4 ms·

Revenue is the most famous of the easily gamed. Target free cash flow.

• lifeisstillgood 12y ago
  Errr - can you explain. I would like to increase my revenue by 20% if you have a simple solution I'm all ears!
  • tiquortoo 12y ago
    I increase revenue $1 and increase expense $1.50. If you target profit I could increase profit, but you take 18 months to collect. Free cash flow targets revenue, leading to profit that is collected ahead of expenses. Their may be a more technical definition, but thats the gist.
  • potatolicious 12y ago
    Drop your price by 50%. Or start selling dollar bills for 95 cents - bet your revenue numbers will go off the charts. I think that's what the previous poster is getting at - getting a lot of revenue isn't hard if you're willing to throw core parts of your business under the bus (say, profitability). More generally though optimizing for any kind of financial target (whether revenue, profit, or otherwise) can still be gamed like any other metric. Your salesperson promises the moon to a client, closes a bunch of deals, looks great, and your company takes on a boatload of liability in the process - for example. Or, to take a real life example - drop the price of your software to 99 cents and ride a huge sales wave but find your clientele unwilling to pay anything more than 99 cents from then on (hellllo mobile apps). Lots of ways raw revenue/profit isn't by itself a great metric.
    • lifeisstillgood 12y ago
      Ah - I may have been looking at the wrong end of the conversion funnel - I was thinking more on the lines of how do I find new leads at all? Oddly I was reading how Buffets first insurance company was focused on writing profitable premiums only - to the extent of seeing shrinking business. It was unusual then and now, so I do take your point.