Revenue Model for Small Businesses & Its Types

Every business will have to advertise or promote their products for which they may incur some expenses so it meets the expectations of the customer. Before jumping into the Revenue Model one has to first understand the Business Models and Revenue Streams. The revenue stream is the company’s revenue with a single source. The Revenue Model meaning is the plan or the strategy of the company managing the revenue for future purposes. The Business Model is the combination of all the requirements of the company to run successfully with the revenue stream and also the revenue models.

Every businessman thinks or searches for answers to the most important question while starting a new business, “How to make money?” The most important thing while starting a new business is the generation of revenue. Whenever one starts a new business, it tends to feel like “a guessing game”. So the ups and downs, losses and profits, and the most significant thing while proceeding in business activity is experience. The more experience one accumulates, the better one can establish a business.

The pertinent question is, what is a revenue model? Once a person starts earning or rotates the money then the revenue model is like a live document. One starts writing or using the strategies required for the business development, focussing on the different sources of income for expansion of the business income and, in case of failure, there should be an alternative business plan.

COLLECTING OF DATA AND SEARCHING NEW WAYS:

Experience: A person requires proper sales data for the business, different sources of income available and the estimated total revenue. Suppose the business is yet to be launched and the person has worked elsewhere, this experience will help the business to be set up and to create an accurate revenue model.

Market Research: When a person is starting his business, they should first go conduct a detailed market research to get a better result once the business is set up in a particular locality.

Primary Revenue Models: One should always have the primary revenue models in their minds so they can sell the products and services accordingly. One can also take the help of lawyers, the public, etc, on a contribution basis.

Secondary Revenue Models: If the person is not able to go with the primary models, he has to go with the secondary revenue model. To understand the revenue model meaning, for instance, a businessman can promote the business and increase revenue by selling the product online or even get an additional amount by advertising on websites by charging a monthly fee or by taking the license of the content of the other websites.

Marketing method: The businessperson should possess other kinds of marketing methods that are being presently used by the businesses. Example: Facebook fan pages, online sales using the services like lazy pay, payU which is used for the local results on the Google website.

RECOGNITION OF THE REVENUE MODEL CATEGORIES:

When a businessman wants to start up a business that combines it to have a lot of creation. There will be few factors that determine the type of business one chooses whether it is the selling of products or services, selling online items, or in traditional stores. So the combination of all the trade and commerce in the business, payment of fees, auctions, selling to middlemen is known as intermediation.

REVENUE PRODUCING ACTIVITIES:

When the business person goes thoroughly into the activities he has to do for the purpose of the business he will really have a good knowledge of the primary and the secondary revenue models. Commerce includes physical goods, digital products, and services that will be offered at a fixed price. All the models concentrate on limited or unlimited factors.

The advertising model includes traditional media advertising, sponsors, etc. The subscription model has limited or unlimited terms and products available on rent. The auction always involves bidding that can be done on the internet or traditionally done near the sites. The intermediation model uses the marketplace online or traditional way for coordinators and third-party payment processors.

WHAT IS REVENUE MODEL?

The revenue model is the model that determines revenue resources for the business and puts them in the correct order and shows the priority. The business person has to plan for the detailed list of the revenue activity, steps involved for achieving the business goals. These goals should be in the mind of the businessman initially in a perfect manner and continue with the proceedings of the adjusted model of the business. But the person should monitor the revenue very keenly, increasing the amount of time and also the resources for the success of the business.

TYPES OF DIFFERENT REVENUE MODELS FOR THE BUSINESSES:

One of the most significant things one can ensure for the financial health of the business is to create a good revenue model. The following are the models that some of the business houses use when they start up the business.

1. Production Model

The business is created by selling goods and services to the end-users who value them and pay for the same. For example, a company that is producing the ice-cream will either sell it directly to the customers or to other business houses.

2. Manufacturing Model

The production of the commodities is done by using the workers, equipment, and other related material for the purpose of finished products where the businessman gets the revenue when selling. These may be sold to the other manufacturers for the production of other related products or can be sold to the wholesalers or the retailers and finally to the customers.

3. Rental or Leasing Model

Renting or leasing is an agreement between the two parties for temporary use of goods and services. When a place is taken as a lease the person pays the amount to the landlord regularly. Example: A bank taking a place on lease for a certain period of time.

4. Advertising Model

This model is generally used by Media Business Houses where this is regarded as one of the platforms for them to advertise or promote their products. For example, an internet business that is providing advertising spaces on their platforms.

5. Commission Model

In this model, there is a model where the transaction is done between the mediators of the two parties. Example: brokerage companies

6. E-Commerce Model

This model is where online trading and commerce takes place.

7. Fee- for - Service Model

In this model the business charges for the customers and charges for the services rendered. Many cell companies provide this type of service to their customers.

8. Licensing Model

In this model, the business owns a particular content that retains the copyright when it is being sold to a third party. The media companies also obtain the patent for the particular technologies.

9. Freemium Models

Some companies provide the products and services free of charge while charging a premium for the advanced and other related products and services. For example, when a product is purchased the company will provide some services free of cost to the customer to retain them.

10. Markup Model

In this model, the businessperson purchases the product for the manufacturer and sells it to end-users by increasing the price of the product purchased. For example, wholesalers and retailers.

11. Wholesale

It is the sale of goods and other kinds of services to other people or the end-consumers. This is implemented via online or electronic transactions.

CONCLUSION

Every business organisation or individual will start a business to earn profits and be successful in business practices that require creativeness and innovation.

Also Read:

1) 50 Small Business Ideas for Computer Experts
2) What Are the Business Ideas I Can Look at If I Am an MBA Graduate?
3) 20 Business Ideas for Stay-At-Home Parents
4) OkCredit: Simple, Paperless & Secure solution for businesses

FAQs

Q. Why should the Revenue model be used for the business?

Ans. The Revenue Model should be used to have a proper plan or strategies to proceed in the business.

Q. How to choose the models for the business?

Ans. It depends on the type of business one wants to choose to get returns from it.

Q. Why should business organisations have a plan?

Ans. The business organisations should have a proper plan and also the strategies to ensure smooth running of the business.