Business Models 101: Revenue Streams
In this part we will discuss the Revenue Stream, where will your income
come from.
I have to repeat it on every page but starting something on your own, creating value for you, your family and
the world is a totally recommendable thing to do. You want to create your
company. This is GREAT. The world has been made by
people like you. Entrepreneurs. Self-Made Men, Creators, Builders people
that believed an obstacle is just another great challenge to overcome, to
solve and put behind them as an achievement.
The Revenue Stream
It would seem obvious that revenue or income is coming from your
customers. This is nowadays an incorrect assumption. As mentioned before,
you might have customers or visitors or users that do not pay anything for
the services you provide.
Your revenues can come different sources like
advertisement, and sponsoring. But this is of course not true for all the
businesses far from it. This applies to Internet site, online services for
example.
If you sell cupcakes, your main revenue stream will be from the sales of
cupcake or from your franchise business which has become a huge success. The
important here is to list properly all the revenue streams in order to be
able later to define actions related to them. Here we have direct sales,
indirect sales from restaurants and bakeries, online sales and franchising
commissions. This is already quite a lot for such a small business.
Here are the questions you have to ask yourself
about the Revenue Stream:
Also what type of revenue will it mainly
be. It is quite often a mix but there is always a clear main stream for a
type of product.
-
piece price: for material or immaterial products
-
usage
fee: for exemple ATM machine charge you every time you withdraw money. So
you could provide some apparatus for free to your customers and they
would be charged only when using it.
-
licensing: if you have a patent on something and people
want to use it. Then you get some income every time they use your
invention
-
commission: if you sell stuff that is produced by
someone else, then getting him a customer will bring you a percentage of
what he will be earning.
-
advertising: if you rent a space on your land, house to
put advertising, or if you put ads on your website (Google Adsense for
example)
-
lending: if you rent stuff for exemple a lawnmower, car,
....
-
subscription fee: if you publish a newspaper for exemple
or if you are a super successful blogger then you could let your reader
pay to read your daily blogs.
Setting your pricing right is of utmost importance: how do
you set your price? Will you be deciding the price to pay (lets say because
you are the only one on the market) or are there similar products on the
market that define the general pricing range.
-
volume dependent: is your price decreasing with volume,
if I buy 1,10, 100 pieces will it be the same price or staying constant.
-
segment
dependent: if you sell to rich people will you charge more (;-) than if you
sell to the "normal" folk...
-
negotiation: are you selling your product to a big chain
or other company? Then surely they will try to reduce and negotiate the
price. DO NOT FORGET: price is not the only component of your product
offering (you can negotiate warranty, service, delivery, quality,
packaging, ....)
-
market price: is your product competing against other
products on the market, then probably you cannot play so much on the
price (except if you offer other services with it)
-
fix price: if you can set your price independently of
the market, your customers, etc... then you are a LUCKY Piece of
person...
There are out there some interesting price fixing scenarios too. Like the
one letting the customer decide what he will pay for your product. This
could be interesting because it has been shown that if you let the customer
decide the price, it will quite often be more than what you would have asked
for... of course this might not last for ever...
Previous: Channels
Next: the Key Activities
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