By Anna Johannson
Small businesses and startups naturally have more financial tumult than their bigger, more established counterparts, and during those early stages, this is almost unavoidable. Unless they’ve received a massive injection of capital to get things started, they don’t have much wiggle room with cash. Plus, they don’t have much history, which means their client bases are less reliable, and they have less infrastructure and experience to deal with an unexpected turn—such as losing a major client or dealing with a new competitor.
Even a small hiccup could spell financial trouble for these types of businesses, but there are ways to protect yourself against them.
Multiple Revenue Streams
The idea behind setting up multiple revenue streams is simple. Your goal is to create multiple ways to generate income for your business simultaneously, preferably in a passive way that requires little to no effort on your part.
There are a couple of major advantages to this approach. First, you’ll earn more income overall—multiple streams means multiplying the revenue you have coming in, which means more available cash and more reliable predictions about your future. Second, you’ll diversify your investments, so if one doesn’t pan out, you’ll have backups to rely on.
There are several potential options for secondary lines of revenue:
- Secondary sites. One option, suggested by com, is building a secondary site altogether. The goal is to target a different audience, build traffic, and then monetize that traffic so that you make money based on the number of people visiting. The type and nature of your site are totally variable—but you might want to consider a field related to your primary business.
- Many major businesses rely on resellers or partnerships as extensions of their core business, including Autodesk and Intuit. With this strategy, you could have another business forward leads to yours, in exchange for a finder’s fee or free products. It would be like having an additional salesperson, without having to pay them a dedicated salary. It’s an easy way to make your stream of new clients more consistent.
- If you have lots of traffic going to your site, you could attempt to make money from that traffic with some additional advertising. Google Adsense is one of the biggest names in the online advertising and traffic monetization industry, but there are other choices if you’re interested in shopping around. If you go this route, make sure you aren’t detracting from the main point of your site or compromising your users’ experiences; in fact, it might be worth creating a separate site altogether.
- Affiliate links. Affiliate links work similar to advertisements; you’ll link to an existing product using a platform like Amazon, and if any visitors you forwarded with that link end up buying that product, you’ll earn a share of the sales. If you aren’t competing with the product or platform you’re using, and you write content regularly, this could be an easy way to generate a few hundred to a few thousand dollars every month.
- Paid content. If you’re working on building a popular blog or an informative resource library of content, consider charging for your most valuable work. For example, you could write an eBook and charge a few dollars for users to download it; if you spend enough time supporting it and truly have content worth paying for, this could turn into a recurring revenue stream for you. On top of that, if you don’t want to charge for your content directly, you could ask your readers to support you using a service like Patreon.
These aren’t the only ways to generate secondary sources of income; you could also start selling different products to an entirely different audience, invest in other businesses, co-op your office space, or come up with a completely novel way to make money on the side.
Managing Multiple Streams
The biggest downside to creating multiple streams of revenue is the fact that you have to manage them separately. This will take more time and resources, and could draw away from your main source of income.
Your best bet, therefore, is to select a method that requires as little time and effort on your part as possible, and can yield the biggest return. These “ideal” strategies will be different for every business, so do your research proactively and consider what makes your business unique when making your decision.
Anna Johansson firstname.lastname@example.org is a freelance writer, researcher, and business consultant. A columnist for Entrepreneur.com, HuffingtonPost.com and more, Anna specializes in entrepreneurship, technology, and social media trends. Follow her on Twitter and LinkedIn.