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A revenue stream is a term used to describe a form of income in a business or government setting. Any activity that generates income can be described as a revenue stream, and it’s common for businesses to have multiple streams of income. Governments also rely on multiple revenue streams from sources in addition to taxes. As a business expands, the owner will often seek out additional revenue streams and will 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 weather financial downturns, because it is not relying on one source, such as sales, for all of its income.
A comparison of an individual store versus a shopping mall can be a good illustration of a revenue stream. A store owned by a local business owner may have only one or two streams of income, such as sales and service. A company that owns a warehouse-style building and turns it into a shopping mall, however, can have a much larger number of revenue streams. Each space that is rented to an individual business within the mall is a separate revenue stream for the mall owner. If a single store goes out of business, that’s often the end of that venture, barring a restructuring plan. If one store in a mall closes down, the mall owner still has many other renters and therefore doesn’t suffer as badly as a company with only one revenue stream.
Governments often use the term “revenue stream” in lieu of "taxes," which has a more negative connotation. Revenue streams for governments can include taxes on income, property, and corporations. They also collect revenue from licensing, such as drivers’ licenses and business licenses. Governments often collect other fees and fines as well, such as fines from criminal convictions and speeding tickets, or from charging admittance to publicly owned parks. When governments run low on money, lawmakers simply look for other income sources in the form of taxes and fees to make up for the shortfall.
Business owners often look at several factors when considering whether to expand operations to include a new revenue stream. Market volatility is one example. If the market has wide swings in a particular area, they may decide not to include that form of income, preferring predictability instead. In the example of the shopping mall, the amount of foot traffic that a mall creates might bring about the predictability needed for a business owner to try new things. There’s less risk involved because of access to customers, and therefore the potential return on investment is greater.
Understanding governmental revenue streams can be difficult as they are multiple in number and complicated. These revenue streams can be divided into two basic categories: taxation and fees for services. For example, a government will tax your income, your automobile, your home. Governments also provide services for which they collect fees, such as water, sewer and refuse collection.
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