26 May 2023 | Revenue

7 Revenue Stream Examples (How to Pick the Right One)

There are a ton of ways to generate revenue, and modern organizations have plenty of choice when it comes to determining how they’re going to drive cash into the business.

While most businesses will have just a single revenue stream it’s entirely possible to drive revenue from multiple streams.

And, while the revenue model you choose will be largely driven by the business model you’re operating under, as you’ll see shortly, many of these revenue streams can serve multiple types of business.

The key, as always, is to determine what works for your customers and your market. Choose the wrong revenue model, and you might fail to convince many customers to get on board, despite offering an excellent product or service.

In this article, we’re going to explore seven of the most commonly adopted revenue streams.

We’ll look at examples of those streams in action, and walk through some tips on how to choose the right revenue stream (or streams) for your company.

 What is a Revenue Stream?

A revenue stream is the lifeblood of any business. It’s where your cash comes from.

Before you can have a revenue stream, your company needs assets. But you can generate revenue in several ways using the same asset.

For example, let’s say you own two cars. These cars are your assets, and you want to generate revenue from them. Several income streams are available to you. You could:

That’s four different revenue streams from two assets.

multiple revenue streams

Of course, you can have more than one asset to generate your revenue streams. A business can have a SaaS as their main source of revenue, but the talent on their team is another asset they can use to provide services, as we’ll discuss later.

How Many Revenue Streams Should a Business Have?

While some businesses maintain just a single revenue stream for their entire lifespan, diversification is generally a good idea.

As an early-stage company, you may only be able to manage one revenue stream at first. But the sooner you diversify your business, the safer it will be.

If your only revenue stream dries up, your cash runway will start to shorten until you get back on track. On the other hand, if you have at least two to three revenue streams, you can offset the drop in revenue from a dried-up stream.

Amazon is probably one of the biggest examples of a company with several revenue streams. Here are just some of their revenue streams:

You don’t have to be the size of Amazon to have multiple revenue streams though. Look at Icons8, a site that sells clipart, illustrations, and music. They have several revenue streams, including:

Hubspot, Salesforce, and Shopify are also examples of companies that have used multiple revenue streams to fuel their growth.

7 Types of Revenue Streams You Can Implement For Your Business

Let’s take a look at what types of revenue streams you can use for your company, as well as the pros and cons of each.

1. Subscriptions

The subscription model is popular within the software world. In fact, today, the majority of software companies sell their products as SaaS (software as a service) subscriptions.

Customers pay you a recurring subscription fee (monthly, quarterly, or yearly) to get access to a product or service.

Instead of owning a product or paying once for a service, customers get access as long as they continue paying their subscription fee.

Of course, there are other types of businesses that use the subscription revenue model (magazines and gyms are two classic examples).

Pros of the subscription model include:

However, there are important cons to keep in mind:

Examples of businesses that use subscriptions as a revenue stream include:

dollar shave club revenue streams

2. Licensing

Licensing comes in different shapes and forms. In software, licensing was the most popular revenue stream before the subscription model took over.

One example of a software company that still uses perpetual licensing is Microsoft. Although they offer their products on a subscription basis, you can still purchase licenses for their products outright, like Microsoft Word.

microsoft word revenue streams

But software isn’t the only thing you can license. You can also grant the right for someone else to use a trademark or copyrighted material.

Other examples of businesses that use a licensing model include:

Here are the pros of using licenses as a revenue stream:

But here are the cons:

3. Product Sales

Product sales is exactly what it sounds like — selling products. Unlike licensing, customers who purchase products own the product outright.

This is the quintessential consumer-facing business model, and is the main way businesses monetize when they have a physical product to sell.

E-commerce companies are one of the best examples of this revenue stream. Brick and mortar retail companies do the same. Some examples include:

Some companies do a blend of both.

For example, Google offers paid software like GSuite, but they also sell physical electronics like the Google Pixel phones, the Google Chromecast, and the Google Nest smart home products. We’ll talk more later about how successful companies diversify by combining multiple revenue streams.

Here are the pros of having product sales as a revenue stream:

But here’s the negative side you should be aware of:

4. Services and Consulting

If you have talent on your team—whether that’s you or your employees—you have an asset that you can leverage in the form of services or consulting.

Some companies are purely service-based and offer several services, which each represent a separate income stream. Local companies like nail salons or landscaping companies are good examples of this model.

Other examples include:

Some other companies provide software, like Evolv.ai with A/B testing, but also provide services to strategize and implement their solution.

evolve revenue stream

Services are a great way to add a new income stream without creating assets from scratch.

There’s no need to invest in research and development for a new product.

You can survey your customers to figure out what services they need, then use your existing in-house expertise to deliver this service.

Services offer several benefits:

However, here are some cons to watch out for:

5. Advertising

If you have an audience, you also have the ability to sell advertising space.

This can be done in a variety of ways.

For example, let’s say you have a podcast in addition to the existing products and services you sell. You can create ad breaks in your podcast and sell the space to relevant companies.

This is how most podcasts and radio stations make money.

If you have an email list, you can also partner with other brands to advertise their products or services to your subscribers. Or, if you have a blog that generates a lot of traffic, you can place ads in your posts, too.

Then there’s the freemium model for apps. Freemium is where your company offers a “dumbed down” free version of your software product.

In the B2B space, it’s more common to use your free plan as a launching pad to upsell customers into a paid subscription. In the B2C world, though, it’s super common to monetize free users with ad revenue (running ads within the app interface itself).

Duolingo is a classic example of a freemium app that utilizes an ad revenue stream.

Examples of businesses that use the advertising model include:

Some pros of selling advertising space include:

But watch out for these cons:

 6. Leasing and Renting

When you use leasing and renting as a revenue stream, you give exclusive usage rights to the buyer for a specific period of time.

You typically need assets to rent out in order for this model to work for you. For example, E-commerce companies like Rent the Runway allow members to rent out designer clothing.

rent the runway revenue streams

Businesses like these often have other revenue streams, such as subscription fees and product sales (since people can opt to buy the products, too).

Car rental companies and hotels work in the same way.

Other examples of leasing and renting companies include:

If you’re a company with a large office space, you could even lease unused parts of your office space to smaller companies or freelancers.

Let’s explore the pros of leasing and renting:

But there are some cons to the model, too:

7. Brokerage Fees

Companies get paid a brokerage fee when they match people with specific companies.

For example, freelancing websites like Upwork make money from matching freelancers with clients who need their help. Twenty percent of the money a client pays for freelance services is taken as a brokerage fee.

Freelancers benefit because they get matched with clients, and clients win because they get access to thousands of talented professionals.

Other businesses that use a brokerage model include:

Here’s how your business can benefit from using a brokerage model:

However, there are downsides to using brokerage fees as a revenue stream:

How to Choose the Right Revenue Stream

With all these revenue streams to choose from, which one is the best for your organization?

Well, it’s largely going to be driven by the kind of product you have. If you have a software platform, renting and leasing probably isn’t going to be a suitable option.

However, you do have some leeway to choose here. For example, it’s possible to sell software on a perpetual license or subscription basis, or make it completely free but monetize using ad revenue.

Here are a few steps to follow when determining which revenue steam makes sense for your business.

1. Check Out What Your Competitors Are Doing

A good competitor analysis is always an important step in figuring out how you present your business to the market. It’s equally important to determine what revenue streams are appropriate.

Of course, the idea isn’t simply to copy what your competitors are doing, but this analysis can be used to get an idea of what payment models customers in this vertical are comfortable with.

Alternatively, it can be used as a way of differentiating.

If all of your competitors are charging on a subscription basis, for example, you might decide to differentiate by offering your product for free and monetizing through an ad revenue stream.

2. Ask The Market

One step better than using competitor analysis to assess the market is to literally ask your customers themselves.

A survey can be a great simple way to collect some quantitative data, like how much customers would be willing to pay for given features.

Then, you can supplement this with qualitative insights from customer interviews. For instance, you might ask about how ads impact their in-app experience.

3. Audit Your Current Skill Sets

Remember: you can only drive revenue based on the assets you have.

One of your most important assets, of course, is your team, meaning you should audit the skills you already have internally to see what additional revenue streams you could take advantage of.

For example, say you sell an API platform on a subscription basis.

You find that you have relevant expertise on the development team to offer a service where you help customers set up custom integrations using your tool, adding another revenue stream to your belt.

4. Consider Future Trends

Yes, considering the market as it stands today is important: those are the customers to whom you’ll be selling.

But you should also take note of how the market as a whole is developing and what it will look like in the long term. Your plan is to be in business then as well, remember.

Take, for example, the car industry.

Consumers are moving away from outright ownership and toward subscription models, which is already evident in the software world but beginning to break into physical products as well.

A car dealership may do well to consider renting out their vehicles on a subscription basis rather than exclusively selling them.

5. Don’t Be Afraid To Diversify

Lastly, continue to bear in mind that you don’t have to choose just a single revenue stream.

Many businesses fall into this trap; they choose one option and put all of their eggs into one basket.

However, many of the most successful organizations diversify and use multiple revenue streams to protect against market fluctuations, and to maximize their opportunities to capture share of wallet.

In the next section, we’ll take a look at some well-known organizations who leverage several revenue streams for this very reason.

Examples Of Businesses With Multiple Revenue Streams

We’ve already explored how a giant like Amazon uses multiple revenue streams to diversify its income and protect against market fluctuations.

But you don’t have to be a massive international enterprise to take advantage of multiple income streams. Here are a few great examples of companies that excel today with multiple sources of revenue:

Diversify Your Company’s Revenue Streams to Make It More Resilient

If your business currently has a single revenue stream, consider adding one or two more to the mix. This will help your company become more resilient to change.

For example, if the market suddenly shifts and one of your revenue streams dries up, you’ll still have other sources of revenue to keep your business afloat while you pivot.

As a final thought, don’t get too carried away with adding all the income streams to your business, though. Make sure your new sources of revenue are still in line with your vision and don’t distract from your purpose.

Josh Krissansen
Josh Krissansen
Contributor

This content is presented “as is,” and is not intended to provide tax, legal or financial advice. Please consult your advisor with any questions.

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