“The first layer of the perfect business model is to build a business with reliable revenue.” Mitch Thrower

When developing business plans, identification of potential revenue streams is a mandatory section. There are several different kinds of revenue models that can be used depending on the nature of business. Having developed several business plans which drew revenue models from product based sales, service fees, memberships and advertising I have been exposed to different types of revenue models. What I have learnt is that when developing these models great care has to be taken in understanding the assumptions these streams are based upon.

Many a time we find ourselves in the middle of an execution strategy and the assumptions we had used breaks down during the actual run. Over time as I have begun starting ventures with personal funding, I have started to use the ready, fire, aim approach. This has given me the ability to take multiple approaches to the market and build revenue streams based on feedback we get from the market place. This approach may however, not be totally feasible for cash strapped startups, in this case I would build stronger assumptions based on market data collated through research. 

A business must develop multiple streams of revenue and each stream much play a strategic part in the overall strategy. Points which must be taken care of during this development phase, will be the synergy between your long term goals and your revenue streams. Do they grow exponentially?, Do they help you achieve the targets you want ? Is the revenue model an optimal fit with the business model, etc. Many web entrepreneurs put a lot of faith in the advertising revenue stream. I have heard countless pitches where entire revenue strategies are based on this one factor. Sometimes they have not even thought a couple of steps ahead about new revenue streams, optimizing current streams, competition, margins. Some have not even accounted for market change. 

If you are writing a business plan or, are in a new startup venture, identify your revenue streams as clearly as possible, and understand what resources need to be put into place to realize their true potential. The future of your organizations rests upon these strategic initiatives. Make sure you think them through in thorough detail before moving forward.