Small Business Online: Thriving in a Virtual World

Multiple Income Streams for Small Businesses to Weather any Economy

It can be tough to be a solo professional or a small business that relies on a single source of revenue like client projects.  In a difficult economy, your long term clients can cut back on their spending, leaving you short of the cashflow your business needs.

The concept of “multiple income streams”has become popular over the last decade with real estate gurus like Robert Allen, “wealth-building” gurus like Robert Kiyosaki, and professional slackers like Tim Ferris touting the benefits.

But as applied to your small business, it’s not about renting out your extra office space or the back corner of your home office.  It’s more about diversification, and ways to generate passive income (money that comes in without you working for every hour to generate it).

Diversifying Client Risk

A typical freelance consultant or virtual assistant might do work for 5 clients a month, and bill 40-50 hours per week (which is probably 50-60 spent in the business).   But for many, instead of each of the 5 clients representing 10 hours in a week, one client will take up the majority of the available hours (maybe 25 hours out of 40 or 50) in a given week.

The rule of thumb in business to reduce exposure is to try to limit your income from a single client to 20% of total revenue.  But this can be challenging with hourly work, especially with good clients - working with two or 3 good clients is less taxing than working with 5 or 10 in the same month for a solo professional.

The problem is that if one of your clients leaves, you’re now at risk for more than 20% reduced income for that month unless you can quickly find a replacement client.

Generating Passive Income

The other strategy for weathering any economy is build up additional sources of income that are more passive.  In other words they don’t rely on your active participation every day (although these do take some time and effort).  There are a couple of good ways to do this:

1. Offer your own monthly service or maintenance program

If you offer a service like web design, you might offer a monthly maintenance package  to your clients to update their site or monitor its uptime, or even do web hosting for them for a monthly fee.

If you are a virtual assistant, you could offer monthly retainer packages that don’t rely on hours, but on specific services rendered.  For example, if you do “social media”, your package could be to maintain a clients online presence (in whatever special way you have) for a set monthly fee.  You can list what types of things you’ll be doing, and even provide a list of what things you did, but get away from a strict hourly billing approach.

2. Become an affiliate of complementary products or services

Even simpler than creating your own services is to offer services from other companies that you commonly use and trust.  A web designer could be an affiliate for a web hosting company instead of offering their own hosting.  A virtual assistant could refer clients to affiliates who do specialized services like accounting, graphic design, or software development.

The same idea works with affiliate products as well as services.  For example, our company’s affiliates refer clients or colleagues and get a recurring commission for as long as the referred account is active.  There are many other affiliate programs available for everything from books and office supplies to seminars and coaching.

By using a strategy of client diversification (remember the 20% rule), and adding carefully chosen passive income sources, you can make your business resistant to downturns, sudden client cancellations, and whatever else life brings.

Virtual assistants are going mainstream

Virtual assistants are online business professionals who work with other entrepreneurs and small businesses to support them with marketing, bookkeeping, administrative tasks, and more.

Having partnered with several in our own business, and served quite a few more as customers of our online project management software, I’ve developed an appreciation for the industry as a truly valuable resource.

Until recently, though, when I asked other entrepreneurs if they were familiar with virtual assistants, I’d get a blank stare.  More and more, I now hear things like “Oh, my cousin is a virtual assistant”, or “I use a virtual assistant myself”.

Certainly books like Tim Ferris’ 4 Hour Work Week helped raise media awareness, though perhaps in a way the industry wasn’t particularly thrilled with (a discussion of overseas virtual assistants making $10 per hour was not well received).

And with increased media awareness, naturally there has been more coverage in blogs and online news sites.

But I think the reasons the industry is going mainstream are twofold.

First, the uncertain economy is making existing businesses hesitant to hire full time staff.   But there is still work to do.  There are also still new businesses being created, and those entrepreneurs want support without needing to hire full time staff and training them.  This is creating tremendous opportunities for skilled professional virtual assistants who can help right away.

Second, a trend I’m noticing in particular is the so-called “social media assistant”, who can setup a presence, monitor online reputations, post entries across the ever-growing range of social media websites, and even guide clients along the path of making an impact.

With major television networks trying to outdo each other in their mentions of Twitter, and confused entrepreneurs trying to figure out how to get a handle on the latest technologies, virtual assistants who specialize in social media assistance are finding more and more eager clients.

When the shine wears off of social media though, I think the value that virtual assistants bring will no longer be a mystery to entrepreneurs.

And that’s how the industry will bridge the gap from the obscure to the mainstream.

The Rise of the Virtual Business

About 5 years ago, I started a small software company with the goal of helping distributed software teams to collaborate on complex projects.  At the time, this was a relatively new phenomenon, and outsourcing of services was mostly limited to software development projects and the occasional call center.

As I write this, new industries like Virtual Assistance have taken off where “regular” people who were working offices as administrative assistants, office managers, or even as executives are now putting those skills to use online.

These new “virtual companies” are providing valuable services to other entrepreneurs and small businesses, often without having full time employees, offices, or set work hours.

What’s more interesting about these new industries is that they are being adopted not by large corporations looking to save a few bucks on software development or handling customer support, but by new businesses, solo entrepreneurs, and others who don’t yet need full time staff, but want to develop a virtual team that can handle their needs as they come up.

Of course, as the number of virtual team members grows, it becomes more and more difficult to manage the tasks, documents, and schedules of team members.   Sending email attachments back and forth with revisions works well for 2 people, but doesn’t scale well to 4 or 5 team members or clients.

Over the last few years, software solutions have started to fill in the gap between these new virtual service professionals and the increased need for visibility and communication now that your team isn’t in the same office (or in an office at all in some cases).

From virtual telephone systems that can route calls to your cell phone, to online project management tools, document collaboration tools, calendars, and more - you can create a virtual business environment in a day with an array of online services.

As the technology matures, and businesses get more savvy about how best to work with virtual service providers, it may be soon that starting a business and getting the resources you need is as easy as clicking a few buttons.

Now if only sales and marketing were that easy.