Business Revenue Models [What Companies Sell and What Pays Them]

Is can be a difficult thing for an entrepreneur or a prospective entrepreneur to identify what model of business they want to work with so as to make revenue on their business. Time is flying and at the same time business models are changing. A lot of people have learnt how to make from direct sales of good and services to people and others have decided to get their revenue indirectly or partially directly. When starting a business, first the type of business model you intend to make revenue matters because the major purpose for running a business is to make profit while satisfying customers. In this post, I will be looking at a few models that companies use in other to make revenues.

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Free product but advertising revenue

If you understand how YouTube works, you should get an idea of what I am saying. YouTube as a video content app/ site used by vloggers allow people to share video for free and even pay a lot of people but this payment is not generated by people watching the video, rather it is generated from advertising. Advertisers pay YouTube to help do publicity for their products and YouTube at the same point decides to pay vloggers a little out of it to keep them doing more free contents and bringing more subscribers to their channel. This same thing applies to traditional TV stations. They do not make money from telling news or showing movies, rather they make money from advertisement. Facebook does the same thing. Having an account on Facebook is free, so how does Facebook make money? Apart from the allegations that Facebook sells data to countries and companies, the true way Facebook makes money is from advertising. Advertisers pay to get their products marketed on the platform.

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Pay for upgrade

Have you tried to open a free account on LinkedIn but realize that you are restricted to a few abilities and need to upgrade in other to have full access. This also applies to a lot of antivirus and a lot of platforms as well, where users are restricted to certain functions and need to pay to upgrade in other to enjoy the full functions. A lot of gamers understand this and it is a good way to make revenue for a company.

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Charge fee based on average value to customers
This is when customers are being charged based on location, personal information and coverage. This charges are calculated with ratio to occurrence. Example of this type of business model works with insurance company. You are not charged on how many times your car get hit but on the average of car accidents.

Revenue based on product cost plus margin.

This is the most common type of business model which is what occurs during buying and selling. Every retailer knows this, buying at a low price and selling at a higher price to make profit.

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Revenue with recurring subscription payments.

Nobody sees paying for monthly subscription as a big deal now as people now subscribe to listen to music as well as watch movies like boom play, Netflix and Deezer. The company makes money by monthly subscription from users who want to enjoy premium services.

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Tiered pricing based on volume.

This is always attached to commission where people make money from being able to meet up with tasks of selling based on volume. Revenue is made based on percentage of every transaction.

Low product price but support is extra.

Have you gotten a product for a very cheap price only to try to get through to support but be charged a particular fee? This is a way companies make revenues.

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Every company has a particular model they use to make revenue and run businesses. If you are thinking of starting a business, you can share with me what type of business model you will like to use. If you have a business, you can also share with me your type of business model and how it has been very profitable.

Please do not forget to share your opinion in the comment section. Stay tuned for more posts from me.