---
title: Revenue Model Clarity: How You Actually Make Money
summary: Identify your revenue model type, judge revenue quality, manage concentration risk, and write your model statement.
est_minutes: 5
sort: 3
---

Most operators know how much they made last month.

Far fewer can clearly explain how their business makes money at a structural level.

That distinction matters more than most people think. Because if you cannot describe your revenue model precisely, you cannot improve it deliberately. And you cannot protect it when something changes.

**The Six Revenue Model Types**

Before you can document your revenue model, you need to know which type or types your business uses. Most small businesses run on a combination of two or three.

Type one: one-time transaction. The customer pays once. A single project, a standalone product, a one-time service. No ongoing relationship assumed.

Type two: recurring subscription. The customer pays on a fixed schedule for ongoing access or service. Monthly or annually. Predictable on both sides.

Type three: retainer. The client commits to a fixed monthly fee for a defined scope of ongoing work. Similar to subscription but typically more customized.

Type four: project-based. Payment tied to specific deliverables or milestones. Common in construction, consulting, development.

Type five: usage-based. The customer pays based on how much they consume. Storage, printing, API calls.

Type six: licensing or royalty. The customer pays for the right to use your intellectual property, your system, or your framework.

Most operators are running types one through three in some combination. Knowing which type each stream is tells you a lot about its predictability and its risk profile.

**Revenue Quality vs. Revenue Quantity**

Here is something most operators do not think about until a major client disappears.

Revenue quantity tells you how much came in. Revenue quality tells you how reliable, how scalable, and how sustainable that revenue is.

There are four criteria for assessing revenue quality.

Predictability: can you forecast this stream 90 days out with reasonable accuracy?

Margin: what percentage of that revenue actually remains after you deliver the product or service?

Scalability: can this stream grow without requiring a proportional increase in your time?

Customer lifetime value: does this stream produce repeat purchases or long-term relationships?

A business with two revenue streams where one scores high on all four criteria and one scores low on all four is a very different operation than it looks on a revenue report. The quality gap is where most operators get surprised.

**Concentration Risk**

Revenue concentration risk is what happens when your business depends too heavily on a single source.

A single client. A single channel. A single product.

The threshold that matters is 40 percent. If any single source represents more than 40 percent of your revenue, a loss event with that source threatens the whole business. Not just that stream. The whole operation.

This is not about eliminating dependence immediately. It is about knowing where the exposure exists so you can manage it deliberately rather than discover it in a crisis.

**Your Revenue Model Statement**

Everything from this module compresses into one output: your revenue model statement for Component 03 of your one-page plan.

The format: Our primary revenue comes from our primary stream priced at our pricing structure. Secondary revenue includes our secondary streams. Our target average revenue per client is a set amount per period.

That statement should be specific enough that someone who does not know your business could understand exactly how it makes money in 30 seconds.

**Your Action Step**

Download the Module 03 Revenue Model worksheet below. Complete all four parts. Transfer your revenue model statement to Component 03 on your one-page plan before moving to Module 04.
