6.2. Calculating Revenue

We’ve discussed how to market your app and get people interested. Now, let’s talk about the crucial aspect of money: How will your app generate Revenue to support itself?

Thinking about revenue is essential, even for social impact projects, because every app has costs to keep running (like internet, maybe server fees, future updates). Understanding your potential revenue is a vital part of your ICT Club Business Plan and shows you’re thinking about long-term sustainability. Remember the basic formula: Profit = Revenue – Operating Costs. Today, we focus on the Revenue side.

Lesson Topic: 6.2 Calculating Revenue

Section 1: Why Does Money Matter (Even for Social Good)?

Whether your project is a for-profit business, a social enterprise, or even a non-profit, it needs some form of income or funding (Revenue) to cover its Operating Costs. These costs might include:

• Internet data costs
• Server fees (if using cloud databases extensively)
• Software licenses or developer account fees (like Google Play Store fee later)
• Marketing costs (even printing posters costs something)
• Potential transport costs for community outreach
• Funds needed for future development and improvements

Without covering these costs, your app can’t survive long-term, no matter how good it is.

Section 2: How Apps Make Money (Revenue Models)

CHOOSING A REVENUE MODEL

For mobile apps and AI inventions, there are three main ways to earn revenue, outlined below. Keep in mind that you can use a combination of the three, like having in-app ads and paid features.

One-time Fee

Google Nest is US$24.99 to buy

Minecraft costs US$11.99 to download.

Mini Metro game costs US$1.89 to download.

In-app Purchases

You sell goods, services, or special features within the app. The app can be free but the user can unlock features or buy items by paying for them.  

In Pokemon Go, you pay real money to buy “Pokecoins” to buy items in the game.

Spotify with ads is free, but you can pay a monthly fee to listen without ads.

With a Metaquest VT device, you purchase games and experiences to use with it.

In-app Ads

You can include banner or pop-up advertising in your app. You get paid each time someone clicks on an ad.

Facebook places ads in your news feed and throughout the app.

Candy Crush is a game that places ads at the bottom of the screen

Youtube plays ads between videos.

There are several common ways mobile apps generate revenue. You can even use a combination! Consider which might work best for your app and your target users in Uganda:

1. One-Time Fee:
   1. Users pay once to download and own the app.
   1. Pros: Simple, predictable income per download.
   1. Cons: Can be a high barrier for users, especially in Uganda where people are used to free apps. Price needs to be carefully considered (e.g., a few thousand UGX?). Payment collection via Mobile Money would likely be necessary. Requires demonstrating strong value upfront.
2. In-App Purchases (IAP) / Freemium:
   1. The basic app is free, but users can pay for extra features, content, services, virtual goods (in games), or an ad-free experience.
   1. Pros: Low barrier to try the app. Users only pay if they see extra value. Can work well for educational content (unlock levels), services (premium features), or removing ads.
   1. Cons: Need truly valuable premium offerings. Requires payment integration (Mobile Money?). Only a small percentage of free users typically convert to paying users.
3. In-App Advertising:
   1. Show ads (banners, interstitials, rewarded videos) within your free app. You earn money when users see or click on ads (usually requires integrating an ad network like Google AdMob – possible in Thunkable).
   1. Pros: App remains free for all users. Relatively easy to implement.
   1. Cons: Requires a large number of active users to generate meaningful revenue. Ads can annoy users if not implemented carefully. Requires internet connectivity for ads to display. Revenue per user is often very low (pennies or less per day).
4. Other Models (Consider these too):
   1. Partnership Fees: A partner organization (NGO, school, company) pays you to provide the app to their clients/employees, or for specific features/data access.
   1. Data Insights (Use with Extreme Caution!): Selling anonymized and aggregated user data trends (NEVER individual data). This has significant ethical and privacy implications and requires user consent – probably too complex for most initial projects.
   1. Commissions/Transaction Fees: If your app facilitates transactions (e.g., connects buyers and sellers), you might take a small percentage. Requires reliable payment processing.

Discuss as a team: Which model(s) seem most realistic and appropriate for your app, your users’ ability/willingness to pay, and the Ugandan context?

Section 3: Estimating Your Earnings (Calculating Revenue)

Once you’ve chosen a potential revenue model, you need to estimate how much revenue your app might generate over the next 5 years for your Business Plan. This involves some research and realistic assumptions:

1. Step 1: Estimate Total Market Size: How many people could possibly use your app in your target geographic area (e.g., Jinja District, Eastern Region, All of Uganda)?
   1. Research: Look for data from Uganda Bureau of Statistics (UBOS), Uganda Communications Commission (UCC) for internet/smartphone users, Ministry of Education/Health reports for specific demographics (students, mothers etc.). Document your sources! This number is usually large.
2. Step 2: Estimate Market Opportunity (Your Realistic Reach): Based on your marketing plan (Lesson 6.1), how many people do you realistically expect to actually download and actively use your app each year for the next 5 years? This will be a much smaller fraction of the total market size.
   1. Assumptions: Be conservative! If you plan community outreach, estimate how many people you’ll reach and what percentage might convert to users. Factor in growth year-on-year if your marketing efforts expand. Explain why you chose your numbers (e.g., “Year 1: Reach 5 schools, estimate 10% of students download = X users. Year 2: Add 5 more schools + partner NGO outreach = Y users…”).
3. Step 3: Estimate Revenue Per User (or Total Funding):
   1. If using Fees, IAP, or Ads: How much revenue do you expect per active user per year?
      1. One-time Fee: Revenue only comes from new users each year.
      1. IAP: Estimate: % of users buying x average purchase value. (e.g., 3% of users pay 5,000 UGX once a year).
      1. Ads: Estimate very conservatively (e.g., maybe 1,000 – 5,000 UGX per active user per year). Research typical AdMob eCPM rates for Uganda if possible, but expect low numbers.
   1. If Non-Profit (Grants/Donations): Instead of revenue per user, estimate the total funding amount you need to raise each year to cover your operating costs (you’ll estimate costs in the next lesson).
4. Step 4: Calculate Total Annual Revenue / Funding Target (Years 1-5):
   1. Formula: (Estimated Active Users per Year) x (Estimated Revenue Per User per Year) = Total Revenue for that Year.
   1. Or (for Non-Profits): Total Funding Target for that Year.
   1. Project this calculation for each of the next 5 years.

Be Realistic! It’s better to have lower, well-justified projections than huge numbers pulled out of thin air. Explain your assumptions clearly in your Business Plan.

Section 4: What If We’re Non-Profit? (Funding Sources)

If your business model is non-profit, you likely won’t have sales revenue. Your financial sustainability comes from external funding:

• Grants: Applying for funds from larger organizations (local and international NGOs, foundations, government programs, sometimes corporations) that support projects aligned with their mission. This requires research and writing strong grant proposals.
• Donations: Receiving voluntary contributions from individuals, community members, or businesses who believe in your cause. This might involve fundraising campaigns, Mobile Money donation options, or community events.

Your 5-year projection would show the target amount of grant funding and/or donations you aim to secure each year to cover your operational costs.

Section 5: Let’s Calculate! (Activity – Revenue Projection)

Time to work on the numbers for your Business Plan!

Your Mission: Create a 5-year revenue projection (or funding target) using the worksheet provided.

Tool: The Revenue section of the worksheet from the lesson.

Task:

1. Confirm Your Revenue/Funding Model: Based on your app and decisions, what model(s) will you use? (Fee, IAP, Ads, Grants, Donations?).
2. Estimate Market Size: Do some quick research (cite sources!).
3. Estimate Market Opportunity (Users/Reach Years 1-5): Be realistic, link to your marketing plan, show growth. Explain assumptions.
4. Estimate Revenue Per User / Funding Goal: How much per user? Or how much total funding needed per year? Explain assumptions.
5. Calculate Total Revenue/Funding (Years 1-5): Fill in the worksheet based on your estimates. Show the calculations clearly.
6. IMPORTANT: Stop there! Do NOT calculate or fill in the ‘Startup Capital’ or ‘Operating Costs’ sections yet. That’s for the next lesson.

Section 6: Why This Matters (Reflection)

Creating this financial projection, even if it involves estimates, is crucial:

• It demonstrates to judges and potential future supporters that you’ve thought about long-term sustainability.
• It forces you to connect your user growth (marketing) with a financial plan.
• It forms a key component of your Business Plan and supports the arguments in your Pitch Video.
• Document your research and assumptions carefully!

Section 7: Quick Review (Key Terms)

• Revenue: The total income generated by your business/app.
• Operating Costs: The expenses needed to run the business/app.
• Profit: Revenue minus Operating Costs.
• Revenue Model: Your plan for how the app will make money (e.g., One-time Fee, In-App Purchases, Ads).
• Market Size: Total potential users.
• Market Opportunity: Realistic number of users you expect to reach.
• Grant: Funding from organizations for specific projects/causes (common for non-profits).
• Donation: Voluntary contributions to support a cause (common for non-profits).

Section 8: More Resources

The lesson links to a video with more details on different app revenue models – check it out!

Conclusion

Webale Kutegeera! (Thank you for understanding!) Tackling the financial side might seem challenging, but it’s essential for planning a sustainable future for your app.

Focus on choosing a realistic revenue or funding model for the Ugandan context, do some research to support your estimates, and clearly explain your assumptions. Completing this revenue projection is a big step towards a strong Business Plan! Mukole Obulungi! (Do Good Work!)