Get more out of your business with additional revenue streams, and ensure that your business is as resilient as possible.
As a business owner, you may not know what the future holds, but you can certainly prepare for it by properly future-proofing your company.
By setting up multiple revenue streams for your own business, you can stop stressing about income stability and devote more time to business development instead.
To get started, read on to learn more about revenue streams and how to successfully set up multiple streams as a recurring revenue model for your business.
Table of Contents
What is a Revenue Stream?
If revenue is the money that your business generates, revenue streams are the different ways that your company generates cash.
You’ll need at least one for a successful business, but most businesses eventually work their way up to two or more different revenue streams (learn why in the next section).
A freelance copywriter might provide services to large SaaS companies as their main revenue source. To supplement that income, they might offer copywriting courses to aspiring and beginner freelancers as a second revenue stream, and monetize their blog on running a freelance business to bring in even more money.
On the other hand, a web design and marketing agency might base most of its recurring revenue on client retainers, with website templates as a secondary source of revenue. For additional income, they might charge a fee when they refer clients to other businesses they work closely with.
Why Multiple Revenue Streams are Beneficial for Your Business
Your business needs money to run, of course, but understanding your revenue streams also helps:
- Protect your business from fluctuating demands or economic downturns
- Shed light onto the health of your business
- Predict your income from month to month
- Reveal opportunities to expand your business into new markets and increase your revenue further
When a business earns money through only one source of revenue, it becomes totally dependent on it — which could spell trouble if that single revenue stream suddenly dries up.
Multiple streams of revenue offer additional protection in the event that one source underperforms or crashes. You can rehabilitate it while leaning on other sources of income in the meantime, or ditch the failing one completely if it makes more sense to do so.
Say your business brings in $10K a month from client projects, but this month you made $7K instead. If you were completely reliant on project revenue, you might find yourself stressing out about how to make up the difference and cover all of your expenses.
But if you also make another $7K a month in subscription fees, you’d be less affected by the change in service revenue because you have that additional income to fall back on. You can thoroughly troubleshoot issues in your business without feeling like the loss will put you in the red.
4 Easy Steps to Successfully Create Revenue Streams for Your Business
1. Assess the Current State of Your Business
Start by reviewing your current sources of revenue, your customer base, and where your business stands in the industry or market. Do you make most of your income through one-time customer payments, a subscription fee model, or through a recurring revenue stream? What does each customer segment look like? How are your competitors generating revenue—through brokerage fees, usage fees, or some other revenue model?
Consider how each revenue stream fits into your business model, and if there are any gaps in your offerings that can be addressed.
2. Identify New Revenue Opportunities
The best types of revenue streams to pursue are the ones that take the least amount of effort to implement.
Increase your chances of success by going after low-hanging fruit. Consider revenue streams that appeal to existing customers, are complementary to your current offerings, or are similar to ones you have but target a new customer base.
If you’re feeling stuck, answering the following questions can help:
- Are there products or services that your prospects or customers consistently ask for?
- Can you tweak a particular service or physical product so it would be useful for another demographic?
- What are your competitors doing successfully? What are they doing that you can do even better?
- What do you wish your customers knew or did before they started working with you?
- What products or services would set your customers up for further success after they finish working with you?
You may also want to look at your current assets, including the skills your team possesses, and think of new ways to leverage them.
Don’t be afraid to dream big here—the sky’s the limit. Just make sure that, when you narrow down your options, they still make sense for your business. If an income stream doesn’t fit your brand or business model, it’ll be harder for you to implement.
3. Do Your Due Diligence
Once you’ve picked out the top contenders, now you’ll want to validate each of those ideas. Check with your audience to ensure they’re actually interested in your offerings. After all, it doesn’t make sense to roll out a product or service only to learn that no one will buy it.
So, send out surveys to your most engaged customers. Conduct polls for your social media followers. And if you plan on breaking into a new market, ask questions on forums like Reddit or Quora, or in the online communities where your new audience spends time.
Customer relationships are important, so if your customer base seems interested, draft a quick plan to determine if you can commit time and resources to this new offering.
Use your finances to guide your path forward. Accurate bookkeeping and financial statements can help identify which types of revenue streams will have a higher chance of success, based on your current situation.
Create financial projections (different forecasting models) for each revenue stream to discover which one is likely to have the greatest impact or the most success. Make sure to discuss your ideas with your accountant too—they may have insights that you wouldn’t have considered.
4. Analyze Your Results
Congratulations! You’ve launched a new revenue stream for your business. But your work’s not done yet.
For best results, measure and analyze the performance [what’s the key performance indicator?] of this new initiative. If you have the data, compare it against your other revenue streams from around the same point in time (e.g. three months after launch). You may also find it helpful to see how your actual revenue stacks up against your financial projections.
If the new addition is doing well, that’s great! Now would be a good time to think about what went well, what didn’t, and what steps to take next. But if it didn’t, don’t feel obligated to make it work. Cut your losses quickly, and start the process again with another revenue opportunity.
How the FreshBooks Revenue Streams Graph Can Help
To help you better understand where your money is coming from, FreshBooks has a Revenue Stream graph right on your dashboard. This gives you an at-a-glance view of your income streams, right when you log in.
Let’s say you’re a photographer who rents out your equipment to earn extra income. Without seeing how much money that’s making you over time, it can be hard to know if that transaction-based revenue has become a valuable way to diversify your income.
The Revenue Stream graph gives you valuable insights into your profitability by compiling the data from all your streams of income. It helps you make informed decisions in order to grow your business and plan for the future.
Of course, the benefits don’t end there. Use the Revenue Streams graph to:
- Assess the health and performance of your business at any time
- Know exactly where your invoice and non-invoice revenue comes from
- Compare the performance of one stream against all the others
- Identify dips in revenue so you can troubleshoot issues accordingly
- Easily spot trends so you can accurately plan for growth
- Make more informed decisions about how to diversify your revenue
Unlock Your Business Potential With a New Revenue Stream
As you can see, you don’t need a multimillion-dollar company to take advantage of the benefits that multiple revenue streams offer.
But whether your goal is to rake in the dough or just to have enough to support yourself and your loved ones, protecting your livelihood with different sources of income is a practical way to achieve the life (and businesses) you want.
Need a hand with the Revenue Streams graph? If you have any questions, feel free to reach out here.
This post was updated in April 2022.