Capital Expenditure:
Involves the purchase of fixed assets such as:
Property
Machinery
Intangible assets
Meant for long-term use (more than 12 months).
Revenue Expenditure:
Involves daily operational costs, including:
Staff salaries
Premises costs
Selling and distribution expenses
Finance costs
Internal Sources:
Funds generated within the business, e.g.,
Retained profits
Owners’ equity
External Sources:
Funds raised from outside the business, such as:
Crowdfunding
Venture capital
Equity financing (selling shares)
Bootstrapping:
Self-funding from personal savings or income.
Crowdfunding:
Raising small amounts of money from a large number of people, typically online.
Equity Financing:
Selling shares of the company to raise funds.
Venture Capital:
Investment from investors seeking high returns, often in high-growth startups.
Definition:
Planning and monitoring of financial resources to achieve long-term goals.
Focus Areas:
Profitability
Growth
Efficiency
Liquidity
Solvency
A revenue model explains how a business generates income and profits.
Indicates the strategy for earning money from goods or services.
Unit Sales Model:
Revenue from selling products or services, primarily used by retail businesses.
Advertising Revenue:
Earnings from ads placed on platforms or content.
Data Revenue:
Selling valuable data to third parties.
Intermediation:
Earnings by facilitating transactions between buyers and sellers.
Licensing:
Earning by permitting others to use intellectual property.
Franchising:
Selling rights to others to operate under the business's name.
Subscription:
Ongoing fees for continuous access to a product/service.
Professional:
Charging for time and expertise (e.g., consultants, lawyers).
Utility and Usage:
Charges based on product or service usage (e.g., pay-per-use).
Freemium:
Offering basic services for free while charging for premium features.
Competition-led Pricing:
Aligning prices with competitors.
Loss Leader:
Pricing products below cost to attract customers.
Introductory Offer:
Discounted pricing for initial users.
Skimming:
High pricing for new products with little competition.
Psychological Pricing:
Pricing based on perception of value by customers.
Bundled Pricing:
Offering a group of products/services at a discounted rate.
Understanding these concepts is crucial for startups to effectively manage finances and develop sustainable revenue generation strategies.