How to find new revenue sources for your online business

As the economy rapidly changes and previously dependable revenue sources dry up, it’s crucial to understand your business model and how you generate revenue. Revenue generation is one of the most important elements of continued business success. But, are you managing it wisely?

Profitable, well-run firms use a systematic, information-driven approach to diversify their revenue profile. Let’s discuss the metrics and methods to effectively evaluate your firm’s revenue sources.

The first step to evaluating your firm’s revenue is understanding the source. It’s important to know what clients are paying for, who is paying, when, and how much. Knowing the answers to these questions will help you forecast your future revenue potential and can serve as the basis for informed decision-making.

As you identify the who, what, when, and how much, it is equally important to categorize them accordingly. The first two elements, the who and what, carry added significance because each needs to be well-diversified to ensure longevity in your firm. We’ve all heard the saying, “Don’t put all of your eggs in one basket.” That’s because a proper revenue diversification strategy minimizes your firm’s dependency on a sole revenue source or client.

You will want to frame the last two elements – when and how much – based on how you categorize your clients and your services.

Let’s map out a clear revenue evaluation strategy.

We’ll start with your service/product offerings (the what), since you have the most control over that.

Evaluating your services (the what)

As you evaluate your services, consider whether they are consistent with your firm’s overall revenue goals. It’s a good idea to separate your services first by the type of service, and then by client. Here, we’ll discuss the services.

Consider the following metrics when reviewing your service revenue on your income statement:

  • Total service revenue ($): Total revenue generated by all
  • Revenue by service ($): Amount of revenue generated by each
  • Revenue by service tier ($): If you have different levels of services that you provide (i.e., starter, intermediate, enterprise), you will want to look at how much revenue each generates. This can be found on QuickBooks’® “Sales by product/service summary” report.
  • Revenue by period ($): QuickBooks has two great reports: “Profit and loss by month” and “Profit and loss by quarter.” Both will help you determine seasonality, as you can see how much each service generates and when.
  • Service revenue as % of total revenue: Again, QuickBooks provides a report called “Profit and loss as % of total Income,” which spells out what percentage of your total revenue comes from each service.

Using these metrics will be the baseline for determining how revenue flows into your company. You will be able to understand which services generate the most revenue, and then drill down to see which tier of service is your highest producer in dollar value and percentage of revenue.

Now that you know how much each service generates, let’s examine who you’re servicing.

Evaluating your clients (the who)

Clients can differ in size, industry, types of services, and service effort. Each can affect how much revenue you generate and when you collect it, so you will want to quantify each.

One of the best ways to evaluate how much each client generates is to look at the “Profit and loss by customer” report in QuickBooks. You will be able to identify your largest clients and how much they generate in total dollar amounts and percentage of revenue. Going further, you should also evaluate your clients’ company size by revenue, industry, and the level of effort required to service them.

How you determine small vs. large will depend on your firm, but a good arbitrary split would be $1 million in sales. Once a client crosses the $1 million threshold, total revenue can vary widely, but so can the amount of work.

Smaller clients will often require a lower service tier, as opposed to a larger organization that has a high volume of complex transactions. This is when the “Sales by product/service summary” reports, mentioned above, come in handy. The report will call out where your clients are concentrated. For example, your smaller clients may be concentrated in your lowest service tier, while large clients are in your highest tier. Smaller clients often have common recurring transactions that are easier to manage, but may not generate as much revenue for your firm. Larger clients tend to stick around longer and generate more revenue over a longer period.

Industry

When looking at your revenue sources, you will want to consider how each client industry plays into your overall revenue goals. Clients in different industries have different seasonality and may require more or less complex services. Looking at the “Profit and Loss by Period” reports will identify any seasonality in your services caused by your clients. For this reason, it is important to diversify your client industries to ensure revenue is generated year-round. Going further, economic situations affect industries differently. Depending heavily on clients in vulnerable industries can affect your overall revenue and firm in the event of a crisis within an industry.

Service effort

Every client will require a different level of service, due to the complexity of their business, or, unfortunately, the complexity of dealing with the actual client. This metric is not presented on a report per se, but can be determined with a simple in-house grading system. You can start by creating a binary 5-point system that takes into account the ease of servicing the client. Add 1 if the task is easy, and 0 if it is difficult.

Consider the following, and grade them accordingly:

  • Amount of effort needed to complete the client’s work
  • The expected turnaround time
  • The quality of the client’s documentation
  • Your relationship with the client
  • The ability to delegate the work

Once you’ve evaluated your revenue sources using the methods and metrics above, you will be better able to understand how revenue is generated within your firm, and how you can diversify your firm to maximize your revenue potential.

How to find new revenue sources for your online business

Table of Contents

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Grow your ecommerce brand in 2020. Download the complete in-depth, 16 chapter guide.

Finding online business success is not easy.

From choosing a product to sell to growing your online presence, there’s a lot to consider.

Add in an overwhelming amount of ecommerce options – from platforms to API integrations – and your head may be spinning.

At BigCommerce, we understand the dedication, hard work, and diligence it takes to create, manage, and scale a successful online business.

We go beyond the basics of ecommerce software and aim to help merchants, around the world, find success in the ecommerce space. That includes how to find a product to sell to abiding by business laws to getting creative with digital marketing strategies.

BigCommerce powers tens of thousands of online stores making billions in online revenue.

Most of these stores didn’t exist a decade ago, many still not even five years ago.

It won’t be easy. It comes with costs. It will take know-how and strategy. It will take dedicated design from day one. But do it right, and your business will bypass those one-hit-wonder brands to become something much more than a dream, a side gig or even a small business.

That’s why we’ve created the ultimate guide to walk you through, step-by-step, the components of selling online and how to create an actionable strategy for each stage.

Need to Get Your Business Online Fast?

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Choose the best features and functionality to showcase your products and run your business — on a platform that can scale with you instead of holding you back.

Who is this guide for?

  • Are you are an entrepreneur who plans on starting a brand new ecommerce business in 2020?
  • Are you looking to expand your business to an independent webstore from an online marketplace (such as Amazon or eBay) or a brick-and-mortar?
  • Are you planning to take your B2B business directly to consumers with a B2C site? (If you’re still on the fence, we’ve debunked B2B selling myths and provided a marketing guide here.)

Buckle up. You’re about to go on a deep planning dive to prepare your business for long-term success.

It is possible to build a legacy brand beginning right now.

It’s go big or go home, and it starts right here, by learning how to start an online ecommerce business — no more procrastinating.

14 Steps to Launching an Online Business

The following guide breaks down the process of starting an online business into manageable chunks.

We will discuss all of the following points throughout every chapter in this guide; at its conclusion, you’ll know how to start and run your own ecommerce store.

Here is an overview of the 14 steps for building and starting a successful online business:

1. Find a niche.

Before you start selling, you need to find the right product with the potential for serious profitability. You’ll learn how to research different niches and even examine your own life to find problems that can be solved.

2. Evaluate market viability.

Now that you have a business idea, it’s time to dig deeper into product viability. Think about the kind of details that can make or break your business, like number of SKUs and shipping weight.

3. Conduct market research.

Validate your product using tactics such as keyword research and evaluating trending products.

4. Conduct competitive analysis.

Find out what’s working — and what can be improved upon — from your biggest competitors. This will tell you more about how to define your branding and positioning in the market.

5. Learn online business laws.

Shipping restrictions, zoning laws, and trademark considerations. These can all make or break your business. With this list, you can avoid the ecommerce landmines that derail your business before it gets off the ground.

6. Analyze your target market.

This is where you dig even deeper to understand your ideal shopper. Who are they? What do they like? How can you tailor both your product and your website experience to appeal to your perfect shopper?

7. Source your product.

You know you have the right product, who your customer is, and how to set up your business. It’s time to get the physical product. We’ll walk you through different ways to source your product and how to avoid common pitfalls.

8. Choose the right ecommerce platform.

None of the above matters if you don’t have an ecommerce store that sells your product, provides an intuitive shopping experience, and makes customers want to return. We’ll show you how to go from zero to beautiful online store in a matter of minutes using powerful ecommerce software (spoiler alert – we have a recommendation).

9. Launch your store.

You’ve got the right platform and product. Who’s ready to start getting your product in front of customers? Before you do, learn all the steps you need to take to make sure you’re prepared.

10. Drive online traffic.

Once you’ve got your store up and running, learn the leading organic traffic driving tactics to get more visitors to your store.

11. Master small business shipping.

Shipping is a big topic for brands and customers alike. Learn the reality of small business shipping as it is today and the best approach your business can take to please your customers.

12. Measuring online success.

Success is nothing without analytics to prove it. We’re here to walk you through all of the key performance indicators (KPIs) you need to pay close attention to and to best leverage your data insights.

13. Scaling your business.

At BigCommerce, we enable our business to make it big. In this chapter, we’ll walk you through how to begin planning for the next stage of growth.

14. Insights directly from the industry’s top experts.

The difference between operational and successful is in mastering man’s greatest nemesis — time. Get firsthand accounts from successful entrepreneurs who have grown their home based business into online behemoths.

What are we waiting for? Let’s get started.

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Most new businesses start out as sole proprietorships. This is the simplest form of ownership for a sole owner and requires little more than a tax ID number. However, when there are concerns over taxation or liability issues, or when the business has multiple owners, other organization types should be considered.

Which organization type is best for your business depends on a number of factors, including the type of business it is, the number of owners it has, and the degree of concern over taxation and liability issues.

Key Takeaways

  • A sole proprietorship requires little more than a tax ID.
  • A partnership is an agreement to share the business revenues. Each partner’s share is taxed as personal income.
  • A limited liability company is a partnership that shields each partner from personal liability for debts incurred by the business.
  • The C corporation is a tax entity in and of itself and can lead to double taxation.
  • An S corporation passes revenues directly to the partners, who report their shares as revenue.

Partnership

A partnership is a straightforward business organization type to create. It requires an agreement that may be verbal or written.

In a partnership, the owners manage and control the business, and all revenue from it flows directly through the business to the partners, who are then taxed based on their portions of the income.  

The partners are personally liable for all debts and any liabilities that result from the operation of the business.  

The sole proprietorship and the partnership are the most straightforward business organization types.

When one partner leaves the business, it is dissolved unless there is an agreement in place that allows it to continue.  A business continuation agreement typically stipulates the terms under which a partner can transfer a share of the business for some financial consideration.

The same agreement should provide for the transfer of a deceased partner’s share so that the surviving family members receive fair compensation from the remaining partners.  

Limited Liability Company (LLC)

The creation of a limited liability company (LLC) requires an operating agreement and a state filing of articles of organization.  

Like the principals in a partnership, the owners of an LLC have direct management control over the company, and the company is required to file an information return to the IRS. The owners file their own individual returns based on the revenue that flows to them directly through the business. The information return shows how much revenue was paid to each partner.  

The primary difference between a partnership and an LLC is that the latter is designed to separate the business assets of the company from the personal assets of the owners. That insulates the owners from personal responsibility for the debts and liabilities of the company.    

In terms of the sale or transfer of the business, a business continuation agreement is needed to ensure the smooth transfer of interests when one of the owners leaves or dies.

C Corporation and S Corporation

There are two types of corporation, the S corporation and the C corporation. Both are legal entities that are formalized with the filing of articles of incorporation with the state.

The primary difference between the two is in their tax structures:

  • The C corporation is a tax entity in and of itself, so it files a tax return and is taxed based on the revenues of the business. Double taxation could occur when the shareholders or owners file individual returns based on any income they receive in the form of dividends from the corporation.  
  • An S corporation is similar to a partnership and LLC in that it files an informational return. However, the revenue flows directly to the shareholder owners, who then file individual returns.  

In most other aspects, the two business structures are the same. In both cases, the business is controlled by a board of directors which is answerable to the shareholders. The board hires the senior management team. Business assets and liabilities belong to the company, and the sale or transfer of interests can be achieved by the sale of shares.

Ultimately the type of business organization selected comes down to the owners’ level of concern over management control, liability exposure, tax issues, and business transfer issues.

Because of the tax and legal implications involved, the guidance of a qualified tax attorney is essential in selecting the most suitable form of ownership.

Not long ago, booking a place to stay meant going to a full-service hotel chain — one that owns and maintains multiple buildings and on-site restaurants and hires vast numbers of service workers. Now, many room seekers just head to Airbnb, which is using an online, community-based platform to challenge an established business model. The result is new revenue generated with minimal costs incurred and the ability to expand room inventory with near-zero capital.

Focus on digital initiatives most likely to drive enterprise market share, revenue and profits

This epitome of digitalization should inspire sales leaders to look for and support digital opportunities in their own companies. But what types of opportunities should they champion?

The short answer is that they should focus on digital initiatives most likely to drive enterprise market share, revenue and profits. But to identify those options, “sales leaders must first understand six key ways that digital business can lead to net-new revenue,” says Hung LeHong, vice president and fellow at Gartner.

TOPO is Now Gartner

United to equip sales and marketing executives to achieve repeatable, scalable revenue growth.

With the right information, sales leaders can step up to lead the conversation with CIOs, IT leaders and others in the C-suite about lucrative digital value creation.

6 options for new digital revenue

There are six key ways to earn new digital revenue, says LeHong:

  1. Sell existing digital assets: Sell assets that others consider valuable, such as information, know-how or brands.
  2. Digitalize a product or service: Do this to complement traditional, nonconnected offerings in the enterprise’s product mix.
  3. Sell metered revenue: Sell on a pay-as-you-use basis so buyers can reap the benefits of the asset without sinking resources into owning or managing it.
  4. Contract assets based on shared-risk outcome: Vary prices for buyers based on a shared-outcome metric, such as service level maintained, a successful sale or a health outcome.
  5. Run a platform business: Enable the trading of products and services without having to own or distribute the products or services.
  6. Move into adjacent or new industries: Explore the organization’s potential for using its know-how in one industry to launch its way into another.

Some of these options (see Figure 1) are more transformative than others or require more time, resources or dedicated workstreams. Others focus more on using digital technologies and approaches to improve existing revenue streams versus creating net-new ones.

How to find new revenue sources for your online business

How digital revenue creates enterprise value

The degree of transformation also affects the amount of value contributed to market share, revenue and profit (see Figure 2). For example, $1 million in revenue earned via one of the six digital revenue categories will likely have better financial characteristics than the same amount earned from traditional analog ways.

CEOs expect digital to account for 46% of the value customers see in their products

If sales leaders fully understand the degree of transformation and the value-generation potential of each digitalization approach, they can collaborate more productively with CIOs to prioritize and articulate how they will contribute to the rest of the organization.

According to the Gartner CEO Survey: The Year of Digital Tenacity , by 2019, CEOs expect digital to account for 46% of the value customers see in their products, so the process of digitalization is certainly not going away. In this environment, sales leaders who can identify and advocate for key digital initiatives will help drive their enterprises to access some of the financial advantages that, until recently, have been the domain of startups and digital giants.

How to find new revenue sources for your online business

In a perfect world, you would have an unlimited budget to market your business in order to find new customers and increase sales. You could buy lots of online and offline advertising, run promotions to build traffic in store and online, and launch a proactive public relations campaign to increase your product or brand’s visibility and awareness. But this isn’t a perfect world. Realistically, most small businesses and even many mid-sized firms have more great ideas on how to peddle their wares than available resources.

So where do you start if you are looking for more customers? Learning to generate new sales leads is an essential skill for an entrepreneur. Even if you don’t consider yourself a salesperson in the classic sense of the Willy Loman character from Arthur Miller’s play Death of a Salesman, you need to understand that the possibilities for finding new customers range from cold calling names from the phone book to buying lists of potential customers to using newer Internet techniques like search engine optimization to drive new business to your website.

The following pages will delve into how to conduct market research to understand your target audience and their needs, how to determine which lead generation techniques are best to broaden your sales horizons, and how to increase sales by following several strategies to sell additional products and/or services to existing customers.

How to Find New Customers and Increase Sales: Understand Your Target Audience

Before you can find new customers and increase sales, you need to understand who your customer is, what value proposition you offer to customers, and what your competition is currently offering in the market and where there are gaps for a new entrant. In other words, you need to do some market research — whether that means hiring an outside firm to do the legwork or trying to do it yourself. There’s an underlying disconnect between your motivation to increase sales and your customer’s motivation to solve their problems.

“Attracting more customers is really about listening to their needs, not being a solution looking for a problem,” says Paige Arnof-Fenn, founder and CEO of Mavens & Moguls, a strategic-marketing consulting firm whose clients include Fortune 500 companies as well as early stage and emerging businesses. “There are many existing problems out there that need to be solved that customers are willing to pay for today.”

How to Find New Customers and Increase Sales: Find Out Who Your Current Customers Are

In order to develop a marketing plan to reach new customers, you need to better understand who you’re already selling to. “If I’m trying to expand sales, I have to find out who my existing customers are. What are their demographics? What do they look like?” says Jerry Osteryoung, director of outreach for the Jim Moran Institute for Global Entrepreneurship at Florida State University. “That means doing market research.”

Market research runs the gamut from very simple qualitative research to in-depth quantitative analysis. It can be done very quickly and inexpensively by sending surveys to your existing customers using one of the many online survey tools, such as SurveyMonkey or Zoomerang. You can also get to know the target audience by looking at existing sources of information — from the U.S. Census Bureau or other government agencies, from trade associations, or from third-party research firms. But depending on the questions you are trying to answer and your research budget, your market research can involve more extensive interviews with customers and qualitative studies on how target customers feel about your business, its products and services.

Certain products and services may appeal to one audience but not to another, so understanding the strengths, weaknesses, opportunities and threats in your target market is critical. You can get to know your customers and segment the market any number of ways including by:

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All individuals or companies doing business in New Jersey must be registered. This includes businesses:

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For information on different types of business structures, visit the New Jersey Tax Guide: Starting a Business in New Jersey document.

All for-profit and non-profit corporations, LLCs, LLPs and LPs must first obtain an employer identification number (EIN) from the IRS.

Once you obtain an EIN, complete the two filings below:

  • First, file a Certificate of formation/authorization.
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Once you have successfully completed the two filings above, you will be able to obtain a Business Registration Certificate (BRC) for public contracting and applying for State grants and tax credits.

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While not required, we recommend all other businesses obtain an EIN as well.

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Once you have successfully filed the NJ-REG, you will be able to obtain a Business Registration Certificate (BRC) for public contracting and applying for State grants and tax credits.

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Business Types

Sole Proprietorship
Someone who owns an unincorporated business by themselves.

Partnership
A relationship existing between two or more persons who join to carry on a trade or business.

International Business
Foreign businesses with activities in the U.S. or domestic businesses with activities outside the U.S.

Corporation
A legal entity that is separate and distinct from its owners.

S Corporation
Corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

Limited Liability Company or LLC
A corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities.

Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area.

Have you ever heard the term “nontraditional revenue”? If you’re not immersed in radio and TV ad sales, you’re most likely not familiar with that industry buzz phrase, more commonly referred to as NTR. But the concept, when applied to your business, can add bottom-line income to your existing revenue streams.

A little history first: A number of years ago, when radio stations were being snapped up and co-joined into large, publicly traded radio groups, there was an urgency on the part of the parent companies to justify the high acquisition costs and demonstrate profitability to their shareholders. But traditional revenue for radio stations (ad sales) was limited for two good reasons. First, the price stations could charge for commercials was determined by ratings and day-parts in each particular market. Second, there was a finite inventory available on any given day, which also limited the amount of income stations could generate.

So they decided to get creative. Part of a radio station’s promotional activities included sponsoring events staged by promoters. When an ad package was purchased by those promoters, the radio stations had to provide additional free commercials, live mentions, on-site talent appearances, and any number of other giveaways. In return, the stations were given signage placement, a space at the event and an on-stage opportunity–but very little else.

It didn’t take long for station marketing directors to notice the promoter’s revenue streams, which included parking fees, gate admissions, booth sales, beverage sales, print co-ops, sponsorships and the like. The marketing directors felt that since the radio stations provided the event visibility and were generally perceived as “owning” the event, they should grow, own and promote virtually identical events. So they did, creating entire NTR departments within their radio groups-and they’ve prospered ever since.

If growth is one of your goals for your business, finding new ways to generate revenue is a good first step. Here are a few example of how to apply the concept of nontraditional revenue to your own company to bring in more dollars:

1. Produce a trade show. If your business is one that serves the consumer service industry, you could create a themed trade show at a local hotel for you and other noncompeting service providers. For instance, if you own a bridal gown store, a catering service or a flower shop, you could create a bridal show for you and other bridal service providers, such as DJs, tux companies, photographers and printers. You’ll generate admissions and booth revenue, plus you can use aggregate exhibitor money to buy advertising you wouldn’t normally be able to afford.

2. Put on a traveling workshop. Does your business use a lot of vendors? Do you have branch offices? A software developer I know created a traveling workshop so customers and their employees could benefit from one-day seminars and demonstrations from industry-specific experts. You could do the same. You make money by charging the experts to purchase time in your seminar, and create sponsorship opportunities from second-tier vendors. For instance, if you own a gym, you could sell sponsorships to exercise equipment manufacturers or makers of health food products. A mini traveling trade show that doesn’t cost your customers tons of money for employee travel and lodging is a real bargain for them and an income-generating opportunity for you.

3. Sublease space in your building for other supportive businesses. For instance, if you own a hair salon, you could rent space to other spa service vendors, such as manicurists or estheticians. Or if you own an auto repair shop, you could lease space to a coffee vendor or sandwich shop, offering your customers some enjoyable amenities while they wait for their car to be repaired.

4. Consider renting out your facility for events. This works especially well if you have a unique office, warehouse or business space. Restaurants, manufacturers and even warehouses are prime party venues for people throwing business events.

These are just a few examples to get you started. Now use your imagination to mine some untapped income.

Mark Cheplowitz is the president of Wizard of Ah’s, a New York City-based international event planning and producing firm specializing in corporate branding and product launches through the creation of live spectacle presentations.

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If you need a business registration number from one of the states listed on this page, all you need to do is click on one of the links below. You will leave the IRS website and enter the state website.

If you are from one of these states and you also want to get a federal Employer Identification Number (EIN), you may obtain both your state and federal information in one session. Here’s how it works!

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