Whether you’ve been in business for awhile or are just starting your venture into the world of entrepreneurship, you have no doubt heard that when it comes to business models, recurring revenue is king. Recurring income means that you can take your customer’s details once, and then set and forget. Not only does recurring income give you the benefit of staying consistent over time, but it also takes away a lot of the stress for business owners who don’t have to worry about constantly looking for new customers. If you often find yourself concerned about cash-flow or wondering about where your next customer order is coming from, these four ideas can help you achieve recurring income in your business.
Change Your Pricing Model
According to Inc., one of the easiest ways to add recurring income is by steering away from the older model of charging your customers a one-time fee when they buy a product or service from you. Instead, shift to a recurring payment model. As an example, they state that if you are used to your customers paying one single large fee when you close a deal, you can shift that into monthly fees instead. Although making this type of change will initially lower the amount of cash you have on hand to keep the business going, switching to this type of pricing model will eventually provide a nice supply of recurring income for the future.
Provide Maintenance Plans
Just about any kind of hands-on business, such as an auto repair shop or air conditioning repair business, can create recurring income by offering customers a monthly or yearly maintenance plan. These types of plans generally appeal to customers because they provide protection in the event that something goes wrong.
In addition, you can use maintenance plans as an incentive for repeat business by offering service discounts for ongoing maintenance. This helps to ensure that there is a future demand for your services and customers are more likely to renew their plan with you on a yearly basis. For example, customers who purchase a maintenance plan could get a 10 to 20 percent discount for having their air conditioner serviced once or twice a year, or a car repair shop could offer a free car checkup and discounted oil change ever so many months.
A relatively new trend that has grown over the last few years, box subscriptions are a popular method of product distribution for businesses that sell niche items. Customers who want to participate in the program pay a monthly fee to receive an item or items of value each month that are then delivered right to their door.
The way that a box subscription works is that a customer who enjoys sampling a variety of teas, for example, could get a box subscription for a couple of new tea samples each month, or perhaps a variety of new makeup items to try. Since box subscription fees typically range anywhere from $10 to $100 each month, savvy business owners can create recurring income by using box subscriptions to distribute niche products on a monthly basis. As an added bonus, when these same items are sold individually, they might take a longer period of time to sell. Since the items are sold as a lot or, rather, a group of items, the inventory moves much faster.
Up-Selling and Cross-Selling
Although automatic monthly or yearly fees are perhaps the best way to increase recurring income, don’t forget the power of up-selling and cross-selling opportunities as a way to increase income too. Look for ways to provide a wider scope of services to your customers as this can provide a way to increase recurring payments. For instance, an accountant could offer monthly bookkeeping services in addition to preparing a customer’s yearly taxes.
Switch to Memberships & Subscriptions
Many service based businesses are now embracing memberships and subscriptions in place of traditional models. Consultants and coaches are using membership models that allow scale (think one to many, rather than one to one) and breaking down their payments into repeating payments models. This means that time for money industries are no longer restricted by how many hours there are in a day. Many coaches, agencies and consultants now use blogging platforms and membership subscriptions to grow massive communities and followings who pay them a repeating payment meaning they can really scale and grow their business and vast community.
No matter which model of recurring income you embrace in your business, finding even small ways to flatten your payments over the months of the year means you’ll have a healthier cash flow and business model for scaling. And, we’re all for that!