Home How to Create Multiple Revenue Streams in a Tech Startup

How to Create Multiple Revenue Streams in a Tech Startup

Revenue is the lifeblood of your tech startup. Without a stream of income, you won’t be able to cover your most basic expenses, including your team members’ salaries and your office lease. But too many startup tech entrepreneurs focus on a single revenue stream—a primary source of income that will exclusively sustain the business.

This model won’t necessarily doom your startup to failure. Many successful businesses have grown thanks to the money and power derived from a single product line. However, if you want a better chance of success, it’s important to develop multiple streams of revenue.

Why Are Multiple Revenue Streams So Valuable?

First, let’s explore the importance of multiple revenue streams. Setting up multiple streams of income for your business can help in a variety of ways:

  • Higher gross income. Revenue streams tend to stack additively, so long as they don’t compete with each other. If you’re making $100,000 from your main product line, and $25,000 from each of four different secondary revenue streams, you can essentially double your income. Obviously, you’ll have to consider the costs of these strategies as well; additional revenue streams often require more time and money to keep going. However, overall, your business will be making a higher profit.
  • Diversification and protection. You’ve likely heard the advice to “diversify your portfolio” of investments. This is often recommended to investors because it has a protective benefit. If you invest all your money in a single asset and that asset fails, you’ll stand to lose everything. But if you invest your money in a variety of different assets and a single asset fails, you’ll lose very little. When setting up multiple revenue streams for your business, you’ll be achieving something similar; if you ever see a marked decline of customer interest or if one of your revenue streams is no longer relevant, you’ll have the others to fall back on. This can help you get through a rough patch, or keep the business alive long enough to pivot it to a completely new model.
  • Improved consistency. Generally, businesses with multiple revenue streams tend to operate more consistently than their single-stream counterparts. Most monetization strategies suffer from some level of inconsistency; they rise and fall in line with consumer demand, competition, or other market conditions. But if you have many different streams responsible for generating revenue for your business, there will be less volatility to contend with; you can count on more predictable results.
  • Exposure to new markets. Developing new revenue streams forces you to expose the business to new opportunities and new market segments. Depending on your actions, you may learn that there’s a more valuable demographic for your business to target, or more lucrative opportunities available for your brand. The more you learn, the better you’ll be able to refine your strategies—whether they’re “main” or “secondary” lines of revenue.
  • Opportunities to take risks. Finally, creating multiple revenue streams affords your business more opportunities to take risks. When you have many different revenue streams supporting the company, you can take bigger risks in your main line of products; if something goes wrong, you can always fall back on your secondary revenue sources. Each new revenue source is also an opportunity to take risks; you can gamble everything on a small offering from your company, and not sweat a total loss in this area.

Step 1: Identify Areas for Monetization

The first and most important step is to identify new areas for monetization. To create multiple streams of revenue, you need multiple ways of making money.

In the tech world, there are countless opportunities for monetization. For example:

  • Core products and services. For starters, there are your core products and services. You might sell specific products to individuals, or ongoing subscription services to companies all over the world. This is your “bread and butter,” and the reason for your company’s existence. Most of the time, it’s your biggest source of revenue and the most important stream to keep alive.
  • Side products and services. Over time, you might develop new products and services that don’t fit with your mainline but may still be valuable to your company. For example, you might develop a new app that doesn’t fit your main brand but could be valuable to thousands of potential customers.
  • Advertising. If you have lots of people visiting your website or downloading your app, you may be able to monetize that traffic with the help of advertising. You can earn money for each person who clicks on the ads on the side of your app or webpage and make little to no ongoing effort to sustain it. Just be aware that some consumers find ads to be a turnoff, and this could hurt their image of your brand. Search volatility from Google could also have an impact on predictable revenue.
  • Affiliate links. Similar to advertising, you could host affiliate links. The idea here is to send some of your visitors/customers to an external site to make a purchase. If they complete a purchase successfully, you’ll earn a portion of the proceeds as a kickback.
  • Premium content. Your business could also get in the side business of creating premium content. Chances are, your team carries expertise in some field. Why not channel that expertise into a series of eBooks, audiobooks, podcasts, and other forms of content? People will pay good money for good content.
  • Classes and education. Similarly, you might develop an online course, a series of tutorials, or some other educative pathway.
  • Branded merchandise. If you have a lot of fans, you might be able to generate revenue with the development of branded merchandise. It can also double as a form of advertisement, exposing you to new customers.

These are just some of the ways you can build extra revenue streams for your business. Take the time to brainstorm and come up with even more unique ideas.

Step 2: Establish Priorities

Once you have a few ideas for possible alternative revenue streams, you should take the time to establish your priorities as a business. How important are the following?

  • The idea of the brand. Will your brand be tainted in any way by adding new revenue streams or changing the business?
  • Total revenue generation. How important is it to make lots of money?
  • Scalability. Do you need to make sure your business is agile and focused enough to scale over time?
  • Stability. How important is it that your business remains stable and predictable throughout its operations?

These priorities should help you determine how many revenue streams to add, how quickly to add them, and how they should fit with your core products and services.

Step 3: Experiment

From there, you’ll be ready to experiment. Not all your additional revenue streams will pan out exactly the way you imagine, so you should be prepared for some surprise hits and surprise failures. Play with a handful of different options, and tinker with the variables. Take consistent measurements, so you understand the ROI for each strategy, and optimize your approach accordingly. If you run multiple websites, experimentation may include trying multiple content management systems or experimenting on the types of content or ads you run to optimize conversions.

Step 4: Consolidate

Over time, you’ll learn which of your revenue streams are the most profitable and least profitable. You’ll discover new ideas that put your initial ideas to shame, and you’ll find that some of your streams begin to eclipse the others. Take in all this information and consolidate your revenue streams. Create a business model that falls in line with your priorities and be prepared for adjustments in the future.

Creating a business with multiple revenue streams can be challenging, especially if you’re having difficulty getting a single revenue stream consistently running. However, it’s often the best long-term move for your business. Take some time early on to consider the possibilities, and explore different strategies that could add value to your brand.

About ReadWrite’s Editorial Process

The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

Nate Nead
CEO & Managing Member

Nate Nead is the CEO & Managing Member of Nead, LLC, a consulting company that provides strategic advisory services across multiple disciplines including finance, marketing and software development. For over a decade Nate had provided strategic guidance on M&A, capital procurement, technology and marketing solutions for some of the most well-known online brands. He and his team advise Fortune 500 and SMB clients alike. The team is based in Seattle, Washington; El Paso, Texas and West Palm Beach, Florida.

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