“How will you profit from this project?” is the question that you will hear in every language and everywhere in the world, on the lips of any investor in the world who is presented with the idea of a new project, whether it is a traditional or innovative project. Rather, it is not an exaggeration to say that this obvious question It is on which commercial transactions have been based throughout history, as these transactions are based mainly on the principle of revenue collection in exchange for providing a specific product or service, in any field or industry.
Will you sell your product or service directly through your website, traditional or online store? Will you sell your product or service through intermediaries? Will you sell your product or service to companies and organizations (B2B Business To Business), or to direct consumers (B2C Business To customer)? Can you have more than one revenue-generating revenue model, or will it be based on one?
Revenue Streams are multiple and cannot be limited to one report, including the existing traditional and non-traditional ones. Here we will highlight a number of the most important of these patterns that are widely used, especially in the world of technology-related startups. (1, 2, 3, 4, 5, 6)
One of the most popular revenue-generating revenue models that is widespread among startups around the world, and the most easy and efficient as well. Simply, you have a specific service or product and ask your customers to pay a sum of money as a subscription to ensure that they get this product or service periodically, weekly, monthly, annually or even for several years.
Examples of this model are numerous and cannot be counted. Netflix, for example, offers you the service of watching movies and video materials in exchange for a monthly subscription, hosting services that offer you the ability to host your website for a monthly or annual subscription, some academic scientific journals ask you to pay a subscription Monthly or annually to get its services constantly.
The Subscription model remains one of the best models for generating Recurring Fee for startups, as it ensures that revenue continues to flow monthly or annually. However, the biggest challenge for this model remains the need for companies to expand their services based on more than one payment plan that is necessarily appropriate to the requirements, needs and financial capabilities of their customers. It also requires the company to continuously provide its services and develop its products in order to keep the subscription rate always higher than the subscription termination rate. .
It is a model similar to the subscription model, and some classify it as one of its departments, and it does not differ from it in anything except that it carries more motivation for the customer to complete the payment process. The word “Freemium” is made up of two parts: “Free” + “Premium”, meaning that the company provides some of its basic services or products for free, and then asks users to pay for the rest of the services or features it provides.
Examples of this model are endless, including the LinkedIn network for employment, which is open to all users to use its basic features, and its paid services and features require a monthly or annual subscription. Also take the Dropbox model, which offers a file-sharing service open to everyone, and then requires a subscription to unlock its paid services.
The “Fremium” model has always been known as a motivating option for customers to buy, after trying the free features of a particular service, and their decision to buy is more continuous and convinced because it is based on past experience and not attraction based on advertising and marketing only.
However, this model also holds some challenges for start-up companies, especially at the beginning of their launch, because it is imperative that there is an increase in the value provided to customers constantly. The basic law here is that if you do not give the customer real additional value through the paid subscription, he will often remain satisfied with the free features, which is a risk for startups, especially in their early stages that are hungry to bring in profits.
Therefore, the balance is very important in this model, between providing a very good free service to ensure that users are attracted on the one hand, and on the other hand ensuring that the bulk of these users are converted into paid customers.
The Connection Portal is one of the most popular revenue channels for startups at the present time, and perhaps the most famous at all in all emerging industries. This made it also known as the Commission model or the Transactional Revenue Model.
The examples are endless. Uber, for example, provides an application to connect the passenger with the driver, and once the delivery process is completed, the company receives a commission. In the same way, startups in the food and ordering sector work according to this model, linking the consumer and the restaurant, whether in ordering or delivering food. There are also platforms for connecting patients and doctors, such as the Vezeeta platform, and most e-commerce platforms such as Souq, which actually act as platforms for connecting merchants and buyers, as well as platforms for linking freelancers and entrepreneurs such as the platform Upwork and Independent website.
As can be expected, this business model is not without its challenges, as the market for connectivity is often dominated by large players, which makes the level of competition in it very high, and it needs a good amount of technical support and backing, which may make the path difficult for newly emerging companies To this sector to achieve rapid growth using traditional methods.
Licensing is a method followed by many startups, where they sell the product or service to their customers while retaining the ownership rights to the product or service sold to the customer, and the possibility of offering upgraded copies to be resold again. This profit model is widespread in companies specializing in the software industry (Saas), media and publishing companies, trademarks, patents, and intellectual property rights of all kinds.
Take Microsoft, for example. Microsoft sells its popular office suite, Microsoft Office, to businesses and customers while retaining full ownership rights to the product. When Microsoft releases a new version, the customer returns the payment for the upgraded version. The same applies to the products of the famous company “Adobe” and other companies whose business model is based on selling the licenses of their products.
There is another model that can fall under the name of “selling the license”, which is the “Franchise” model. “Franchise” means the sale of the Trademark and its rights to other organizations to benefit from it through an agreement between the parties based on precisely defined financial and operational terms. The most famous example of the “Franchise” model is the McDonald’s chain of restaurants, which generates a large amount of revenue by selling its brand to agents around the world on specific terms, in exchange for large sums of money.