David Strebinger - CEO, PayWith
Most technology startups today start with a particular business model in mind and think they know how their company is going to generate revenue.
“We are going to charge monthly fees” or “We are going to get advertising dollars for access to our targeted audience” or “We make a dollar for every download,” etc.
But it is only when you get your product to market and you are presenting your business to the paying customers that you actually know how you are going to charge. Your paying customers ultimately tell you what your product is worth to them. They will tell you if your monthly fees are worth it, they will tell you if they are willing to pay a dollar for each download, etc.
Oftentimes, the revenue stream and model you started out thinking you were going to have morphs into one very different from what you had thought.
So a good strategy is always to start out thinking of four or five different potential revenue streams and models that you believe will be possible as you scale your business. For instance, our primary revenue stream is our monthly fees. We charge X dollars per month per customer for our services.
Our secondary source of revenue comes from business intelligence (BI) information that we can provide to organizations. We charge X dollars per report for BI reports.
Our third source of revenue comes from consulting services we provide to organizations. Our consulting fees are charged at X dollars per project.
Every business will be different, but starting with a multiple revenue stream approach at the beginning gives you both flexibility and increased revenue opportunities for your business.
Roy Osing - Author, Be Different or Be Dead
“It’s not good to have all your eggs in one basket” is a saying that speaks well to the business risk of relying on too few assets for a disproportionate amount of your income. Too much from too few leaves you vulnerable to the negative effects of unexpected economic and competitive events.
Five steps will help you develop valuable diversity.
1) Target customers where your wallet share is low. These are customers whose spending on your service or product comprises a low percentage of their overall spending in your particular business sector.
2) Sell current product applications provided to your most popular customer groups to other customers who don’t currently use your products in the same way. Use existing marketing materials in the sales process to maximize return on investment.
3) Develop new applications for your current products based on the wants and desires of your high-value customers. New application success depends on the clarity and “intimacy” of the customer requirements you identify. Emphasize the value derived from your products, not the technology used to deliver it.
4) If you are tempted to pursue new customers for your products, employ the “fast and easy” approach. Identify those who have good revenue potential and are easy to pitch to and quick to buy. Business risk is increased by going after new customers who pose difficulty and consume too many of your resources as you try to sell to them.
5) For the longer term, develop new products to satisfy unmet customer demand. This usually involves new technologies that are more difficult to adopt and take longer to assimilate.
But don’t be too diverse.
Provide what your customers care about, and be the sole provider.
Sarah Adams - Vice-president of small business, RBC
Diversifying what your business has to offer provides an opportunity to generate multiple revenue streams that can help a small business improve its profits.
There are benefits to diversification, and the ability to generate additional cash flow when business is slow will add value to your existing products and services as well as your bottom line.
If you are thinking about diversifying, understand what your passion is and how you can use it to build added value for your business.
Take your idea and look for opportunities to create a new stream of income around it. For example, you can sell products and services similar to ones you already offer. Or partner with like-minded business owners on new initiatives.
Having multiple streams of revenue can help your business, but you need to have a good strategy in place to make it work. Have a clear goal and understanding to justify the diversification. Be strategic and selective about the revenue streams you want to move forward with.
Focus on areas that will make the most financial sense for your business. As you diversify your business offerings, you may need to hire additional staff to help you manage the new streams.
Lastly, don’t forget to cross-promote yourself. Each revenue stream will have its own needs and targets, so make sure your plan reflects that.
