The Simplest Form Of Recurring Revenue Almost Any Business Can Adopt
This is the seventh in the discussion of the eight growth drivers that generate value.
There are many ways to create loyal customers such as providing a valuable product/service and excellent customer service.
There’s another way that you can extend this value that will increase your customer loyalty - creating a model or offering, that solves your customer’s need so they buy what you have consistently.
Recurring revenue makes your company more predictable, extends the lifetime value of your customer, and ultimately makes your business more valuable. Valuable to you now and in the future.
I wrote a couple of weeks ago about how cash moving through your business is its lifeforce. It allows you to fulfill your mission, strengthen the business so it, your employees, and customers thrive.
Creating a recurring revenue stream is another way to bring cash flow into your business to create these automatic sales.
While there are many ways to do this, I’ll share how a simple service contract could be the place to start for many.
A service contract is an agreement to provide an ongoing level of service in return for a regular payment. It can be a way to transform an ordinary service company into a predictable subscription business.
Most businesses begin life using the “break/fix” business model where a customer has a problem, and you provide a solution. This business model may make you feel valued as a problem solver, but it comes at the expense of the value of your company. In the “break/fix model”, you must create demand, sell your product or service, deliver it, and start all over again.
By contrast, with a service contract, you create an ongoing stream of income that has the potential to grow the lifetime value of a customer dramatically. When you can accurately predict how much money you will get from a subscriber, you can invest more in wooing them.
This becomes a win-win situation: your customers having their needs met and your business gains predictable revenue.
The most compelling reason to adopt a recurring revenue model is the impact it can have on your bottom line. Also dollar for dollar, recurring revenue can be worth more than twice that of transactional revenue, depending on your industry. Service contracts are a simple and effective way to transform a transactional business into a recurring revenue stream.
NOW is YOUR time,
Ariana
PS: Reach out if you’re interested in seeing how this could apply to your business.