How to add more incomes streams to your business.

My first business was a little cafe I opened from scratch back in 2008.

When you operate them well, businesses like this can offer a brilliant lifestyle.

But they have limited reach because people must physically walk in if they want to buy anything.

About a year or two into it, I’d built it to just over $1.2 million in revenue across a range of products like coffee, sandwiches, pastries, etc. 

But I could see that growth had hit a wall and I wasn’t going anywhere.

What made it worse was the weekly revenue rollercoaster caused by rain, heat, cold, wind, events, public holidays, office worker pay cycles and other businesses opening nearby.

There was always an excuse for not hitting the revenue targets I’d set.

I remember being so bloody frustrated.

Rather than accept defeat, I started pouring hundreds of hours into learning about scaling businesses.

The obvious thing was to open more of them but in my opinion the world didn’t need another coffee franchise.

Then I realised that the best businesses in other industries had diversified revenue streams which included ones I couldn’t see on the surface.

They seemed to offer a ton of backend products and services and cross-promote another business they were linked to.

Very clever I thought…

Even though I already had multiple revenue streams through different products, they weren't scaleable revenue streams and were all linked to common transactions.

ie, they were still reliant on that one customer walking through the door.

And learning how to build different streams has been one of the keys to my success over the years.

Today I wanted to share what that looks like for our business and how you might be about to steal it and do the same.

It all starts with making sure you do the things that give you the most leverage. 

The most bang for your buck when it comes to time and investment.

I learned this the hard way and spent a few years chasing the wrong revenue opportunities only to land in bankruptcy meetings…

Whoops…!

(Honestly though, it set me back years… And I don't want that for you so let's find a better way together.)

What you want are products and services that attract great margins (profit), can be scaled outside of your location and complement your brand.

It helped me to categorise potential revenue opportunities into two sections - front end products and back end products.

What’s the difference you say?

The front end products are your core business activities and are responsible for the biggest part of your revenue.

What your customers know you for now, what suits your brand, and makes sense to new customers who interact with you for the first time.

A back end product might be a completely different product. 

A bespoke service, a more specific niche offer, a subscription service. 

Even things like expensive 1:1 coaching, consulting or a small class.

These are super juicy revenue opportunities if they're good and you keep them easy to make, high margin and scaleable.

Why separate front and back end products?

Customers fatigue easily.

Have you ever gone to a restaurant and been given one of those giant menus with 267 options for dinner? You know the ones on a double-sided, laminated A3 page...

The choices are overwhelming to the point where you can’t decide easily.

Do you see high-end restaurants doing that? 

Nope. They have thoughtful, concise menus. 

Does that mean the brilliant Chef isn’t capable of making those 267 things? You know they absolutely can.

They wait to reveal their revenue model until you’re finally at that nice restaurant. 

Their back-end products are a few sneaky additional courses and upgrades, products you can buy to take home, a cookbook, a follow-up invitation to a limited space class, etc.

All of it is easy to make and deliver when there’s established trust.

Here's a different example of how this works. 

At my bakery, we started with a only few products in our first year and now sell hundreds.

We’re still known for sourdough and laminated pastries but we noticed that as we got to know key wholesale clients, they needed other bakery products produced to sustain their businesses.

So we started making a few and now that we've built those products, we can keep them in our back end and sell them to other establishments without them confusing the brand.

They’re things we don’t really talk about until you’re on board because otherwise, we’d be that restaurant with the giant menu.

Again, those are just products. 

In terms of key revenue streams, here are some of ours:

• Catering - Commercial office morning tea and lunch-style food in line with our current offer (B2B)
• Online sales - A catalogue of all products delivered to you the same day you order (B2C
• Government grants - Taking advantage of gov. grants to open up revenue streams
• Cookbook - We wrote a cookbook once that we now reprint and continue selling (B2B2C+B2C)
• Hospitality - Selling to other food businesses that sell to a customer (B2B2C)
• Retailers - Selling to another business that sells to a customer (B2B2C)
• Direct - Selling directly to customers through our cafe stores (B2C)
• Members Only - A subscription service for exclusive products (B2C)
• Information - Selling information, consulting, etc (B2B)

And these are only the main ones. 

As you can see, there’s more going on here than my original cafe.

When you combine a few diversified revenue streams you can really dial up your growth.

Okay…

Before you close this email and sprint off to start adding layers of revenue to your business, let's take a quick look at risk.

I’ve made some epic doozies over the years doing this that have nearly cost me my business.

Where it went wrong for me was:

1. Not prioritising profit

2. Not testing ideas first.

The best example was when I chased national wholesale revenue because it was exciting, but there was almost no margin in it. 

We ended up pumping out loads of products but had massive costs to produce them and therefore no cash left at the end. 

Pretty dumb.

So don’t chase growth opportunities, just for growth.

Chase the right type of growth with a juicy margin.

As for not testing…

I have a tendency to run at things full steam and at that time I thought it was a race. 

We innovated so rapidly just to get products into the market at full-scale production that we had limited time to chase down the right supply of ingredients and fully cost all parts of the production.

We made a ton of people happy, but made almost no cash.

Don’t do that. 

There’s always more time than you think. 

So, test, learn and iterate with the limited resources you have, and then ramp it up.

 I hope this helps!