Revenue Quality – Overlook This at Your Peril Part I

Revenue quality is a key component of your financial review.  If  you miss this – you have probably missed the boat and will find yourself with expectations of a company that cannot be met.  In other words you may have overpaid and worse yet – been bamboozled.  Revenue is tricky in the sense that it may be going up – that’s good – but the question is why?  You always want to see  increased revenue over time – it’s considered the basic strength of the business.  However you don’t the following; 1) revenue thats concentrated in only a few clients 2) revenue that has increased as a result of price increases not volume increases 3) revenue that is a result of one time revenue generating opportunities 4) revenue that may have been booked but at lower margins and 5) revenue that has been reoccurring but may not in the future.  In Part II we are going to take a closer look at revenue quality and the five preceding points.

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