Growth Driver #1 – Confirm Your Revenue ModelPosted: November 1, 2012
The Letterman Approach or to Lead with the Highest Value Driver?
As I started discussing the idea of developing a summary of top growth drivers with colleagues and clients, people asked me whether I would take the “Letterman Approach” and start with #10 and build to a strong finish, or whether I would lead with the highest value growth driver. My answer was neither, let me explain.
I answered neither because I chose to start with #1 for nominal purposes only; the driver that is most relevant or valuable for your company may not be for the next reader’s. In Sales, context matters, particularly market, product, customer, and overall business model contexts. So don’t necessarily interpret “Confirming Your Revenue Model” as the most valuable, or first driver to tackle. Instead, think of it, because it’s externally rooted in the mind of the customer, as a great place to start thinking about growth.
A Revenue Model Checklist
At the heart of every growth engine there is the ability to answer at least seven fundamental questions:
- Who has a problem that we can solve?
- What will they buy from us to solve their problem(s)?
- Why will they buy from us vs. others?
- Who will buy more overall and more products from us?
- Who is willing to pay us the most for our products?
- Who is willing to pay us the fastest?
- Which of these customers are most profitable (efficient and effective) for us to serve?
Note: The above questions were inspired by The Lean Startup, Running Lean, and Getting to Plan B.
If you’ve been in a start up in the last five years, these questions have loomed large and been the cause of many sleepless nights.
However, if you’ve been working at an established business that’s in the later stages of growth or maturing, odds are you have not done a top to bottom fact based review of these questions in several years. Why? Because because in the downturn cash flow and profits (#6 and #7) have been of paramount importance. This is no longer acceptable.
If you have not probed this checklist deeply or frequently, it is time to double down and conduct a full review using fact based evidence from your own data, market research, and conversations with customers. Zombie revenue models abound and arrive abruptly, particularly in companies with undifferentiated products that serve customers with rapidly changing – either maturing or innovating – business models. In these situation, product relevance and competitive advantage are questionable, as are the sales potential, profitability, and cash flow expectations for different accounts. If you find yourself in this context, make confirming your revenue model a top priority!
If you have recently reviewed your revenue model, or are planning to, please comment below. And, if you have pivoted from a Zombie model please share your story with me.