Every year, the revenue model template changes due to several factors, including changes in customer behavior and expectation, the inception of new technology and innovations, transformation in industries, etc. I’ve often written that no matter how good your product or service is, you have not yet conducted business unless it can get into the hands of your customers. But before it gets to the final consumers, there are several strategies to put in place. You need to consider certain factors when you set out to launch your product or service into the market. And, this is what this is why you are reading this article – everything you need to know about revenue models is outlined here.
It may interest you to know that many businesses you see today are a product of profitable revenue models. Reason being that they have successfully developed and implemented effective strategies that work on various stages of marketing and sales. The question is do you know about revenue models? Have you developed one before? If no, then you need to create one now. Revenue forecasting models are important to achieve your company’s long-term business goals as it gives an overview of your company’s current and future potential to earn profits.
What is Revenue Model?
As an entrepreneur or business owner, there are thousands of ways to generate revenue for your business. It could be in the form of commission, rent, markup, bids, product sales, arbitrage, and so on. It can also include a one-time payment or recurring payments, either way. Before explaining the types of revenue models, there is a need to briefly explain what is a revenue model?
A revenue model is a conceptual structure for generating financial income. It is a framework that identifies and explains the revenue source and earning strategy of a business. It also states what product or service of value to offer and who to offer (the target consumer). A revenue model is an essential component of a company's business model that should not be neglected.
Types of Revenue Models
There are numerous types of revenue models but this list will introduce the top 5 startup revenue models for dropshipping.
1. Markup revenue model
Markup revenue model involves selling goods (that are not your own) and adding profits and/or overhead charges above its manufacturing price. This is the oldest and commonest revenue model that is adopted by wholesalers and retailers to earn money. They serve as an intermediary or middlemen between the manufacturers and the consumers. This revenue sharing model is commonly used by most retail stores to ensure they make a profit. To know if this revenue model works for you, it is a wise practice to consider where the product is produced and how you can sell it. The farther the destination, the more profit you get to make.
2. Advertising revenue model
The advertising revenue model is usually adopted by B2B businesses. Businesses pay other businesses (e.g. media channels) to advertise their content. Advertising platforms can earn money both offline and online. It is possible offline with newspapers and posters and also online via social media sites like Instagram, Facebook, Twitter, Snapchat, and WhatsApp. However, with the emergence of video platforms like YouTube and search engines like Google, the advertising revenue model has become the fastest way to get your products or services to the world. Consider this revenue model if you need a high amount of traffic and thousands of impressions on a daily basis.
3. Subscription revenue model
A subscription revenue model is a typical example of a recurring revenue model that has been in play for many years. Just recently, a lot of businesses are buying this idea. Subscription revenue model examples include Netflix and YouTube. Rather than collecting gigantic upfront payment from their customers, they simply entice customers to pay a certain percent for some time.
4. Pay-as-you-use or fee-for-service
Pay-per-use is unique yet one of the oldest and most effective revenue models. In this model, the customer is charged a flat rate for (either per minute or hourly basis) for the use of the product or services. Telecom and cloud-based services use this revenue model because it trades flexibility for profit.
5. Donation revenue model
This method is not employed by the majority because the companies involved hardly make enough profits. Anyways, in this revenue sharing model, a company provides products and services for free and relies on donations from visitors to pay operational costs or make a profit. Wikipedia is a popular donation revenue model example.
Other revenue models may include:
- E commerce revenue models
- Affiliate revenue model
- Rent or lease revenue model
- Upselling revenue model
- Arbitrage revenue model
- Licensing revenue model
Starting a Dropshipping Business at Low Cost with SaleYee.com
The risk and money associated with starting a business are very high. And, this is why many people back off from starting something. Gone are those days when you need thousands of dollars before you can start a business. If you are wondering how to start a business and generate revenue, there are some dropshipping platforms where you can make money with zero capital. SaleYee.com is a popular dropshipping platform where you can build a viable and profitable online business. You can save additional cost on setup fees and listing fees and even make more money on selling items from a wide range of selections. The model is unique compared to others, in that you promote other people’s products, add your profit to the cost price, and make a sale. Using SaleYee means you will be saving costs on inventory and shipping. It’s as straightforward as that.
Conclusion
The key to developing the right revenue model for your dropshipping business is to research, take the time to experiment, and decide which model works best for you. Depending on your business type, you may choose one or strategically combine a few to create the most ideal revenue model for your dropshipping business. With this article, you should have enough resources to create something unique and make money.
