The majority of people only have one source of income: a paycheck. Even entrepreneurs frequently restrict themselves to a single source of income depending on their most direct business activities. However, if you want better income security and income, you may need to go beyond that “one thing” and begin combining numerous interconnected activities into your business.
Let’s take a look at what this implies, how to make it happen, and how each action may help the other.
Consolidated Business Efforts
Before a product or service reaches a consumer, it must first pass through a chain of producers and creators, known as the value chain. A transport company delivered a wooden cabinet to you, you purchased it from a furniture store, and it was manufactured by a carpenter from wood acquired from a lumber yard supplied by a forestry firm. This is commonly referred to as a chain’s “depth”; a single line from material source to the final product.
Similarly, the same wood at the lumber yard may have been utilized for different purposes, such as construction, firewood, or paper production. This is referred to as the chain’s “width”; numerous applications originate from a single material source.
This is significant because it demonstrates that you, as an entrepreneur, have the option of going “deep” or “broad.” In other words, include many links of a production chain into your business, or discover different applications for the same talent or commodity you deal with.
Assume you are a logistics consultant, for example. You might provide logistics companies with advice. Further, you may elect to contract manufacturing companies so that they can better interact with transportation companies, or advise retailers so that things are received more efficiently. By counseling along the same “way” in the chain, you have increased your influence.
Instead, if you extend from logistics consulting to vehicle consultancy or develop your own high-profile transportation business, you are growing along the same theme and increasing your business’s “width.”
Creating a Supporting Network
It is not enough to merely broaden and deepen your business; you must also evaluate how each of these movements contributes to your overall business goals. In most cases, expanding your business activities lowers costs (by managing your prior supply source) or increases margins (by removing the middleman from a supply chain). Extending your activities increases income (by targeting diverse markets) and protects your organization overall from market changes.
If you invest in a larger or deeper structure, it must accomplish one of these objectives. If you are a woodworker, having a timber mill can help you save money on materials because you no longer have to pay the supplier’s margins. However, you must invest in the mill and the pay of its employees, so you must provide a return on investment!
When a single investment accomplishes numerous goals, the situation is perfect. If you own a furniture store as well as a paper mill, that same timber mill certainly lowers the cost of supplies to both. If you are a beekeeper, you may plant blooming herbs to increase honey supply; however, the same herbs can also be collected and marketed as herbal tea!
Each business-enhancement you make might thus bring more than one business gain. Look for methods to generate numerous streams of income from each investment or to reduce expenses in each of your value chains.
Mutual Support and Security
Assume you own a Bed and Breakfast with an organic herb garden and honey bees. Organic herbal teas and organic honey are provided to guests, as well as organic honey in the morning. As a result, people are prepared to spend a higher price for their stay.
But wait, there’s more! Guests may purchase honey and organic teas from the kitchen’s little store at far lower costs than at the supermarket. That’s a fantastic deal that will boost your tea and honey sales.
Alternatively, you may opt to offer special “weekend wakeups,” where the price of the stay is greater, but you tour people around the garden and explain how organic herbs and bees function. People are prepared to pay a higher price for this since it is unique and informative.
Each component—the garden, the B&B, and the products—complements one another. They work together to produce a one-of-a-kind comprehensive business model. That value accumulates and ensures that you continue to earn income and have security in running your business. When one part of the business has a bad year, the others compensate.
When you first establish a business, you may not understand that you may broaden or deepen your entrepreneurship, and so expand beyond your existing market and sources of income. You may not only make your business more future-proof by spreading the risk and increasing your market position, but you can also put together a unique combination of business activities that makes a brand name renowned by spreading the risk and enhancing your market position.