Revenue is the hottest topic in business. How can I increase my revenue? How can I shed inefficient programs to bolster our bottom line? How can we optimize our workforce to ensure that we aren't wasting resources? All of these questions are regularly asked by decision-makers.
The percentage of revenue from new users is yet another aspect of revenue generation that companies track. While it is important to analyze the solutions to the questions above, understanding the percentage of your revenue from new users can help you understand if your product is generating buzz and providing the necessary value to new consumers.
The percentage of revenue from new users is simply defined as the portion of your total revenue that is generated by new users. Understanding this metric is crucial to generate insights about where your product is in its lifecycle and if improvements must be made.
If your percentage of revenue from new users is falling, your revenue is dependent on loyal customers. This leads us to the question: why would you need revenue from your new users if your upselling and cross-selling tactics are generating high expansion revenue?
Although new business results in higher customer acquisition costs, adding new users that are enthusiastic about your product can provide a safety net in case your loyal customers decide to jump ship. Your existing customers and expansion revenue should total around 60-70% of your business's total revenue, with new business making up the rest. Depending on your business model, a 30-40% decrease in revenue could be catastrophic, which is why the percentage of revenue from new users is crucial to every business's bottom line.
Although we mentioned that attracting new users requires extra capital, there may be a few exceptions to that rule. There are three main ways to grow your new user revenue:
Leveraging a combination of these factors will result in new business, even if your product doesn't deliver as much value as an iPhone. Your product likely eases your customers' pain points in more ways than one; you just have to get the message to them.
Expansion revenue can be calculated by using the following formula:
You can also use this formula to find the percentage of revenue from new users in a specified time period. For example, you can take your monthly new business revenue and divide it by your total monthly revenue to track your monthly percentage of revenue from new users.
Targeting existing customers to generate revenue is the most cost-effective way to increase revenue, and you should generate as much expansion revenue as possible to lower the need for new business revenue. However, however impressive your expansion revenue may be, it won't be 100%, meaning that you will have to fill that gap with new business revenue.
Tracking the percentage of revenue from new users with a modern analytics solution like Toucan can reveal insights about your new users and how much they are spending. Contrasting these insights with your expansion revenue strategies can help you business understand where it can leverage factors in its favor.