Revenue Streams: Meaning, Types and Examples

Every merchant knows that in the business world, there are good days and slow days. Customer preferences can change in the blink of an eye, and the market landscape shifts just as quickly.

That’s why relying on more than one revenue stream isn’t just a smart strategy—it can save your business. During slow months, changes in demand or periods of economic uncertainty, multiple revenue streams can help you maintain a steady income and keep you running.

So, what are revenue streams?

In this post, we’ll break down the meaning of revenue streams, explore the various types and share examples to inspire you. By the end, you’ll have a clear picture of how to create a more resilient and profitable business.

What are revenue streams?

Companies can generate revenue in different ways depending on their operations, assets, and the activities they engage in. And that’s what revenue streams are—the source of a company’s income. Essentially, it’s the various mediums through which your business earns money. 

You might have one revenue stream or several, depending on your business model, as well as your revenue model. 

The business model outlines how your company creates and delivers value, while the revenue model focuses on how you generate income from that value. Together, these determine your business’ financial health.

For example, some stick to a single revenue stream, such as selling one product or service. Others diversify by offering multiple products or services or engaging in secondary activities, such as investments, renting equipment or selling advertising space. 

Core vs. ancillary revenue streams

Revenue streams fall into two categories: core and ancillary.

• Core revenue streams represent the backbone of your business. These are the earnings generated from your primary operations, such as product sales or services rendered. Think of these as your predictable, recurring revenue streams. They provide consistency in your income. For example, if you own a bakery, your core revenue source would be the sales of bread, pastries and cakes.
• Ancillary revenue streams come from non-core business operations. These are supplementary ways your business can earn revenue on the side. For instance, you might rent out unused space for workshops or networking events. Another option could be earning interest revenue by investing in savings or low-risk investment accounts, or dividend revenue if your business holds shares in other companies.

Ancillary streams are often irregular and unpredictable. They might result from one-time opportunities, but they can still significantly boost the revenue generated by your business.

Why revenue streams matter

Diversifying revenue streams helps boost financial stability, which in the long term leads to sustainable growth. It makes businesses more adaptable to the ever-shifting customer preferences and resilient to unforeseen changes in the economy. 

Imagine you’re relying on just one revenue stream and the market demand for that product or service suddenly drops. That could leave your business vulnerable. 

On the other hand, if you have different revenue streams—like selling both products and services or offering add-ons—you can soften the financial impact. When one stream slows down, the others can help keep your business operating.

Additionally, introducing multiple revenue streams creates opportunities for growth and additional income. This approach allows you to upsell and appeal to different customer segments. 

In some cases, you don’t even need to develop new assets. When used strategically, a single asset can often generate multiple revenue streams. Further down in the article, we will look at several ways to do this.

Types of revenue streams

There can be different types of revenue streams, depending on the industry and the revenue models. Below, we’ll explore the most common ones in more detail.

Transaction-based revenue

The transaction-based revenue model is one of the most common ways businesses generate revenue. It relies on one-time payments for goods or services.

While straightforward, transaction-based revenue can be less predictable than recurring revenue streams. Factors such as market demand, pricing strategies and your business’s value proposition all significantly influence success.

To succeed, businesses must deliver excellent customer service, maintain a competitive edge, and invest in marketing to attract new customers and retain existing ones.

Examples of businesses using the transaction-based revenue model include grocery stores, retail shops, restaurants, and hotels. 

Recurring revenue 

Recurring revenue streams are especially common in businesses employing subscription models, where customers pay subscription fees for ongoing access to a product or service. Think of streaming services, “box of the month” subscriptions, gym memberships or loyalty programs.

These businesses rely on strong customer relationships. For example, SaaS companies often depend on a subscription-based revenue model, where they leverage loyal, recurring clients. 

To encourage long-term commitments, businesses with a recurring revenue model often offer perks. These include discounts on annual plans, exclusive features, or added benefits through upselling opportunities.

Another example of recurring revenue streams is the brokerage model. Here, businesses rely on a recurring fee as a commission for facilitating transactions between buyers and sellers. 

For instance, online marketplaces or real estate platforms charge brokerage fees for their role in maintaining and monitoring the platform. This model ensures steady income as long as the platform remains active and valuable to its users.

Royalties and licensing revenue

Royalties and licensing revenue streams are generated when a company grants customers access to its content or intellectual property (IP) while retaining ownership. In exchange, customers pay a fee to use the content for their needs.

The licensing model is common in industries that rely on proprietary technology, creative works or brand trademarks.

For example, many software companies earn revenue by selling licenses for their software product. Traditionally, this was done through one-time purchases, but the trend has shifted toward the subscription revenue model, especially for cloud services and online platforms. 

Licensing isn’t limited to software only. This revenue model is often seen in the creative industry, as well. 

For instance, a music production company might license a song to a movie studio. Similarly, authors and publishers earn royalties when their books are licensed for adaptations, such as turning a novel into a film or a TV series. 

Advertising revenue

Advertising revenue refers to the income earned by displaying ads from other companies to your target audience. This can take many forms, such as placing ads in your physical store, on your website, online platform, social media accounts, YouTube channel, digital newsletters or even on vehicles like taxis or food trucks.

If your store is located in a high-traffic area or your website attracts a significant audience, you can capitalise on this by selling advertising space to other businesses. 

For instance, a local café could display posters for nearby events or a popular blog could host banner ads for relevant products.

Affiliate programs and referral partnerships also fall under ad revenue. These involve earning commissions by promoting other companies’ products or services.

If you are offering a freemium mobile app, you can monetise free users by displaying in-app ads. This allows you to earn revenue without charging your users upfront.

One major advantage of advertising as a revenue stream is its cost-effectiveness. Unlike many other forms of revenue generation, it typically doesn’t involve operating or administrative expenses. 

Project-based revenue

Project revenue works similarly to transaction-based revenue, as it relies on one-time payments. The key difference is that you’re earning revenue by completing specific, time-bound projects. These could include consulting assignments, construction jobs or freelance design work.

Project-based earnings are often calculated based on the time spent on the job. For instance, you might charge hourly rates or day rates. However, you can also base pricing on other units, like charging per piece completed, word written or even by weight (e.g., grams of material used).

This revenue is different from service revenue based on performance or outcomes. For example, many marketing and consulting firms, as well as professionals like lawyers and accountants, choose to charge clients for their time spent working on a project, regardless of the final result.

One great example of a business using diversified project revenue streams is a beauty salon.  They often offer a variety of services—like haircuts, nail treatments and other cosmetic services. Each of these services can be treated as its own project-based revenue stream, with clients paying for each specific task completed.

Benefits of diversifying revenue streams

Having multiple streams of revenue isn’t just about profit. Sure, it ensures a steady flow of income, but the advantages go far beyond that. Let’s break down the key benefits of diversifying your revenue streams and why it can be a game-changer for any small business.

Financial stability

Relying on a single revenue source might work fine—until customer demand suddenly shifts or an economic downturn hits. How would your business cope then?

Diversifying revenue streams is like having a safety net. It ensures you can keep your operations running even when challenges arise because no business is entirely risk-proof.

This became particularly evident during the COVID-19 pandemic. Many businesses struggled or even shut down due to lost customers and market disruptions. However, those that adapted quickly, exploring new revenue streams and finding creative solutions, managed to thrive.

The takeaway here is that building multiple revenue streams is a smart strategy for long-term financial stability. It reduces your reliance on a single income source and minimises the risk of operating at a loss.

Customer segmentation

The more customers you attract, the bigger your profits will be. But how do you appeal to a wider audience? The answer is simple: expand your revenue stream portfolio.

By tailoring your offerings to different customer groups, you can increase brand visibility and reach a broader customer base. Not only does this allow you to meet the specific needs and preferences of each group, but it also boosts customer satisfaction. When everyone can find something that works for them, you’re more likely to turn casual shoppers into loyal customers. 

Plus, it gives you a competitive advantage in the market by allowing you to stand out from your competitors. 

Growth and scalability

Scaling a business can feel challenging—sometimes even impossible—when resources are limited. Diversifying revenue streams, however, can bring in additional income to fuel growth.

By introducing new revenue streams, you can set aside extra profits for key areas like marketing, hiring more staff or upgrading your technology.

Whether it comes from your core business operations or activities on the side, every revenue stream becomes a valuable resource to help you reach new customers and grow your market presence.

Challenges in managing revenue streams

Securing multiple revenue sources is the goal for many businesses—more ways to make money and more stability. But let’s be honest: juggling several revenue streams can get tricky.

Balancing core and ancillary revenues

If you are managing to earn income on the side from investments, selling advertising space or renting out your studio, great. But your core revenue streams should always remain your top priority. After all, they’re the foundation of your business.

It’s tempting to chase ancillary revenue streams, especially when they often seem like easy wins. But be careful: these can sometimes pull your focus away from your primary goals.

If managing these side streams starts taking too much of your time or energy, it’s worth stepping back to reassess. Ensure your core business offerings are solid and thriving before devoting too many resources to non-core activities.

Customer acquisition costs

When you’re managing multiple revenue streams, keeping an eye on your customer acquisition cost (CAC) is essential. Why? Because if it costs too much to acquire customers for a particular stream, it could eat into your profits—even if that stream is initially bringing in earnings.

Each revenue model may have its own marketing and retention expenses. For example, the cost of running ads for your main product might differ from what you spend to promote an ancillary service. Tracking these costs separately helps you see which streams are truly profitable and which might need reassessing.

Consistency and forecasting

One of the biggest challenges in managing a business’ financial health is ensuring a steady flow of income. This is especially true when you’re balancing different types of revenue streams, like one-off payments and recurring subscription fees. The key is to find ways to maintain consistent cash flow, even if one stream faces a drop.

Accurate forecasting plays a crucial role here. While some revenue streams can be hard to predict due to changes in customer demand or the market landscape, keeping detailed reports of previous months or seasons can provide valuable insights and help you prepare. 

Strategies for choosing the right revenue stream

Adding new revenue streams to your business sounds exciting, but let’s be real—it’s not always as simple as it seems. With so many options out there, how do you figure out which one is the best fit for your business? And how can you be confident it’ll actually work?

To help you navigate this decision, here are a few strategies to guide you.

Aligning with your business model

Before adding a new revenue stream, you should always make sure it aligns with your business model. In other words, it should complement what you already offer and enhance your value proposition. If the new revenue stream fits well with your products or services and target audience, it’s more likely to succeed.

For example, if you run a small online cosmetics store, you could add a subscription box service. It could offer customers exclusive items or a discounted price for multiple products, while also providing you with a predictable income. 

Or, if you’re a baker, you could introduce cooking classes in your bakery or offer a digital recipe book.

The key is to choose revenue streams that not only make sense financially but also fit naturally with what you already do.

Evaluating customer needs

Another aspect to consider is market demand and customer preferences. After all, your customers are the ones who will interact with your business and pay for your products or services.

Start by determining whether what you plan to offer will truly provide value and resonate with your customers. Look for gaps in the market and underserved areas within your industry. By addressing your customers’ needs, you’re more likely to drive sales and build brand loyalty.

Next, consider how your customers prefer to pay. Do they lean toward subscriptions, one-time purchases or pay-per-use models? Understanding their payment preferences will help you choose the right revenue stream model for your business.

Leveraging technology

Technology is a game-changer when it comes to managing and growing your revenue streams. With the right digital tools, you can easily track your income, analyse what’s working (and what’s not) and make adjustments to optimise your profits.

For instance, many online platforms provide all-in-one solutions to process payments, monitor sales performance, and even keep track of inventory, making it easier to manage your finances. One such example is myPOS.

Digital tools can not only save you time but also give you valuable insights to make smarter business decisions, reduce errors and streamline operations.

Еxamples of revenue stream diversification across industries

In this section, we will examine a few real-life examples of companies from various industries that have successfully diversified their revenue streams. You can use these case studies as inspiration for your business.

Technology and software companies

Many software companies, particularly those offering Software as a Service (SaaS), combine subscription models with additional income streams like licensing and advertising. For example, Microsoft generates recurring revenue through its cloud-based subscriptions while also earning from software licensing. 

Apple is another example of a tech company successfully diversifying its revenue. In addition to product sales like iPhones and Macs, Apple profits from services such as iCloud storage and Apple Music subscriptions. By combining hardware, software and services, Apple ensures a steady stream of income from multiple sources.

Beyond core products, technology companies can also generate additional income through advertising, like Google and Facebook, which monetise user data through targeted ads. 

Retail and consumer goods

Retail businesses traditionally earn revenue through direct sales of products. This model is straightforward but can be limited by seasonality, customer loyalty and competition.

To ensure consistent revenue, some companies offer subscription services. For example, Dollar Shave Club revolutionised the consumer goods sector by offering a subscription for shaving products, making it easy for customers to receive regular deliveries without having to worry about reordering.

Online platforms and media

Online platforms and media companies often rely on a mix of revenue streams, such as ads, subscriptions and projects, to maximise profitability. 

Netflix is a great example of this. The primary revenue source for the streaming platform is the subscription fees it collects from customers on a monthly or annual basis. 

However, the company also invests in creating original content that contributes to attracting and retaining subscribers, while reducing reliance on expensive third-party licensing. In addition, Netflix also licenses its original content to TV networks or other platforms in regions where its streaming services are unavailable.

Professional services

Professional service businesses, such as consultants, agencies, and financial service providers, often diversify by combining one-time projects with ongoing services. This helps them maintain a steady income.

For example, a financial firm may charge for both initial consultations and ongoing finance management. This mix of project-based fees and recurring retainer income ensures a steady cash flow, even during slower periods.

Key takeaways

Revenue streams represent the different ways a business earns money. Whether it’s through selling products, offering services or exploring alternative income sources like subscriptions or partnerships, diversifying revenue streams is key to staying profitable and resilient.

In this blog post, we’ve covered the meaning of revenue streams, explored their types and shared examples to inspire your business strategy.

Your next step is to reassess your current revenue source. Determine whether it is working for you and identify opportunities to introduce new ones.

Finally, remember that long-term growth comes from balance. Diversify, but do it wisely. Focus solely on revenue streams that align with your business model and values.

Frequently Asked Questions

How many revenue streams should I have?

There’s no set rule for how many revenue streams a business should have. You can succeed with just one, but diversifying increases your chances of growth and resilience.

How do I calculate a revenue stream?

Calculating a revenue stream is simple—it’s the total earnings generated from a specific product, service or source over a given period. Just make sure you’ve recorded all sales accurately.

Is social media a revenue stream?

Social media itself isn’t a revenue stream, but it can be a powerful tool to drive sales. Platforms like Instagram and Facebook can help you generate revenue through selling products and services, affiliate marketing, sponsored content, subscriptions or memberships, and ad placements.