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Attack, attack and attack.
His forces can replenish while in enemy territory, most of your money will come from raiding, attacking and sacking.
As Carog said, blood for the blood god gives you an extra army. Not good for income, but very good for killing the slaanesh. If you don't want to do that, just siege them a couple of turns to attirtion their forces, THEN attack when you can autoresolve without casualties, but that does take a couple of turns. (Or attack manually, if you feel confident about fighting battles.).
Note that Skarbrand has seriously good units and he's shockingly brutal himself. He can win battles that don't look too good fairly easily. His tier 2(1) chaos warriors would be tier 3 for anyone else - that's why they're so expensive. His bloodletters are also great.
Free tip: Get a chaos cultist ASAP. Their extra movement is gold.
Step 2: MAIM
Step 3: BURN
Yep, he is one of the most powerful in terms of faction mechanics for WH3. Just need to destroy things and snowball, its OK to go into negative income, all of his faction benefits (growth etc) are tied to this.
Blood hosts are not free at gamestart. You make them free through techtree.
Technically no, but the mechanic is to drive your main army and the blood hosts forward and destroy as much as you can. The more you have the better as is serves your provinces that you do occupy. You don't occupy settlements unless its the first one (or capital if you prefer) in the province, you allow your passive colonization abilities to do that... destroy / raze everything else, just go kill stuff... all you need to do.
If you try to turtle: Skarbrands faction will just wither away.
This is wrong. You make a blood host by razing the first settlement then attack Slaanesh to the south.
To OP. Make a bloodhost off the first settlement you raze and just keep attacking from there. Don't ever stop. If a bloodhost gets weak disband it and make a new one. Or use two bloodhosts. Don't worry about going into the red if you can attack right away.
What about you paying full price for blood hosts is wrong exactly?
Ya'll are talking about how to use them. I am talking about how they're not free when you start a campaign and thus respond to how the OP ends up losing money per turn.