The most stable businesses I have worked with are based on a recurring revenue model. And they are the easiest to sell at a much higher value than industry average.
Why? When your company has a recurring customer base, you will:
- Stabilize your cash flow, flattening out the peaks and valleys that all businesses experience to some degree or another.
- Decrease the future risk in the mind of a potential buyer.
- Be presented with opportunities to upsell and cross-sell other products and/or services.
- Make it harder for your customer to switch. It is often hard for them to find the same convenience that you offer with your monthly package.
There are several ways to develop recurring revenue for any business. Here are some examples:
- Maintenance contracts
- Monthly support agreements
- Service retainers (similar to those offered by attorneys)
- Warranties
- Subscriptions
If these traditional tools don’t apply, don’t give up. You should consider creating a “widget” Dan Kennedy uses the term to refer to a special offer or package of your products or services that you offer at a premium. It should feature a compelling advantage to the customer and create recurring revenue for the business owner. Here are some examples I have used or seen:
- Monthly Tax and QuickBooks package that I offer, designed to meet all of a business owner's needs in one place with the major advantage of knowing they are paying the lowest taxes possible.
- Air conditioning and heating companies that offer a package to start up your air conditioner or furnace, shut them down, perform monthly maintenance for equipment longevity, and test for carbon monoxide.
- Landscape maintenance and pool cleaning businesses that come out every month and include maintenance in the off season.
- Janitorial companies that provide regular cleaning.
- Attorneys who will keep your corporate meeting minutes accurate.
The list goes on and is only limited by your imagination. But the payoff is huge and should be a priority for every business.