The Vulnerability of Single-Stream Dependency
A significant risk for service-based businesses is the total reliance on a single revenue stream, such as custom client services. While this model may be effective during periods of economic stability, it leaves the organization vulnerable to sudden market shifts, frozen budgets, or industry-wide disruptions. This dependency exposes a critical flaw: when client budgets decline, the pipeline can vanish almost overnight, demonstrating that trading time for dollars is a fragile foundation for long-term growth.
The Strategic Value of Revenue Diversification
The most resilient businesses are those that operate with a diversified revenue architecture, consisting of two distinct streams: one active and one passive. Integrating a membership model or a productized service allows an entrepreneur to generate recurring revenue that does not require constant manual delivery or custom work. This second stream acts as a financial buffer, protecting the business when service-based budgets slow down and providing the breathing room necessary for leadership to make better strategic decisions.
Engineering Stability Before the Crisis
True diversification is a proactive measure rather than a reactive one, following the principle of building a second revenue stream before it is needed. Establishing a secondary, product-based revenue stream while the primary business is healthy ensures that the organization is prepared for future market volatility or “mini-pandemics” that affect specific industries. By shifting toward a model that balances active service with passive income, founders can secure their business against external shocks and achieve a level of predictability that traditional client services cannot provide.
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Transcription:
Gresham Harkless 00:00
I've interviewed, talked with and chatted with lots and lots of businesses, including ones that have been very similar to mine. Sometimes what hurts them more than anything else is they rely on a single revenue stream, and sometimes that's client services. And it worked great. And it will continue to work great until it doesn't.
If you're building something meaningful, you're in the right place. This is the I Am CEO Podcast. I'm gresh, and for over a decade I've had the honor and the privilege of Learning directly from CEOs, entrepreneurs and business owners just like you on how to build after recording more than 1600 episodes, one thing has become clear. Success isn't about following someone else's blueprint. And as I like to say on the show, if you run your own race, you can't lose. Even when we feel the journey should be a straight and linear path, what I've come to find out is success is a lot more like a plate of spaghetti. So in this special segment and episode, I'm starting to curate and share some CEO hacks and CEO nuggets that I've been dying to share. Drawn from thousands of episodes with phenomenal guests that have provided awesome value on the show, but also my 10 years of business experience as well too. These lessons are designed to strengthen the foundational principles that every business is built on and guided by a simple equation that we always go back to with our content. Visibility plus resources times connections equals success. This is practical wisdom you can apply almost immediately, so be sure to check out the show notes for more resources and next steps on how to level up. And of course, enjoy this special episode of the I Am CEO Podcast.
Gresham Harkless 01:43
I've interviewed, talked with and chatted with lots and lots of businesses, including ones that have been very similar to mine. Sometimes what hurts them more than anything else is they rely on a single revenue stream and sometimes that's client services. And it worked great. And it will continue to work great until it doesn't Many people, many businesses did get affected during the pandemic and they're still being affected today. Because while the pandemic is not something that is affecting every business at the same time as it did before, it still are, quote unquote many pandemics that are happening on a regular basis for any many different industries. So when pandemics hit, budgets freeze, pipelines didn't just slow, they absolutely declined. They vanished almost overnight like that. That moment exposed how vulnerable it is to depend on just one way to make money. That's when the lesson becomes clear Every business needs a second revenue stream, one that isn't tied to trading time are fully dependent on client budgets. Here's an idea of something that can be a better revenue stream to kind of work through the membership model. Low ticket, high volume, recurring revenue. And when it's done right, it can change absolutely everything. What happens is there's suddenly a predictable income that doesn't require constant selling or nonstop delivery of custom work. That buffer creates breathing room and better decisions follow after that. Here's what I wish more CEOs, entrepreneurs and business owners and founders understood sooner. You don't need 10, 15 different revenue streams. You need two that are ultimately diversified. One active, one passive, one service based, one product based. Something that protects you when one stream starts to slow down. Diversification isn't just for investors. It's for entrepreneurs who want to sleep better at night. One of my favorite sayings is you dig your ditches before you need them. So build that second revenue stream before you need it, not when everything is ultimately on fire.