Talking Business
Marvin Carolina Jr.: How to increase revenue
If your business is doing well and you’ve increased revenue every year, in addition to offering your main product or service, you should also have at least five additional revenue streams.
Complementary products or services
If you consider everything your small business does, it won’t be difficult to find new ways to generate revenue. What I’ve found is most small-business owners focus exclusively on their main product or service, so they don’t see all the services they’re performing but aren’t charging for. They also fail to see they can provide an additional, related product or service. Here’s an example:
I’m a residential mover, and I have a moving job on Friday. In addition to arriving on Friday and moving my customer, I can offer — for a small fee — to come to their house on Wednesday and pack their items in boxes, label the boxes and move everything to the first floor. So on Friday, I can move them smoothly and quickly.
Though I’m charging a fee for this additional service — this add-on — I’m also providing an additional benefit: convenience. If I consider everything my customer will need for moving, I might decide to also offer complementary products: boxes, tape, wrapping paper.
When looking for new revenue streams, instead of looking for ways to make money, look for ways to provide value to your customers. If you do that, the revenue streams will find you.
Promote
It does little good to offer add-ons if no one knows about them, so make sure they’re in your advertising and marketing materials. And on your website. You should also offer your add-ons to your customers, and emphasize the benefits they provide.
By marketing your add-ons, you will occasionally get customers who only want your add-ons. Here’s an example:
A prospective customer is visiting the websites of local residential movers. They don’t need a moving coordinator, and they don’t need movers. They need boxes. You’re a residential mover, and your website says you sell boxes and deliver them, so even though your boxes cost more than some of your competitors’ boxes, you provide convenience. So you get their business.
Upgrade
No matter what product or service you provide, you can offer an upgrade, which is larger or of higher quality.
If I’m a coffee vendor, in addition to offering my drinks in compostable cups, I also offer them in recyclable mugs. The mugs are an upgrade, so they cost more.
Bundle
Bundling products or services, an excellent way to increase revenue and save customers money, is simply selling your product or service with add-ons at a reduced price.
In addition to offering my moving service, I can combine my moving service and my packing service in a bundle, and offer that. Customers who choose this bundle will pay less than if they had bought those services separately. I also can offer a second bundle that includes everything: my moving service, my packing service and all of my moving products.
More customers
You can increase revenue by finding more customers in the existing pool of prospective customers, or you can find new customers in an entirely different pool. Here’s an example:
I build houses and want to expand my customer base, so I decide to build small commercial buildings too. The commercial buildings won’t be much larger than the houses I build now, so modifying and equipping my warehouse to enable me to build commercial buildings won’t cost much. And my business model won’t change much.
Had I decided, instead, to build small and large commercial buildings or to build lots of commercial buildings, I would have had to re-configure my entire business infrastructure and make major — and undoubtedly expensive — modifications. My customers’ expectations also would have changed. Since I’m now a commercial builder, they will expect me to provide large-scale products and services that commercial builders routinely provide.
Don’t change your business model
“Business model” is a fancy term that asks a simple question: “How will your business make money?” You answered this question before launching your small business, so even though you’re seeking more ways to make money, you don’t have to abandon your business model.
You do not have to start a new business or make wholesale changes to expand revenue sources. You need only to charge for services you’re providing now but aren’t charging for, or add related products or services your customers will want or need. Of course, you can do both.
My business
When I owned my small business in Atlanta, even though I expanded my product line, I continued selling the same line of products: bottled beverages. I initially sold water, then water and juice, and eventually water, juice and soda. My expansion made sense because each time I expanded, I added another non-alcoholic, bottled beverage.
Add-ons sell themselves. When I began offering juice, some of my customers asked for it each time I delivered their water, so I simply asked if I should begin adding juice to their order sheets. Most of them said I could. I didn’t need a high-pressure sales tactic, nor did I need to persuade them. They were already buying it!
Is it worth it?
With every business decision, you have to determine whether the change is worth it. In other words, Will it make money? Revenue is obviously important, but profit is even more important because it’s what you keep from each sale. So when considering an add-on or an upgrade, no matter how valuable it may be to your customers, if it’s not profitable, you shouldn’t offer it.
Conclusion
Finding new revenue streams that cost little or nothing to add isn’t difficult, and when you find them, don’t be afraid to offer them. Some customers won’t want them, but some will. When I launched my small business, my partner sold only bottled water. Though business was good, I saw an opportunity to expand. Without adding a single customer — and almost overnight — my revenue doubled. My expansion succeeded because I sold a similar product, marketed my new product and asked for the new business.
Marvin Carolina Jr. is a Vice President for JE Dunn Construction. He can be reached at marvin.carolina@jedunn.com.
Comments