You made it! Your business is real, ongoing, stable. A call? Your client n.1 is withdrawing his orders. Another is requesting a delay in payment. Could you have anticipated to it?
As revenue flows in and success takes shape, it is easy to become confident in the long viability of one stream. However, excessive dependency can prove to be fatal, especially when a related analysis is missing. At the end of this article, you will know the criteria for a foolproof examination and the ways to multiply your revenue sources.
Big picture
“If customers comprise the heart of a business model, Revenue Streams are its arteries”
The building block describes the sources from which a business earns money. A business model can generate cash from one-time payments, ongoing payments or post-purchase customer service. Complementarily, different pricing mechanisms are present.
Important questions
Answering these subjects is the first step you must take in order to establish a dependable assessment:
For what value are your customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?
Ways of generating streams
SWOT Revenue Assessment
Using this familiar tool in combination with the business model canvas, we can determine that Streams belong to the external environment and thus opportunities or threats may result from the analysis of the section.
Feel free to use the table below:
Threats
· Are our margins threatened by competitors? By technology?
· Do we depend excessively on one or more Revenue Streams?
· Which Revenue Streams are likely to disappear in the future?
Opportunities
· Can we replace one-time transaction revenues with recurring revenues?
· What other elements would customers be willing to pay for?
· Do we have cross-selling opportunities either internally or with partners?
· What other Revenue Streams could we add or create?
Takeaways
1. Take advantage of digital data to uncover potential new areas of revenue expansion
Are there any gaps in the market that the data suggests might be lucrative?
2. If you have built your business around a specific knowledge or skill, coaching/consulting opens up a world of possibilities. Split up your services and start segmenting.
3. Create a monetized membership or subscription option.
4. Make sure you carve up your resources so that one revenue stream doesn’t take up the entirety of your focus. (Hojeige, 2019)
"Business and non-profit researchers have long argued that by establishing and maintaining multiple streams of funding… organizations are able to avoid excessive dependence on any single revenue source, stabilize their financial positions, and thereby reduce the risk of financial crises."- Peter Frumkin, Elizabeth K. Keating
Diversify or die?
It's not a case of to diversify or not to diversify but to what degree: as a startup, diversification should be limited to closely related products or customers. Young companies have many challenges from simply getting products/services to work, to scaling up, to finding paying customers. Diversifying spreads your focus over a broader range of products or customer segments increasing the chance of the startup taking their "eye off the ball".
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Written by Steven Pango
steven@innovate.today
