Pricing, Revenue Streams, and Marketing
Money and marketing go hand in hand. To grow our revenue and businesses, we need to market ourselves, and, more often than not, we need to spend money to get the best return on investment for our marketing efforts.
In this post, we’ll be covering…
Revenue streams
Pricing your business for growth
The cost of marketing
Return on investment
What Revenue Streams Are You Growing?
Let’s talk about revenue streams.
There are a couple of ways to grow your business - expanding in your current markets, entering new markets, and releasing new products. Check out the Ansoff Matrix for more on growth strategy.
If you’re a product-based business, you might have revenue streams that include your Etsy shop, your website, passive income from Creative Market, and wholesale.
You might have retainer clients, project work, and digital resources if you're a service-based business.
Different revenue streams have different levels of profitability and require different resources: this is really important for us to understand as we consume content online, especially in the business space.
As we look at growing revenue streams in the coming weeks and months, we want to understand the following questions:
How profitable is this revenue stream for my business?
Maintaining an Etsy store but paying up to 35% commission with their advertising scheme is not as profitable as running your own website, but it’s another source of traffic to your shop.
How much effort do I need to put into growing this revenue stream?
With Etsy, maybe you set it up and maintain listings but you don’t actively drive traffic to your Etsy shop, so it doesn’t take up valuable marketing time.
Will this be profitable in the next 12 months?
With wholesale, the high street isn’t necessarily going to be operating as normal for another few months, so putting a large amount of energy into your wholesale revenue stream isn’t necessarily going to bring you the quickest return on investment.
Whatever type of business we run, it’s important to understand where our revenue comes from and the potential for helping us meet our goals. Revenue streams are ultimately the thing we are marketing & sending potential customers to in one form or another, so while this post isn’t strictly about marketing, it’s an important foundational consideration.
Now, consider why these numbers are important as we think about pricing.
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Pricing Your Business for Growth
I want you to consider some of the financial implications of growing your business. Often, what we’re doing now isn’t going to work in the same way as our businesses expand and grow.
But on top of that, it’s difficult to grow your business significantly without investing resources - time, skills, and money.
Think about the following two questions…
What is your profit margin?
If you doubled your sales this year, would your business be viable? If not, why not? This is a helpful exercise to understand where your biggest potential issues are.
How much does selling, promoting, and delivering your products and services cost you?
Which elements of that are out of your control? E.g. supply chains might increase their prices, you need to outsource skills, or Royal Mail might put their prices up.
These are all things your accountant can help you think through: I’m talking about numbers today because of the impact on your marketing.
To grow your business, you will need to spend money on marketing. Maybe it’s educating yourself to do it. Maybe it’s advertising spending, or maybe it’s outsourcing elements to somebody else.
But it’s unavoidable that marketing costs. The skill is in getting a return on investment!
The average return on investment for Facebook advertising is 2-3X. The average return on investment for email marketing is $42 to $1.
Want to feel more confident with your marketing metrics? Join my mailing list and get access to my library of free resources to help you measure the return on investment of your marketing actions!
Sometimes, You’ve Gotta Spend Money to Make Money
Spending money on marketing helps your business grow. But you can’t spend money on marketing unless your profit margins can hold up!
I’m going to leave you with a second set of questions:
How much do you want to grow?
How much are you spending on advertising?
How much are you willing to spend on marketing?
We are not entitled to free marketing. We are not entitled to share and promote our businesses on other people’s platforms. It’s a privilege and one that we should not take for granted.
Want to learn more about this topic? Check out the rest of the blog for more resources…
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Listen to the Creative Business Marketing Podcast episodes!
You can listen to the content of this blog post over on my podcast, Creative Business Marketing, in the following episodes:
Subscribe to it on Apple Podcasts or via Spotify, or search “Creative Business Marketing” on your usual podcast app.