Today’s climate is an ideal time for owner managers to optimise their revenue streams and consider introducing new ones. However, it is extremely necessary to take customers’ needs into account alongside any potential financial impacts on the business.
The pandemic has pushed some owner managers into rethinking their business plans, including how they generate revenue. There have been many trading challenges such as supply shortages and shifts in consumer habits which have forced some companies to experiment with new revenue streams to boost profits.
How can starting up new revenue streams help your business?
Manage risk and remain viable
- Through securing multiple revenue streams businesses are more likely to manage risk and remain viable. For example, if the company is reliant on a single customer, which becomes insolvent or decides to change supplier, the owner manager could find their company in a financially troubled place.
What are competitors doing?
- Owner managers can improve their understanding of where revenue originates by analysing and segmenting the customer base, based on their sectors, business size and the products or services they’re supplied. It is also helpful to consider what competitors are doing as this can assist the business in identifying opportunities to strengthen performance. Although potential new revenue streams may seem like a valuable opportunity, they’ll need to be financed.
- For example, developing a new product would likely incur research and development and manufacturing costs. This investment often has to be made before the business receives payments from customers, so it’s important to build these upfront costs into cashflow forecasts.
Diversification
- When considering diversification, business owners often focus on expanding existing product and service lines.
- For example, considering whether existing products or services are in line with customer demand or whether it is possible to anticipate their future needs. They may also be able to discover new revenue streams by opening a branch in a new location or introducing their products and services to a completely new group of customers.
Are you considering the opportunities that are available?
When reviewing the marketplace, it is vital owner managers consider any opportunities to secure new revenue streams carefully. Developing a strong understanding of their customer base and ensuring any changes to their business model are financially viable will allow owner managers to manage risk efficiently while improving the financial position of the business.