As another year draws to a close it’s only natural that you start to analyse how you your business has grown and developed throughout 2015, and what initiatives you can put in place to ensure its continued success and profitability for 2016.
That brings us to recurring revenue… As the digital marketplace has grown and consumers have embraced online services and products, many entrepreneurs have built highly profitable businesses that embrace a recurring (subscription based) revenue stream. That said, this is not a new way of generating income and recurring revenue can generally be adopted no matter what your business.
Introducing or formalising recurring revenue streams is a sure fire way to help you succeed, here’s why…
- Recurring revenue provides regular cash flow. Discover more tips for better cash flow in this article from our blog archive.
- Budgets and forecasts will be simpler and more accurate. Recurring revenue provides predictability.
- You’ll become a farmer not a hunter. Spend more time developing relationships with your quality clients and customers, rather than consistently seeking out new prospects.
- A smooth and profitable exit. If you’re considering selling your business, recurring revenue is always of great interest to potential purchasers.
So now we’ve established why it’s a great idea to introduce a recurring revenue stream here are a few suggestions for how you can create it.
- Subscriptions. Let’s say you have a lawn mowing service… For those customers that only contact you once in a while, consider offering a weekly or fortnightly slot, at a marginal discount, paid up front.
This also works if you’re in a service industry that provides knowledge or training support to your clients, you can offer a subscription to regular information, advice or best practices, these can be delivered electronically or as workshops and seminars.
- Extended Warranties and Servicing. If your business sells a physical product, and that product requires regular maintenance or service, you have a recurring revenue stream, you just may not have packaged it as such. Offering extended warranties on high ticket items is a great way to generate recurring revenue.
- Pricing Structure. Consider a move away from charging your customers a single one-time fee for your product or service and adopt a monthly recurring model of payment instead. You will often hang on to your customers for longer.
- Upselling. This can be applied in almost any business. If you already have a client or customer, there are probably other products or services in your portfolio that they may be interested in. Consider packaging these together and offering them for a recurring monthly payment.
Remember here at Johnston Associates South we have a specialist Business Consulting Division that can help you look at your business through fresh eyes, we may recognise a recurring revenue opportunity that you haven’t, so do give us a call if you’d like to chat further.