---
title: "Revenue streams and cost structure"
subject: "Entrepreneurship Development"
chapter: 4
key: "semester_7/entrepreneurship_development:revenue-streams-and-cost"
source: https://www.bctengineer.com/q/semester_7/entrepreneurship_development/revenue-streams-and-cost
site: BCT Engineering
---

# Revenue streams and cost structure

Entrepreneurship Development · Chapter 4: Business Model

- Asked in: year not given, 6 marks
- Video: [Revenue Streams: Crash Course Entrepreneurship #13](https://www.youtube.com/watch?v=Vhz9fGYkYLg) — CrashCourse
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/entrepreneurship_development/revenue-streams-and-cost
- Whole chapter: https://www.bctengineer.com/md/semester_7/entrepreneurship_development/chapter-4

## Question

Describe the different types of revenue streams a startup can use. Also explain the cost structure of a business with fixed and variable costs.

## Short answer

Revenue may come from sales, usage, subscription, licensing, commission, advertising or freemium; costs split into fixed and variable, which together decide profitability.

## Answer

A **revenue stream** is the way a business earns money from each customer segment. A **cost structure** lists all the costs of operating the business model.

#### Types of revenue streams
| Stream | How it earns | Example |
|---|---|---|
| Asset sale | One-time sale of ownership | Selling a phone |
| Usage fee | Pay per use | Taxi fare, electricity |
| Subscription | Regular fee for continuing access | Streaming service |
| Lending/renting/leasing | Temporary use of an asset | Equipment rental |
| Licensing | Fee for using intellectual property | Software licence |
| Brokerage/commission | Percentage for connecting parties | Marketplace |
| Advertising | Advertisers pay for audience | Media platforms |
| Freemium | Free basic, paid premium | Apps |

Pricing may be fixed (list price) or dynamic (demand-based, negotiated, auction).

#### Cost structure
- **Fixed costs:** do not change with output in the short run (rent, salaries, insurance, loan interest).
- **Variable costs:** change with output (raw material, packaging, sales commission).
- **Semi-variable costs:** part fixed, part variable (electricity with a minimum charge).

Total cost = fixed cost + variable cost per unit x quantity.

Business models can be **cost-driven** (lowest cost, high automation) or **value-driven** (premium value, higher cost). Knowing the structure shows the break-even point and where costs can be cut.

**Answer:** Revenue may come from sales, usage, subscription, licensing, commission, advertising or freemium; costs split into fixed and variable, which together decide profitability.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Subscription revenue is:
   A. A regular fee for continuing access
   B. A one-time sale of ownership
   C. Pay per use
   D. Commission on deals
   Answer: A. Streaming services are a typical example. (Key point: Subscription)

2. Which stream is a percentage for connecting parties?
   A. Licensing
   B. Brokerage/commission
   C. Asset sale
   D. Usage fee
   Answer: B. Marketplaces earn commission. (Key point: Brokerage)

3. Which is a fixed cost?
   A. Raw material
   B. Packaging
   C. Rent
   D. Sales commission
   Answer: C. Rent does not vary with output in the short run. (Key point: Fixed cost)

4. Total cost equals:
   A. Fixed cost x quantity
   B. Variable cost only
   C. Price x quantity
   D. Fixed cost + variable cost per unit x quantity
   Answer: D. This is the cost formula. (Key point: Total cost)

## Related in Entrepreneurship Development

- [Break-even analysis for a startup](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Abreak-even-analysis-numerical) — Entrepreneurship Development, chapter 5
- [Cost-plus pricing numerical](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Apricing-cost-plus-numerical) — Entrepreneurship Development, chapter 3
- [Testing key business assumptions](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Atesting-key-assumptions) — Entrepreneurship Development, chapter 3

## Related in other subjects

- [Source coding; fixed vs variable length codes](https://www.bctengineer.com/question.md?key=semester_5%2Fdata_communication%3Asource-coding-fixed-variable) — Data Communication, chapter 8
- [Variable length coding; entropy and fixed code efficiency](https://www.bctengineer.com/question.md?key=semester_6%2Fcommunication_systems%3Avariable-length-coding-entropy-six) — Communication Systems, chapter 6
- [Fixed vs variable partitioning](https://www.bctengineer.com/question.md?key=semester_6%2Foperating_system%3Afixed-vs-variable-partitioning) — Operating System, chapter 4
- [Fixed overhead cost variance from standard card](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Afixed-overhead-variance-standard-card) — Engineering Economics, chapter 1