Adding A New Revenue Stream: A Hedge Against Risk During Uncertain Times


Founder and CEO of ERG Enterprises. Nationally recognized thought leader on entrepreneurship, investing and leadership.

In 2019, my team and I gathered in a conference room with a simple yet challenging task: Devise a way to increase sales while developing a new revenue stream for a performing arts venue in New Orleans’ Central Business District.

Two hours and dozens of Post-It notes later, I proposed the idea of converting the facility’s unused basement into a speakeasy. The concept would capture secondary sales before and after shows, generate revenue separate from performances and attract a new demographic to the theater, who after enjoying a cocktail might consider attending a future performance.

The idea came to fruition 11 months later. The speakeasy opened January 2020 as a prohibition-themed cocktail bar that resembled the backstage area of a 1920s vaudeville theater, a place where stage crews and performers would gather, drink and entertain themselves after amusing others. Importantly, it was the second upgrade to the theater in five years. (The first change we made was outfitting the venue with an adjustable orchestra floor that allowed it to accommodate private events.) These updates sought to reinvent the theater while still preserving and strengthening its core business.

For the speakeasy, it goes without saying that the pandemic complicated our plans. Yet this anecdote highlights an important, timeless business practice that every leader should consistently keep top of mind, especially in today’s Covid-19 climate: Every leader should question the current makeup of their business with the aim of developing a better future state.

The practice of considering new products, services and lines of business not only staves off complacency with the status quo, but also it helps fortify the lifeblood of any enterprise: its cashflow.

Still, adding a new product or service is an important decision with considerable consequences. It can save an organization from certain failure in desperate times (e.g., now), but it can also distract it from more important and lucrative opportunities. It centers on a question of focus; a scope too narrow can miss important opportunities and render the business obsolete, while one too broad can send the enterprise scrambling and kill its margins in the process.

For these reasons, business leaders must apply care when evaluating new ideas. There is no formula for completing this process; it depends on factors too nuanced, complicated and numerous for an article. In my experience, however, three sets of questions have helped our team evaluate new opportunities successfully.

Does the opportunity reinforce your core business?

To understand the new product or service within the context of your business, ask yourself: Does it distract from or enhance your existing business? In other words, does it provide a new entry point for customers to buy what you sell? Or does the new service or product line compete with your current offering? Additionally, does the new opportunity require substantial investment in infrastructure or technology? The more the new product or service offering creates synergies and consistencies with the existing enterprise, the better.

Does it reflect your team?

Additionally, consider your team. Does the new opportunity fall within your current knowledge and talent base? Do you have the experience and expertise needed to make the revenue stream a natural addition of what you do? Or do you need to hire new skills and experience, provide extensive training or find a combination of each? The greater investment needed in the human side of your business — hiring, retraining, etc. — the more important it becomes to perform a cost-benefit analysis of the new offering. In my experience, the need to make a substantial investment represents a red flag that the new product or service doesn’t fit with the core aspects of your business.

Does it align with your purpose?

Lastly, consider the purpose of your business — your collective “why.” Does the new offering fit with your organization’s mission and values (your “why”)? Or does it dilute, complicate or contradict your purpose?

The more that your new offering aligns with your company’s goals and purpose, the more valuable the opportunity.

Returning to my example, the speakeasy checked off all the right boxes. The opportunity didn’t distract from the core business of the theater (event-based hospitality) but instead enhanced it by making each event more attractive while also creating a consistent source of capital to supplement our episodic revenue streams.

It also didn’t require substantial investment in infrastructure or human capital. We already possessed the space, the talent and the needed resources, such as a full-sized kitchen. Besides needing to hire a small cohort of service staff, we already had the expertise of seasoned food and beverage professionals. The opportunity also didn’t dilute our purpose as an organization: to provide patrons with a memorable, world-class experience.

To reiterate the importance of evaluating new business lines, consider the challenges created by Covid-19. When the pandemic hit, many of the theater’s private and public events were canceled. Revenue plummeted, and like many businesses locally and nationally, we sought every opportunity to bring revenue in the door. Meanwhile, the speakeasy remained open and operating, saving jobs and keeping our business alive in the process.

While local mandates forced its temporary closure, it made a business case that highlights the importance of adding a new dimension to your existing business, especially at a time when service lines and entire industries can shut down without notice. Offering a new product or service can create a safety valve that can mean the difference between survival and death. In better times, it can also solidify your competitive advantage, and most importantly, your future state.

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