Are you exhausting all your potential revenue streams?
We stalled launching our Job Board for a while because we felt we had bigger fish to fry. Once we got around to it, we couldn’t believe we had waited so long. It was easy to set up, a great resource for our community, and has generated lots of cash for the company.
There’s more than one way to skin the revenue cat:
If you sell web software, you can also write a book. Or put on a conference.
If you’re a design firm, you can also sell jewel case packaging. Or start an ad network.
If you’re a site that collects funny videos, you can also sell tee shirts.
If you’re a popular local blog, you can operate a flea market.
If you’re a computer company, you can reinvent the music business.
Etc.
Your self-imposed limitations on how to make money are often just that: self-imposed. Seek out other routes to your destination.
It’s one of the big advantages that small, agile companies have. They can experiment and change directions quickly. Plus, multiple revenue streams help you diversify so all your eggs aren’t in one basket.
Do you have an example of a company that has come up with an interesting or unorthodox way to make money on the side? Tell us about it in the comments.
Tommy
on 07 Jul 08Sure; how about an online retailer providing infrastructure services?
Evan
on 07 Jul 08This seems like a very double-edged sword kind of thing. While being small does allow you to change directions quickly, there is also a real risk of spreading yourself too thin at that size. Think about all the troubles at Yahoo, who ought to have the manpower to put their eggs in just about as many baskets as they feel like.
Some of your examples make a lot of sense (local blog and flea market) and others (videos and tee shirts, IAC backing notwithstanding) seem like a dangerous example to consider a rule rather than an exception.
Your point of diversifying revenue and exploring all possible revenue sources for your business is fine, but I think you’re ignoring a big risk of losing focus and creating a company that does a bunch of things okay rather than one thing really well.
John Yunker
on 07 Jul 08We’re a small Web globalization consulting company that now sells a rather unique map of the world’s country codes: www.bytelevel.com/map/ccTLD.html.
It was a steep learning curve getting the thing designed and printed, but the map has been quite successful—and gotten us a wider audience.
JY
Michael
on 07 Jul 08If you are a potato chip maker, you can make vodka, like Tyrell’s does. http://www.thedieline.com/blog/2008/07/tyrrells-vodka.html
Happy White Man
on 07 Jul 08What about a design company that offers free Wordpress installs/setups for people who use blogging to make the world a better place?
They also offer special Wordpress hosting and support, but using it isn’t mandatory to receive the free install/setup.
Tom
on 07 Jul 08If you’re a credit card company, you can sell your customer’s personal information. If you’re a software company, you can sell the email addresses you collect…
Not all revenue streams that can be used should be used. Unless you want to be the kind of company that just doesn’t care. Knowing when you shouldn’t make money can be just as important as thinking up ways to make money.
James
on 07 Jul 08Matt, I’m a small business and I think a lot about doing this sort of branching out in the future. Doing too much now would be spreading myself too thinly, but I find the best way to keep the opportunities open for myself is not to specialise too much now. Also, to be aware of the generic skills I’m developing. What do you think?
@Evan: strikes me that the problem with Yahoo! is more lack of inspiration/energy that spreading themselves too thinly. It’s like they just buy stuff and then let it sit there.
Thomas
on 07 Jul 08I love this way of thinking outside the box. Of using some core competencies in another context.
This reminds of several academic articles I’ve read on myopia (Levitt et al.). Imagine for instance if the railroad companies of olden days had thought of themselves not as railway companies but as transportation companies or freight companies to whom the method of freight or transportation was unimportant. I imagine the same being the case with oil companies turning themselves into energy companies.
Good stuff!
David Kaneda
on 07 Jul 08Actually, my partner and I — a mac developer and web designer, respectively — are currently working on a native iPhone application for Basecamp called Outpost, set to release in August. The emerging iPhone SDK seemed like the perfect way for us to combine skills and do something entirely new.
Berserk
on 07 Jul 08@Thomas: You mean like if Air France were to consider shuffling passengers by train?
(Instead of folding in a couple of years.)
Mark Sigal
on 07 Jul 08I think that you raise really good points in this post.
I also think that a lot of companies struggle with the “internal narrative” of how is growing this product line or that revenue source consistent with the brand that we are trying to build and the relationship we want to foster with our customers.
My only guidance is that entrepreneurs should think of this as a narrative so as to ensure that there is internal logic that this is additive to your reason for being (a 1+1=3 value proposition) and not dilutive (a 1+1=
In other words, write down the short 1-2 sentence articulation of why to pursue this revenue source. Iterate it until it feels crisp and clear, and then imagine delivering this articulation to your core constituency of customers, employees, partners and investors. Does it still hold up?
Mark
Jeff Koke
on 07 Jul 08We are a small design and marketing firm and we do a lot of artwork and illustrations for PowerPoint. We decided to start an online e-commerce site selling PowerPoint artwork that’s built in PowerPoint. It’s not a huge revenue generator, but it covers its costs and requires almost no effort to keep running. It’s definitely the type of thing we’ll do more of as opportunities arise.
Ed
on 07 Jul 08Open source project makes money too:
http://damnsmalllinux.org/income-guide/
DLS is a proof of that statement.
Jason falk
on 07 Jul 08I always thought a online t-shirt company selling prints and paintings of its designs was interesting idea.
Tatyana Balte
on 07 Jul 08This may be a bit off industry but the Industrial Design Society of America (IDSA) publishes a hard-cover book every year. It makes the industry more visible to the world, showcases new and veteran designers/design educators, encourages participation within the Society, and makes for a pretty good way to fund the organization.
Scott Wintheiser
on 07 Jul 08How about web designers selling hard hats?
We’re a smaller web design firm in milwaukee. A few years ago we started a safety supply “company” (website) called Cooper Safety to use as a test lab for our ecommerce software that we built from the ground up. The company now has its own staff and will break $1,000,000 in revenue this year.
It’s really been a great source of revenue for both companies. We certainly like the additional revenue from Cooper Safety. On the Lightburn side, the experience has helped us prove we know how to run ALL aspects of an online business, from inventory to customer service, which has been a great sales tool.
Wade
on 07 Jul 08I’m an Information Architect and I sell t-shirts on the side to hone my skills at customer experience design. (And for fun)
GeeIWonder
on 07 Jul 08Yeah, I don’t know. This is dangerously close to ‘adding more features’. It’s one thing to leverage market position and especially eyeballs, but doing something just because you can or just because it MAY provide more revenue seems a little wrong-headed to me. Additionally, you run the risk of compromising your existing markets.
Also, the point is wrongly stated, I think. “Exhausting revenue streams” suggest a decision making process centered around benefiting the business, but not necessarily for the user. And ‘exhausting’ suggests you’re burning bridges rather than building them.
Steve Kinney
on 07 Jul 08Great call on Brownstoner and the Brooklyn Flea, I live right around the corner from the flea market and I am constantly amazed what a success it is.
Bart
on 07 Jul 08[shameless plug] We are a small software company from the netherlands and we create software for live video performances (vj software). Last year we started selling stock footage for our customers that is created by our customers who’s work we really like. This is creating enough revenue to hire a freelance programmer to help us make our software run on pc and mac. [/shameless plug]
Tim
on 07 Jul 08Isn’t this what business schools teach you to not do?
Because expanding in the ways you highlight through example is not in the core competency of the company.
Wade
on 07 Jul 08Tim,
It seems to me like 37Signals spends the majority of their time telling people to do things that business schools would specifically teach them not to do.
Dharmesh Shah
on 08 Jul 08Tim: Where is it written that the advice that a business school provides is necessarily the right (or best) advice for a startup?
Disclaimer: I went to a top 10 business school and learned a bunch of things. But, a lot of the stuff you encounter in startup-land, they don’t (can’t) really teach you in business school.
Mike
on 08 Jul 08might have to get jobs’ dick out of your mouth. Apple didn’t exactly reinvent the music business, its still dying. They found a way to make music sound worse and have more restrictions in the digital age.
Anindya
on 08 Jul 08We are a web development company who are into web design and development training too.
Pete Bowen
on 08 Jul 08I think it makes sense to build additional revenue streams.
We’ve systemized (built software around) 15 years of seminar experience and use it in our seminar business – might as well give other people the benefit of it and make a little extra on the side by letting them use our system.
I think it’s a logical next step.
Don Schenck
on 08 Jul 08@GeeIWonder: You know I love you, but sometimes it seems like you think or over-analyze a tad too much.
Jason and the gang are just posting their thoughts, ideas and methods. No more, no less. Take ‘em or leave ‘em.
I’m going to add a revenue stream soon, and this post is a good kick in the seat of the pants for me.
Don Schenck
on 08 Jul 08@GeeIWonder: Then again, YOU are just posting YOUR opinions. Maybe I over-analyze, eh?
GeeIWonder
on 08 Jul 08@Don; Yeah, maybe guilty as charged (me, I mean!) ;)
Good luck on your new venture!
Brownstoner
on 08 Jul 08Thanks for the mention. This is a really interesting topic. To expand on the ideas in the post, I saw the flea market as another way to monetize the existing eyeballs, albeit offline; given the blog’s focus on renovation and architectural salvage, the flea market was closely related enough to be a good “fit”. Being the largest local blog in Brooklyn put Brownstoner at a huge competitive advantage to organize something like a flea market—think of someone without the same platform taping flyers to telephone poles! The decision to start the market reflected a larger strategic decision to leverage the brand recognition locally on related projects rather than to try to try to start more real estate blogs in other geographic markets where the brand was unknown. Only time will time if that was the right call!
Adrian
on 09 Jul 08I think what a lot of design and development people are finding is that their services are now a commodity, traded online to the lowest bidder ( http://www.businessweek.com/magazine/content/08_28/b4092077027296.htm?chan=top+news_top+news+index_small+business ). To survive they NEED to either become the best in their niche, at which point they can charge what they like and pick their projects, or branch out.
Josh A.
on 09 Jul 08How about an aircraft company that manufactures composites, and then decides to build tourism spacecraft, and then satellite boosters.
Or a software company that makes mice, then a table computer and then releases its office suite as a subscription service.
This discussion is closed.