Revenue streams have become a core factor in business growth. While the main revenue stream is undoubtedly sales, numerous other methods can be used to enhance and supplement the primary source of revenue.
What are Revenue Streams?
The revenue streams for SaaS businesses are similar to the revenue streams for any business. The main difference is that SaaS businesses are subscription-based and have recurring revenue.
The revenue streams for a SaaS business can be categorized into two broad categories: direct and indirect. Direct revenue is generated from customers who pay directly for your products or services, while indirect revenue comes from partners or other companies with whom you collaborate on projects.
Recurring revenue is a key metric for SaaS businesses because it indicates that customers are using your product and paying for it on an ongoing basis. The challenge with recurring revenue is that it doesn’t happen overnight — you need to invest time in building a sustainable subscription model.
Let’s look at the top 10 revenue streams for SaaS businesses:
1. Monthly Subscriptions to a Hosted Application
If your business is already offering a product that needs to be downloaded and installed on customers’ computers, it can be challenging to think of ways to make money from the product. However, if you offer your customers a hosted version of your software instead—a version that runs on the customer’s servers or in the cloud—they will pay you a monthly fee regardless of how many times they use it.
This kind of arrangement can work even if your product isn’t particularly complex: because customers only have to pay for what they need when they need it rather than having an upfront cost for installation and ongoing maintenance, this model can lead to more engaged users over time who are willing to spend more money with you as their business grows (and vice versa).
2. Pay-Per-Use and Pay-Per-Click Subscription Plans
Pay-per-use and pay-per-click subscription plans are extremely popular revenue models for SaaS businesses. These plans allow you to charge your customers each time they use a certain feature or service on your platform. The most common type of pay-per-use plan is a subscription plan, which is often used by business applications like CRM systems, accounting software, and project management tools. In these cases, the user pays a fixed fee per month—typically in exchange for unlimited access to all features and functions within that particular solution.
Pay-per-click (PPC) models are also very common among consumer applications such as games or social media platforms (like Facebook). With PPC subscriptions, consumers only pay when they click on ads or sponsored content—so if no one ever clicked on those ads, no one would ever have to pay anything! This model works well because it gives users access without having to commit upfront; anyone can try out the product without paying anything first.
3. Monthly or Annual Software Licenses
The most common type of SaaS business model is one where you pay a subscription fee for access to the software. If you use Salesforce or Office 365, for example, you pay a monthly fee for access to these products. This type of revenue stream is simple and easy to understand from both sides of the equation — the customer pays a fixed amount each month and gets access to the product, while the provider gets guaranteed recurring income from those same customers every month or year (depending on what kind of subscription they signed up for).
4. Customer Service
Customer service is the most important part of your business and is your 24/7 sales team. Your current customers are your greatest advocates, so it’s important to keep them happy and have a high customer retention rate. Customer service is also an excellent opportunity to build revenue streams outside the initial sale.
If you can find ways to add value or automate some aspects of the customer experience, you will be able to sell more services at a higher price point without having the same level of competition from competitors who do not offer those additional services yet.
5. Custom Web Portal Development
Custom web portal development is a revenue stream that can be used when you have a client who needs a custom website or web application to fit their specific needs. This revenue stream is often related to the business consulting business model.
In this model, one of your clients comes to you with an idea for a new product or service and asks if you can build it for them. They may have already done some initial research on competitors in the space, but now they want something custom-built that will do things differently than everyone else.
The best way to find these clients is through networking at conferences and meetups, as well as referrals from existing customers who want similar products built out in different industries/business processes (i.e., financial services).
One thing we’ve noticed about businesses like this is that they usually don’t bring in lots of recurring revenue streams because most of these businesses are not software-as-a-service (SaaS) companies themselves—they just want one specific solution that doesn’t compete with anything else they already own/use (think Salesforce).
Revenue streams don’t have to be complicated, but they need to convert. You can leverage your existing audience by advertising on your own website, where you know your customers are already looking for content. You can also create a native ad that uses the same design as the content around it and blends seamlessly into any platform or app.
Advertising on other websites is another possibility: If you’re a SaaS company and a user is browsing an article related to your niche, why not pay them a little bit of money to turn their attention toward your brand?
Social media platforms are also good options for advertising. If someone sees an advertisement from their friend or family member on Facebook and clicks through, then they’re more likely to convert than if they saw it elsewhere (or maybe even anywhere at all).
7. Feature Enhancements and Add-ons
Feature enhancements and add-ons are two ways you can offer additional value to existing customers. They’re designed to bring in more revenue by offering your current users more features, but they have some differences.
Feature enhancements are free upgrades or additions that come with an update of one of your products, such as a software upgrade or new feature release. Add-ons are new services that you charge for separately and don’t necessarily require the purchase of another product (although they often do). For example, if your main product is a web application, an add-on might be the ability for customers to store their data in the cloud rather than locally on their computers—and then reactivate this option when they need it again later on down the road.
Pricing is important because you want it high enough so people will buy but low enough so it doesn’t scare them from using other features.
8. Professional Consulting Services
This is one of the most common sources of revenue for SaaS businesses, and it’s also a good source of monthly recurring revenue. The idea here is to provide professional services around your core product. For example, if you have a SaaS application for managing inventory, you could sell consulting services to other companies on how to use the software. The key thing to remember with this type of revenue stream is that it should be related to your primary product.
If you’re selling professional consulting services on how to use an accounting software package, make sure that it’s an accounting software package. If not, you’re probably going to have trouble convincing customers that they need it because they’re not going to see any benefit from spending money on something they already have (i.e., their current accounting system).
9. Affiliate Sales
Websites and blogs can be a great way to earn money. Affiliate marketing is one of the ways you can do it.
Affiliate marketing is when you earn a commission for every sale that your affiliates make. You can also get affiliates to sell your products or services for you. Moreover, you can also become an affiliate for other companies, which will pay you when someone clicks on one of their links from your website or blog and buys something from them.
10. White Label Licensing
As a SaaS business owner, you can offer white label licensing to your customers to increase revenue and reach more markets. This is also referred to as OEM or private label marketing.
White labeling is a software licensing model where a software vendor grants a customer the right to use its software products but not to modify or distribute them. The customer is responsible for marketing and selling the product and may not use the vendor’s brand name or logo to promote the product.
Subscriptions are the most popular revenue stream among SaaS businesses, and they’re also one of the easiest to set up.
It’s important to have a strong value proposition so that customers understand how your product will benefit them. This can be in the form of free trials and free versions of paid products so that you can show potential customers what it is like using your software before asking them to pay upfront.
If you’ve got an enterprise product, larger companies may benefit from additional customizations or support resources that could be included in the contract agreement with your company (i.e., “customer success”).