revenue model for business plan

Revenue Models: 17 Types, Examples & Template [2023]

Revenue Models

How does (or will ) your business make money? It sounds almost too simple to ask, but having a clear understanding of your business' revenue model can be one of the most important ways to focus on key activities--and actually move the needles you care about most.

For indie businesses, settling on the right revenue model type rarely happens on first attempt. Instead, it's common to bounce around from subscriptions to digital products, membership communities and affiliate offerings until something finally *clicks* for you and your business.

This revenue models list component and template is intended to help you sort, consider and rank a list of common revenue models. In future, I'll be linking this table to related marketing channels, real data from other indie businesses and related templates--for now, let's take a quick look at the revenue models listed.

17 Common Revenue Model Examples

• Subscription
• Licensing (Digital Prod.)
• Advertising
• Affiliate Commission
• Project-Based Services
• Retainer-Based Services
• Tickets, Events, Workshops
• Manufacture (D2C)
• Library Access
• Community Access
• Marketplace

1. Subscription

The most common revenue model for SaaS and membership-based businesses. Customers pay a recurring fee, typically on a monthly or yearly basis, in exchange for access to your product or service.

Pros of subscription model

• Recurring revenue is more predictable and can be helpful in forecasting
• Can be a great way to build long-term relationships with customers
• Customers who are paying on a recurring basis are typically more engaged and have a higher lifetime value

Cons of subscription model:

• Can be difficult to acquire customers who are willing to pay a recurring fee
• Can be difficult to increase prices without losing customers
• There is always the risk of churn (customers cancelling their subscription)

The markup revenue model is most common in retail and ecommerce businesses, where goods are bought at wholesale prices and then sold to customers at a higher price.

Pros of markup model:

• Can be easier to get started since you don't need to develop a unique product or service
• There is less risk involved since you're not investing in developing or producing a good or service
• Can be easier to scale since you can simply buy more inventory as needed

Cons of markup model:

• Can be difficult to compete on price alone
• You may need to invest in marketing and branding to differentiate your business
• There can be slim margins if you're not careful with your pricing

3. Licensing (Digital Prod.)

The licensing revenue model is most common for digital products, where customers pay a one-time fee for access to your product.

Pros of licensing model:

• Can be a great way to generate one-time revenue from customers
• Customers who pays for a license typically have a higher perceived value of your product
• Can be easier to scale since you're not selling a physical good or service

Cons of licensing model:

• Can be difficult to acquire customers who are willing to pay a one-time fee
• There is always the risk of piracy (customers sharing your product without paying)
• Can be difficult to upsell customers or generate recurring revenue

4. Advertising

The advertising revenue model is most common for online businesses, where businesses sell advertising space on their website or in their email newsletter.

Pros of advertising model:

• Can be a great way to generate revenue from customers who are not ready to buy your product or service
• Advertising can be a complementary revenue stream to other revenue models

Cons of advertising model:

• Advertising can be disruptive to the user experience
• Advertising rates can fluctuate based on market conditions
• You may need to invest in marketing and branding to attract advertisers

5. Donation

The donation revenue model is most common for non-profit organizations, where customers donate money to support the cause or organization.

Pros of donation model:

• Can be a great way to generate revenue from customers who are passionate about your cause
• Donations are typically tax-deductible for the donor
• There is less pressure to generate revenue since donations are not expected to be recurring

Cons of donation model:

• Can be difficult to acquire customers who are willing to donate money
• May need to invest in marketing and branding to attract donors
• Donations can fluctuate based on economic conditions

6. Affiliate commission

The affiliate commission revenue model is another common for online businesses, where businesses pay a commission to affiliates for referring customers.

Pros of affiliate commission model:

• Can be a great way to generate revenue from customers who are already interested in your content
• Affiliates can provide valuable marketing and promotion for your business
• Can be easier to scale since you're not producing all the products you sell

Cons of affiliate commission model:

• Not always easy to find good affiliate programs
• You may need to invest in marketing and branding to attract affiliates, as well as readers
• Commissions can vary based on affiliate performance

7. Sponsors

The sponsorship revenue model is becoming increasingly common for online creators.

Pros of sponsorship model:

• Can be a great way to generate revenue from businesses or individuals who support your cause
• Sponsors typically have a high perceived value of your organization

Cons of sponsorship model:

• Can be difficult to acquire sponsors who are willing to pay
• May need to invest in marketing and branding to attract sponsors
• Sponsorship can fluctuate based on economic conditions

8. Data Sales

The data sales revenue model is most common for online businesses, where businesses sell data that they have collected.

Pros of data sales model:

• Scale advantages
• Data can be a valuable commodity for businesses

Cons of data sales model:

• Difficult to acquire unique data sets
• Longer sales cycle
• Data rates can fluctuate based on market conditions

9. Project-Based Services

The project-based services revenue model is most common for businesses that provide consulting or other services.

Pros of project-based services model:

• Can be a great way to generate revenue from customers who need your services
• Projects can be customized to the customer's needs

Cons of project-based services model:

• Very hands-on
• Need to keep your pipeline filled
• Projects can fluctuate based on economic conditions

10. Retainer-based services

The retainer-based services revenue model is most common recurring stream for businesses that provide consulting or other services.

Pros of retainer-based services model:

• Can be a good way to introduce recurring revenue to a services business
• Customers typically pay upfront for your services

Cons of retainer-based services model:

• Need to find a service that's profitable on retainer;
• Reducing churn;
• Pricing your retainer.

11. Tickets, Events, Workshops

The ticketing revenue model is most common for businesses that host events or workshops.

Pros of ticketing model:

• Can be a great way to generate revenue from customers who are interested in your event
• Tickets can be sold in advance of the event
• Virtual events and workshops can be easier to scale since you're not selling a physical good or service

Cons of ticketing model:

• Need to consistently market events
• Margins need to be high for it to be sustainable
• Often need to pay staff to help facilitate event

12. Royalties

The royalty revenue model is most common for businesses that sell digital content, such as books, music, or software.

Pros of royalty model:

• Royalties can be collected on a per-sale or per-use basis
• Highly asynchronous

Cons of royalty model:

• Can be difficult to track sales and commissions
• Typically low % commission
• Royalties can be volatile from year to year

13. Manufacture (D2C)

The manufacture model, going direct to customer, is probably the most familiar. You make a product and then sell it to the customer, whether that’s through your own store, a third-party retailer, or some other means.

Pros of Manufacture (D2C)

• You have complete control over your product
• You can build your own brand
• You can reach customers directly

Cons of Manufacture (D2C)

• It can be expensive to get started
• You have to invest in marketing and branding
• You have to manage inventory and shipping

14. Library Access

The library access model is common for businesses that offer digital content, such as books, music, or software. Customers can access your content through a subscription or pay-per-use basis.

Pros of Library Access

• Can reach a wide audience of potential customers
• Can generate revenue from customers who are interested in your content

Cons of Library Access

• Possibility of duplicating digital content without license
• Retaining users after they pay for first access
• Offering a unique library

15. Rent/Lease

The rent/lease revenue model is common for businesses that offer physical goods, such as equipment or vehicles. Customers can rent or lease your products on a short-term basis.

Pros of Rent/Lease

• Can generate revenue from customers who need your equipment
• Can be quite 'Passive' income
• Scalable if margins and demand are high enough

Cons of Rent/Lease

• High expenses upfront
• Potential damages costs

16. Community Access

The community access revenue model is common for businesses that offer physical goods or services. Customers can access your product or service through a subscription or pay-per-use basis.

Pros of Community Access

• Compounding as the community grows
• Plenty of online community software and tech popping up

Cons of Community Access

• Difficult to upgrade to a 'paid tier'
• Community moderation can be time-consuming
• Sustaining high community engagement

17. Marketplace

The marketplace revenue model is common for businesses that offer a platform for other businesses to sell their products or services. Customers can access the marketplace through a subscription or pay-per-use basis.

Pros of Marketplace

• Buyers will typically bring their own customers
• Can generate revenue from both sides of the market: buyers and sellers
• Don't need to produce your own products (beyond the marketplace itself)

Cons of Marketplace

• Quality control can be difficult
• Chicken-egg problem: getting your very first buyers and sellers
• Settling disputes and investing in customer support

Choosing A Revenue Model For Your Business

This Notion template database also includes some properties to help you understand more about the various revenue models listed, and how they compare with one another on a few important factors. These are:

• Volume needed;
• Typical Margins;
• Capital needed upfront;
• Relationship to customer (direct or indirect);
• Scalability;
• Revenue model examples; and

Volume Needed

The volume needed property gives an indication (on a scale from 'Very Low' to 'Very High') of how many customers are typically needed for this type of revenue model to work. For example, a subscription revenue model that charges $1.99/month will need a Very High volume of customers in order for the model to work; whereas a high-ticket services business may only need 1 or 2 big clients per year.

Typical Margins

The typical margins property is there to help you understand how profitable this revenue model can be, given the right circumstances, per sale or customer. For example, a business selling digital products will typically have very high margins (if they are priced correctly), whereas a business that relies on advertising as its primary revenue source may have lower margins.

Capital Needed Upfront

The capital needed upfront column describes (loosely) of how much money you will need to spend in order to get the business up-and-running. For example, a subscription business can be started with very little capital as there are no inventory or product development costs; whereas a manufacturing business may need a lot of money to get started as there are significant inventory and product development costs.

Relationship to Customer (Direct or Indirect)

The relationship to customer property gives an indication of whether the revenue model is direct, indirect or two-sided (e.g. marketplaces). A direct revenue model is one where you have a direct relationship with the customer; whereas an indirect revenue model is one where you do not have a direct relationship with the customer.

For example, a subscription business has a direct relationship with the customer as they are paying the business directly for a product/service; whereas an advertising-based revenue model has an indirect relationship with the customer as they are paying the advertiser, not the business.

Scalability

The scalability property gives an indication of how easy it is to scale this type of revenue model. A scalable revenue model is one that can grow without a significant increase in costs; whereas a non-scalable business is one that has fixed costs which limit its growth.

For example, a subscription business is usually more scalable than a manufacturing business as there are no inventory or product development costs; whereas a business that relies on a small number of high-value clients is usually less scalable as it is difficult for you to service more such clients with the same number of hours in a day.

Revenue Model Examples

This column provides an example of a real business that is deploying this revenue model. I've tried to select primarily indie businesses, however this isn't the case for all of the businesses listed (where I couldn't find an indie business, I chose something that may be relevant or a company that I just generally like).

It's also worth noting that many of the businesses listed under a certain revenue model type employ multiple revenue models, alongside the stream that they're listed under. This is quite common for indie businesses (to have multiple revenue streams) and can be a good hedge against any single revenue stream going dry.

As you look through the list of possible revenue models, you can give each a ranking and sort the list based on those that are best suited.  

Getting Started

Duplicate this template into your own Notion workspace, and start ranking the various revenue models as they suit your own business, today.

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Revenue Model

Last Updated :

Blog Author :

Prakhar Gajendrakar

Edited by :

Collins Enosh

Reviewed by :

Dheeraj Vaidya, CFA, FRM

Table Of Contents

What Is a Revenue Model?

Updated: October 06, 2021

Published: September 24, 2021

Deciding how you’ll generate revenue is one of the most challenging decisions for a business to make, aside from coming up with what you’ll actually sell.

You want to ensure that you’re accounting for production costs, salaries for workers, what your consumers are willing to pay, and that you generate enough to continue business operations. You also want to make sure that your strategy fits with what you’re trying to sell.

Various revenue models will help you set your business on the right path. In this post, we’ll outline what they are and how to choose the right one for your company.

What is a revenue model?

A revenue model dictates how a business will charge customers for a product or service to generate revenue. Revenue models prioritize the most effective ways to make money based on what is offered and who pays for it.

Revenue models are not to be confused with pricing models , which is when a business considers the products’ value and target audience to establish the best possible price for what they are selling to maximize profits. Once the pricing strategy is set, the revenue model will dictate how customers pay that price when they purchase.

RevOps teams also use pricing models to predict and forecast revenue for future business planning. Knowing where your money is coming from and how you’ll get it makes it easier to predict how often it will come in.

There are various revenue models that businesses use, and we’ll cover some below.

Types of Revenue Models

Recurring revenue model.

Recurring revenue model , sometimes called the subscription revenue model, generates revenue by charging customers at specific intervals (monthly, quarterly, annually, etc.) for access to a product or service. Businesses using this model are guaranteed to receive payment at each interval so long as customers don’t cancel their plans.

Recurring Revenue Model Example

Businesses that benefit from recurring revenue models are service-based (like providing software), product-based (like subscription boxes), or content-based (like newspapers or streaming services). Businesses you may be familiar with that use this strategy are Spotify, Amazon, and Hello Fresh.

Affiliate Revenue Model

Businesses using affiliate revenue models generate revenue through commission, as they sell items from other retailers on their site or vice versa.

Sellers work with different businesses to advertise and sell their products, tracking transactions with an affiliate link . When someone makes a purchase, the unique link notes the responsible affiliate, and commission is paid.

Affiliate Revenue Model Example

Businesses you may be familiar with that use the affiliate revenue model include Amazon affiliate links and ticket promoting services. Influencers also use this model to advertise products from businesses and entice users to purchase them through custom links.

Advertising Revenue Model

The advertising revenue model involves selling advertising space to other businesses. This space is sought after because the advertiser (who is selling the space) has high traffic and large audiences that the buyer (who is purchasing the space) wants to benefit from to give their business, product, or service visibility.

Advertising Revenue Model Example

Various types of online businesses use this model, like YouTube and Google, and so do traditional outlets like newspapers and magazines.

Sales Revenue Model

The sales revenue model states that you make money by selling goods and services to consumers, online and in person. Therefore, any business that directly sells products and services uses this model.

Sales Revenue Model Example

Clothing stores that only sell their products in a storefront or business-specific retail website use the sales revenue model as they sell directly to consumers with no third-party involvement.

SaaS Revenue Model

The Software as a Service (SaaS) revenue model is similar to the recurring revenue model as users are charged on an interval basis to use software. Businesses using this model focus on customer retention, as revenue is only guaranteed if you keep your customers. The image below is the HubSpot Marketing Hub pricing page that uses the SaaS recurring subscription model pricing.

SaaS Revenue Model Example

Businesses using this revenue model include video conferencing tool Zoom, communication platform Slack, and Adobe Suite.

How to Choose a Revenue Model

Choosing a revenue model is entirely dependent on your specific business needs and your pricing strategy.

There is no one-size-fits-all solution, and some businesses have multiple revenue streams within their revenue model. For example, if you use a recurring revenue model, you still may sell advertising space on your website to other businesses because you have a high-traffic page.

There are some key factors to keep in mind, though:

1. Understand your audience.

When picking a revenue model, the most important thing to remember is the target market and audience your pricing strategy has identified. You want to understand their pain points and what model makes the most sense for charging them.

For example, if you’re a service that sells meal kits, your target audience is likely busy and wants the convenience of food that is set up and easy to make after a long day. Using the recurring revenue model makes sense, as you’ll automatically charge them on an interval basis, and they won’t have to remember to submit payment — speaking directly to their desire for convenience .

2. Understand your product or service.

It’s also essential to have an in-depth understanding of your product or service and how your audience will use it. For example, if you sell shoes, your audience likely won’t need a new pair every month, so it may make sense to go with the Sales Revenue Model. Instead, your customers can come to you directly every time they need a new pair.

Choose the Model That Best Fits Your Needs

Ultimately, choosing a revenue model is centered around understanding what makes the most sense for what you’re selling and what makes the most sense (and will be most convenient) for the audiences you’re targeting.

Take time to develop your pricing strategy, choose a revenue model aligned with it, and begin generating revenue.

Don't forget to share this post!

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