How Companies Can Protect Revenue During a Downturn

Kathleen Hartigan, VP International at Clari

 

While there are hopes of inflation easing off, the current trajectory for the economy remains uncertain with spending levels low and falling and a recession likely to happen.

How businesses respond to these economic challenges is widely debated. Restructuring operations and cutting costs and spending are obvious tactics on the table. While these are sensible, if painful, to consider, business leaders need to also ask themselves whether their processes to manage the flow of revenue into the business are strong enough. Indeed, as enterprises navigate stormy economic weather, revenue leak – revenue earned but not yet captured – is an issue that needs to be fixed.

So, what steps should CFOs and other business leaders be taking to ensure they’re not leaving hard-earned revenue on the table?

Interrogate the business to kick start a revenue debate

A CEO or CFO needs data from multiple revenue dimensions to comprehend how the broader economy might impact the operating plan and revenue expectations. There must be intellectually honest, tough questioning about each segment, region and line of business to assess where the organisation is most likely experiencing headwinds that could impact revenue flows. Staff need to be fired up to plan for contingencies, prepare tactics to find and secure revenue, and do a “root and branch” assessment of the revenue potential within their books of business.

Fine-tune your customer insight antenna 

Don’t stick your head in the sand. Encouraging customer outreach and communication are key. While you shouldn’t assume everyone is suffering, there are obvious warning signs to spot. If engagement has fallen off in an account, for example, that could signal potential churn. It’s equally vital to track outside trends. The customer success team should note any business risk they hear from customers, such as potential fallout from supply chain issues specific to a given geography.

Drill into the ‘three Cs’ of coverage, capacity, and conversion

Tighten up pipeline reviews and their frequency. If you don’t already have weekly cadences to review pipeline, establish that now, so if anything starts to slip, you will see it immediately. Make sure you have an equally clear view of your sales team’s capacity and pipeline changes. In a recession, you may need more pipeline to generate the same revenue as previous quarters. You’ll need to know if your reps can handle that increase or if the forecast is at risk. Creating financial models that run best- and worst-case scenarios helps prepare the revenue organisation, so everyone knows what plays to run immediately with macroeconomic shifts. Doing this without a powerful, easy-to-use revenue management platform is difficult, so consider investing in one.

Protecting revenue with pressure tests

Every active deal should be assessed by sales leaders, with a risk level assigned to each deal based on the account’s size, industry, and region. These figures should highlight the areas where risk is likely to exist which saves time and spotlights potentially unreliable deals. Instead of moving forward with shaky deals that can either make or break your company in its current quarter, it is better to use the insight to predict how your business can be affected in times of economic uncertainty.

Finding the ‘why’

Tracking the reasons why deals are slipping will provide clarity into how to proceed with your out-quarter forecast and operating plan. This can be done by building in the requirements for data capture from reps when they are pushing a deal from one quarter to the next. From this, you can begin to assess whether deals are slipping based on addressable or non-addressable reasons and make an accurate plan of action.

Finding the ‘where’

It is crucial to pinpoint where your organisation is leaking revenue so that the problem can be diagnosed. This has become an issue for most companies, whether it’s due to passivity or a lack of oversight, as 64% of companies do not have standardised revenue assurance tools in their enterprise data systems, regardless of the fact that they are losing money. Executives can no longer afford to idly watch as resources are being wasted. Therefore, by reviewing revenue processes and systems, this can help you spot and monitor revenue leak.

Business leaders in every industry need to act now to stay ahead of the recession and protect revenue. Many are heeding the call to prioritise revenue assurance as a vital strategy for times of both economic challenge and opportunity. The most successful are leaning on new approaches to revenue collaboration and governance that simplify how to effectively manage pipeline, focus on the right deals, and forecast revenue with precision.

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