In today’s business environment, innovation plays a very critical role in the sustainability and competitiveness of an organization, particularly in the small and medium enterprises. Kisumu town has very many SMEs and this study can provide a valuable insight for business owners or individuals seeking to venture into business. This research paper sought to investigate the dynamic relationship between innovation strategies and the financial performance of fish production SMEs in Kisumu town. It aimed to evaluate the effect of improved production processes on the financial performance of fish production SMEs in Kisumu, to analyze the influence of market diversification on the financial performance of fish production SMEs in Kisumu, and to analyze the influence of adopting new technology on the financial performance of fish production SMEs in Kisumu. This study used qualitative data from the qualitative insights from interviews and surveys from the important industry stakeholders. The research assessed the adoption and implementation of various innovation strategies such as product innovation, process innovation and market innovation from a sample in Kisumu. Findings from existing research articles indicate a positive correlation between the innovation strategies and the financial performance of various businesses in other areas both locally and globally, businesses that prioritize innovation leading to higher profitability and creating room for growth and expansion. This research furthermore identified the barriers, giving light to the challenges these businesses face in pursuing innovation initiatives. It also offers a practical recommendation for businesses seeking an improvement in their financial performance through various innovation strategies.