Weighing Your Revenue Channels

Weighing Your Revenue Channels

Organizing Your Revenue Channels’ Winners & Losers

Starting and running a business is an endeavor that no doubt took a lot of courage, hard work, and patience. Early on, you may have been worried about where the next chunk of income or sales would come from, maybe even stressing about whether it would come at all. So, as your business matured, perhaps you ended up developing multiple revenue streams. Having money come in through different pathways was a way to increase profits, provide more security, and enhance your business.

That’s all great, but as your business matures, it’s also important to continuously weigh your various revenue channels. Some may provide more profits, some may have less risk, and some may just not be worth your time. So, how do you weigh your revenue streams?

Evaluate Costs and Value to your Business

Various revenue channels you have in your business could look extremely different. Contracts may be hourly compared with paid on a per-task basis. Some projects are ongoing, repeat work, while others are one-off engagements without further expectations.

These different parts of your business may result in revenue streams that are really like comparing apples and oranges. A great way to make these comparisons is to put them all in the same economic terms through a process called job costing. For each project, evaluate the exact costs to you, including labor, the effort to find and win those projects, material or software expenses, and anything else that takes away from your bottom line. Then, you need to do the same thing from the income side and evaluate the revenue each project brings in.

By weighing the costs and income of each project type, you will be able to see which revenue channels are winners and which are losers.

Other Factors

There are other parts of evaluating revenue streams that go beyond just the direct dollars and cents. For example, how risky or stable is a revenue channel? For example, if a particular channel does not look to have long-term relevance or stability (e.g., because it’s seasonal in nature, it’s built on a passing fad, or future regulations may hamper this business), putting all your eggs in that basket may not be as wise.

Additionally, it’s also worth comparing different revenue channels based on the type of work they bring in and if it’s what you want your business to be known for. Is that a direction in which you want to steer your company? Is it the type of work you want to be doing or enjoy doing? Sometimes a revenue channel may be slightly more economical, but if the answers to these questions are negative, then that’s worth weighing as well.

If you’re looking for an outside perspective to help you evaluate your revenue channels, then we can help. The experts at Tobin & Collins are ready and able to discuss your revenue channels and business performance. Contact Tobin & Collins to help get started today.