How to design a revenue engine (a Big Problem article)
An engine is a complex thing. There are tons of parts, many of them moving at high speed, and everything has to work in split-second synchronisation for the engine to work. Modern engines are as much about electronics as they are about mechanics, but still the moving parts are what makes things go forward. Your business has an engine too - the engine that, when running smoothly, generates revenue for your business. This engine has lots of moving parts too; from marketing to sales to delivering your products and services, but of course the good news is that not everything has to be running in split-second synchronisation for the engine to work.
We call this the Revenue Engine.
(For details on the next Revenue Engine Design Workshop, check out this page.)
The Revenue Engine
In your business, your Revenue Engine has five major parts:
Marketing generates leads for your business;
Lead Nurturing builds trust and establishes you as an authority in what you do;
Sales gets people to buy;
Delivery is where you deliver your products or services; and
Follow Up is where you make sure they’re happy and encourage them to come back for more.
Here’s what it looks like:
The Revenue Engine is part of the Tornado Method, a comprehensive framework for designing, building and running a business. Get all 5 stages of your Revenue Engine working well and you have a business; get all 11 elements of the Tornado Method right and you have a great business (and a life).
Why design your Revenue Engine?
I became familiar with business model design and design thinking about seven years ago when I came across Business Model Generation - the book that introduced the Business Model Canvas and the concept of design thinking applied to business model design. The Business Model Canvas is a visual tool for designing business models, and I’ve used it extensively in my consulting work, helping clients design and build better business models and businesses.
But as good as the Business Model Canvas is for designing business models, it does not help enough to actually design the bits and pieces that go into a working business. We lacked a framework for turning business models into the specific things that you need to have a working business.
The Tornado Method was born out of that lack, and the Revenue Engine is one of three layers in the Tornado Method framework.
We all know that marketing is important (marketers will say it’s everything). We also know that you need to make sales, and you need to deliver your products or services in a way that delights your customers. So we spend a lot of time on marketing, and sales, and delivery - but somehow we still seem to struggle to get the revenue we want.
In my work with my clients, I’ve found two major problems that many businesses share:
Their revenue engines are too complicated. There’s so much happening in each stage of their Revenue Engine that nothing actually works very well.
The stages of the revenue engine are disconnected. Even if marketing works, the process of capturing lead information and starting to nurture them down the sales funnel is not working well enough.
So to build a successful business you have to design your Revenue Engine. It has to start simple, and each stage has to connect to the next to make the flow of leads to prospects to customers as seamless as possible.
Let’s take a look at how you can design a Revenue Engine.
How to design a Revenue Engine
There are five steps to designing a Revenue Engine. You’ll need a blank Revenue Engine Designer (you can download and print the worksheet below). Here’s what it looks like:
To make the steps below a little more real, I’m going to use an example. The example is for an info product - an ebook that will help dog owners get rid of fleas once and for all. (OK, this may seem a little silly, but I actually think it is a viable product and we should have a bit of fun while we’re doing this, right?)
We’re going to start with the products or services you want to sell.
Step 1: Add your products or services
So you’re going to write and sell an ebook titled “How to get rid of fleas: the ultimate guide for dog owners”. At this stage of your business you have only this one product, so we’re going to add it to the Sales stage of your Revenue Engine. Here’s what it looks like:
That was easy, right?
Step 2: Decide how you’re going to market
Your next step is to decide how you’re going to market your ebook. You have a pretty good idea that you will find dog owners on Facebook, so you’re going to create Facebook page and possibly a Facebook group as well.
Of course you have to have a website, so that goes into the marketing mix as well. And you’re going to try and hook up with the local animal rescue societies - you’ll provide them with a 1-page “How to keep your dog flea-free” pamphlet they can give to new dog owners (which contains a link to your website).
Here’s what your Revenue Engine looks like now:
So far, so good. Here’s one of the keys to using the Tornado Method (and in particular the Revenue Engine) correctly:
In the Tornado Method, marketing is targeted at potential customers whom you don’t know yet. As soon as you can address them individually (for example, by email), they move into the lead nurturing stage.
So, let’s look at how we capture leads and start nurturing them.
Step 3: Design your lead nurturing
You’re going to capture leads by driving them to your website (via Facebook and the pamphlet you gave to the animal rescue societies) and getting them to sign up for something free - let’s say a checklist they can use to make sure they’re getting the basics of flea management right. This is something of value (it’s called a lead magnet) and should build enough credibility for them to understand you know your fleas.
You also know that prospects are never ready to buy when you’re ready to sell, so you now need to keep providing them with valuable information until they’re ready to buy. You decide to do this with a weekly “Flea Battles” newsletter where you provide them with useful tips, success stories and offer the ebook.
Here’s what your Revenue Engine looks like now:
Step 4: Design your Delivery
Your product is an ebook, so delivery is simple - they’re going to buy it off your website and you send the PDF to them. You decide that you don’t want to mess with payment gateways and PDF delivery, so you’re going to use PayPal and Stripe for your payment processing and SendOwl for your shopping cart and PDF delivery (there are of course other options too).
But just delivering the ebook is not a great customer experience, so you’re going to send a welcome email after the purchase and follow up a week or two later with a “How’s it going?” email.
Here’s what your Revenue Engine looks like now:
Now for the final step - following up with your customers.
Step 5: Design your Follow Up
Happy clients will refer you to other potential buyers, and chances are they will come back for more. So you want to follow up with clients, make sure they’re happy, offer them special deals on new products or just ask them for testimonials.
You decide that you’re going to follow up with existing clients by email, and ask them to join the “Flea Battle Hall of Fame” page on your website. This page is going to be dedicated to pictures and stories of owners and their dogs extolling the virtues of your ebook.
Later on, you will kick off a “Story of the Month” section where you pick one of your clients, send them a special gift and feature them (with a picture of their dog and your gift) at the top of the page.
Here’s your complete Revenue Engine:
Why designing your Revenue Engine is so important
I’ve seen so many businesses with great ideas struggle because they don’t have all the elements of their Revenue Engine designed, built or tested.
The biggest advantage of designing your Revenue Engine is that you know about all the bits you need to have a working business. Your business just won’t work if you don’t have all these bits in place.
As I mentioned at the start, there are two things that make a Revenue Engine work:
you have all the bits in place, tested and working; and
each stage connects to the next stage as seamlessly as possible.
In the example above we’ve made sure all the bits are there. The connections work as follows:
Marketing drives potential customers to the website.
Visitors to the website are encouraged to download the Basic Checklist which places them in the Lead Nurturing stage.
Leads are nurtured through the weekly Flea Battles newsletter which also encourages them to purchase the ebook.
When they’re ready to buy, a link in the newsletter (or website) drives them to the sales page.
When they buy, Delivery kicks into action and they get the PDF and a thank you email.
Finally, you keep following up with the Hall of Fame and Owner of the Month.
So you not only have all the bits in place, you also know how they connect to each other.
What can still go wrong
The example above is of course very simple, but the principles I’ve shown here apply to every business that sells info products (including online or self-study courses). I use the same methodology to help consultants, coaches and business service providers (like branding businesses, website developers or marketers) design their revenue engines.
But things can still go wrong.
If you try to build something people don’t want, you can have the greatest Revenue Engine in the world but still not make the sales you’re looking for. You may even have a really great product or service, but if you present it badly people won’t buy. Or your pricing may be wrong, or your brand does not inspire confidence.
These “other things” that can go wrong are covered in the remaining 6 elements of the Tornado Method. Things like your brand and business model fall into those elements, as do your product ladder and pricing.
But in the end you have to have a working Revenue Engine, and I hope you now have a better idea of how you can design one.
What you can do now
Designing a Revenue Engine is one example of how to solve a Big Problem - read this article for more on how to solve a big problem - even if you don’t know how.
This article is an abbreviated excerpt from my upcoming Lifestyle Business Foundation Course which helps entrepreneurs build a solid foundation for their business - and have a life as well. Sign up for my newsletter (and get the Beginner’s Guide to the Tornado Method free) to get updates on when the course will be available.
And good luck building your business!