Monday 29th Oct 2018
Five Essential Sources of Revenue for SMEs
29 Mar 2018
Revenue is one of the most important metrics for any business - without it there can be no profit. Naturally this means that any business looking to move forward will have to figure out how to improve this metric. There are lots of ways of doing this, but in this article, we’re going to consider how you can approach opening additional revenue sources that you might not have thought about. Determining a revenue model is generally one of the very first things that a business will do when setting out a plan, but that doesn’t mean that this can’t progress and evolve as time goes by and new opportunities present themselves. Let’s take a look.
The main source of revenue for any business, whether small or large, is quite clearly going to be the sale of a product. This means that if you’re wanting to increase your product revenue, one of the ways you can do this is by expanding your offering. This will be considerably easier in some businesses than others, depending on whether you’re making the product yourself, or you’re a reseller. You can also expand your market, improve your rates of conversion and more. There’s a huge number of things you can do here, but in this article we’re focussing on some of the less obvious revenue streams.
Services are generally seen as a type of product, but they can also be added on as a form of revenue too. Consider for instance a small web development agency that builds websites; that’s their primary product, but they could also branch out into the maintenance of the website in the future, creating long-term value. This is especially true if a retainer can be secured, which brings in monthly revenue. Alternatively, you might have a small bricks-and-mortar or ecommerce appliance shop. Consider also offering servicing, support and warranties as additional service-based products which act as an additional revenue stream. There are many options out there for adding service-based revenue to your SME.
Advertising can be a highly effective additional source of revenue, but only if it’s approached correctly, and for many reasons it won’t be suitable for all businesses. If you’re running a website, then you can of course look to hosting other business’ adverts as an extremely effective revenue generating tool, provided that they don’t overly harm the customer experience or cause a conflict of interest. This goes for many digital products such as apps, particularly if they’re free to use.
Licensing of assets is certainly an option open to some businesses, and potentially more than you might previously have thought. Again, SMEs in the digital space are more likely to be able to take advantage here. Do you have your own proprietary software or internal systems? You may well be able to license them out for use by other companies, or even white label them to be sold on. There are many opportunities out there that often aren’t realised. Have a think about development that goes on for your company. Could other businesses benefit from it too?
Commission is the final revenue source that we’re going to touch on. Usually it’s seen as something for the company’s salespeople, but actually it can work between businesses as a form of mutual revenue generation. If you can pair with another business that offers a product that’s in a similar market to yours, but there’s no conflict, then you might be able to work out some form of agreement based on recommendation. Let’s go back to the previous examples of a web development company and an appliance retailer. If you’re building websites, then you might be able to get commission for recommending a particular hosting company or even platform. If you’re running an ecommerce site and don’t have the facilities to offer your own servicing and repairs, then you might be able to formulate an agreement with someone who can. It’s thinking broadly about how you can help consumers in your market that will open up additional revenue streams such as this.