Arne’s presentation is very dense with a lot of great examples.
What a Revenue Model Is
Revenue models are how businesses generate their income. They’re a critical part of any business model.
Although it’s generally not a good idea to innovate on too many fronts at once, choosing the right revenue model can sometimes give a startup an edge in a competitive market (e.g. Salesforce, who brought CRMs to the age of SaaS).
B2B Revenue Models to Consider for Your Startup
To help you consider different alternatives, I put together a list of the most compelling revenue models founders that should be considering today:
- Subscription (e.g. Salesforce): This is probably the most common revenue model in B2B. Access to a software solution is provided via a recurring monthly or annual subscription (SaaS). Subscriptions are also possible for physical products (e.g. Equipment-as-a-Service, EaaS).
- Licensing (e.g. IBM): Intellectual property (patents, copyrights, trademarks, etc) is licensed to other businesses in exchange of royalties, which can be collected in perpetuity, or until the agreement is canceled.
- Transaction Fees (e.g. Stripe): A company facilitates a transaction, or manages money, and collects fixed fees per transaction, or takes a percentage of them.
- Pay-Per-Use (e.g. Amazon Web Services): This is a usage-based model in which a company charges based on the bandwidth used. A key action or benefit (data, leads, conversions, uploads, etc) is monitored, and priced.
- Data (e.g. G2): With this model, a company resells data or information. Data can be collected through users interacting with a free offering, or created through unique research or data analysis.
- Advertising (e.g. LinkedIn): Less common in B2B, this model involves selling ad space, or visibility. To make advertising work, it’s necessary to have a significant amount of traffic, engagement, or an audience whose attention is of great value to organizations.
- Commerce & Retail (e.g. equipment): This is a classic revenue model, where companies sell physical goods or one-off digital products to other companies.
- Arbitrage (e.g. Google AdSense): The price difference between two different markets for the same asset is used in order to profit from the difference. This is a common model for ad platforms.
- Commissions (e.g. Fiverr): An intermediary charges commission fees for each transaction handled between different parties. This is a particularly common model for aggregators and marketplaces.
- Up-Front Charge plus Maintenance (e.g. SensaNetworks): Customers pay up-front charge to buy a product, with the option to receive ongoing upgrades or maintenance for a recurring fee.
- Shared Savings (e.g. Rocketrip): Customers pay once they have realized savings or benefits from the product.
- Microtransactions (e.g. Noun Project): Customers pay small amounts on a transaction basis to acquire digital goods. This model is more popular in B2C.
- Interest Revenue Model (e.g. Affirm): A company earns interest for lending money. This is a classic model that is often used by banks and financial institutions.
- Technology + Services (e.g. Workday): A physical or software product is provided to organizations, as well as professional services, which may be included in the price, or may have to be purchased by the client.
Consider exploring different revenue models early on. If your proposed revenue model doesn’t connect with your early customers however, it might be best to align your revenue model to market expectations.
More on B2B Revenue Models
- How to Find Business Opportunities by Analyzing B2B SaaS Pricing Pages
- Why You Want to Consider Doing a B2B Pilot Project With Your Customers
- 211 Startup Tools, Posts & Resources for B2B Entrepreneurs in 2023
Download the First 4 Chapters Free
Learn the major differences between B2B and B2C customer development, how to think about business ideas, and how to assess a venture’s risk in this 70-page sampler.
Working on a B2B Startup?
Learn B2B customer development with our free email course: