When considering additional investment in the Japan business, judging by revenue growth alone can cause the quality of growth to be overlooked. Before investing more, it is important to agree with headquarters on which indicators to check.
- The indicators used to decide on additional investment differ between headquarters and the Japan office
- Revenue is growing, but profit and customer retention are not visible
- It is unclear whether to prioritize short-term numbers or mid- to long-term growth
- There is not enough data to explain the situation to headquarters
This article explains growth indicators to check before investing more in the Japan market.
Why Revenue Alone Makes Investment Decisions Hard
Even when revenue is growing, growth may not last if it is concentrated in particular customers or one-off projects. Before investing more, it is necessary to check what the growth is made of.
In the Japanese market, deals also often take time to get going, and short-term numbers alone can make it hard to read the business's progress correctly.
Growth Indicators to Check
When considering additional investment, check the quality of growth from several perspectives like the following.
| Perspective | What to Check |
|---|---|
| Revenue composition | Trends in customers and deals, dependence on top customers, and the share of recurring revenue |
| Profitability | Trends in margin and the expected payback on additional investment |
| Customer retention | Whether existing customers continue and expand, and the reasons for churn or lost deals |
| Sales efficiency | Time and number of deals from meeting to close, and results per salesperson |
| Organizational capacity | Whether the current team can handle additional deals, and whether hiring is needed |
Share the Indicators With Headquarters
It is desirable to agree with headquarters in advance on which indicators to check. Sharing what level must be met before investing more makes decisions less likely to waver.
Review the indicators regularly. As the business moves to a new stage, the indicators that matter change, so set aside occasions such as each quarter to check them.
Summary
- Revenue growth alone makes it hard to judge the quality and durability of growth
- Check revenue composition, profitability, customer retention, sales efficiency, and organizational capacity
- Agree with headquarters in advance on the indicator levels that trigger more investment
- Review which indicators to check regularly as the business stage changes
Contact
JBN supports foreign companies' Japan business from designing indicators through to planning and executing growth strategy.
To discuss organizing the indicators for investment decisions, please contact us.