What Is Revenue Generation? A Guide to Diversifying Revenue Streams

It's a year out from your big planned expansion into the southwest region, but materials costs are climbing. Every unit you sell only brings in 75% of the revenue it once did. You won't have the cashflow to complete your new capital investment, but if you don't do that, the new customer-base you were counting on is inaccessible. You've got a serious revenue generation problem.

To put it in perspective, think of revenue as the icing on a cake: It looks great, but without strong foundational layers underneath, everything will crumble.

This raises an important question: should you prioritize revenue or profit ? While both are important, focusing on growing revenue can help you improve profitability over time.

Read on to learn all about the methods for generating revenue and how you measure their success.

• What is revenue generation?
• The importance of revenue generation in business growth
• Key strategies for increasing revenue generation
• Diversifying revenue streams
• Using technology for revenue growth

Revenue generation is the combination of processes, technology, and strategies that help a business earn and grow revenue in a sustainable way. It includes things like:

• Selling physical and digital products
• Charging for professional services through hourly rates and project fees
• Advertising other businesses on space you own
• Referring business to other companies for affiliate commissions
• Leasing and selling off assets

And it's not just about the moment you bring revenue into the business — every bit of work that makes it easier to earn and predict cashflow is part of revenue generation.

Some people might assume this job belongs to the sales team, but it's a responsibility shared among a few key groups:

• Sales: The sales team must find leads and close deals, which has a direct impact on revenue.
• Marketing: This team is constantly performing activities that bring in fresh new leads for the sales team to close, and get old customers to buy again. Learn more about the differences between sales and marketing .
• Customer success: This team is key in making sure a customer stays happy. They help with onboarding and grow accounts over time through service and upselling. 42% percent of sales leaders named recurring revenue as their top revenue source, and customer success teams help lock that down.
• Product development team: This team helps create what you sell. By updating current products and creating new ones based on customer and market demands, more revenue can come in.
• Revenue operations (RevOps): RevOps teams interact with many of the above teams, helping with sales, sales enablement, marketing, finance, and customer success. They work to align all teams to maximize revenue generation. See a revenue operations org chart for a better view into their role.

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Pulling in cash is important for obvious and not-so-obvious reasons, both in the long and short term. The main reasons you need to focus on revenue generation are to:

• Stay in business: Without income, you can't cover expenses. Whether that's simply payroll or being able to build and store enough product to keep up with demand, you need revenue to do it all. And without revenue, a business goes into debt and eventually dissolves.
• Scale operations: If you want to achieve economies of scale, expand to new markets, or otherwise compete at a higher level, you need significant capital investment, such as into new factories, warehouses, new developers, or larger purchase orders of raw materials. More revenue enables this.
• Invest in innovation: You could become a market leader through technological innovation — inventing something new. Research and development (R&D) can often cost a lot, but it's worth the investment if it gives you features and selling points the competition can't match.
• Maintain a competitive advantage: Whether it's protecting your patents and trademarks, working with regulators, or purchasing up-start competitors in your industry, keeping ahead takes strategic spending. Revenue plays a crucial part here.
• Attract top talent: Higher revenue reflects well on a business and enables things like higher wages, salaries, commissions, and perks. The best salespeople want to work for companies that reward them for their contributions.

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Depending on your situation, you can opt for one or more kinds of ways to grow revenue. Here are the broad strategies you might consider:

There's a reason why 80% of sales reps are encouraged by leadership to prioritize long-term relationships over short-term wins. By aligning sales and service teams , you can grow existing accounts, reduce churn of displeased customers, and unlock new levels of revenue that can be relied upon for growth.

One major area for growth is in the sales you're already trying to make. The sales process itself can be a source of missed revenue:

• B2C sales: Rely on UX teams to clean up app and website experiences for customers to create more frictionless sales and subscriptions (both of which are key for revenue). And provide better training for employees in brick-and-mortar stores to help them sell more to the customers who shop in-person.
• B2B sales: You can optimize your CPQ (Configure, Price, Quote) process to reduce friction during and after the deal stage. Enable buyers to purchase simpler products and services through e-commerce experiences. For complex products, make the orders configurable into quotes through self-service platforms for a faster sales process down the funnel. A smoother, faster process means potential revenue can be realized faster, more deals can be worked in the same period, and revenue in general can be increased.

The right price for your goods and services is whatever customers will pay in high enough volumes to make a solid profit. Your current pricing may be holding you back, so consider these pricing strategies :

• Cost-plus pricing: Also called "markup," this strategy takes the cost to create your product and adds your desired profit on top. It's a simple way to know you'll make a profit. Exploring this could help bring in a more appropriate level of revenue to cover costs if that's been a problem for your business.
• Competitive pricing : This set of strategies looks at your competitors and aims to either undercut their price to gain market share, match their price so you can beat them on better features, or exceed their price and justify it based on convenience or luxury, if appropriate for your products. Any one of these can increase revenue if they help you outcompete your rivals and gain market share.
• Price skimming : With price skimming, you set an initially high price on a new product to get early adopters and max out how much revenue you can get. As demand cools, you slowly lower prices and expand your market share. By boxing out new competition and expanding your volume, your revenue can increase in a stable way.
• Penetration pricing : This plan sets an initially low price to gain market share quickly, which also helps with awareness. You either rely on upsells or high volume with low margins to make a profit. With high market share and eventually higher prices, you may be able to increase your revenue.
• Value-based pricing: This type of pricing uses perceived value and charges for products based on it. Luxury goods, status symbols, and other high-markup brands tend to rely on this. Assuming you have the perception to match, the large margins this strategy permits naturally increase revenue.

Generally speaking, an existing customer has a lower acquisition cost than a new one. Upselling takes a current sale and pushes the buyers to higher-value aspects associated with it to increase the revenue the product brings in. Cross-selling adds related products and services to what the customer bought to increase the revenue. Try these common techniques:

• Bundling: Offer modest discounts and price breaks for packages of two or more products, leading to higher volumes and customers upgrading where they normally wouldn't.
• Tailored recommendations: Use customer analytics from your CRM, apps, or online tools that measure your website to automatically detect patterns in similar customers, and recommend additional products that are likely to be bought here too. That way, you know exactly what to upsell or cross-sell in your next deal.
• Loyalty programs: Create rewards to incentivize repeat purchases — this is particularly useful if the customer could easily get the same or similar products elsewhere.
• During service calls: Upselling with field service workers allows you to move products through trusted, in-person appointments where you have the customer's ear. Often, other products or service lines can help solve a problem with an existing product, after all.

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One of the biggest pitfalls in business is relying on a single revenue source, such as a single product line. By contrast, you can diversify your revenue streams to reduce risk, ensure stability, create growth opportunities, and make better use of resources. If one revenue stream lessens or disappears, the others can protect you from loss.

Start by analyzing your revenue streams in your CRM to find the proportion of revenue and profitability of each stream. Find specific customer segments for new opportunities and look into competitors and market trends.

Are there unmet needs in the market? Do you see opportunities to expand to a new region? Once you have this information, you can identify new potential revenue streams and create a new business plan to begin realizing this revenue.

• Product sales: Selling a digital or physical product is the most common type of revenue.
• Service fees: This can vary greatly. Think of the hourly rates of a landscaper, the project fees of a photographer, or retainer of a lawyer.
• Advertising: This is cash in exchange for renting part of a physical or digital space you own to advertisers.
• Affiliate marketing: This refers to commissions paid for referring business to a partner company.

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A lot of the methods for finding new opportunities to grow revenue are easier to discover if you make use of a revenue growth platform. Users of a particular platform were able to reduce their quote turnaround time by an average of 34%, leading to fewer lost opportunities and greater growth on a faster scale.

What kind of features do they use?

• Configure, price, and quote guidance: Centralize your product catalog in a platform that also has access to sales data, so it can figure out insights like intelligent bundling to increase cart sizes, or times of the month most likely to get quotes approved.
• Contract management: Speed up contract generation and keep them all in one place so that sales teams, finance departments, and more can keep on top of it. It's even better if it ties into a CRM. That way deals won and lost at the contract stage can inform the sales team, and they can make better proposals over time.
• Order automation: Run deals through the same platform that handles CPQ and contracts, so that changes during negotiations or amendments can inform the other steps of the process and nothing is siloed.
• Invoice and collection automation: Run and manage invoices for any billing type, like usage-based billing or subscriptions, making it easier to collect payments and realize revenue.

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Revenue generation is about getting money into your business, but it's not just about sales reps selling to customers. It's everything from the core strategy of the business, the mechanism for growth, and the constant searching for new frontiers to explore. And with the right technology pulling your data together for analysis, you can find even more opportunities to make your top line grow.

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