Recurring Revenue

Profit Building Series

In this blog series, we aim to help you unlock unrealized value in your business and go beyond what your business is today. There are always new methods to build value in your business and given the adequate time you can execute a plan to realize it. This third blog installment deals with the benefits of Recurring Revenue. Businesses with recurring and predictable revenues are the number one greatest creator of wealth for astute business owners.

This type of revenue is considered to be highly reliable and more stable than other types of income. The monthly payment you make to your security company is recurring revenue. Your gym membership, wine of the month basket or even the shipment of razors you get every 3 months. Those are all examples of recurring revenue.

The other factors to consider when integrating this type of revenue stream into your operation is your sale value and better customer retention. Businesses that create recurring and predictable revenues always attract interested buyers. Buyers are willing to pay more when their perception is that the cash flow of your business is substantial, predictable, growing and recurring.

Smart operators from across almost every sector are finding ways to become subscription-based and turn their companies into revenue-recurring businesses. For providers, recurring revenue establishes a regular income stream as long as the customer continues to use the service. The key to having a successful revenue-recurring business is to offer something of real value to customers that are not readily available elsewhere; it has to be worth their while to commit to a subscription or membership service. To ensure that, though, businesses must build an ongoing relationship in which they handle interactions smoothly and maintain customer engagement throughout the life cycle.

So you want to pursue this income generator. How do you start? Ultimately you need to ask yourself – “What do my customers want?”

Take a good look at your current model and see what you have to work with. Maybe you need to offer ancillary products or premium upgrades of the existing core products. If opportunities can’t be created through your existing products or services, you’ll have to come up with a way to generate this new revenue through a future product or service. Depending on your current sales practices, it might be easier to implement a new product first—if it works, you can extend this approach to your entire product line.

Here are a few different models to consider:

Always make sure to keep your focus as tight as possible and avoid bombarding customers with unwanted services or upgrades without a pressing consumer need. Businesses that add features only so that they can charge more may lose their existing customer base and decrease revenues overall.

Transforming into this type of model can be tricky, so it is prudent to maximize the profitability of a successful transition. Start with a big vision and a small test of the first step to see if what you envision is possible. Balancing the potential loss of short-term transactional revenue with long-term subscription revenue requires a very clear vision of whom the fees and new service will serve. You need to know what the nature of the “forever” promise will be. This promise is a commitment to handle something for the customer forever — continuously innovating, repackaging, and evolving to make sure the company is providing the best solution.

You may need help along the way to uncover subscription opportunities, set up a realistic plan to implement them, advise you on challenges as they arise, and hold you accountable for making progress. We’re here to assist.

We are entering the age of “customer experience” and they demand to consume services at their convenience. In other words, the consumers are looking to subscribe to things and consistently consume (recurring revenues for you). This doesn’t necessarily mean working harder to serve each customer, but it does mean finding creative ways to serve them.