Recurring revenue is the revenue you can depend on generating, year after year, with a high degree of certainty.
For example, you might bundle offers into a monthly subscription. You could launch a points system that encourages loyalty (and recurring revenue) with gifts or special discounts. Recurring revenue comes in many forms and is the gold standard of business models.
Strong words! Need a bit more convincing? Here are the top three reasons it’s a good idea to build recurring revenue into your business model.
1. Frees up more time to grow your business
Consider this: if your business generates $1 million in revenue, and 75% of that total is recurring revenue, you’ll start each year knowing you can count on at least $750, 000. This guaranteed revenue frees up time and energy for new product development, expanded marketing, and attracting new customers.
Another big win? The added financial certainty can alleviate stress, which goes a long way to improving productivity and your overall well-being.
2. Helps maintain positive cash flow
Recurring revenue also helps business owners develop a reasonable budget. Knowing you can expect to earn a certain amount each month makes it easier to cover both routine and unexpected costs.
It’s also worth noting that potential investors and loan providers regard businesses with recurring revenue as “safer bets”. If you’re hoping to attract a partner or secure a loan to expand your company, showing recurring revenue streams can help strengthen your position.
3. Opens the door to valuable customer insights
To develop multiple income streams, you need to know the particular wants, needs, and behaviours of your target audience.
To build long-term relationships, you must understand what matters most to your customers. You can then figure out how to meet those needs (in ways your competitors do not).
As you research your market and talk with your clients, more profound insights will emerge. You will find out about their particular preferences and frustrations. This knowledge will directly inform your marketing and further refine your product or service offers. Enhanced customization leads to more competitive offers, which support recurring revenue.
The bottom line?
Instead of focusing on one-off transactions, business owners should focus on building long-term customer relationships. While lucrative onetime deals are a bonus, recurring contracts are the gifts that keep on giving!
Having multiple streams of revenue is always a good idea. It makes your business stronger because you can focus on developing your business without worrying about money. You will also focus on meeting the needs of your clients.
What are your multiple streams of revenue? Do you include recurring revenue?
