Stop Living Project to Project
The best thing you can do for your business —and peace of mind—in 2011 is to create a recurring revenue model. You know the kind, where you start a month knowing you already have some sales guaranteed. Having visibility into your future revenue allows you to plan your time and neutralizes the worry about when your next job will be.
Just about any business can be reshaped to provide a steady flow of projects and cash. For example, Jim Vagonis, the founder of Potomac-based Hassle Free Home Services, has redesigned the business model of the typical contractor. Your average drywaller, stone mason, electrician or plumber lives a lumpy existence, lurching between 16-hour days and stretches of unemployment.
Instead of following the project-to-project model of home repair, Vagonis charges a flat monthly fee. In return, his company's property managers oversee the maintenance and repair of a customer's house throughout the entire year. The company's handy staff can take care of most maintenance projects. Instead of succumbing to the roller-coaster cash flow of a tradesman, Vagonis goes into each month knowing how much revenue the business will generate because its customers pay monthly on annual contracts.
The recurring nature of Vagonis's contracts caught the attention of my fellow judges at the 2010 Emerging Franchise Challenge, which selected Hassle Free as a finalist. You can soon expect to see a Hassle Free Home Services franchise in a town near you.
Switching your customers to monthly billing
So how do you make the switch from project-based revenue to recurring revenue? The trick is to figure out what will meet a customer's needs in such a way to make him or her agree to pay a monthly fee.
Because homeowners have trouble getting a tradesperson to come to their house for a simple—that is, low-paying—job (fixing a toilet that runs, remounting a towel holder that has dislodged from the drywall), Hassle Free Home Services meets such a need. Customers' monthly fees pay for a block of time that guarantees they get someone to their house for even the smallest jobs. That's a compelling offer for a busy double-income professional family or a widow or widower who still has a 'honey do' list but no honey to do it.
If you can come up with a compelling reason for customers to agree to a regular bill, you'll have taken a big step toward making your company more valuable in the long term and less worrisome in 2011.
JOHN WARRILLOW | Columnist | Sellability
John Warrillow’s new book, The Automatic Customer: Creating a Subscription Business In Any Industry will be released on February 5, 2015. John is also the author of Built to Sell: Creating a Business That Can Thrive Without You and the founder of The Sellability Score, a company dedicated to helping business owners improve the value of their company.