Four Reasons Why Revenue Growth is Important in Digital Marketing

Emerging and growth stage companies take as fact that “if you’re not growing, you’re in the process of dying.” For mid-tier and small businesses the wisdom of this statement also applies. Why is it so important that your business grows its revenue? Let’s consider what is behind this truism. 

Here are the four primary reasons that revenue growth is critically important to your business. 

1. Profitability:-

The purpose of business is to make a profit. The more profit you make, the more opportunity you and your business have to reap the benefits and rewards of running the business. You invest your time, energy, and money to make profit. 

The primary driver of profitability is revenue. The more you grow revenue the more likely you are to grow profits. If you achieve higher levels of revenue and manage costs so they rise at a lower rate, then you maximize profits. By accelerating the rate of revenue growth you generate more profits faster which enables you to (a) take more profits, (b) reinvest in your business, (c) create new sources of revenue, (d) merge or acquire another business, and (e) improve the value of your business. 

By driving revenues higher you improve the profitability of your business. Revenue growth becomes the engine for investing, acquiring (e.g. talent, new capabilities, additional products, other companies), expanding, and attaining even more growth and profit in your business - a virtuous cycle. 

2. Valuation:-

The valuation of your company becomes a currency to enable strategic decision making in your business. The valuation that others assign to your business determines your ability and flexibility to make important transactional decisions about your business. If you want to secure investment funding, sell your business, buy another business, secure a bank loan, or take your business public your valuation determines how much your business is worth and how much you will either gain or pay from these transactions. 

Early stage companies in particular, need to prove they have a product that can generate revenue and a model for scaling it further. This is a key element of their valuation that investors will consider. Your current level of revenue and a demonstrated growth trend are the basis for applying a multiple to the value of your business. Other elements also determine the multiple assigned in the valuation of your business. However, revenue growth is a sure indicator of the potential of a business that goes into its valuation. 

Profits generated by your business will always be an important element for assigning a multiple to its value. The higher your profits, the higher your valuation will likely be. This means you have more currency for strategic transaction and a higher degree of financial benefit you can attain.  Tech companies may not achieve profitability for quite a long time. Revenue growth is therefore, the key metric for establishing the value of those companies.

The rate of revenue growth is also important. The trajectory of your revenue growth reflects the future strength of your business. An accelerating rate of revenue growth is viewed as a positive indicator for improving trends and therefore, value of your business.

Revenue growth and in particular, significant rates of growth are important elements in establishing a valuation for your business. 

3. Customers:-

The ultimate proof of the value of your product or service is that customers are buying it. Keeping the customers you have takes hard work.  Acquiring new customers is even harder and requires greater financial resources to capture. 

They buy because they expect to receive value from what you provide. When they continue to buy they are affirming that you are delivering to them a solution that they need. When new potential customers see that others are buying and your revenue is growing they have confidence that they also will received the benefits from your product. They become buyers too. 

In an increasingly customer-centric business climate, investing in and strengthening your customer engagement capabilities must be a priority for your business. Growing revenues in your business is a testament to your effectiveness in delivering value to customers. Revenue growth is a key metric of your success in satisfying customers. 

Information about your company today is broadcast through social media. These reports will either be fuel for a networking effect driving further customer acquisition and growth or be an impediment that will work against such growth.  You must use the revenues you generate to continue to invest in fulfilling the needs of customers. Informed customers can easily find alternatives if you are unable to deliver the value they expect from their purchase of your product.

You need the resources afforded by effectively growing revenues to enable you to invest more in your customers’ success. The faster the growth of revenues the sooner you can improve your services, offer improvements to your products, and secure customer loyalty. You will also find it easier to acquire new customers who will generate more revenue for you, as they seek similar benefits and value as earlier customers.

4. Employees:-

Talent acquisition and retention is a critical element in your company’s success. There is a shortage of employees who can effectively fill the needs of most companies. Your business no doubt needs to keep its best employees in order to thrive and needs more great talent to fill new and emerging business requirements.

Growing your revenue is important to workforce success. When your company is growing, employee satisfaction is also likely to grow. 

Employees expect to benefit from a business that is growing. Improved wages, career path opportunities, management performance bonus, and participation in equity payouts are all possible for employees to acquire. Offering such benefits based on having a profile of continuing revenue growth in your business assists you with employee retention and talent attraction. If your company is growing, employees should benefit.

The opposite is also true. If your revenues are not growing it is more difficult to retain good employees and challenging to hire new talent. Often higher compensation packages become your weapon for securing the best employees. This drives your costs up and is a drag on profits. 

Growing revenues drives more profits that enable investment in your workforce. Today, you must compete for customers and win with your employees while, attracting additional talent to your business.

Knowing that their company is succeeding, demonstrated by growth in revenue, is evidence to your employees that their work is impactful. They are contributing to its success. The millennial workforce gains job satisfaction knowing that their work makes a difference. 

Attaining growth in revenues in your business enables you to keep the best workers, drives their motivation to excel at their work, and creates an atmosphere of success that everyone wants to be part of and contribute to. Whether you are a small business starting out, or a corporation that needs to give their current site a cutting edge transformation, our team of Web Developers in Silverthorne can take on anything.