The Importance of Multiple Revenue Streams through Diversification (2024)

What Do I Mean By Diversification?

Simply put, it is multiple streams of income deriving from more than one source. This could be simply having customers in different regions or even in different countries. With your income stream coming from these different sources you are spreading your risk should something like a devastating hurricane in the southeastern United States, for example, adversely affect your client base there. You will still have income coming in from other parts of the country, or world. Another example would be product diversification. Let’s imagine for a moment that the single product you sell suffers an interruption in production, or delivery. No product to sell - no income. However, if you had several products in your lineup, where one might fail you, the others will carry you over until things return to normal.

Why Income Diversification?

The paragraph exploring what diversified multiple streams of income is, pretty much answers this question. Diversification of revenues provides financial stability for you and your company, reduces business risk, and makes your business infinitely more marketable when it comes time to sell.

When your income has a greater stability factor, you in turn will experience greater peace of mind through income security, increased income which will give you many different options, and potentially greater tax write-off benefits, depending on your country’s tax structure.

Additionally, in many circ*mstances your multiple streams of income can be complementary to each other, acting as a feeder system from one to the other, mutually building each sector of your business.

Types of Income Diversification

There are traditional style investments that provide passive income such as real estate and investing in securities. Both of these have their benefits, both have their risks, and both typically take time for an individual to accumulate enough savings, or have enough earnings to be able to invest in them.

There is diversification within your existing business, such as adding product lines, adding independent practitioners, offering online services, workshops, retreats, public speaking, etc. These all have the benefit of diversifying your income, but they also all require expertise, management, time, money and effort to develop and then additional bookkeeping and record keeping.

Residual income, in my opinion, is the best form of income for a busy business owner to develop in adding diversified revenue. Successful actors, musicians, athletes, authors, celebrities of all kinds earn additional money through residual income. The preface of residual income is that you do something once, and you keep earning money on multiple sales or exposures of it. Another way to create residual income is to negotiate ongoing commissions on revenues you were implemental in creating. As an example, one of the revenue streams I benefit from is monthly commission checks on revenues a company established through 6 years of my consultation. Another form of residual income is derived through commissions from a multiple level structure of earnings. Real Estate and Insurance businesses are both examples of this. There is also the multi-level networking business structure. This business model allows for tremendous earnings opportunities. However, over the years it has suffered from some bad press because of opportunistic individuals and companies offering misleading encouragement to poorly suited people to engage. But don’t let that put you off. The MLM industry is an authentic industry, distributing quality products and making millions of people much needed additional income. We’ve had plenty of unethical people in the securities business (Madoff), companies that have lied and cheated and caused thousands to lose jobs/retirement/homes – (Enron), and countless unethical real estate and insurance agents. Does that stop people from investing in the stock market, working for Fortune 500 companies, buying and selling real estate and buying insurance? No, of course not! As with all investments and business endeavors, do your homework before jumping in with both feet.

Resources:

Forbes Magazine – The Importance of Revenue Diversification In Business