Let's say a SaaS company generates millions of dollars in sales per year and has a lower churn rate. In that situation, they still desire to investigate more SaaS business revenue models to diversify their revenue streams.
You've arrived at the right place if you're a SaaS business owner trying to diversify your revenue sources. We'll walk you through the different revenue models of SaaS companies in this article. So you can pick the suitable one for your organisation.
However, before we get further into the various SaaS revenue models, we must be perfectly clear on similar terms like revenue stream, revenue model, and business model.
What is Revenue Stream?
It is the single enormous source of earnings for a SaaS organisation. Whether your company is in its initial or development stage, you must have at least one revenue stream to persist floating. Typically, all SaaS businesses include a subscription-relying revenue stream nonetheless of their market length or customer base.
What is Revenue Model?
SaaS business proprietors forge revenue for their enterprises with the revenue model. It displays the company's approach to earning money. A single revenue model can hold two or three revenue streams. For example, the subscription-dependent revenue model constantly has add-on and base-free income streamlets.
What is Business Model?
It describes the comprehensive structure of your SaaS organization.
Furthermore, it stimulates possible investors to calculate what customer issues SaaS companies assert to resolve. Thus, the business model protects both the revenue model and streams.
Also, you can establish product development, marketing, and recruitment with the help of the business models of your SaaS company.
Different SaaS Revenue Models
There are a variety of revenue models available on the market. The following are some of the most well-liked ones you can consider for your company.
The transaction-dependent revenue payment is one of the most common ones you see in the market. These models are established on the sales of products or services to consumers.
The client can be either a business (B2B) or a customer (B2C). The organization controls the expense of the product or service by examining the production price and margin.
All businesses that make money by dealing with SaaS products are classified in this transaction-based revenue standard. Examples of enterprises that utilize the transaction-based income model include e-commerce shops that trade products online, a saloon that supplies haircut services, fast-food cafes, and more.
Pros: You can control the pricing scheme, influencing the company's revenue.
Cons: You will require a constant source of products or services, dealing, and selling since you only make money when there is a deal.
The subscription-based payment model is a recurring revenue measure whereby consumers can opt-in to pay for services for a more extended period, usually each month or year.
This model promotes an ongoing, frequent income for your organization. The subscription revenue model is one of the most suitable ones where you can market your future products and allow the business to bring a more predictable income for the forthcoming period.
Examples of the companies that include a subscription revenue model possess WordPress Page Builder Divi, which presents annual approval subscription plans, hosting firms like Serverfreak that show annual hosting programs, and your internet provider.
Pros: In this, recurring revenue for the business is more predictable income for a more prolonged time.
Cons: Marketing work and customer assistance must be in suitable condition to gain shoppers' trust.
The affiliate revenue standard is identical to the commission revenue standard, where the business obtains its commission by advertising another company’s goods or services and inducing sales.
The only distinction is that the affiliate revenue model accepts its commission from the vendor rather than the customers. The affiliate model generally begins with an agreement between the supplier of the product and the promoter.
In this affiliate model, you can upgrade the products by employing various methods, including social media, referral code, blogging, etc., following the terms and prerequisites of the affiliate agreement. The most prominent examples of companies that use affiliate revenue models are influencers and blogging firms.
Pros: You will not need to own a good or service. It usually lets you pay better than Ads.
Cons: It has no control over the product given by the other organisation and demands higher traffic for more increased volumes of converted sales.
The ad-based remuneration model is one of the most straightforward models where you position ads on your media either online or offline and accumulate money when people watch or click on your advertisements.
The ad-based model generally performs well with an immense volume of audiences since ads usually have a low click-through rate or transformation rate.
If you own a website with a bigger audience, you can efficiently register for an ads account with Google AdSense, where you can acquire approximately $4-10 per 1,000 page views.
Pros: It is most effortless to set up and does not demand products or price upfront.
Cons: It needs high traffic to make a living, and not all industries have increased CPM.
We can also call this model a donation-based revenue model that relies on customers' voluntary contributions to create revenue. It is pretty similar to the "no-revenue" approach; the difference is that it is constantly looking for donations or pennies for a cup of coffee.
Offering goods or services for free by default adds value to the company, and sales are solely based on customer preference. You still have to pay taxes if you run a spend-what-you-want organisation instead of a charity. On top of other revenue models, this income model is frequently employed as a supplemental source of money.
Pros: It offers free access to SaaS quality products that will acquire high popularity; thus, donations might contribute significantly to your company’s remuneration.
Cons: In this model, the revenue is inconsistent.
As long as you are completely clear on your SaaS revenue models, your SaaS organisation has the potential to be very profitable. As a SaaS business owner, you should look at all the potential SaaS revenue models rather than limiting yourself to monthly, yearly, or membership plans.
Additionally, consider using Noetic IT Services' assistance to add more revenue models and revenue streams to your SaaS corporation. We are always here to help you at every step of your SaaS revenue journey.