Have you exhausted the growth opportunities within your existing market? If so, it could be time to consider adjusting your strategy to identify additional revenue streams. One way of doing this is through diversification away from current markets, products, services, or by reimagining how you sell.
But take care, as moving away from your core business may involve its own perils, including being distracted from the core business itself.
Adopt new business models
How each business generates revenue will vary, but chances are you can find at least one way to switch up your business model.
Consider utilising one (or more) of the following strategies to enhance how your product or service reaches its target market:
Growing through resellers
Finding resellers to buy your product and sell it to their end users is an effective way to facilitate a business model transformation. It can help you reach more customers across a diverse range of demographics, depending on who your ideal customer is, and what product or service you’re offering.
Online trading platforms and marketplaces are popular ways to get your products and services in front of a larger audience. They typically charge a fee (usually a percentage of the sale price) on transactions. Benefits of utilising online marketplaces include low set-up costs, simplified product listings, and access to payment processing tools. More importantly, listing in online marketplaces helps you reach a wider range of customers, as well as giving you the chance to receive feedback on your products or services.
This is becoming an effective way for professional service firms to diversify their revenue, moving away from charging hourly or yearly, and charging monthly instead. For example, accountants can estimate their yearly invoice and then suggest paying a monthly, fixed-fee instead. Without any hidden surprises, customers are happier, and the accountant can rely on fixed revenue spread throughout the year, rather than lump sums towards the end of it.
Licensing and royalty models
Licensing or royalty models involve selling all or part of your intellectual property (patent, copyright, or trademark), to a third party responsible for commercialising it. As the licensor, you receive a royalty as compensation for allowing them to use your intellectual property. This is an effective way for you to earn revenue without attracting any distribution, marketing or production costs.
Digital advertising models
If you’re looking to generate revenue from your existing online traffic and have a substantial following on your social media channels, you can sell advertising space. Online media websites and social media pages often use this approach, tapping into the power of content marketing by providing value to audiences. This results in building a loyal following over time, while generating income by developing partnerships with other businesses in your niche to sell digital advertising.
Pre-paid service models
This model involves customers paying in advance, typically with a set time or usage limit. Customers freely use the product or service within the limits, and you benefit from upfront payments and predictable revenue. Examples of the pre-paid service model include insurance premiums, or software-as-a-service (SaaS) products.
It’s important to consider that not every model will work for every business. Therefore, you should carefully assess your business goals, your target market, and learn what makes your customers tick.
Consider new selling methods
Aside from adjusting your business model, new selling methods have revolutionised how we traditionally do business – both online and off. Thanks to the rapid advancement of technology, businesses can now reach a wider audience and diversify their revenue in new ways.
Below are some innovative ways to sell products or services.
If you don’t wish to hold inventory or worry about postal logistics, drop shipping could be a great option for your business. The supplier retains the inventory and ships the product directly to the customer. Adopting this method means you must identify what physical products can be sold without the need to hold or process them yourself.
Do you have a thriving website or blog that receives consistent, engaged traffic? If so, you can monetise it by promoting another business, receiving a commission for each sale through a referral link. This a viable option for businesses with existing audiences. Offers are promoted via many channels, including email and social media.
Providing a brokering service involves connecting buyers and sellers, earning you a commission on successful sales. For example, real estate agents can act as a sort of middleman, making a brokerage commission for successfully selling a property.
This method involves the delivery of products or services only when ordered. For example, printing only when an order is placed. If relevant for your business, providing on-demand services could be a suitable solution, especially for when it comes to giving your customers an additional option for purchasing.
Gig economy businesses, like ridesharing companies, have disrupted traditional industries by providing resource-sharing platforms. This successful business model involves using the public to rent products or services directly to end-users but may only be relevant to specific industries and products.
Collaborate with other businesses
Working with another company brings numerous benefits, such as accessing new products, services, sharing resources and risks, enhancing capacity and exploring new ways of conducting business. It can also strengthen relationships with customers and suppliers, improve brand identity, expand bidding capacity, and provide access to new technologies.
Finding the right partner is key to making the most out of collaboration – one that shares your business ethics, strategy, and expectations. The goal should be to develop a mutually beneficial relationship that allows both parties to achieve outcomes that are otherwise out of reach.
Buy up or down your supply chain
Another way to diversify is to invest in the infrastructure of your industry. This could mean taking over one of your leading suppliers to control the flow of materials, saving on costs or buying direct from manufacturers. It results in your business becoming the wholesaler to other businesses (including your own).
Expand into new markets
If you’re confident of your industry, it could make sense to expand into new regions, by opening new branches or offices in different regions, buying competitors or complementary businesses, franchise your business, or agree to subcontract to other companies.
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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.