How to Expand Your Revenue Sources

How to expand your revenue sources

There are lots of different things you can do to expand your revenue sources. Some are easier or more obvious than others. Let’s look at some of the best ways to increase revenue.

1. Add services to existing product lines

An easy first step is to expand on what you already have. Let’s say you launched a product line a year ago that has done well. What else could you release under the same banner that would add to your sales? Are there potential accessories, add-on services or subscription models that would provide value to your existing customers?

The trick here is to think not of what you could create easily but what your customers could genuinely use. An example would be someone who sells custom bikes. Perhaps they also start selling an accessory kit with a bar lock, an attachable water bottle and a neon signal light for night riding.

The seller could offer this kit at checkout for an additional cost or throw it in at a discount for new bike purchases. Suddenly, they have a new revenue stream that is genuinely helpful to the customer.

If all you offer is a digital product, there’s a way to expand your revenue to physical products. For example, start selling printed versions of your digital items. My Social Book, for instance, allows you to print out your digital Facebook page.

2. Collaborate with related brands

Strategic partnerships have become sophisticated in the digital age. While traditional retail collaborations remain an effective strategy — such as bundling complementary products with purchase incentives — modern businesses are leveraging technology platforms to find partnerships that can increase revenue streams.

For example, a subscription box services partner can collaborate with multiple brands to create curated consumer experiences. So, a fitness subscription box might collaborate with protein powder manufacturers, athletic wear brands and wellness app developers.

CoFoundersLab is a great platform to find partners in the digital world, such as advisors, mentors, investors and co-founders.

3. Create membership tiers

Services almost always offer different subscription tiers.  Research shows that businesses with three to four pricing tiers see higher conversion rates than those that offer just two options. [Learn how to start a membership website from scratch.]

For example, a website builder might structure tiers as follows: a free version with basic features and platform branding, a professional tier at $15 per month offering custom domains and enhanced templates, and a business tier at $45 month per month that includes e-commerce capabilities, advanced analytics and support.

Once you give people a taste of what you do, they are more likely to go in for the advanced tools. Web Hosting Hub is a good example of this model.

4. Target a new audience

Maybe you should be expanding not your product line, but the streams of revenue from the customer side. While it is good practice to target a single demographic when you first launch, over time you may want to consider attracting new audiences with products, services or marketing aimed directly at them.

A good example is Netflix, which narrows its focus on specific demographics regularly based on its greenlit original series. If you go through its lineup, you can see where it has been attracting particular demographics with a different show meant to appeal to their tastes, age, gender, interests and more. [Related article: What We Can All Learn From the Netflix Model]

Another example of a company that has expanded its target audience successfully is Cyfe. It has partnered with an overwhelming number of online services so that you can connect your entire digital life inside one tool. The more services it partners with, the more it expands its customer base.

5. Cross and upsell products and services

Businesses should be looking at how they can upsell and re-engage existing customers. It’s significantly more cost-effective to upsell current customers than to find new ones — customer acquisition costs have increased by about 60 percent in the last five years according to research from SimplicityDX. Returning customers spend more, too. This tactic relies on having a wide range of products or services likely to appeal to the current customer base.

6. Embed financial services

You can team up with a financial institution to offer your customers a range of extra services from loans and credit cards to insurance and bank accounts.

Called banking as a service, you essentially become a white-label reseller of these services, leveraging the loyalty and trust customers have in your brand. Stripe has an issuing service that is a great example of this. They allow you to launch branded debit, credit and prepaid cards but they manage the entire back-end — it’s like renting your name out to the financial institution.

As well as receiving a monthly income from your customers’ use of their cards, you could encourage them to buy more from you by giving them an automatic discount when they purchase in your store or online.

7. Offer incentives for referrals

Nothing is quite as powerful as a referral from a current customer. According to Nielsen’s Trust in Advertising Study, 88 percent of consumers trust recommendations from people they know more than any other form of advertising. Yet many businesses fail to capitalize on this by not using referral programs.

That means telling them why their referral benefits them. Drive customer engagement with rewards like coupons, free items or premium tools for their efforts and you will see your referrals increase overnight.

8. Give special perks for new accounts

In addition to special offers for referrals, you can offer loyalty perks to people who are signing up for your service for the first time. You might offer a free trial period, a significant first-purchase discount or bonus features. Many software-as-a-service companies, for example, now offer extended 30-day trials with full feature access, resulting in conversion rates as high as 25 percent, according to industry benchmarks.

9. Try to match (then surpass) competitors

If you’re trying to find out what customers are willing to pay for, there is no better source of information than your competitors. They are drawing people that you aren’t, so they must be doing something right.

Competitive intelligence has become more sophisticated with tools that track competitor pricing, feature releases and customer opinions in real-time. This data-driven approach to competitive analysis helps businesses identify opportunities to differentiate themselves while meeting market needs on essential features.

Even competitors who are less successful than you can provide some insight into what other potential customers enjoy. Look at competitors’ services, perks or promotions, their methods of marketing, prices and the demographics they target. Then aim to be even better. [Related article: How to Keep Your Business Competitive]

10. Give something for free (but not for nothing)

One key content strategy is pay with a share. For example, someone creates an e-book, either as an individual author or as a brand and allows consumers to get it for free if they share the content on social media.

Say someone hosts a webinar series and allows people to view or take part in exchange for an email from the host. Still others offer contest entries for social media likes or free samples for following Facebook pages. This is a great tactic as you are giving away something for free while meeting your individual goals.

At the very least, you are building your list of leads reliably. That means potential conversions and consistent revenue improvements.

11. Leasing and renting your assets

If you have assets that you can lease or rent out, you can trade exclusive usage rights for revenue. For instance, Rent the Runway, an e-commerce company, allows members to rent designer clothing instead of buying it.

If you have spare space at your office or your staff doesn’t take up all the parking spaces, you can lease or rent those out for additional income, too.

12. Sell or buy advertising space

From banners in emails and/or blogs to ad breaks in a podcast or YouTube tutorial, advertising provides the means for partner brands to reach your audience.

You can charge a rate for every 1,000 subscribers for your partner’s brand and offer to be included in your email newsletter. If you run regular text marketing campaigns to your target audience, sell broadcasts to other companies that target the same customers.

Another option is to ask companies to appear in their email and text broadcasts. You could pay outright for it or you could use an affiliate marketing model so that you only pay when a sale is made.

13. Purchase a competitor

When you buy a competitor, you don’t only get their main product, you get their customer base, their additional revenue streams and their expertise. All of this adds to your overall offering and you can also use all of the above tips to maximize the revenue from the purchased entity.

Most businesses aren’t bought for a lump sum figure. Instead, buyers usually make a down payment and then repay the seller over an agreed course of time using the cash flows of the business they’ve purchased.

Why it’s important to expand your revenue sources

Diversifying income streams has become critical for business survival and growth in today’s ever-changing market environment. Companies with multiple revenue sources demonstrate greater resilience during economic uncertainty and are better positioned to maximize opportunities.

Here are the key reasons why expanding revenue streams is important:

• Reducing risk: Having multiple revenue sources means that your business is less reliant on one source of income. This leaves it less vulnerable to market fluctuations, changes in consumer behavior, industry downturns or broader economic downturns.
• Enhancing financial stability: Expanding your revenue streams means that your cash flow is more consistent. This helps to build a financial cushion as well as make for easier operation expense management.
• Tapping into new opportunities: Looking to expand revenue sources actively means you can tap into new markets or take advantage of emerging trends. This keeps you one step ahead of the competition.
• Encouraging innovation: Looking for new revenue streams can drive internal innovation. This might lead to new products, services or business models which means you stay competitive and one step ahead of your peers.
• Growing over the long term: Multiple revenue sources means sustainable long-term growth. This is because diversified income streams bring stability to your overall profitability and scalability. In turn, stability means you are more likely to have money to reinvest in the business, promoting further growth.
• Diversifying the customer base: Offering a broader array of products or services means you appeal to a wider audience. This reduces the risk of revenue loss due to changing preferences. Diverse offerings can also increase customer loyalty by meeting a wider range of customer needs.
• Being resilient to change: Businesses with multiple revenue streams are better placed to react to changes in the market, such as new regulations, technological advancements or shifts in consumer behavior. They are also more able to be proactive and flexible in the face of emerging trends and demand.
• Maximizing profit potential: Diversified revenue streams can increase profit margins. Cross-selling and upselling opportunities naturally emerge when you offer complementary products or services, optimizing each customer relationship.

Expanding business revenue sources is not only a strategic choice but a necessity whichever way you look at it. If a business is to thrive in a dynamic and competitive environment, then having diversified income streams means it can mitigate risk, increase financial stability, capitalize on market opportunities, drive innovation and achieve sustainable long-term growth.

Kimberlee Leonard and Ann Smarty contributed to the reporting and writing in this article.