Question

When expanding revenue streams within your business, what steps in form of market research to take to ensure your entering profitable markets?

What would be considered best forms of investment back into a company for future growth? Should or should not the access money after bills are paid off go towards investments?

What steps that need to be taken in order to diversify risk by generating new income streams? Which income streams are going to be beneficial for business?

Answer 1

When expanding revenue streams within your business, what steps in form of market research to take to ensure your entering profitable markets?

A general view on the expansion of revenue streams within the business has been mentioned below as the nature of business has not been specified.

• Identify the areas where the company will be able to utilize the idle resources if any.
• Identify the areas where the company will be able to invest and make some additional capital expenditures.
• The market trends need to be observed for the streams being finalized.
• Customer needs should be studied.
• Pricing strategies should be finalized
• Technologies specifically helping in market research should be used.
• Surveys can be made to understand the potential of the planned stream.

What would be considered best forms of investment back into a company for future growth?

The best form of investment back into company for future growth will again be company and industry specific. General views have been mentioned below:

• Money should be reinvested strategically rather than depending upon the amount of re investment.
• If product diversification or expansion is planned in near future, capital expenditures would be a good investment.
• If no such event is planned, then the money may be invested by way of acquiring interest in other profitable companies.
• If the company has excessive cash resources, it may also invest in money market instruments or short term marketable instruments with less risks and easy liquidity.
• A small business should go for retention of earnings for future, a medium sized business with good cash surplus may opt for some securities and a large size company may opt for acquisitions or heavy capital expenditures.
• The investment should also be made in

o Acquiring skilled manpower.

o Training and appraisals of existing manpower.

o Research and development.

o Technologically advanced machinery.

Should or should not the excess money after bills are paid off go towards investments?

Yes. There should be always excess money after meeting the working capital requirements and the debts that need to be paid in short term. Also portion of long term due in current period should be paid out.

However too excess level of surplus funds lying idle is also not a good sign. It should be ideally invested to earn the minimum market rate of interest or should be invested as per the needs like immediate liquidity or long term locking period as per suitability.

What steps that need to be taken in order to diversify risk by generating new income streams?

• Risk can be diversified by having a good portfolio
• Different kinds of investments like long terms and short term should be made.
• The liquidity requirement should be kept in view.
• Future needs should be kept in mind.
• Smooth functioning of business should be taken care of .

Which income streams are going to be beneficial for business?

Beneficial streams :

Small & medium business : Bonds, debentures, shares, Fixed deposits , Capital expenditures .

Large scale   business : Money market instruments, Treasury bills, capital expenditures, acquisitions.

Kindly elaborate the points and merge the ideas as per the nature of business selected.