A few weeks ago I talked about why every company needs a business emergency fund. Starting a rainy day fund is a good first step toward building financial security for your business. However, if you want your company to be as stable as possible, it’s important to have multiple revenue streams instead of relying on one. Here’s why every entrepreneur needs several income sources in today’s unpredictable economy.
Helps You Survive Downturns
At the beginning of the pandemic, everyone thought lockdown would last for a couple of weeks. But nearly two years later, the coronavirus is still circulating. And many businesses haven’t recovered from the financial effects of prolonged shutdowns.
A recent report from McKinsey indicated that some industries, including hospitality and entertainment, could take five or more years to bounce back. Small businesses were hit especially hard and may take the longest to return to pre-pandemic levels of revenue.
All of this to say, you never know when your business will hit an extended rough patch. Building a business emergency fund can help you weather shorter downturns. But you probably can’t save enough money to survive a five-year economic recovery. You need multiple streams of income to future-proof your business and keep it afloat through recessions and pandemics.
Speaking from personal experience, I would’ve felt much more secure when I lost clients during the pandemic if I had multiple income streams. Thankfully my emergency fund was enough to get me through until business picked up. However, if I were in a different industry such as travel writing, I might not have been so lucky.
I’ve definitely learned my lesson and have started building other revenue streams for extra financial security.
Allows You to Scale Quicker
Having multiple streams of income can also help you scale quicker. If you invest the money you earn from your extra revenue sources back into your business, you can grow your company faster.
You’ll always have extra cash to buy equipment and inventory or jump on a new business opportunity. Since you have the capital you need to expand, you’ll be able to increase your income and start building real wealth.
Helps You Expand Your Skills
Another benefit of building multiple streams of income is that it forces you to expand your skill set. Taking on a side hustle can help you explore a new industry or deepen your knowledge of your current one. You’ll also have to learn new skills to make your business ventures successful.
For example, I’ve had to learn to use CAD and CNC machines while making products for my crafting business. If my freelance writing business ever failed, I’d be able to switch gears and offer CAD drafting services instead. This experience has made me a much more versatile, adaptable entrepreneur.
Gaining experience in several business verticals will give you a unique perspective as a business owner. You may even gain a competitive edge over companies that are reluctant to innovate because you’re so used to learning, adapting, and growing.
Setting aside money for emergencies is a good idea. But if you want to create even more financial security for yourself and your business, building multiple revenue streams is a must.
Are you working on establishing any new income streams? Let me know in the comments section below!