Why revenue streams are important for small businesses
- Business Rescue Business Growth
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Revenue is the driving force of any small business, a good income stream will help your business cover costs, grow and turn a profit. Revenue streams are central to the Business Model Canvas So, what are revenue streams? The Collins Dictionary states that: “A company’s revenue stream is the amount of money that it receives from selling a particular product or service.” It is how you generate cash. To be successful you need to look for a constant revenue stream. Building income streams is crucial for the development of your business. Here’s the low-down on why revenue streams are important for small businesses.
What small business owners need to consider when looking at revenue streams
Why revenue streams are crucial to the Business Model Canvas
In the Business Model Canvas, revenue streams concentrate on how the business will generate sales.
You need to break down the different ways you generate revenue in the Business Model, whether you have one or multiple income streams.
The revenue streams part of the business model is highly influential as it can be used to inform strategy and business planning. It also helps influence decisions on potential investments and is used in estimates on business spend.
Founder of Be Rescued, Maria Pombo, helps small businesses plan for growth. If you need any help creating a Business Model Canvas, get in touch to find out how Maria can support your business.
Revenue streams and cashflow go hand in hand
As revenue streams are about how you generate cash for your business you need to consider a variety of things.
Revenue streams and cashflow go hand in hand. It’s important that you get money in for your business on time. For example, if you sell services, ask for a deposit up front before starting the work and payment on completion. If you run a product business insist on payment on delivery or at the point of order or a deposit to cover your raw materials at the very least. Otherwise, you’re extending credit to businesses and have to provide cashflow for your own business to keep it afloat. The key to a healthy business is a good cashflow.
As a small business owner, it’s vital that you know what revenue you have coming into your business.
Your pricing strategy is crucial
When building income streams, getting a handle on your pricing strategy is crucial. The way you price your products and services has an enormous impact on your revenue streams.
Review your products and services to check that your pricing strategy is correct. It also helps to do some competitor research. But be wary of replicating their prices without looking closely at your offering. Your business might offer your customers additional benefits and you need to consider this when setting your prices.
Consider your target market when you’re developing a pricing strategy. A consultant working with small businesses may not be able to charge the same price point as consultants servicing major tech companies.
If you sell products in large quantities, you may be able to offer a discount. But be careful with promotions – don’t lose out financially. The exception to this rule is if you have a loss leader that brings customers into the business who are likely to buy higher value products or services.
If you provide high quality and you deliver value to the customer you can set a higher rate. Be confident in your pricing.
However, getting pricing right is sometimes a challenge for small business owners as certain products and services prices are either regulated or subject to a market cap, if you would benefit from an expert eye, get in touch with Maria at Be Rescued.
The importance of multiple revenue streams
The Danish proverb ‘Many small streams make a large river’ is hugely relevant to revenue streams.
Developing multiple income streams will really benefit your business. It means that you’re not dependent on one income source and therefore less vulnerable to an interruption of cashflow.
You might want to think about developing new revenue streams to generate regular cashflow. Automated income streams that help you create a passive income are great for small businesses.
Consider diversifying revenue streams from multiple sources. Always look at how any new products and services will add value to the customer as well as to cashflow.
How to create revenue streams
Building income streams is vital for business success. You might be surprised to know that you can diversify revenue streams by drawing on what already exists in your business.
Could you repurpose something you already offer customers? Can you package your services or adapt a product? Small tweaks make all the difference. Ask how this service can benefit your customers.
Customer feedback is gold dust for small businesses. Look through any feedback to see if you can identify a common need among your customers. This could be the inspiration for a new product or service.
You could earn while you sleep! Share your business know-how in an online course or an e-book to get a passive income.
Over the past year many businesses have moved their products and services online. Could your business sell additional products and services online?
Brainstorm ideas to help find new income streams for your business. We’d love to know what you come up with!
The end-goal
Revenue streams are crucial to businesses. The goal is to have constant revenue streams in place as this helps build a healthy cashflow and promotes business growth.
If you’re worried about your current revenue streams, get in touch with Maria at Be Rescued.
Maria can help with building income streams that work for your business.
At Be Rescued we help small businesses survive and thrive.
You might have noticed that our logo features a bee – we can’t wait to get busy as bees working on your business!