How your business is going to make money and what will be your strategy and approach?
Revenue Streams will form as you successfully deliver your value proposition to your customers. You will begin to notice how the Business Model Canvas (BMC) flows and each segment supports our value proposition. Remember that the right side of the BMC is all about generating positive cash flow.
There has been a lot of information thrown your way if you have followed my previous posts. If you have missed any of the previous blog posts it’s not too late to check them out.
- A Learning by Doing Model
- Assessing Your Entrepreneurial Abilities
- What’s Your Value Proposition?
- Painting a Picture of Your Business on Canvas
- Front Stage of Your Business Model Generation (1/2)
Let’s first discuss what a revenue stream is and how to apply it to the BMC. Revenue is generated from a company’s products or services being offered and are connected to your customer segments. Each customer segment will most likely be different from the others and will vary in pricing.
Your company will generate revenues in two ways. One approach is a one-time payment from your customers. I will use a magazine company as an example. The one-time payment would you purchasing it at a store or newsstand. The other type of revenue is recurring revenue where the payments are continuous to deliver your company’s value proposition. This is true for magazine companies when their customers purchase subscriptions.
What revenue stream will work for your company? You can have more than one.
- Usage fee is when a service is sold, eg. hotel rooms vary in cost and there is usage fees associated with staying in the hotel room.
- Asset sale is physical products, eg. food, clothing, cars, house, etc.
- Subscription fee is having access to a service, eg. magazines, internet, cable television, etc.
- Lending, renting, or leasing is having a limited or exclusive right to a product, eg. hotel rooms, rental cars, golf cart if you golf, etc.
- Licensing is when you pay a fee to use a product or service that is protected patents, trademarks, copyrights, designs, and other intellectual property (IP), eg. using a tech. company’s existing technology.
- Brokerage fees are when an agreement from two parties come together and earn commission on a product or service, eg. buying a home you have the realtor and a broker, same with purchasing a car, or anything you go to a dealer for and need to take a loan to purchase the product or service.
- Advertising is allowing other companies advertise through your business, eg. internet sites, newspapers, magazine, etc.
- Pricing Mechanisms looks at how you are going to decide your prices. There are two types, Fixed Pricing or Dynamic Pricing.
- Fixed Pricing is a predetermined price, eg. movie tickets, menu items, etc.
- Dynamic Pricing is being able to negotiate the price lower, eg. purchasing a car, bartering in for a
product or service in Mexico, etc.
Figuring out what type of revenue streams you want to use can be tricky. Just ask yourself what value are you giving your customers and how will you generate revenue from your value proposition.
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