Revenue planning capabilities are flexible enough to accommodate our constantly changing revenue model

Description

Being able to adapt to constantly changing revenue models is critical in today's dynamic business environment. Corporate Performance Management (CPM) software should have flexible revenue planning capabilities to facilitate the transition between various models. This process would allow the incorporation of different revenue structures, including varying income streams, disbursement timings, customer segments or geographic regions. Having such flexibility can greatly aid in financial forecasting, budgeting, and decision-making.

Example Use Case

Scenario: A multi-service digital platform company operates various online services, including streaming media, cloud computing, e-commerce, and digital advertising. The company's revenue stems from various sources and the model frequently changes as it explores new markets and service offerings.

Solution: The CPM software used by the company allows the end user to customize and modify revenue planning, matching each service's unique characteristics. For example, it can model the growth of subscription revenue for the streaming service, project the returns from cloud services based on usage, track retail profits from e-commerce, and factor in potential revenue changes from the digital advertising sector. When they decide to add a new revenue stream in an adjacent category, the system can handle the additional dimensionality.

Considerations

What makes a company unique is not how it spends money, but how it makes it. This is why revenue models are the most important and difficult part of implementing any CPM software. Revenue models can be straightforward, like selling X units for Y value - but that is the exception. Take a SaaS business for example. New business sales, renewals, upsells, new SKUs every 6 months, new support packages, implementation services, managed services, and so on. Or consider a contract manufacturer that decides to go direct to the consumer. There are millions of potential scenarios that could come up that require a revenue model to grow.

Due to this, it is important to make sure that the revenue model you build into a planning system is not a rigid tool that must be used in the exact same way every time. There will be exceptions. If the vendor says “maybe keep that revenue model in Excel” that means they are concerned that:

• Your company is immature and still dialing in the revenue model
• You plan to add to it in the future which will be more expensive than just building it right the first time

Either way, their reasoning for keeping it in Excel is the same - their platform is not good at easily adding or modifying a revenue model. Maybe they don't have enough dimensions. Or maybe augmenting an implemented model in the future is too difficult.

Questions to Ask a Vendor

• Modeling Flexibility: How easily can we adjust the revenue planning models within your system to fit our constantly changing needs?
• Capability: Can your CPM software accommodate multiple revenue models that vary significantly in characteristics?
• Ease of Use: How user-friendly is your system? Can non-technical personnel adjust revenue models as needed, or does it require specialized technical knowledge?
• Excel Model: Would you recommend we keep our revenue models in Excel for now, and just upload the results?