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Three Strategies for Diversifying Revenue Streams
- Written by Samantha Johnson
In 2023 I bought a business that relied on one customer for 80% of its turnover. It’s now more like 40% of turnover.
Whilst this is still too high (10% would be ideal), profitable growth takes time and we continue to work on growing our market share in our core offering (private label candles and home fragrance).
We’ve also worked hard to bring in new options for revenue, both now and in the years to follow. We’ve followed three different routes for diversifying and they look broadly like this -
Diversifying product base
Channel mix and new ways in to the same customer groups
Growing market share in our key profitable areas
Product will always have my heart. And making more product in the UK, building our local manufacturing communities and pouring money into places that need it will always be my life’s work. And getting to do more of it is great.
Further reading: The Benefits of Sourcing Inventory Locally, in Britain
Like all new things, some of it flies and some of it flops - so never bet the house on a new idea. We always launch newness in small quantities and work on two margin models - the ‘low volume’ margin and the ‘scale margin’.
Basically, I don’t want to be stuck with 5000 of a bad product even if it made the unit cost look better on paper.
Pay a bit more initially to properly test your concepts.
Channel I think is sometimes the easiest way to diversify. Take your best selling lines and see if they can perform somewhere new.
We opened two new wholesale websites, an Amazon store, several homeware dropship websites (that are only paid on commission) and a new brand that had a slightly different ‘take’ on our existing product.
All of those have added a mix of new wholesale and retail customers. A lot of them are small orders, but the long tail of small orders is very very stable.
Some will always lapse, but there is also usually a new one to replace them.
Market Share - doing more of what you do already. Which is both the easiest and the hardest in my experience.
Our deals tend to be six-ish figures and so often they take six months from first chat to project over the line - which can be challenging to forecast and to maintain momentum on.
But, with a bit of grit we’ve gone from a single major client to five major clients over the last year - so I hope that in another year we might crack that revenue risk issue we inherited.
The other part of market share diversification is driven through that product revenue stream. And essentially is ‘make yourself an indispensable supplier’ by selling multiple categories.
This really only works where you can maintain credibility and quality so perhaps offering a combination of ice cream makers and SaaS products isn’t a killer approach…
