Mall's Revenues Identify What Seem to Be

¶ … Mall's Revenues Identify what seem to be the important trends in TechMall's financial statements. Are these trends consistent with TechMall's strategy and the economics of a growing company? The trends that seem to be occurring are that Tech Mall is seeing slower levels of growth. This is taking place with less merchants signing up for the service (which is resulting in lower revenues for this segment).

Evidence of this can be seen by looking at the below table which is showing the total number of merchants in comparison with revenues from the setup fee. (Swain, 2012) Merchants vs. Revenues from the Set Up Fee Merchant Set Up Fee Revenues Merchants $1.948 million $3.088 million 4,751 4 $2.831 million 4,883 (Swain, 2012) These numbers are illustrating how the amount of new merchants signing up is decreasing from 46.6% growth (in year 3) to 2.71% (in year 4). This is consistent with growing companies that will realize slowing sales after several years.

They are also consistent with the growth strategy of the firm by focusing on a continuous stream of revenues from transactions and the statement fees merchants are paying. (Swain, 2012) Prepare a diagram for the next executive meeting that illustrates what factors determine or drive TechMall's revenue. Use the monthly revenue data and performance metrics in Exhibit 5 to assess important trends in these revenue drivers. What does or should TechMall do to manage these drivers.

For example, the number of merchants set up each month, combined with the average setup fee, drives TechMall's setup fee revenue each month. What then can TechMall realistically do to effectively manage these two revenue drivers (i.e., the volume of merchant setups or the size of the setup fee)? There are three factors that drive Tech Mall's revenues these include: set up, statement and transaction fees. The below diagram illustrates how each one of these areas contributes to the firm's bottom line results.

(Swain, 2012) Factors Impacting Tech Mall's Revenues Set Up Fees Statement Fees Transaction Fees Total Revenues To manage these drivers, Tech Mall needs to keep the different fees segregated and look at how this is impacting bottom line growth. For example, the company is currently facing challenges with declining set up fees. One possible strategy for managing these areas is to focus on understanding why each number is not consistently improving. Those areas that are experience a decrease, are indicating that the company should be concentrating on marketing to this segment.

Over the long-term, this will help the firm to maximize their returns. (Swain, 2012) What important points does Sheri need to communicate to her colleagues on the executive committee? In light of TechMall's strategy, what can the CFO office do to better support the company in pursuit of a strong revenue.