The sudden and unpredicted impact of the coronavirus has led to a shortfall in business revenues or in some cases cutting it off entirely. This has made many affected business owners worried about what they could do to help their businesses survive.
To survive the pandemic many small and medium scale enterprises are learning the importance of diversifying their revenue streams and the apparent risks associated with relying on a single revenue source.
One of the reasons why diversification is a great strategy for increasing your business revenue is that it does not demand excessive investment to develop; it simply enables your business to maximize the use of its resources and reach their full potential. According to Peter Frumkin and Elizabeth Keating, authors of Diversification Reconsidered, “by maintaining multiple streams of funding…organizations are able to avoid excessive dependence on any single revenue source, stabilize their financial position and thereby reduce the risks of financial crises”.
Here are a few tips to help you diversify your business’s revenue stream successfully:
- Think About What Your Customers Need– the best place to start sourcing for ideas on what you can do to create multiple streams of income for your SME is your customers. Sometimes, business owners are overly focused on bringing in new revenue that they neglect their customers. You should be able to know what your customers are struggling with, what they need, by answering these questions you will be better positioned to offer your customers new products that provide them value. If you can’t tell for sure what your customers want, you can talk to them about their needs and pains.
- Research Before You Leap– Diversifying is not always a win for businesses, but in most cases where a business’s effort to build alternative streams of income fails, lack of proper research is the culprit. As a business owner, it is not enough to identify a million diversification opportunities, if proper research is not done you still may fail at all of them.
- Offer A Complementary Product or Service – A complementary product or service is used or consumed with another product. Carefully evaluate your core product or service and determine what complementary product or service you can offer. Apart from the fact that it would help you better satisfy the needs of your customers, a complementary product or service is an excellent way to increase your transaction amount per customer and your sales.
- Sell Your Knowledge – As a business owner, you can monetize the knowledge you have about your core business. What you know about your niche is valuable information that so many people would like to learn. You can give others access to that knowledge by sharing them in various content forms, like through webinars, ebooks, courses, or even workshops. Whatever way you chose or if you chose all, it is an excellent way to diversify your business’s revenue.
- Identify Valuable Assets – Audit your business assets to identify various assets you can turn into an extra source of income. For instance, you can rent out free office space from your office. You have to think of different possible ways your assets can be used to reach their full potential. This is another excellent to apply when sourcing for diversification opportunities.
- Look at your Business Model for Diversification Opportunities– your business model is full of new opportunities that can increase your revenue stream. You can choose to offer your product to new a market/customer group or you can increase your revenue streams by adding other streams like a subscription model or new sales channels.
Diversification is not something you rush into, that would only lead to failure. You have to be ready to critically evaluate the opportunities available for your business to take advantage of and then chose the best. The best way to look for opportunities for new revenue is to understand how your business can better meet the needs of your customers or how you can channel your products to entirely new customers. Don’t be afraid to try new ideas too.