There’s a good chance you’re leaving money on the table, lots of it too. Like thousands of other businesses, your business is most likely experiencing revenue leakage. The challenging part is that it’s hard to tell when and where this revenue leak happens.
Most pipeline reviews do not reveal what’s happening or if you’re losing money each month. Even worse, most businesses don’t know how to fix leaks when they are eventually discovered.
In this article, we’ll explain what revenue leakage is, why it happens and how to spot and eliminate it in time to save your business. So, if you’ve ever wondered “what is revenue leakage?” or suspect that your revenue may be leaking, keep reading.
What is revenue leakage?
Revenue leakage refers to the loss of revenue from your business, which often goes unnoticed. Revenue leaks can be prevented, but since they typically go unnoticed, many businesses fail to put in place measures that can prevent them from occurring in the first place. The more leaks that are hidden in your end-to-end revenue generation process, the greater the accumulated impact they’ll have on your revenue in the long run.
Image description: Example of a leaky pipeline and its causes
There are several reasons revenue leaks may happen, and the causes vary from one business to the other. But the impact is typically the same — stunted growth, revenue loss, and missed quotas. Even worse, it is near-impossible to spot revenue leaks, especially if your business still leverages manual processes.
What does revenue leakage mean for your business?
According to an MGI research, an estimated 42% of companies experience some form of revenue leakage, and further research conducted by EY suggests that every company loses 1% to 5% of realized EBITA to leakage annually.
Revenue leakage is bad news for any business, especially businesses looking to grow. This unintended loss of revenue can impact the bottom line considerably. Because factors causing revenue leaks differ based on each organization’s structure, it can be challenging to determine the exact cause of leaks across the board.
Many forward-looking organizations have started replacing manual aspects of their processes with robust AI-based revenue intelligence solutions, making it less challenging to spot leaks.
What causes revenue leakage?
The first step toward eliminating unintended revenue loss is by identifying what caused the leaks in the first place. Some of the factors that cause leaks include:
Inaccurate or incomplete data
If your organization still manually collects and saves data, this might be the biggest cause of leaks in your pipeline. The problem with manual data entry is that it is highly error-prone, and a single error can cost you thousands in revenue.
This is especially the case for organizations that have a large customer base and have to deal with a lot of customer data. In such cases, it is best to invest in a data automation tool, to reduce errors and ensure that your reps are not making any mistakes.
Errors in data synchronization
Imagine this: Customer A subscribes to the basic plan of your product and is billed $10 per month for the service. After a month, Customer A upgrades to the premium plan which costs $60 per month. But, here’s the problem, your account manager forgot to make an update to their subscription plan pricing. The result — revenue leaks.
When data is incorrectly synced or not synced at all, you end up losing revenue without even realizing it’s happening. The more data synchronization errors you have, the more pronounced the leaks and their impact on your business.
Flawed engagement with customers
With how notoriously busy reps are, it can be all too easy for them to miss sending an invoice to a customer, especially when dealing with a large customer base. When this happens, the chances the customer will request the invoice themselves are pretty slim.
Without an automated system that helps your reps engage efficiently and track billing cycles, you may be losing revenue as well as potential upsells at the same time.
Limited pipeline visibility
If you and your team have limited or no pipeline visibility, it can be very difficult to see what’s happening in your pipeline and if revenue is leaking out. Without visibility, you can’t tell when or why deals go south, why customer engagement is stalling, and so on; all of which contribute in one way or the other to revenue leaks.
This is usually the case for businesses that do not have a centralized data bank that allows for generating insights and reports or businesses that still manually handle data.
Limited selling time
According to Salesforce, reps only spend about 34% of their time on selling-related activities. This means a good 66% of their productive time is spent doing administrative tasks that could easily be automated to save time and money. Every time your reps spend not selling equates to lost revenue.
Other factors that cause revenue leaks include but are not limited to:
- Inaccurate forecasting
- Inconsistent revenue engine execution process
- Misalignment between teams
- Slow movement of deals across your pipeline, etc.
How to spot leaks ahead of time
To spot leaks on time, you need to periodically scrutinize your entire sales process, from your CRM and pipeline to your team’s workflow and activities, to spot potential areas that could cause leaks.
But, this can be challenging to do manually, especially for companies with a large customer base or workforce. As such, investing in a revenue intelligence tool that can help you x-ray your entire sales process, pipeline, CRM, and workflows for potential leaks is highly recommended. But, not every solution on the market can accurately spot leaks ahead of time.
You need a Salesforce-native solution like Revenue Grid that can seamlessly integrate with your CRM and spotlight potential problem areas in your pipeline or processes where leaks may be happening (or might eventually occur). With Revenue Grid, you get real-time revenue leakage analytics, allowing you to spot leaks and their causes ahead of time and plug them, so they never happen again.
Revenue Grid also prevents leaks by automating key sales processes such as data capture, customer engagement, and conducts revenue leakage audits using data-based insights and AI. In the next section, we’ll show you how to use Revenue Grid to stop revenue leakage on time.
4 steps to stop revenue leakage
1. Auto-capture all relevant sales data
One of the biggest causes of revenue leaks in businesses is data entry or synchronization errors. To eliminate leaks, the first thing to do is to centralize your data in a way that allows for no errors, by automating it. Automating your data capture means you have accurate and updated data in your CRM always.
An excellent way to achieve this is by using Revenue Grid’s data capture tool, which automatically captures and saves customer data from all touchpoints (emails, calendars and communication tools) to your CRM.
2. Analyze data with AI
Once you’ve pooled all related sales data into a central source of truth, the next thing is to look through these collected data to spot where and why leaks may happen. But, manually sifting through hundreds or even thousands of customer data is not realistically possible and (even if it is) you might be unable to spot the problem areas. But, with a revenue intelligence tool, it should be a walk in the park. With a tool like Revenue Grid which has revenue leakage analytics, you can analyze the captured data with AI and easily spot when and where the leaks are happening and the reasons behind them.
3. Implement company-wide changes in the sales process
Once you’ve established where and why revenue leaks are happening, you can then implement company-wide structural changes that ensure your team follows the right processes every time to avoid leaks.
For instance, if the leaks happen because your reps forget to follow up with customers after a critical meeting, you can set up a trigger that automatically ensures your reps engage customers at specific key stages in the sales process. Revenue Signals from Revenue Grid are an excellent way to implement organizational changes to prevent leaks.
Revenue Signals from Revenue Grid are an excellent way to implement organizational changes to prevent leaks. These Signals provide real-time and contextual notifications that guide your team on the next best action at strategic points in the sales process.
4. Measure the effectiveness of changes
It’s not just enough to spot and fix the leak, you also have to measure the effect of fixing the leak to ensure it is successful. For instance, if your realized committed pipeline and forecast remain misaligned even after fixing the leak, then there’s a good chance that you need to iterate the entire process.
Of course, it might not be easy to measure the effect of changes made unless you use a revenue intelligence tool that can help you visualize the difference in your pipeline and processes after plugging the leaks. Once you can tell that your revenue is improving or meeting the forecast, only then can you rest assured that you’ve fixed the leaks.
Ready to plug the leaks with a revenue intelligence tool that works?
With the industry’s leading revenue intelligence tool, spotting and fixing leaks in your sales process is easier than ever. See how Revenue Grid can help your business stop revenue leakage for good.