When you own a business or operate as an independent contractor, your revenue stream is your livelihood. And unless you’re part of a major corporation with decades of history, that revenue stream is going to fluctuate significantly over time. During slow periods, or during a downturn of the business, that revenue stream could shrink—or even disappear altogether, leaving you unable to cover your expenses, or worse, without an income.
Fortunately, there are many strategies you can use to protect your revenue stream from such an abrupt and unexpected downturn.
How to Safeguard Your Revenue
These strategies, individually or together, will work to keep your revenue stream stronger and more stable for the long run:
- Diversify your clients. With investments, one of the most common pieces of advice is to “diversify your portfolio,” encouraging investors to invest their resources in multiple types of securities. This selection method avoids the “eggs in one basket” problem, mitigating the risk of a catastrophic loss, and allows investors to see more stable returns, since their capitalizing on multiple investment methods at once. You can use the same strategy to diversify your client base, choosing a wide variety of both small and big clients to even out your incoming revenue.
- Seek alternative revenue streams. You can also streamline your revenue by adding more than one source to your business. For example, if you write content on a regular basis and earn a main stream of income selling your eBooks and consulting, you could start a side line of income by putting ads on your site. This way, if one line of revenue drops off or takes a hit, you’ll still have the complementary line in place to balance you out.
- Get a good insurance policy. Depending on your type of business, you may be able to get a good business interruption insurance policy, which will protect you in the event you aren’t able to run your business as usual for a temporary period of time. For example, if your business is destroyed, or if you’re seriously injured, this policy will kick in and provide you with a temporary replacement stream of income.
- Be prepared to take legal action. If you lose business or revenue due to someone else’s mistake or negligence, you should also be prepared to take legal action. For example, if you’re personally injured and someone else is responsible, a personal injury attorney can make sure they pay for the initial damages as well as any business you lose as a result.
- Get more retainer clients. Instead of relying on new people buying products or enlisting your services, invest more time in securing retainer clients, who pay you a monthly fee on an ongoing basis for ongoing work. Retainer clients are inherently more stable and predictable than other types of clients, so you can count on a fixed amount of revenue (and work to do) each month. The downside is that you may need to restructure your business offerings, or recalculate your profitability model.
- Secure long-term contracts with cancellation notices. While you’re gathering more retainer clients, make sure your contract language is updated to get you long-term agreements of at least six months. Long-term contracts are less likely to be broken, and can help you plan your revenue makeup for the distant future. You’ll also want to mandate advanced notice of cancellation (usually 30 days) so you have time to prepare for the revenue loss, if and when it happens.
- Collect income elsewhere. As an individual, you can also protect yourself from business revenue loss by making money other places. These days, it’s easy to find and pick up a side gig where you can make a few extra bucks, or invest in an opportunity with the potential to pay out dividends.
Though not a strategy to protect your revenue stream, you can limit your financial liabilities and improve your profitability by minimizing your expenses. You’ll also reduce the potential ramifications of a revenue stream in decline. You can cut expenses by operating more efficiently, limiting subscriptions and similar expenses, and by hiring only the people you need to continue operations.
In any case, your combination of money-saving and revenue-preserving strategies should be enough to keep your business thriving for years to come. Pay close attention to your fluctuations, and work proactively to prevent downturns before they settle in.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.