Relying on a single source of revenue is risky for your business—diversifying your income with multiple healthy revenue streams mitigates that risk. In this article, you’ll learn how to assess your current revenue sources and add new ones to the mix.
What you need to know
- Diversifying your business with multiple revenue streams strengthens your company’s financial health.
- Examples of new revenue streams can include launching a new product line, breaking into a new market, or partnering with another company.
- As a small business owner, you should work with your team to regularly evaluate your revenue streams as conditions change.
What is a revenue stream?
A revenue stream is simply a source of your income. Revenue streams can be active, in which revenue is accrued in relation to work done, or passive, in which revenue is accrued after initial work is done.
| Active revenue streams | Passive revenue streams |
| Product sales | Licensing |
| Service fees | Subscriptions/Membership fees |
| In-person events | Affiliate marketing |
Investing more money into sales and marketing efforts could produce more revenue, but each revenue stream has different external factors that can put it at risk, and a change in any of those factors can disrupt that revenue stream. It’s usually best to mix multiple active and passive income strategies to offset that risk and diversify your income.
How to add a new revenue stream
There are several financial growth strategies you can employ to diversify your revenue:
- Expand into a new market
- Develop new products or services
- Create a subscription model
- License your products for use by others
- Set up a discount or loyalty program
Strategies for diversifying your revenue streams
Assess your current revenue sources
Categorize and sub-categorize your current revenue sources by channel—for example, ecommerce sales versus brick-and-mortar sales, and sales of each different product. The more detailed you are, the easier it’ll be to see vulnerabilities and dependencies.
Leverage partnerships and alliances
When breaking into a new market, you can lower the costs of expansion by partnering with another company that’s already established there. You can sell complimentary products or even co-develop a product line together.
Use digital platforms
Even if you consider your business mainly brick-and-mortar, digital platforms can provide multiple additional revenue streams, such as subscription shopping, online services, or affiliate marketing. In addition, invest in digital tools that can make your business banking and sales more efficient, such as an analytics dashboard.
Manage risk
The first risk of diversification is the upfront cost of opening a new income stream. When launching a new product line or breaking into a new market, look for opportunities to reduce costs.
Adding revenue streams adds complexity to your business. You’ll need to periodically adjust your finances and operations to ensure the company scales smoothly. Schedule monthly or quarterly reviews to analyze revenue, costs, and profitability for best results.
Monitor and adjust your revenue streams
Monitor your revenue by connecting your business bank account to automated accounting software like QuickBooks Online. This will let you see incoming sales revenue and the costs involved in generating it, plus generate financial reports.
To keep your finances easy to parse, look for a business banking platform that lets you separate revenue streams into sub-accounts. This way, your streams will be distinct even if all the funds are deposited into the same business checking account.
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