In the neverending chase for new business, professional service organizations can sometimes fail to devote enough time to plugging the hole that is revenue leakage. This can turn any seemingly profitable business into a major loss maker.
The hard part is telling when and where a revenue leak is happening. Most pipeline reviews have little on what’s or even if you’re losing money on a monthly basis. Worse still, many organizations don’t know where to start when a leak is eventually discovered.
In this article, we’ll explain what revenue leakage is, its causes, and how to find and eliminate it in time so it doesn’t impact your business.
Ready to learn more about revenue leakage? In this guide, we’ll dig deeper into:
Use the links above to skip ahead to the sections on revenue leakage you’re most interested in.
WHAT IS REVENUE LEAKAGE AND WHY IS IT IMPORTANT?
Revenue leakage describes the revenue lost from your organization, which many times can go unnoticed. These revenue leaks can be prevented, but since many slip under the radar, businesses often fail to execute measures that can stop them from happening in the first place. THe more leaks that go unnoticed in your revenue generation process, the greater the impact of this accumulation on your revenue in the long term.
Tracking revenue leakage should be an activity which takes high priority for professional services organizations. Without it, a company will show high profitability and growth on paper, but the issues will be hidden away until they become a real problem. A business with revenue leakage issues will most likely find themselves putting out one fire after another and find ways of giving themselves more time using risky methods such as borrowing at high interest rates to manage operations. This will lead to much slower growth or even stagnation until new systems are introduced to alleviate the situation.
The first step you should take to prevent revenue leakage is to identify the reasons for it happening and examine current processes and systems to see if there are any gaps or inefficiencies that need to be dealt with.
WHAT CAUSES REVENUE LEAKAGE AND HOW DO YOU SPOT IT?
As we’ve said above, what you need to be doing first is to identify the causes of revenue leakage so you can get a better idea of how you continue.
Listed below are some of the factors that can cause leaks:
Inaccurate or incomplete data
This often comes about when organizations manually collect and store data, and can be one of the biggest causes of revenue leakage in your pipeline. Manual data entry will always be a problem because it is often prone to errors, and a single mistake can sacrifice thousands in revenue.
Organizations with a large customer base and a high amount of customer data are susceptible to this. When it comes to these, it’s recommended to invest in a data automation tool to ensure errors are reduced.
Mistakes in data synchronization
Picture a customer that has a subscription plan for your most basic plan, costing them $15 per month. After one month, this customer upgrades to your premium plan, at $50 a month. The problem here lies in your account manager forgetting to update their subscription plan pricing, and voila, revenue leaks.
If data is not correctly synced, lost revenue is the result, without much realization that it’s happening. If you let data synchronization errors pile up, then you will have larger leaks with more catastrophic impacts on your business.
Poor engagement with customers
Your reps will probably be busy every second of the day, so it can be very easy for them to accidentally miss firing off an invoice, especially if you have a large customer base to contend with. If this happens, you’re likely on your own, because it’s not likely that customers will request the invoice themselves.
If you lack an automated system that aids your reps when it comes to tracking billing cycles, you might be losing more revenue than you think as well as potential upsells.
Low pipeline visibility
If your team has little to no pipeline visibility, it can be nearly impossible to see what’s going on in said pipeline and there is any revenue leakage. No visibility means you can’t assess when or why potential deals die out or why customer engagement is slow, both of which contribute massively to revenue leaks.
This is very common for businesses that have no centralized data bank, as this can generate great insights and reports which can do a lot of the heavy lifting.
HOW TO PREVENT REVENUE LEAKAGE USING A PROFESSIONAL SERVICE
If you’re looking to spot leaks before it’s too late, you need to be analyzing your entire sales process at a granular level periodically. This covers everything from your team’s workflow, to your CRM and pipeline. Scrutinizing it to this level is the best way of spotting the potential areas that could cause leaks.
This is not easily done using manual processes, however, especially for organizations with a larger staff and customer base. Investing in a tool focused on revenue intelligence helps you to dissect your whole sales process, CRM, pipeline, and workflows for leaks is the way forward.
The best tool to use is a Salesforce-native solution like Precursive, as it can seamlessly integrate with your CRM and highlight areas with potential issues in your processes or pipeline where leaks could be happening currently, or where they might occur in the future.
OUR TIPS FOR SPOTTING REVENUE LEAKAGE IN YOUR BUSINESS
Record all relevant sales data
One of the most significant reasons for revenue leakage in businesses is data entry or synchronization problems. To remove leaks, the first step is to centralize your data to ensure there are fewer errors, by automating it. Automating your data capture process means you will always have accurate and up to date data in your CRM. A data capture tool is perfect for this, as it automatically saves customer data from every source, such as emails and calendars, to your CRM.
Utilize AI to analyze data
As soon as the relevant sales data is transferred into a single, centralized platform, the next step is to go through all of it to try and spot where potential leaks could happen. Manually searching through thousands of customer datasets is not possible, but even if it was, that still doesn’t guarantee you will be able to spot the pain points.
Introduce changes to the sales process
When you know where and why revenue leakage is happening, it’s vital that you employ company-wide changes to make sure your entire team follows these new processes to the letter in order to avoid any leaks. If, for example, your reps forget to chase up with customers following an important meeting, it would be wise to set up a trigger that automatically reminds your sales reps to engage with customers at specific stages in the sales process.
Measure the effectiveness of these changes
It’s not enough that you just spot a leak and resolve it, but you must be measuring the effect of fixing them to ensure it’s successful and that it doesn’t happen again. For example, if your actual pipeline and forecast aren’t aligned even once the leak is fixed, it’s likely that you need to iterate the whole process.
It’s not always easy to measure the effect these changes have made without a revenue intelligence tool which can help visualize the discrepancy in your pipeline once the leaks have been sorted. Once your revenue is matching the forecast, then you can be sure that you’ve truly fixed the leaks.
WHAT NEXT?
You should now understand revenue leakage a bit more, and know how and when to spot the signs, and take steps to overcome it. The whole process from start to finish can seem overwhelming, which is why a software psa solution can do much of the legwork. Want to see it for yourself? Book a demo today to see how we can help you and your organization with revenue leakage.
