How Do Online Businesses Generate Revenue?

Online businesses are the hottest topic of discussion among entrepreneurs currently. Although they had existed for a long time, they have come into...

  • How Do Online Businesses Generate Revenue?
    Daniel Hall Image Daniel Hall

    How Do Online Businesses Generate Revenue?

    • Updated: Monday 26th of October 2020
    • Strategy

    Online businesses are the hottest topic of discussion among entrepreneurs currently. Although they had existed for a long time, they have come into their own after the COVID-19 pandemic. During the lockdown in New Zealand, most people shifted their shopping needs online. The social distancing norms have forced consumers to look for digital alternatives for their supply of daily needs. The comfort of shopping from home and getting the goods and services delivered to the doorstep has increased the popularity of this medium.

    Thus most budding entrepreneurs looking for a business for sale in New Zealand are considering to dive into the digital space. However, many are not sure about the sources of income of these ventures. The common question is, how do they even manage to break-even and generate profits. Let us try to help you with the answer. Here is what you need to know about their revenue generation models.

    1. Selling Products Without Middlemen

    When you sell your products physically, then there are several people involved in the supply chain network. All of them add to the cost of the product, which is sold at a higher price to the customers.

    With an online shop, you do not need to sell through a third party or through retailers who charge commission and include transportation costs. You are responsible for your product delivery and can choose to work with cost-effective service providers for shipment. With everything in your control, the price of the goods can be reduced, which can lure the customers to your website. So selling your products online can bring higher profits since COVID-19 has doubled online sales. E-commerce has been gaining momentum in the current circumstances and will continue to boom in the future.

    2. Selling Specialised Services Online

    Certified experts and subject matter experts offering specialised services online can make money through their clients. They do not have to spend on leasing an office and maintaining a staff. These days a variety of services are being offered online ranging from legal consultations, art classes, yoga classes and financial consultation to tutoring. You can also create a website and offer the service at the doorstep of the customers, such as gardening and landscaping, cleaning, handyman, electrician, plumbing, etc.

    Since you are working as the owner and operator, you can earn handsomely. The only limitation is that you can offer the services to a few clients, but you can charge a premium for your expertise which helps to maintain the income. Also, this type of online business needs building a rapport with the clients.

    3. Digital Marketplace

    Another revenue generation model utilised by online business is the creation of a digital marketplace. It offers a platform where buyers and sellers come together to complete their deals.

    For example, eBay and Trade Me are some of the largest online marketplaces which do not sell their own products. These websites help buyers and sellers to connect with each other, and in return, the website gets a share from every purchase made through their channel. It is one of the most lucrative online businesses. Similar websites can be created for niche segments like a website dedicated to buying and selling restaurants or smart gadgets. Amazon has become one of the biggest tech giants in the world by following the same business model.

    4. Scale Up Your Offline Business

    Some entrepreneurs take the click and mortar route, which allows them to expand their existing offline business. The online business is an extension of the physical business, which helps in reaching a wider target audience.

    For example, a small business may be operating in Auckland, but with the help of its website, it can sell its products across New Zealand. Most businesses just create a digital interface to have an online presence while forgetting that they can improve their profits significantly by introducing e-commerce. When you begin with the online store, you can divide the marketing budget and share the stock to create awareness. Taking an offline business online is one of the best ways to survive the Covid-19 crisis.

    5. Dropshipping Business

    If you are not familiar with this term, then you must find out more about it. The dropship online business does not require procurement of stock or its storage. You purchase the products from the wholesaler and then list them on your website. When the buyer purchases a product from the site, then the wholesaler packs and ships the product to the buyer.

    Thus you save on the shipping cost and the hassles related to organising and tracking orders. You do not have to hire a shipping company either, and all the work of sending out the products is managed by a third party. It allows you to sell branded products and gain terrific profits without any stress or challenges. However, it requires gaining widespread visibility for your website through marketing and advertising.

    6. Affiliate Marketing

    Many small service-based businesses in their attempt to scale-up take the route of affiliate marketing. It allows them to promote products of their affiliate partners along with their services. For example, if you are offering online yoga classes, you can expand your business by adding links of other sites that are selling yoga mats, yoga pants, copper water bottles, books, etc. You will be working in partnership with these businesses and will get a share of their earnings through these sales.

    For this purpose, you must find partners whose products are in some way related to your products or services. The promotional link can be placed in a banner on the site or the link can be included in the blogs and articles being published on your website.

    7. Generating Revenue from Ad Space

    You must have noticed that sometimes blogs and websites display ads on the banner or the side columns. These are a fantastic platform for raking in dollars quickly. Content-based websites which offer information on a variety of topics, such as travel, news, economy, hospitality, etc., can make use of this opportunity to enjoy a rewarding income from their website. You can start doing this when you have huge targeted traffic coming to your site.

    Also, advertisers will be willing to shell out money only when they will be able to reach a wider audience. It can be utilised at a later stage of your business when you have the required traction. However, this should not become the primary source of income. You must use it as an additional revenue stream to avoid bombarding visitors with advertisements.

    Endnote

    Online business is easier to set up than a brick and mortar store. However, you need to identify the revenue streams which can help in improving the desired profits. Thus if you are planning to purchase a business for sale in New Zealand, then make sure that you take advantage of the strategies mentioned above.

  • Author Info Daniel Hall

    Daniel is a business strategist with an experience of over 25 years in business acquisitions and investment portfolio management. He has been working with small and medium-sized enterprises as well as entrepreneurs, helping them to achieve their business buying and selling goals. His wisdom and vast industry knowledge have transformed the careers of a variety of individuals. Business2Sell is excited to welcome Daniel onboard as a guest author for our blog.