Boosting Revenues and Resilience Through Diversification

Boosting Revenues and Resilience Through Diversification

It’s not easy running a business in the dynamic times we live in. Customer needs and preferences are constantly shifting. New competitors continue to emerge. Economic uncertainty holds the potential to weaken sales. And one-off market disruptions can cause a whole range of challenges to cash flow and revenues.

How can you strengthen your business to withstand the inevitable ups and downs? One strategy is diversifying your revenue streams. Diversification simply means that you’re not putting all your eggs in one basket — you sell multiple products and/or services, you appeal to multiple demographic or geographic markets, you identify creative ways to monetize your expertise, etc.

The payoffs of diversification may be substantial:

• Reducing risk – Relying on one major product or customer segment can make a business vulnerable to losses in a downturn. With multiple revenue streams, if one is compromised, the others may serve as a counterbalance.
• Stabilizing cash flow – A well-planned diversification strategy works to buoy sales during seasonal or unexpected slowdowns to keep revenues revving and cash flow flowing year-round.
• Building sales – When all streams are going strong, sales potential multiplies, generating additional revenue and providing new avenues for growth.
• Deepening customer relationships – The more ways you engage and support your customers, the more loyal they may become.
• Strengthening competitiveness and investor appeal – Establishing your company’s unique mix of revenue streams differentiates it among peer companies and may make it more attractive to investors, who look for financial stability and strategic leadership.

Ideas for diversifying your business

There are many ways to diversify your business. Here are some general areas to consider, keeping in mind that what’s right for one business may not be right for another. As you consider alternatives, choose only those that are aligned with your brand, your capabilities and the resources available to support your efforts.

Develop complementary products or services

You know your industry and your customers. Why not make the most of that by selling new products or services that pair well with your current offerings? You have the opportunity to not only increase revenue per user but also build brand loyalty. For example, if you own a gym, you might consider adding an on-site juice bar, menu planning services or home personal training sessions. If you sell software programs, you may find that your customers would also appreciate IT consulting or system maintenance services.

It’s smart to do some focus groups or informal research to gauge customer sentiment around various options before you dive into a new venture. Make sure they’re open to buying what you’re selling!

Expand your reach to new markets

Broadening your reach to a wider audience can make sense, provided what you’re selling appeals to that demographic. You can branch out in a number of ways: by opening an e-commerce site that reaches a different audience than your brick-and-mortar operation does, by moving into new geographic markets by opening locations there, by adjusting your marketing approach to appeal to different age demographics or by establishing strategic partnerships with companies that serve different customer segments than your business does.

For example, if you are selling portable saunas to millennial and Gen Z customers for their post-workout and mental wellness benefits, you may want to try marketing them to older generations by focusing on their potential to ease joint pain and inflammation. Or, if you own a high-end clothing boutique, you might consider partnering with a local luxury hotel, where you may be able to introduce affluent guests to your fashions through VIP shopping packages or exclusive trunk shows.

Package and sell your industry expertise

The knowledge and expertise you and your team are building every day may prove to be more valuable to your company than you realize. Think about how you might monetize these assets to create new revenue streams:

• Could you attract registration fees or sponsorships to support webinars, workshops, conferences or other events you develop and host?
• How much would customers pay for e-books, how-to guides or online courses you create to instruct them in their areas of interest?
• Would listeners pay for a subscription or premium membership to follow your podcasts?
• Have you built proprietary software or systems you’d be willing to license to other companies to earn ongoing royalties?
• Would any members of your team be comfortable providing consulting or coaching services in their areas of expertise?

Put your diversification plans into motion

If you are ready to embark on a revenue diversification strategy, Dollar Bank is here for you. From Business Express Loans and term loans to business credit cards and lines of credit, Dollar Bank offers flexible financing options to support your initiatives. Schedule an appointment with our Business Lending team for more information and insight.
 

This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. Any reliance on the information herein is solely and exclusively at your own risk and you are urged to do your own independent research. To the extent information herein references an outside resource or Internet site, Dollar Bank is not responsible for information, products or services obtained from outside sources and Dollar Bank will not be liable for any damages that may result from your access to outside resources. As always, please consult your own counsel, accountant, or other advisor regarding your specific situation.