Throughout the COVID-19 crisis, businesses with diverse revenue streams were able to weather the storm and pivot with every new challenge they faced. Despite the hurdles, they were able to implement new models and strategies to generate successful business growth.
Having multiple revenue streams can protect your business in economic downturns and create new opportunities in the future. Let’s take a look into revenue streams, and how you can use them to uncover new forms of income.
Take a step back before you move forward
If you’re ready to upgrade your business strategy, you need to look at your business from the ground up. That means understanding your customer and the market itself. Begin by asking yourself these three questions:
1.) What do we do for customers?
Start by identifying your customers’ deeper, more emotional needs. For example, a good daycare business does more than provide care for children, it gives parents relief from some responsibilities. Once you determine these deeper needs, identify how you can build value for your customers. In our daycare example, the business could provide early-level tutoring services. This would provide relief for parents by providing homework help for their children.
2.) How do customers use our products or service?
Analyzing how your customer is using your products and services provides another insight to innovate your strategy and find new revenue streams for your business. Think of each stage of your customer’s experience:
- How they receive your product/service: Is it delivered or picked up in-store, or do your customers go somewhere unique to receive it? Think about how you can make it more convenient and how that convenience is monetized. For example, many furniture companies now sell assembly services with their product deliveries.
- How they use the product/service: Is it for personal or business use? If a business is using the product or service, think about how you can offer them more services in their value chain.
- What happens when they finish using the product/service: The ending phase of a relationship with a customer has revenue potential. Think about the next logical step for your customer when they’re done using your product or service. For instance, a nutritionist can sell meal kits after they finish advising a client, or an online school can sell job placement services after students finish their programming.
3.) How do people access us?
Where do your customers look for and consider your product/service? This is often the most limiting feature of business operations as it closes your business off to just your captive audience, especially when decreased foot traffic eliminates random store walk-ins.
People are shopping for personal services, more expensive product purchases, and non-discretionary purchases online or remotely in ways never imagined. Access to products goes beyond just the ways that you sell the product. It also includes your distribution. If you want to grow your business’s presence, consider:
- Beginning a wholesale program
- Selling to new types of wholesale stores — if you’ve been focusing on big-box stores, maybe selling to boutiques might attract new types of customers
- Using independent representatives. An independent representative can help expand who has access to your brand and can do the intimate sales work for you.
Creating new streams of revenue
There are many strategies you can use to increase your revenue streams. Consider expanding your business’s offerings into subscription or recurring revenues, or exploring how to generate passive income.
Recurring revenues: Subscriptions are having a moment. If you sell a product or service that is used regularly, considering offering subscriptions. Customers will love it because they have a clear and stable monthly spend on something they would be buying anyways, and you’ll love it because you can charge upfront for a product/service that you deliver gradually over time.
Passive income: Getting your business in a place where it can generate passive income means first identifying your business’s assets. Physical assets include real estate, tools, or equipment that your business might be able to rent out to others. On the other hand, intellectual property, such as video content you’ve copyrighted or, software that you’ve built into custom spreadsheets or manuals, can all be licensed out or sold for download online.
Putting it all together: What to consider moving forward
Now, that you’ve can identified new revenue streams, here are two important things to consider going forward:
- Benchmark for success: When you make a big-picture change to your business, it’s important to benchmark where you are now. Start by revising your business plan to create a clear map for what new revenue streams to introduce, and then determine how you’ll measure success over time.
- Maximizing profits: As you start to roll out your new business lines, it’s important that you don’t compete with yourself. When a new business line comes out, it must add additional benefits to your customers, but it should not substitute those you’re already providing.
Choose revenue streams that add value and maximize your business’s profits. For example, a furniture store can introduce furniture rental services to complement the products they already sell. More customers can access the business’s products with the rental option because they don’t have to pay upfront. The business benefits because the rental program is structured in a way that the business earns even more in the long term than if the customer buys upfront.
By knowing how to develop multiple revenue streams, you can continue to build and protect your business from any crisis. If you need more support, get in touch with Pursuit today.
