Revenue Share Deals — A Lucrative Online Business Model

Most people have the wrong idea about revenue share deals or don’t know much about them at all. This article will hopefully change that.

This is a business model that we don’t hear about so often — we’ve been doing it for a while, and it’s the kind of business model that will let you work less, make more.

What Is Revenue Sharing?

Revenue share deals are very different from profit share, fee-for-service, or equity. They are also known as royalty deals.

You earn by working with a business and receiving a percentage of their revenue stream. The royalty you get is either for the entire business or a division of it.

What Is a Reverse Revenue Share Deal?

I came up with the reverse revenue share deal where you own the asset, and you hire in an expert on a performance basis. So this person wants to do a revenue share deal, but a reverse revenue share deal, because they already own a business and they want someone to actually drive it, run it, grow it, manage the team and allocate capital — essentially be a CEO or general manager.

Where would you find someone like this? Probably from your own client base. Someone who’s actually been through your program, who knows your business and has high competencies.

Types of Revenue Sharing

There are three common types of revenue sharing.

• In professional sports, players split the revenue with team owners.
• In companies, operating profits are divided between partners and stakeholders.
• In online businesses, there is cost-per-sale revenue sharing.

There is also a fourth type: reverse revenue sharing, where you own the asset and hire in an expert on a performance basis.

10 Problems that Revenue Share Deals Can Solve

1. To start or buy a business, you need funds – the kind of cash most of us can’t fork over. Revenue share deals give you access to a business without paying any money.
2. Revenue share deals have less legal risk. Unlike a business with partners that can fail spectacularly at times, revenue-sharing is safe.
3. Starting an international business is challenging. You have to set up an entity, find a partner in the country, etc. Rev share deals soar through these hurdles.
4. Most business models don’t offer precise results. With revenue sharing, you get hard, measurable results.
5. 50:50 partnerships often are lopsided and more beneficial to one partner. Revenue sharing puts you on equal footing.
6. Cost allocation lines are a blur in business. Revenue deals put in place clear and distinct lines.
7. Service contracts such as retainer-based put a limit on how much you can earn. Rev share deals are performance-based and not limited. The rewards are often far more generous than service contracts.
8. Contracts are short-term and low leverage. The cash flow stops at some point, an issue that doesn’t occur with revenue share.
9. Most business deals take a long time to implement. Revenue sharing is ready to launch typically in a few days.
10. To earn a substantial income from other business deals, you need a massive portfolio. In the case of revenue share, you just need the right deals and not many of them.

9 Benefits of the Revenue Sharing Model

1. A revenue share model is designed to be a win-win business model. You get a percentage of the revenue, and the business partner benefits from your skills.
2. Setting up is simple. While a handshake is sufficient, you should always put it in a written contract.
3. You can scale revenue-sharing models without injecting any money.
4. There is minimal risk to you and the business owners.
5. Payment is straightforward. You generate an invoice every month, and the money is credited to your account.
6. It’s a performance-based model. Unlike fee-for-service, rev-share incentivizes the partner to knock it out of the park.
7. The model frees up hours of your week, yet your income stream still climbs.
8. They have an inbuilt fail-safe because you earn from different deals. Therefore, there is no single point of failure.
9. The structure of revenue sharing models focuses on shared success. Everyone is aligned to increase the revenue stream.

How To Structure Rev Share Deals?

Landing a fantastic revenue-sharing deal is dependent on its structure. The foundation is always the same and remains performance-based.

You get paid when the business earns more. For example, for every dollar you make for a business, you might get ten cents.

For an information business, the margins are more notable, so you can structure at a higher percentage. For e-commerce businesses, profit margins may be as low as 10%, so the portion you ask has to be less.

What is the difference between profit sharing and revenue sharing?

Profit-sharing deals split the profits — that’s the revenue left after all costs are subtracted. They are ambiguous, making it easy to manipulate the numbers. In revenue sharing, it’s a top-level income split. You either earn or you don’t.

Written revenue share agreements: always have one.

It is vital to have a lawyer write it down because the agreement is legally complicated. When they’re put on pen and paper, it saves you from disputes and hassles down the line.

What Should You Expect from a Revenue Share Deal?

Your expectation from a revenue share deal should be simple — you earn more when they make more. The more effort you put in building the business, the more significant piece you get.

A good idea is to keep the percentage between 5 to 15.

There are two things to look for in rev share deals: that it should leverage your asset, and that every contract should synchronise with your other deals.

Revenue Sharing Lessons for Beginners

Your first revenue-sharing deal will be average at best, and you’ll likely make mistakes — power through it and just start. As you gain experience, each arrangement will improve.

Always add a buy-out clause in the agreement. It helps address a scenario when the revenue share partner no longer wants to cut a check.

Not all rev share deals are created equal. Like shares or properties, there’ll be good ones and bad ones. You have to set your filters carefully. My best rev share deals are 20 times better than my worst.

How to Get Help Structuring a Revenue Share Deal?

Revenue share deals are not silver bullets. That said, they are a fantastic earning opportunity. But structuring the best deal takes skill, experience, and finesse. The more value you add to the business, the more you make.

We’ve been structuring revenue share deals for years, for our own business and also for many of our members. If you’d like support to ensure you don’t make many costly mistakes, consider receiving mentorship and guidance through JamesSchramko mentoring.