You know you need to increase revenue. But write "increase revenue" on your to-do list and I'd be willing to bet that you never get around to it. The problem will defeat you before you ever really get started.

And therein lies your real dilemma: Where do you start? What levers can you pull to bring up your bottom line?

If you'll allow me to make a brief detour back to high school math, I'll show you.

To get your mind around it, here's a simple formula:

(#*%*\$)/t ~ Revenue

OK, it doesn't look all that simple, but it is. Let’s break it down:

# = The number of leads you get per month.

% = The conversion rate of deals into transactions. For example, if 100 people call you, and out of those, 10 buy, your conversion rate is 10%.

\$ = The average amount you collect from a customer in a single transaction.

t = The average amount of time it takes to close each deal.

~ (squiggly guy) = This symbol indicates a proportional relationship.

Revenue = The amount your sales pipeline generates per month.

What does all of this mean?

If you think back to Algebra class, by increasing variables in the numerator or decreasing variables in the denominator of a fraction, you will end up with a larger number. Also, if you have a number that is proportional to revenue and that number increases, so does your revenue. Therefore, if you can increase #, \$, or %, you increase revenues; likewise, if you can decrease t you can increase revenues. Oh, and the really cool thing here is that if you can make very small positive changes to each of these variables you are essentially leveraging the “Compound Effect” as described best by Darren Hardy.

An example:

Let’s say you’re a business consultant. You get 40 leads a month, and you sell to two of them. Your average sale is \$5,000 and it takes you 10 hours to close a typical deal. Units aside (to simplify), your formula would be (40*5%*5,000)/10 which gives you the magic number of 1,000.

Now, let’s say you increase leads by 10 (25%), improve your closing ratio from 5% to 10%, up your average transaction size from \$5,000 to \$6,250, and decrease the time you need to close each deal from 10 hours to 7.5 hours (25%). Your magic number is now about 4,167, which translates to a revenue increase of about 400%. The compound effect at work!

So how do you improve each one?