All organizations need money to function and therefore require means to generate sufficient income. An organization’s revenue model is the specific manner by which it acquires these funds – it is the way that the organization gets paid.
In a typical company, the implicit standard approach is that revenue comes from selling products or services to customers, who directly pay the list price in cash. Yet, besides this ‘default revenue model’ there are many different ways of generating income.
The revenue model framework outlines the five categories of choices that together make up a revenue model. Each category is formulated as a question around payment, with three common examples mentioned of alternatives to the default option. Each set of three examples is not exhaustive, so more possibilities exist in each of the five categories, but the categories themselves are exhaustive and all need to be addressed.
The five revenue model categories that need to be determined are: