Understanding revenue and cost structures

Revenue structure defines how your product generates income through various streams like subscriptions, one-time purchases, or usage fees. Cost structure outlines all expenses required to build, maintain, and grow your product. Understanding both helps you optimize profitability.

Common revenue models include subscription (recurring monthly fees), transactional (per-purchase fees), freemium (free tier with paid upgrades), and advertising. Each model has different implications for cash flow and growth strategies. Your choice depends on your product type and target market.

Cost structures typically include fixed costs (salaries, rent) and variable costs (server usage, customer support). Direct costs tie directly to product delivery, while indirect costs support overall operations. Tracking the ratio between customer acquisition costs and revenue helps ensure sustainable growth.