Revenue is the lifeblood of a business, and understanding how to accurately predict it is essential for any successful organization. The first step to predicting revenue is knowing your existing client revenue. This includes all of the revenue from clients that started working with you before the beginning of your fiscal year. To get a better grip on your existing client revenue, there are three elements you must consider: renewals, upsells, and attrition. Let’s break down each element so you can make accurate predictions about your future revenue.
Renewals
To accurately predict renewals, start by estimating the revenue of each service for every month. At each renewal period you will want to determine if the client will renew for the same amount, less or more. Breaking your predictions down in this way will provide you with a wealth of essential data that is necessary for resource planning and decision making. Aim to make binary decisions regarding renewal instead of assigning probabilities – as our experience has proven that this strategy yields more accurate forecasts!
Upsells
Upsells are additional services you can offer customers beyond their initial purchase. For the most accurate upsell predictions, consider existing opportunities in your current pipeline and also anticipate potential unknown ones that have not been explored yet – these “blue sky” upsells require insight from past patterns of successful upselling as well as investments made to enhance future performance. Leverage historical data combined with intentional investment for the best possible outcome!
Attrition
Attrition is when customers leave and stop purchasing your products or services altogether. It’s important that you account for attrition in your prediction so that your estimated revenue isn’t too inflated due to unexpected losses from clients who decide to leave your company during the course of the year. Examining past customer churn rates, as well as the causes of their departure such as industry shifts and new competitors in the market can be beneficial. Additionally, you should investigate if any investments made to your service offering could potentially reduce future churning.
Predicting existing revenue for your business can seem daunting but it doesn’t have to be! Start by considering three key elements—renewals, upsells, and attrition—to gain insight into accurate predictions about existing client revenues for this fiscal year and beyond. By taking these steps, agency owners can better understand their current financial situation and plan ahead for success in their businesses!