Best Practices for Diversifying Your Revenue Stream
We all know that it’s wise to regularly visit a physician for checkups. Even if you’re not feeling unwell, a doctor might be able to spot concerning results from lab tests and help diagnose and treat a problem before it becomes a bigger issue. The same idea goes for business; there are some areas of your company’s health that should be evaluated regularly to make sure underlying issues are addressed before they become toxic. One of the most important areas to consider for your business is the diversification of your revenue streams.
Diversifying your revenue can mean several things, so let’s take a deeper dive into the various ways this term can apply to your business. If most of your customers are in the oil and gas industry, you’ve likely experienced a tough past few years because of your lack of industry diversification. If more than 20% of your revenue comes from one client, you’ve likely felt the pressure of a lack of client diversification. Location diversification can be felt if all your business is in one place. For example, if you’re in Houston, last year’s hurricanes likely caused an impact. Finally, if all your business is with clients you’ve had for 20 years or more and you haven’t brought on new clients, you will feel the effects of tenure diversification when one of those long-term clients departs.
Now that you’ve identified some areas where a single-track focus has created a lack of diversity, what can you do about it? Start by thinking about which areas hold the most risk or would benefit most by adding diversity. Begin by thinking about your customer concentration and expand your list from there. Your focus should be on attracting new customers and making sure you’ve got more than just one large customer.
Speaking of that big customer, your relationship with them might provide some hints at ways to grow your business. What unique need are you solving for them? What keeps them coming back to you for more? Once you’ve identified that unique selling proposition, integrate it into your marketing messaging to attract other customers who might need to solve the same issue.
Remember that having 20% or more of your business come from a single client is a huge liability. Companies that focus solely on the “big fish” can end up failing because once they lose that business they have no other real revenue sources to sustain them. At goBRANDgo! no single client makes up more than 10% of our annual revenue. Our business model is designed this way on purpose so that if we lose our biggest client it might hurt, but it won’t end our business.
In summary, take the time to think about and identify what you do best and make that your key marketing message. If your business isn’t growing, it’s dying. By not diversifying your business in all areas, you’re setting yourself up for big headaches when changes come (and change always comes). Want some objective help at identifying areas of diversification weakness in your business? Contact us!