Multiple Streams of Income
By Ron Rosenberg
It's an essential truth of marketing that the number "1" is usually not good. Oh, it's nice to be able to say, "We're #1" at something, but to rely on just one of anything is asking for trouble. If your entire business model is based on one product, one market, or one technology, then you leave yourself open to disaster if anything happens to that "one" component.
That's why it's essential to make sure that you deliberately engineer multiple streams of income to help you balance out your revenue when something unexpected comes along.
Let's look at examples from several different types of businesses.
Why Don't We Start with Us?
In our own business, we have a kind of "three-legged stool" with revenue coming from speaking fees, product sales, and coaching programs.
The speaking fees come from clients who pay a fee to have me present keynote or breakout sessions at their conferences or speak at their corporate events. Product sales come when individuals or businesses invest in our various programs in marketing and customer service. The coaching stream involves ongoing work with a small group of clients to help them develop and grow their businesses.
When the recession hit back in 2009, travel and training budgets were slashed and people were unable to attend conferences and conventions as they had previously. Because of that, the associations and companies that put on these events were also forced to cut back, meaning fewer speaking engagements for us.
And when the economy began to turn around, everyone was still a bit skittish about spending money, so when speaking opportunities did appear, they came with budget limitations.
Had this been the only source of revenue for us, it would have been a very difficult time. Fortunately, we had the other two "legs" on the stool which were continuing to do very well.
Sorry About Your Loss...
Multiple streams of income are available in almost every type of business. For example, I speak a lot for groups in the funeral profession. You might think that these audiences are boring, but I can assure you that they're some of the most lively and engaged groups I present to. When they're out of the funeral home and have the opportunity to cut loose and unwind, they do just that.
When most people think of funeral directors and funeral homes, it's normally in the context of the death of a friend or family member - what's referred to as an "at need" situation.
And, as you might imagine, though, it can be a little tricky to actively promote your at-need services. Fortunately, there's a whole other market for funeral services - what's referred to as either "pre-need" or "pre-arrangement" where individuals actually set up their funeral arrangements and pay for them in advance, sparing their family the hassle and expense of having to attend to these details on top of the grief they’ll already be experiencing when the funeral actually takes place.
These are two different offerings that provide independent revenue streams.
That Tree Needs Trimming…
In the tree-care profession, businesses have three different markets they can tap into. The first is “residential,” where a technician will take care of trees at your home, or perhaps cut down and remove trees that present a potential danger to your family or your property.
The second market is “commercial” where the same services are performed not for an individual homeowner, but for an office complex, industrial park, or neighborhood association. The third option is “utility” where crews trim the branches of trees that have grown too close to overhead utility lines and could pose a danger if they were to break because of ice, snow, or high winds.
Many tree-care companies choose to specialize in one of these markets or another, but there are definitely three options available to them in terms of market opportunity, and there are likely similar options available in your business.
It’s Hot in Here!
One final example involves a service provider. HVAC (heating, ventilation and air conditioning) companies can have three distinct streams of income: new construction, replacement, and maintenance.
It’s generally a good idea to have your HVAC systems checked once or twice a year so your heating or air conditioning doesn’t fail at an inopportune time. As it turns out, many companies that install these systems also offer ongoing maintenance agreements that include system checkups in the fall (before winter) and in the spring (before summer).
If you remember, one of the side effects of the ’09 recession was that new-home construction came to a virtual standstill; so if an HVAC company’s entire business model was based on contracts it had with new-home builders, it would have gone out of business. In contrast, a company that had a mix of new construction, existing home system replacement, and ongoing maintenance would have experienced the near-complete loss of one part of the business but would have had steady revenue from the other two to weather the storm.
In the final analysis, if you’re dependent on “one” of anything for your success, you risk total collapse if anything happens to that single source.