Strategically Important: Diversification of Revenue Streams
A healthy business practice to repeat at least on an annual basis is a review of your revenue streams. Are you achieving your annual revenues from a narrow group of customers or market segments? Let’s say you have one customer that is responsible for 33% of your annual Sales. All of a sudden, something happened to that customer. Maybe they had a change in ownership, a different buyer, they changed strategies or possibly something happened to their market that forced them to shut down a plant that your company supplied. How are you going to survive with just two thirds of the volume you once had?
We look at individual customers, regions of the world and product segments. For example, from time to time certain issues pop up in certain regions of the world like a recession, war, banking issues, currency issues, etc. To assure that our company stays healthy in the long term, we look to expand our presence in weaker markets so that we have more diversification by regions.
In your situation, you might have one market segment that has been great. It keeps growing and wants more of your product. But as part of your annual strategic planning process, you also need to look at how much of your volume is coming from that one market segment. How do you and your team continue to support this growth in a positive way, but at the same time take some of those added profits and invest in growing other markets or regions? Maybe that market is in the broiler industry and now you decide to more aggressively go after customers in the layer industry. Or possibly there is a developing dairy industry you now want to pursue.
The benefits of this strategic approach is clear. Broadening your sales are definitely part of risk mitigation for your business. It also balances your revenues so that as a market declines, your diversification will bring in other markets which might be going up. Or as one product might be facing extreme pricing pressures, another product might be taking off as competition has faltered. With a broad enough business, you can manage through the ups and downs of any one market, region, customer or product.
Insta-Pro Intl can help support you in the development of a new product or market with experience in many areas. The Sales and Nutrition/Technology teams would be happy to discuss ideas with you to assist in developing a solid strategic plan to diversify your revenue streams.
