Has the rising cost of gas had a negative impact on your business’ profits? Have you realized with dismay that your market has become overrun (and your profits been dashed) by copycat competitors? Or have you had the bewildering realization that your business is growing faster than you’re able to support it?
Each of these problems is related to your revenue model. In simple terms, your revenue model is how your brand makes money. With new technology and a broadening global market, revenue models are evolving and new models spring into existence regularly. A few models that you might be familiar with include:
- Recurring revenue, e.g. subscriptions and advertising
- Transactional revenue, e.g. selling physical and/or digital products
- Service revenue, e.g. charging for services rendered
You can avoid a lot of cash flow problems by having a better understanding of the revenue model (or models) that will offer you clients the greatest value while ensuring a predictable profit for your business. So where should you start this branch of the discovery process?
Start with historical data
If you’ve been toiling away for a while, you should have enough data to determine the sources of your current revenue streams. By looking at this data closely, you can identify the most abundant streams and beef them up, and you can also find out which revenue streams aren’t producing.
If your business is still mostly in your imagination, look to your competitors. You’ll often find rates, packages, products, and other revealing data on the websites and in the marketing materials they make available to the public. If you sell handcrafted earrings, check out Etsy and other online retail sites and see what others are offering (and charging) for similar jewelry.
Learn more about your market
You can’t make a profit if you’re not offering something that your target market needs or wants. Use your historical data to determine what your market has been responding to most enthusiastically, and get in touch with your existing clients and prospects to flesh out your revenue stream data with real voices. You can also turn to publications like industry magazines and journals to get a sense of what’s popular with your prospects.
Identify external variables that affect your revenue
If you’ve got historical data, you may discover buying patterns based on seasons, evolving technology, and other external factors. However, not all external variables are so predictable. The rising cost of gas will negatively impact the cost of deliveries if you trade in physical goods. On the other hand, if Taylor Swift is seen wearing a pair of earrings you created, that could increase demand beyond what you’re capable of producing.
By taking a hard look at the market influences that are beyond your control, you can “future-proof” your revenue model by planning accordingly.
Decide on primary and secondary sources of revenue
The more revenue streams you develop, the more consistent and sustainable your profits will be. Use the data you’ve gathered to choose a primary source of revenue that will reliably generate the bulk of your income. This may be the sale of your gorgeous earrings at your online shop.
Back up that primary revenue stream with a secondary source. Your best case scenario is a revenue stream that can maintain itself, for example, an ebook on using accessories to jazz up any outfit.
Get ready to grow your revenue!
By investing time into the discovery process, you’ll learn what’s working and what’s not in your current revenue models. You’ll find stagnant streams that need to be revitalized (or abandoned) as well as new opportunities that hadn’t occurred to you before.
Sifting through all the data and figuring out what it all means can be a challenging process for a solopreneur, however. My six-step program the Business Design Roadmap helps business owners identify existing and potential revenue models that will grow your business at a pace that works for you. Let’s travel the road together.