Not to be confused with a business model, your revenue model is how your company makes money.  There are dozens of potential revenue models, including subscriptions, product sales, data sales, lead generation, advertising, licensing, freemium, and fee for service.

Google’s primary revenue model is selling advertising on its search pages.  Walmart’s revenue model is product sales.  But dig a little deeper you’ll quickly realize that Google and Walmart make money a lot of different ways, not just through advertising and product sales.  A hybrid revenue model is often in order.  But don’t get distracted early on – focus on your core (the tree trunk) initially, and slowly branch out from there.

So what revenue models should start with?  Unless your differentiator is the way you charge customers, follow the leader and mimic the industry leaders.  It’s probably too risky to try to change the traditional business model while introducing a new product to the market.

Clearly understanding how your business makes money is crucial.  Don’t fall into the temptation of glossing over this.  You’re much more likely to stay alive and fight the good fight if you clearly understand how you’re going to make money.

Matt Sand

Author Matt Sand

Passionate about making a difference through innovation and entrepreneurship.

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