If businesses weren’t constantly innovating before Covid-19, the pandemic certainly forced their hand. As a wave of lockdowns swept the globe, businesses needed to adapt quickly to survive. The most obvious pivot was moving business operations online. Zoom was nine years old when Covid hit, but it was 2020 when things took off: on 1 March 2020, they announced revenues had soared 326% year-on-year to $2.6 billion USD, and sales had soared 369% in the last quarter to $882.5 million.
With the increasing pace of technological innovation, diversifying services and adding revenue streams has never been more important for business success and continuity. So whether you’re looking for inspiration on how to expand your business, increase your profits, or you need brand new ideas for generating revenue, then let’s dive in.
What is a revenue stream?
If revenue is the amount of money that a business or company generates from the products or services that they sell, then the revenue stream is how they bring that money into the business. Thus revenue streams are the different channels that a business can use to earn income. Revenue streams differ depending on the business model or business activity, but can derive from one-off transaction sales or recurring revenue such as subscriptions.
A business may have multiple streams of income, while others may have a single stream. Typically retail or product businesses tend to have more diverse streams of income than service providers, though this doesn’t necessarily have to be the case.
Why should businesses seek multiple revenue streams in 2023?
All businesses need revenue to stay in business. But as experiences with the pandemic or supply chain disruptions in the last few years prove, things can change very quickly. A single revenue stream is seen by many as unreliable, risky and vulnerable. That’s why having multiple revenue streams can help protect your business and make it more resilient, particularly during uncertain times.
Another advantage of adding revenue streams is that they can help you scale faster. Earning income from different sources, depending on what they are, can help you get out of the weeds and grow faster using the same assets or resources.
What are some examples of revenue streams?
There are several ways in which businesses generate income. Here are some of the most common models:
Transactional revenue is earned from proceeds from the sale of goods. These tend to be one-off product sales, for example a bar of soap or a single project.
Service revenue is earned from proceeds from the sale of services. Whereas transactional revenue is based on products, service revenue tends to be based on time – for example, consulting services.
Recurring revenue comes from recurring sales and covers models such as subscriptions, memberships, leases, brokerage fees or advertising fees. With recurring revenue, the customer pays a fee on an ongoing basis to access a product or service. Recurring revenue is popular as it is arguably the most predictable and stable model to generate income for a business.
How many revenue streams should a business have?
There is no right or wrong answer to how many revenue streams a business should have as it entirely depends on the business. Factors such as business type, business size, customer or audience size, type and location, as well as the number of employees, size of teams and capacity of your team to serve and support multiple revenue streams all play a role.
That being said, in this day and age, it’s wise for any business not to rely on a single revenue stream. In the early days as you test out your minimum viable product (MVP), a single revenue stream might be all that you can manage. But the quicker you can add additional revenue streams, the more resilient your business will be.
Common ways to find additional revenue streams
Before you go gung-ho on adding new additional revenue streams, it’s worth investigating if there are other (perhaps easier) ways to get cash flowing in your business. You might find that there are some straightforward ways to trim costs or chase unpaid bills that you’ve not seen before.
After all, it’s not profit that makes or breaks small and medium businesses. It’s cash flow – the money coming in and going out. Did you know that 82% of small businesses fail due to poor cash flow management? That’s why you need to sort out cash flow and make sure your business is in good financial health.
Once you’ve done that, you can consider introducing new revenue streams.
1. Finding new ways to reach existing customers
Consider investing in new ways to reach customers. Perhaps that means reaching out through social media to the thousands of people who are now working from home. Or it could be taking your shop floor product online to reduce the need for face-to-face sales. The key is to keep the cash coming in, so get creative and adapt.
2. Diversify your product offerings
Adding products to your range can be a great way to increase revenue. This could be providing different packages at different price points, such as low ticket items that are easy to sell, with higher ticket items to market to a different customer segment. But make sure your pricing strategy is on point. If you want to maintain your competitive edge and ensure your business booms, it’s critical to check in regularly on your pricing strategy.
Another way to diversify your offerings is to provide a service on top of your products. Can you wrap up your expertise in your field to offer consultancy services to businesses who want to do what you do?
3. Explore recurring revenue options
Subscriptions are also a great way to offer your products and services and bring in recurring revenue. Did you know they come in all sorts of shapes and sizes? If you can find a way to provide your product or service as a subscription, this is a smart move for your business.
Business owners could also consider adding membership options to give access to your products and services, which is a type of recurring revenue and is a great way to diversify your offerings
You can also earn recurring revenue by recommending other businesses – so if you use a product or service that you rave about, why not explore any opportunities for partnering for referrals?
And don’t let your imagination stop there. Do you have space that you can rent out for advertising? This doesn’t just cover buildings or wall space – your website can also host banners displaying ads from relevant businesses who will pay you to get in front of your audience. Or do you have assets you don’t use all the time? Hiring out your car, building or even parking spaces when you don’t need them can help bring in additional revenue.
How to choose the right new revenue stream for your business
Gold shiny object syndrome is real, and it can be all too tempting for business owners to try too many things at once, or get overwhelmed and not try anything at all. But fear not, we’re here to help you cut through the noise and make the best decision for your business.
In order to figure out which new revenue stream will best fit your business, you need to know which revenue streams are currently working. If it ain’t broke, don’t fix it, right? And if it’s working well, then you can focus on ways to scale that success up.
So take a review of your business. An end of year business audit can help you get clear on your current assets and how your current team is performing, as well as help you identify if you need any additional resources or headcount.
Once you’ve assessed your current position, and you’ve got an idea of how you want your business to grow, it should be an easy step to see where you can add additional revenue streams.
For example, if you currently have a particular product selling well, can you sell a service package for it? Or a monthly subscription box?
If you already sell a subscription service, is there room in your team to provide a higher tier of service provision?
Or if your blog has high traffic, can you monetise it with ads?
At the end of the day, the best new revenue stream will be the one that adds the most value with the least complexity. And before you go making any final decisions, make sure that this new model is something that your customers or clients want – so our top tip is to ask them first.
The key to keep growing
It can feel hard to sustain your business and keep up momentum, especially in challenging times like this. Even in the best of times, with every new level comes a new devil, so the saying goes. But we’re here to cheer you on. You should feel good about your growing business – you’ve come this far, after all.
And when your business does start to grow, this isn’t the time to sit back and relax. You need to stay creative and ahead of the game – and that’s exactly what additional revenue streams are there for. Be proactive and always on the lookout for new opportunities. This is our advice for 2023 – so let’s make it a good one!
Are you looking for an additional revenue stream?
If you’re already using our platform, this is a great way to earn extra cash for your business. Our referral partners simply use a link to refer their Australian clients and customers to us, and we give you a thank you in return!
Find out more about our referral partner network here.