• Sep 19, 2023

What Is Revenue Stream? Types, Examples and Importance for Business

by Flexadia 1 year ago in Business
What Is Revenue Stream? Types, Examples and Importance for Business

What Is Revenue Stream? Types, Examples and Importance for Business (image: shutterstock)

What Is Revenue Stream? – Revenue stream is how the business gets money or from any source where the money is generated. The more revenue streams, the more the business thrives. Learn more about what a revenue stream is, its functions, types, and examples in this discussion.

What Is Revenue Stream?

The revenue stream, also known as the revenue stream, is the source from which a business generates money ( revenue ). Generally, a company’s revenue comes from business activities such as sales and provision of services, as well as from assets.

Broadly speaking, income streams are the various sources of income that funnel money into a business or bank account. It includes all the components that makeup business operations and the sources that generate the company’s cash.

In principle, the income stream can be adjusted to the scale of the business. A feeling of being advised to have more than one income stream to keep the business intact and balanced.

If one source of income begins to decline, at least the impact can be minimized with other sources of income. It’s like a business has a strong foundation other than having to start from scratch when a stream of income starts to stall.

Importance of Revenue Stream

1. Shows the Sources and Ways of Businesses to Earn Money

The company will create a Business Model Canvas (BMC) or Products and Business Lines to describe the Revenue Stream Profile. About the way of business and business sources that generate money and profit, as well as the amount.

2. Key Performance Indicators (KPI) for Business

One of the indicators for the analysis of company performance is the financial KPI. An analyst must identify the different sources and revenue streams from which a company generates cash and interpret the earnings figures on the financial statements.

Total revenue reflects the amount recognized by the company, and whether it is in line with the KPI targets.

3. Pointing Out Strategic Business Sources That Make Money

You can analyze which source of income streams has the best performance and income. You can focus on that source of income and strengthen it. On income streams that are not performing well, you can fix them or end them.

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4. Forecasting Methods for Different Revenue Models

Financial analysis can use forecasting methods to make financial forecasts by the company’s revenue model.

5. Help Predict Sales

Revenue streams help in predicting and forecasting sales and business revenues, even in situations where it is difficult to forecast revenue due to seasonal problems or market volatility.

6. Help Predict Performance

Predicting performance differs between different revenue streams. Enables financial analysts to discover patterns of cash inflows, observe unusual movements or changes in earnings trends, and identify their causes.

7. Reduce Risk

The more revenue streams, the more diversified the business, and the less risk the business has to market volatility. Understanding and having a good revenue stream structure also allows companies to create realistic business strategies that can attract the attention of prospective instruments.

Types of Revenue Stream

There are 4 categories of revenue streams for making money, depending on the type of payment and the product or service provided.

1. Transaction Revenue

The revenue stream is generated from the sale of goods and services, with a one-time payment system directly by the customer. This is the most common revenue stream for businesses.

2. Project

The company’s revenue streams from projects are based on one-time transactions directly by customers.

However, this payment system can be divided into several large payments throughout the project according to the size of the project which may take a lot of time, money, and resources to complete.

3. Service

Revenue streams from services or services sold. For example, when you hire a lawyer or freelancer. You have to pay them according to the hourly rate of the service.

4. Recurring Revenue

A recurring income stream is an ongoing source of income. For example:

Revenue from advertising, product subscriptions, regular cash injections, funds from leasing, asset lending, and other recurring sources of funds.

Examples of Revenue Stream Sources in Business

Here are examples of revenue streams and you can use them as inspiration to develop a source of income for your business!

1. Product Sales

Source of income from product sales, the calculation is per pcs of sales. This includes the type of transaction revenue.

2. Opening a New Business Branch

This includes the type of recurring revenue. Profits from branches will usually be sent to the parent company so that it becomes a source of recurring income.

3. Service Fee

Revenue from the sale of services or services offered. This also includes the type of transaction revenue.

4. Subscriptions

Revenue generated from subscriptions. For example, a gym that sells member cards monthly or yearly so that consumers can access gym facilities at an easier price.

Another example is an online game subscription or a music or movie streaming subscription.

5. Consultation

Companies that also open consulting services and generate income from there.

6. Advertising

The income that the company gets from providing advertising space for other products, or advertising other brands/products.

7. Loan/ Rent/ Leasing

A stream of income resulting from borrowing, leasing, leasing, or the use of a particular asset in a given period by consumers.

8. Brokerage Fees

Companies are paid an intermediary fee or become a broker. For example, a car buying and selling platform that makes money by bringing buyers and sellers together.

9. Usage Fee

Revenue streams are generated by the use of certain services. For example, a hotel will earn according to how long a customer stays.

That’s a complete discussion of what a revenue stream or revenue stream is. The more income streams, the better and safer it will be.

Consider having other income streams to balance finances and reduce business risk. One of them is by optimizing your business online as well. You can add a stream of income by selling through an online business.

The advantage of an online business is that you can reach opportunities and target consumers that are wider to unlimited. Considering this is the era of digitalization, most consumers have also switched to online shopping trends which are considered more flexible, easy, fast, and profitable.

You can place online advertisements that are integrated with social media as well to introduce products, launch marketing strategies, or strengthen your store branding strategy.