It’s not uncommon for companies to explore different opportunities, especially if the aim is to increase sales and diversify revenue streams. However, did you know that too many options and excessive revenue diversification can hurt your business?
Innovation is important, but too much of it may leave you holding a double-edged sword. For instance, if you’re a business owner who regularly launches new products, chances are you are diluting your resources including your staff’s effort and talent. You may even be allowing your most profitable products to be put on the back burner.
At SUM OF ALL NUMBERS, we advocate innovation, which is the key to survive and flourish in today’s highly competitive market. But again, it should be well-thought, carefully executed and generally lean on a “conservative side.” In short, you should realize that not all potential opportunities should be pounded upon.
The cons of too many opportunities in business
Aside from diluting your resources, these are some of the “cons” that happen when you bite off more than you can chew.
The more products or services you offer, the bigger the capital and resources you need; this may become a serious problem if you’re a startup or small company because it affects the cash flow your business needs in other areas.
Instead of introducing new products or wasting precious resources to sell something with a small profit margin, why not focus your efforts on your established revenue flow, aka, your top-performing products or services? This is why at SUM OF ALL NUMBERS, our bookkeeping experts will look into revenue streams.
Once we know your most reliable and profitable revenue streams, we can help you analyze your cash flow and ultimately stabilize or even increase your revenue growth sustainably.
With the advent of online media and the current business landscape lacking any geographic supplier boundaries, having a broader product offering means you need to face more competitors, including established brands and companies with bigger marketing and advertising budgets.
When you spread yourself too thin, it’s hard or even impossible to brand yourself as an industry leader. Remember that you should always aim to position yourself as one of the best companies in your field or craft.
When you have an overwhelming number of products and services, your customers may have difficulty choosing.
While we believe that a single revenue stream isn’t always ideal and that businesses should always look for new clients and customer bases, moving away from what makes you unique in an effort to diversify may hurt your business.
What we primarily advocate is this: Focus on your top-performing products or services, particularly those that generate high-profit margins, and reduce or even eliminate those that have poor ROI.
Should you decide to diversify, the general recommendation is not to deviate too much from your top-performing products and “core” business. For example, it’s easier and more cost-effective for a pastry bakery to partner with local restaurants and cafes rather than start selling baking supplies, equipment and tools.
Another way to avoid product saturation or over-exerting your resources is to ask yourself these two questions:
- Does my staff find it difficult to create or deliver a new product or service?
- Do my customers find it difficult to access them or find it overwhelming to choose from a wide range of options?
As a vibrant team of business consultants and bookkeeping experts, the SUM OF ALL NUMBERS can help you manage your cash flow efficiently and keep your record accurate and up-to-date, so it gives you a clear picture of your company’s financial health.
Also, we can look into your bookkeeping record to identify the loopholes and correct them using the PROFIT FIRST principles. For instance, you might be spending too many resources on launching new products to the point that your established revenue streams are neglected.
Send us an email to learn more about how we can take your business to the next level.