Show me the Money

Revenue Models
A revenue model is how a business
makes money.

Business

Revenue
Customers pay for a solution to a
problem.

Solution

Business Customer

Revenue
A revenue model is an exchange of
value.

Solution
Value

Business Customer

Revenue
 There are different types of revenue.

• Recurring revenue - ex. Dropbox

• Transactional revenue - ex. American Eagle

• Project revenue - ex. Construction

• Service revenue - ex. Haircut

http://www.marsdd.com/articles/revenue-models-overview/
 There are many types of revenue
models.
• Physical goods • Rental

• Digital products • Brokerage

• Service sold per unit • Platform/marketplace

• Service sold fixed price • Freemium

• License • Affiliate marketing

• Auctions • Subscription

• Advertisements • Usage fees

http://www.bmnow.com/revenue-models-quick-guide/
 There are key points to remember.

• Your customer may not be your consumer

• Revenue model does not equal business model

• Revenue model impacts all areas of business

(brand, sales, operations, finance)

• Each model has advantages and disadvantages

 You will develop a revenue model.

• Identify target customer - Complete

• Determine value proposition - Complete

• Evaluate revenue model options

• Select revenue model

• Adapt and adjust

 Revenue Model Description Pros Cons Example companies

One-time sale of goods or

Transaction revenue
services.

Project revenue One-time project.

Customer pays for access

to a product or service in
Recurring revenue
installments (usually
monthly or yearly).

Service provided to
Service revenue customer. Customer pays
for time or expertise.

Offer subset of features for

free. Try to convert free
Freemium
customers to paying
customers.

Advertisements Sell adspace.

Platform or marketplace to
Marketplace, platform connect buyers to
producers.
 Revenue Model Description
One-time sale of goods or
Transaction revenue
services.
Project revenue One-time project.
Customer pays for access
to a product or service in
Recurring revenue
installments (usually
monthly or yearly).
Service provided to
Service revenue customer. Customer pays
for time or expertise.
Offer subset of features for
free. Try to convert free
Freemium
customers to paying
customers.
Advertisements Sell adspace.
Platform or marketplace to
Marketplace, platform connect buyers to
producers.
Pros Cons Example companies
Can have low barrier to Need to continuously
American Eagle
trial. generate new sales.
Scalability issues. May
Can have large payouts. have long sales cycle. May
Construction company
Can have low startup costs. require large upfront
investment.
Do not have to resell May require large upfront
customer for each revenue investment. May have long Dropbox, Salesforce
installment. sales cycle.
May not require large
Scalability issues. Law firm, Supercuts
upfront investment.
Hard to convert to paid.
Can have low barrier to
Hard to determine paid/ Dropbox
trial.
unpaid.
Large market of potential Need a lot of eyeballs to
customers. Potential make viable. Can detract Google
secondary revenue source. from user experience.
May not require large
upfront investment.
Two sided market. Etsy
Sometimes are winner-take-
all markets.