Seeking new streams: multiple revenue sources are critical to small businesses.
It didn't take long for Thompson to realize he could tap his own expertise in information technology to generate additional revenue by offering consulting services. In 2002, a third revenue stream was discovered when Thompson was approached by a large defense contractor who needed help creating a joint tactical radio system (JTRS) program to help solve the communications problems that U.S. troops were having with their radios in the field.
"The contractor did the research and built the architecture for it, and we built a test tool that's used to test, the radios," says Thompson. Successful completion of the $700,000 project opened yet another door for Blue Collar Objects: making an existing public safety radio system compliant with the new JTRS technological architecture.
Thompson credits his flexibility and willingness to diversify with doubling company revenues every year, to $1.3 million in 2003. Today, his 21 employee firm is considered an information technology, system integration, and engineering firm with a niche in software-defined radio technology. "It's about diversifying and being willing to explore new opportunities that fall in line with our core business offerings," says Thompson.
In the business world, significant changes in economic conditions, buyer preferences, markets, products, and services are the norm. For small businesses to thrive in such an environment, they must be willing to diversify and stretch beyond their core business offerings, particularly if they are accustomed to relying on a single revenue stream.
Like Thompson found out, branching out into a new line of business--or tapping new customer groups--can be profitable when it doesn't require too much additional labor or resources. The key is to start with your core offerings and figure out what additional products or services you can offer without having to open an entirely new business. Diversification of customer base is equally important. If your company is currently selling concrete products to individual contractors, why not also sell them to the local and state governments? Doing so will not only boost revenues, but will also protect your company from falling into the "too many eggs in one basket" trap that swallows so many small business owners.
Thompson concurs, and advises companies to look first at their existing customer base for the chance to sell more--or to sell something different--to the clients who already know and trust them. "Leverage those relationships that have been most successful," says Thompson, "and try to gel; into something better, and that's related to what you're already doing."
RANKING IN THE DOUGH
When trolling for new revenue streams, business experts recommend keeping the following things in mind:
* Think about new revenue streams from the start. Entrepreneurs often hit roadblocks early on when trying to reach success because they don't consider diversifying or changing and adding to their product lines.
* Establish meaningful dialogue with customers. Discuss exactly now you can help them, how well your competitors are serving them, and what you can do to fill in the gaps.
* Do your homework. Find out what market opportunities you're missing out on and which ones would be most compatible with your existing business model. A distributor of welding supplies, for example might consider adding a welding machine repair service for customers.
* Don't give up on your core business. The key to success says Joanne Sujansky, Ph.D., CSP, and CEO of business consulting firm Key Group in Pittsburgh, Is to stick to your core business while keeping an ear to the ground for new opportunities.
* Tap resources, Among them is the Small Business Administration Managing Your Business" Website: www.sba.gov/managing/index.html.
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|Title Annotation:||Management Advice|
|Date:||Jun 1, 2004|
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