Importance of Revenue Diversification

“If I lose this client, am in trouble! “

It feels amazing to get your first major client, paying you more than all your other clients put together. This is common with small businesses that tend to have a singular focus or cater to a specific market niche. 

Nurturing one client and retaining them may have made sense 2 years ago until Covid-19 led to massive changes in the business landscape.

Many small business owners I have interacted with reveal that the pandemic has made it clear – one revenue stream is simply not enough.

Increasing your revenue streams mitigates risk and will help you survive and thrive in the long run. 

Three additional reasons why you should diversify revenue include: –

Increase visibility with target customers

With more than one revenue stream, you become visible across different markets and target audiences. This makes it easier to tap into other sectors that could boost your overall productivity and results. It then becomes possible to grow horizontally or vertically. The added benefit is making full use of your existing resources, enabling you to maximize your potential.

Minimize Competition

In any market, there are gaps or pockets of customers that are underserved. Diversifying your offering enables you to tap into revenue opportunities from these gaps, ahead of your competition. You can also stand out as a market leader in the sector so that even as competition arises, the target audience thinks of your offering as a benchmark.

Build a Stable Business Foundation

Diversifying your revenue opens the opportunity to spread your risk across business categories and industries. This increases predictability as you chart your potential income. Furthermore, if you lose a major client in one sector, you need not worry that there will be a devastating impact on your business operations. Diversifying revenue helps you stabilize your business against volatility in the market.

Elevate your Customer Base

Diversifying your revenues enables you to strategically increase your customer base. To be safe, the most a customer should contribute to your business is 15% of revenue. Using this as a formula, in the event of losing one customer, the business is more likely to continue with operations without too much disruption.

Plan for longevity. You need to create a long-term strategy, that includes the cultivation of your ideas and allowing time for them to be transformed to reality. Businesses that have one source of income risk an uncertain future. Explore your options with a professional from RCN CPAs & Business Advisors, by booking a discovery call.