How to Increase Recurring Revenue for Steadier Income

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How to Increase Recurring Revenue

There are all sorts of benefits that come with owning a business—the ability to pursue your passion, the freedom to build the company you want, and the potential for enormous personal and corporate success.

But that’s not to say that there aren’t a few notable drawbacks. One of the biggest downsides that people quickly become aware of after going into business is the problem of inconsistent income.

All business owners know that the peaks and valleys of sales can be incredibly trying at times. The stress brought on by a season of poor cash flow is matched only by that of the next lean period.

Fortunately, you’re not doomed to a lifetime filled with bad cash flow and financial woes. The key to eliminating the stress, worry, and anxiety of inconsistent income is recurring revenue.

What Does Recurring Revenue Look Like?

When you hear the term recurring revenue, your mind might flash to countless sales each month, huge profit margins, and more monthly income than you know how to spend.

While you can certainly aim for these kinds of lofty goals, you can experience the financial freedom that comes with recurring revenue simply by having enough money each month to cover your normal overhead expenses.

The good news is that this is a practical financial goal that all business owners can achieve!

6 Ways to Create Recurring Revenue for Your Business

Regardless of the type of business you own, there are six specific ways in which you can generate more recurring revenue for your company:

1. Put hard contracts in place

You see these types of contracts with cell phone companies, internet service providers (ISPs), fitness gyms, and many other businesses.

Locking a customer into a specific monthly payment over the course of one year, two years, or more ensures that you have consistent revenue coming in for that period.

2. Set up auto-renewal subscriptions

Whether your business sells products, services, or both, auto-renewal subscriptions allow you to receive a set payment at the same time each month.

Depending on your business, industry, and the products you sell, you might opt for subscriptions to renew as often as weekly or as infrequently as annually!

3. Incorporate support agreements

The majority of businesses provide some level of technical support for their products and services.

Rather than only charging for training, support, and maintenance as the customer places a service call, consider implementing a support agreement that allows you to bill a set amount of money each month in exchange for ongoing technical services.

One way to incentivize support agreements is to bump these customers to the top of your priority list!

4. Develop consumable products and services

Businesses that only sell big-ticket items often struggle to retain customers and are largely dependent on their next major sale.

If you haven’t done so already, consider developing consumable products and services—whether it’s a standalone product or an accessory that a big-ticket item depends on.

A great example of this is coffee pods that are purchased for a coffee maker. While customers aren’t buying new coffee makers each month, they are constantly replenishing their coffee pod supplies.

Doing this can help secure some additional—albeit, smaller—recurring revenue long after a major sale has been made!

5. Implement monthly payments for an annual purchase

When you make a sale, do you require one lump sum payment or do you allow for multiple scheduled payments over the course of a few months?

It might be tempting to require full payment for a new purchase if you’re already having cash flow issues. Allowing customers to make equal monthly payments towards an annual purchase, however, allows you to depend on a specific amount of revenue each month.

Not to mention, this can often help win over customers who would prefer to make partial payments!

6. Agree to monthly retainers with customers

While most often seen with attorneys, consultants, and certain independent contractors, the monthly retainer is a system you can implement at your own business—particularly if you provide an ongoing service.

Essentially, your customer will agree to make a fixed recurring payment to your business in exchange for a certain number of service hours provided to them each month!