When it comes revenue streams, they are generally either “transactional,” resulting from a one-time payment, or “recurring,” resulting from ongoing payments that deliver value or provide post-sales support. When it comes to defining a business’s revenue streams, I find it helpful to consider a list of different types of revenue streams to guide me and my client’s thinking. To that end, here are seven common revenue streams that many businesses might receive for their selected customer segment. Review the following common types of revenue streams and determine which one is most appropriate for your offering:
1. Asset Sale – This type of revenue stream is where someone sells ownership of a physical asset, such as a car or furniture. Once owned by the consumer, he is free to do with it as he chooses. He can use it or sell it without permission from the producer of the product. Asset sales are transactional revenue.
2. Usage Fees – The more it is used, the more the customer pays the company. When you book a hotel room, you pay based on the number of nights you stay, which is a usage fee. You never own the room, but are simply granted permission to use it for a period of time. A cell phone’s data plan is another example. For cell phone data plans, the wireless carrier charges the customer a usage fee based on the data used. Usage fees are recurring revenue.
3. Subscription Fees – Revenue is generated by continuing to provide access to a service. Fitness centers have a monthly subscription plan to continue to provide the user access to the gym. Netflix charges a monthly subscription fee to provide continued access to its online streaming video service. With a subscription fee, the user is granted unlimited access to the service during the subscription period. Subscription fees are recurring revenue.
4. Lending/Renting/Leasing – Revenue is generated by temporally granting exclusive rights to use an asset for a fixed period of time. When you rent a car, the rental agency gives you exclusive use of the vehicle for the term of the rental agreement. No one else can use the asset while it is assigned to the customer. However, once the period is over, the asset can be assigned to another customer and the customer has no ownership of the product during the term besides the exclusive right to use it. Lending, renting, and leasing can be either transactional or recurring revenue.
5. Licensing – Revenue is generated by giving the customer permission to use protected intellectual property and allowing the customer the right to generate revenue from the property. Patent holders often license their ideas to a manufacture in exchange for a fixed fee or a royalty on all sales. Licensing can be either transactional or recurring revenue.
6. Brokerage Fees – Revenue is generated by an intermediary service performed between two or more parties. A credit card company collects a brokerage fee by connecting the merchant to the customer. The credit card company owns nothing and just facilitates the transaction. Another example of a brokerage fee is when a real estate broker captures a commission at the closing of a sell for matching buyers and sellers. Brokerage fees are typically transactional revenue.
7. Advertising – Revenue is generated from fees charged to a third party to present a message to your customers. Advertising can be either transactional or recurring revenue.
