Quickbooks, Bookkeeping and Accounting Blog

Knowing whether your revenue went up or down is important, but it’s equally important to understand why. There are many things to consider when thinking about why, such as whether the overall market for your product went up or down. If worldwide sales for your product went up 50% and your sales went up just 20%, then you should consider whether or not 20% growth is really a good thing. Another thing to consider, and generally an easy thing to measure, is who your revenue comes from.

I recommend breaking out your revenue into at least the following two categories: revenue from existing customers and revenue from new customers. Let’s think about each category:
Revenue from existing customers: providing great products and services is generally the key to keeping revenue coming from current customers. By looking at revenue from existing customers alone you can get an idea as to how happy your customers are. Is the amount of business you get from existing customers growing or shrinking? Obviously, different businesses will have different expectations and goals with respect to business from existing customers, but all businesses will benefit from a clear understanding of whether or not their existing customers are sticking with them, and therefore it is important to look at them alone.

Revenue from new customers: effective marketing and sales efforts are the key to getting business from new customers. In a sense, new business should be thought of as an independent business. The revenue and profits received from new business need to justify the cost of getting the new business. By looking at revenue from new business alone, a company can get a clear understanding as to whether or not this is the case.

By regularly measuring the revenue and expenses associated with new business, you can make sure your investments are worthwhile quickly realize when a change in strategy is called for. Likewise, clearly understanding revenue trends from existing customers is vital to keeping your finger on the pulse of customer satisfaction.