Business Core · Monetisation · Module
Revenue quality
How predictable, recurring and concentrated the income is. Two businesses with the same turnover can be worth very different amounts.
The idea
How it works
Revenue quality is about the shape of the income rather than its size. Recurring beats one-off, diversified beats concentrated, and predictable beats lumpy — each for reasons that show up when something goes wrong.
Concentration is the risk most often carried unknowingly. Three customers producing most of the revenue is a business with three points of failure, however healthy the total looks.
Working with it
In practice
- 01
Split recurring from one-off
They behave completely differently and averaging them produces a number that describes neither.
- 02
Measure concentration
What share comes from the top three, five and ten customers. The number is usually higher than expected.
- 03
Track retention as revenue, not logos
Keeping ninety per cent of customers while losing the largest one is not ninety per cent retention.
- 04
Test predictability
How well last quarter predicted this one. Poor predictability makes every other plan harder.
One level in
The components of revenue quality
A component is something that exists afterwards which did not exist before — a deliverable or a mechanism, not an intention.
The retention record
Revenue retained rather than logos retained, including expansion and contraction.
Learn
Measure retention in revenue, not customers. Keeping ninety per cent of accounts while losing the biggest is not ninety per cent retention.
The other modules in monetisation
Revenue model
What the organisation charges for and on what basis. The most consequential choice in the object, and usually the least examined.
LearnPricing
What is charged, and how the level is arrived at — from cost, from competitors, or from the value delivered. The third is hardest and usually produces the best answer.
LearnMargin structure
What remains after delivery, and how that changes with volume. A business with margin at small scale and none at large scale has a structural problem, not a pricing one.
Learn