Diverse Revenue Streams Bring Less Risk

Posted by JasonBlumeron Jan 26, 2017 in

As a business tweaks its revenue model, it also inadvertently adjusts its risk. Examples of tweaking your revenue model are (1) beginning to value price instead of hourly bill, (2) selling pre-defined packages, (3) creating a retainer model of revenue as opposed to a project-based revenue model, or even (4) beginning to draft your prices instead of sending out invoices. There are many ways to tweak your revenue model, and it's worth exploring in depth. You can think strategically about how you are trying to grow, and then try to match up how you earn your revenue to the growth you are trying to achieve. It takes work, but you will be at a competitive advantage if you do this, because few business owners take the time to think through it.

But there is always a risk component involved in any change an entrepreneurial company makes to its business model. If you don't also assess the risk, then you are doomed to simply respond to the effects that risk will bring later on. Responding to risk is a lot more painful than planning for risk.

An example from our firm:

We serve creative businesses, development shops, marketing agencies and designers in our firm. Over the past couple of years, our marketing and pricing have turned towards serving larger companies, and turning away from addressing the needs of the smaller designer or creative business owner. This has led to a smaller client base and a larger average monthly draft per client. Sounds great! But, when one of these larger agencies leaves our firm, the effects are much larger on our firm, and impact us in heavy ways.

Our risk increased significantly in moving to higher drafts for larger agencies, as we were simultaneously being supported by a smaller client base. So we are going to keep serving the larger group of creative designers, and agency owners, while adding back the smaller design community for smaller package prices. Building back a smaller client base will smooth out our revenue base, give us a larger foundation made up of more diverse clients, and significantly minimize our risk as clients come and go.

We are creating our packages now for the smaller creative and design community. Email us at info [at] blumercpas [dot] com to get a list of our packages, and see how we can serve you too. 

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