Every startup builds a business model that is viable and promises huge returns after a specific time frame. But for a business to sustain itself in this highly competitive ecosystem, earning revenue along with some investments is important. So, here are some of the revenue model for startups i.e. a channel through which a specific business earns to sustain and grow itself. The offerings could either be a B2B (Business to Business) or B2C (Business to Consumer).
What is Revenue Model?
A revenue model is a conceptual framework that determines and explains the revenue earning strategy of the business. A revenue model is a framework for generating financial income. It is the strategy of managing a company’s revenue streams and the resources required for each revenue stream. It includes the product or service of value, the revenue generation techniques, the revenue sources, and the target consumer of the product offered.
Markup Revenue Model
Normally followed by middlemen. In simple words, earning profits by selling goods at a price which is higher than its actual price, this margin includes all the profits, commission based revenue model, and additional costs. They buy the product from the manufacturer, before selling it to the consumer. E-Tailers, retailers follow this type of revenue model.
Commission Revenue Model
Charging a fee or a commission for providing a platform, to connect a provider with a consumer. They charge a commission based on service or item being sold. The commission may be fixed or maybe a percentage of the selling price. This commission based business model is highly popular in generating a revenue stream, especially for various internet companies. Aggregators like Ola, Payments wallets like Paytm work on this business model.
Subscription Business Model
Charging a periodic fee for a specific service. Most common for OTT (Over the top) platforms and SaaS (Software as a service) providers to generate revenue. The periodicity can be weekly, monthly, or yearly, based on the service and its provider. A subscription for basic access in addition to some extra charge contingent upon use. An essential telephone utility pays a pre-decided expense for a month to month use yet may have additional charges for extra administrations, for example, significant distance calls, registry administrations, and pay-per-call administrations.
At the point when the essential help is offered for nothing out of pocket, this plan of action is frequently alluded to as freemium. This revenue model has a high recurring ratio i.e. a customer might come back to the platform if he likes the service and finds Return on Investment good enough. Netflix, Prime Video, Byju’s follow this revenue model.
Arbitrage Business Model
This business model works on the price difference of the same product in different markets. Currencies, bonds, commodities are traded in different markets and the profit generated through the trading results in cash flow. This revenue model of a startup is usually a low risk one but might result in heavy losses if a currency gets delisted due to heavy inflation. The arbitrage online system is a publicizing procedure which includes purchasing traffic from a site that coordinates to your webpage and selling promoting space on your site. Utilizing this basic method the potential for cash making is boundless.
Advertising Revenue Model
Money is generated by providing a platform for companies or individuals to display their advertisements. Social media platforms earn through this business model. This revenue model is highly profitable if successfully implemented. A provider might charge an advertiser based on duration and area, if present in an offline channel or based on clicks and views in the case on online channels. Facebook, Instagram, and various magazines and newspapers follow this model for generating cash flow. This revenue model is easy to adopt if you have a greater regular audience and you can easily earn more money.
Pay Per Use Business Model
Platforms charges a user commission, every time he uses their service. Rates might differ as per service being provided and amount. Credit card companies follow this revenue model of a startup.
Licensing Revenue Model
Most inventors and owners of any intellectual property earn by providing a license for their invention. People who have patented their inventions follow this revenue model. The license amount is dependent on time, region, and volume. Software providers like Microsoft follow these tpyes of business models for startups to generate a revenue stream. A licensing revenue model allows technology producers to monetize their new technology products by licensing them to other companies so that they may be integrated into an end-product.
Frequently Asked Questions
How do you explain revenue model?
A revenue model is a strategy for 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 and revenue streams for startups, and describes how they all work together.
What is revenue generation model?
A revenue model is a framework for generating financial income. It identifies which revenue source to pursue, what value to offer, how to price the value, and who pays for the value. It is a key component of a company's business model.
How does your startup generate revenue?
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.
What is the Best Revenue Model?
Types of Best Revenue Models:
- Ad-Based Revenue Model.
- Affiliate Revenue Model.
- Transactional Revenue Model.
- Subscription Revenue Model.
- Web Sales.
- Direct Sales.
- Channel Sales (or Indirect Sales).
- Retail Sales.
How do you create a revenue model for a startup or how to generate revenue for startups or how to make revenue model for startup?
7 Ways to Build a Successful Startup Revenue Model:
- Find the right fit for startup and expertise.
- Create a framework for expressing value.
- Build a revenue model that helps you find the right investors.
- Limit projections to a reasonable timeframe.
- Your revenue model is not static.
- Determine the critical variables that drive your business.
- Mitigate for variables.
What is the simplest example of revenue model in business plan?
The simplest example of a revenue model is a high traffic blog that places ads to earn a profit. Web resources that generate content for the public, e.g. news (value), will make use of its traffic (audience), to place ads.
How much revenue should a small business have?
For small businesses, if their average annual revenues are $27 million or less. Some revenue of startups are much lower than others.