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Recurring revenue is not a new concept, but it is getting a lot of attention recently.  The whole ‘Software as a Service’ industry is based around the recurring model.  Monthly or annual payments for a service delivered online, with no technology, upgrade or integration issues, and the whole package has taken off.

In entertainment too, services like Spotify and Netflix use a subscription model to let users unlock digital access.

But it’s not just digital.  Look at Aussie Farmers Direct.  Their core proposition is a weekly box delivered to your door.  It’s classic recurring revenue.  There’s an extra twist, though.  You can specify exactly what groceries you want, or you can just opt for the ‘Farmer’s Choice’.  This gives the company control over what exactly to provide each week.  So they’re free to pick and choose the specific fruit or vegetables they ship, giving them extra opportunities to generate margin.

This is a simple example of the ‘subscription box’ model of recurring revenue.  Instead of the customer deciding what they want to repeat-order, the company decides.  As long as they get it right, subscribers will stay with them.  It’s the physical goods equivalent of a magazine – you need to build the trust of your subscribers by giving them what they want, every time.

Benefits of Recurring Revenue

  • Most obviously, you acquire a steady, reliable income stream.  This helps with budgeting and cashflow.  There are other advantages too.
  • Recurring revenue is built around standard, repeatable tasks or projects.  It’s usually easier to review and improve a process for these services than it is for one-off projects, which makes them more efficient.  This makes your business more efficient.
  • You have an opportunity for regular contact with your customers.  If you’re sending a paper or electronic invoice every month or quarter, you can add information such as special promotions, new products, company news or a customer satisfaction survey.
  • You are more visible to your customers, so you become the first person to ask when there is a one-off need in your area.  You may even get this business without any competitive quotation process.

Opportunities for Recurring Revenue in your Business

If you already have recurring revenue streams, congratulations!  If not, why not take another look at your business now?  There may be some way to add some regular repeat business to your model.  Here’s some ideas to get you started.

  • Servicing and Maintenance Contracts.
    If you’re supplying or installing items like air conditioners, gas heaters, dishwashers or industrial machinery, why not offer an annual check-up visit?  Give clients a discount for committing to you now – and lock them in for years.
    For industries like software, support is more difficult to handle.  You never know how much need there will be and you can’t plan ahead.  So why not charge a high hourly fee, then offer clients a lower hourly fee if they commit to a monthly flat fee?  Effectively, they are insuring themselves against the need for support, while you are getting a more stable income to cover your resourcing costs.
  • Add-on Services.
    Maybe you’re a landscape designer.  Why not offer a garden maintenance service to keep that garden in tip-top condition?
    Website designers and developers often offer hosting, but what about regular traffic reporting or a broken link checking service?  Or backups and upgrade management?
  • Retainers.
    These work well for advice and expertise-based businesses – as long as you are seen to add value! Think business or personal coaches, professional advisers, therapists.
  • Add-on Consumables.
    Is there something users of your product or service will require or want on a regular basis?  One obvious example is that anyone who buys a Nespresso is going to need coffee pods to go in it.
  • Subscription e-Commerce
    An interesting recent trend is subscription commerce in the online space.  Maybe you sell health products online.  Why not offer a ‘monthly sample pack’?

If none of these ideas seem to fit with your business, why not challenge the NoBull team to see if we can find a recurring revenue option which works for you!



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