There are many different financial models and strategies used by businesses and organizations, and each one has its own advantages. One of these business models is known as “revenue sharing.” But, what is revenue sharing and why do certain organizations use it?
What Does Revenue Sharing Mean?
“Revenue sharing” is a term used to describe a wide range of financial practices that vary based on the profits or losses of a certain company or organization. Businesses and organizations of many sizes can use a revenue-sharing model—also known as a “rev-share model”—that shares the revenue of that organization. There are also revenue-sharing deals that occur between multiple businesses.
Revenue is all the money a business or organization receives, not just the funds they gain from sales. Revenue also includes investment gains, royalties, interest, leases, patents, and more. In business partnerships, that revenue is then dispersed to financial actors—such as employees, investors, partners, associates, stakeholders, and more. These partnerships are generally mutually beneficial, and allow all parties involved to enjoy financial advantages.
There is another financial practice called “profit-sharing,” which is similar—but shouldn’t be confused with—revenue sharing. In a profit-sharing model, everyone in an organization essentially receives a bonus when the company profits over a certain margin, which is different than a company sharing all of its revenue. However, the basic concept of these models is the same. In this article, we’ll explain more about what revenue sharing is, the different types of revenue sharing, and the benefits they offer.
Different Types of Revenue Sharing
- Professional Sports – There are several professional sports leagues that use a revenue-sharing model, generally for their ticketing and merchandising. One example of revenue sharing within these leagues is from the National Football League (NFL). In the NFL, the team owners and the players’ union have a revenue split of 53% (owners) and 47% (players) of all ticket proceeds and merchandise sales. In 2019, that amounted to $8.5 billion for the owners and $7.5 billion for the players.
This is all covered in the collective bargaining agreement (CBA) between the players’ union, owners, and NFL. With revenue sharing agreements like this, there can be certain percentage increases or decreases depending on performance or pre-set metrics, which can affect the amount of revenue shared with each group.
- Online Business Activity – Another type of revenue sharing involves online business activity. This type of rev-sharing model has become increasingly popular as online businesses have grown in popularity. It can apply to sales that are generated from an advertisement being fulfilled, creating a “cost-per-sale” form of sharing revenue. There are also other types of online rev-sharing that compensate individuals based on the traffic produced by their work—like content, design, and more.
- Company Revenue Sharing – Additionally, revenue sharing can be implemented within an individual business or organization. These revenue-sharing models often involve contractual agreements between all parties involved, but distribute revenue to stakeholders, partners, employees, and more based on profits and losses. Some rev-sharing models are still required to pay money to certain entities, even when the organization lost money.
- Revenue Sharing Packages – An increasingly popular form of revenue sharing involves packages that combine multiple streams of income, like the ones offered by our partner entity, Universal Achievers. Purchasing UA Abundance Packages is a creative passive income strategy that also gives back to those in need.
UA Abundance Packages are similar to annuities—you pay a lump sum up front, then begin to receive payments in the future. But, UA Abundance Packages also offer additional benefits, like contributing funds to UA Legacy Grants to help individual grant recipients, charities, and more. Universal Achievers—the partner entity to UA Legacy Grants—makes this possible by combining multiple streams of income and distributing the funds (revenue shares), with variable payouts based on maturity. Those income streams include a portion of Abundance Package sales, preferred vendor product/service sales, online retail sales, donations, real estate transactions, and more.
You can then use these funds as a way to create passive income, contribute to retirement supplementation and elder care, and more. At the same time, you are helping to charitably “give back” through your purchase by helping grant recipients receive funds as well.
At UA Legacy Grants, our mission is to empower over 1 million individuals with the tools needed to increase financial literacy and the ability to create financial abundance for their families. Our UA Abundance Packages help individuals and organizations to reach their financial goals, like making college more affordable for students or creating passive income in retirement, through our Purchase With Purpose program.
Between grant donors and contributions from our “for profit” sister company, Universal Achievers, we are able to provide granted financial wellness packages to those in need. Find out how you can learn more about what we do or purchase your own UA Abundance Package today!