Our topic for newsletter and blogs this month is “predictable, reliable revenue sources.” This is especially important in uncertain economic times which, given the election year, we are in right now.
Reliance on a single revenue source is dangerous for any business. To survive any circumstance, a company needs at least three reliable, predictable sources.
The Danger of a Single Revenue Source
Especially for a new business owner, an enormous single revenue source can seem like a dream. A friend and business associate of ours watched this happen several years ago in a town in the South. A furniture factory there employed a healthy part of the town’s population and had been around for nearly 40 years. A businessman got the bright idea of opening a lumber mill that milled hardwood just for that furniture factory. It seemed like a no-brainer—the furniture factory had long been in business and showed no signs of slowing down. In the 1980s, though, with changes in the economy and in the furniture industry, the furniture factory ceased operations. The lumber company lost its sole source of revenue and was forced to shut down.
Elsewhere, we’ve personally been witness to a business that only has a single revenue source and the high risk such a proposition carries. We’ve seen schools that relied solely on federal funding, and when politics or other events caused the funding to cease, the school was forced to close. Another of our associates had their product carried by one of the largest big-box retail chains in the nation, and he netted millions per year with this one source. However, he didn’t leverage his gains into other revenue sources, and when the chain dropped his product, his only revenue stream was gone.
Three Sources
Let’s examine what might have happened had these companies maintained a minimum of three predictable, reliable revenue sources.
The sawmill already had infrastructure in place. It bought from a network of local loggers, so it always had a supply of raw material. It had an operational and fully staffed mill and a big-rig delivery truck. If the company had been intelligent and engaged two or more regular clients in addition to the furniture factory, it could well have survived the shutting down of the furniture factory and might still be in business today.
A school would have had several options, such as charging tuition and seeking donations from local businesses. Had they made any of these other sources into reliable, regular patrons, the loss of federal funding might not have even hurt them.
The person who had their product in the big-box store could have sold through a variety of stores and chains, even under different brand names. Retail sales offer many different channels and options. Two more reliable, predictable sources could well have avoided financial disaster through the loss of his multimillion-dollar big-box deal.
Learn This Well
Take these lessons to heart: always maintain at least three reliable, predictable revenue sources. If you don’t currently have three, get out there and create them. And don’t stop there! Keep creating more. The only real answer to economic uncertainty is abundance.
To learn more, sign up at SELLability.com.
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