In my practice, I frequently see entrepreneurs who develop a product, and in their excitement, they believe that this product will be the “be all and end all” of the market that they aspire to dominate. Unfortunately, it’s rare that a single product will generate enough revenue so that an entire business can be built around it. Rather, a single product should provide one of many revenue streams that flow into a successful business.
This is a why I promote the concept of the Revenue Octopus. The Revenue Octopus concept involves establishing multiple streams of revenue – multiple “tentacles” of revenue – to insulate an entrepreneurial business from seasonal ups and downs or from other factors that can interrupt the flow of cash from the sale of a single product or service. For example, revenues from the rental of water skis may be strong in the summer, but snow skiing revenues are going to dominate in the winter. Do you want to be dependent on only one of these revenue streams? Owners of young businesses who are serious about growth need to expand their horizons and cultivate a Revenue Octopus.
I’ve seen many products that have multiple applications or that could be added to a line of products and marketed much more effectively than if they were presented on a stand-alone basis. I recently found such a product while I was walking through the supermarket. The product was a clever little device that slides onto the end of a toothpaste tube and rolls up the tube as the toothpaste is used so that the user can get all of the toothpaste out of the tube without a lot of work.
Clever as this device is, it’s hard to imagine that it could take the market in such a powerful way that its promoters could turn it – by itself – into a successful business. Instead, that little product needs to be part of a product line of personal care accessories or hygiene accessories, or it needs to be part of a pharmaceutical line. An entrepreneur can certainly build such a product, develop distribution for it and put it into the hands of the consumer. But it would probably be easier for the entrepreneur to do those things profitably if such a product was part of a line of products, so that when the entrepreneur decided to distribute it, he or she had more products to bring to market than that one item. Although this is an isolated example, I see it every day – entrepreneurs attempting to build an entire business around a single product.
It’s a form of myopia that entrepreneurs need to address head on.
So, as you are working hard every day to build your company, or as you’re building your career, recognize that while the product you are developing may do well on a stand-alone basis, you’ll likely have an easier time garnering distribution and sales and generating revenue if it’s part of a product line. Consider the concept of the Revenue OctopusT and develop multiple streams of revenue to guard against the dry spells that can hit business that rely on a single product or service.