Revenue streams are forms of income for businesses and governments, with multiple streams reducing the risk of financial recessions. Governments use revenue streams instead of taxes, while businesses consider market volatility and potential return on investment when expanding. A mall is an example of multiple revenue streams, with each leased space being a separate stream for the owner.
A revenue stream is a term used to describe a form of income in a corporate or government context. Any business that generates income can be described as a revenue stream and it is common for businesses to have multiple streams of income. Governments also rely on multiple revenue streams from sources other than taxes. As the business expands, the owner will often look for additional revenue streams and analyze his ideas based on market predictors, potential risk, and return on investment. Having multiple revenue streams can make it more likely for a business to face financial recessions, because it doesn’t rely on a single source, such as sales, for all of its revenue.
A comparison of an individual store to a mall can be a good illustration of a revenue stream. A store owned by a local business owner may only have one or two income streams, such as sales and service. A company that owns a warehouse-style building and turns it into a shopping mall, however, can have a far greater number of revenue streams. Each space that is leased to an individual business within the mall is a separate revenue stream for the mall owner. If a single store fails, that’s often the end of that enterprise, barring a restructuring plan. If a store in a mall closes, the mall owner still has many other tenants and therefore doesn’t suffer as much as a company with only one revenue stream.
Governments often use the term “revenue stream” instead of “taxes”, which has a more negative connotation. Revenue streams for governments can include income, property and corporate taxes. They also collect licensing revenue, such as driver’s licenses and business licenses. Governments also often levy other fees and fines, such as fines for criminal convictions and speeding tickets, or for charging admission to publicly owned parks. When governments are short on cash, lawmakers simply look for other sources of income in the form of taxes and fees to make up the shortfall.
Business owners often consider several factors when considering whether to expand operations to include a new revenue stream. Market volatility is one example. If the market swings large in a particular area, they may decide not to include that form of income, instead preferring predictability. In the mall example, the amount of foot traffic a mall creates could determine the predictability needed for a business owner to try new things. There are fewer risks due to customer access and therefore the potential return on investment is higher.
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