Revenue is a lagging indicator

leading-indicators

Gokul Rajaram has a great post on Medium entitled The one word great CEOs never use.

That word is revenue. He asks the question So what do they talk about instead with various internal and external constituents, if not revenue?

and answers it.

They create compelling narratives. They articulate the company’s purpose and strategy, as well as how it will win a market. They obsess over customers and products.

So what is this post about how CEOs like those Gokul Rajaram has worked with like Larry Page at Google, Mark Zuckerberg at Facebook and Jack Dorsey at Square doing in a blog about mentoring and startups?

Simple! This advice applies equally well to startup founders. Job #1 for founders is selling the vision and mission of the company, to investors, partners, prospective employees, advisors, the media – everyone. Given that the revenue stream for virtually all founders is di minimis, founders need to get their audience excited in other ways – the same ways these successful CEO do.

  • Frame winning in terms of market share — specifically, what percentage of all target customers in their geographic footprint are using their service.

  • They motivate people by being compelling storytellers and starting with the “Why”. They drive performance by pushing teams to think deeply about customer needs and to build remarkable, differentiated products that serve these customers better than anyone else does.

  • They set growth goals based on users, advertisers and/or other customer segments, versus those based on revenue and dollars.

Why? Because revenue is a lagging indicator. Revenue is a natural outgrowth of doing the right things on every other dimension that matters. Purpose. Strategy. Customers. Products. Employees.

So yes, you need to talk about your business model and projected revenues, but revenue projections are just that, projections.Focus on the leading indicators of your business: purpose, strategy, customers, products, market share, competitive advantage … Building the business case for your leadering indicators will create credibility when that time comes with investors when you need to talk about … revenue.

 

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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