As a business continues to grow, it can sometimes become difficult to maximise revenues – especially in highly competitive markets. That is why revenue management is so important, as it’s designed to maximise revenue growth.
It’s going to be essential for businesses to both understand revenue management and implement appropriate practices in order to remain competitive. In many cases, revenue can be better managed by developing a business plan.
What is revenue management
Revenue management is the process of ensuring maximum business revenue while continuing to sell the same number of products or services. This involves using pricing strategies and systems to maximise revenue yields.
This is a concept that has been commonly used in the airline industry, and applied to the process of selling enough seats to cover operating expenses. Once the expenses have been met, other seats can be sold at higher prices to maximise revenue. The same process can be used in the hospitality industries, or wherever resources are perishable.
Applying revenue management
Revenue management is an operating methodology, and focuses each group or department within a company on the required actions to to increase profitability. As focus is the core, it’s here where a business plan can be especially useful, laying the groundwork for departments and groups within the company.
Once groups and departments are focused, businesses can begin turning to metrics and monitoring in order to better understand the changes.
A slightly smaller aspect of revenue management, measuring revenue is essential in order to uncover actionable business information that cannot be found through other means. Through use of this process, businesses are able to clearly understand profitability.
By not measuring, business owners can only estimate whether or not the business is actually performing well.
Revenue management should become a key business consideration for your SME over the next few years, so as to maximise revenue and increase profit.