The world around us is changing fast. New technology may render your business operations less profitable. Robots, drones and computers may be able to take over manual labour. Is your revenue model still in line with these rapid developments?
What is a revenue model?
A revenue model - part of a business model - is an important building block of your business plan. It is your money-making strategy. A revenue model indicates the distinguishing element of your company, briefly and simply. In short: how do you really earn your money and is this a future-proof revenue model? What makes the profit? With a smart business model you can make more profit and keep up with the times.
There are over 50 revenue models. A few examples:
- Product sales: the customer pays you per purchased product. This is the best known and simplest model.
- Hourly rate: you pass on your hours worked to the customer. This model is widely used in the service sector.
- Free model or freemium: you share something for free with a potential customer, for example information or a basic app. This is how you build trust and a relationship; the customer has to pay for more services.
- Service model: you sell your product or service for a modest amount of money. You earn your actual turnover with service and maintenance. Think of IT companies service contracts.
- Bait model or razorblade model: a manufacturer who sells relatively inexpensive coffee machines, and then makes money by selling coffee cups that only fit into these coffee machines. This model is also used with razors and printers.
Renew your revenue model
Take a critical look at your revenue model and investigate whether there are opportunities and trends that you can capitalise on. It prepares your company for the future. We present you with 6 revenue models. What do they mean, what do they look like and what can they mean for you?
With personalisation, you earn from products or services that are tailor-made for the buyer. Digital design platforms and manufacturing techniques, such as 3D printing and ‘printing on demand’, make this ever easier. Think of clothing with your own name on it, a custom-made spectacle frame or baby’s first story book, with grandfather’s and grandmother’s names in it. These digital techniques allow you to distinguish yourself from your competitors. In quality, speed and price. In this model, the customer pays extra for the added emotional value of an otherwise anonymous product.
2. Servitisation: extra service with your product
In servitisation, services play an increasingly important role in the business model. It is widely used in, for example, the manufacturing industry and the construction and installation sector. The customer pays for additional services you provide. Think of subscriptions, maintenance, repair and logistics services. Service is no longer a cost item, but a means to make extra profit. The advantages are more stable sales and sustainable customer relationships. How does servitisation work (in Dutch)?
3. Social entrepreneurship
A social enterprise, like any other independent enterprise, provides a product or service. The difference is that the entrepreneur wants to meet a social need or wants to contribute to social challenges. For example, a clean environment, fair trade or equal opportunities for everyone. Social Enterprise NL wants to put social entrepreneurship on the map in the Netherlands. Read more about social entrepreneurship (in Dutch).
4. Lean startup method
The core of lean startup is to quickly learn what works and what doesn't. You will enter the market with only a simple prototype. This in contrast to the traditional way of working, in which everything is sorted and worked out before starting. Using your prototype, you test the market: do they like it, how can it be improved? The customer does the testing for you. They give you feedback and so help in the further development of your product. This method enables you to innovate without the risk of a major fiasco. You will save time, and you will already be earning money while developing your product. Could lean startup (in Dutch) work for you?
5. Circular economy
The circular economy aims to ensure that products, raw materials and residues retain their value. An example of a revenue model that fits into this is the PAS model (Product As Service), from ownership to use. You no longer sell a product, you sell services and the use of products through, for example, leasing, deposits, sharing and subscriptions. The incentives and the responsibility to make the best possible product with the lowest possible impact on the environment lie in the chain. What does this mean (in Dutch)? Find out how you can conduct business in a sustainable way (in Dutch) in corona time.
6. Exponential organisations
They often have ambitious goals, grow quickly and sometimes turn the sector upside down: exponential organisations. These companies make smart use of new developments such as algorithms. They collect digital data to measure performance and implement improvements. Technology helps them to make routine work scalable. Or, as Loes Daniels from Hotelgift puts it: "It doesn't matter to us whether we sell 1 or 100 gift cards, that's no extra work." Their business rapidly grew to a €12 million turnover in 2019; Daniels hopes to reach a turnover of €100 million within 2 years.
Which model suits your business?
Which revenue model best suits your company, products and services? Your success starts with your own motives. Choose 1 or 2 models that suit your company and develop them further. This is possible with the Business Model Canvas (in Dutch), for example. Also take a look at the market, the competitors and the technical developments in your industry.