Having multiple revenue streams is a MUST for any freelancer or business owner. If you have just one source of income, you’re opening yourself up to risk if that source of revenue ever drops or goes away. Having multiple sources of income not only protects you but helps you to further grow your business.
Don’t want to read this post? Listen to the podcast instead:
Relying on a single source of income can put you in a precarious position. Changes in the economy, client needs, or simply unforeseen obstacles can hurt your primary revenue stream. By diversifying your income sources, you create a safety net that protects you against these changes. But I feel the greater incentive is what an additional revenue stream can do to the growth of your business.
When I started my business, I had just one revenue stream; I sold my time in return for consulting services. Now, we've developed multiple revenue streams that complement each other, where selling one service, often results in revenue for the other.
We generate the bulk of our revenue from our consulting services. When clients come to us looking to optimise their use of Asana or Pipedrive, we sell a custom project or our support program. Often, a client looking for help with one of these tools may also need a quote for their Asana or Pipedrive subscription. Maybe they’re signing up for the first time, or upgrading. In either case, we can offer a good deal on their subscription and consulting as they’re purchasing more from us at once, so we can be more generous.
Clients receive immediate benefit from our consulting services along with long-term support if they also purchased a subscription from us. Clients also like being able to deal with one party for their subscription and support. This makes our service stickier which is why we get a lot of repeat business.
For the company, we get immediate profit from the consulting services and nice annual recurring revenue from the subscription. While the margin we make on the subscription is a lot less than our consulting services, it’s what I like to call “money for jam” (i.e. easy money) when their annual renewal comes up in 12 months. If we’ve done a good job, the client renews their annual subscription and there’s very little in the way of operational cost to deliver the subscription for a second or third year.
A great insight to illustrate the importance of multiple revenue streams comes from Elon Musk. In this YouTube Short he explains how most car companies generate the majority of their revenue by selling high-margin parts and accessories and not from the initial sale of the car. And as a new car company, you don’t have an existing fleet of customers to sell these parts to, making it a challenging industry to break into. But once established, these two revenue streams complement each other nicely.
If you’re a freelancer or business owner and you currently have just one source of income, it’s worth asking yourself: What complementary products or services could you offer alongside your main source of income?
- e.g. A web developer who does coding could sell an educational ebook or course.
- e.g. A graphic designer who creates logos could sell branded merchandise (or partner with a company that does).
- e.g. A nutritionist who helps with meal planning could sell the supplements they’re recommending.
You may even find ways of generating supplementary income that don’t support your other revenue streams. And that’s fine as well, every little helps. For example, we generate a small income from the YouTube ads that run on our channel. This revenue is completely separate and unaffected by our consulting or subscription revenue. It’s easy revenue for us as people are watching our videos and a lot of them will never pay for our consulting services so we may as well monetise the information if we can. It’s not a huge source of revenue but it covers some of our costs and it doesn’t require any additional work to deliver.
Of course, the greatest benefit occurs when the sale of one product or service generates revenue in other ways. That’s what you should really be aiming for. The additional income stream helps to lower your risk, increases the perceived value by the customer and generates new profit for the business that you wouldn’t have otherwise had.