One of the critical ingredients of developing a successful business is the development of right model. This refers to the what, why, when, where and how of the idea that stimulates the business. However, opinions differed on whether a start-up should concentrate on generating huge revenue from the outset or focusing on growing his business through the various strategies. Those in favour of generating enormous income believe that since the start-up has chosen fit-for-purpose business model, earning enough revenue from the beginning should not be difficult. In other words, there is no business without revenue model. Revenue model should be rightly developed from the business model because right business model should guide a start-up in identifying revenue streams.

As one of the key components of business model, revenue model pinpoints how a business generates revenue streams from its products and services. Development or adoption of right revenue model depends solely on the extent to which a start-up owner could reasonably link his value propositions with customer segments section of the model (business). While carrying out this, it is also imperative that lifetime value of each customer segment are critically analysed. LTV is what you can make from an average customer during his or her purchasing lifetime with you.

Credit: Anonymous

Credit: Anonymous

Suffice to note that there are many types of revenue models. The choice is therefore depends on a number of factors. Here are five common revenue models:

Advertising

There are various modes of this model. Pay per click text ads, pay per view, display advertising, content sponsorship (fixed fee for a period) and affiliate ads are the most common. When this model is adopted, as a start-up you have opportunity of generating income from one or combination of these modes. The modes are usually created in different sizes and designs, which speak volume of the kind of fees that would be charged. The model is appropriate for all categories of businesses and industries.

Freemium

This is a typical way of converting huge number of free customers to paying customers. With this model, you are giving out some part of your products or services to targeted customers free and charging a premium for the full access to the products or services. It has been widely used across business categories, especially in software development industry. Dropbox is one of the companies generating its revenue through this model.

Subscription

Chopup Games, one of the Nigerian leading game companies, adopts this model. Media businesses are also using the model to augment their direct sales model. Chopup Games recently announced that users will now have to pay N30 ($0.12) weekly to have access to all of their games.

Sales

This entails direct sales of product or service. Hello Food, Jumia and other online shopping stores in Nigeria use this model mostly. American Eagle remains one of the American companies that have derived and still deriving vast revenue from the model. It affords customers of paying on any good ordered after delivery by the companies. Through this model, companies usually get extra income from products delivered to their customers through specific shipping charges.

Affiliate

In business world, affiliate model is commonly referred as affiliate marketing strategy. As a start-up, when the model is employed, you will often resell items of other companies through your marketing platforms and charge such companies based on commissions. Evidently, you are reselling items from other small businesses or retailers. The main benefit of the model is extension of customers reach and generating new sales, which delivers a continued revenue stream.

As observed earlier, the effectiveness of one or combination of these models depends on identification of target customers, provision of precise solutions to their pains and evaluation of the models in line with what they intend to expend their money on.

 

Enterprations offers 1. Companies of all sizes business growth strategies which bring high returns on investment within short period. 2. Highly skilled professionals, platform to bring their idea to life.