One piece of crisis management advice is to diversify by creating new revenue streams.
Not putting all your eggs in one basket means that your business will be more resilient to unexpected conditions (i.e., pandemic). When your main source of revenue gets pulled out from under you, you'll still have back-up (and a bigger bottom line in good times).
How do you create a revenue stream that works in the real world? Relying on a single revenue source has always been a risk. The impact of the pandemic has made this fact more real and visible.
As far as long-term strategies go, diversifying income sources is one of the best ways to get your business in a more stable and secure position. Becoming more efficient and saving money also may help. The following are tips on how to identify and create new sources of revenue.
Speak to Your Customers
Nobody understands the needs of your customers like… your customers! So why not talk to them? What problems are they having? What needs are unmet that you could potentially fill?
Going directly to your customers to find out their needs can be done in many different ways, from one-on-one conversations to polls. However you do it, it’s a great way to identify opportunities for added value or new products.
Leverage Exisiting Resources and Contacts
What resources does my business already have? And how else could we use them? Many small promotions, printing and supplier businesses have used their industry connections to start making pandemic related products such as PPE, and have made more sales and clients than in previous years.
Tweak your product or service so it appeals to a new group of consumers or users. If you have a "high-end" product or service, consider a less-expensive version. Add features that will make your product or service appealing to a different group of consumers.
Expanding your product range is the most obvious way to generate more revenue. But it’s not the only way. Another option is to niche down.
How can you take your existing products and target them to new niches or sub-niches? Niching down has a lot to do with how you package up or market your products and services. Perhaps there’s a subset of your existing audience who you could target more directly. Or maybe you can tweak your offering to make it appeal to a new demographic.
Find Related Products and Integrated Services
Are there products that go along with what you sell or do that your customers or clients purchase from a different vendor? Perhaps there are training materials that you can offer as well. A medical equipment company, for example, found a new niche in providing ongoing training and support for its equipment.
The most aggressive version of this strategy is to buy a company that makes products related to yours. If you can swing it, this can be a very smart move. You diversify your lineup and remove a potential competitor from the playing field.
The basic question you need to ask yourself and your team is, "Can we do more?" This may include training, cloud services, apps, additional gear, monitoring or servicing - the possibilities are endless.
Find Out What's Next
Are technological changes beginning to erode your base? Don’t be the last in your industry to sense where things are going. Devote part of your business to meeting the needs of the “early adopters,” and then you’ll be ready if a major shift occurs.
If you don't offer your products over the Internet, add an e-commerce element to your website. If you already sell online, sell online more. Consider opening an eBay store, especially if you have miscellaneous overstock items in your warehouse. Rather than marking them down to next to nothing and undercutting new products, sell them on eBay.
Smart business owners, like the smart investors, place a high value on diversification. Take time to draw up a good game plan for your company so that you can prosper from this strategy for small business.
Consider different revenue models
There are many revenue models aside from direct-to-consumer sales. You might try, for example, offering products by subscription, or partnering with affiliates to generate revenue from commission. Adding new revenue models can help you diversify income.
The key is having something unique that addresses a problem and creates a valuable solution, has a large addressable market, and can scale globally.
Embrace change (but stick to your vision)
If there’s one thing 2020 has taught us, it’s that nothing is certain. And to survive, we must be willing to adapt to changing circumstances.
It’s worth bearing in mind that changes you make to your business in response to a crisis — including new revenue streams — should always align with your company’s vision and values. Otherwise you run the risk of alienating existing customers or damaging your reputation.
Ready to diversify?
Establishing multiple streams of revenue is a way for you to better weather a crisis and reduce future risk. It’s not easy—the first step is identifying where your opportunities lie. If you’re not sure where to start, the following are some questions to ask:
- How can I add value to my existing customer base? What other problems or unmet needs do they have?
- How might I adapt my existing products to target different niches?
- What other revenue models might I pursue?
- And what resources and contacts do I already have that I can use to my advantage?