6 Ways to Diversify Revenue Ahead of a Potential Second Wave

As some experts warn of the potential for extended lockdowns or even a second wave of the virus in autumn, high in-person contact businesses like restaurants, bars and retail stores should be aiming for positive cash flow positions now. Cash on hand to pay expenses may be the critical factor that determines whether a company can survive a second outbreak, and thoughtful revenue stream diversification may help business owners achieve that position in the near-term and insulate against any major shocks in the future.

As you look to develop your own plans for the months and years ahead, take a look at how the following business owners have found ways to achieve positive cash flow by diversifying revenue streams and adjusting their business models.

Taking Business Online

For many businesses, improving cash flow means shifting their emphasis to no-contact and online-based revenue streams as states and local governments regulate in-person retail activities.

“Truthfully, we have no idea what’s going to happen to [store] locations by the time this is over. We are focusing all our energy — and our cash — on our online store and working on covering the losses we’re incurring from the physical locations," says Sandra Hurley, operations manager at girls' clothing company Hayden Girls.

"We are using that capital to promote our website, to enhance customer service, to ensure that delivery times stay within normal ranges and we’re able to promote and utilize our stock," Hurley continues. "There are also some costs associated with equipping our operations and warehouses to operate safely.”

Rethinking Products

Business owners are also adding revenue streams to supplement their cash flow by offering new products or evolving existing ones.

Each project we have carried out during lockdown has been scrutinized so that we know our cash is being used in the most efficient places.

—Helen White, founder of House of Lights

Jeremy Klaben, CEO and founder of Brightwok Kitchen has started to offer personal protection equipment (PPE) with all their takeout orders.

"For a few weeks we were scrambling for our own PPE, but then found reliable vendors," Klaben explains. "As a community-focused business, it was an immediate win-win-win to offer affordable gloves, masks and cleaning supplies on our online menu for guests to buy if they’d like."

Other companies are diversifying their revenue streams with creative pivots that meet changing consumer demand. Goldens’ Cast Iron, the consumer division of Goldens’ Foundry and Machine Company located in Columbus, Georgia, began manufacturing kettlebells and dumbbells in response to the run on at-home workout equipment which depleted the supply of equipment from major manufactures early in the crisis.

Switching Up Business Models

Business models are also shifting to focus more revenue from fewer customers who are willing to pay for an exclusive and private experience. For $350, customers can rent the entire theater at Moviehouse & Eatery in Texas. Beverly Hills agency Westside Nannies offers a private one-on-one camp experience for children. 

“Restaurants, bars and coffee shops have a leg-up here, as they can begin promoting their space as a clean, private venue in accordance with local gathering ordinances," says Shane Dutka, CEO of Review Home Warranties. "You can seriously bolster revenue by booking even one or two private parties a month during these tough times.”

Also given the focus on privacy and exclusivity, you may be able to charge a higher price point than you would've for your usual services.

Adding on Sales Channels

To keep their revenue pipeline full and cash flow more predictable, companies are turning to additional sales channels.

Adam Muncy of Samson's Haircare sells grooming products through 40 retailers throughout the Midwest. Muncy has moved his efforts “to direct-to-consumer marketing and pricing strategies," he says.

"Also we are providing affiliate links to our retailers so they can preserve their cash flow during the required shutdowns,” he adds.

Robin Bennett, co-founder at The Dog Gurus is creating one-time special events to promote pet lodging with other businesses.

“We have partnered with local stores to provide gift certificates for a couple’s dog as part of a package for date nights,” Bennett explains.

Inspecting Investments

Businesses are having to choose where they want to invest their cash internally and why. This is the case for Helen White, founder of House of Lights.

“Each project we have carried out during lockdown has been scrutinized so that we know our cash is being used in the most efficient places," White explains. "At the moment, projects where we see long-term gains for our money have been halted or reduced, and we have increased projects where we can see quicker returns.

"For example, our pay-per-click ads and organic search have both had handsome returns on Google," she continues, "whilst social media has been performing poorly compared with our pre-COVID-19 results.”

In addition, owners are practicing standard cash-flow conservation techniques. Brian Halbert of Halbert Capital has projected his cash flow for 2020 and 2021.

“I am using my historical [trend] revenue as my base case. Then, I've got three alternative revenue case—at 72 percent below base, 60 percent below base and 125 percent above base—that coincide with projected expenses. Being a spreadsheet nerd, I am plotting a graph as we go along.“

Saving Your Existing Cash

Preserving the cash that you have in the bank is also critical.

“Negotiating with vendors, partners and leveraging government rules can keep a business from having to shell out cash unnecessarily," says Michael Lewis at RetailGo. "Negotiate paying some rent in accordance with local evictions regulations and mandates during the pandemic. Try and strike a fair balance for you and your vendors/partners and landlords. “

Another way to save cash is to manage less inventory and turn it faster. 

"This is a particularly good suggestion for small businesses like restaurants, coffee shops and mom-and-pop retail operations," Dutka says. "Pare down your menu or don't stock overflow goods as you usually would.”

Read more articles on cash flow.

Photo: Getty Images