Your small business model (10 ways to make money)

August 19, 2022

In this issue, you will learn:

  1. Top 10 ways to make money at scale (Revenue streams)

  2. Why did we update Strategyzer's 7-stream model?

  3. The value of having multiple revenue streams

  4. The king of revenue streams

Reading time: 3 minutes.

Traditional ways to make money

If you look at the Strategyzer's business model canvas, you will see the following ways to make money:

  1. Asset Sale: Selling physical products

  2. Usage fee: Selling services.

  3. Subscription fee: Selling continuous access to a service.

  4. Lending/Renting/Leasing: Temporary right of asset use.

  5. Licensing: Mostly software and IP.

  6. Brokerage fees: Acting as a bridge between different people or groups.

  7. Advertising: Fees for advertising a particular product, service, or brand.

Our Modified Revenue streams

We've updated Strategizer's list because of the following:

  1. There are more ways to make money than the ones above.

  2. Some ways of making money are out of date because they don't take into account some new ways.

  3. Some categories aren't really that different from each other.

For example: I don't think advertising should be a category, It's a service that may traditionally involve physical products, so depending on how you plan to use the advertising service, it fits into one of the other categories.

Also, the most important model for making money these days, which is the platform model, is not mentioned, and neither are the free or freemium models.

Now, let's talk about our 10 ways to make money:

1. Traditional Sale

The traditional model is either asset sales or usage fees.

For products and services, retailers and wholesalers, and classic services like plumbers, barbers, and doctors.

Examples: (Walmart, Nike, etc.).

2. Lending/Renting/Leasing/Licensing

Temporary right of asset use.

The apartment that you are renting, the book that you are lending, or the house that you are leasing.

For licensing, you have less control because a third party can't use the asset. 

However, if you have a perpetual license, you can use the license for as long as you want, and if you have a lease, you can own it when you finish paying for it.

3. Base plus feature

You charge less for the basic product and then give people the option to buy more features.

One example is the automotive industry.

4. Tiered pricing

You have different price levels for each service. (This is usually used with a subscription model.)

5. Subscription

The user pays a regular amount of money every month to use the product, service, or access.

monthly recurring revenue (MRR).

An example is software as a service or the gym.

6. Pay per use

When a customer uses the product or service, they have to pay for it (Fancy-hands buy tasks option, iTunes)

7. Affiliate

Affiliates run businesses in which they sell other people's products.

One example is Herbalife.

8. Platform/Brokerage

Platforms Bring together supply and demand and charge both.

Examples include Uber and AirBnB.

Brokerage is a different way to reach the same goal. Platforms are disrupting brokerages and causing a revolution.

9. Free

By giving away a free basic product or service, you can make money by selling advertising space on your website, in your game, or in your software.

10. Freemium

By giving away the basic product or service for free but charging money (a premium) for extra features, services, or virtual (online) or physical (offline) goods that make the free version of the software more useful.

The Importance of many revenue streams

In a digital ecosystem, all of these ways of making money happen at the same time. One transaction starts a domino effect that affects the whole ecosystem.

The subscription model seems to be the best for most industries, which is why all industries are being hit by a "softwarization storm."

The lines between different fields are blurring. If you still say you work in automotive, aviation, or any other industry, you should know that this is becoming a thing of the past.

Things are changing. Software is now on wheels, software is on wings, and software is on a living body. Things are going to change.

We are all now in the business of making software. AI is now silently eating software as we speak.

I know my revenue models, so what?

Now go back to your products and services catalog and map out these revenue models, and think about which one works best for you.

For the ones that do not work well, think about how you could improve them.

You are changing your revenue model because you want to increase the value of your company, make your revenue streams more diverse, and avoid disruption.

Some revenue streams that you are not using are money on the table, so go get them!

Do you have affiliates? Subscription? Consider them. However, be aware that you need to have a proper system to operate these revenue streams and that some are more complex than others, so you may need a transformation to be able to properly deliver them.

Your key resources, as we discussed in the previous issue, are your allies. cater for them.

The best business model is the one that enables you to scale.

I'm sharing two links at the end of this article that show how car manufacturers are going through a business model evolution.

You pay a monthly subscription and all maintenance and tire changes and other costs, except fuel, go under the subscription. Worry about nothing.

Most revenue models apply to most types of SMBs and companies.

If you just think about a car manufacturer, you will find all of these models at play.

The best revenue model is the one that enables you to scale.

How would you feel about paying $10, $20, or $100 per month to access features already built into your car?

BCG explores how car subscriptions, an emerging and potentially disruptive mobility option, will impact auto sales and the broader industry. Read now.

Wrap up

As we progress through the issues, we'll get into the rest of our modified small business model canvas and the other tools I cover in my business coaching program and cohort.

As a valued newsletter subscriber, it is completely free!

Ways I can help

I work with small and medium-sized business owners (SMBs) to help them set up 12 systems for their business so that it can run without them. When that happens, their business will scale. Without it, stagnation is the way forward.

I do this through:

  • Cohort Classes

  • Coaching sessions

  • Consulting projects

I was recently chosen among 10% of experts globally to build on MavenHQ.

I'm preparing for my first Maven cohort, where I'll share my experience coaching 12 SMBs in tech, internet, pharma, food supplements, fitness, engineering, and shipping.

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- Luqman