How your business can generate cash from each customer segment

A customer at a supermarket. FILE 

By Scott Bellows

In Summary

• It is easy to add new revenue streams by targeting many groups, you just need to know how to.

Razia enjoyed the search for affordable technologies to assist in building homes across East Africa. She deep down felt a sense of commitment to assist all East Africans to live in their own homes on their own plots of land.

Feeling overwhelmed by the need versus the impact that she could provide as only one person, she decided to tackle one aspect of the housing crisis; inexpensive building blocks made of red soil.

Razia formed a new business that distributed brick making machines to rural Kenyan villages. She started with a simple business model; buy the machines from the industrial area of Nairobi and then bring them on trucks through villages and seek buyers. Inasmuch, Razia relied on one revenue stream to sustain her business; asset sales.

Razia struggled to convince villagers that building with earthen bricks would yield solid results. Along the way, various Kenyan ministries, NGOs, and socially conscious businesses got interested in her methodology and started sourcing clients and convincing villagers about the merit of her work.

All the while, Razia continued to just sell the brick-making machines as her only source of revenue.

Now, if you reading the Business Daily today and you could spend only five minutes advising Razia on her business venture, what would you say?

Likely, you would urge her to consider other sources of revenue on her ingenious business product. You see, Kenyan entrepreneurs often outdo their international competitors due to their creativity in skillfully incorporating multiple sources of revenue even on simple products and business models.

Revenue streams entail the cash you may generate from each of your customer segments.

As discussed in earlier Business Talk columns, Razia should identify multiple customer segments, not just one. Once identified, how might she get cash from different sources?

What value are your customers really willing to pay? What do your customers currently pay for other solutions? How do your customers currently pay? How would they prefer to pay? Who else might be willing to pay into a portion of your value chain? How much does each revenue stream contribute to overall revenues?

Razia already understands the asset sale revenue stream. She actively sells the brick-making machines across Kenya. From ‘mama mbogas’ to car dealers to shopping malls, many entrepreneurs find asset sales the easiest concept to implement.

Could Razia also incorporate maintenance and repair fees into her business revenue streams? Many suppliers of equipment easily include after-sales maintenance as an additional cash generator.

Further, could Razia incorporate advertising revenue into her business model? As her sales truck roves across Kenya, would other socially conscious businesses advertise on the truck exterior?

Could she also advertise for others for a fee on her brochures, website, and SMS follow-ups? Kenyan entrepreneurs tend to incorporate additional advertising revenue into business models arguably better than anywhere else in the world.

Next, could Razia or your own business rent or lease machines, products, or services to customers who cannot afford to buy outright?