30 Aug 8 Revenue Streams That Will Maximize Your Profit Margins
A business model is not a business model if it doesn’t connect to a revenue stream. In fact, every business should have at least two recurring revenue streams. This may seem like a no brainer, but you would be surprised by how many start-ups I have consulted who haven’t practically considered their profit margins—especially nonprofits and ministries.
“Any enterprise is built by wise planning, becomes strong through common sense, and profits wonderfully by keeping abreast of the facts,” (Proverbs 24:3-4, TLB.)
Many people get into business because a certain mission or cause is close to their heart. That’s why it breaks my heart when their business fails because they thought about the mission and neglected the money. Why does this happen so frequently?
Well, in Christian culture it’s common to hold the viewpoint that not having a plan is the more spiritual approach. People think that if they focus on the mission, God will make everything fall into place. This is only a half-truth. Whereas God will provide where He guides, that doesn’t absolve us from a certain level of stewardship and wisdom. Spirituality can be systematic.
What is a Revenue Stream?
- How you earn money from a customer segment.
- How your business model captures value in return for creating and delivering customer value.
- Outcome of your choices regarding value propositions, customer segments, channels, and relationships (See Business Model Canvas.)
- Should always exceed your cost structure (don’t spend more than you earn.)
There are several types of revenue streams, and you can implement more than one into your business plan. Don’t be afraid to experiment with them!
Types of Revenue Streams
- Asset Sales— Generated from the transfer of ownership rights of a good or service. (Example: buying a cup of coffee or purchasing a car)
- Rental Fees— Generated by temporarily granting someone the exclusive right to use a particular (physical) asset for a fixed period in return for a fee. (Example: A car rental service)
- Usage Fees— Generated by the use of a particular service. The more the service is used, the more the customer pays. (Example: Ubers/Taxis)
- Subscription-Based- Generated by using continuous access to a service. (Example: Our online learning subscription site, WealthBuilders University)
- Lending, Renting, and Leasing—The exchanging usage of a property you own for a fee. (Example: passive income generated through buy and hold real estate)
- Licensing Fees— Generated by giving customers permission to use protected intellectual property in exchange for licensing fees. (Example: Major League Baseball teams get paid every time someone uses their logo.)
- Brokerage Fees- Generated from intermediation services performed between two or more parties (Example: An insurance broker or real estate broker)
- Advertising— Generated by using your business as a platform to give visibility to a particular business or service (example: monetized blogs, popular YouTube channels, billboards, etc.)
In our Denver office, I have a large print out of the Business Model Canvas on the wall. We use sticky notes to physically document our revenue streams so that they’re top of mind— and remember, we are a nonprofit!
Choosing the right revenue stream and pricing mechanism can make a fundamental difference in your organization. If you have questions or examples of how you’ve implemented revenue streams in your business, please comment below! We’d love to hear from you.