Companies struggle to understand where to attribute their revenue, and it’s a hugely important issue. You cannot optimize what you cannot measure. The increasingly complex digital landscape has increased the number of touch points before buying, and many blame this as a reason. Hubspot says that the average new client has 8 touch points with your B2B brand before buying.  There’s also a commonly accepted “Rule of 7.”  The actual answer to this question varies widely by company and channel. But also…it doesn’t matter.

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It’s the wrong question for maximizing revenue. Focusing on the number of touch points focuses on new revenue only. Assuming you have decent customer retention, the majority of revenue is from existing customers.

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The question isn’t:  “Where have our new customers come from?”
The question is:  “Where has each dollar of revenue come from?”

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The 5 Buckets of Revenue

The top-level categories (aka “buckets”) to attribute revenue look strikingly similar from one organization to the next. Once you dig down to the 2nd and 3rd levels of attribution, they look wildly different.  But that 1st level is going to have just five buckets - the first three are for new customers and the last two are for existing customers.

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• Partner/Referral  (new)
• Inbound (new)
• Outbound (new)
• Retained (existing)
• Expansion (existing)

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You’ll find that whether you’re a $1 million or $1 billion revenue organization, every dollar will fit into one of these buckets.  It’s important to keep each of these buckets mutually exclusive and collectively exhaustive (MECE).  That’s consulting speak for, “They should not overlap.”

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The point at which a new customer becomes an existing customer varies by business model, but typically, it should be after the initial engagement.  In a Saas company with monthly contracts, that means after the first month.

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Partner/Referral

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This is my favorite bucket because it’s a huge driver for both multi-national corporations as well as your local pool company. Partnerships can be very formal programs or very informal referrals from other businesses and customers.

Word-of-mouth (WOM) also falls into this bucket.  Many organizations use WOM as a catch-all for anything that cannot be attributed elsewhere.  That’s ok, but this should shrink as attribution gets better.

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Inbound

This is any revenue produced by your marketing efforts. Lots of ways to slice and dice that up further, but a common separation is Free versus Paid.

Free are marketing efforts like an email newsletter, LinkedIn, your website (this include organic search), or press. Paid is search ads, display, video, print, conferences or any other paid media.

Inbound often gets confused as the means by which a client first contacts you. It’s not. If a referral calls you, that is still in the Partner/Referral bucket.

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Outbound

Outbound Revenue any revenue produced by your sales efforts. That could be an in-house rep, but it could also be an outsourced agency of Business Development Reps (BDRs). Most complex B2B sales will require a conversation with a sales rep at some point.  However, even if a rep makes a phone call and closes the deal, this may not be Outbound revenue. That customer might have first found you through a blog article, signed up for the email newsletter and then the rep calls. In that case, it’s Inbound.

What is important for revenue attribution is the first touch.  Why? Those other touch points are extremely valuable, but they don’t happen without the first touch. Every touch point is relevant for optimizing marketing, but the first touch wins the day for overall revenue attribution.

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Retained

This is any revenue derived from current customers if one assumed zero growth and zero contraction.  This is an easy concept in a recurring revenue business (i.e. subscription).  It is more difficult in a project-based business.

In a project-based business, we calculate the average project value. There may be a few different averages.  For instance, a certain type of engagement may have a larger value than another type. If you assumed this value stayed consistent into the future, that is your retention revenue.

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Expansion

Expansion Revenue is any revenue derived from upsells and cross-sells. Again, this will look very different in a recurring revenue business as compared to a project-based business.

There are many business models where a happy customer may have a long engagement, leave, and then return (i.e. staffing firms). In these businesses, the initial contract (or estimated project size) in either time period is retention revenue.

Any revenue above and beyond projections is  the expansion revenue.

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How to Track Each

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Tracking attribution has two components - where and how.

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Both are specific to the software tools that you have at your disposal. We love data visualization tools like the ones below to make this information easy to understand. It also makes it much easier to dive down to the 2nd and 3rd layers, change time ranges, and schedule reports.

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Can you do revenue attribution in excel?  Sure.  You can do just about anything in excel, but you’ll get both limitations as well as a time investment that becomes huge ongoing.

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As for the how, it’s easiest to think about this is terms of the New and Existing revenue.
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Existing Revenue

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The key is your accounting system.  You heard me.  Sage, NetSuite, Quickbooks, Xero…it makes no difference which one.  They all have the data you need, which includes:

• Customer Names
• Invoice Dates
• Invoice Amounts
• Products/Services purchases

With this information, you can model your retention revenue. You can also model the expansion revenue, but its essentially all other customer spend beyond retention revenue.  This may be information that also lives in your CRM. If so, you don’t need the accounting software.  But 100% of the time, it’s in your accounting software.

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New Revenue

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In your CRM, you should have a picklist called “Lead Source.”  Each one of these can be mapped to either Partner/Referral, Inbound or Outbound.  How the information gets into the CRM is highly variable.  It can be a “How did you hear about us?” question on the website and/or phone calls.  But it is typically more advanced.

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At Everpeak, we utilize Hubspot to capture most attribution points.  When a contact in Hubspot is pushed into Salesforce, the Lead Source is pushed through (as well as a ton of other touch points and data).  So every Lead and Customer in Salesforce is going to have a Source.  This gives us our New Revenue buckets.

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If you’d like to discuss how you can better attribute and optimize revenue for your own organization, schedule a call with us.  Revenue Attribution data will be some of the most powerful information for your business and a data set that executives, managers and investors can rally around.

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