Considerations in Selecting a Revenue Model for Startup by Lellith Garcia


By Lellith Garcia

The revenue model is the conceptual structure of how the business will generate revenue. It identifies what value to offer, at what price, and to whom it will be provided. There are different revenue models, such as the subscription, pay per use, commission, affiliate, mark-up, and arbitrage. Identifying the revenue model for your start-up business will require a thorough evaluation of your business.

Listed below are some points to consider in selecting the right revenue model.

  1. Creating Value and Solving a Problem

What is your product or service trying to solve? To offer value, you must identify your market needs and help solve a problem. The solution you offer must also be in line with what you are good at. Then identify what makes your offerings different from your competitors and consider those in selecting the revenue model to fit your value proposition.

  1. Select the Revenue Model That Will Help You Attract Investors

Given the business you want to start, you may consider attracting investors who will put up business funds. You have to make sure that your proposed revenue model fits your business, making the investors trust you and your proposition. Make sure to choose investors who share the same vision as you to create a longer business relationship with them.

  1. Provide a Reasonable Projection Timeframe

Before investors invest in your company, they want to know how much the expected return on investment is. It is best to prepare a shorter time frame in providing financial projections since more extended forecasts would be more unpredictable and unreliable. A more reasonable projection can gain trust from your investors.

  1. Make Adjustments to Your Revenue Model if Necessary

As your business grows, changes are inevitable. Your projections and assumptions may change. With that, you also need to make adjustments to your revenue model. If your revenue model is no longer useful and efficient, be prepared to make amendments.

Selecting the right revenue model would be crucial to your business’s success since it is the financial structure that will bring earnings to your company. You can choose to use more than one revenue model. Doing so can provide better options for your customers that would be more efficient and offer more value. It would also give different revenue sources and probably bring more earnings to your business. Being open to change and trying other methods can help you find the right fit that will work out best for your company. You don’t need to stick out to one option when it is not working.

Different financial model templates are available in eFinancialModels prepared by industry experts to prepare the financial projections that include your business’s revenue model.