Revenue leakage: What it is and where to look

First Heat is the pre-read for Forge Notes. In the forge, first heat is the metal's first trip into the fire, before anything else gets shaped. These three notes cover the basics. The Forge Notes get specific.

Revenue leakage is revenue you earned, or should have earned, that never lands on the P&L. It rarely shows up as one big loss. It shows up as a dozen small ones, each owned by nobody.

This post defines it, shows where it hides, and covers how to put a dollar figure on it before anyone starts fixing.

What revenue leakage is

The finance definition is narrow: unbilled usage, missed price increases, discounts nobody approved.

Price is the bottom line, for real. It's also only one kind out of seven types of revenue leakage:

• Price. You charge less than you should. Renewals go out flat, discounts creep, usage never gets billed.

• Flow. Deals and leads fall through. Inbound waits a day for an owner, new customers get dropped at the Sales to CS handoff.

• Time. People spend hours on the wrong work. Sellers doing admin instead of selling.

• Spend. You pay for it and don't use it. Tools and contracts nobody opens.

• Retention. Customers leave, or shrink on the way out.

• Timing. The money arrives late. Invoices go out weeks after signature, go-lives slip.

• Error. You fix it or credit it. Billing errors, contracts sent back for rework.

Why revenue leakage lives between teams

Every team measures its own job, and measures it well. Forge Notes 02 covers what happens next: scorecards stay green while retention doesn't move.

The leak sits in the handoff. Each team thinks the other owns the gap, and the dollars drain out in between.

Five handoffs to check first:

1. Marketing to sales

2. Sales to customer success

3. Customer success to renewal

4. Product to GTM

5. IT to finance, for the tools and contracts GTM runs onWhere to look first

Where to look first

Product

Features shipped and never adopted. Customers paying for modules they don't use, which is a renewal conversation waiting to go badly.

Operations

Priorities with no owner. Reviews that report status instead of changing the plan. Help tickets that pull people out of the work they were hired to do.

GTM

Gross and net retention. The share of the week sellers actually spend selling. The handoff from the signed deal to the first value a customer sees.

AI

Pilots with no owner. Automation that moved work to a new place instead of removing it.

The stack

Tools renewing on autopilot with a fraction of their seats in use. Forge Notes 03 shows how that one gets fixed.

How to size a revenue leakage problem

Before fixing anything, put a number on it by running through four steps:

Sizing a revenue leak requires you to put a number on it before you fix it.

Where this fits: Assay, Smelt

This First Heat maps to the first two stages of the six-stage cycle.

• Assay (Discover). Test the ore before you commit to it. Interviews, a data pull and a current-state map find where the leaks are.

• Smelt (Analyze). Separate the metal from the slag. Root causes, ranked by the dollars at stake.

Next: First Heat 03, the six stages, from Assay to Temper.

If you know money is leaking and can't say where, book a Spark Test. Thirty minutes, free, and you leave with the first place to look.

Dustin J. Richardson is the Founder & Fractional Operator of Rustin Forge Consulting LLC, based in Minneapolis and working worldwide.