Importance of Earnings Retention Ratio
Like funnel size, the underlying revenue retention rate is an important metric to achieve.
If these are unstable, it is impossible to compensate for them elsewhere, so it is the number one priority metric.
In the case of small and medium-sized businesses, this indicator can easily collapse with the loss of just one large customer.
So, if you are convinced that that one customer is the last big customer at risk
Manually override it.
If you are convinced that there are no other customers at risk, you can manually override the well-founded assessment of the revenue retention ratio.
The first two quadrants essentially examine and evaluate the fundamental factors of earnings retention.
The first two quadrants basically examine and evaluate the basic factors of revenue performance as the basic run rate at the beginning of the year.
Consider revenue retention and account growth for the following year, and further evaluate the revenue generated from new bookings.
Based on the close rate and the size of the funnel, the answer is the added revenue from new bookings.
Furthermore, we calculate the revenue to be booked for the year.
The maximum number of points we can get from the four quadrants and 12 variables is 1200 points.
If that score is 1140 or higher, then overall the managed business is in a strong position to achieve the goals you have set.
A score of 1000-1140 is a strong business.
It is ready to take off and is in optimal condition.
If your score is below 1000, you need to remedy the identified risk variables before you are ready to fly.
This test is designed to assess how your business is performing against your goals.
It is not intended to evaluate how you compare to your competitors.
You need to set your overall goals in a way that gives you an edge over your competitors.
I think this test is an excellent way to understand the sustainability of the business outcomes you are looking at.
Even if one variable is sub-par, it is a cause for concern and should be focused on immediately.
If you ignore these important variables, it will be a big blow to the business you are running.