Mommy, Where Does Revenue Come From?

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This weekend I had the first, of what I assume will be many, “talks” with my Daughter. I used the exact same book my Mom read to me. It’s perfect for explaining to a 7-year the science behind reproduction. And with the exception of how a family is defined, the book is still fairly accurate. It was a painless discussion and I had to laugh when my Daughter looked down at her stomach with surprise and said “I have a uterus in there?!”

Of course, because the book is written for young children, the explanations are relatively simple in nature. Two people fall in love, parts connect, and a miracle happens. Now that I’m in my mid-thirties I have a new found respect for the process. I’ve watched as many friends have struggled with fertility issues and I now recognize the exact science that must occur for that miracle to actually happen. stork-carrying-baby

What Is Revenue?
I’ve recently found myself drawn to books on finance. When you work in an industry that touts the importance of revenue attribution and closing the loop, it’s important that you understand what revenue actually is. I assumed it was simply the money coming into the company. And much like the first talk I had with my Daughter, that’s kinda correct, but there’s so much more to it.

Revenue is not simply created when a sales and marketing team align and decide to create more sales opportunity together. And even the best sales enablement programs, product positioning, and compelling messages won’t result in revenue if all of the necessary factors are not in place. In fact, revenue is just a piece of the company’s income statement, and that income statement begins with sales. Sales (revenue) is always at the top of the income statement. Revenue on an income statement is referring to the products or services that were delivered during a period of time. It’s not closed opportunities; it’s what was actually delivered.

The Science of Revenue
So as you consider your department’s contribution to the company, remember that revenue is a piece of the larger picture. And in order to create a fiscally reproductive company, the chemistry must be exact. You must understand your contribution to revenue, but also your impact on liabilities. You must understand the company’s financial wellness as well as provide a confident projection on the longevity of your department’s investment. You must take into account accrual which is the portion of an expense item that is recorded in a particular time span. Much like product development costs, these costs would be spread out over several periods so a portion of the cost would be accrued each month.

Does the Stork Deliver Profit?

The science of profitability must also work in your favor. Profit is simply revenue minus expenses. This is typically the topic that makes marketers a bit uneasy because marketing has traditionally been viewed as an expense, a cost center. And when profits are down, companies are quick to cut costs. So, how can marketers demonstrate their contribution to profit, as well as eradicate low profitability while still keeping their jobs? Understanding gross profit, profitability index, and profitability ratios will allow you to identify opportunity for improvement.

As you begin to evaluate the balance sheet you’ll notice a number of other factors that are at play like cash flow, owner earnings, inventory control and capital investments and expenditures. Inventory reduction, accelerated collection of receivables, increasing asset turnover ratio, employee skill set, data accuracy, customer engagement, reputation, awareness, and many other factors all play a role.

So, certainly a strong sales organization aligning with an effective marketing organization to deliver sales and create a positive customer experience is important. But there are a number of other factors that must be healthy and focused in order to create revenue, and revenue is just one consideration when birthing that healthy company.

What measurements are most important to your company?


Marilyn Cox

Marilyn Cox is the Director of Marketing for Second City Works - the B2B division of the famed Second City.

You know the buzzwords; inbound, outbound, content, demand gen, lead gen, martech, social media, account-based, advocacy, customer success, sales enablement, and analytics.She studies it, plans it, executes it, experiments with it, and loves it.

Through discovery, creation, and innovation she's learned to say "Yes, And".Like business, her career is one big improvisational act.

She leads all aspects of the brand and culture, developing and executing a clearly defined, integrated marketing communications strategy.Marilyn is responsible for planning, organizing, staffing, training, and managing all marketing functions to achieve objectives of growth, awareness, customer success and making work better.

Marilyn exists to empower sales and support the customer. When not geeking out over marketing analytics, she can be found daydreaming about her unrealized dream as a professional wrestler with the WWE.

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