5 Ways To Boost Startup Revenue
In the past, a startup company could afford to take its time, using venture capital to buffer its expansion and growth. However, in recent years, the ability of startup companies to bankroll their efforts seems to come sooner and sooner, according to Entrepreneur. Because of this, startups are expected to generate significant amounts of revenue almost from the time they begin operation.
The apparent oversight of this model is that most businesses can’t stand on their own as soon as they open their doors. Chron notes that, on average, it may take a startup between two and three years to reach profitability through its regular operation. However, there are ways to fast-track a business into developing revenue streams. Boosting startup revenue allows the company to become profitable that much sooner and reduce how much dependence it has on its initial investors and seed money. Here, we explore five techniques for startups to boost their revenue generation.
1. Focus on a Singular Customer Segment
Startup businesses have the benefit of having a lot of untapped potential, which makes their initial customer segment a massive space. It is in the best interest of the business, however, that they focus their marketing on a particular part of the industry they are dealing with. The reason is that for startups at least, money spent in marketing across a wide range of customers may turn out to be overspending. A small marketing budget dictates that the business needs to set its sights on a particular demographic and drill down from there.
As Forbes mentions, retaining customers is better than acquiring new ones to enable profitable growth. Businesses that want to see a significant increase in their revenue stream are best advised to develop an ideal customer model that represents the target demographic that the company is interested in acquiring as customers and honing their marketing efforts to this particular perfect customer.
2. Don’t Overlook Addons
Many startups are built around the idea of a core business product. While providing the product itself is the primary focus of the business, the core product rarely ever deals with specific edge cases within the industry. The core demographic of customers mentioned above are likely to be loyal to the business after purchasing the initial product, and the expansion or add-n would focus on the complaints or issues those customers have.
The critical element that the sale of addons hinges on is brand loyalty. The London Economic states that brand loyalty is a significant driving factor for sales. Startups can’t approach their business idea like traveling salespeople, where their customer is unlikely to see them again. Instead, they must know the customer as a continual source of income and develop improvements for their core product focused on their customers’ needs.
3. Branch Out into New Demographics
Dealing with the same demographic of consumers can lead to overexploitation of a market. Startups don’t usually target segments with endless potential, and eventually, the business will need to look at new ideal customers to develop and market to. However, the mistake that most startups make with this approach is to leave behind their primary target demographic altogether and search out completely new markets. Forging new boundaries is the right approach, but it can be expensive to break into a brand new market, taking away from the revenue that the company already earns.
Inc. mentions that market research can help to find new customers based on what the current customers of a company are. Customers of a particular demographic that has similar likes or interests as the core target demographic may be a useful area to explore to land new customers. While the acquisition of these new customers is still likely to take up some marketing budget, the cost and effort to find them is significantly less with an existing lead in place. The result is a revenue stream that costs less than the first one did to set up.
4. Aggressive Pricing Followed by Upselling
While this method is a useful one, especially when targeting new customers, it should be noted that the practice isn’t sustainable over the long term. Aggressive pricing is a viable method to penetrate a new market, according to Study.com. The definition of aggressive pricing is when a business lowers the price of their product below that of their competitor. When the price is unreasonably low, it can create a situation where the company starts incurring losses, hence the reason why the practice isn’t very sustainable.
It is likely to get customers in the door, however, and shouldn’t be written off. Having aggressive pricing and then using upselling to offset that initial drop in price can create a sustainable system for the business, although the profits would be lessened because of the hit the company takes in the initial sale. Again, leveraging addons is vital in this strategy as the majority of profits as well as the buffer for the initial price cut on the core product come from addon sales.
5. Consider International Customers
Businesses that have a competitive product can look into exporting it to other parts of the world. In some cases, they may face little or no competition and be able to establish dominance within a local market. In these cases, the revenue the exports generate would enable a company to become self-sufficient much sooner. However, an essential consideration for a company intending to do this would be how much local legislation in the target country would impact the business operation and overall profits. Some states, while ripe for opening a business, display tendencies against privately owned enterprise which may negatively influence the revenue stream from exported products.
Start Small and Then Build
Generally, the first customers a startup gets are its most important. These customers allow the business to establish itself and to create a brand that customers can recognize. Existing customers are the easiest method for a company to grow its initial revenue. Other business opportunities can be explored after the initial revenue steam becomes solidified. While businesses can be burned for trying to do too much too quickly, the challenge for a startup is to establish itself as rapidly as possible. In this, the risk-to-reward ratio when it comes to developing revenue streams is of the utmost importance.