Business is really about margins, and revenue models anchor margins. You need to bring in revenue if you plan to be in existence for long. It is from revenue that profit would come. Without revenue, over an extended period, your mission would stall and the vision lost. In this table, I present some revenue models for your consideration. Your business strategy would drive the one to adopt and it is not cast on stone. Yes, you may pivot from one model to another until you hit the sweet spot where customers are happy: paying, spreading the message, and enjoying the value you have created.
Largely, we are in business for profit margin. It may not be obvious because there are many companies which operate for years without profitability, by raising tons of money, in successions. But even with that, over time, the companies will be expected to make money.
Always remember that when most startups talk of execution, they really mean revenue. Yes, sooner or later, all executions would be linked to revenue.
When you execute, you enable growth. Growth fixes all problems. Growth makes you a good presenter before the Board. Growth makes your grammar to become flawless. Growth brings respect as you stand before the investors. Growth makes legends. When you grow, you are moving. It means you have momentum. The bigger your size, and the rate of that growth, the more is the momentum [In Physics, momentum = mass x velocity; velocity is speed with direction]
A revenue stream is a company’s single source of revenue. A company can have zero or many revenue streams, depending on its size.
A revenue model is the strategy of managing a company’s revenue streams and the resources required for each revenue stream.
A business model is the structure comprised of all aspects of a company, including revenue model and revenue streams, and describes how they all work together.
|Revenue Models||Description||Advantages||Disadvantages||Example (Foreign)||Example
|Advertising||Host ads like AdSence or banners. Site can run on freemium where services are free||Simple and easy to execute||Needs huge traffic||Facebook
|Affiliate||Promoting links for others||Could be better than advertising||Very sector specific with measurement challenges||Udacity||Jobberman|
|Transactional||Customers pay for products or services. Could be offline or online, direct or indirect.||Simple and straightforward||Very popular, very competitive as most do it.||Walmart||Jevinik|
|Subscription||Recurring, typically monthly or yearly. Could give product free for service subscriptions||Predictable revenue||Needs scale, making sure you retain subscribers||New York Times||Tekedia|