Your business is going well, but sales have stabilized and the pace of growth has slowed down. It's time to add a new revenue stream. While that's a great idea in theory, in practice it can be almost as tricky as getting started in the first place. It is a big challenge for businesses of all sizes, considering that, according to at least one study, 95 percent of new product launches fail.
But don't be intimidated. You've done this before and this could take your business to a whole new level.
Regardless of the type of revenue stream you’d like to create, there are ways you can get the most out of any new investment. Here are some tips for successfully adding and testing new revenue streams for your business.
Consider what is most advantageous to your company. Every industry and brand has some limitations when it comes to adding new revenue streams. Big tech companies, for example, stray away from physical products and services that don’t align with their brand and come with costly logistical implications.
Look at your current business model and ask what’s missing. For example, a website generating revenue from subscription services may succeed by adding some e-commerce merchandise to its website (and vice versa).
Next, look at your competition. Your competitors may offer a type of product or service that you’re missing, as they are bound to have the most similar business model to your own.
Finally, look at some of the services and features of your business that aren’t directly earning revenue. Consider the ways you can change that. For example, if your website uses a blog for SEO purposes, maybe you could pursue ad revenue or affiliate marketing.
Once you have a few ideas in mind, it’s time to see if they are worth your company’s time and resources.
Smart ways to do this include:
Focus on customer interest and unanticipated costs that may crop up as you do your diligence.
Before deciding which ideas to launch, there are three important factors to consider: cost, demand, and scale.
What are the initial and ongoing costs? How much demand there is in your target audience, and how long do you estimate it will be before you are profitable? Is there potential to scale this new revenue stream in the future?
Take a look at as many metrics as much as possible, including user engagement, feedback, customer requests, and any findings from your competitor research. From there, you can crunch the numbers and determine the best approach.
Any move in business comes with risk, so it’s important to understand potential pitfalls, calculate potential losses, and plan ahead for them. What is the worst that could happen? Which of your options is the least risky? How do the risk factors on each of your options compare to the potential rewards? What can you do to mitigate the risks?
Even tech giants like Google have flopped on dozens of products over the years. For this reason, we suggest writing a plan based on your research, featuring how much you are willing to invest and the minimum amount of revenue you will accept over a certain period.
This written strategy should outline your approach for marketing, becoming profitable, ideal milestones, how you'll process payments, and the ways you anticipate growing and scaling. Having a plan to follow will help you stay on track and adjust as needed.
Once complete, sit down with your marketing, accounting, and other applicable teams to discuss the plan ahead. Get everyone on board and poke holes in your plan. Work out the kinks as much as possible.
Now that you know how to add and test a new revenue stream as safely as possible, take your time. It doesn’t have to happen overnight, so keep doing research and come up with a calculated approach to launch that works for your employees.
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