Business terms like revenue model, revenue stream and business model may seem like basic concepts, but many people get confused with these terms. In business, you often hear these terms being used with various levels of accuracy. And in this article I’ll try to provide clear explanations and definitions for what these terms are.
What Is A Revenue Stream
A revenue stream is a very basic term. A revenue stream represents a single source of revenue for your business. A business can have zero or many revenue streams. New businesses or start-ups often have no revenue streams. Once a business matures, 99% of businesses must develop some kind of a a revenue stream because without a revenue stream, the business just keeps losing money until money runs out. The only exception to that is when investors provide enough cash to sustain the business. That allows the business to focus on growth rather than revenue.
Most businesses need at least one great revenue stream. Typically, a revenue stream gets nurtured and optimized, and the marketing channels that lead customers into that revenue stream also get optimized. It takes a substantial amount of your company’s resources to hone in on, and optimize a single revenue stream. That is why even if your business has more than one revenue stream, there should typically be a great revenue stream among them that trumps all the others. What you don’t want to have is a number of mediocre revenue streams, but rather one amazing revenue stream and maybe a few additional ones.
Here is an article with a discussion on one of the best kinds of revenue streams, which is the subscription revenue stream.
What Is A Revenue Model
A revenue model is precisely the strategy of how many revenue models your business will have, and how you position your business in regard to the overall revenue strategy. The revenue model is the high level look at the revenue structure of your business. As mentioned in the previous paragraph, there are a number of decisions for what revenue stream you will have as your top earning revenue stream, and how many additional revenue streams you will add to your business. Each revenue stream requires a certain amount of business resources (skilled worker hours) so the decision of what revenue models to focus on is a very important one. Here is an article on some common different revenue models and revenue streams to consider for your business.
What Is A Business Model
A business model is sometimes used interchangeably with the idea of how your business will make money. But that is incorrect. The more correct way to look at a business model is as a high level view of your overall business. The business model takes all aspects of your business into account, including your revenue model and all your revenue streams, and examines how well the different parts of the business play well together. For example, is the product something that has natural promotional channels? Do the promotional channels bring in lucrative customers? And do those consumers want to buy the product your business offers at the price and structure of your revenue model? And can all that be done in a way that makes financial sense? When all these components are considered together, that is the business model.
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Author: Alex Genadinik