Will you be able to pay your staff this month? Will the financial win you need to stay afloat come this month?
Startups and businesses, in general, go through financial ebbs and flows. But stressing yourself out about meeting payroll or staying up late at night looking for a new big customer isn't sustainable, or a fun place to be.
There is a solution that, if done correctly, can set your business up for long-term stability. But it also requires one of the most important financial and mindset shifts you will need to take within your business.
It's called recurring revenue, a stream of predictable income that, unlike one-off sales, can be counted on to occur at predictable intervals with a high level of certainty.
Predictability is one of the best benefits a company can turn to for building out financial and strategic plans. When your business is seasonal, having a level of predictability will help you not only feel secure during the slow seasons but will also grant you cash flow to swing big on different things. Instead of waiting around for a season's influx of cash flow to invest in a new project or equipment purchase, having predictable revenue will grant you the access or understanding of whether that is possible.
It requires you to get creative and consider what your unique audience needs more of. Here are three ways you can start building recurring revenue for your business.
1. Provide access to an exclusive community.
Learn to view the benefits of recurring revenue streams on multiple levels to reap the most benefits. Look to create an exclusive newsletter or private access to a community. This can look like a private online group that has access to resources and contacts or hosting live events and gatherings for your customers. View your customers as a group of like-minded individuals who would benefit from meeting and connecting with one another.
When I was studying e-commerce sales, I took only courses that offered the added perk of private groups. It was in these groups that I made connections with future mentors and found a system of support. When your business brand and product are the point of connection between two people, you won't be forgotten.
2. Offer elevated service support.
When you bake recurring revenue into your business model, the company will become more valuable. Offer elevated support to your customers as an incentive to not only purchase your product but stay connected as well.
Take a look at the Microsoft Office Suite, which has transitioned to offering its programs on a subscription basis. Although the single-time purchase is still available, having the subscription ensures you are constantly using the most upgraded versions and have support, if issues arise.
Amazon Prime is another great example of an add-on recurring fee. It provides faster shipping, better prices, and hassle-free returns. The key is to build on top of what you are already doing. Stack your product or service with elevated support as an added bonus to pull customers into beneficial recurring payments.
3. Offer a subscription product.
"Out of sight, out of mind" is a real thing. To retain customers, you want to be present in their minds, and a subscription or recurring offering is a powerful way to do this.
My e-commerce coffee grinder business implemented a subscription plan for members of our community to receive monthly bags of coffee beans from sustainable farmers. This offering grew our sales and our community. Instead of being a one-time product business, customers receive a product and friendly hello from us each month. We use this as an opportunity to keep them updated on what's happening within our community and educate them on their new coffee beans. It is not only a product but an experience they indulge in each month.
Your customer lifetime value (LTV), the net worth of a single customer throughout his or her lifetime of purchasing your product, is the most important metric you hold. It is also the best way to build a moat around your company. The higher your LTV, the larger the separation will be between your competitors and your customers.
The money from recurring revenue isn't only for keeping current employees happy. This spike in sales also gives you the funding to reach new customers and follow alternative leads that wouldn't have been there if you stuck to a single product offering.
Instead of remaining limited in your business model, explore the opportunities that a recurring service and product will bring you. Set your business up for success now, and reap the recurring benefits for years to come.