The Recurring Revenue Model: Why It’s the Golden Ticket for Business

BY: ON WEDNESDAY, MAY 18, 2016

How do you make money each month? Does your business rely on new sales and new customers? Or are you taking advantage of the golden ticket in business - recurring revenue streams.

Recurring revenue is money that arrives in your bank account time and time again without you having to lift a finger. It’s what has made the subscription box model so attractive. For example, Dollar Shave Club (a subscription service for razors) has skyrocketed in popularity. The company started in March 2012 and since then it has grown to over $120 million in sales. Another subscription service, Birchbox, dominates this market too with $170 million in sales each year.

And it’s not just subscription services. More and more agencies are employing the monthly retainer fees to build recurring revenue streams. This keeps clients on board instead of losing them after one-off projects.


What kind of recurring revenue stream is your business offering?

There are numerous ways you can offer recurring revenue streams in your business. Take these ideas for example:

  • If you’re a dentist, you can offer unlimited teeth whitening for $300 per month;
  • If you’re a web developer, you can offer ongoing website maintenance and updates for $100 per month;
  • If you’re a coach, you can offer a membership program with monthly calls for $500 per month.

The list goes on and on. The goal is to find the best one for your business model and industry.

Not sure it’s worth your time? Here are a few reasons why recurring revenue is the secret sauce to business success these days.


You Can Count Your Money Before it Arrives

Recurring revenue is easier to manage because you know what to expect month after month. This isn’t to say you’ll stop selling. You’ll never stop selling. But having committed income each month will ease the burden on your sales team.

Sure, there will be some attrition. That’s true of any business. Still, you won’t have to abide by such rigorous quotas or go through the stresses of finding new business each month just to keep the lights on. You’ll have a good chunk already committed and in your pocket so you know what to expect and can plan accordingly.


You Can Scale Your Business

Many service oriented businesses get stuck in the mud as they spin their wheels trying to accommodate everyone’s needs. This is important to a certain extent, but with a service or product you can sell on a recurring basis, you can get unstuck.

As you find a recurring revenue model that works effectively for your business, you can scale it more rapidly. You’ll already know what your customers want. All you have to do is deliver.


You Easily Build Loyalty

Have you taken advantage of recurring revenue in your business? If not, you’re spending more money spinning your wheels trying to acquire new customers time and time again. It costs five times as much to find new customers as it does to keep the ones you have, according to Ipsos.

Having a recurring revenue stream breeds loyalty among your customer base. It keeps people engaged with your brand, making them less likely to veer off to a competitor and more likely to continue engaging with your business. The more you continue to deliver to your customers, the more likely they are to continue to buy from you. In turn, you have a loyal customer base, saving you money on the acquisition costs.


You Can Automate It

Marketing automation can help you scale faster too.

Set up funnels to move customers through the buying experience with ease. By using the information you gather from your initial customer base, you can fine tune your marketing campaigns to better speak to your customer’s needs and wants. The better you get over time, the better able you will be to retain your customers and slow the attrition rate, making your recurring revenue dollars even greater.


It’s Predictable

Don’t stress about the sales figures month after month. With recurring revenue, you’re better able to estimate and manage your expenses when you can plan and forecast what you need to meet the demand. There’s less excess inventory, less excess labor costs and less question marks all around.


What’s Stopping You From Having a Product That Brings You Recurring Revenues?

Millions of businesses have adopted this strategy for good reason - it works. If you’re stuck wondering how you can reach your next income goal or build your business without a hefty new investment, consider creating a product that brings you recurring revenue (or building on the one you already have). You might surprise yourself and your team at just how lucrative it can be.



Image via Shutterstock

About the Author

Goutham Bhadri

Goutham Bhadri is the CEO of Marketing Samurai, a digital marketing firm that helps businesses gain customers online by increasing traffic and website conversions. Through his help, his clients understand how to generate recurring revenue and automate their inbound marketing to scale their business in a smart, strategic manner. If you are interested in getting more customers, maximizing lifetime-customer-value (LTV) and scaling your business, set up a free consultation at Marketing Samurai or follow Goutham on Twitter @mktgsamurai or Facebook for digital marketing tips.

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