Sources of income

REVENUE STREAMS - CANVAS

Accelerate your business with these expert tips on "Revenue streams". Analyse and discover this TIP!

EXAMPLES OF SOURCES OF INCOME

  • Sale of a product (e-commerce, shop).
  • Sale time service (advice, professionals).
  • Quota by use of software (typical of SAAS) or by download of APP.
  • Payment by volume of information consumed.
  • Commissions on sales.
  • Asset sales. This is when, by selling your value proposition, you give customers ownership rights to it. The customer becomes the owner of the product or acquired asset and may put it to any use it chooses. In essence, it refers to the sale of tangible goods.
  • Fee or pay-per-use. In this case, the customer pay only for use of what we offer you as a solution to your problem or need, which typically is of temporary nature. It is related to the provision of services. 
    • For example: catering fees, attendance of training courses.
  • Subscription fee (fixed monthly amount for receiving "x"). This is when the customer makes payments in recurring instalments for the solution of their problem or need, which is usually of a permanentor at least of long duration. It is characterised by the existence of a contractual obligation
    • For example: payment for electricity, telephone and internet access.
  • Loan or lease. The client obtains a concession on the value proposition in exchange for consideration or remuneration. The rental of machines, cars and real estate is most common in this line of business.
  • Licensing. Revenues are generated when, by this means, the following are received payments for the licensed operation of our value proposition (+) for commercial or industrial purposes. Typical cases are licences for the use of intellectual property, patents or trademarks.
  • Advertising. We can take advantage of the market positioning of our value proposition to promoting other businesses and providing advertising space to customers
    • A common example today is the advertisements that appear on most of the websites we visit.

Revenue streams are just ideas and hypotheses that are in your entrepreneurial head until you validate them with the customer. Think of experiments that allow you to test if the customer is willing to payand how much, and the formula. So, you have to go out there and sell even if you don't have the product yet!Collecting a sale is the best validation (+)You can always get your money back!

Use the pre-sales crowdfunding (we work with ULULE) to get sales before having the product or service. In CANVAS revenue sources, we do not include numbers, only concepts. The pricing and quantification of the number of customers, the break-even point, can be found in the economic viability (+) and you will need it to complete the treasury (+) and calculate how much money you need to finance your project. We call users to differentiate it from the customer when we bring value (we have costs...), but we we do not generate income!

FOOD FOR THOUGHT:

In order to develop the revenue source canvas module, it is important to reflect on and respond concretely and concisely to the following questions:

  • FOR WHAT VALUE ARE CUSTOMERS WILLING TO PAY?

With this we will be able to determine our main source of revenue generation, as well as validate the coherence and viability of the business model.

  • HOW DO CUSTOMERS PAY AND HOW WOULD THEY LIKE TO PAY?

It is also very useful, to understand the payment preferences of customers and whether we are offering the right means to promote and facilitate the flow of revenue to the business.

  • HOW MUCH DO THE DIFFERENT SOURCES OF INCOME CONTRIBUTE TO THE TOTAL?

However, it allows us to quantify the income from each source and focus on the most important ones.

TYPES OF PRICES:

When setting prices, it is necessary to take into account the 2 types of prices that can be found: fixed and/or dynamic.

  • FIXED

They are based on static variables such as: product characteristics, weight, volume, etc. They determine the basis of the selling price we are going to choose.

    • HOW THEY CAN BE:
      • Fixed price listfixed prices for products, services and other individual price value propositions.
      • Product featuresHere the price depends on the quantity or quality of the value proposition.
      • The volumeprice depends on the quantity purchased.
      • The market segmentprice depends on the type and characteristics of a given market segment.
  • DYNAMICS

They vary according to the market in which we operate and are based on negotiation between two or more parties.

    • MAY BE:
      • NegotiationThe price is negotiated between two or more parties and depends on your bargaining skills or bargaining power.
      • Profitability managementprice depends on inventory and time of purchase (often used for perishable resources such as hotel rooms or remaining seats on a flight).
      • Real-time marketThe price is set dynamically in real time based on supply and demand. It usually requires a large number of parties involved and a large volume of transactions.
      • Auctionwhen the price is determined by a public tender.

Once we have analysed what type of pricing we are going to apply, we must choose the charging method to be used, based on the following revenue models:

INCOME MODELS:

ONE-OFF REVENUES

This refers to the collection obtained by direct sales. Generally speaking, we are talking about cash, card, transfer, etc...

RECURRING INCOME

Those obtained through periodic fees from customers or users for the use of our products, services or subscriptions. The analysis of this segment of the canvas will determine part of the profitability or feasibility of the business model (+), Therefore, great care must be taken to validate the different sources of income in order to be able to adapt it quickly, where necessary.

Monetising a business refers to how you are going to turn your business idea into money. In addition to, turning an idea into a opportunity (+), to be a good entrepreneur, you have to get the customer to pay a price for how satisfied he/she is by buying your solution!

If you don't manage to monetise, you have to revisit the first steps looking for market fit. You may not have well localised problemEither the customer, or the solution does not provide enough value for the customer to pay. No monetisation, no viability!!! In addition, it satisfies a need of a customer segment, must think about how to make a profit and monetise your project.

However, many entrepreneurs leave their monetisation to chance and this is a big mistake. You have to be able to sell and get paid. Currently on the market, there are many ways to monetise a business. I suggest you read a lot of them so that you can practice and apply monetisation correctly in your business!!!

In the Canvas model, revenue streams are one of nine key areas to consider when designing a company's business model. Revenue sources refer to the different means by which the company generates revenue and how this revenue relates to the company's costs and expenses.

SOME EXAMPLES OF REVENUE STREAMS THAT CAN BE CONSIDERED IN A CANVAS MODEL ARE EXPLAINED BELOW:
  1. Direct sales: revenue comes from the direct sale of products or services to customers. This may be the most common method of generating income.
  2. Advertising: revenue comes from selling advertising space to other companies. Businesses can display ads on their website, social media, email, and more.
  3. Subscriptions: revenue comes from the sale of a subscription to customers who want access to exclusive content or services.
  4. Commissions: income derives from earning a commission on the sale of other companies' products or services.
  5. Licences: revenue comes from the sale of a licence to use a company's product or service.
  6. Franchising: revenue comes from the sale of a franchise of the company to other entrepreneurs who wish to operate under the company's brand name.
  7. Crowdfunding: revenue comes from obtaining donations or investments from customers in exchange for the promise of a future product or service.
  8. Income from services: revenues come from the provision of services to customers, which can be consulting services, technical support services, among others.
  9. Rent: income comes from the rental of products or services, such as the rental of space, vehicles, tools, among others.

Each business may have different revenue streams, and it is important to consider which is best for the business model and market in which you operate.

Practical examples of sources of income

HERE ARE SOME PRACTICAL EXAMPLES OF REVENUE STREAMS THAT CAN BE APPLICABLE TO DIFFERENT BUSINESS MODELS:

  1. Direct sale of products or services: This is the most common and traditional source of income. It consists of selling products or services directly to the end customer.
  2. Subscriptions: Customers pay a periodic fee to access exclusive content or services.
  3. Advertising: Revenue comes from third party advertising on your website, app, social media, etc.
  4. Commissions: You receive a commission for brokering the sale of a third-party product or service.
  5. Licences: You offer a licence to customers to use your product or service.
  6. Freemium: You offer a free and a premium version of the product or service, generating revenue from sales of the premium version.
  7. Sale of data: If your business model involves collecting and analysing customer data, you can sell that data to third parties.
  8. Rent: You can rent goods, property or services, generating recurring income.
  9. Crowdfunding: Clients fund your project in exchange for benefits or rewards.
  10. Licensing: Sell intellectual property rights (patents, trademarks, etc.) to third parties for their use.

What are the differences between revenue streams and monetisation of a business model?

Revenue streams and monetisation are related but distinct concepts in a business model. Revenue sources refer to the different means by which the company earns revenue. In other words, they are the different ways in which the business generates money through its products or services.

Monetisation, on the other hand, refers to the process of turning something into money. In the context of a business model, it refers to the way in which value is created and charged for. In a nutshell, while revenue streams are the concrete ways in which money is generated, monetisation is the process of transforming that value into revenue.

APPLY THIS TIP TO YOUR PROJECT

TASK

NOW THAT YOU HAVE READ THIS TIP ON SOURCES OF INCOME, REFLECT ON THESE QUESTIONS:

  1. What types of revenue do your customers generate for your company?
  2. What are sources of income?
  3. What is the customer segment willing to pay for the value proposition, i.e. the solution to their problem/need?

CASE STUDY

Juan is an entrepreneur who has set up an online shop selling eco-friendly pet products. He is now reviewing his business model and analysing revenue streams to improve his profitability.

TO DO SO, PLEASE FOLLOW THE STEPS BELOW:
  1. Identify sources of income: Juan identifies his online shop as having two main sources of income: product sales and personalised advisory services for pet owners.
  2. Analyse the potential of each source of income: Juan analyses the potential of each revenue source, estimates the associated costs and expected profitability.
  3. Assess current profitability: John reviews the sales and profitability of his online shop over the past year, and finds that product sales account for 80% of his revenue, while consulting services account for only 20%.
  4. Identifies areas for improvement: Juan realises that selling products is more profitable than consultancy services. He also analyses which products sell best and which have the highest profit margins.
  5. Make decisions to improve profitability: Juan decides to focus his strategy on product sales and products that have a higher profit margin. In addition, he decides to invest in advertising and in improving his website to increase sales.

In summary, Juan has analysed the revenue streams of his business model, assessed their profitability and made decisions to improve his profitability by focusing on the most profitable revenue streams.

Quiz

THINK ABOUT YOU

THINK ABOUT HELPING OTHERS

COMPARTE

Facebook
Twitter
LinkedIn
Pinterest
WhatsApp
Picture of Jaime Cavero

Jaime Cavero

Presidente de la Aceleradora mentorDay. Inversor en startups e impulsor de nuevas empresas a través de Dyrecto, DreaperB1 y mentorDay.
COMENTARIOS
Todos los Comentarios
COMENTARIOS

  1. Business Model Canvas - Mentor Day WikiTips

    [Revenue stream: [...] 8.]

  2. Vicky

    When setting prices, we must take into account the 2 types of prices that we can find: fixed and / or dynamic .

    - PRICEING. I would love to learn more about pricing my self I have issue here thanks

  3. José Luis Prieto Calviño

    Important to know if there are people willing to pay for what we offer

  4. Paul Lejarza

    Regarding the economic stability of your company, you should study meticulously which products or services your customers would pay for, through different segments and targets, we would have more chances of success, especially taking into account diversifying the different options, adopting different pricing methods.

Tabla de contenidos

  • mentorVIRTUAL: Soy tu mentorVIRTUAL. ¿alguna pregunta?

La respuesta tardará unos 20 segundos. Generando respuesta ...

Fuentes de ingresos

Rate this TIP!

Tu opinión es importante para ayudarnos a mejorar

Nº votos «85" - Average " - Average4.6"

No votes yet, be the first to vote!

We are sorry you did not find it useful.

Help us improve this TIP!

Leave us a comment and tell us how you would improve this TIP

Ir al contenido