Revenue Models and Financing

Flashcards on revenue models, pricing strategies, financing, and financial statements.

Revenue Model

A conceptual structure that explains how a business generates money.

Commercial and Retail Revenue Model

Selling physical products in the market either business-to-business or business-to-consumer.

Subscription and Usage Fees Revenue Model

Offering customers a specific product or service that customers can pay for over a longer period of time.

Licensing Revenue Model

Granting a license to use name, products or services at a predetermined or recurring cost.

Auctions and Bids Revenue Model

When a seller offers an item or items for sale and expects the highest price.

Advertising Revenue Model

Making money by charging the advertiser per size of the space offered in print, the length of video in television or duration of the commercial in radio.

Databases Revenue Model

Collects data and then sell them directly to a consumer or business customer.

Transactions and Intermediation Revenue Model

Revenue comes from transactions that involves the main profit-making activity of a business.

Solution

The key inputs and activities that drive the operational and financial results of a business.

Revenue Channels

The sources of the revenue may come from online sales and ecommerce, through retail sales in bricks and mortar stores, or through wholesale to other businesses.

Cost Drivers

The direct cause of a cost and its effect on the total cost incurred.

Cost Drivers

A method being used to accurately identify both the direct and indirect costs in a particular activity.

Price

A significant element of the marketing mix and is the company’s complete source of earning.

Maximization Pricing Strategy

Maximizing revenue growth in the short term by estimating both the fixed and variable costs and then discover how to cut these costs.

Penetration Pricing Strategy

Setting a low price in a competitive market to win dominant market share and raising it later.

Skimming Pricing Strategy

Setting a high price systematically broaden the product offering to address more of the customer base at lower prices as the market progresses.

Cost-Led Pricing

A pricing strategy wherein a company which include direct material cost, direct labor adds all expenses which have been used in producing a product r cost, and overhead cost then it adds some fraction of a desired profit margin on top and arrived at a price for a product and/or service.

Target-Return Pricing

A method wherein a business prices its product and/or service based on a target rate of return on the investment or what the company anticipates from the investment in the business.

Value-Based Pricing

A method that uses the perception of the customers on the worth or value of a product and/or service for pricing.

Bootstrapping

Starting a company with little or no capital or relies on money excluding outside investments.

Crowdsourcing

Referring to getting work, information, or opinions from a big group of people who give their data via the Internet, social media, and smartphone apps.

Equity Financing

The process of generating capital through the sale of shares.

Pre-Seed Funding

The preliminary capital a business that comes from friends, family members or even credit cards.

Seed Funding

Also known as seed capital, frequently given by angel investors.

Series A

Refers to the first round of institutional funding for a venture.

Series B

A fund that could be raised is Php 5 million to Php 10 million or even to the extent of Php 20 million or even more.

Series C, D

Capital funding coming from venture capital firms and/or strategic/corporate investors.

Mezzanine Financing

A capital in the form of equity, debt, or convertible note that is given to a company just before its Initial Public Offering (IPO).

Individual Private Investors

May include the entrepreneur’s friends, family, and other colleagues. Basically, this is the easiest way because of prior relationship with these people.

Venture Capitalists

Are investors who provide money for the business only after the company has been operating successfully for some years and they feel that it is already an established one.

Angel Investors

Are those individuals or larger group that make available financial backing at an early phase of the business at advantageous terms and do not typically participate in the management of the venture.

The Family Investor

A supportive family member who knows the entrepreneur well. The investment is motivated primarily by emotion and personal reasons.

The Relationship Investor

A colleague of the owner from his previous employment who happened to know him well. He is willing to support the owner and at the same time has the interest to earn something in return.

The Idea Investor

A person who can confirm the soundness of the entrepreneur’s idea being very familiar with the business. He can be a good partner because he can provide good advice.

The Once Removed Investor

A personal or professional connection with either the relationship investor or idea investor. Trusted someone to lead him into a successful investment prospects.

The Archangel Investor

Could be a relationship investor or idea investor has been successful in making other angels an non angels generate money. Has his own company in the same industry or have strong connections with other angel investors.

Crowdfunding

Raising money for an individual or company by collecting donations from a large number of individuals to fund a startup business.

Initial Public Offering

A company can source out funds by offering shares of the company to the public. Rich individuals and institutional investors with huge amount of fund invested in this type of fundraising activity.

Financial Statements

Represent a formal record of the financial activities of an entity.

Income Statement

Also known as a Profit and Loss Statement. A summary of a company’s total revenue and its operating expenses for a given period such as per month, per quarter of a year or for one year.

Balance Sheet

Also known as Statement of Financial Position. Presents the financial position of an organization at a specified date.

Assets

Is something that an entity owns or controls so that a company can produce economic benefits in its usage.

Liabilities

Is an obligation that a business owes to someone and its payment could be in cash or other resources.

Equity

Is primarily what the business owes to its owners. This represents the remainder amount of capital in the business after its assets are utilized to settle its outstanding liabilities.

Cash Flow Statement

A financial report that describes the sources of a company’s cash and how that cash was expended over a specified time period.