Revenue streams are one of the things that you need to learn when you start a business. This is of course related to how to manage the revenue that the business will get later. One of the best ways to manage it is to use it to become something that can bring in revenue again.
For those of you who are just starting a business, read this article to find out the definition. In addition, find out what are the examples of revenue streams that you can use for your business. In addition, several functions can affect your business.
Definition of Revenue Streams
The definition of revenue streams is a component in the business that is related to the funds in the company that are used to be managed. In essence, revenue streams are revenue streams that include all sources in a business that provides income.
In addition, the notion of revenue streams is a source of income that goes into the cash owned by the company. This source of income can come from direct income and indirect income.
A direct source of revenue streams is income that comes from the main sale of your business's products or services. Meanwhile, indirect sources of revenue streams are income from utilizing assets owned by businesses that are not the main source of business income, such as investment profits, leasing assets to outsiders, grants, or others.
Well, the types of revenue streams above are differentiated based on the business model. Intrigued by the description of what types of revenue streams are like?
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- Transaction Revenues
One type of revenue streams is transaction revenues, namely inflows of funds obtained through transactions that are paid once. What does that mean?
This type is a flow of funds calculated from the sale of products or services purchased by customers every time a transaction occurs between the customer and the business. As a simple example, when a customer buys or uses the product you are selling. Then the income you receive will be included in transaction revenues.
- Recurring Revenues
Conversely, another type of revenue streams is recurring revenues, which are inflows of funds that are routinely obtained on an ongoing basis.
So, unlike the previous type, which originates from a single transaction, recurring revenue is a flow of funds that periodically enters the company's cash. For example when a business invests. The profit from the investment is periodic because you can get profit per month through this investment.
Revenue Streams Function
Understanding revenue streams is something every business owner needs to do. But how important is it for a business owner to know? Following are some of the other functions for business
- Knowing the Source of Profit
Any type of business, be it small or large scale, needs to determine which source of income stream will be most profitable for the business. That way, you as a business owner can determine which sources of income can be optimized so that the profits you get will increase.
- Get Funding
The second function is to attract investors to invest in your business. Investors will be interested in investing in well-managed companies. Well, one of the company indicators that investors pay attention to is certainly having clear revenue streams.
- Business Strategy Reference
Knowing the flow of income can also help you when you want to formulate a business strategy that needs to be done, you know. When there are sources of revenue streams that are declining or not performing well, this problem can be used as material for determining the next business strategy.
So, the business strategy is based on a clear problem. Understanding revenue streams is a step that can help you not just make business strategies and determine work activities without goals.
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Examples of Revenue Streams
If you are still confused about what revenue streams are like in your business, here are some common examples.
- Product or Service Sales
One of the revenue streams owned by a business model, in general, is derived from the sale of products or services. As previously described, sales of products or services are included in transaction revenue.
For example, when you sell imported snacks online in e-Commerce. On this day, you managed to sell 100 imported snacks at IDR 50,000 per product. Thus, the total number of revenue streams is Rp. 5,000,000.
Revenue streams obtained from opening new business branches are classified as recurring revenue. In general, businesses that have this income stream are businesses with a franchise system.
For example, the snack product business A is experiencing growth and trying to expand its business by opening a franchise business model. Well, the business managed to find partners in other locations. The income earned from these partners is included in recurring revenue.
- Renting assets
Another example of another revenue stream is when a business opens an asset rental service. Usually, this income stream is carried out by businesses that have many assets, for example, assets in the form of business operational transportation. The profits from the rental are also included in the operating income streams.
Sales of licenses in the form of copyrights and patents can also include revenue streams that are periodic or ongoing. This income stream is not only carried out by large companies, small-scale business actors or even individuals can do it. For example, you sell design assets on your website and make a profit by selling licenses.
A business can also take advantage of the revenue earned for investment. Investment is arguably one of the best prospects for managing revenue. You can choose to invest in areas that are still related to your current business.
You can invest in a business that is your supplier, for example. Besides getting profit, later you can reduce production costs because you produce the raw materials yourself.
- Ad Placements
Currently, advertising is an important part of promotion. You can advertise offline or online. Therefore, ad placement can be a safe choice because people always place advertisements. Even today, social media accounts can also provide ad placements.
For ad placement, usually, someone will provide a price for a certain period. So when people take turns placing ads, you will get passive income from these ads.
That's a brief discussion about revenue streams, the functions you get along with examples. You have to be careful in managing revenue so that it doesn't run out and instead becomes another source of income. Do not let the business not grow because of revenue mismanagement.
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