One of the biggest questions entrepreneurs have as they grow in their business is how to access other streams of revenue.
Sure, your bread and butter is paying the bills- but what can you do to take things to the next level? Well, you asked and I answered- with Five Steps to Setting Up Multiple Revenue Streams!
One of the golden rules of business is to find your niche and stick to it. The old idiom, “Jack of all trades, master of none,” comes to mind, and it’s true.
You can’t specialize in everything- and trying to can actually drive away your ideal customer and cost you revenue!
That doesn’t mean, however, that you can only have one revenue stream- in fact, the opposite is true.
So, how can you stick to your niche and still set up multiple revenue streams?
I like to use the example of a bakery. Let’s name our imaginary carb factory Badass Bakery. At Badass Bakery, we specialize in baked goods- obviously. It’s our niche.
Even though we specialize, we have many revenue streams- cookies, cupcakes, bread, and cheesecakes. We’re still operating in our circle of genius- in this case, baking goodies. But within that circle, we are doing many things to pull in revenue.
You have the ability to set up multiple streams of revenue, if you follow these steps.
1) Know Your Existing Revenue Streams
The first step to setting up multiple revenue streams is to know what you already have going on.
- What kind of products do you offer?
- What services do you provide?
- How many types of clients do you serve?
Now, you need to figure out what percentage of your total revenue each stream accounts for.
Let’s go back to Badass Bakery for a second. Each month, Badass Bakery generates $10,000 in revenue. Let’s suppose that revenue is made up of $2500 in bread, $3000 in cookies, $3000 in cupcakes, and $1500 in cheesecake.
So, now we know our revenue is 25% bread, 30% cupcakes, 30% cookies, and 15% cheesecake.
2. Know What Work Goes Into Each Stream
Now that we know how much of our total revenue each stream accounts for, it’s time to evaluate each one individually.
At Badass Bakery, cookies and cupcakes total 60% of our revenue. They’re relatively inexpensive to make and don’t take much time. All our staff can make them, they don’t take any special skill.
Bread makes up 25% of our revenue. It takes a little longer to make, but the ingredients are cheap and it’s cost effective to produce.
Cheesecakes account for 15% of our total revenue. The ingredients for cheesecake are expensive- and a cheesecake takes about six hours to make.
3) Cut Out What Doesn’t Make Sense
You need to look critically at your different streams of revenue- is the amount they contribute worth what it takes to sell them?
If not, it’s time to trim the fat.
It’s easy to see that at Badass Bakery, one of our streams of revenue is not pulling its weight. Cheesecakes are not cost-effective to produce and are very time-consuming. The amount of revenue they generate is not relative to the output they require, so it makes sense to cut them out.
So now, Badass Bakery sells cookies, cupcakes, and bread. Where to from here?
4) Look for Logical Alternative Streams
This step requires that you put yourself in your customer’s shoes.
What are your customer’s pain points? What are they struggling with?
Don’t be afraid to let people tell you what they need. You’d be surprised what you can find out by being open to feedback!
Think about the products or services you offer, or could offer in your sphere of genius. Can you offer something that solves a problem for your customer?
It’s tempting here to look to your competition for guidance- DON’T. Your business and your value should never be dictated by the behaviour of your competition. Focus on what your customer needs and set your price based on the value you see in your product or service.
At Badass Bakery, let’s say we’ve heard from our customers that they’re trying to be more health conscious. We’ve noticed customers skipping out on their usual orders to save their waistlines. We know, in our sphere of genius, that we can produce some fantastic and healthy muffins, maybe even some granola – these are logical alternative streams of revenue.
5) Explore Collaborations
Partnership is an excellent way to set up an additional revenue stream without significant risk or investment.
Reach out through your network and see who is also looking to try something new. Be open to doing things differently- you never know what opportunities will come your way.
Let’s look at the bakery again. We now have a couple of additional products to sell- but what else can we offer?
Badass Bakery could partner with a party planner to throw kids cupcake parties on the weekends. The baker could offer bread-making classes through a local organization, or partner with a food blogger to teach baking and food photography workshops.
The possibilities are endless if you follow these five steps to setting up multiple revenue streams.
- Know your existing revenue streams.
- Know how much work and expense each stream requires.
- Cut out the streams that don’t make sense.
- Find logical alternate streams within your sphere of genius,.
- Look for collaboration opportunities.
Open your mind and usher in abundance; give yourself the freedom to generate revenue in multiple ways.