What Should You Do When Your Revenue Isn’t Growing?
“Revenue is always a lagging indicator of success,” I said to “Kevin.”
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We were reviewing his progress, and he was behind plan. But I was seeing progress, and I wanted to remind Kevin.
“What do you mean?” Kevin asked me.
“Revenue is always a lagging indicator of success,” I repeated.
“My co-founders are getting worried that we’re not growing quickly,” Kevin said.
You need to have conviction about your revenue plan.
“I’ve been there,” I said to Kevin. “In the early days of revenue for my company, before I got the flywheel really spinning, one of the senior executives on my team wanted us to completely change course.
“At one of our staff meetings, he came in and presented why we should change direction. And, worse yet, he had data to back up his claims.”
“What did you do?” Kevin asked me.
“The first thing I did was listen to his concerns. I knew the direction he wanted to go was a panic move, but I also knew I didn’t want to say that to him. Does that sound familiar?”
“Yeah, that’s pretty similar to what I’m dealing with,” Kevin said. “What did you do next?”
“In my case, it was pretty easy. I was able to point that we had no strategic advantages with the direction he wanted us to take,” I said. “Then I was able to show him the progress we were making.
“I said at the end, the same thing I said to you, ‘revenue is a lagging indicator of success.’”
“Did it work?” Kevin asked me.
“Yeah, it quieted his concerns for the time being. Then, fortunately, revenue caught up to the progress we were making and everything was fine.”
You need incremental goals while you’re striving to hit your long-term goals.
“Let’s get back to you and your challenges,” I said. “I know revenue is at the $1 million ARR goal you set, but let’s take a look at the other measures you set up.”
“There are two things we are tracking besides revenue,” Kevin said. “They are web traffic and email subscribers. I know I’m behind on those too.”
“Let’s take a look,” I said.
Kevin showed me the charts on his laptop. Web traffic and subscribers were growing at 24% per month. Unfortunately, revenue had been flat for the last six months.
“That’s great,” I said. “Eventually, the revenue will catch up. Let me guess, you have one big customer that hasn’t ordered in while.”
“That’s what I think has been going on,” Kevin said. “What should I tell my team?”
“I would be honest with them. Show them the positive progress you are making, and acknowledge that you need to adjust your plan.”
“I think that will help,” he said.
The difficulty of scaling is part of the deal when you are just starting out.
“Great,” I said. The reality is you’re doing well. You just need to grind away. That’s what I did, and that’s what you need to do. Grind away.
“Trust me, the revenue will catch up. I’ve seen business where there’s no traction and they need to make a big change. That’s not your situation.”
“What does that look like?” Kevin asked me.
“It’s the exact opposite of your situation. They’re not making any progress versus their incremental goals.”
Adjust your plan to the reality of your situation, and, whatever you do, don’t panic.
“Having said that,” I continued. “You do need to make adjustments to your financial plan to reflect reality.”
“I know,” Kevin said. “I working with my controller to create a new financial plan.”
“Perfect,” I said. “Do you have a feel for how much runway you have left?”
“I think if we scale back our hiring and spending, I have about one year and a half.”
“Okay, then you’re in good shape,” I said. “You just need to do one more thing.”
“What’s that?”
“Don’t panic,” I said, smiling.