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Consciously creating or discovering new revenue streams can be the saviour of businesses and open up a wealth of opportunity.

Relying on one individual revenue stream can be a risky strategy.

It is of course how most of our businesses will start, but the sooner you can diversify the different services or products you sell, the longer your company’s life expectancy may be extended.

You may have heard me share about client concentration risk before. That is, that no one client should occupy more than 20% of your revenue.

We have also seen the usually far lower risk ‘industry concentration’ bite a few businesses during the Coronavirus lockdown. That is where a business sells more than 20% of their – potentially multiple – service(s) into the same industry. I know, no one saw it coming, but the risk was always there.

The same is equally true of surviving off of just one revenue stream. It can be risky.

I once heard the story – albeit almost mythical now – of a company whose business was built exclusively around the Car Tax Disc when overnight, the government moved “emissions duty” to a wholly digital evidence-based system.

You may be doing well now, but every product and service has a life expectancy.


Let’s Define Multiple Income Streams

To my mind, different revenue streams can mean the different ways in which you can earn revenue.

On researching this article, I immediately hit upon sites suggesting we “monetise our YouTube channel” and even “rent out our spare room through Airbnb,” but it is so much easier and more achievable than any of these.

And besides (from an accounting perspective) we are talking about operating income, not non-operating income like these click-bait suggestions.

To me, multiple revenue streams could be as simple as the distinction between project-based work and retainer work for say, a creative agency. The output is largely the same, but the process and payment structure quite different.


So, When Do New Revenue Streams Work Best?

New revenue streams work best, when they feel right.

According to Ansoff, there are two typical means of increasing your revenue streams. Well in fact, there are four ways, and he was talking about increasing volumes, but the same applies here.

Essentially, you can either sell your existing product or service to new markets. Or create new products or services for your existing market.

When it comes to investing in products, in conjunction with increasing revenue streams, look no further than Apple. They are the world leader in creating new product lines over the years with the iPod, iPhone, iPad, Apple Watch.

They are not just a set of interconnected products. Each product line will be accounted for separately, within its own department, and in healthy competition with one another.

Apple are investing in multiple revenue streams. When one sees its decline, like the iPod, others move into position.

The highest risk strategy would be creating new products for new markets. This is called diversification and is a very high-risk strategy. In theory there will be no economies of scale with your existing service, nor the ability to utilise existing expertise.


Let’s Get Personal

A good example of product development that has worked is that of Mark Master’s (The ID Group) and his You Are The Media (YATM) side project, that became something much bigger.

For those of you who don’t know – as if – You Are the Media is a marketing and media training and learning community. One side is a marketing consultancy (The ID Group), the other relates to learning (You Are The Media).

I asked Mark how multiple income streams have worked for him. Mark says, “The most important thing is buy in and recognising ways to create relatable products. For instance, my main business supports others to become a trusted industry voice.”

“We create the content and help businesses with their narrative, to create leads and revenue. The other side is to bring people together so we can all learn how to do it. This becomes inclusive of everyone, rather than working on a retained fee with clients. They work together, but sit separately.”

“Over time, I recognised there was an appetite for learning and how people can build their own media space and own their own audience. It is all about intent and a genuine belief that people can build something that is theirs, plus it feels good when it becomes part of a wider community. What started as a side project (it began as a weekly email in 2013), gradual elements have been introduced to support the learning.”

Additional revenue has been built around workshops, an annual conference and the live YATM Lunch Club events. Mark says, “People have a decision how far they want to invest. They can work on a much deeper, one to one level, or they can pick and choose what feels comfortable with them. For instance, joining the YATM community is free and events start from £10. Everything connects and that makes it easier for people to step forward in whatever way is comfortable for them.”

“When the coronavirus hit, whilst some clients pressed paused on activity, having other income streams has been immensely reassuring. A side project can become something much stronger. It can be done.”


What You Can Take From This

Here is what I take from what Mark has done:

  • When Mark struck upon the concept of You Are The Media, it was very much the principle of investing in a product that would showcase his industry to a community.
  • By creating the YATM vehicle Mark converted his market into a listening audience which quite quickly became a community
  • The product was simply sharing content marketing as a concept and educating the community.
  • The market was the same. But an audience and a community were built.
  • It is a perfect synergy and yet wholly separate revenue streams
  • Both revenue streams go some way to improving the service in the other.
  • Like the Apple Phone and Watch, two stand-alone products, when you find a fit, they work equally well together


Conclusion Time

Your number one role as a business owner is managing and reducing your business risk.

Creating multiple revenue streams is a great place to start in reducing the risks in your revenue.

Who knows what gold you may also find at the end of that rainbow? The opportunity is there to deliver to a marketplace that want more from you.

This article was written in collaboration with Mark Masters.


The right Virtual Finance Director is as committed to your business as a full-timer, but without the overhead.

I’m Chris, and I help business leaders clarify, simplify and improve the financial performance of their business. Maybe I can help you too?

There is no reason not to plan. Now is the time to go back to basics and identify the challenges and brighter horizons for your business.

With the immediate panic behind us – and some very long hours worked clients are now asking how we should adjust our business plan to account for this global crisis.

Genuinely, my response is, keep the business plan as it is.

Keep the objectives for the year as they are. We need to find new ways of achieving them.


Bin Scenario Planning

Businesses have been considering a multitude of future scenarios. When it comes to this, proceed with caution.

Just to give you a quick definition, scenario planning represents different possible outlooks for the business future. Businesses form an idea of possible future scenarios and how each would affect the strategic objectives.

In all honesty, scenario planning can be time-consuming, chaotic, and a potentially stressful exercise. Look at it this way, would you have predicted where we are today at the end of 2019? None of your proposed scenarios could ever be played out.

There is one scenario to concentrate on right now. It represents a variation of:

  • There is a global pandemic
  • The UK is in lockdown
  • Most businesses are shut
  • You and your team now work from home
  • Schools are closed. You look after your children full-time with no support
  • Your Revenue has been slashed in March, April and May
  • Your future Revenue forecasts are hugely reduced
  • There will be a global recession
  • You will need to get leaner
  • Some of your customers will not survive

That should be enough to get your head around for now.


Lets Go Back To Your Objectives. NoLets Go Back Even Further

Your Business Plan has to always start with Your Mission and Your Vision. I have provided a link to two previous blog posts on each.

Your Mission Statement is your Who, What, and Why. It could be up to a page long and defines your purpose and core principles.

It is a very broad brush and never targeted at specific customers or percentage margins.

The vision statement enables you to detail which direction you want your business to head in.

A well thought out vision statement will save you time and the possibility of making the wrong decision when opportunities suddenly arise. They will arise.

Hopefully taking some time to review the above can bring new context to this crisis.

Ask yourself, has either fundamentally changed over the last six weeks? Is your business still relevant, all things known? This is where the winners will be. Those businesses who are relevant within their marketplace and for their audience.

Now that you have revisited your Mission, your Vision, we have kept our Business Plan for the Year including our Objectives, we just need to rethink how we can achieve them?

Now, Lets Forecast

This is the aspect that you need to consider and change. Your original forecasts for Spring, Summer, and possibly Autumn, need amending.

The place for you to start is with sales. Business planning, forecasting and budgeting MUST ALWAYS start with Sales.

It has always stunned me when I see salesis covered in just one line on the default P&L (profit and loss). Businesses like to separate Printing and Stationerycosts from Postage and Courier, but it is naive to think that sales can be covered in one single line.

I recommend you split your monthly sales across a few lines. If you are a small business, like me, then you might be able to have a separate row for each customer. If you are bigger, then I would split it out by Service Type, Market Segment, Customer Type, or Geographical Location (whichever is most helpful to you).

Ask yourself, which revenue segmentation would improve your decision making? Why not hard-code it into your Accounting software? I bet your accountant hasnt recommended that!

The next step is to obtain an accurate set of accounts that can detail monthly Revenue within each segment for the last six to 12 months.

Now, it is time to forecast for the next six months.

  • What and Where are the shortfalls?
  • Has Revenue been equally cut across every segment? Probably not.
  • Has the number of clients been reduced across every segment? Probably not.
  • Has the number of projects been reduced across every segment? Probably not.
  • Which segments still appear to be intact?
  • Where are you going to make up the shortfalls?
  • What is the average revenue per client or per project?
  • How many clients do you need?
  • Which services are people still buying?
  • Which industries are still buying?
  • How are you going to achieve sales in these areas?
  • Who do you need to help you?
  • What specifically do you need them to do?

That is all Business Strategy is. Break it down. Slow it down. Keep it real simple.

  • What do you need?
  • How can you get it?
  • Who could help?

And the Business Plan, Mission, and Vision all stay intact.


Lets Bring To A Close

You will know the decisions you may need to make providing, you map out your sales forecast. You adjust your costs accordingly and compare future performance against this forecast. I would suggest you do this monthly.

If you keep on missing your forecasts, then you will need to continue making bigger decisions, but you will already know what those decisions relate to.

Having a commonsense business plan is about setting expectations for yourself and your business.

Know what you should be doing, what you think you should be doing and where you should be starting. It provides the basis to build on and longevity for your business. Having a plan can help save the day.

The role of the Virtual Finance Director does not need to be a full-time overhead to provide confidence and commitment to your business. I share and help simplify financial performance, planning and strategic positioning for business owners and investors who just want their world to be uncomplicated and thrive.

The money flowing in and out of your business is integral to your future right now.

I want to offer you some real knowledge about money and cashflow, right now. Let me help you steer your ship to a healthy destination.

It’s Safe To Say You Are Probably A Little Worried About Cash Right Now

Among the business owners I support, two have just bought a new car on a lease (one a Mustang!), one a new house, one spent £25k in cash on new equipment for the year in January, and another a top of the range coffee machine for the office at the beginning of March.

You are not alone. No one saw this coming. Let me reassure you that none of this is your fault.

What you always knew, and now appreciate more, is that a lack of access to cash is the reason why businesses fail.

I know of companies who have made a profit every year in business and gone into administration. I have seen a company first hand, make profit and loss (P&L) losses for multiple years, and stay in business. And I still work for them. They are going to be fine.

Did you know the first thing institutional investors look at when analysing a business is their cash in the bank. This is where the saying ‘cash is king’ comes from.

Can you guess what the first thing I do when I walk into different businesses every morning? I look at the Bank Account. I look at how much money they have got. I remind myself of how much money they had about a month ago.

It gives me an immediate overview of the health of the business, likely priorities, and maybe even what mood the boss will be in. Without having to ask anything.

That is how integral this is to the wellbeing of each and every company.

Cashflow Forecasting. Getting The Basic Right

Let me share some practical tips for what you can do. It has to start with:

  1. understanding where you are now
  2. scenario mapping where you might be, going forward

A cashflow forecast can be built with a basic knowledge of Excel. It should document how you generate cash in order to pay your operating expenses and other debt obligations such as loans.

You do not need to be an expert in your accounting software to build this.

Design the forecast in a similar layout to a typical P&L Report, with monthly columns. (I do usually employ a far better template than this, but it’s not important at a time like this).

If you are new to this, I would recommend you enter the actual figures for the past six months or more, in order to see where cash is typically generated and spent.

If cash is looking like a real problem, then you should break the next three months (at least) into a weekly forecast. Daily even, if critical.

Start with Sales. Import every outstanding Customer Invoice as a new line and make a prediction when it will be paid. Remember to include VAT.

Insert a new line for New Sales. What sales are you going to achieve in the future and make an estimate of when you will receive this money. Again, remember to include VAT.

Is there any other income you receive? Itemise this too.

Add a Total row to sum the above. This is now your forecast income into the bank / business.

Next, list out your costs. I would use your normal P&L categories as line items.

Again, list out your outstanding Supplier Invoices (Bills) that you need to settle under each heading. Now you can start to become more tactical in terms of when you might choose to pay these (but always be honourable to whom you owe money to).

Remember to include VAT.

I would recommend listing each employee on a separate line, as you might wish to play out a few scenarios here too.

Different scenarios can help you. If you are assuming this will all be over in three months, then you could be gambling your company’s future on a certainty. Nobody knows how long this will last, or what effect it will have on businesses and our evolved mindset.

What You Can Do Now?

The excuse I’ve heard the most for not paying this last week was, “I’m self-isolating and don’t have access to my bank”. That’s a good one.

Remember this, focus on the areas you can control. You have total control of the money in your bank and the payments you choose to make.

Let me break things down further now for what you can do over the coming weeks or months (and beyond).

Put a freeze on all purchasing. I know this is pretty obvious but just be certain that everyone in your company understands and adheres to this. No one is allowed to buy anything, without your new consent.

Cut all non-essential purchases. Cleaners, new apps or tech, monthly subscriptions, let’s just put the brakes on for a short while. Anything a PAYE’d member of staff can do, can do it.

Assess which of your Aged Payables (Creditors) are critical suppliers and which are not. Make a decision on who you need to pay right now, and who you could call to perhaps delay and not have it affect your customers. Please be fair and reasonable about it. This is tough for everyone.

You could consider delaying payment of the VAT element of Supplier Invoices, for those you do pay.

Base your decisions with a customer focus. Which suppliers affect your customers. It is important that you need to keep these on side.

Current orders with suppliers. Analyse them. Do you need to cancel them? If any order you have placed does not directly service a customer order then you might want to make a quick decision now.

Recent deliveries. The decadent purchase from two weeks ago, can you send it back for a refund? Obviously, be reasonable, one of my clients had very recently made a large, but unfortunately bespoke, materials order. For us, it would be morally poor to send this back. But anything you could still send back and wanted to, at least have a think.

Mortgages, rent, and all other loan repayments. Phone them. You can negotiate a payment holiday on these. If not, you could stop them anyway. One negotiation tactic is to offer to extend your lease by 3 months if they can provide you with a 3 month holiday. It’s worth a phone call even if you’re not in distress!

VAT. I don’t expect you are hearing this first, but you can default on your VAT bill – between 20th March and 30th June – until the 31st March 2021. Despite their reputation, HMRC is genuinely very reasonable to company’s wanting to stagger VAT payments anyway, so you could have been getting away with – far shorter – VAT Holidays, every year!

PAYE & NI. You could just delay paying it. If you can’t afford it right now, one might recommend this being a cost you could delay. You’ll be fined 1% per day for any late payment. Although as per VAT above, I suspect HMRC will be pretty lenient if you phone them with a plea bargain in advance.

Pensions. Personally I think you should pay this. I know of one company that won’t be. They’ll have to just make it up at a later date.

Asking customers for payment. Attempt to understand your customer’s payment terms, processes and previous paying habits. Is a PO Number always required? Who does the invoice need to be sent to and by what date? When do they usually pay?

Make a County Court claim. If you have the annoyance of non-paying customers that you don’t intend on working with again, I would suggest making a County Court claim. It is far cheaper than a solicitor’s letter, and potentially get the money in your bank, quicker too. This isn’t so easy if your customer is international. Obviously, this will affect the relationship and goodwill with your customer, so do not make this a blanket company policy!

Going forward, have a think about payment terms you might wish to offer clients.

I realised some time ago that companies didn’t consider my payment terms before purchase, so I set them at 7 days Net. Some company’s still take 15 days to pay, but it is better than waiting 30 days plus. Encourage payment terms as a part of the conversation among your customers? It is good to be open with those you work with.

If you regularly suffer from late customers payments, then you could implement a Direct Debit solution such as GoCardless. The advantage of this is it saves the customer time having to process the payment, and means you get paid quicker. A wins a wins a win.

What If You Need Money Right Now?

If you need money now, you have three options:

  1. Sell a percentage of your company for cash. The cash goes into the company
  2. Get a loan
  3. Dip into your overdraft

All three options are fantastic to have but you need to understand which is the correct option for you.

The simple advice I give to clients is, borrow the money from the source most suitable to the time period you will need the money for. If you need money for life, you need equity investment. If you need money for 1 to 4 years, take out a loan. If you only need money very occasionally, and you don’t know when then an overdraft could be the appropriate option.

Let me highlight the pros and cons of each.

1. Selling Shares (or essentially a percentage of your business)

Pros — Less risky than a loan. Technically, you never have to pay the money back! If the investment happens, and the company still goes bust, well at least you tried.

You will also likely be gaining an experienced person with an abundance of business acumen. They will be able to share a raft of ideas to solve problems and open doors too.

Cons — It could be very time-consuming, and thus possibly inappropriate if you need cash urgently.

A new shareholder is for life unless you can buy it back. It could become very expensive.

Every time you take a dividend. Guess what, they get a dividend too equivalent to their percentage stake. You need to understand this before you start paying them more than the 5% interest you would have paid on a loan. And when you sell the business, naturally they are obliged to take their percentage.

You have also now just brought in a fellow business owner, who will have their own ideas, and it might annoy you. I’ve seen this happen first hand. It can create an uncomfortable dynamic.

So in short, don’t take out a loan for life, if all you needed was money for three years.

2. Loan

Pros — Generally the cheapest way to borrow money. Far cheaper than an overdraft or an investor, plus Loan Interest is (Corporation) Tax deductible. Dividends are not. Therefore you should only be paying circa 4% of a 5% loan.

You also still own the company and can continue to manage the business in your own style.

Cons — Unlike dividends, which are optional, loan repayments are mandatory and generally have to be paid monthly, so you will have to pay the money back, with interest. This will affect cashflows for the duration of the loan. A financial commitment has thus been entered into.

3. Overdraft

Pros — It is very flexible. You only have to pay interest on the amount borrowed for the duration of the ‘loan’. The interest payments stop, the moment you’re back above zero.

Cons — It is a very expensive rate if you are planning on using the overdraft facility for long periods of time.

Let’s Bring Things To A Close

Now is a great time to improve your business acumen.

The steps and processes above are ones you could be adopting all year round, but just like every aspect of your business, it takes commitment, persistence and dedication to be consistent.

The more you get into it, the easier it becomes. Trust me, the people I work with, this becomes a habit that becomes manageable over time.

I sincerely hope my advice, suggestions, and how you can steer things back into steady waters in this unusual time, support you now and your future success.

The role of the Finance Director does not need to be a full-time overhead for someone to be committed and make a difference to your business. I share and help simplify financial performance, planning and strategic positioning for businesses who just want their world to be uncomplicated and thrive.