When the pandemic swept over the world and lockdown measures were put into effect in many places, a lot of companies faced revenue loss. They had to implement strategies to keep businesses afloat, including budget cuts, curtail of supplies, furlough, shut down of stores and manufacturing facilities.
Certain companies, however, took the crisis as an opportunity to diversify their businesses and mitigate losses, among them, fitness trainers who introduced exercise programmes for online audiences, restaurants and retailers pushing online sales and delivery angles, event space providers turning to web conferences and seminars.
While some approaches help to sustain revenue, these businesses have also opened doors to diversifying their portfolio.
Even in the absence of a pandemic, companies should always review their business model lest they become overly reliant on one revenue stream for income. In other words, how about putting in a few more eggs in different baskets? Keep reading to find out more about how you can diversify your company’s portfolio and increase revenue streams this year.
The Definition of Revenue Stream
Before diving into the topic of portfolio diversification, it is essential to first and foremost understand what a revenue stream is. Simply put, a revenue stream is a company or organisation’s source of income.
A business can have either one or multiple revenue streams, and these are generally associated with the provision of services or the sale of goods.
Examples of Revenue Streams
Service Revenue
This type of revenue stream is obtained by providing a specific service or even several services to customers. Its value is calculated based on money per time, such as through daily or hourly rates.
Transaction Revenue
Most commonly encountered in the retail industry, transaction-based revenue represents proceeds from the sale of various goods. Customer payments determine it.
Project Revenue
Project revenue is a type of income earned by a business on a project to project basis. It is calculated from case to case and it can come from either new or pre-existing clients.
Recurring Revenue
Recurring revenue represents earnings that come in the form of payments customers make due to after-sale services or continuing services that the company offers. Popular examples of recurring revenue include subscription fees such as the ones charged by video streaming services.
What Is Revenue Diversification?
When a company is successful in its field and brings in constant income, it is very easy to become complacent. Studies show that roughly 75% of existing businesses fail at diving into new initiatives.
While this might work out for a while, you should be aware that revenue streams can potentially dry up, and this is before you factor in unexpected circumstances.
If there is anything we can learn in 2020, is that owning a business can be very unpredictable, and it would be wise to diversify revenue streams as much as possible.
Revenue diversification is part and parcel of a company’s portfolio diversification process. Besides providing new products and services to bring income through new avenues, a business should always add new customers, locations, and markets to its roster.
How Do I Diversify My Business?
Strengthen Your Customer Base
The global business economy is becoming increasingly customer-driven in 2020. Therefore, your client base should be your top priority when venturing out to diversify revenue streams.
On top of finding new customers, you should strengthen engagement with your existing customer base. Focus on products or services that can add extra value for your current customers. Some examples include designing membership sites or exclusive subscription services, which builds recurring revenue.
Identify Market Gaps
Do something your competitors have not thought about doing. Look into what the market is lacking, what consumers need and have yet to be met or which market have yet to be tapped in, and you will unearth new opportunities.
To begin your research into market gaps, a good place to start is by looking into the local and international market of your own industry, or the nature of your own business – your business excel in a certain aspect, you may want to tap into your existing resources and look into your existing strength to create something new and/or improved.
Diminish Risks on New Assets
New assets do not necessarily imply additional risks for your company. Instead of going too far out of your niche, you can also focus efforts into generating new revenue from existing data.
Relevant instances on how to better monetise what you already have access to in 2020 include targeting better audiences or increasing the average CPM (cost per thousand) on your ads. Take a look through your inventory and see what you can remove, then use that space to increase your marketing budget and capture more leads.
Focus on Thriving (Not Just Surviving)
Having a successful business in 2020 means more than just surviving. Focus on thriving and offer services that highlight your products better. You can take advantage of new technology when doing so, including increased brand engagements on social media platforms, developing customised mobile applications, and so forth.
When looking for ways to diversify your capital, remember that 2020 is client-centric, and a key to this success is to take advantage of existing data, and look into what is worth investing. This approach will allow you to more adequately leverage resources you already have, while finding new avenues for income at the same time.