4 Ways to Use New Revenue Streams to Grow Your Business
Editor’s Note: Entrepreneur, business consultant and university professor Michael Glauser offers a different take on what you really need to start, run and grow a successful business. Riding more than 4,000 miles in 45 days, Glauser spent 246 hours on a bike seat, climbed 155,000 vertical feet, visited more than 100 cities across the country and interviewed 100 small-town entrepreneurs. In “Main Street Entrepreneur,” Glauser shares the secrets behind the success of America’s small business owners and entrepreneurs.
Change is inevitable, so why not choose your path of change so you can grow your business in the direction you want? Nearly all the entrepreneurs I’ve interviewed over the years have made at least one pivot to create additional revenue for their business. Some have made two or three. Let’s talk about some of these remarkable role models in light of the four different ways you can pivot to grow your business.
1. Base Product to Base Market
If you launch a true business opportunity, this doesn’t mean you won’t need to pivot a bit before you establish your base product in your base market. Feedback from early customers will help you tweak your product, pricing, packaging and service system. Sometimes these early shifts can be quite dramatic before you gain traction. For example, Matthew and Kate Maloney created software to help businesses improve their Google rankings. To prove that their model worked, they started selling monk’s robes on their platform. Sales were so strong that they pivoted to the online costume business as their new core company. Today, Costume Craze is one of the largest retailers of costumes in the world. In the end, increasing sales is the only indicator of whether your core business is working.
Once you’re successfully generating revenue, you need to do everything possible to sell your base product to your base market. You don’t pivot to new revenue streams just for the sake of pivoting. You only want to pursue additional revenue streams when it makes sense or is necessary to survive. So focus on your core business before you pursue alternative revenue streams.
2. New Products to Base Market
Once you have a community of customers who love your business, you can start thinking of other products for these same buyers. Customers want complete solutions to their pain points, so think about the products they may be purchasing from other businesses in addition to yours to solve their problem. For example, I’ve worked with two companies in the funeral industry. Obviously, families who lose a loved one need a casket and a funeral service. But they also need flowers, a memory book, a burial plot and a gravestone. Both the companies I consulted with added all these services plus various “pre-need” insurance plans so the funeral of the future can be paid for in today’s dollars. Customers of these companies only need to make one stop to get everything they need during a difficult time.
The important question to ask yourself is, “What else do my customers need that’s related to my base product line?” The more you can provide complete solutions for your customers, the better your sales will be.
3. Base Product to New Markets
Gail and Will Williams, the founders of Idaho Sewing for Sports, started making padded cushions for ski resorts, and now sell to hundreds of resorts all over the world. Over the years, Gail and Will also branched out to additional industries. They now make padding for pole vaulting and high jumping pits, as well as protective padding for the military and law enforcement. For the most part, they’ll make anything anybody wants that requires padding. Selling their services to a variety of industries has allowed them to fully use their expensive cutting and sewing equipment. Gail and Will’s son, Gunther, who’s now CEO of the company, explains their philosophy: “There aren’t a lot of places that will make whatever you want. You call us up with an issue, you got to pad something or cover something, and we make it. It doesn’t really matter. We work right with the customer. We turn [the request] into something we can make … It’s kind of our niche.”
The important question here is simple: “What other customer niches might want my products or services?” There are always new places you can go.
4. New Products to New Markets
Adam Hepworth, Jared Richards and Dan Nebeker lived in a blue house while attending college. They also spent a lot of time on the ski slopes. When they graduated, they decided to create a company called Bluehouse Skis that sold special skis for skiing powder. Over the next few years, they worked hard to build a successful company. But the ski industry is capital-intensive with low margins, so making money was a challenge.
During this time, Adam’s wife and her two sisters would get their nails done during their “Sisters’ Day Out.” They loved the outing, but it was expensive and difficult to keep their nails looking good for more than a week. Then they had an epiphany: Bluehouse Skis had a laminating machine to put graphics on skis, so why not create stick-on fingernails that would last three or four weeks? They could create a plethora of unique designs that would be much less expensive than going to the nail salon. So Jamberry Nails was born, using the resources of the existing company, and became the new priority. Today, Jamberry Nails has more than 100,000 distributors who demonstrate and sell the product line. During our bike ride across America, we met a handful of exuberant ladies who sell Jamberry Nails. They are doing the same thing the Bluehouse team did when they created Jamberry: building additional revenue for themselves in tandem with their existing jobs or businesses –new products in a new market.
The key is to inventory your growing resources and consider what else you can do with them. This is creative rather than linear logic. Don’t think, “I want to build “A” so I need to go get the resources.” Rather think, “I have all these resources, how can I fully utilize them?”
Planning your pivots
The best time to think about pivoting is long before you actually do it. The strategy outlined below can help you successfully plan your pivots to new opportunities.
1. Define the broader problem people are trying to solve when they purchase your product.
2. List other related products your customers may be buying elsewhere to fully solve this problem.
3. Ask your customers which of these products they might be more likely to buy from you if the quality is great and the price is right.
4. Create an action plan to start developing and testing the highest-ranked product on the list with your base customers.
5. Brainstorm additional customer niches that may be interested in your base product.
6. Find an initial customer to partner with so you can test the viability of your product in one of these new markets.
7. Inventory all the resources you have and determine how you might use them in related ventures without incurring significant startup costs.
8. Assemble a brain trust of advisors to help you evaluate, develop and implement a test of one of these new opportunities in a new market.
By pivoting to multiple revenue streams, you reduce the vulnerability of a narrow product line, alter your business with changing market conditions and create long-term stability for your enterprise. I95
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