Analyze a business by first understanding how they make money.
8 ways a business makes money:
• Licensing
• Asset sale
• Usage fee
• Advertising
• Brokerage fee
• Subscription fee
• Commission/Take-rate
•Lending/Renting/Leasing
Examples for each method 👇
8 ways a business makes money:
• Licensing
• Asset sale
• Usage fee
• Advertising
• Brokerage fee
• Subscription fee
• Commission/Take-rate
•Lending/Renting/Leasing
Examples for each method 👇
1. Asset sale
Ownership rights of physical products are sold.
Example: Amazon's 1P marketplace for books and electronics.
Ownership rights of physical products are sold.
Example: Amazon's 1P marketplace for books and electronics.
2. Usage fee
Amount paid is based on how much the service is used.
Example: Twilio communications API are charged on a usage basis.
Amount paid is based on how much the service is used.
Example: Twilio communications API are charged on a usage basis.
3. Subscription fee
Fees paid for repeated access to a service.
Example: Adobe creative suite charges creators an annual subscription fee.
Fees paid for repeated access to a service.
Example: Adobe creative suite charges creators an annual subscription fee.
4. Lending/Renting/Leasing
Giving someone the right to use an asset for a fixed period in exchange for a fee.
Example: Hertz renting out its cars.
Giving someone the right to use an asset for a fixed period in exchange for a fee.
Example: Hertz renting out its cars.
5. Licensing
Content owners retain copyright when they sell licenses to third parties.
Example: Media companies with its movies and patent holders of new technologies.
Content owners retain copyright when they sell licenses to third parties.
Example: Media companies with its movies and patent holders of new technologies.
6. Brokerage fee
Revenue is derived from intermediation services provided to two or more parties.
Example: Interactive brokers charge a small commission for every trade.
Revenue is derived from intermediation services provided to two or more parties.
Example: Interactive brokers charge a small commission for every trade.
7. Advertising
Money is made for advertising a product, service or brand.
Example: Google, Facebook and Amazon selling ad space.
Money is made for advertising a product, service or brand.
Example: Google, Facebook and Amazon selling ad space.
8. Take-rate
Fees are charged whenever a transaction happens.
Example: Ebay charging a commission or Stripe collecting a fee whenever a transaction happens on their platform.
Fees are charged whenever a transaction happens.
Example: Ebay charging a commission or Stripe collecting a fee whenever a transaction happens on their platform.
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