Revenue questions to ask today to help build company exit valuation for tomorrow
When the day comes you want to sell your business, the potential acquirer is going to evaluate the future growth potential of your company. During their due diligence probe, they will look to see how effective your company has been historically at making and achieving its revenue projections.
Too often business owners and CEOs set a new year revenue target but don’t truly think it through strategically. So achieving the target becomes hit or miss and may be more related to luck than true strategic deployment of sales resources. To facilitate productive team dialog now, here are great questions to discuss with your team and bring strategic thought to your new year revenue target:
- How will we calendarize, by month and by quarter, our full year revenue target? It’s one thing to project a full year revenue target but when calendarized over the 12 months, you may then view the target very differently. Look at prior years calendarization and ask yourself will this repeat in the new year, or will you want to make strategic sales deployment changes to bring about a change if you don’t like the current calendarization you’ve been experiencing.
- Also ask - does our product or service fulfillment team understand this calendarization because they will need to know if there are specific months and/or quarters where the workload will require them to be prepared differently? Projected slow months may require prior material/labor adjustments and higher projected revenue months may require early resource planning.
- What percentage of our revenues will come from Existing customers? From New customers?
- Do we have visibility/access to the number of potential new customers we will need to achieve our New customer revenue growth or do we need to first invest time in finding these new customers which means our revenue from them may come further down the road?
- How will our revenues come in by product or service we provide? Will all have the same level of growth or will they perform differently and how will this impact our consolidated revenue target?
- Are we tracking each month the number of sales calls, sales proposals, site click throughs, etc. that we will need to support achieving our revenue target?
- What “leading” activities do we need to be taking that will ultimately lead to achieving the “lagging” indicator of hitting our revenue target. (i.e.: we need to make 50 sales calls per week (leading indicator) which we project will lead to 10 requests for proposals (leading indicator) which we project will lead to 2 new orders each week (lagging indicator). Or we need to place 3 new banner ads per week (leading indicator) projecting this will lead to 5,000 click throughs (leading indicator) and will lead to 200 new orders per week (lagging indicator).
- What factor will the economy have on our revenue projection in the new year. Will it be a headwind or a tailwind versus what we experienced last year?
- Will all of our customers be equally impacted by the economy or will some be affected differently?
- How about our products or services, will they be impacted equally in the economy or should we adjust some to grow less and others more and therefore what is the consolidated result on your full year revenue target?
As you return from the holiday break, huddle with your team and use these questions to facilitate productive dialog. You asking these strategic questions will help build their strategic thinking muscle as well and as you do this over time, the planning muscle of your overall organization will improve. This muscle could pay you great dividends when your exit day arrives as the acquirer will be impressed by your company having this planning capability, especially if they see the positive results in your financial statements.
