3 Fun Revenue Models

Understanding how to make money the smart way

When starting a business it is a good idea to have an understanding of how you’ll make money. How will the customers help build the company up? What are they willing to pay? What are they currently already paying? It’s important to gather this information if you want to have the best success with your business. This information is what will help generate the company's revenue model.

Three fun revenue models I learned about were the Subscription, Renting, and Usage strategy.

Subscription Model

The subscription model is one of the top strategies for generating money. It provides convenience towards the customer. The recurring payments can be canceled at their leisure which makes the customer feel in control of their subscriptions. This method is transparent. Meaning, there is always so and so days before the next payment; it is the job of the customer to remember or cancel their subscription. However, a con about this approach is that customers may decide to keep subscriptions only for a minimal period of time so businesses need to give first time users the optimal experience. Another downside is multiple customers may try to share one subscription. To combat this, the company should put a limit on users per subscription.

Renting Model

Companies can also choose to go with a renting/leasing revenue model. An example of this would be Car Rentals. The temporary access to a service or good saves customers the hassle of buying something that they need for only a short period of time. However, before engaging in this model it is important to have a good review and testimonials to encourage clients to trust your business and reliability. Also, people take for granted the simplicity and convenience of renting a good/service. This revenue model is beneficial because it saves customers the money, time, and energy of trying to buy something last minute, instead, it provides quick access in fulfilling the brief need they have.

Usage Model

This model is not as transparent as subscription and renting revenue models. With this model the customer pays a fee that corresponds to the amount of service they use so the cost will vary every payment. An example of this is your basic utilities (telephone, electricity, water usage). Users get charged a fee for this service. This method is beneficial because customers may overuse or forget to track their usage.

In closing, I’ve gathered that is important for companies to have multiple revenue streams. Usually startups fail because they don’t realize the importance of revenue streams and focus more so on the pricing aspect of the business. A business with multiple revenue streams allows for flexibility in failure. If one revenue stream runs dry then there is always another to fall back on. It promotes more opportunity for growth. Companies need to have revenue streams in order to achieve greater heights. They help generate money for the business while also helping in interacting and engaging customers.