By Ed McLaughlin with Wyn Lydecker
Before you start your business, ask yourself: How will you generate revenue? Answering this question is an essential part in determining your business model. You need to know if you will sell a product, a service, advertising, or access to data. Cash flowing into your business from sales is the first step toward realizing a profit.
You need to understand how you will structure your model:
• Will you collect sales revenue directly from customers in exchange for the service or product?
• Or will your business act as an intermediary, helping to bring buyers and sellers together, and collecting a fee for the service or a percentage of the resulting sale?
• Or will your business be a publisher of content or the creator of an online community that charges for access to the content?
• Or will you provide content or community for free and collect revenues from advertisers who want to target your readers or users?
• Or will you be a collector of data and charge fees to marketers for access to that information?
• Or will your business use a combination of these revenue models?
Use theses questions to help you formulate and describe your own model. My startup, USI, had a pretty simple revenue model. We sold a service of managing real estate portfolios and executing real estate transactions. Our customers paid us fees for dedicated resources and commissions on transactions.
I explore revenue generation in more depth in my upcoming book, “The Purpose Is Profit: Secrets of a Successful Entrepreneur from Startup to Exit.”
Copyright © 2014 by Ed McLaughlin All rights reserved.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]