Everything in the business world, from creating a viral ad to striking up just the right rapport with key clients, is becoming far more of a science than an art. Simultaneously, the business areas already categorized as math and science—such as financial calculations—are becoming increasingly systematic and advanced. Revenue growth analysis, in particular, is now a key business priority for SMBs, enterprise organizations, and small businesses.
But before your business can start building in-depth analytics models, you need to understand the science operating behind the scenes and the core element that makes all the difference: trustworthy data.
Positive Thinking puts it plainly: “…High data quality is one of the key success factors for high-value analytics projects. It is the base for all further developments of a use case.” This article explores why revenue growth analysis should be your high-priority use case, what it can do for your business, and how to ensure you’re using high-quality data throughout the analytics project.
What Is Revenue Growth Analysis?
Revenue growth is the measure of how much more your organization’s revenue has grown from one specific time period to another. For example, your finance team may measure revenue growth year over year, from one quarter to the next, and even from one Q1 to a previous Q1. By measuring revenue growth, you can determine the following:
- If your revenue stream is growing or shrinking
- When your revenue grows and shrinks over the course of a year or other time period
Revenue is an isolated measurement. It doesn’t incorporate earnings (which includes money from cash investments, property, and capital) or expenditures (such as paying employees, marketing expenses, and shipping costs). Instead, it primarily tracks overall sales in your organization. Growing revenue is typically a sign of good sales health.
Revenue growth analysis is the actual process of monitoring, measuring, and comparing revenue growth over time. Robust analytics tools can dive deep into the data to identify key drop-off points or your business’s peak season. With the help of artificial intelligence and predictive models, your revenue growth analysis efforts can even forecast growth across future months and quarters.
How Revenue Growth Analysis Has Evolved
At its core, revenue growth analysis can be very simple. Here are three progressive formulas organizations frequently use:
- Revenue difference = (The revenue of one period) – (the revenue of a previous, comparable period). It’s important that the time periods be comparable; both can be a year, a quarter, a month, etc., but they need to be the same.
- Fractional revenue growth = (Revenue difference) / (the revenue of the previous period). This formula calculates the growth rate. For example, if your business earned $1,500,000 this quarter and $1,000,000 in the previous quarter, the fractional revenue growth is 1.5.
- Revenue growth percentage = (fractional revenue growth) * 100. This transforms the number found above into a percentage, which is easy to express at stakeholder meetings and to establish new growth goals.
However, Big Data and machine learning capabilities have quickly elevated the amount of analysis organizations can perform. Today, rather than seeing revenue growth analysis as a series of pass/fail cues, organizations can more strategically analyze results by:
- Developing trend lines that measure successive series of 30-day, 90-day, and 365-day periods for a more granular view of growth every day.
- Breaking down revenue growth into more granular areas of analysis, such as organic revenue growth through in-house product sales, inorganic growth through mergers and acquisitions, and even the revenue growth of individual products and product lines.
- Automatically collecting and analyzing data with advanced analytics tools that run 24/7 behind the scenes.
- Measuring revenue growth by individual salespeople to identify the most active salespeople and the ones creating the most revenue for the company.
These and hundreds of different variations give organizations far more insight into their business’s revenue by creating specific trends and filtered views. More robust software allows for these calculations to become instantaneous so all users can have in-depth dashboards and reports with real-time results.
Why Revenue Growth Analysis Matters
Revenue growth is essential for companies. Any member of the organization can instantly realize the value of being able to measure revenue growth: to see if the company is succeeding, to know if the company is moving toward its revenue goals in a predictable manner, or to know whether the company is shrinking.
Everyone from business investors to legacy employees has a stake in ensuring the company has positive revenue growth. However, revenue growth analysis is important for more than these direct insights. Some of the key reasons why it’s so vital to companies of every size and industry include the following:
- Identifying high-priority product lines
- Determining budget and hiring limits for the months ahead
- Identifying areas that need more efficiency
- Motivating employees
- Ensuring adequate cash flow
- Setting the right revenue goals
Clearly, revenue growth analysis is integral to the success of a business – and it all starts with clean data.
The Secret to Superior Revenue Growth Analysis: Clean Data You Can Trust
Revenue growth analysis can’t be powered by modern-day analytics tools alone. They require a robust pool of data that can be transformed into those critical business insights. But, according to one study, only 16% of companies characterize the data they are using as “very good,” limiting the effectiveness of analysis. To capitalize on new analytics capabilities, begin by collecting and organizing revenue-related data from every arm of your organization. Follow these three steps to start amassing reliable and useful data from your revenue operations.
1. Consolidate the Data Within a Centralized Database
Your organization may still have remnants of silos that interfere with cohesive communication, tracking, and data gathering. The first step to creating the foundation of data your organization needs for reliable revenue growth analysis is ensuring you house all of the data within a single source of truth. All of your different product lines and sales channels need to route the data to a centralized database or customer relationship management tool.
At first, it can be hard to consolidate all of your business’s data within one system, especially when that data includes expenses for sales and marketing, supply chain details, and everything in between. That’s why starting with revenue — not earnings or expenses, just revenue — can make your first data consolidation efforts more actionable and immediately rewarding.
2. Audit Your Data
Create internal auditing processes so you can ensure your data is as clean as possible. Especially if you’re just beginning to consolidate data, there’s a risk of uncovered errors within the data. There may be duplicate records of sales, sales left out of the count, and line items that reflect the initial product price, not the final negotiated rate. By regularly auditing the data and using the right technology, you can fix systematic errors and catch the one-off errors that will continue to appear wherever there’s human data entry.
3. Integrate Data Into Your Revenue Operations
To capitalize on your clean, comprehensive data, you can now add data analysis tools to your tech stack. These tools can offer the insights you need by parsing through the data you provide. Depending on the tool you select, you may perform predictive revenue forecasts so you can fine-tune your business goals, create personalized dashboards for different RevOps leaders, and measure each salesperson’s progress alongside their goals in real-time. You can even set automatic alerts, so marketing and sales leaders know when different product lines are exceeding expectations or are in need of more attention. The possibilities are virtually endless once you have clear, clean, and identifiable data in your systems.
Start Setting the Foundation for Revenue Growth Analysis in Your Organization
Having a robust platform running behind the scenes allows your team to access data and insights when they need them, whenever they need them. Your CFO might be presenting quarterly revenue overviews to investors, or your sales managers might need clear-cut insight into which salespeople have the highest performance. To effectively and efficiently accumulate this information, you need the right data in the right tech stack.
At Vertify, we deliver the tools you need to get that done. Turn to our RevOps automation platform to integrate your CRMs, capitalize on sales data, and always know where your revenue is growing. Contact us today to learn more and to schedule a demo.
CPO & Co-Founder