QuestionsAnswered.net
What's Your Question?
Making a Risk Management Plan for Your Business
It’s impossible to eliminate all business risk. Therefore, it’s essential for having a plan for its management. You’ll be developing one covering compliance, environmental, financial, operational and reputation risk management. These guidelines are for making a risk management plan for your business.
Developing Your Executive Summary
When you start the risk management plan with an executive summary, you’re breaking apart what it will be compromised of into easy to understand chunks. Even though this summary is the project’s high-level overview, the goal is describing the risk management plan’s approach and scope. In doing so, you’re informing all stakeholders regarding what to expect when they’re reviewing these plans so that they can set their expectations appropriately.
Who Are the Stakeholders and What Potential Problems Need Identifying?
During this phase of making the risk management plan, you’re going to need to have a team meeting. Every member of the team must be vocal regarding what they believe could be potential problems or risks. Stakeholders should also be involved in this meeting as well to help you collect ideas regarding what could become a potential risk. All who are participating should look at past projects, what went wrong, what is going wrong in current projects and what everyone hopes to achieve from what they learned from these experiences. During this session, you’ll be creating a sample risk management plan that begins to outline risk management standards and risk management strategies.
Evaluate the Potential Risks Identified
A myriad of internal and external sources can pose as risks including commercial, management and technical, for example. When you’re identifying what these potential risks are and have your list complete, the next step is organizing it according to importance and likelihood. Categorize each risk according to how it could impact your project. For example, does the risk threaten to throw off timelines or budgets? Using a risk breakdown structure is an effective way to help ensure all potential risks are effectively categorized and considered. Use of this risk management plan template keeps everything organized and paints a clear picture of everything you’re identifying.
Assign Ownership and Create Responses
It’s essential to ensure a team member is overseeing each potential risk. That way, they can jump into action should an issue occur. Those who are assigned a risk, as well as the project manager, should work as a team to develop responses before problems arise. That way, if there are issues, the person overseeing the risk can refer to the response that was predetermined.
Have a System for Monitoring
Having effective risk management companies plans includes having a system for monitoring. It’s not wise to develop a security risk management or compliance risk management plan, for example, without having a system for monitoring. What this means is there’s a system for monitoring in place to ensure risk doesn’t occur until the project is finished. In doing so, you’re ensuring no new risks will potentially surface. If one does, like during the IT risk management process, for example, your team will know how to react.
MORE FROM QUESTIONSANSWERED.NET
Revenue model template for startups
15 best investor pitch deck examples from successful startups.
Choosing a revenue model that fits you perfectly isn’t easy. As the framework of how a startup will generate income, a proper revenue model needs to consider prices, revenue sources, income and expense statements, and many other elements. It’s crucial to get this right, too, because a perfect match needs to help your business out in those diverse aspects. From sales to growth, choosing the right revenue model is especially vital for long term projections. It’s just central to any business model! To help your final choice, we put together the best 5 steps to a revenue model for startups. We hope these aid in making the right kind of difference for your company to make positive game-changing decisions.
What is a revenue model?
Said plainly for a startup, a revenue model means understanding how the company will make money. In other words, a revenue model is a map out of important business aspects in earning a startup valuable revenue. It’s not the same as a business model , though it’s a significant part of it.
Popular revenue models provide different benefits. We just need to pick the one that’s best suited for our company. In that sense, even a revenue model template can be a great way to find the model that’s just right for our business. Because, as we said, choosing the right revenue model is critical. That’s primarily the case because picking the wrong one can equal a company failing overall. And we certainly live to avoid that.
How do you write a revenue model?
Remember, a revenue model is all about know-how. We should thus start writing revenue models by doing research. And aim it at knowing how to make money. So, combine the inquiry of other companies with the experience and knowledge you’ve gained about our own businesses.
For that, we’ll need critical pieces of information, which are the ones that constitute a robust revenue model.
Download our Financial Model Template
Key information to write a revenue model.
Let’s define some of the essential pieces of information to start writing a revenue model. First, get all of your sales data along with income and expense statements. Just in case, you can know these by other names, as well. They go by a statement of earnings, for example, a profit and loss statement (P&L for short), and even as a statement of operations.
In short, the above are documents that reflect your income and expenses , of course. Yet, in the income one, you’ll list revenues from your business offer sales before you subtract any top-line expenses, for instance. This should include net income (or loss) over a specific timeframe. And, contrary to a balance sheet, these don’t just focus on a single moment of your startup’s trajectory.
Anyways, once those financial documents are handy, you’ll also need to understand the market in which you’re operating and to which you’re inserting. Seek a clear idea of how many customers exist who are likely consumers of your services and products. As this is also a big side topic, we’ll leave you with our Go To Market Strategy Presentation Structure as reference for later, in case you need it.
Note that the more thorough job you do in gathering all this information, the better your backup will be. And that’s just the kind of support we’re looking to create, to choose the most accurate revenue model that’s right for your startup.
Once you’ve gathered the above data, make a list of revenue models. Filter them by those you can actually use. What’s important here is that primary and secondary models will matter and come in handy if you offer different services and products. You might quickly need a different model for each product or service offer.
We’ll now make the steps to writing a solid revenue model for your startup clearer in the following section.
Revenue model for startups: Step by step
Without further ado, here are the best 5 steps to a revenue model for startups:
1. Choose a model that works for your company and allows you to communicate your value.
Consider your background. And value your strong points. In the end, choose something that helps your development. Use a revenue projection template, if you can. It can be quite useful. And bear in mind that your revenue model should also show your uniqueness and the services you provide.
2. Write down a list of long-term revenue sources and potential investors.
Look for knowledgeable people in your area of expertise. Think of the long term project you’re building. And consider other sources of income that aren’t necessarily the main ones bringing money in or keeping the business afloat. These might eventually surprise you as significant areas to your business.
3. Make projections for the future.
Create a page for each revenue source, and detail how you’ll achieve goals for each. These projections are vital to give to investors and help them understand when you expect to have a sizable income.
4. Review and adjust the model as needed.
Revenue models are continually evolving. Over time, business circumstances, areas, and situations might change. Keep your eye out for what’s working and what’s just isn’t anymore. Check accordingly and use other models if that’s the case.
5. Identify and mitigate variables.
Understand the variables that come into play for your company and processes. Figure out what affects your revenue the most and learn how to mitigate that. Don’t hide from risk, but seek to be prepared for most incidentals.
Revenue model webinar and other useful tools
To learn how to develop a revenue model that’s right for you, there are also webinars and a step-by-step modeling tutorial to integrate. These tools include an easily downloadable and customized financial model spreadsheet you can count in with that. Coupled with more literature on building a financial model for a SaaS Business or our financial model insight webpage, the more resources you can check, the better. They’ll all enable you more and more to extract the best out of your upcoming efforts.
Financial Modeling Coaching
At Slidebean, we understand the importance of having a solid financial model for your business. That's why we launched this comprehensive course, tailored to empower you with the tools and techniques you need to create accurate and effective financial models for your startup.
In today's competitive startup world, having a strong financial model can give you a significant edge. And what better way to gain that edge than by learning from experts in the field? Our workshop is designed to teach you the tools and techniques needed to create financial models that will help you make informed business decisions and secure funding.
Don't miss this opportunity to take your financial modeling skills to the next level and give your business the boost it needs. Sign up for our workshop today and let's work together to take your startup to the next level.
At Slidebean, we are committed to helping startup founders like you succeed. So, don't wait any longer, register for the Financial Modeling Workshop now and let's get started on building a solid financial foundation for your business.
Join our Workshop
Year 2021 is passing by quickly, eh? Yet, we’re still in a good time to consider what industries are blooming in the startup world. So we’ve drawn a list of the 14 best innovative startup ideas for you.
Pitching to investors can be a daunting task for entrepreneurs, especially when you're trying to secure funding for your startup. But with the right approach, you can make a compelling case for your business and increase your chances of getting the funding you need. In this article, we'll take a look at some tips and best practices for pitching to investors.
This is a functional model you can use to create your own formulas and project your potential business growth. Instructions on how to use it are on the front page.
How can we help?
Choose the service that best matches your needs
Redesign my presentation
Our design team takes an existing presentation and redesigns it
Create a pitch deck for me
Our analysts write a professional investor pitch deck for your business
Book a call with our sales team
Not what you are looking for?
In a hurry? Give us a call at
- Login with Google
- Login with Linkedin
- Don't have an account? Register
- Forgot password? Recover
- Sign In? Sign In
Your location preferences
Jun 01, 2018, the 10 most popular startup revenue models.
How do you get your product, service, or app into the hands of your target customers? Check our guide on the most used revenue models to help you decide.
Regardless of how good your product, service, or app is, it’s only useful when you can get it into the hands of your target customers. But once you’ve got a finalized offering, selling it should be easy, right? Not really. There are countless factors that need to be taken into account when you set out to bring your product to market, like the industry you’re in, whether you’re selling a web-based product or physical hardware, the channels you use to attract your customers, etc.
The Founder Institute has helped launched many profitable startups around the world. Apply to a program to a program in a city near you!
And that’s why we’ve prepared an extensive guide that clearly outlines some of the most commonly used revenue models startups use to sell their offerings, along with the advantages and disadvantages of each to help you pick the best revenue model for your company.
Business Model vs Revenue Model vs Revenue Stream
Before we delve into the different types of revenue models, we should spend a little time differentiating between the terms "business model", "revenue model", and "revenue stream", as they are very often used interchangeably. In the GlowingStart article, " What Is The Difference Between A Revenue Model, Revenue Stream And A Business Model ", Alex Genadinik does a great job explaining the difference between those terms. They are summarized below:
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.
Types of Revenue Models
There are numerous types of revenue models, so this list in no way attempts to list them all, especially since so many of them go by other names in the startup community. However, below are ten of the most popular and effective revenue models employed by companies, both big and small.
Genadinik’s article, “ Different Revenue Models ”, covers some of the more common revenue models that countless recently-launched startups use to generate their first sales. Here are the revenue models he covers below:
1. Ad-Based Revenue Model
Ad-based revenue models entail creating ads for a specific website, service, app, or other product, and placing them on strategic, high-traffic channels. If your company has a website or you have a web-based company, Google’s AdSense is one of the most common tools get ads. For most websites, AdSense will earn about $5-10 per 1,000 page views.
- Advantages : Making money from ads is one of the simplest and easiest ways to implement revenue models, which is why so many companies utilize ads as a source of revenue.
- Disadvantages : In order to generate sufficient revenue to withhold a business, you will need to attract millions of users. In addition, most people find ads annoying, which can lead to low clickthrough rates, and therefore, lower revenue.
2. Affiliate Revenue Model
Another popular web-based revenue model is the affiliate revenue model, which works by promoting links to relevant products and collecting commission on the sales of those products, and can even work in conjunction with ads or separately.
- Advantages : One of the most obvious benefits of employing an affiliate revenue model is that it generally makes more money than ad-based revenue models.
- Disadvantages : If you use an affiliate revenue model for your startup, remember that the amount of money you make is limited to the size of your industry, the types of products you sell, and your audience.
3. Transactional Revenue Model
Countless companies, both tech-oriented and otherwise, strive to rely on the transactional revenue model, and for good reason too. This method is one of the most direct ways of generating revenue, as it entails a company providing a service or product and customers paying them for it.
- Advantages : Consumers are more attracted to this experience because of its simplicity and the wider set of options.
- Disadvantages : Because of the directness of the transactional revenue model, many companies employ it themselves, which means more competition and price deterioration, and therefore, less money to made for everyone who uses this model.
4. Subscription Revenue Model
The subscription revenue model entails offering your customers a product or service that customers can pay for over a longer period of time, usually month to month, or even year to year.
- Advantages : If your company is far enough along in its development, this model can generate recurring revenue, and can even benefit from customers who are simply too lazy to cancel their subscription to your company (which is the dirty little secret of a subscription-based model).
- Disadvantages : Because this model depends so much on having a large consumer base, it’s critical to maintain a higher subscribe rate than an unsubscribe rate.
In the blog post “ Comparing Business Models to Sales Models ”, Dave Parker outlines the various ways that a company can sell their product or service, emphasizing how the market you pick affects the way in which you take your product to market. Here are the methods he describes:
5. Web Sales
This is an offshoot of the transactional revenue model, in which a customer pays directly for a product or service, except that customers must first come to your company via a web search or outbound marketing, and conduct transactions solely over the internet.
- Advantages : Web sales work with a wide variety of offerings, including software, hardware, and even subscription services.
- Disadvantages : Relationship sales are incompatible with the web sales model, so if your company is related to consulting or big ticket items (high-value items such as houses, appliances, and cars), you should consider employing a model that’s more suited to your offering.
6. Direct Sales
There are two types of direct sales: inside sales, in which someone calls in to place an order or sales agents calling prospects; and outside sales, which is a face to face sales transaction.
- Advantages : Direct sales models work great with relationship sales cycles, enterprise sales cycles, or complex sales cycles that entail multiple buyers and influencers.
- Disadvantages : The direct sales model often requires hiring a sales team of some sort, which means that it isn’t optimal for small ticket price items. If your offering is priced below the $1,000-$2,000 range, you’ll have trouble building a scalable company.
7. Channel Sales (or Indirect Sales)
The channel sales model consists of agents or resellers selling your product for you and either you or the reseller delivering the product. The affiliate revenue model is a good companion model to this one, especially if your offering is a virtual product.
- Advantages : The channel sales model is ideal for companies who have a product that’s an incremental sale for their channel and can produce incremental profit.
- Disadvantages : Don’t employ this model if your product requires you to evangelize your marketplace, or if your product competes with that of your partner’s, as they will push theirs and not yours.
8. Retail Sales
Retail sales entails setting up a traditional department store or retail store in which you offer physical goods to your customers. Keep in mind that the retail sales model will require shelf space (that you’ll have to pay for) at existing stores, and is best suited for products that require logistics to reach your customers.
- Advantages : Retail sales is a great way to offer deals and complimentary products to an existing customer base to help boost brand awareness.
- Disadvantages : The retail sales route is not ideal for early stage companies, or companies that offer digital products like software or apps.
In the Domain.me article, “ Planning The Expansion and Revenue Models for your Startup ”, Sarah Green lists even more effective revenue models for startups, including two that are based around the idea of giving something to your customers for free to help generate revenue at a later point.
9. Product is Free, But Services Aren’t
This model is unique compared to others, in that you have to give your product away for free, yet require customers to pay for installation, customization, training or other additional services.
- Advantages : This model is great for building trust with your customer base and boosting brand awareness, as any company that offers anything for free will generate considerable buzz.
- Disadvantages : Remember, employing this model means that you are basically running a services business with the product as a marketing cost. Also, a model like this isn’t always the best for scaling your company in the long term, so keep your eye on additional revenue models to utilize later on.
10. Freemium Model
The freemium model is one in which a company’s basic services are free, yet users must pay for additional premium features, extensions, functions, etc. One of the biggest companies to use this model is Linkedin, the most popular business/social media platform.
- Advantages : Similar to the previous model, the freemium model offers something free to users, which is a great way to give them a taste of your product or service while simultaneously enticing them to pay for something later on.
- Disadvantages : This model requires a considerable investment of time and money to reach out to your audience, and even more effort to convert free users into paying customers.
Final Thoughts
Remember to do your research, and take the time to decide which model is most ideal for your startup, as once you settle on a revenue model, especially if you’re early stage, it can be hard to pick another. As stated before, this blog post doesn’t cover every revenue model used by startups, but by highlighting the most popular ones, you should have enough information to help you pick the revenue model that will boost your startup into the big leagues.
Do you want more expert entrepreneurial advice? The Founder Institute is currently enrolling. Apply today!
Related insights.
Why the Most Successful Founders Typically Solve Problems that are Personal to Them
5 Strategies for Startup Customer Retention
What is a Cap Table? 🧐 Tracking VC Investments and Stock Option Grants
Are you ready to apply to the world's largest pre-seed accelerator, subscribe to our newsletter to receive exclusive startup articles, videos, and more..
Revenue models: 11 types and how to pick the right one
Finding the right revenue model for your company and products is an incredibly important part of starting and expanding your business. It's a key part of building a brand. Explore popular revenue models and how to choose the right one.
What is a revenue model?
- 11 different types of revenue models
Costs associated with revenue models
How to choose your revenue model.
In one of the most famous lines from the 1941 classic Citizen Kane Citizen Kane, Mr. Bernstein proclaims: “ It's no trick to make an awful lot of money... if what you want is to do is make a lot of money .” If only that statement were as true as it seemed. It's probably more accurate to say, “There are a lot of ways to make a lot of money.”
That’s particularly true for software businesses, with the rise of the mobile internet stimulating an explosion in the number of viable revenue models. Choosing which revenue model works best for your SaaS business, though, is not easy (even if that's all you want to do is choose a revenue model for your SaaS business). Your choice will help determine your sales strategy , and from there the growth rates, the amount of money you’ll need to invest initially, and the kind of relationship you’re likely to build with your customers. More than that — the choice determines the future of your business. Let’s take a look at some of the most popular revenue models used today — why they’re popular, why they work, and why they will (or won’t) work for you.
A revenue model is the income generating framework that is part of a company’s business model. Common revenue models include subscription, licensing and markup. The revenue model helps businesses determine their revenue generation strategies such as: which revenue source to prioritize, understanding target customers, and how to price their products.
Revenue models often get conflated with revenue streams, probably because each is a single revenue generation source. They are also confused with business models, of which revenue models are a part. Revenue models help business owners determine how to manage their revenue streams and are required to complete a business model.
Without a considered revenue model, your business will incur costs it cannot sustain. With a revenue model, you can set, track, and forecast business growth based on specific customer segments.
11 different types of revenue models
There is no such thing as a perfect revenue model, but the popularity of some of the methods below suggests that many of them are well-tailored for the current state of the market. Here we’ll walk through each type of revenue model and when they may be most beneficial and applicable.
1. Subscription
The subscription model is the “vanilla” SaaS revenue model, not that there’s anything boring about a well-worked subscription plan. Businesses charge a customer every month or year for use of a product or service. All revenue is deferred and then fulfilled in installments. The subscription model is perhaps the most popular among SaaS companies because of its versatility, promise of recurring revenue , and high value:customer lifetime balance. Done right it's a one-way-ticket to sustainable growth .
Companies working with recurring revenue models, such as subscription or licensing , see more value from a customer across a given customer lifetime. Being able to offer a variety of value options means your company can respond to more than one set of customer needs, expanding your appeal. Hubstaff’s subscription plan, seen below, is a classic of the genre:
Hubstaff’s various plans are distinct from one another in price and feature. This flexibility in the subscription model means that tentative or lower-budgeted customers can still get what they need, all the while maintaining visibility of what extra they could get for a few dollars more a month.
The freemium model is often described as a subscription revenue model, but in fact it’s an acquisition model, not a revenue model. Freemium involves giving users free access to an app and then selling subscriptions for a premium tier that includes more features.
Markup is a very common revenue model for buyer companies (i.e., companies that buy the products they sell). It’s as simple as can be: Take the cost of goods you just bought, mark it up X%, and make a profit margin on the original purchase. There are various subgenres of the markup model, including the following:
- Wholesale: Sale of goods or merchandise to retailers, business users, or other wholesalers
- Retail: Identification of demand, and satisfaction of it through a supply chain via a number of possible outlets, including physical and ecommercial ones
Markup is particularly used by mediators like ecommerce marketplaces — Amazon, for example. On average, Amazon charges a seller who uses their site 15% of the sale, plus FBA fees (including storage, pick & pack, shipping).
3. Licensing
Licensing involves renting goods or services to other businesses. The seller retains full control of copyright on the product or service used by the buyer. Licensing is common for media companies and for patents, copyrights, trademarks — anywhere intellectual property is being used. Compare that to subscribers, for example, who pay for a copy of a product or service. Computer software producers such as Adobe turn to licensing revenue models as often as they do subscription revenue models.
A typical licensing agreement for software, this one for an Adobe XI Pro suite. The main difference between subscription and licensing is that subscription runs for a fixed term while licensing runs in perpetuity, until one of the parties involved terminates it. Licensing offers more stable recurring income; subscription offers greater opportunity for upselling.
4. Advertising
Advertising allows any platform that courts a significant amount of traffic to turn that traffic directly into revenue. You have seen it on your favorite blog, media site, and social media platform (think Google, Facebook, and LinkedIn): The popularity of the medium is valued, and advertisers pay to feature their product somewhere on it (known as display advertising) in order to co-opt a percentage of that site’s user base. Other types of advertising that fall under the same revenue model include search engine marketing, social media marketing, Facebook advertising , and mobile advertising.
On a typical page hosted by the UK-based newspaper The Guardian , which otherwise operates a donation revenue model, we can see a display ad posted on the right. It’s easy to combine with other revenue models for greater effect. For instance, this online news source that uses a subscription or donation-based revenue model may also use advertising to bolster its overall revenue.
5. Pay-Per-User
One of the most enduring legacies of SaaS in the world of business is the introduction of pay-per-user (PPU). It involves giving a customer potentially unlimited to access to a range of features while charging them only for the services they use. At the dawn of SaaS, as the software required no physical delivery and deployed so quickly and cheaply, PPU appeared to be the most sensible revenue model. However, as natural as it seemed back in the day, pay-per-user is not popular anymore. Ascribing value to your product is one of the key considerations of your revenue model, and that includes demonstrating why it’s worth your target customers’ valuable dollars, not just making everything so cheap and easy that they can’t refuse. The issue with PPU, then, is that it’s rarely where value is ascribed to your product. Moreover, PPU kills your Monthly Active User metric. The per-user metric is not the most useful to customers in terms of deriving value — its take-it-or-leave-it approach actively works against your Daily Active Users number, and thus contributes to your churn rate.
6. Donation
As evidenced by the rise and rise of Kickstarter - and Patreon -based ventures, altruism is, if unpredictable, a pretty effective revenue model by itself. Relying on the donations of regular users is a common revenue model for nonprofits, online media (i.e., YouTubers) and independent news outlets.
7. Affiliate
What is affiliate marketing ? This new, popular model works by promoting referral links to relevant products and collecting commission on any subsequent sales of those products. Leverage your product’s synergy with another product in an adjacent space and you both stand to gain. The affiliate model can be as simple as including in an article an outlink to a book or other product mentioned or offering your customers specialized recommendations relative to purchase history (again, Amazon is a master of this art). Some companies, such as Etsy, even have a specific program for their affiliates, where other companies can earn a commission on qualifying sales that result from featuring links to Etsy products and services. The affiliate revenue model is increasingly popular, owing to the way it dovetails effectively with other revenue models, particularly ad-based models.
8. Arbitrage
Applicable mainly to sellers or marketplace-oriented companies, the arbitrage revenue model uses the price difference in two different markets of the same good/service to make a profit. You buy in one market (a security/currency/commodity) and simultaneously sell in another market, at a higher price, what you just bought, pocketing the temporary price difference. Arbitrage is popular with affiliate marketers , as well as with many cryptocurrency firms, SFOX being a prime example.
9. Commission
This transactional revenue model involves a middleman charging commission for each transaction it handles between two parties or for any lead it provides to the other party. It’s particularly popular with online marketplaces and aggregators, as well as businesses like independent music distributors. It’s particularly easy to get up and running with a commission-based business model because you’re working off of existing products. However, unless your field is well-conditioned for a monopoly, and unless your company is (or can become) that monopoly, you’ll find the commission model very tough to scale .
10. Data Sales
Ever heard the phrase, “If you can’t see how the money’s made, you’re the product”? That’s data-selling in action. Many companies selling digital goods and services could not exist without core underlying data assets. In the data sale revenue model, this data is sold directly to a consumer or business customer. While certain companies will use data sale as their primary revenue model, the use of data sales to augment another revenue model is virtually ubiquitous. While some are using it as an entrepreneurial venture , it is also the subject of considerable justified public concern and should be handled with care in the event you decide to go with it as your revenue model.
11. Web/Direct Sales
The old-fashioned revenue model made new, web sales and direct sales involve payment for goods or services through a digital medium. Web sales involve a customer finding your product via outbound marketing (or a web search) and can used for software, hardware, and subscription-based offerings. Direct sales revolve around inbound marketing and is good for handling multiple buyers and influencers in big-ticket markets.
A good revenue model is not just about squeezing as much revenue possible out of a sales cycle; it’s also about balancing your ambitions in the market with your resourcing requirements. A startup revenue model may be significantly different than one for an established business because their resources are vastly different. When choosing your model, factoring in costs is paramount to ensure profitability.
Cost of revenue
The first cost you’ll be likely to factor in is your cost of goods — how much it costs to produce the goods or service that you then sell. For hardware, this can comprise testing and manufacture; for software, it’ll include the whole development cycle. Regardless of what you produce, administrative overheads will also apply. You will find cost of goods a considerably less comprehensive metric than cost of revenue, which is the total cost of manufacturing and delivering a product or service to consumers. That includes everything we’ve just covered, plus distribution and marketing costs. Cost of revenue is more often used in SaaS and other service-oriented industries because it makes the many costs incurred outside of production in SaaS easier to track.
Prototyping costs
Prototyping is a fundamental aspect of any production cycle and, unfortunately, is one of the most expensive. While testing prototypes or beta versions of your new product, even the smallest revisions can necessitate costly changes to your production/development process. This usually comprises a base-level cost, plus iteration costs on top of that. When forecasting prototyping costs, it’s wise to plan for several iterations; it’s highly unlikely you’ll get everything right the first time around, especially if your product is innovative or is composed of a number of features.
Equipment costs
One of the beautiful things about being a SaaS company is that there are no production lines to run. Nevertheless, equipment costs still factor into the bottom line. Firmware, app development tools , server rental, plus any other administrative services bought on subscription (e.g. Slack or Hubstaff) will play a part in your equipment costs, but, generally, equipment costs should be the easiest of all to forecast.
Labor costs
An underpaid workforce is an unhappy workforce (if it’s a workforce at all); wage costs come out of your bottom line. Based on the interaction of salary and commission in your compensation plan , as well as the type of commission you offer (entirely open-ended or capped? Will there be accelerators/decelerators involved?), you will have to plan for your expenditure on labor costs differently.
Advertising & marketing costs
Your advertising and marketing costs will be determined by the following:
- The size of your respective advertising and marketing teams
- The scale of exposure you’re shooting for
- Your method of approach to advertising and marketing: undefinedundefinedundefined
With all of those options, how could you possibly be expected to choose? The answer is in your product itself.
Know your market
Where are your customers? How are they accessible to you? If your buyer personas are mainly single customers, address subscription options to them that are expertly targeted to their needs and how your product can fulfill them . On the other hand, if you’re looking to sell to larger companies who need a customized version of your core product, consider a licensing-based option that will allow you to establish a solid, high-return relationship that has the legs to run for the long term. Knowing your market also means knowing your competitors. Before choosing a revenue model, make sure you have a firm grasp of industry benchmarks: Where is the baseline value for equivalent products to yours in the market? Where does your product sit? Interrogate your product honestly. Not only will a frank assessment of your product’s value save you the mistake of pricing your product too high (or too low), but it will also show you how to capitalize on its value and where your developmental compass should be pointed. Consider the strength of your connections with compatible peer companies. For instance, if you’re running time-management software and have connections to a neighboring company selling compatible HR software, reach out to them. A strong network connection can be leveraged with an effective affiliate revenue model–based strategy.
Know your product
Knowing your product is every bit as important as knowing your market, if not more so. Sometimes, the nature of a product dictates the best revenue model for it by itself. If you have a suite of products, is it most sensible to have them as a subscription service or as one-off purchased products? The smart money in this case, for the sake of your growth and daily-user figures, would be on the subscription option. Again, evaluate your product’s performance honestly. How does your product perform compared with its competitors? How wide is your feature array compared with the rest? An awareness of your product enables you to choose a revenue model that hits the value/willingness-to-pay sweet spot. Consider your options further if your product is not a straightforward software proposition. For example, if your product is platform-based, investigate your advertising prospects to capitalize on your traffic buzz, and think laterally to find possible partners for an affiliate strategy that will give your revenue an added kick.
Pitchfork’s affiliate program with makers of craft beer can be seen on the leftmost tab. Music blog platform Pitchfork sussed out that the only thing their readers like more than left-field music is craft beer, so they introduced an affiliate feature with brewer’s outlet October. It’s a smart exhibition of affiliate revenue scoring.
Expect the unexpected
As your product line changes and as your company grows, your initial revenue model may change. You may begin with a subscription revenue model that then assimilates aspects from the affiliate, advertising, and data sales models with time and opportunity. You might start off as a fledgling independent blog on donation with a little bit of advertising, then find yourself with an audience big enough that you can shun the advertisers, install a subscription model, and keep the integrity of your writing safeguarded. Alternatively, you may begin with subscription, see only a fraction of your potential success realized, and move to a licensing revenue model. The important thing is to be willing to shift your revenue model or bring in additional models to complement what you already use, if the situation calls for it.
Your revenue model is unique
So many revenue sources, so many revenue models, so little time. There are some fundamental differences between revenue models. For instance, if you’re a SaaS company producing your own software product, you’re unlikely to get all that far with an arbitrage model. Likewise, if your product is a medium or if you’re a seller, a subscription-based revenue model won’t do the trick. A product with a high ceiling for potential revenue is not best served by a donation model. Nevertheless, the choice of a main revenue model out of the batch that do work for your product, and how you then combine them with appropriate aspects of other models, is yours, and yours only. Your product and the market should be in mind at all times while you’re settling on, adding to, and refining your model. After that, bringing in the revenue itself should be as easy as Citizen Kane said.
Join our community of SaaS leaders
Sign up to get early access to our latest resources and insights
By subscribing, I agree to receive the Paddle newsletter. Unsubscribe at any time.
Related reading
How to Write a Business Revenue Model
- Small Business
- Business Communications & Etiquette
- Business Writing
- ')" data-event="social share" data-info="Pinterest" aria-label="Share on Pinterest">
- ')" data-event="social share" data-info="Reddit" aria-label="Share on Reddit">
- ')" data-event="social share" data-info="Flipboard" aria-label="Share on Flipboard">
Examples of Sales Projections
How to write a 3-year business forecast, how to make a projected sales budget.
- What Is a Revenue Model?
- Appraising a Sole Proprietorship
A business revenue model answers the most important question about a new business: How will you make money? When you are first starting out, this may feel like a guessing game. However, the experience you have accumulated and the study of more established businesses can give you a wealth of information to begin your own revenue model. Once you begin bringing in money, use the revenue model as a living document to change your strategies, focusing on sources of income that work best, while revising your approach to those that aren't working well.
Gathering Data and Finding New Ideas
Gather your sales data if your business has already produced some income. Make a note of each type of income source and an estimate of the total revenue. If you have not yet launched your business, but worked in the same market for someone else in the past, make notes of the revenue sources your company had. The more sales history you have, the more accurate your revenue model will be.
Determine how many customers exist for your products or services by doing some market research. You can research this yourself using resources such as the most current Economic Census or by hiring a market research consultant.
Make a list of primary revenue models you can use. For example, you can sell products and services on a project-by-project basis. You can also charge a retainer to organizations that may need your services, such as lawyers and public relations firms do. You may also be able to offer services on a subscription basis.
Make a list of secondary revenue models you can use. For example, if you promote your business on your website, you may be able to add to your revenue by selling affiliate products related to your core business. You may also be able to make additional money by putting advertisements on your website. In addition, you may be able to charge a monthly fee for premium content on your website or license your content to other websites.
Make a list of other marketing methods used by other businesses. Examples include Facebook fan pages, online sales using a service such as PayPal, eBay, and indexing your business for local search results on websites such as Google.
Writing Your Revenue Model
Launch word processing software and create a new document for your revenue model or add it as a new section in your business plan.
Write down a second list of long-term revenue sources. These may eventually bring in a lot of income but are not enough themselves to sustain your business today. These may be secondary income sources such as website advertising or subscription-based services.
Create a new page for each revenue source and use the revenue source as the title for that page. Detail the steps you need to take to achieve the revenue goal you specified in the summary page. Specify how much time each will require to implement, as well as how much time will be required to keep it active.
Review your revenue model on a regular basis and adjust it as needed. If your business is just starting, you will have a much stronger understanding of your revenue after a month than you will before you began. Increase the amount of time you spend on the revenue sources that work well. Decrease the time you spend on revenue sources that are not working as well as you projected until you can revise your strategies for them.
- Corbett Barr: An In-Depth Guide to Online Business Revenu Models for Lifestyle Entrepreneurs
A published author and professional speaker, David Weedmark has advised businesses and governments on technology, media and marketing for more than 20 years. He has taught computer science at Algonquin College, has started three successful businesses, and has written hundreds of articles for newspapers and magazines throughout Canada and the United States.
Related Articles
The entries for closing a revenue account in a perpetual inventory system, marketing budgets that include pro forma financial statements, how to calculate budgeted revenue, how do i write a three-year business plan, how to calculate revenue vs. labor, business start-up strategies, how to plan & grow a business venture, what financial projections do investors look for in a business plan, what is a revenue budget, most popular.
- 1 The Entries for Closing a Revenue Account in a Perpetual Inventory System
- 2 Marketing Budgets That Include Pro Forma Financial Statements
- 3 How to Calculate Budgeted Revenue
- 4 How do I Write a Three-Year Business Plan?
Revenue Models: 17 Types, Examples & Template [2022]
![Revenue Models: 17 Types, Examples & Template [2022]](https://global-uploads.webflow.com/5e1331324b55b0fe5f41fe63/6318a69e798a619939d83e87_62f13a77bc47b228f0eedb36_Revenue%2520Models%2520Types%252C%2520Template%2520and%2520Examples.png "sample of business plan revenue model")
Revenue Models
How does (or will ) your business make money? It sounds almost too simple to ask, but having a clear understanding of your business' revenue model can be one of the most important ways to focus on key activities--and actually move the needles you care about most.
For indie businesses, settling on the right revenue model type rarely happens on first attempt. Instead, it's common to bounce around from subscriptions to digital products, membership communities and affiliate offerings until something finally *clicks* for you and your business.
This revenue models list component and template is intended to help you sort, consider and rank a list of common revenue models. In future, I'll be linking this table to related marketing channels, real data from other indie businesses and related templates--for now, let's take a quick look at the revenue models listed.
17 Common Revenue Model Examples
- Subscription
- Licensing (Digital Prod.)
- Advertising
- Affiliate Commission
- Project-Based Services
- Retainer-Based Services
- Tickets, Events, Workshops
- Manufacture (D2C)
- Library Access
- Community Access
- Marketplace
1. Subscription
The most common revenue model for SaaS and membership-based businesses. Customers pay a recurring fee, typically on a monthly or yearly basis, in exchange for access to your product or service.
Pros of subscription model
- Recurring revenue is more predictable and can be helpful in forecasting
- Can be a great way to build long-term relationships with customers
- Customers who are paying on a recurring basis are typically more engaged and have a higher lifetime value
Cons of subscription model:
- Can be difficult to acquire customers who are willing to pay a recurring fee
- Can be difficult to increase prices without losing customers
- There is always the risk of churn (customers cancelling their subscription)
The markup revenue model is most common in retail and ecommerce businesses, where goods are bought at wholesale prices and then sold to customers at a higher price.
Pros of markup model:
- Can be easier to get started since you don't need to develop a unique product or service
- There is less risk involved since you're not investing in developing or producing a good or service
- Can be easier to scale since you can simply buy more inventory as needed
Cons of markup model:
- Can be difficult to compete on price alone
- You may need to invest in marketing and branding to differentiate your business
- There can be slim margins if you're not careful with your pricing
3. Licensing (Digital Prod.)
The licensing revenue model is most common for digital products, where customers pay a one-time fee for access to your product.
Pros of licensing model:
- Can be a great way to generate one-time revenue from customers
- Customers who pays for a license typically have a higher perceived value of your product
- Can be easier to scale since you're not selling a physical good or service
Cons of licensing model:
- Can be difficult to acquire customers who are willing to pay a one-time fee
- There is always the risk of piracy (customers sharing your product without paying)
- Can be difficult to upsell customers or generate recurring revenue
4. Advertising
The advertising revenue model is most common for online businesses, where businesses sell advertising space on their website or in their email newsletter.
Pros of advertising model:
- Can be a great way to generate revenue from customers who are not ready to buy your product or service
- Advertising can be a complementary revenue stream to other revenue models
Cons of advertising model:
- Advertising can be disruptive to the user experience
- Advertising rates can fluctuate based on market conditions
- You may need to invest in marketing and branding to attract advertisers
5. Donation
The donation revenue model is most common for non-profit organizations, where customers donate money to support the cause or organization.
Pros of donation model:
- Can be a great way to generate revenue from customers who are passionate about your cause
- Donations are typically tax-deductible for the donor
- There is less pressure to generate revenue since donations are not expected to be recurring
Cons of donation model:
- Can be difficult to acquire customers who are willing to donate money
- May need to invest in marketing and branding to attract donors
- Donations can fluctuate based on economic conditions
6. Affiliate commission
The affiliate commission revenue model is another common for online businesses, where businesses pay a commission to affiliates for referring customers.
Pros of affiliate commission model:
- Can be a great way to generate revenue from customers who are already interested in your content
- Affiliates can provide valuable marketing and promotion for your business
- Can be easier to scale since you're not producing all the products you sell
Cons of affiliate commission model:
- Not always easy to find good affiliate programs
- You may need to invest in marketing and branding to attract affiliates, as well as readers
- Commissions can vary based on affiliate performance
7. Sponsors
The sponsorship revenue model is becoming increasingly common for online creators.
Pros of sponsorship model:
- Can be a great way to generate revenue from businesses or individuals who support your cause
- Sponsors typically have a high perceived value of your organization
Cons of sponsorship model:
- Can be difficult to acquire sponsors who are willing to pay
- May need to invest in marketing and branding to attract sponsors
- Sponsorship can fluctuate based on economic conditions
8. Data Sales
The data sales revenue model is most common for online businesses, where businesses sell data that they have collected.
Pros of data sales model:
- Scale advantages
- Data can be a valuable commodity for businesses
Cons of data sales model:
- Difficult to acquire unique data sets
- Longer sales cycle
- Data rates can fluctuate based on market conditions
9. Project-Based Services
The project-based services revenue model is most common for businesses that provide consulting or other services.
Pros of project-based services model:
- Can be a great way to generate revenue from customers who need your services
- Projects can be customized to the customer's needs
Cons of project-based services model:
- Very hands-on
- Need to keep your pipeline filled
- Projects can fluctuate based on economic conditions
10. Retainer-based services
The retainer-based services revenue model is most common recurring stream for businesses that provide consulting or other services.
Pros of retainer-based services model:
- Can be a good way to introduce recurring revenue to a services business
- Customers typically pay upfront for your services
Cons of retainer-based services model:
- Need to find a service that's profitable on retainer;
- Reducing churn;
- Pricing your retainer.
11. Tickets, Events, Workshops
The ticketing revenue model is most common for businesses that host events or workshops.
Pros of ticketing model:
- Can be a great way to generate revenue from customers who are interested in your event
- Tickets can be sold in advance of the event
- Virtual events and workshops can be easier to scale since you're not selling a physical good or service
Cons of ticketing model:
- Need to consistently market events
- Margins need to be high for it to be sustainable
- Often need to pay staff to help facilitate event
12. Royalties
The royalty revenue model is most common for businesses that sell digital content, such as books, music, or software.
Pros of royalty model:
- Royalties can be collected on a per-sale or per-use basis
- Highly asynchronous
Cons of royalty model:
- Can be difficult to track sales and commissions
- Typically low % commission
- Royalties can be volatile from year to year
13. Manufacture (D2C)
The manufacture model, going direct to customer, is probably the most familiar. You make a product and then sell it to the customer, whether that’s through your own store, a third-party retailer, or some other means.
Pros of Manufacture (D2C)
- You have complete control over your product
- You can build your own brand
- You can reach customers directly
Cons of Manufacture (D2C)
- It can be expensive to get started
- You have to invest in marketing and branding
- You have to manage inventory and shipping
14. Library Access
The library access model is common for businesses that offer digital content, such as books, music, or software. Customers can access your content through a subscription or pay-per-use basis.
Pros of Library Access
- Can reach a wide audience of potential customers
- Can generate revenue from customers who are interested in your content
Cons of Library Access
- Possibility of duplicating digital content without license
- Retaining users after they pay for first access
- Offering a unique library
15. Rent/Lease
The rent/lease revenue model is common for businesses that offer physical goods, such as equipment or vehicles. Customers can rent or lease your products on a short-term basis.
Pros of Rent/Lease
- Can generate revenue from customers who need your equipment
- Can be quite 'Passive' income
- Scalable if margins and demand are high enough
Cons of Rent/Lease
- High expenses upfront
- Potential damages costs
16. Community Access
The community access revenue model is common for businesses that offer physical goods or services. Customers can access your product or service through a subscription or pay-per-use basis.
Pros of Community Access
- Compounding as the community grows
- Plenty of online community software and tech popping up
Cons of Community Access
- Difficult to upgrade to a 'paid tier'
- Community moderation can be time-consuming
- Sustaining high community engagement
17. Marketplace
The marketplace revenue model is common for businesses that offer a platform for other businesses to sell their products or services. Customers can access the marketplace through a subscription or pay-per-use basis.
Pros of Marketplace
- Buyers will typically bring their own customers
- Can generate revenue from both sides of the market: buyers and sellers
- Don't need to produce your own products (beyond the marketplace itself)
Cons of Marketplace
- Quality control can be difficult
- Chicken-egg problem: getting your very first buyers and sellers
- Settling disputes and investing in customer support
Choosing A Revenue Model For Your Business
This Notion template database also includes some properties to help you understand more about the various revenue models listed, and how they compare with one another on a few important factors. These are:
- Volume needed;
- Typical Margins;
- Capital needed upfront;
- Relationship to customer (direct or indirect);
- Scalability;
- Revenue model examples; and
Volume Needed
The volume needed property gives an indication (on a scale from 'Very Low' to 'Very High') of how many customers are typically needed for this type of revenue model to work. For example, a subscription revenue model that charges $1.99/month will need a Very High volume of customers in order for the model to work; whereas a high-ticket services business may only need 1 or 2 big clients per year.
Typical Margins
The typical margins property is there to help you understand how profitable this revenue model can be, given the right circumstances, per sale or customer. For example, a business selling digital products will typically have very high margins (if they are priced correctly), whereas a business that relies on advertising as its primary revenue source may have lower margins.
Capital Needed Upfront
The capital needed upfront column describes (loosely) of how much money you will need to spend in order to get the business up-and-running. For example, a subscription business can be started with very little capital as there are no inventory or product development costs; whereas a manufacturing business may need a lot of money to get started as there are significant inventory and product development costs.
Relationship to Customer (Direct or Indirect)
The relationship to customer property gives an indication of whether the revenue model is direct, indirect or two-sided (e.g. marketplaces). A direct revenue model is one where you have a direct relationship with the customer; whereas an indirect revenue model is one where you do not have a direct relationship with the customer.
For example, a subscription business has a direct relationship with the customer as they are paying the business directly for a product/service; whereas an advertising-based revenue model has an indirect relationship with the customer as they are paying the advertiser, not the business.
Scalability
The scalability property gives an indication of how easy it is to scale this type of revenue model. A scalable revenue model is one that can grow without a significant increase in costs; whereas a non-scalable business is one that has fixed costs which limit its growth.
For example, a subscription business is usually more scalable than a manufacturing business as there are no inventory or product development costs; whereas a business that relies on a small number of high-value clients is usually less scalable as it is difficult for you to service more such clients with the same number of hours in a day.
Revenue Model Examples
This column provides an example of a real business that is deploying this revenue model. I've tried to select primarily indie businesses, however this isn't the case for all of the businesses listed (where I couldn't find an indie business, I chose something that may be relevant or a company that I just generally like).
It's also worth noting that many of the businesses listed under a certain revenue model type employ multiple revenue models, alongside the stream that they're listed under. This is quite common for indie businesses (to have multiple revenue streams) and can be a good hedge against any single revenue stream going dry.
As you look through the list of possible revenue models, you can give each a ranking and sort the list based on those that are best suited.
Getting Started
Duplicate this template into your own Notion workspace, and start ranking the various revenue models as they suit your own business, today.
Free components, templates and guides, delivered to your inbox weekly.
Revenue Model Template
What do you think of this template.
Product details
A business model is a framework for how a company will create value. Ultimately, it distills the potential of a business down to its essence. It answers fundamental questions about the problem you are going to solve, how you will solve it and the growth opportunity within a given market. Creating a business model is essential, whether you are starting a new venture, expanding into a new market, or changing your go-to-market strategy. Creating a business model requires deep thought and analysis. Company and product builders must think from the outside in, focusing on market needs and what matters most to customers.
Revenue Model Template is a professional and modern template. The template consists of four slides, each of which contains beautiful infographics and has its own unique style. Infographics and text blocks layout give you the opportunity to choose the design that best suits you and combine the slide with our other templates. In this template, you can present the sources of income in detail and give them a short explanation. This template is perfect for startups and investors. Marketers will also appreciate its benefits when preparing a new product launch report and analyzing potential sales markets. Product developers can use the slide to describe the benefits of the product. Template slides can be easily combined with slides for business plans, investment projects, enterprise profit planning. The Revenue Model Template is a versatile slide set that can complement any presentation or report that analyzes the sources of cash flows.
Related Products
Company Overview
Quarterly Business Review
Cost Comparison
Company Strategy
Financial Model
Quarterly Report Template
Return on Investment
Business Review
Capex vs Opex
Economic Value Added
You dont have access, please change your membership plan., great you're all signed up..., verify your account.
PowerSlides.com will email you template files that you've chosen to dowload.
Please make sure you've provided a valid email address! Sometimes, our emails can end up in your Promotions/Spam folder.
Simply, verify your account by clicking on the link in your email.
The Leading Source of Insights On Business Model Strategy & Tech Business Models
Build Your Business Model With These Revenue Model Examples
In this article we’ll see some revenue model examples you can use or borrow to build your business model .
Ad-supported
Subscription-based
Consumption-based
Commission-based
Hidden Revenue
Razor and blade
This is what’s called a reverse razor and blade strategy . Where the blade (in this case the App and software ecosystem) becomes what justifies a wide premium on the core product.
Read Next: Business Model , Minimum Viable Audience , Lean Startup .
FourWeekMBA Business Toolbox
Business Engineering
Tech Business Model Template
Web3 Business Model Template
Asymmetric Business Models
Business Competition
Technological Modeling
Transitional Business Models
Minimum Viable Audience
Business Scaling
Market Expansion Theory
Speed-Reversibility
Asymmetric Betting
Growth Matrix
Revenue Streams Matrix
Revenue Modeling
Pricing Strategies
Other business resources:
- What Is Business Model Innovation
- What Is a Business Model
- What Is Business Strategy
- What is Blitzscaling
- What Is Market Segmentation
- What Is a Marketing Strategy
- What is Growth Hacking
More Resources
About The Author
Gennaro Cuofano
- Bundle Promo
- 70+ Business Models
- Airbnb Business Model
- Amazon Business Model
- Apple Business Model
- Google Business Model
- Facebook [Meta] Business Model
- Microsoft Business Model
- Netflix Business Model
- Uber Business Model
IMAGES
VIDEO
COMMENTS
Preparing a financial plan for your business is important if you plan to pursue business finance options such as loans, according to Inc. Business finance companies look at the short-term viability as well as the long-term potential of a bu...
It’s impossible to eliminate all business risk. Therefore, it’s essential for having a plan for its management. You’ll be developing one covering compliance, environmental, financial, operational and reputation risk management.
The annual business revenue is how much money a company generates in a year, whether from sales or interest from investment. Companies must keep up with annual revenue as it is a number used for tax purposes.
A revenue model is a plan for earning revenue from a business or project. It explains different mechanisms of revenue generation and its sources
Said plainly for a startup, a revenue model means understanding how the company will make money. In other words, a revenue model is a map out of
Business Model vs Revenue Model vs Revenue Stream · A revenue stream is a company's single source of revenue. · A revenue model is the strategy of managing a
A revenue model is how a business makes money. Page 3. Business. Revenue. Customer. Solution. Customers pay for a solution to a problem. Page 4. Business.
Common revenue models include subscription, licensing and markup. The revenue model helps businesses determine their revenue generation strategies such as:
Writing Your Revenue Model · 1. Launch word processing software and create a new document for your revenue model or add it as a new section in your business plan
17 Common Revenue Model Examples. Subscription; Markup; Licensing (Digital Prod.) Advertising; Donation; Affiliate Commission; Sponsors; Data Sales; Project-
A revenue model is a blueprint that shows how a startup business will earn revenue or gross income from its standard business operations, and
As a startup, it is essential to have a clear understanding of your revenue model and how it will help you achieve your business goals. A revenue model
Template slides can be easily combined with slides for business plans, investment projects, enterprise profit planning. The Revenue Model Template is a
Build Your Business Model With These Revenue Model Examples · More videos on YouTube · Ad-supported · Freemium · Subscription-based · Consumption-