The Laughing Crow is a nickname whose voice I borrow: a rascal who is abrasive but honest, curious and outgoing.
Most people have one source of income: salary. Even entrepreneurs are often limited to a single source of income, based on the most direct business endeavors they undertake. But if you want greater income security and diversity of income sources, you may need to look beyond that “one thing” and start building multiple interrelated activities into your business.
Let’s see what this means, how to make it happen, and how to make each activity support the other.
Consolidated commercial efforts
Before any product or service reaches the consumer, it has gone through a chain of producers and creators; the so-called value chain. A shipping company has brought you a wooden cabinet, you bought it from a furniture store, and a carpenter made it from wood from a lumber yard that was supplied by a forestry company. This is often called the “depth” of a string; a single line from the source of the material to the final product.
Also, that same wood in the lumber yard could have been used for other things; It could have been used in buildings, turned into firewood, or made into paper. This is called the “width” of the string; multiple applications arising from a single source of material.
This is important to know, because it shows that you, as an entrepreneur, can choose to go “deep” or “wide.” In other words, consolidate multiple links in a production chain in your business or find multiple uses for the same skill or material you work with.
For example, let’s say you are a logistics consultant. You could advise logistics companies. Going deeper, you could decide to also consult the production companies to better interact with the transport companies, or consult the stores to receive the products in a better way. You have deepened your influence by consulting along the same “route” in the chain.
If instead you are moving from logistics consulting to transportation vehicle consulting or starting a high-profile transportation business yourself, you are expanding on the same topic, improving the “breadth” of your business.
Support network design
It is not enough to simply expand your business deeper and deeper; you need to consider how each of those moves supports your business goals. Deepening your business activities generally reduces costs (by controlling your previous source of supply) or improves margin (by removing the middleman from a supply chain). Expanding your activities improves revenue (by targeting different markets) and protects your business as a whole against market fluctuations.
If you invest in a deeper or broader structure, you have to achieve one of these goals. If you are a carpenter, owning a sawmill can lower your material cost, because you no longer pay supplier margins. However, you must invest in the mill and the wages of your workers, so you need to make sure you get a return on your investment!
An ideal situation exists when one of those investments achieves multiple objectives. If you have a furniture store in addition to a paper factory, then obviously that same wood factory now improves the cost of supplying each of them. If you’re a beekeeper, you can grow flowering herbs to enhance honey production, but those same herbs can also be harvested and sold as herbal tea!
Each business improvement you make can provide more than one business benefit. Look for ways you can get multiple sources of income from each investment or improve costs for each of your value chains.
Mutual reinforcement and security
Let’s say you have a Bed & Breakfast, where you have a garden of organic herbs and honey bees. Organic herbal teas and organic honey are available to guests in the morning. Because of this, people are willing to pay more for their stay.
But that is not all! Guests can buy honey and organic teas in the small kitchen shop, at much better prices than in the supermarket. That’s a great value and will improve your tea and honey sales.
Turning that around, you might decide to have special “weekend awakenings” where the price of the stay is higher, but you show people the garden by explaining how organic herbs and bees work. People are willing to pay more for this because it is special and educational.
Each component, the garden, the B&B and the products, reinforces at least one other. Together, they create a comprehensive business concept that is unique. That value is cumulative and ensures that you maintain your income and have security in running your business. When one component of the business has a lean year, the others make up for it.
When you start a business, you may not realize that you can deepen or broaden your entrepreneurship and in doing so grow beyond your current market and current sources of income. By spreading risk and improving your market position, you can not only make your business more future-proof, you can even create a unique combination of business activities that makes a brand famous.
This article is accurate and true to the best of the author’s knowledge and belief. The content is for informational or entertainment purposes only and is not a substitute for personal advice or professional advice on business, financial, legal or technical matters.
© 2019 Lolcrow