What Are Revenue Streams? Overview, Types & Examples

Revenue is all-important to any business. For growth businesses, the crucial thing is to organize their activities to maximize revenue while limiting risk. That’s precisely what diversifying revenue streams can do for a fast-growing small business. Think of business revenue as a lake that’s fed by several streams. Every one of those streams comes from a different source and travels through different terrain, collecting water as it goes, before eventually reaching the lake. The more streams that feed into the lake, the fuller the lake can become; and the more diverse the sources of those streams, the lower the possibility that the lake will ever dry up. That’s how revenue streams lower risk while contributing to a business’s top and bottom lines — and why they are essential for its survival.

Read on to discover how to identify revenue streams, what forms revenue streams can take and how to manage multiple revenue streams effectively for long-term growth.

What Are Revenue Streams?

Revenue streams are a business’s sources of income. Every business has at least one but many businesses have multiple revenue streams. All revenue streams involve selling or lending goods or providing services. A business’s revenue streams can be recurring (for example, subscriptions), transaction-based (such as in-store sales), project-based (as is typical in construction) or some mixture of these, depending on the nature of the business and its growth objectives.

Generally, the more revenue streams a business has, the greater its revenues, because each revenue stream serves a different part of the market. Having multiple revenue streams can also stabilize total revenue, making businesses more resilient to shocks and their potential for growth over the long term. So it’s not surprising that highly successful businesses usually have multiple complementary revenue streams.

Key Takeaways

• Revenue streams are the source of money in business. Without them, a business can’t survive.
• They are important for measuring business performance and identifying growth opportunities.
• Revenue streams can be recurring or oriented around transactions, services or projects.
• Any given revenue stream is a unique mix of customers, products and/or services, pricing and payment methods.
• Businesses can identify new revenue streams by analyzing customer needs and market trends to discover gaps in the market and emerging opportunities.

Revenue Streams Explained

Fundamental questions that every business must ask, and answer, for itself are: Who is going to pay us? Why should they pay us? And, how will they pay us? These translate into the business’s target customer profile, the products and services it offers and its pricing and payment mechanisms. For example, a revenue stream for a tour company might target 18-30 year olds, offering extreme adventure holidays, advertising them on social media and accepting instant electronic payments through the company’s app and website.

Imagine that the tour company is a simple business that sells only the one product. It has a single revenue stream, which consists of all the money from sales of that product. The business’s net income is the amount of money left after the business’s expenses, including operating expenses, have been paid. That net income is also the business’s “bottom line,” because it’s the final line in the income statement.

Of course, today’s businesses are much more complex than this. Most businesses generate sales from multiple sources. They might sell products, provide consulting or maintenance services for their products, lease out products, have a membership club offering discounts for repeat purchases — in short, there are innumerable ways of leveraging a single product to generate multiple revenue streams. All these revenue streams generate additional sales, but they also generate additional expenses to fulfill. Each revenue stream should be profitable, so it’s important for a business to keep control of costs as it seeks new sources of revenue.

This article discusses some of the main forms that revenue streams can take, but there are many others. Every revenue stream is different: It’s a unique mix of the customer group targeted, the product or service offered and the pricing and payment methods used.

Importance of Revenue Streams

Revenue streams provide a business with the money it needs for survival and growth. A diverse mix of revenue streams can provide a buffer against market fluctuations, economic downturns or the failure of any single stream. That enhances a business’s financial stability, making it more resilient and, therefore, more attractive to investors or lenders. From an internal management perspective, experimenting with new revenue streams can drive innovation, provide valuable market insights and inform overall business strategy.

Revenue streams are also important for measuring the relative success of different parts of the business, which can, for example, help managers determine which business lines to develop and which to divest. Choosing the right mix of revenue streams also is essential for long-term growth and maximizing profit. For instance, because different revenue streams can cater to various customer needs, their multiple value propositions help a business increase customer engagement and loyalty. And businesses with multiple related revenue streams can cross-sell and upsell, maximizing customer lifetime value.

The scalability potential of different revenue models is also important to consider. Understanding which streams align with a business’s growth objectives allows it to allocate resources more strategically to its higher-potential areas. Multiple revenue streams also enable businesses to adapt more easily to changing market conditions, providing the flexibility to test new ideas without having to completely overhaul the business model. And a mix of revenue streams with varying payment cycles can help smooth out cash flow, which can reduce reliance on external financing.

Types of Revenue Streams

Businesses generate sales through various revenue streams, each reflecting different ways of creating and delivering value to customers. These streams are fundamental to a company’s business model and help define how it monetizes its products or services. Understanding the different types of revenue streams is crucial for business owners and managers, as it informs strategic decisions about market positioning, customer engagement and growth opportunities.

While there are numerous ways to categorize revenue streams, four broad types are commonly recognized in business operations.

• Transaction-based revenue: This is generated whenever a business sells goods and services to customers on a one-off basis, whether in person, by telephone, via email or online. For example, when a customer purchases a new car from a dealership, that’s transaction revenue for the car manufacturer. Buying an airline flight from Dallas to Houston is transaction revenue for the air carrier. Likewise, the purchase of digital books or software licenses is also transaction revenue.

  Revenue for the supplier is still transaction-based even if the sale is through an intermediary. For example, booking a hotel through a travel website gives the hotel transaction revenue. The website, as an intermediary, primarily receives commission-based revenue, which is a form of transaction revenue tied to each booking it facilitates.

• Service-based revenue: For some businesses, service revenue is their main stream. Consultancies, lawyers, accountants, online therapists, personal trainers and sports coaches all generate revenue primarily by offering services. These businesses usually charge for time spent, typically by the hour. But, sometimes, services may be priced based on value or outcomes rather than time spent. Service-based revenue streams also include retainer models, in which clients pay a fixed fee for ongoing access to services.

  Businesses whose main revenue stream is transaction-based often offer services as well. For example, the car dealership in the example above probably also offers maintenance services. And service revenue can be recurring. For example, if an online therapist hosts a group session at the same time every week, the revenue the group generates can be considered recurring, even if the membership of the group changes. While some services companies have built their business around a single, simple revenue model, others are expanding into additional revenue streams.

• Project revenue: Businesses such as construction companies and software development companies usually undertake projects, rather than selling goods or services. Revenue is generated upon successful completion of the project, though there may be an up-front payment. For long projects, there can be interim payments at defined stages. Projects are often fixed-price, and there can be penalties for late completion. Given the nature of project revenue, a business must take care to estimate its costs accurately and follow project management best practices to ensure profitability.

• Recurring revenue: Businesses value recurring revenue. It gives them cash flow stability and helps smooth out business cycles. The challenge is generating it. Ways of generating recurring revenue include subscriptions (like Netflix or Microsoft 365), long-term service contracts (such as your local heating fuel company) or usage-based billing (such as cloud computing services). Other approaches include exclusive memberships, regular maintenance plans and automated repeat purchases.

  Many businesses combine recurring revenue models with other revenue streams. For instance, project-based companies like large engineering firms often take on long-term service contracts to generate steady income alongside their project work. Other businesses supplement transactional revenue streams by selling products that generate repeat sales. Software companies may offer products on a subscription basis while also providing customization services. The key to successful recurring revenue models lies in providing ongoing value to customers.

Examples of Revenue Streams

Within each of the broad types of revenue streams, outlined in the preceding section, there are uncountable potential permutations of the who-what-how combination presented earlier, in the graphic representation. Each such combination represents a different revenue stream. Here are some of the most common.

• Subscription services: Subscription services generate revenue by providing access to content or software in return for a regular fee, usually monthly or annually. They are becoming an increasingly common way for online businesses to generate recurring revenue. Software-as-a-service licensing is a form of subscription. Subscription services range from simple and flat rate to complex and variable. For example, people typically pay monthly subscriptions to access Netflix. The streaming service Spotify offers advertising-free access for a monthly subscription. The financial newspaper, The Financial Times, allows readers to access a few articles for free per month but has a paywall for general access and additional subscription-only services.
• Product sales: Selling products is the most basic form of transaction revenue, and the most common. Manufacturers produce goods in order to sell them; retailers acquire goods in order to sell them. This encompasses a wide range of items, from consumer goods to industrial equipment.
• Asset sales: Though not typically considered a primary revenue stream, businesses may occasionally generate money by selling long-term assets (e.g., equipment, property). This is usually classified as nonoperating income (which means, it’s not related to the core business), unless asset sales are a core part of the business model (as in real estate development). Not all asset sales are business transactions; for example, an individual who sells a car privately to another individual is selling an asset.
• Asset rental, leasing or lending: Lending out assets is a common way of generating income. Landlords rent apartments, hotels let out rooms, car rental companies lend out cars. There are also car-leasing services that offer an alternative to an outright purchase transaction, often with the opportunity to buy the car at the end of the lease. Bank loans are a form of asset lending that generates interest income. As with asset sales, revenue from asset rental, leasing or lending is not usually considered operating revenue unless it is the company’s main line of business.
• In-store sales: This is perhaps the best-known transaction-based revenue stream. For a corner shop, in-store sales are likely to be its only revenue stream. Even for giant retailers, people walking into their stores and purchasing goods is a principal source of revenue.
• Ecommerce sales: Ecommerce is the buying and selling of goods over the internet through web-based applications and mobile devices. It’s a rapidly growing revenue stream for both business-to-consumer (B2C) and business-to-business (B2B) companies. Some of the largest B2C companies in the world, such as Amazon, are ecommerce companies. B2B companies make use of various wholesale and/or industry-specific online ecommerce marketplaces. And, increasingly, small and traditional companies are venturing into the ecommerce space.
• Maintenance contracts: These are contracts in which service providers charge fees for regular maintenance of customer assets. For example, a property maintenance contract will cover all repairs to a building for a period of time, usually 12 months. Maintenance contracts can be a form of insurance: The customer pays a fixed fee whether or not any work is done. However, they also often include regular checks and basic (routine) maintenance. Predictive maintenance and other services enabled by Internet of Things (IoT) data are modern extensions of this revenue stream.
• Professional services: There are innumerable professional services, from business management consultancies and law firms to accountancy and secretarial services. They often charge by the hour but may also price their services on the basis of outcome or in a retainer model.
• Usage fees: Businesses can charge fees for allowing other businesses or individuals to use assets or facilities that they own or lease. For example, a coworking space provider’s primary revenue stream is usage fees for office space. Cloud-computing services also typically include usage fees, as do artificial intelligence companies that provide access to large language models via application programming interfaces.
• Membership fees: Membership fees are similar to subscriptions. Typically, they grant permission to use facilities for a defined period of time. Perhaps the most familiar form of membership fee is a gym membership. Some membership fees, instead of giving permission to use facilities, offer discounts and perks that are not available to one-off users of a service. For example, many coffee shops have membership clubs that offer free coffee after you purchase a certain number of cups, plus additional perks, such as free birthday cake.
• Content licensing: This allows people and businesses to reuse or repurpose copyrighted content created by someone else. Content license fees can be one-off or involve more complex licensing terms. For example, the visual media agencies generally allow customers to make one-off purchases and also have a range of subscription plans giving users the right to use a specified number of images or to use images for a period of time, such as a year. Content licensing includes royalty-based business models, such as in the music and book publishing industries.
• Brokerage fees: Brokers acting as intermediaries between two parties to an asset sale charge fees for their services. For example, real estate agents who match people with houses to sell to people looking for a new home charge fees when a sale is completed. Online intermediaries, such as ride-sharing and apartment-sharing companies, all charge brokerage fees for transactions completed through their platforms. Brokerage fees are also common in financial services.
• Advertising fees: Businesses can charge fees for selling advertising space on online platforms or offline spaces, such as billboards and TV channels. Recently, online businesses that generate significant traffic from their user communities have added ancillary advertising revenue streams to their core streams, whether those are transactional or subscription-based.
• Commission-based revenue: Businesses that act as intermediaries between buyers and sellers can earn commission revenue by facilitating transactions. Commission revenue is typically paid as a percentage of sales value. Variations include performance-based commissions, in which a rising commission percentage is tied to sales volume or another performance metric. For example, a sales intermediary might earn higher commission percentages after reaching certain sales thresholds.
• Affiliate marketing: Businesses can earn commission or fees for promoting other businesses through their outlets, whether online or offline, and directing their own customers to those businesses. Hotel and airline cards offered by credit card companies are typically affiliate marketing programs. A rising subgenre of affiliate marketing is content creator partnerships — also referred to as influencer marketing. An example would be a fitness influencer, who publishes content on Instagram or Facebook, partnering with a protein shake brand. The influencer creates posts showcasing how they use the product in their fitness routine, along with a unique discount code for their followers. When followers purchase shakes using the code, the influencer earns a commission.
• Booking fees: Booking fees are charged by travel and ticket sales agencies. The fee is typically a percentage of the ticket price. Online travel agencies also charge fees, usually a percentage of the price advertised on their website.
• Donations: For charities and not-for-profit organizations, donations are often the primary revenue stream. Donations are gifts of money. They can be recurring — for example, monthly donations to a major charity — or one-off, such as contributions to a disaster relief fund. Donations can also be made through wills. More recently, crowdfunding and peer-to-peer fundraising platforms have emerged to provide more widespread access to donation revenue streams.
• Pay-what-you-want: Here, the product is free to use, but the customer is encouraged to make a voluntary payment. An example is blogsites that are free to read but invite the reader to “buy me a coffee.” Tipping is a “pay-what-you-want” revenue stream that supplements wages in many service industries.

5 Strategies for Developing New Revenue Streams

Relying on a single revenue stream can be risky, so businesses need to be constantly on the lookout for new revenue streams to develop. Diversifying a business’s revenue sources can enhance its financial stability, foster growth and increase its resilience to market changes. The five strategies outlined here can help businesses identify and develop new revenue streams that complement their existing offerings and enhance customer value.

1. Market Research and Analysis

Businesses can commission market research and undertake analyses to understand customers’ unmet needs, clarify emerging trends and identify potential gaps in the market that align with the business’s capabilities. Such thorough market research is the foundation for identifying new revenue opportunities. This strategy involves conducting customer surveys and focus groups to uncover unmet needs, analyzing competitors to identify gaps, utilizing data analytics to spot emerging trends, engaging with industry experts and attending trade shows, and aligning potential opportunities with the company’s core competencies and resources.

2. Digital and Technological Integration

Upgrading the company’s online presence and embracing new technology can generate new revenue streams, such as ecommerce, usage fees, content licensing and subscriptions. Developing an ecommerce capability, for example, can expand the company’s customer base; creating a mobile app can enhance customer engagement and lead to potential in-app purchases. Technology integration could make it possible to add new subscription-based models for digital content or services or lead to leveraging IoT-enabled services in a usage-based revenue model. Thinking further, companies could explore new revenue stream opportunities in still-emerging technologies like augmented reality/virtual reality or blockchain.

3. Partnerships and Collaborations

Developing partnerships and collaborations with other businesses can create opportunities to expand a company’s revenue streams. Here, the business should identify complementary firms and explore how to earn fees from co-marketing initiatives, develop affiliate marketing programs with relevant influencers and explore white-label or licensing opportunities for its products or services. Brokerage, commission or advertising revenue streams could also emerge from partnership discussions. Collaborations can also create opportunities to cross-sell to a wider customer base and/or to generate referrals.

4. Innovation and Diversification

Diversifying the company’s core business lines is key to generating new revenue streams, and constantly innovating to develop new products and services is an effective way of diversifying. Companies should establish an internal innovation lab or R&D department, implement a structured process for idea generation and evaluation, adapt existing products or services for new customer segments or industries, and explore adjacent markets where their core competencies can be applied. Another approach is to acquire or merge with compatible businesses whose products and services can fill gaps in the company’s existing offerings.

5. Upselling Strategies

Existing customers can be an important source of new revenue. Strategies to generate new revenue from existing customers can include promoting to them the benefits of upgrading their existing product or service or buying something new; offering them time-limited free or reduced-price trials of new or upgraded products or services; reminding them to confirm their upgrade or purchase, before a specified time limit expires; or offering a bundle of products for a single price. In their execution plans for any or all of these ideas, a business could use data analytics to personalize upselling recommendations and train sales and customer service teams in effective upselling techniques.

Enhance Revenue With NetSuite Financial Management

With NetSuite’s financial tools, businesses can enhance revenue by confidently tracking and managing complex revenue streams. NetSuite’s cloud-based financial planning and budgeting tools simplify and streamline the processes of budgeting and tracking progress against a target for each revenue stream, and its real-time accounting software records revenue from multiple streams as it arrives and is fed into cash flow and financial accounts. Revenue stream data can be viewed together in a single application and analyzed using the software’s comprehensive reporting facilities. NetSuite enables business managers to keep tight control of income and costs and helps them identify potential new revenue-generation opportunities.

Businesses today need to earn income from many diverse sources. Building a portfolio of revenue streams targeting key customer groups can stabilize business income and build resilience across business cycles. Moreover, the process of seeking new revenue streams to develop keeps a business alert and responsive to unmet needs and gaps in the market that can help it generate long-term growth. With the right insights in hand, business leaders can seize fast-evolving market opportunities to capture game-changing new revenue streams.

Revenue Streams FAQs

How many revenue streams should a business have?

Every business needs at least one revenue stream, but the most successful businesses usually have several complementary revenue streams. However, a multiplicity of unrelated revenue streams can raise administrative costs and overstretch management.

How do businesses determine revenue streams?

Businesses identify revenue streams by analyzing their target market. Understanding the unmet needs of customers, seeing emerging trends and identifying gaps in the market give businesses the information they need to develop new revenue streams or upgrade existing ones.

How do you track and manage revenue streams?

First, create a budget plan that identifies all of the business’s revenue streams and sets income and expenses targets for each revenue stream. Then, as money comes in, allocate it to the right revenue streams. This can be done in a streamlined way using automated tools.

What are the streams of revenue?

For a business, the streams of revenue are its sources of money. After deduction of expenses, they make up the business’s net income figure in its financial accounts.

What is considered a revenue stream?

Any source of income for a business is a revenue stream. Most revenue streams constitute operating income, which means they come from core business activities. However, nonoperating income, such as rentals, can also be important revenue streams for some businesses.

Why are revenue streams important?

Revenue streams are the source of money for a business, and every business needs revenue. Multiple complementary revenue streams can improve a business’s financial stability and build resilience across business cycles, helping to generate long-term growth.

How to make a revenue stream?

Businesses can establish new revenue streams by undertaking market research and analyses to identify unmet customer needs and gaps in the market; developing new products and services; entering into strategic partnerships; improving their online presence and embracing digital technologies; and upselling new features, enhancements and add-ons to existing customers.