draft notes 11/13/20
There is a wide variety of income differences, but the most commonly calculated is the amount of money people spend, which is called income distribution, and the other is the amount of wealth people possess, which is the distribution of wealth. There are several reasons that impact the overall growth of revenue of any type of business. The gap between the revenue and business generated the concept of economic inequality. If the business fails to earn the revenue for significant period, then the revenue gap will be experienced. (Greenwood, 1991) The revenue gap is mainly based on the benchmark of set targets vs achievement. In today’s world, we have vast varieties of tools, and by using them, we can analyze the trend and projection of revenue performance.
CAUSES OF BUSINESS REVENUE GAP
There are a number of reasons due to which business revenue start decreasing: the reduction of supply of the products due to termination of the manufacturing plants and supply chain problems; the consumer taste change and decline of your goods; economic conditions, and fluctuation of economy effects the business revenue gap. The frequent change of workforce can also affect the ability to sell products. Beside decline in sale, there is another main reason which is increased operational expenses or combination of increased operational expenses and decline in sales. Mismanagement or leadership failure can be the major cause of business revenue gap. The decisions of top management should be based on the vision of company keeping in view all the aspect of success and failure. One wrong decision can cause the spiral down of the company and the loss of business can be faced. There are several examples of the failure of businesses. Due to the poor management and wrong decisions, huge revenue losses are faced by the top-class companies in the world. In order to offset the lack of company income, the top management decision must be made with firm conviction, with adequate delegation, strong employment management, a stable society, transition, adoption of emerging technologies, and marketing patterns. Careful consideration has to be paid to competition in the industry. You need to know what the rival launches, and what the features of their new products are, so that you can then launch a better product that can minimize the risk of disappointment and improve the profits of the business.
INCREASED OVERHEAD COSTS
These are those costs which are related to the running of your business; these costs directly affect your revenue. The business revenue gap can be reduced if we control these costs. Overhead costs include the electricity bills, rent, marketing, insurance, increased workforce, and advertising. If the selling of the goods is steady over the year, but you grant your workforce an annual boost, you can see an erosion of your earnings unless the costs of your products are not increased.
The decline of revenue is also impacted due to the usage of more credit. If you take the credit loans from bank and pay your bills by using credit cards, it may happen that you get unaware of the interest rate until the end of year. So, it is better to make sure to use better credit cards and pay all debt services on time to reduce revenue loss.
EFFECTS OF REVENUE GAP ON BUSINESS
If we consider the profit versus revenue, then increasing the sales and revenues does not mean that it is the sign of the increase in profit. This can be possible that sales can be increased, and revenue can be increased but the decline in profit is due to profit erosion. Revenue refers to the amount of money you bring in regardless of how much the expenses are. (Johnston, 2005) This can be only happening in such a situation if you invest more money and your costs rise above the limit of your income. This occurs due to higher overhead and production costs, increased number of workforces, increased debt services costs, and no payback from the capital investments you make.
SOLUTION TO COVER UP GAP
Capital investment is another major reason of decreasing the business revenue gap. If you are producing a product that costs $10 per unit with your existing current machine, and there is provision of producing same product that costs $5 per unit with new machine, it is obvious that the profit from new machine cannot be gained immediately. This will take time of months or years to compete the cost of machine you purchased, and will erode profits temporarily. (Jones, 1988) In such case, the business revenue gap can be reduced by calculating the long term costs of capital improvements, which includes the initial cash outlay, training cost, debt services costs to determine if you can make investments which reduce the cost of doing business, and increase revenue.
HOW TO INCREASE BUSINESS REVENUE
To increase the revenue in business, there must be a positive strategy in place that will help focus more on customer demand, increasing the marketing and sales efforts, and reviewing the pricing. The strategy of running a business must be of increasing the income. (Olson, 2003)
Business Revenue streams are the source of earning money. To increase the revenue streams and the customer ratio, the marketing strategy will be an increase in more places where flow of people is high. Usage of technology such as online marketing, social media campaigns, emailing can help you to reach more customers. To increase the business revenue streams, the most effective way is to raise the prices. In competitive market, this is the problem but this can be done while considering the market situation and the competing trends. (Teece, 2010)
Below-mentioned are some of the operational marketing tactics which can be useful for business owners to reduce the other expenses and increase the business revenue.
• Goal Setting
• Focus on repeat customers
• Analyzing customer list for cross selling opportunities.
• Honing your price strategy
• Adding complementary services and products.
• Identifying the customers who are unaware of new products and making list of customers to whom new additional services can be offered.
• Offering discounts and rebates
• Effective marketing strategies through website, emailing, social media, public relation, content writing.
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ii. Johnston. (2005). Service operations management:. International Journal of Operations & Production Management., 190-210.
iii. Jones, G. a. (1988). osts, revenue, and business-level strategy. Academy of Management Review,, 202-213.
iv. Olson, P. Z. (2003). he impact of the family and the business on family business sustainability. . ournal of business venturing,, 639-666.
v. Teece, D. (2010). Business models, business strategy and innovation. Long range planning, 172-194.