TheUC 045: 2 Simple Strategies to Generate Revenue

045generatingrevenue

The Unapologetic Capitalist relays 2 simple strategies to plant seeds for quick, low risk and profitable ways to generate revenue in your business. As industries, economies and marketplaces emerge and evolve, businesses can stagnate.  Margins get squeezed, the shine of innovation wears off, and economies of scale can turn to dis-economies.  In an attempt to generate revenues, many companies err in seeking strategies that seduce in the short term, but thwart generating revenues and value for the long-term.  This discussion focuses on two cogent strategies that leverage a venture’s core products and assets to quickly, sustainably, and profitably generate revenue.

First, a quick review of last few shows on social media strategy:

  • Big take away:
    • Social media is here and will just keep growing
    • How loud the voice will get is still unknown
    • What we do know is that social media strategy is a lot like teenage sex…everybody says they are doing it, but few are actually…and those who are, aren’t doing it very well.

To generate revenue, consider the context.  Let’s take the top 3 most popular times when a company really feels the pinch to generate revenue:

  1. New businesses well and then stagnate. PR and the honeymoon phase only take you so far…the marriage has to last.
  2. Products may become commoditized…if product is valuable then entrants come in and margins get squeezed
  3. Service businesses…feed the beast businesses. If you do well, you get bigger, the beast then grows and needs to be fed more.

So what do we do?

  1. Consider the metrics that can be used to assess how you generate revenue and how well a firm is doing with respect to its profitability drivers. What are your profitability drivers? Remember, your customer and your P&L need to define the metrics that drive generating revenue.
  2. Generate revenue by doing one of two things for your company (or for your customers):
    1. Change your unit of business so it more closely reflects the value created for customers. You will probably also want to change how you measure the effectiveness of your performance.
      1. As industries emerge and evolve, most players eventually settle on a common unit of offering. Lawyers sell units of time (billable hours), consumer-goods producers sell bars of soap and boxes of cereal, airlines sell passenger trips, and so on. These are all units of business—the fundamental basis for transactions between buyers and sellers.
    2. Dramatically change your performance on existing key metrics in a way that uniquely favors your company.

What Type of Business is Your Venture?

  1. Commoditized businesses:
    1. Changing your unit of business, or radically changing your key metrics, can be a powerful engine for growth, particularly for early movers.
    2. From a competitive point of view, a change in the unit of business can be difficult for rivals to respond to because it often comes as a surprise.
  1. Beast Businesses: Service industries…pricing…adding a product that adds value without connecting it to the billable hour. The allure is to go to high price few transactions to make more money, but this strategy is highly susceptible to falling victim to a bad economy.  A better model is actually coming up with a low priced, high volume transaction like a subscription model to generate revenue.