Simply put, a predictable revenue model is a framework for consistency that provides business growth data based on a formulaic process. Think, forecasting.
Implementing a predictable revenue model provides business owners an understanding of average revenue over time, including leads (MQL and SQL), sales growth, cost of customer acquisition, and more.
In this new blog, the marketing experts at YGL Enterprises explain marketing’s role in predictable revenue and why implementing this model is essential to organic growth and a strengthened business valuation.
Consider these startling statistics in the U.S.:
- Over 78 million people are closing in on retirement in the next 10–15 years.
- Baby Boomers own 65%+ of businesses, totaling nearly four million companies.
- Retiring business owners plan to sell or bequeath $10 trillion worth of assets by 2025.
- The Baby Boomer generation controls roughly 80% of all U.S. aggregate net worth.
Ultimately, this means that a tsunami of Boomers is on the precipice of selling their businesses.
All of that said, what does this trend have to do with marketing, specifically?
When it’s time to sell, owners who haven’t developed and implemented structured marketing strategies will be at a disadvantage as potential buyers consider the “market value” of buying said business.
Every business must invest in marketing-related activities — it doesn’t matter if you are a start-up enterprise or have been in business for 40 years. If prospective buyers don’t know about the company, there’s little opportunity for growth. No growth, no revenue.
Unfortunately, many businesses, especially small businesses, don’t invest the time and money in strategic sustainable marketing activities. Often, business owners try to handle all facets of marketing and sales because 1) they think they are saving money, and 2) they think they know best instead of focusing on running the company and developing a solid infrastructure that is not dependent on one person. Lack of visibility or inconsistent visibility directly impacts a business’s value not only in the consumer’s eyes, but also when the owner is looking to sell.
Consider the following points:
- How you market your business determines the success or failure of your enterprise. Marketing is a tool used to create and maintain demand, relevance, and reputation.
- Consistent and targeted marketing attracts potential customers. Without a marketing strategy, a business’s footprint is significantly smaller.
- Predictable and effective marketing delivers a consistent and remarkable customer experience.
According to The CMO Imperative: Revenue Marketing Transformation by The Pedowitz Group, there are six components in a revenue marketing strategy:
- Strategy: Clearly define the role of sales and marketing in your growth plan. Internally validate the digital personas, sales cycles, and channels. Include growth plans as well as a strong communication plan.
- People: Align your people resources to create content, drive marketing automation, and regularly collaborate with your sales leadership on mutual revenue goals.
- Process: Map the entire buyer journey from lead to lifetime customer value.
- Technology: Optimize your tech stack with integrated marketing automation and sales software.
- Content: Develop a content plan that addresses personas, stages in the buyer journey, segmentation, and various content types.
- Results: Establish your top revenue metrics and build dashboards demonstrating your progress.
Ultimately, ensuring you have a comprehensive marketing strategy enables your organization to improve insight into where your revenue is coming from and how it is generated. Guesswork is eliminated as it provides perspective into how prospects are attracted, engaged, and converted into a customer.
“A brand is the set of expectations, memories, stories, and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.” — Seth Godin, Founder & CEO, Do You Zoom
To begin with a definition, “brand value” is the monetary amount the brand is worth, as stated on the balance sheet. It is how consumers perceive and support your brand.
Several factors are present when determining a brand’s worth, including:
- Connecting with the right audience group
- The customer experience
- A brand’s “uniqueness”
For example, let’s consider a side-by-side comparison of two businesses operating in the same industry.
Company #1 has a professional-looking website, an active blog, several online customer reviews, and consistent social media activity.
Company #2 has an outdated website, no social media presence, no online reviews, and does not appear on page one in Google or Bing search results.
Which business, then, do you gravitate towards? Who do you trust? Which company is more likely to engage with its customers?
You guessed it… Company #1.
A strong and visible brand
- tells a story that resonates with its customer base
- is a relationship
- increases customer loyalty
- provides positive word-of-mouth
- increases employee retention
- reduces price sensitivity AND
- it provides a predictable experience for the consumer.
The U.S. Small Business Administration recommends, “As a general rule, small businesses with revenues less than $5 million need to allocate 7%-8% of their revenue to marketing.” That percentage is based on companies that have profit margins in the 10%-12% range post expenses.
The revenue that businesses allocate to marketing has increased steadily over the past ten years, with the average marketing percentage totaling around 13% in 2021, compared to 8% in 2011.
Of course, various factors impact spending, including industry, competitive landscape, size, B2B or B2C, and if the enterprise is a start-up or established.
Firstly, you need a system — a tool that monitors varied types of data. For instance, a customer relationship management (CRM) platform. Next, you must clearly define the results you are looking to achieve and establish your key performance indicators (KPIs).
Some examples of KPIs include:
- Sales growth
- Leads (MQL, SQL)
- The lifetime value of a customer
- Cost of customer acquisition
- Email marketing performance
- Website traffic
Next, use unique landing pages or phone numbers to measure the marketing campaign’s effectiveness. You want to identify the source of your leads so you know what is working — and what might need to be tweaked to improve success.
When Sales and Marketing work together in creating a constant feedback loop, revenue is more predictable. In addition, the feedback loop provides insights as to where leads originate and what is driving customers from a marketing perspective. Working as a team, Sales and Marketing can move prospects more effectively through each stage of the funnel.
Remember, one team and one vision equal increased leads, sales, and revenue.
If you think you are ready to sell, take a step back. Realize that the exit planning process can take 3–5 years. Therefore, planning is critical, and the predictable revenue model is an excellent place to start. Educate yourself. For example, here are some general questions a prospective buyer asks when investigating the potential of a business:
- What is Marketing and Sales’ involvement in determining the design of company products?
- How often does Marketing meet with Technology and Operations groups to review products and ascertain progress on developing new products?
- What are target markets?
- Are there identifiable customer groups for each type of product or service now being sold? Have you created buyer personas?
- Is market research available on customer verticals to help identify needs and primary buying influences?
- What role does branding play in market positioning, and is it consistent throughout all channels?
- How does the company differentiate itself from the competition?
- What is the lifecycle of the average client?
- Does the company advertise? If so, on what channels? How is success or failure measured? What is the return on investment?
Regardless of the intent to sell a business or not, all business owners should be able to answer the above questions. If not, you have work to do. Take the time to implement strategies to increase customer engagement, solicit online reviews, streamline and automate the customer experience, boost lead generation via inbound marketing strategies, optimize the website and blog to improve organic search results, and accurately define customer success to guarantee long-term retention.
If you plan to sell your business in the next 3–5 years, now is the critical time to begin work on marketing initiatives that can help you achieve a positive outcome. Remember, digital marketing campaigns involving SEO and content marketing can take six months to a year to realize targeted results. Therefore, keep in mind that you cannot achieve your goals overnight.
The first step, of course, is to create a marketing plan, which can take 2–4 months, depending on complexity. So we invite you to reach out and schedule a consultation. We are passionate about helping business owners attain the marketing results they desire and designing a targeted strategy that results in short and long-term success.
Reach out today and learn how YGL Enterprises will be your guide and advisor as you develop a predictable revenue model through strategic marketing.