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Diversifying Revenue Streams

Author: Jeffrey Moses Date: August 01, 2003

The mantra for investors always seems to be: "Diversify. Diversify. Diversify." The reasoning is that by placing investments in various types of stocks, bonds, real estate, and other diversified investments, an investor can protect assets. When one type of investment goes down, reasoning states, another type of investment may go up -- thus preserving the overall value of an investment portfolio.

Similarly, a small company should work to create more than one source of revenue. Resisting diversification puts the company's overall cash flow at risk. Even over the course of a year or two, most businesses experience rises and dips in cash flow. By having diversified revenue potential, one source of cash flow can buoy up a company even while other sources are temporarily slow.

Examples of Multiple Revenue Streams

It's not enough, for example, that a business writer has several clients in the same industry. If that particular industry slows, the writer's workload and resulting cash flow could be in jeopardy. Better would be to have clients in widely diversified industries. Better still would be to diversify into other related but distinctly different fields, such as consulting, sales via direct mail, partial ownership of a retail operation or leading seminars.

Even the smallest and most focused retail stores would be wise to offer products for at least three distinctly different markets. An antique shop, for instance, also could offer interior design services, fine art pieces, jewelry, or even framing in addition to merely selling antiques. A sports apparel and running shoe store also could offer a complete line of camping paraphernalia, boating equipment, or fishing gear. Similarly, a restaurant could offer cookbooks or travel books relating to the restaurant's specialty or could have an online store.

How to Set Up Multiple Revenue Streams

The key to creating multiple revenue streams is creativity and dedication. Setting up multiple businesses or diversifying a business takes time and energy, especially during the initial phases. The setup can also require financial resources as new products are added, store layouts are expanded or changed and Web sites are designed. In the long run, however, the creation of multiple revenues can help your business and you cash flow stay afloat.

RELATED: Get Recurring Revenue with a Membership-Based Website and How to Self-Publish Your eBook on Amazon's Kindle

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