What are revenue streams?
Many business stakeholders and accounting experts monitor the income and expenses that a company earns and spends to further understand the financial stability of their organization. One detail that they analyze is the various ways that the company makes money from the products and services that it sells. Diversified revenue streams can help a company reach its goals while providing financial security by offering it multiple ways to make money. In this article, we define revenue streams, list types and examples of revenue streams, and discuss the importance of having different revenue streams.
What are revenue streams?
Revenue streams are the different ways in which a business makes money. Revenue streams are usually the different mediums through which an organization can generate revenue from the sale of goods and services, but there are other revenue streams that a business can create depending on the services and activities it provides and performs. It is more common for a product-based business to have more revenue than a company that focuses solely on providing services to its customer base.
| Income statement | |
| For financial years ending December 31, 2025 | Total amount of sales, revenue streams, etc., from trial balance |
| Revenue | Total amount of income, interest, fees, etc. from trial balance |
| Sales | Total revenue |
| Other income | |
| Total revenue: | Total amount of raw materials, inventory, etc. from trial balance |
| Expenditure | Useful life of the asset (asset cost – residual value) |
| Cost of goods sold | Total amount of wages and salaries, rent, interest, supplies, utilities, etc., from trial balance |
| Depreciation | Total amount of expenditure |
| Administrative expenses | Total income – total expenditure = net income |
Types of revenue streams
You can categorize revenue streams depending on whether they are transactional, service-focused, project revenue, or recurring. The different types of revenue streams that fall under these categories include: – Ad fees: A business can benefit from an ad revenue stream, which is when it makes money based on the fees it charges for ads that appear on the company’s website. – Asset sales: An asset sale is the most common type of revenue stream that businesses use. It involves selling a product to a customer for an agreed price and then giving the customer ownership of the item so they can use it as they wish. When a company sells part of its business to an investor or forms a new business with an existing company, this is also called an asset sale. – Brokerage fees: Brokerage fees are a revenue stream that a company or entrepreneur can use where they make money based on pairing people and businesses and facilitating the start of a deal between the two parties. – Lending, renting or leasing: When a customer lends, rents or leases an asset from a company, that company makes money from the fees they charge for such an action. – Licensing: Licensing is when a business retains the copyright to its content, but charges a fee to another business that wants to use the content for its own needs. – Subscription fees: When a customer signs up for continued access to the services or products a business offers and pays a subscription fee for it, this is yet another way the business generates revenue. Subscription fees are usually a passive source of income for a business. – Usage fees: A business benefits from usage fees depending on when, how often or how much a customer or client uses their services.
Examples of revenue streams
To better understand different revenue streams, explore these examples for different types of monetization: – Advertising fees: A podcast host sells sponsorship for their podcast show and shows their sponsor during a break in the discussion. – Asset sales: A retailer sells paper products such as notepads, folders, and cards to customers for a fixed price. That customer can now use the products they buy however they want, including reselling them to others. – Brokerage fees: A real estate agent earns a brokerage fee when they are able to pair a buyer and a seller to facilitate a real estate transaction. – Lending, renting or leasing: A car rental company charges a rental fee to customers who use their cars for a certain period of time – Licensing: A musician owns the copyright to their music creation, but a company that wants to use this original content in their advertising pays the musician a licensing fee for this opportunity. – Subscription fees: A local gym sells memberships to individuals who want to use the space to exercise and take group classes. The gym benefits from the cost of these monthly membership fees. – Usage fees: City water companies that provide water to neighborhoods and businesses within a given district charge customers individually for the amount of water they use.
The importance of having income streams
The main reason a company has multiple revenue streams is that it diversifies its ways of earning income so that if one stream fails, the organization can continue to make money from the revenue streams that are still functioning properly. This helps protect the company’s operations and ensures continued revenue for the business. Here are some other important facts to consider:
Revenue often indicates business performance
Analysts and investors who review business financial statements often look for the various ways that the business generates revenue. Revenue usually correlates with performance because it allows investors to find investment opportunities and interpret the financial future of the organization, so having more revenue streams that perform well can show the financial strength of the company. This also helps investors feel more confident about the company’s performance, stability and ability to provide a stable return on investment.
Market needs may change
The stakeholders, senior executives, and CEO of any business are likely to consistently review the positioning of the business in its market to determine how the company can meet the needs of customers and clients. Understanding that the market needs change helps these key employees discover new ways to create additional revenue streams that help a company reach its goals. As market needs can change, different streams can also ensure financial success.
Companies can experiment with offers
With established revenue streams that have proven effective, a company may choose to experiment with an additional way to earn a profit for the business without significantly affecting the current income. Consider a business that has five successful revenue streams and the ability the business may have to see if a sixth revenue stream works without having to invest a lot of money in it. If a company is working with multiple revenue streams, it is likely a failed sixth revenue stream will not affect the revenue streams that are currently producing.
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