Being in business is at the same time exciting, terrifying, energising and scary.
On the plus side, you get to be your own boss, do the thing you like to do and you are master of your own destiny.
On the downside, it’s rare when a day doesn’t go by when you are not thinking about money.
If you speak to any experienced owner, they’ll tell you that business never pans out how you expect it to and some will even tell war stories about 180-degree pivots!
So it is important that every small business develops more than one income stream so that when things are going badly in one area, another will be flourishing.
Use the Pareto rule to analyse your business
The Pareto Rule or Pareto’s law is a theory that says most things naturally fall into a 20/80 split.
For businesses, this could mean that 20% of your products produce 80% of the profit or 20% of the staff are making 80% of the sales.
It’s an odd thing, but it is pretty much true. Try it.
Admittedly it won’ fall into exactly 80%, it may be 75% or 83% but it will be around that mark.
Why is this important?
Because it points the way to some very risky features of being in business.
For example, analyse your sales and work out where the money is coming from.
Do you see around 80% of your turnover coming from just one customer? What would happen to your business if that customer went broke?
Is 80% of your profit coming from only 20% of your lines? What would happen if those lines were suddenly unavailable?
Business graveyards are littered with companies that pinned all their hopes on a single customer, product or service and learned about diversification too late.
Think about diversifying your income streams
If you want to reduce risk to yourself then you need to diversify.
A business owner who earns $10,000 per month from a single source is in a much riskier position that one who earns the same amount from five sources.
In the first scenario, if their only customer decides to take a new direction, then they will have no income at all whilst they find new ones. In the second, if one customer disappears then it won’t be such a problem.
This can work within the same business by making sure that your turnover is well distributed across a wide variety of different customers or you can take the approach of developing different businesses, each of which contribute a little to your overall income stream.
What to do if you only have one source of income
Let’s assume that you are doing OK but you only have one source of regular income; your business.
What can you do?
Well here are some ideas that don’t take a great deal of time, effort or money to turn into a useful additional income stream that may even compliment your existing business.
You have the skills, you have the knowledge, why not put them to good use.
You can bet that there are any number of people out there that would love to do what you do, even if it is only on an amatuer level so think about how you can deliver training to people in an innovative way.
There are many platforms like Udemy where you can record training sessions and charge people to watch and whilst the course fees are low they do bring in volume sales for popular courses.
The best thing is that once you have recorded your course you have a passive income stream that will bring in money without requiring regular work.
If you are lucky then you’ll hit it big and will have a goldmine of a course but for most people, the platform simply brings in a useful extra amount for little to no effort.
Write about what you know
In a similar vein to training, this tip makes use of your knowledge and experience across the years and turns it into a new income source.
Many publications will pay for authoritative sources of information and this especially true for technical subjects like accounting, the law or computer sciences.
Check out sites like Upwork or People per Hour to find out how you can trade your knowledge for cash.
Again using your knowledge and experience but this time to help people set up their own business or develop the one they already have.
For example, imagine you are a baker and you start consulting with convenience stores to show them how to set up and run a bake-off operation.
Or maybe you tie-up with a supplier of baking equipment to advise their customers on how to use the ovens, mixers and packers properly.
Whatever your trade or profession you’ll probably find that there are many ways you can leverage your knowledge for cash.
Franchise your business
Some of the world’s biggest businesses are franchises, and success in this area depends upon providing a proven business model that can be easily replicated.
Again this is drawing on your experience to help other people to make money but in return, you’ll receive an initial set up fee and usually a small monthly retainer.
We’re not suggesting you’ll necessarily become the next McDonalds, Hertz or UPS but a well-organized franchise operation could bring you in some good money but require little extra effort.
Adding new income streams makes sense
When you look back at our ideas they all leverage your experience and knowledge to some degree and this makes sense.
After all, you’ve spent a lifetime training, researching and building up experience that allows you to run a business, why not turn that effort into extra income streams.
It’s possible that one of these ideas could actually take over and provide you with the bulk of your profits but even if that doesn’t happen you’re not going to lose.
Imagine that you do all five of these ideas in addition to your main business and each of them only brings in $2,000 per month. That’s $10,000 per month extra from some pretty low-maintenance concepts.
Whatever you do, carry out that Pareto analysis now and make sure you spread your risk!
By John Pearson
John is a serial entrepreneur and writer who is passionate about helping small businesses launch and grow. His work has been featured in Huffington Post, Entrepreneur, and Forbes.