• Fewer than 20% of sales organisations have a quantified view of their market opportunity and untapped customer potential

• 2-7% more sales from redesigning who covers which customer, with the same team

Sales Capacity

QUESTION FOR YOUR LEADERSHIP TEAM

Which twenty accounts hold the most growth potential, and what share of our sales time did they receive last quarter?

The difference between your price list and what you collect.

List prices are set centrally. The price you realise is set deal by deal, through discounts, payment terms and extras agreed during negotiation.

Each concession is reasonable on its own. Without rules for who can approve what, and without a yearly total, no one manages the sum.

• Over 10% more profit from a 1% better realised price, with nothing else changed

• 3-10% margin improvement from disciplined pricing with existing resources

• 71% of senior finance executives say a more efficient pricing and approval process would substantially improve profitability

The gap between what is signed and what is invoiced and collected.

A signed order is not yet revenue. Between contract, delivery, invoice and payment, value is lost through scope that was promised but never specified, delivery that starts late, billing errors and disputes, and contract terms such as indexation or renewal that nobody follows up.

This sits between sales, operations, and finance, and in most companies, no one owns it.

• Over 5% of total revenue can be lost between booked and realised revenue through billing disputes and late collection

• Up to 50% gap between committed new business and realised revenue reported by CFOs who cannot see what delays it

• 1-5% of EBITDA leaves through contracts and payments that are not followed up.

Revenue from your existing customers.

Existing customers are the most profitable source of growth, and in most B2B companies, the least measured. Customers rarely cancel. Order volumes decline over several periods before anyone reacts.

Account growth is usually left to the individual account manager or the sales manager focused on bringing in new customers, without a plan or signal when the account changes.

• 25-95% more profit from keeping 5% more of your customers

• 5-25X more expensive to win a new customer than to keep an existing one

• 62% of sales leaders lack confidence in their organisation’s ability to cross-sell, upsell or expand key accounts.

How fast new salespeople become productive, and how long they stay.

Every vacancy and every slow start is revenue you planned for and did not receive. In B2B, with long sales cycles, it can take a year for a new salesperson to perform.

Structured onboarding, training and coaching shorten that period and reduce turnover. In many companies, a new salesperson learns by following a colleague around.

• 2-3% less revenue and 4-6% higher selling costs for every five-point rise in salesperson turnover

• Up to 60% less time to full productivity where onboarding, coaching and tools where aligned

If the answers were hard to get, that is the finding

A revenue audit determines which of these apply to your company and their costs.