Consistent Cash Flow: The Sand Pail Approach to Stable Income

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Sand Pail ApproachDo you have all your revenue eggs in one basket? It’s the classic situation many entrepreneurs find themselves in – and it’s a precarious place to operate your business from.

If you have one big client, one main offering or one key industry that provides you most of your revenue, then you have left yourself vulnerable to many forces you can’t control.

Knowing this, many entrepreneurs strive to diversify their income with information products, the “funnel of offerings” or spread themselves to thin into many different industries.

Right idea… but if you swing too far into diversification, you’ll find yourself in the land of Bright Shiny Objects.

That’s when you chase too many ideas and opportunities only to find yourself overwhelmed, stressed and with lackluster results in all areas. Plus, there is that tendency to try to be everything to every body just to make sure you always have enough business – then you just blend in like plain vanilla.

So where is that happy medium of an optimal approach to diversification without losing focus? I call it the “Sand Pail Approach.” You’ve probably heard this analogy used for time management. I like to use it for ideas on how to stabilize income.

If you think of your core, high-paying clients as big rocks that fill a pail, you’ll probably notice there is still a lot of empty space around them. I like to think of the different levels of programs and services as different size rocks:

Big Rocks

Big rocks are your big anchor clients/projects that commit to a monthly retainer or finance their payments over time. It could also be a joint venture or partnership that is a big supplier of business. An example of this in my business these are my Mastermind Coaching Clients. You probably only have just a few of these kinds of clients as they take up most of your time.

Of course if even one of your big rocks goes away you are in trouble. This actually happened to me a few years back when I over-relied on two very large marketing partners. I got 75% of my referrals from them until they added a similar program – and my referrals dried up immediately!

Small Rocks

Think big-ticket product sales, large events or a vendor who makes large purchases from you. The small rocks fit nicely around the bigger rocks filling in big gaps. Small rocks are typically one-time purchases — and often these clients will become “big rocks” when you wow them with their initial investment.

In my business, I offer small rocks like a Profit Amplifier strategic planning sessionBuild Your Dream Team and MoneyDNA Mastery. Another idea for a “small rock” is having a $1000 – $2000 dollar package where you bundle a series of sessions with you. Small rocks are great for a potential client to make a safe investment of time and money. A key to your Small Rocks is setting up opportunities to generate consistent income without having to sell every day. Think recurring payments.

Sand

Since sand is small, it fills in the space around the rocks. These are smaller price point offers that are passive income for the business owner. Often your “sand” will be under $500 and can even be a digital course or downloadable resource, and something that doesn’t require any of your time to deliver. In my business, this would be my Profit Explosion Toolkit. 

A key for your “Sand” offers is that this offering should be a stepping stone to other, bigger price point offerings. For instance, one of my clients uses their “Sand” offering as a gateway to their live events enrollment (when a client buys their digital course they get a free ticket to their live event.)

A note of caution — don’t confuse “Sand” with “Rocks” and focus too much time filling your bucket with sand and not leave time/energy for your “Rocks.”

Water

Even though your pail seems full, it’s not. The water seeps through the sand, filling your pail to the top. Small fee products or low-cost monthly continuity programs would be your water. Think under $25 and micro-continuity. If you have a book you sell on Amazon or your website, this would be your water. If you have a $9.95 online program or a digital audio program you sell for $10, this would be “water.”  I have multiple “water” programs like my Power of the Virtual Team ebook as well as a couple of one-time pricing discounts once someone has asked for a special report.

The idea here is to understand how to use the Sand Pail Method in building your business model. As you explore ways to stabilize your income, and not be overly dependent on one type of revenue stream, make a list of the types of rocks, sand and water that you could either offer to the current industry your serve or to other industry’s with similar needs.

I’d love to hear your ideas on how you are diversifying your income to create more stability by sharing in the comments below.

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6 Comments

  • Tammy Redmon

    January 14, 2010

    Melanie this is a great post. I hadn’t looked at the metaphor of the sand pail for business and revenue generation before. Very clear and descriptive, I am looking at the rocks in my bucket today.

    Diversification has been about flexibility for me, and I see that showing up with clients all the time. When we get so locked on to ‘the way it’s suppose to be’ we can miss one of those necessary bright shiny objects. That can poke a hole in our bucket. Being able to look from a multifaceted approach at offerings, actually helps in building the model for diversification.

    Great read and thanks for the invitation to share.

  • Heather Villa

    January 15, 2010

    Great way to use an old analogy in a new way.

    I recently worked with a company that only relied on one very large rock, to the extent of even turning way small rocks, sand, and water. Some changes were made in the large rock organization and poof!, the company lost the account. It took less than 3 months for this company to file bankruptcy.

    The is a great lesson that all business can learn from, whether you’re small or large.

  • Lalitha Brahma

    January 27, 2010

    Great analogy. Thanks

  • Lisa B

    April 13, 2011

    Melanie – Thanks for suggesting that I read this article! Great analogy!