[ENTREP] CH.1.1 (pt.1) | LESSON 2 - Entrepreneurship: Revenue, Income, and Profit

Revenue

is the amount of money a company earns from typical business operations, like sales. Unlike income and profit, this doesn’t incorporate business spending.d

1. Sale of products or services

2. Product or brand licensing

3. Advertising

4. Consumer subscriptions

SOURCES OF REVENUE: (4)

Revenue

is the amount of money a company earns from typical business operations, like sales. Unlike income and profit, this doesn’t incorporate business spending.d

1. Sale of products or services

2. Product or brand licensing

3. Advertising

4. Consumer subscriptions

SOURCES OF REVENUE: (4)

licensor

The business or individual who owns the brand, product, or intellectual property.

licensee

The business or individual obtaining the rights from the owner of a certain brand, product, or intellectual property.

Product licensing

is a legal agreement between two organizations in which a product's copyright holder allows another company to sell the product in a designated region.

licensor

use brand licensing as a way of marketing and enhancing their core INTELLECTUAL PROPERTY (IP)

license agreement

When the licensor and licensee enter into a legal contract

• The scope of the license (e.g., geographic regions, type

of product).

• The duration of the license.

• Payment terms (e.g., royalties, upfront fees, or both).

• Usage guidelines (e.g., how the brand or product must be presented)

Outline of a LICENSE AGREEMENT (4)

Royalty Payments

A percentage of the licensee's sales of the licensed product (e.g., 5–15% of revenue).

Upfront Licensing Fees

A one-time payment made by the licensee to secure the licensing rights

Minimum Guarantee

A fixed amount the licensee agrees to pay regardless of sales performance

Minimum Guarantee

is a baseline payment the licensee promises to pay the licensor, regardless of actual sales or performance.

Flat flee

An amount that is charged or paid that does not change according to the amount of work done, or the number of times something is used

Flat flee

is a fixed payment agreed upon in the contract, regardless of sales or performance. It does not vary with sales, usage, or any other metric and is typically paid upfront or in installments

• Royalty Payments

• Upfront Licensing Fees

• Minimum Guarantees

Revenue Generation (3)

The Walt Disney Company

is the world’s largest licensor and sits at the top of Licenses Global’s Top Global Licensors report.

Advertising

When a business hosts ads on its website, it earns revenue from the company posting its advertisements

Cost Per Mille (CPM) – "Cost per Thousand Impressions”

Advertisers pay based on the number of times an ad is viewed, regardless of whether the viewer clicks or engages with the ad.

Example: $5 ___ means the advertiser pays $5 for every 1,000 views

Pay-Per-Click (PPC)

Advertisers pay each time a user clicks their ad.

Example: A search engine charges $2 per click on an ad.

Cost Per Acquisition (CPA)

Advertisers pay only when a user completes a specific action, such as signing up or making a purchase.

Flat Rate

A fixed amount is paid for a specific time frame, such as $500 for a banner ad displayed for one week

Consumer Subscription

Subscription business models are based on the idea of selling a product or service to receive monthly or yearly recurring subscription revenue.

1. Rent

2. Long Term Contracts

3. Content Subscriptions

4. Payments from loyal customers

5. Membership fees

CONSUMER SUBSCRIPTION (5)

Revenue

Product/Service Quantity x Sale Price

Income

is the amount of money a company makes minus the cost of running a business

Income

To calculate _____, subtract business operation expenses from company revenue. Include both the cost of the goods and other operational costs like rent, salaries and taxes

1. Depreciation of goods and property

2. Cost of industry-specific business operations

3. Rent for company office, brick-and-mortar retail

or warehouse space

4. Manufacturing costs

5. Commission costs

6. Taxes

factors to consider to calculate the company income: (6)

Depreciation

is an accounting practice used to spread the cost of a tangible or physical asset over its useful life.

Depreciation

represents how much of the asset's value has been used up in any given time period.

Depreciation

The number of years over which you depreciate something is determined by its useful life (e.g., a laptop is useful for about five years

• You own it

• You use it in your business, or to produce income

• You can determine its useful life

• You expect it to last more than one year

The IRS sets guidelines for what types of assets you

can depreciate. It needs to meet the following

criteria: (4)

• Vehicles

• Real estate

• Equipment

• Office furniture

• Computers

Some common examples of assets depreciated by

small businesses include: (5)

Income

Revenue - Cost of Goods - Variable

Expenses and Operating Costs - Taxes