It is week 6 of our business strategy bootcamp. We are getting closer to the end of this video series and we are starting to get into the most exciting part. This is when we start talking about implementation. Specifically, in this video we are going to talk about how to choose the right revenue stream. Watch now!
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The overall objective of this business strategy bootcamp is to write a one-page strategic plan. To accomplish this, we have been going through a three step process.
- Define resources
- Identify competitive advantage
We have already completed the first two steps. We talked about how to define our business and what makes up our business. Then we talked about competitive advantage and how our business compares against the market. Those first two steps create a very strong foundation for us to write our strategic plan. However, the first two steps will not mean anything, if you are not able to implement them. It does not matter if you have a strong competitive advantage if you do not do anything about it.
Implementation is all about making money. How do you take your competitive advantage and make money with it? The first thing you want to do is look at your revenue streams. We are going to do a quick analysis on our potential revenue streams.
A revenue stream describes how people pay money for a product or service. Whatever position your company is in, you will always have a bunch of different options for potential revenue streams. You can make money a whole lot of different ways.
So the first step in our analysis is for you to list out all the potential revenue streams. What are the different ways you could make money? This should be fairly easy for you. You have probably daydreamed about different businesses you could start, or different products you could sell. This is simply listing out all the different business ideas you have come up with in the past. Different things you could sell might include:
- Selling advertising space
- Selling a service
- Opening a brick and mortar store
- Creating an ecommerce business
- Passive income businesses
- Writing a book
The list is endless, and each one of these items could have many different alternatives. Just taking an area like merchandise, you could list out different types of merchandise lines. So think of your business and list out all the different ways you could make money.
The second step is to rank these revenue streams. The trick of this analysis is that not all revenue streams are as valuable. You are going to evaluate these revenue streams on two specific criteria.
Potential means you are going after business with a large market of potential customers. It takes a lot of effort to run a business, and so you do not want to be going after a market where there will only ever be a few potential customers for your product. You want millions of customers. You want to go after markets that have the potential to be very, very large, or else you are setting up a business that will always hit a low ceiling of market potential.
The second metric is scalability. You want a business that you can scale. A lot of solo-entrepreneur businesses can never grow larger than one person. You want a business you can grow from one person to 1,000 people. Because then you have 1,000 people working on making you money rather than just one person. This eliminates a whole lot of revenue streams. If you have a revenue stream, that only works if you are personally doing the work, you will always be trapped in that job and unable to grow your business. You need to be able to remove yourself from the business, hire other employees to do the work, and still make money.
What I want you to do is go through your list and think about each revenue stream. Is there a large potential market of customers? And is it scalable to become a large business? What you are doing is focusing your business on the best revenue stream, and stop focusing on revenue streams that will never be as successful.
This can be a very powerful tool. I have seen so many businesses that never do this. If you do not do this analysis, what happens is your business will end up chasing a whole bunch of different revenue streams. You will have a whole bunch of different products or services. You will not be as effective as if you focused all your resources on the best revenue stream. You want to be able to grow your company and provide value to as many customers as possible.
I am going to ask you to do something very difficult. I want you to look at your list of revenue streams, and you are going to have to choose one. Only one. You are going to decide which revenue stream has the potential to make the most money and you will say “No” to all the rest. That is what it means to have a strategy that is really focused. Imagine what it means to focus all your company resources on the area that will generate the most value. This is really hard for people. Because you might love some of those other revenue streams. But you are going to have to turn off some of those things that you love, so you can focus on what generates the most value.
Guess what? I have another worksheet to help you through this activity. There is a link in the description down below to download a PDF worksheet. Go ahead and fill it out. It should only take you about 30 minutes. See if you can identify the best revenue stream for your business.
Leave a comment down below letting me know what you think!
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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.