Specialization is great, but don’t drill your business down to the point where your offering is too limited.
It’s a tough balance. On the one hand, you want to be specialized enough in your business to ensure that your unique selling proposition is the key focus and that your target customer is easy to identify and locate. On the other hand, if you have multiple revenue streams in your business, you will have a more stable enterprise that can keep a customer coming back again and again. What’s an entrepreneur to do?
Take for example, the case of Dana the Yoga Master*. Dana has a yoga studio where she offers memberships for weekly classes that take place during the day, based on a year long, prepaid subscription system. Dana is a very good instructor and a lot of people have posted positive comments about her teaching on Yelp, but yet she struggles to fill her classes, and her bank account.
What’s wrong with Dana’s business?
Multiple revenue streams ensure that your potential customers have different entry points into your business.
Let’s start with the inflexible one-year prepaid subscription system. With only a single point of entry into the business, and one that requires a hefty commitment on the part of the client, there are a lot of potential clients who will be put off.
New clients, in particular, might want a way to ‘try out’ a class or two before committing to a longer term. A short ‘trial’ option might create a point of entry that then leads to a conversion to a longer commitment.
Even existing clients who absolutely love Dana’s classes might not want to commit to a full year, for any number of reasons: they might be thinking of moving, they might be pregnant, they might be starting a new job that precludes daytime classes… Offering more subscription varieties—shorter terms, but at progressively higher prices would be one way to handle that: the more you commit, the less you pay, per class—or the ability to put one’s subscription on hold or to transfer it to another student would make those risks a little less daunting.
Other options Dana could offer to expand her repertoire: ‘one off’ Mom and Kid yoga classes, offered on weekends, or a once a week ‘after work’ session, would allow clients that could not come during the day to enjoy an invigorating session!
The point is to find ways to allow people with different interests, abilities and commitment levels to participate: those same people who did a trial run could very easily be converted to a longer term!
Multiple revenue streams ensure that your existing customers become repeat customers.
For any business, if you’ve got a customer and they buy what you offer but once that’s done (if it is finite), you have nothing else to offer, they have no reason to stay with you. It’s MUCH more cost effective to retain an existing customer than it is to find a new one, so it’s important to find ways to keep them coming back for more.
If you have a variety of options available to your customers, you can sell them different things and give them different options. Going back to the example of Dana, offering different types of classes is one way that she can get an existing customer to come back for different reasons. She could offer classes to specific groups, for example: ‘yoga for pregnant moms’ gives way to ‘yoga with babies’ and eventually ‘yoga with toddlers’. This same group could stay around time and again because the offering evolves to allow it.
Another frequently missed opportunity by businesses is the ability to diversify a little by adding products, which can add to the service stream without adding a tremendous amount to the workload. Dana could sell a special line of antimicrobial yoga mats, for example. Or perhaps pair up with a nutritionist and write a book that includes yoga moves and recipes for a healthy lifestyle. The point is to take what you already do beautifully and see how you can repackage and re-invent parts of it to be of interest to the same customer base.
Multiple revenue streams help with cash flow and ongoing sales.
Ultimately, having multiple revenue streams ensures that all of your proverbial eggs aren’t in one basket! You’re able to have a more consistent cash flow because of ongoing sales, for different services and products, at different times throughout the sales period. If sales go down in one area, you’re not left in the lurch.
The key with multiple revenue streams is that they be coordinated. Dana would be spreading herself too thin if she offered classes on using the internet, for example, as a secondary line of business. She couldn’t leverage one set of clients for both businesses and none of the marketing could be coordinated. Basically, it would be like running two businesses and, ultimately, this kind of division would be difficult to maintain successfully. Adding yoga products or diversifying to include a yoga teaching academy, on the other hand, make perfect sense.
Take the time to look at your business and your key customers and see what else you could offer them that would make a difference to you, to them and to your business. You’ll be glad that you did!
*Dana has been invented to illustrate a point in this post.