Posted on September 24, 2018
When you are starting a new business, one of the biggest challenges you will face is choosing your startup’s revenue model. Your revenue model essentially shows how your startup will make money. It is what your target market is ready to pay for. Will you be selling a product? A service? An online service? Are you selling packages? Are you charging a commission fee? Are you a franchise and earning royalty fees? Find out how to choose the right model with these tips from Berytech.
A startup’s revenue model essentially connects [through its different revenue streams] the business value proposition to the target market segments.
People generally think that what determines the success of a startup is the extent to which the idea behind it is innovative. This is only true if it is coupled with the choice of the right revenue model. There are two main reasons for that:
GrowthWheel – a visual toolbox and cloud-based platform used by business advisors to help startups and small businesses, classifies revenue models in five main categories: Manufacturing, Trading, Services, Online activities, and Financial Revenue Models. Within those categories are 26 revenue models like freemium, franchising, leasing, sale of services, affiliate marketing, etc. (cf. below for all options)
Source: GrowthWheel
The above classification is by no means mutually exclusive and the best businesses have proven to be a combination of various revenue models. For startups and even established companies, it is always helpful and beneficial to think of alternative/additional revenue models. Oftentimes, this exercise proves to generate new revenue streams for the business.
At this point, you might be wondering how to select your revenue model and on what basis to select/modify it. Here are 3 tips to keep in mind while selecting or evaluating your revenue model.
In summary, when it comes to choosing the right revenue model for your startup, keep in mind that:
Article Author
Joelle Atallah is currently Business and Finance Advisor at Berytech. She has 10+ years of experience between management and financial consulting helping organizations in finding solutions to their most challenging problems. Passionate about entrepreneurship and growth, she currently works with startup founders to help them build a strong foundation for their businesses, optimize their growth, and drive their companies’ bottom line. Joelle holds a Masters in Economic Analysis from the Barcelona Graduate School of Economics as well as a double-degree in Economics and Finance from the American University of Beirut.