It’s essential to find out the best revenue model so that your business idea generates something positive. Furthermore, it will be fruitful to use these revenue models to ensure your stay in the market for a long time.
You may have the best business idea in the world. But, it won’t be of any use until and unless it reaches the right group of customers. Your business won’t generate any possible revenue if your products are not marketing in the right demographics.
What Is The Difference Between A Revenue Model And A Business Model?
Before discussing the best revenue models, we want to make sure you understand the difference between a revenue model and a business model. Your business has different aspects apart from the revenue streams. So, choosing a suitable business model will help you manage all those aspects effectively.
Your business may have a single source of revenue, or it can have multiple sources too. By choosing a suitable revenue model, you can manage the different sources of income in your business. Even you may need additional resources to address each of the revenue streams. So, the suitable revenue model will help you acquire those potential resources too.
What Are The Best Revenue Models of 2021?
Before diving into the list, we must understand that these revenue models will be helpful for any business. Even if it is a startup or sizeable entity-these revenue models will bring out the best from their revenue streams.
1: Affiliate Model
It is a simple revenue model that is based on commissions. You have to promote links of other sellers to your clients, and if they buy the product from that link, you will earn money. This revenue model allows you to work with or without ads separately also. Therefore, it is more effective in terms of generating cash than any other ad-based revenue model.
However, if you plan to use this model for your startup, remember it will make a limited amount of money only from a bit of audience group. You can send the links to your client base indeed. But, how will you attract new customers? Make sure your clients share those links with their friends and families to help you attract some new leads.
2: Ad-based Model
An ad-based revenue model helps you to create ads for websites, products, and services. You can also place the link on high-authority websites to attract more and more traffic every day. If you plan to launch a web-based start-up, Google’s Ad-Sense will be the best tool for you. So many companies worldwide use this revenue model because it is one of the easiest ways to earn revenue.
On the other hand, the click-through rates of your website become very low with the ad-based revenue model. This model can only work the best when you already have a large follower base. If you keep on applying it to your limited audience group, it will make them frustrated, and thus your ads will fail.
3: Web Sales Model
This revenue model will need the customers to come to a website through a particular channel on the internet. Once the customer finds its desired product, they will have to complete the transaction online. So, without the internet, this model does not stand anywhere. The best part of this model is that it works with subscription, software, and hardware services.
Nevertheless, this revenue model is uncertain because many people may find it less trustworthy if it does not allow the cash-on-delivery option. In addition, you cannot foster long-term relationships with your customers using this model. So, if you have a start-up, make sure to employ a different revenue model first, and switch later on to this one.
4: Subscription Model
Using this revenue model, a start-up can enable customers to pay for their services for the long term. Customers often trust a business less when it first enters the market. They may take a step back also if they have to pay a considerable sum of money instantly. So, the subscription revenue model will help them to pay for the services on a monthly and yearly basis.
This model is highly beneficial if your start-up has already attained its large customer base. Once they subscribe to it, you don’t need to promote your services anymore to them. However, convincing new customers to subscribe to your site may be complicated than it looks. Especially if your company does not have a large audience base yet, it will be tough.
5: Transaction Model
Not only the start-ups but also many large business entities depend on this revenue model. It is simple to understand and easy to implement. That is because customers pay upfront for accessing your company’s products and services. You don’t have to put in too much effort to convince customers because they are already familiar with it.
However, the only drawback of this revenue model is it is too simple. Due to that, many companies employ it, and that increases the competition. Companies may also have to face price deterioration of their products because of the excessive competition in the market.
6: Channel Sales Model
In this revenue model, you will get many resellers and agents who will sell your products on your behalf. It is somehow similar to the affiliate revenue model. If your company has an incremental service, the channel sales revenue model is your best option. It also lets you boost up the innovation curve extremely high.
On the contrary, the revenue model is also very complex, so not many start-up companies can apply it effectively. If you are launching a product that is a competition in the market, this revenue model is not for you.
7: Direct Sales Model
This revenue model has two categories such as the inside sales and outside sales. If a customer calls the company and places an order, it is the inside sales model. But, if the sales agents are trying to sell the products to a customer face-to-face, monthly and yearly, it will be called outside sales. If a company entails multiple sellers and buyers, this revenue model is the best fit for them.
The only disadvantage of this model is it requires hiring a separate sales team for the process. So, for small-sized businesses, this revenue model may not be effective right from the start. You will need a lot of salespeople to convince the customers.
8: Peer-to-Peer Model
The peer-to-peer revenue model is one of the best revenue models on this list for startup companies. It satisfies the customers and the companies equally. You will have a platform to sell your services to make the prospective buyer and the prospective seller meet one another.
For example, if you know someone who needs a product, you also know someone who has the product. Now, your job will be to make these two people meet. You will get a certain percentage from their transactions. However, this revenue model does not provide any governmental security and poses substantial credit risks.
9: Retail Sales Model
You have to set a physical outlet of a departmental store to apply this revenue model. You will interact with the customers face to face to sell your products. This model will need a lot of shelf space and logistics to reach the customers. The best way to improve your brand awareness among existing and new customers is through this revenue model.
Start-up companies can use this model if they have a strong business plan. But, if they don’t have a strong sales plan yet, it is better to hold this model a little longer. Once your brand image is established, this model will work fine for you.
10: Freemium Model
Another great revenue model for start-ups is the freemium model. Customers pay a premium amount and access the rest of its services. Once customers get the taste of your products at an accessible price, they will be interested in repurchasing them. This time you get to charge them.
You need to have a lot of money and time to make this model work. It will also take a substantial amount of effort to turn the free subscribers into paying customers. So, if you don’t have money to put at stake, this model is not for you.
We have enlisted the best revenue models for start-up companies in this article. Besides the benefits of these models, we have also mentioned their drawbacks. Now, you can judge which one of these models will be a good fit for your business. So, make your decision the right way, and be ready to encounter some serious cash flow to your business.