Is your Revenue Diverse?
How many customers is too many?
As you start your small business or entrepreneurial adventure you will have one or two customers to start with. Very few will be luckily enough to go viral and end up with a diverse revenue stream right off the bat. So it will be a process, but it’s one that you need to peruse, or have your sales team peruse. There are a couple of different ways to diversify your revenue and both are great options.
Multiple product/service offerings
Multiple customers
Both are pretty straightforward, but worth looking at in a little more detail.
Multiple Product/Service Offerings
Again pretty straight forward, instead of just offering widget A, you want to offer widgets A & B, maybe service 1 & 2. Obviously it’s best to start out with some complimentary products and services because you will be the primary provider of all. But the advantage of this is as there are delays in shipping for one product the other can compliment and continue to provide you revenue. As your customers use your product they realize they need a service or another product. Think pen holder for your planners or cases for your smart phone. A great way to determine these complimentary products and services is to engage with your customers and ask them. Use social media, e-mail, phone calls, etc. As customer provide some thoughts, listen and take notes. When you see a trend in requests spend some time reflecting. Is that an additional product or service you can offer. Or is that something you can team up with another small business or entrepreneur on. This can lead to additional markets, or market segments, as well as reoccurring revenue.
Multiple Customers
This probably affects larger products or the services that are sold to larger companies. Like software packages, or larger machines. These items are also more likely to be the business to business (B2B) type of transactions. In these transactions it makes sense to have multiple customer to develop a diverse revenue line. These larger transactions are going to take more time. They will require more effort for each transaction. They will be larger dollar amounts, but that also means there can be more competition. So plan to lose accounts. Plan to have a service or delivery issues that causes some delays in your revenue stream. How do you avoid that killing your small business? Have several projects in the works. Work toward, no customer being larger than 15%-20% of your total revenue. This will take time and this number will fluctuate from month to month. But as you build the diverse customer base you will have more freedom. You will be at peace more, know that one lost sale will not sink your ship. You will be able to fire those bad customers. You will be able to hire more great sales and operations folks, because you have a diverse revenue stream, that gives you confidence that you can support the head count.
So now what? Do you know your current product and customer revenue mix?
If not, spend some time to dig in and understand.
Also review customer feedback. There may be some low hanging fruit for your next diversification step.